Good morning! There's a little more to get our teeth into today.
Inflation: as noted in the comments, inflation has come in at 3.8%, slightly higher than the 3.7% figure that was forecast by economists. The Bank of England forecast was 3.76%. Inflation is back up to its highest level since January 2024.
All done for now, thanks everyone.
Spreadsheet accompanying this report: link (last updated to: 1st August).
Companies Reporting
| Name (Mkt Cap) | RNS | Summary | Our view (Author) |
|---|---|---|---|
ConvaTec (LON:CTEC) (£4.7bn) | $300m share buyback to begin immediately and run until 31 Dec 25. | ||
Lion Finance (LON:BGEO) (£3.4bn) | Loan book +22.5% YoY, deposits +14.7%. PBT +27% to GEL1,219m. Positive outlook. | ||
Ithaca Energy (LON:ITH) (£3.0bn) | H1 prod +132% to 123.6kboe/d, adjusted net income +3.2% to $128.7m. FY25 guidance updated: Production: 119-125kboe/d (prev. 109-119kboe/d) | AMBER/GREEN (Roland) [no section below] | |
Osb (LON:OSB) (£1.98bn) | Net loan book +1.2% to £25.4bn, PBT -20% to £192.3m. FY25 guidance unchanged. | GREEN (Graham) Trading as Kent Reliance and other brands, this continues to make progress towards its medium-term goals. It's not plain sailing - some metrics are moving in the wrong direction - but I believe that it's in the price at a P/E multiple at 7x next year's forecast earnings. At this sort of level, it doesn't need a return on tangible equity of 20%+. It is currently earning 13.7%, which in my view is more than adequate. | |
| ROSEBANK INDUSTRIES (LON:ROSE) (£960m) | ECI Acquisition Completion & Interim Results | Acquisition completed yesterday at 9x adj EBITDA. ECI trading in line with H1 adj op margin of 15.1% and new business wins +28% YoY. Its leverage is “materially reduced on completion”, improvement plans already underway. | AMBER (Roland) [no section below] Rosebank is the new AIM-listed vehicle setup by the founders of Melrose Industries (LON:MRO). They have just completed their first acquisition, ECI, a US electrical components business with c.$1.3bn annual revenue and mid-teens margins. Rosebank has acquired ECI for “less than $1.9bn”, equivalent to around 9x adj EBITDA. This was funded by a £1.1bn capital raise at £3 per share. Following yesterday’s completion, Rosebank shares will be cancelled and then readmitted to AIM on 21/8. It’s too soon for us to take a strong view on Rosebank, but the same team delivered impressive gains for early shareholders in Melrose, so Rosebank’s progress could be worth following. I’m going to initiate our coverage with a neutral view, but look forward to seeing a consolidated set of accounts (including ECI). |
Costain (LON:COST) (£436m) | SP -15% Rev -17.8% due lower road/rail activity. Adj PBT -4.1% to £18.6m. FY25 expectations unchanged. Panmure Liberum updated forecasts: FY25E EPS: 14.4p (unch) FY26E EPS: 15.9p (unch) | AMBER (Roland) Today’s results flag up a 50% drop in road revenue, following project completions. They also warn that HS2 revenue is being pushed back into future periods as this cash-hungry rail project is “rephased” following a government review. Forecasts from the house broker have left EPS estimates unchanged, suggesting that improved profitability from the growing Natural Resources division will offset weakness in Transportation. I have some sympathy with this view, but today’s numbers imply a hefty H2 profit weighting and my sums suggest profits will fall short unless some further higher-margin work is secured. Objectively, I think there is at least some risk of a profit warning in H2. However, I have to acknowledge the company’s guidance that expectations are unchanged, so I have downgraded our view to neutral today. | |
Kenmare Resources (LON:KMR) (£294m) | Rev +2% w/ avg price/tonne +1% at $326. Adj net profit -71% to $6.1m. Exp stronger H2 volumes. | ||
Concurrent Technologies (LON:CNC) (£156m) | Launched Bragi, CNC’s first NVIDIA graphics card. Developed by partner, provides AI capability. | ||
Jadestone Energy (LON:JSE) (£107m) | Initial oil production >6,000 bopd, ahead of exps for 3,500bopd. Production stabilised at 4,400bopd | ||
Sundae Bar (LON:SBAR) (£36m) | Gateway that brings AI agents directly to businesses and consumers. Users gain a single hub. | RED (Graham) [no section below] I’m RED on this purely because it has a Bitcoin Treasury policy, which might be a little harsh seeing as they’ve only allocated, as far as I can tell, less than £100k to Bitcoin purchases. But that’s not my only reason for caution: this is a startup that only floated in June, raising £2m. Its new product has now launched and I wish it every success, but investors with value instincts will surely be steering clear of it for the time being. The company produced zero revenues in FY Sep 2024 - did I mention that it was a startup? | |
Angling Direct (LON:ANG) (£33m) | Rev +17% (£53.6m). UK LfL +14.2%. Comfortably trading in line with consensus exps. | AMBER/GREEN (Roland) Sales have been H1 weighted in recent years, but this fishing tackle retailer does seem well positioned to meet full-year forecasts, with the potential for an upgrade if H2 growth is strong. While I have some doubts about the very low (sub-3%) operating margin implied by current forecasts, I can see scope for this to become a larger business. To reflect the seemingly strong momentum and Super Stock styling, I’ve upgraded our view by one notch today. | |
Cora Gold (LON:CORA) (£32m) | +1 million oz estimate for flagship project. Ongoing engagement with Mali re: issuance of mining permit. | ||
Inspiration Healthcare (LON:IHC) (£19m) | Rev +41% (£24m). Strong sales momentum to continue into H2. Confident in delivering exps. | ||
Angle (LON:AGL) (£19m) | Blood samples will be processed by ANGLE. Cancer cells to be captured for molecular analysis. | ||
Kakuzi (LON:KAKU) (£18m) | YTD trading in two core crops is in line. The avocado market is well-supplied (i.e. lower prices). | ||
Pebble Beach Systems (LON:PEB) (£17m) | SP +2% Revenue +12%, orders +33%. PBT £0.5m. Good visibility reduces pressure to deliver market expectations. A comprehensive research note from Cavendish describes full-year expectations as having been “derisked”. FY Dec 2025 revenue £11.5m, adj. PBT £2.4m with the same again expected in FY26. | AMBER/GREEN (Graham) [no section below] This small software business issued an excellent trading update last month which saw the shares pop by over 50% in a single trading session. Today’s update keeps up the optimistic tone, with visibility allowing better-than-expected confidence in full-year expectations. The company provides “playout” solutions to the broadcast industry, i.e. enabling TV channels to organise their broadcast schedules. Growth has been very limited in recent years, which says to me that the company is not exposed to high-growth sectors of the media industry, but strong order intake in H1 provides a counter-argument that future profit growth might not be driven simply by cost savings. The shares trade at a very modest earnings multiple and Cavendish highlights that they are aiming to be in a net cash position by the end of 2026. I’m willing to give this the benefit of the doubt and an upgrade today. | |
Mast Energy Developments (LON:MAST) (£13m) | Full construction works planned to commence in Sep, commercial operations in Q2 2026. | ||
OptiBiotix Health (LON:OPTI) (£13m) | Distribution agreement with a well-known direct selling weight management company. |
Graham's Section
Osb (LON:OSB)
Down 1% to 538.5p (£1.96bn) - Interim Results - Graham - GREEN
Pleased to see that I was GREEN on this in March at 429p. It owns Kent Reliance, Charter Savings Bank, and other brands.
It’s still rated as a Super Stock:
Not much growth has been expected, but I have felt that this was priced in at a very cheap earnings multiple!
Key points from today’s interim results:
Loan book grows 1.2% (£25.4bn)
13.7% return on tangible equity
Reiterates 2025 guidance.
As a reminder, here’s the guidance we looked at last time:
Nothing too adventurous here, but the key point was the valuation: it was trading at only 5.4x earnings! Today it’s trading at 7.2x. A company doesn’t need a 20% return on equity to justify that sort of valuation.
As we saw with the preliminary results, it’s not all plain sailing at Osb: many metrics are moving in the wrong direction, but generally in ways that the company itself has predicted and planned around.
For example:
Net interest margin dropping from higher levels down towards the 225bps guidance.
Cost income ratio rises to 40%, reflecting lower income and planned investment in their transformation programme.
PBT falls to £192m (H1 last year: £241m), due to “lower net interest income and a fair value loss on financial instruments”, and an impairment charge.
Despite these negatives, I still think the main point is the more-than-adequate return on tangible equity of 13.7%.
Solvency and safety: CET1 ratio is 15.7%, in line with larger banking peers. Osb has been buying back its own shares using surplus cash.
CEO comment:
The Group’s financial results for the first half of 2025 reflected resilient delivery and progress against the full year guidance. They also demonstrate our day-to-day discipline and focus as we work our way through the two-year transition period to achieve the Group’s medium-term aspirations. We made operational and strategic progress in the period with further milestones completed in the transformation programme.
Market comment: Osb reminds us that the buy-to-let market saw Stamp Duty-related activity prior to tax threshold changes, and lower mortgage pricing also provided a boost. Last year, Osb was “the largest independent Buy-to-Let lender in the UK in terms of gross new lending with a market share of 5.3%”.
Graham’s view
Some of the cheapness has evaporated, but I’m still inclined to think that this offers decent value.
Tangible net assets per share are 540p, so the share price has now caught up with that metric.
On earnings, it’s expected to earn 73p per share this year, rising to 78p next year. So on next year’s earnings, it’s trading at 7x.
The main exposure is to the buy-to-let market, so if you are very bearish on that sector - and I can understand why you might be - then this share might not be very appealing. Buy-to-let is 69% of the total loan book, although they are trying to get this below 60%.
There is a slight uptick in arrears to 1.8% , from 1.7%, which doesn’t seem terribly concerning. Fixed rate deals have matured and rolled over to higher rates, causing a slight increase in stress.
Overall, I continue to have a positive view here. I could downgrade it from GREEN, given that the share price has performed so well in recent months, but I’d like to let this winner run a little longer.
Roland's Section
Costain (LON:COST)
Down 15% to 139p (£370m) - Roland - Half-Year Report - AMBER
Shares in infrastructure construction group Costain have taken a bath this morning. The market seems to have been disappointed by today’s half-year results, despite management leaving full-year expectations unchanged.
Checking back through the archives, Mark and I were both GREEN on Costain in March and June respectively, following positive updates. The shares have been on a tear this year thanks to a (previously) bullish outlook and several broker upgrades:
Let’s take a look to see what’s changed.
Half-year results summary: Costain reports its results in two segments, Transportation (air/road/rail) and Natural Resources (nuclear/water/gas).
It’s the transportation business that is causing today’s headache, in particular the group’s exposure to the troubled HS2 rail project.
Headline numbers show a decline in revenue, which is said to be due to a reduction in revenue from Roads following project completions and “a rephased schedule from HS2”:
Revenue -17.8% to £525.3m
Adjusted operating profit +3.1% to £16.8m
H1 adj operating margin: 3.2% (H1 24: 2.5%)
Adjusted EPS -1.7% to 5.5p
Net cash: £144.9m (H1 24: £166m)
Forward work position: £5.6bn (H1 25: £4.3bn)
These numbers are not all bad. Profits are broadly flat and show the company making progress towards its target of a 4.5% operating margin. CEO Alex Vaughan remains confident of hitting this target in 2025, although I think this is only on a run-rate basis (i.e. perhaps in H2 alone). Costain’s profits have been H2-weighted in recent years.
Profit adjustments in today’s results were minimal and I don’t see any need to dwell on these.
However, a near-20% slump in revenue does need addressing. When we look at the divisional performance of the business in H1, the explanation becomes clear:
Transportation: this is a higher volume, lower margin business for Costain. It’s dependent on large, lumpy projects such as major roadworks. Total revenue fell by 28.9% to £316.1m during the half year, leading to a 47% drop in operating profit to just £7.3m.
Looking at the segmental breakdown, the biggest issue was a 50%+ fall in road revenues as major projects completed and were not immediately replaced:
The other issue was a 23.2% fall in rail revenue, which the company says was primarily because of the rephasing (delaying) of some the HS2 programme. This was mentioned as a risk with the full-year results but does not seem to have been mentioned in subsequent updates until today. My impression is that this is likely to be an ongoing challenge, at least for the remainder of this year:
The HS2 programme continues to be navigating a change in its programme delivery strategy with an integrated programme being developed.
Natural Resources: in contrast, performance in this higher-margin business was quite strong, with much higher margins:
These results confirm my feeling that this side of the business has some strong political and structural support at the moment; no one can question the need for upgrades to the UK’s water and energy infrastructure.
Consultancy: another positive, in my view, is the continued development of Costain’s consultancy services. These cover both transportation and natural resources and generated almost 17% of revenue in H1.
By its nature, consultancy should be higher margin than construction. In addition, successful consultancy work will presumably leave Costain well positioned to win work on related projects..
Outlook
CEO Vaughan says government plans for infrastructure spending mean that “there is real momentum in our chosen markets”.
He leaves FY25 and FY26 expectations unchanged today, while warning of some potential challenges in near-term trading conditions:
Whilst we remain mindful of the near term macro-economic and geopolitical environment and the potential consequences of government spend phasing decisions, the improvements in market outlook and the Group's positioning and resilience underpin our confidence in delivering on our expectations for further progress in FY 25 and FY 26, with a step change in performance expected in FY 27 and beyond.
With thanks to Costain’s house broker, Panmure Liberum, we have access to updated forecasts today.
PanLib has cut its revenue forecasts for both Transportation and Natural Resources this year. Costain’s full-year revenue is now expected to fall by 11% to £1,109m, compared to expectations for a flat result previously.
However, profit margin estimates for the Natural Resources business have been lifted to improve the expected outlook for profits this year. This has enabled the broker to leave its earnings forecasts unchanged today, citing stronger margins and profit contributions in H2 from the Natural Resources division:
FY25E EPS: 14.4p
FY26E EPS: 15.9p
FY27E EPS: 17.7p
After this morning’s share price ‘rephasing’, these estimates put Costain on a FY25E P/E of 9.7, dropping to 8.7 in 2026.
Roland’s view
PanLib’s earnings forecasts are slightly above the existing consensus estimates shown on the StockReport. But whichever number we choose, Costain’s H1 adjusted EPS of just 5.5p means that there needs to be a 60%+ H2 profit weighting for these estimates to be delivered.
To get a feel for how likely this is, I’ve used the H2 secured revenue numbers provided today to model H2 profits and estimate the potential shortfall.
At a group level, management says £490m of revenue was secured for H2, meaning that 90% of full-year forecast revenue was secured. My feeling is that this means 90% of the revised, lower revenue forecasts.
Helpfully, this figure is also split out segmentally:
Transportation H2 secured revenue: £275.3m
Natural Resources H2 secured revenue: £218.4m
Assuming each division achieves the same operating margins as in H1, my sums suggest this work should generate an adjusted operating profit of £23.1m in H2.
Adding this to today’s H1 figure of £16.8m gives c.£40m. That’s 18% below Panmure Liberum’s FY25 EBIT estimate of £48.8m.
So can Costain still meet FY25 forecasts?
If margins improve in H2 and if the remaining 10% of revenue to be secured in H2 is secured (ideally in Natural Resources), then I think Costain might still meet forecasts.
However, objectively I think there has to be some doubt about this.
Ultimately, I think Costain is a relatively good business operating in some potentially attractive markets. But there’s no escaping the company’s dependence on large, low-margin work.
While the profitability of the mix may be improving, the reality is that big lumpy public infrastructure projects sometimes get delayed or suffer other problems. Political exposure is also a factor here.
While the net cash position of £145m seems impressive, the reality is that this is needed to support the group’s operations and is not surplus to requirements – note the measly 20% dividend payout ratio.
For these reasons, Costain isn’t a business I’d pay a high multiple for. I would argue that the P/E of 13 seen ahead of today’s drop had probably left the stock looking up with events, so perhaps some of today’s fall is due to profit taking.
A forward P/E of under 10x looks more reasonable to me, but I think there’s still some risk we could see a profit warning later this year.
I’m going to downgrade our view to neutral today, as I don’t think it’s sensible to take a strong view either way at this point. AMBER
Angling Direct (LON:ANG)
Up 6% to 48p (£35m) - Roland - HY Trading Update - AMBER/GREEN
Angling Direct plc (AIM: ANG), the leading omni-channel specialist fishing tackle and equipment retailer, provides an update on trading for the six months ended 31 July 2025 ('H1 26').
Megan covered Angling Direct’s FY25 results in May and took a neutral view, noting continued low profit margins.
Today’s half-year trading update looks pretty reassuring to me and confirms that the group is “comfortably trading in line with full year consensus market expectations”.
These are for revenue of £97.7m and adjusted EBITDA of £3.75m – that implies an EBITDA margin of less than 4%, which is uncomfortably low, in my view.
H1 trading update: Angling Direct’s H1 revenue certainly seems to be consistent with full-year expectations, with double-digit gains in the UK and more modest growth in Europe:
H1 revenue of £51.1m represents 52% of full-year forecasts, but recent years have shown some H1 weighting to sales due to the peak summer period, so I can see why the company might not be upgrading today.
In today’s commentary, the company reports like-for-like UK sales growth of 14.2% and continued growth in its MyAD loyalty club, which now has over 500k subscribers (Jan 25: 409k).
Store footfall is said to have improved. The company has opened new stores in Chester and Bradford so far this year, leaving it with 55 UK stores.
Net cash was £12.5m at the end of July, up from £12.1m in January.
£1.7m has been spent on share buybacks since December 2024, reducing share count by 6%.
Roland’s view
There’s no mention of profits or margins today, but if we use the consensus figures provided by the company as a guide, then the group’s adj EBITDA margin is expected to increase from 3.7% to 3.8% this year.
Assuming a similar performance to last year, I estimate this could drop down to a real operating profit of about £2.2m, giving an operating margin of less than 2.5%.
While sales are growing, Angling Direct doesn’t seem to be having much success with rebuilding its margins:
Although the group’s net cash position is reassuring and accounts for a third of the market, cap, such low profitability is offputting for me:
I can’t help feeling that the shares might be up with events, despite trading slightly below book value:
One caveat to this is that today’s update suggests to me that a further upgrade to earnings might be possible later in the year.
I am also encouraged to see the stock appear in the Tiny Titans screen – this screen has an impressive record and is one of my favourites for interesting small cap growth opportunities:
With small caps such as this, I think it’s important for investors to DYOR. It might be worth digging deeper and modelling potential profit and cash generation as the business expands.
Northern European countries could potentially provide a big growth opportunity if the company can capture market share in the way it’s done in the UK – but I don’t know what the competitive pressures might be.
For now, I am going to upgrade our view by one notch to AMBER/GREEN, reflecting the solid StockRank, strong H1 sales growth and confident outlook.
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