Good morning!
Quite a short list this morning, so we'll see if we can get this report finished slightly earlier than usual!
Wrapping it up there, thanks!
Spreadsheet accompanying this report: link (last updated to: 11th August).
Companies Reporting
| Name (Mkt Cap) | RNS | Summary | Our view (Author) |
|---|---|---|---|
Prudential (LON:PRU) (£25.1bn) | Adj PBT up 6% to $1,366m. H1 results in line, confident outlook, “on track” for 2027 objectives. | ||
JD Sports Fashion (LON:JD.) (£4.8bn) | Group LFL sales -3.0% with improved trend in N.Am. Expect FY26 profit in line with exps. (LFL % corrected at 08.30) | AMBER/GREEN (Roland) Today’s update shows negative LFL sales being offset by a positive contribution from new space and updated stores. Acquisitions are also providing a further boost to the top line. My sums suggest the H2 weighting to profit could be greater than last year, perhaps injecting some uncertainty given the consumer environment. However, with the stock trading on just eight times FY26E earnings, I think the shares are cheap enough to justify a moderately positive view. | |
Hochschild Mining (LON:HOC) (£1.6bn) | SP -15% | AMBER/RED (Roland) [no section below] I’m relieved to see I went AMBER/RED on Hochschild when this gold and silver miner flagged up problems at its Maria Rosa mine in June. Today we have the promised update to FY guidance (see left). In June, I estimated a possible 10% reduction to full-year production, but today’s new guidance suggests a mid-point reduction of 16%. That’s slightly more than I expected. There’s also a corresponding increase in costs per ounce, which is likely to hold back profit in H2 if gold and silver prices remain stable. The sharp rise in costs this year means that Hochschild will be more exposed to any weakness in gold and silver prices than it might otherwise have been. Although this could be a low point for the business operationally, I think there’s still some risk of further disappointment relating to production and costs. For this reason, I’ve left my cautious view unchanged today. | |
International Personal Finance (LON:IPF) (£462m) | Still in discussions with BasePoint. Deadline for firm offer has been extended to 5pm 24 Sept 25. | PINK (Graham holds) [no section below] Watching this with great interest as a shareholder, I see that discussions continue four weeks after the original announcement of a planned takeover. Despite making a fast return on my investment here (at least on paper - I haven’t sold yet!), the takeover price did not seem all that generous to me. It was a 25% premium to the prevailing share price, which tends to be around the minimum acceptable premium that shareholders will accept, and a P/E multiple of only around 7-8x. IPF shares currently trade at a 6.5% discount to the purported takeover price, or an 8% discount if we include the value of the interim dividend (the shares are marked ex-dividend tomorrow, so buyers today will still get this dividend). An 8% discount implies either a little scepticism around whether or not the deal will go through, the potential for a long delay, or possibly a bit of both. I’m not familiar with the New York-based potential buyer and information is sparse online, so I’m unable to judge their ability to fund the takeover. I do think that the mooted price (220p plus the dividend) is too cheap, so I’m perfectly content with the deal being delayed. | |
Tracsis (LON:TRCS) (£107m) |
FY25 in line: rev c.£82m + adj EBITDA c.£12.6m. FY26 exps unchanged for “modest growth”. Core rail business remains “constrained” by CP7 funding restrictions, with hardware volumes below historic levels. | AMBER (Roland) [no section below] I was neutral on Tracsis in February and it seems that little has changed since then. Results for the year ended 31 July are expected to be essentially flat, with only modest growth forecast for the year ahead. Stockopedia’s algorithms have upgraded from Falling Star to Neutral since February and my view on the situation is similar – I think Tracsis might be positioned for return to growth, but I don’t have a strong conviction on this. In the meantime, the valuation looks fair to me on a P/E of 13. | |
Victoria (LON:VCP) (£84m) | €612m of 9.875% Senior Secured Notes due July 2029, and £130m credit facility. | RED (Graham) [no section below] Following up on recent coverage, Victoria confirms that the refinancing has gone through, as the vast majority of 2026 noteholders were happy to wait until 2029 for maturity. Look beyond the announcement, however, and you’ll find criticism at S&P: they observe that the position of some lenders, namely the 2028 noteholders, has been compromised without their full consent or participation. They say that the exchange is “tantamount to a default” and they lower Victoria’s credit rating temporarily to “SD” (selective default). More positively, they expect to raise their ratings on Victoria in the coming days, bearing in mind the new financial structure. I continue to view the equity here as extremely risky, and I’m not even sure how the bondholders are able to sleep soundly at night. | |
Journeo (LON:JNEO) (£63m) | Supply, installation and maintenance of passenger info system to a large local authority in S. England for its bus improvement plan. Additionally, JNEO has received orders for airport information systems at LBA and Dublin Airport. | GREEN (Roland) [no section below] I’ve been a fan of this small-cap technology group (and NAPS stock) for a while. Today’s wins suggest to me that Journeo is maintaining the steady momentum that’s helped the stock to double over the last two years. However, it’s not clear to me if these contracts are already priced into existing forecasts. It may also be worth noting that previous Cavendish estimates show earnings remaining broadly flat this year, versus 2024. With Journeo now trading on a FY25E P/E of 15, the shares aren’t quite as cheap as they were a few months ago, either. I might be tempted to downgrade to AMBER/GREEN if it wasn’t for Journeo’s large net cash balance, which stood at £13m at the end of 2024. Adjusting for cash gives a P/E of 12, and this money has the potential to support a meaningful acquisition or perhaps even a shareholder return. With Super Stock styling and a StockRank of 94, I’m happy to maintain our positive view ahead of September’s interim results. | |
Anexo (LON:ANX) (£39m) | 78% shareholder will vote in favour of the proposals, so it is expected they will pass. | PINK (Graham) [no section below] This should just be a formality. DBAY Advisors, who already own 75% of the shares, will take this private. Under the terms of the takeover offer, shareholders who have not yet cashed out look set to receive 60p in loan notes, accruing interest at 15% (PIK interest, not cash interest), and maturing five years after issuance. I’d be much more interested in cashing out, and it looks to me like the takeover offer has been structured to incentivise cashing out. | |
Aptamer (LON:APTA) (£22m) | New fee-for-service revenue stream. Immediate monetisation with minimal upfront investment. | ||
Fusion Antibodies (LON:FAB) (£17m) | Three follow on projects for $460k. Collaborative R&D with a US biotech company. | ||
Zenith Energy (LON:ZEN) (£16m) | Additional 10 hectares of farmland in Lazio for development of a 5MWp solar project. €650k. |
Roland's Section
JD Sports Fashion (LON:JD.)
Up 3% to 97p (£4.9bn) - Roland - Q2 Trading Statement - AMBER/GREEN
Improved LFL sales trend for Q2 in North America; Europe & UK affected by tough prior year comparatives due to Euro 2024 tournament
Today’s second-quarter trading statement from the footwear and sports fashion retailer paints a mixed picture, in my view. Full-year expectations are unchanged today, but this footwear and sports fashion retailer is certainly facing some headwinds from softer consumer spending, tough competition and potentially from US tariffs.
Despite this, CEO Régis Schultz is confident enough to announce a new £100m share buyback today.
Q2 trading: JD’s sales numbers show a decline in like-for-like sales in all the group’s core markets. However, organic sales (including new space and remodelled stores) are positive, suggesting the company may still be gaining scale and market share:
In general, JD says it saw softer sales in footwear in H1 due to “end of cycle for key product lines”. Sales of clothing were stronger.
The company says it’s being disciplined when it comes to discounting, but admits to some pricing pressure. Overall gross margins fell by 0.6% in H1, including the Hibbett and Courir acquisitions.
Within the continuing business, gross margins were 0.4% lower due mainly to “controlled price investments in the online offer” – i.e. price cuts and discounting.
Customers are described as resilient but “very selective on their purchases”.
North America (36% of Q2 sales): the company says product launches that were deferred in Q1 helped to support an improved sales trend in Q2 – albeit LFL sales were still negative.
Pricing and gross margins were said to be “well managed overall”.
The group is continuing to consolidate acquisitions, with the conversion of Finish Line stores to JD branding and City Gear stores to DTLR and Shoe Palace fascias.
A multi-fascia distribution centre is due to go live later this year, as are updated ecommerce platforms.
Europe & UK (34% and 26% of Q2 sales, respectively): management says both regions had “tough comparatives” from the Euro 2024 championships last summer. However, checking back to last year’s Q2 statement shows UK LFL at -0.8% and Europe LFL at 3.0% – not exactly blockbuster growth.
I’d speculate that this year’s weaker Q2 figures for Europe and the UK are probably more of a reflection of consumer spending trends than anything else.
Outlook: JD’s results are generally weighted to H2 and the company says it expects to generate c.60% of adjusted pre-tax profit in the second half of this year.
For comparison, my sums suggest JD generated 56% of its profit in H2 last year, so there could be a small increase in H2 weighting this year.
The mood music certainly still sounds cautious:
On overall trading conditions through H2, we remain cautious given the continued strains on consumer finances, unemployment risk, and the ongoing shift in the footwear product cycle
The company also says that while it doesn’t expect a direct impact from US tariffs, it’s still assessing the potential impact of tariffs on its main suppliers.
Despite this, full-year adjusted pre-tax profit is still expected to be in line with expectations. A note on JD’s website tells me that the consensus estimate for adjusted PBT is £885m, with a range of £852m to £915m.
A result of £885m would represent a fall of 4% from the FY25 figure of £923m.
Roland’s view
JD is clearly under some pressure from sluggish consumer spending and geopolitical factors. However, this remains a well-scaled retailer with £12bn of annual sales and an attractive share of its main markets.
Earnings have trended gently lower this year and the latest FY26 forecasts are around 20% lower than they were in August 2024:
However, JD’s historic quality metrics have been satisfactory and the company remains highly cash generative, as Mark discussed in his Stock Pitch earlier this year.
The shares also trade on an undemanding valuation, with a forward P/E in single digits:
Megan was AMBER/GREEN on JD when she reviewed the company’s full-year results in May.
While I feel there’s still a measure of uncertainty attached to the outlook for H2, I think today’s trading statement is strong enough to allow me to leave this view unchanged today. AMBER/GREEN.
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