Daily Stock Market Report (Thur 28th August 2025) - ULTP, PPH, DRX, HTG, SCT, MACF

Good morning!

Today's Agenda is complete.

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Spreadsheet accompanying this report: link (last updated to: 11th August).

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Companies Reporting

Name (Mkt Cap)	RNS	Summary	Our view (Author)
South32 (LON:S32) (£6.0bn)	2025 Financial Results and Outlook	Adj. EBITDA +7% ($1.9bn), adj. earnings +75% ($666m). Unch. guidance except for two sites.
Softcat (LON:SCT) (£3.1bn)	Year End Trading Update	FY25 ahead of expectations: high-teens gross profit growth & mid-teens operating profit growth (previously: low-teens). FY26 guidance: low double digit gross profit growth, high single digit operating profit growth BUT this excludes the impact of losing some large projects that occurred in 2025. The unadjusted forecast is for low single digit growth in operating profit.	GREEN (Graham) [no section below] Delighted to see another earnings upgrade from this software reseller. We already had an upgrade in May and before that in March. Well done to Roland for steering us towards a positive stance on this one. The company is now heading for mid-teens operating profit growth in the year just finished, and it guides for low single digit operating profit growth next year. Perhaps this will also turn out to be an underestimate of their potential? The founder still has an enormous 32.5% stake even though he is fully retired. My sense is that current management is still running it with a conservative ethos, almost like a founder would: the company holds a healthy cash balance (£141m at the half-year), with high cash conversion (111% at the half-year), and a steady dividend stream.
Drax (LON:DRX) (£2.5bn)	Notification of Investigation by FCA	SP -10% Investigation into statements re: biomass sourcing & 2021, 2022 and 2023 Annual Reports.	BLACK (AMBER/RED) (Graham) [no section below] This is the first time I’m covering this one, and will use the BLACK coding for news of a regulatory investigation into the company’s source of biomass fuel. Drax was in the headlines earlier this year when a former employee - a lobbyist - alleged that she was sacked after telling her bosses that Drax was “misleading the public, government and its regulator’” in relation to sustainability. This all came after the BBC said back in 2022 that Drax was using wood from “primary forests” in Canada, i.e. healthy wood rather than sawdust. I don’t have any particular view on the investment merits of Drax but I’ll put AMBER/RED on it today to reflect the risks that go with an FCA investigation into multiple annual reports: risks in terms of fines, public perception and underlying profitability. The stock is “cheap” against earnings but a power station should trade cheaply, particularly when there are question marks over it from the financial regulator. The company already paid a £25m fine last year after an Ofgem investigation into its wood sourcing practices from April 2021 until March 2022. The current FCA investigation relates to the period from January 2022 to March 2024.
PPHE Hotel (LON:PPH) (£684m)	Interim Results	“Solid” revenue (LfL +1.3%), but lower EBITDA margins. Outlook: EBITDA at similar level to FY24.	BLACK (AMBER) (Graham) Downgrading my view on this by two notches after a worsened outlook that is primarily caused by weaker room rates. The company has managed to boost occupancy further and also says that it mitigated labour cost inflation to only 3% vs. an initial estimate of 7%. But room rates have declined and I have a few other reasons for caution. The financial statements remain very complex, with a Master’s degree in accounting and several hours needed to unpack them fully. That’s not the company’s fault, in my view - it’s the nature of the business - and I was willing to look past it when I had little doubt that trading momentum was positive. For now, however, I think a neutral stance makes the most sense.
Chesnara (LON:CSN) (£662m)	Half-year Report	Outlook: strong financial outcomes. H1 loss £5m; mgmt focus on £37m of cash generation.
Hunting (LON:HTG) (£548m)	Interim Results & Launch of Share Buyback	Rev +7%, adj. PBT +21% ($44m). $40m buyback. Market uncertainty but reiterate current guidance.	AMBER/GREEN (Mark - I hold) Although the company re-iterates their guidance today, a cautious outlook means I moderate our view today. The risks appear to be largely ones of timing, and the long-term recovery story remains intact. The renewed focus on shareholder returns via growing dividends and buybacks is welcome, but not new news. The shares remain modestly valued, particularly if the announced restructuring activities deliver the targeted 15% ROCE, so it makes sense to maintain a broadly positive view, despite caution over the outlook.
Gulf Keystone Petroleum (LON:GKP) (£393m)	Half Year Results	YTD gross average production of 40.6 kbopd. Revenue +17% to $83.1m, FCF -8% to $24.6m, Adh. EBITDA +13% to $41.1m. Tightened 2025 gross average production guidance to 40-42 kbopd, from 40-45 kbopd, primarily reflecting the production losses from recent temporary disruptions.
Next 15 (LON:NFG) (£264m)	Intention to permanently cease operations at Mach49	Mach49 to permanently close, will be reported as discontinued operations. Arbitration entered into with the former members of Mach49 in relation to the remaining earnout payment. “The Group’s guidance for its continued operations for FY26 remains unchanged, with adjusted operating profit for the year remaining in-line with market expectations.”
Intuitive Investments (LON:IIG) (252m)	Equity fundraise of £3.7 million	£3.65m raised at £1.00 per share to be invested in Hui10 Inc., a technology company leading the digital transformation of the Chinese lottery and IIG's largest investment.
Zotefoams (LON:ZTF) (£205m)	Innovation Initiatives and Executive Appointment	Formed a Global Innovation Hub in the UK, established a dedicated Footwear Innovation Centre in South Korea and appointed first Chief Strategy and Innovation Officer, Simon Comer, formerly Group Strategy & Delivery Director.
Macfarlane (LON:MACF) (£151m)	Half-year Report	Revenue +13% to £146.6m, Adj PBT -32% to £4.96m. Adj. EPS -30% to 3.78p. “The full year outlook for 2025 is in line with market expectations.”	AMBER (Mark) This company has a good long-term record of growth via acquisition. However, weak market conditions and cost rises leave them with largely static EPS for an extended period, despite multiple acquisitions. They are on a modest multiple, but perhaps one they deserve until they can show they can return to historical growth trends. In the meantime we have the risk of a further profits warning unless everything goes right on revenue, margin and costs in H2. Their ability to improve their outlook via acquisition looks a little constrained until they pay down the costs of previous purchases. On balance, I am keeping the neutral view for the moment.
Serabi Gold (LON:SRB) (£149m)	Results to 30th June	H1 Gold production +14% to 20.545koz. EBITDA +102% to $26.3m. AISCC flat. $30.4m cash balance (31 Dec: $22.2m).
Avingtrans (LON:AVG) (£146m)	Booth Industries secures £8.5m HS2 & TfL contracts	“Booth Industries, has secured a contract worth in excess of £7.5 million over 4 years to supply high-integrity steel doorsets for HS2's Old Oak Common station. In addition to this, the Company has been awarded a strategically significant multi-year contract to provide maintenance services for the tunnel doors on the Elizabeth Line for Transport for London, worth up to £1 million in total.”
Ondine Biomedical (LON:OBI) (£73m)	Result of Fundraise & TVR	Gross proceeds £11m, net £10.35m raised at 15p per share.
Carr's (LON:CARR) (£70m)	Update on NZ Strategic Distribution Partnership	“Since being appointed as Carr's Group's third party distributor for New Zealand in November 2024, the partnership has proved successful, with operational transition and customer migration benefits ahead of schedule.”
Ultimate Products (LON:ULTP) (£56m)	Senior Management Changes	Internal hires to CCO, Chief Supply Chain Officer, COO, Chief Product Officer, CMO. Simon Showman, founder and current Chief Commercial Officer, transitions to the role of President and Founder	AMBER/RED (Mark) [no section below] For a company that probably has more brokers than any other UK microcap, they appear to be aiming to have more board members than any other, too. Today, five internal positions were elevated to board level. This can be taken two ways. Either this is a sign that they are retaining and developing their internal staff, or evidence of further bloat of the type that means they have failed to react to weakening market conditions leading to their 2026 EPS estimates falling 67% this year. The unanswered question is are they being paid more for assuming board positions? Perhaps bigger news is the change of title for founder Simon Showman, this may be a sign that he is being sidelined in an increasing move away from discount stock buying to branded products. Either way, these board changes aren’t likely to make a material difference to the financials.
Mast Energy Developments (LON:MAST) (£19m)	Half-year Report	Revenue +260% to £727k. Loss +14% to £559k. Net debt excl. leases of £4.4m prior to £5m gross equity raise.
Solvonis Therapeutics (LON:SVNS) (£17.5m)	Exclusive collaboration with CSO Professor David Nutt	Professor Nutt's role increases to two days per week (40% FTE), his commercial CNS drug discovery and development expertise will be applied solely to Solvonis' programmes. He will serve as Interim Chair of the SAC. Settled outstanding liabilities of £286,681 through the issue of 141.9m new shares. 81.7m at 0.13p and 60.1m at 0.3p.
Fusion Antibodies (LON:FAB) (£17m)	Contract Win	Selected to proceed with a new humanisation project under an existing Master Service Agreement with a US based specialty division of a global pharmaceutical company. No figures given.
Cambridge Cognition Holdings (LON:COG) (£11m)	Interim Results	Order book +12% to £16.4m, Revenue -23% to £4.3m, LBITDA £0.4m (24H1:£0.1m). Cash £0.4m. Received expressions of intent from certain investors to subscribe for 4.1m new shares at 27.25p per share, a 4.8% premium, raising £1.1m gross. “...On track to deliver growth and achieve our core objective of sustained profitability and cash flow.”

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Graham's Section

PPHE Hotel (LON:PPH)

Down 11% to £14.52 (£615m) - Interim Results - Graham - AMBER

PPHE Hotel Group, the international hospitality real estate group which develops, owns and operates hotels and resorts, announces its unaudited interim results for the six months ended 30 June 2025.

I’ve been positive on this one (e.g. see here) for a few years, but it has disappointed the market this morning with a profit warning.

Going through the archives, it looks like I first turned GREEN on it in June 2023, at a share price of £11.12.

Share price momentum has generally been positive since then:

However, recent trading has been more difficult.

Key points from today’s interim results:

• Like-for-like revenue +1.3%

• Total revenue +4.7% including hotel openings.

• RevPAR (revenue per available room) +1.1% like-for-like.

RevPAR is the product of occupancy and room rates: fill more rooms at higher rates, and RevPAR grows strongly.

The occupancy side of the equation is doing fine: up from 70.6% in H1 last year, to 73% in H1 this year, on a like-for-like basis.

But room rates are softer, down 2.2% on a like-for-like basis to £149.30.

Combine that with cost inflation (primarily employment-related costs, I think) and it results in a disappointing EBITDA performance, down 4.9% (like-for-like) to £45.9m.

For a business like a hotel, EBITDA is a much inflated figure compared to bottom-line profitability; the actual pre-tax loss is £10m (H1 last year: loss of £1m). The company also provides an adjusted PBT figure which is a £4m loss.

So it seems there is little for investors to crow about in these figures.

Management’s analysis:

"In the first half, we increased our occupancy levels whilst proactively managing room rate in an industry which continues to be impacted by the volatile macroeconomic and geopolitical environment…

Overall, revenue performance in the first half has been solid, although normalising rates and higher social security costs have impacted EBITDA margins."

Many other measures of profit are provided. In particular, there are “EPRA earnings” and “company adjusted EPRA earnings”. I don’t think readers would forgive me if I devoted several paragraphs to deciphering these, as they include a long list of adjusting items.

I will say that I think Company Adjusted EPRA earnings is quite forgiving but it is potentially a useful metric. It starts with net income, and adds back in depreciation and amortisation, but it importantly then subtracts maintenance capex. So the result of this is that as far as capex/depreciation goes, it tries to only exclude the effect of expansion or growth capex, i.e. hotel opening costs. That is a useful way of looking at company performance, in my book.

But many other adjustments go into this calculation. All told, there are twelve categories of adjustment that go into creating Company Adjusted EPRA earnings. So I do think it’s reasonable for private investors to approach this number with some trepidation. I’m going to listen in to their IMC meeting later this morning to hopefully boost my understanding of the company’s view of profits.

I did speak with their CFO Daniel Kos last year (notes typed up here) and I asked if we might see cleaner accounts from the company - to be fair, that is not something he promised would happen!

Over the last twelve months (not just H1), PPHE says its Company Adjusted EPRA earnings were £49.9m, versus actual earnings to shareholders of £21.9m.

The Outlook is a downgrade to expectations:

Whilst occupancy is an important contributor to RevPAR, margins remain sensitive to movements in room rates and cost inflation. The combination of the short-term trading trends and the previously announced lower contribution from art'otel London Hoxton, means that the Board expects the EBITDA* outcome to be at a similar level to FY24.

Estimates: thanks to h2Radnor for publishing a note on this. Their FY25 EBITDA forecast reduces by 8% to match the outlook shown above. New EBITDA forecast £136.6m. They also reduce FY26 and FY27 forecasts by 12% and 11% respectively.

Balance sheet: EPRA net asset value remains very high at nearly £1.2 billion, giving a value per share of £28.07.

Graham’s view

I’m going to downgrade my stance on this to AMBER for a few reasons:

• While I knew that the company was economically sensitive, I thought it might be able to continue its positive trading momentum for a little longer.

• Employer tax changes have been mitigated and yet the company has still been forced to issue this profit warning. This shows how tough the external environment is: employment taxes are only one element.

• I love clean accounts; I’ve been willing to make an exception for PPHE on the basis of its strong balance sheet value (looking at NAV) and trading momentum, but I can’t do that indefinitely.

• Speaking of the balance sheet, net debt has risen to £788m. LTV (calculated using EPRA methods) is thought to be only 34.5%, so I’m not concerned about solvency, but this does reduce the company’s flexibility.

While I still have a generally positive impression of the company and would like to be positive on the stock again in due course, a neutral stance makes the most sense to me today.

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Hunting (LON:HTG)

Down 2% to 327p - Interim Results & Launch of Share Buyback - Mark (I hold) - AMBER/GREEN

The market seems to have no idea how to react to these results this morning, with the price yo-yoing between up a few percent and down a few percent. The results summary show a half that is much more in line with H2 last year, underlining the continued recovery in the business::

Adjusted EPS is up 23% half on half. These are adjusted numbers, though, and it is quite annoying to have to click through to a separate pdf to see the details:

While my usual critique remains - the company want us to include the benefits of restructuring, but exclude the costs - these do look to be genuinely one-off, as there were no adjustments in H1 last year.

In terms of mix, this is a balanced business between North America and the rest of the world:

However, the trend of increasing international business is as much about a slow decline in North America as a rise elsewhere. Part of this is the continued decline in rig count in North America, as shale drillers struggle to access capital to grow production. However, it is worth noting that their OCTG delivery bucking rig count trend. (OCTG stands for Oil Country Tubular Goods, which are high-strength, durable steel pipes used in the oil and gas industry for drilling, completing, and operating wells)

The restructuring has focussed on two areas. Firstly, Hunting Titan, which specializes in perforating systems and accessories, has seen site closures and redundancies in order to restore its EBITDA margin, and these results show further progress here:

Secondly, a further EMEA restructuring recently announced reflects the state of the UK Oil & Gas industry. Four operating sites will be closed, leaving just one in Europe. Headcount reductions target 167 FTE’s in a year’s time from the current 248. They say they are not exiting the UK but business wins are tending to be with the likes of Enpro who specialise in decommissioning. These changes should make the EMEA business profitable next year.

Returns on Capital

Revenue recovery from the COVID trough, plus the cost savings have seen a marked improvement in ROCE:

They say that the current 10.5% in these results is roughly equal to the WACC. However, they target a further recovery to around 15%. Partly, this will be achieved through M&A, but also the focus on cost reduction. For example, EMEA performance represented a 5% drag on these figures. Clearly improving EMEA to wider group levels would give them this boost.

One factor that helps improve ROCE is the reduction in working capital, an in particular inventories:

In H1, the ratio of net working capital to revenue was down to 34% from 46% in H1 last year. However, this was up from 29% for 24H4, which benefited from contracts with the Kuwaiti Oil Company, that have particularly favourable terms. They are guiding 25H2 to be consistent with H1. However, this has scope to improve next year if they win further KOC business.

Revised Capital Allocation

One of the biggest changes recently, although one that has already been flagged in previous announcements , is a revised capital allocation strategy. With the company generating decent free cash flow and back into a net cash position, they are increasing the focus on dividends and buybacks:

The interim dividend is raised by 13% to 6.2c and the company guides that they will return $200m in dividends by 2030. However, they also start a $40m buyback today. When I looked at Hunting in The Week Ahead, I calculated that this could reduce the free float by around 15% at current prices.

Acquisitions

Even with increased shareholder returns, M&A remains a key focus for the business. They have been selling off capital intensive parts of the business such as Rival Downhole Tools, and reinvesting in what they view as capital light growth areas. So far, they have focussed on acquiring private businesses where they consider valuations more favourable. Organic Oil Recovery was bought for $18m and they are targeting $100m of sales from this business. The large acquisition is actually Uk-based, although its exposure to the UK O&G industry is minimal. Here is how they describe FES:

The current order book isn’t huge but they consider the addressable market very large for what is a capital light, strong IP business. On their results call they made the point that while not every FPSO in the world will need the titanium stress joints from their existing Hunting Subsea Technologies, due to water depth or other factors. However, every FPSO is a potential marketplace for FES. The market access and cross-selling opportunities should be large.

Outlook:

Their order book continues to decline, which is a little worrying. Although they say this doesn’t include Hunting Titan:

Their tender pipeline remains over $1bn of work which gives them confidence in the longer term picture. However, in the short term they sound quite guarded:

In the near term, the geopolitical and macro-economic outlook remains choppy, given the actions of the OPEC+ cartel, coupled with some project deferrals reported by our clients. However, growth in the North American market continues to be pursued as longer lateral wells are drilled, demanding higher volumes of OCTG, coupled with a strengthening in gas-related drilling observed in a number of basins. Large OCTG tenders are likely to be issued across the Middle East in the second half of the year, while Subsea growth in South America and West Africa continue to provide opportunities.

They expect a stronger H2 due to better margin mix, and reiterate their guidance:

In summary, while there is a level of market uncertainty that may impact the Group's full year outturn, the Directors reiterate current guidance, underpinned by the efficiencies achieved as part of the Group's ongoing restructuring programme, with a full year EBITDA of between $135-$145m, supported by a strong balance sheet and net cash.

However, given that they did $70m EBITDA in H1, the midpoint of their guidance suggests a flat H2 on probably declining revenue. They say that in the short term, the subsea market looks weak, but this is largely timing with significant sales potential for 2026-2030 in growth areas such as Guyana. Subsea margins are down on this weakness, partly due to volume but also mix. Both of these should normalise and they still see this as a 20% EBITDA margin product line.

Valuation:

Compared to the general market this is a cheaply-rated business, but it compares less favourably with other Oil & Gas Equipment providers:

Management clearly believes that the share price undervalues the medium-term prospects, hence the share buyback.

One of the big attractions is that this trades close to book value, with at least half that value liquid assets such as cash and net working capital. I don’t tend to include tax assets in my calculations, and this means that my calculation doesn’t look quite as good value as the figures on the Stock Report:

However, this still indicates potential undervaluation.

Mark’s view

I had been a happy buyer of Hunting a few months ago, as the discount to TBV seemed to indicate significant undervaluation for a profitable recovering business. Since then the shares have risen, largely on the indication that the company is willing to increase shareholder returns via accelerated dividends and a buyback. However, the rise hasn’t been backed by improvements in EPS trends:

And the short-term outlook highlights the risks. These do largely seem to be issues of timing, rather than a fundamental deterioration in prospects, though. The company is targeting a 15% ROCE from the current 10.5%, which if achieved, together with modest revenue growth would make the shares look very cheap on earnings. However, there can be a big gap between management aspirations and reality. In this case, this looks achievable as the planned restructuring of a number of areas that are currently loss-making, would have a big impact on the bottom line and deliver these targeted figures. We had this as GREEN recently, but given the very cautious H2 outlook statement, I think we should moderate our view slightly to AMBER/GREEN, as the risk of a short-term warning looks to have increased, even if the long-term recovery story remains intact.

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Macfarlane (LON:MACF)

Flat at 96p - Half-year Report - Mark - AMBER

The headlines reveal reasonable revenue growth, but all the profitability measures have gone backwards:

The adjustments are fairly standard, amortisation of acquired intangibles and changes to contingent consideration. However, given that a charge to the income statement implies that the contingent consideration has gone up, this does seem discordant with a core business that has struggled. This highlights the problem with contingent consideration - companies have to pay for improving prospects of an acquisition even if the rest of the business struggles.

The company does both distribution and manufacturing. For distribution, revenue is flat:

Lower gross margin here suggests that they have had lower volumes on slightly higher pricing. Here they say:

…this reflects the timing of the pass-through of increased input prices, the competitive environment in a weak market and one of our second-tier corrugate suppliers going into administration.

SG&A costs have increased, too, and the combined impact is a big drop in profitability.

In manufacturing, things look a little better:

However, the growth here is all from acquisitions:

…organic growth of 0.3% including increases in internal supply to Distribution.

The scale of the acquisitions in this BU makes it hard to separate out the true impact of margins versus costs. Also impacting the bottom line is net finance costs, which have more than doubled:

Driven by a c.£20m increase in bank debt, and c£8m increase in lease liabilities, largely due to acquisitions and dividends paid.

Outlook:

Having warned at the start of July, today they say:

Performance improvement expected in H2 2025 through seasonal trading uplift and actions the management team is taking to manage input cost changes, mitigate operating cost increases, convert our strong pipeline of new business and deliver synergies from the Pitreavie acquisition. The full year outlook for 2025 is in line with market expectations.

Shore Capital leave their forecasts unchanged which are for £307m sales, broadly similar gross margins at 38%, and £21.1m PBT, saying:

Macfarlane’s H2 period is set to see the impact of annual staff pay increases and the full impact of NICs, but offset by a seasonal trading benefit from Pitreavie, price increases, new business growth, savings across the property estate and other positive cost initiatives. We expect to see higher revenue come through on a stable cost platform overall for the period going into FY26F. Our forecast base remains unchanged, therefore.

I wonder if this is a bit of a stretch, though. It leaves quite a lot to do in H2:

Especially, as they are flagging further cost increases to come in H2, and they would need to hit, sales and GM forecasts and offset all of the cost increases elsewhere to hit the Adj. PBT figure.

Management seem confident that they can overcome these challenges in the medium term:

"The recently launched share buyback programme will continue as planned.

"Despite the current market conditions, the Board remains confident that our strengthened sales team, differentiated customer proposition and proven executional skills mean the medium-term prospects for the Group are positive."

That buyback is only for £4m versus a market cap of £150m, so perhaps reflects that their finances have been more constrained by recent acquisitions than they would like to let on. They pay a reasonable dividend, but at just less than 4% the yield isn’t exceptional, despite recent share price falls. Historically, the company has preferred to recycle capital back into acquisitions.

Mark’s view

This company has a good long-term record of growth via acquisition. However, weak market conditions and cost rises leave them with largely static EPS for an extended period, despite multiple acquisitions:

They are on a modest multiple, but perhaps one they deserve until they can show they can return to historical growth trends. In the meantime we have the risk of a further profits warning unless everything goes right on revenue, margin and costs in H2. Their ability to improve their outlook via acquisition looks a little constrained until they pay down the costs of previous purchases. On balance, I am keeping the neutral rating for the moment. AMBER