Good morning!
The Budget is coming up on Wednesday - always an exciting day for UK markets.
The agenda is complete.
Spreadsheet accompanying this report: link (last updated to: 10th November).
Companies Reporting
| Name (Mkt Cap) | RNS | Summary | Our View (Author) |
|---|---|---|---|
AstraZeneca (LON:AZN) (£214bn | SR75) | Plans to invest $2bn to expand its existing Frederick and Gaithersburg facilities, adding manufacturing and development capacity. | ||
BHP (LON:BHP) (£101bn | SR95) | BHP confirms it is no longer considering a combination of the two companies. | ||
IMI (LON:IMI) (£5.9bn | SR73) | Sold Truflo Marine business to Fairbanks Morse Defense for an enterprise value of £225m. Expect completion mid-2026. | ||
Cerillion (LON:CER) (£400m | SR34) | Rev +4%, pre-tax profit +10% to £21.7m. New orders +25%, order backlog +21% to £56.9m. 2026 outlook positive, broker forecasts broadly unchanged. | ||
TT electronics (LON:TTG) (£241m | SR76) | Jul-Oct revenue was £150m, “broadly flat” versus H1 2025. FY25 guidance unchanged (adj op profit £33.7m) but this outcome will require “significant step up in” in Nov/Dec, with c.£12m of op profit needed during this period. FY26 outlook “broadly in line with 2025” | PINK / BLACK | |
Tristel (LON:TSTL) (£170m | SR62) | American Institute of Ultrasound in Medicine has issued updated guidelines, for the first time accepting chlorine dioxide as an option for high-level disinfection. Leaves conditions “well-aligned” for greater adoption of Tristel ULT. | ||
Microlise (LON:SAAS) (£162m | SR74) | HH2 trading “mixed” due to a slower recovery in the automotive and constructions sectors. FY25 revenue and EBITDA to be below expectations at >£84m and >£8.3m respectively (previously £91.3m, £12.7m). FY26 outlook also downgraded. Canaccord Genuity estimates: - FY25E EPS 3.1p (prev. 5.5p) - FY26E EPS 4.9p (prev. 6.6p) | BLACK (AMBER/RED) (Roland) Today’s profit warning is quite a big one. I cannot help feeling that the company has left it as long as possible before admitting that it won’t meet previous expectations. More broadly, this 2021 IPO is not a business I’ve looked at before, but appears to have some intriguing characteristics – while it has a big share of the telematics market for UK HGV fleets, profitability is markedly weak. The CEO also controls more than half the shares. I’m intrigued, but plan to wait for the full-year accounts before conducting a more detailed assessment. | |
M&C Saatchi (LON:SAA) (£154m | SR49) | US government shutdown had a material impact on Q4 revenue and profit. FY25 results to be below expectations, with LFL net revenue -7% and op profit of £26-28m (PanLib previously: £31.4m). | BLACK (AMBER) (Graham) The broker forecast for next year's profit result gets cut by 25%, but I think there's enough value here to keep me neutral rather than negative. It had net cash (prior to a small acquisition in October), is still profitable according to forecasts, is embarking on a reasonably-sized (£5m) share buyback, and recently received a £50m bid for its Enterprise division. On a forward PER of less than 8x, I think this could be an interesting contrarian idea. | |
S4 Capital (LON:SFOR) (£119m | SR43) | 2025 like-for-like net revenue to be down by just under 10%. Now targeting operational EBITDA, c. £75m, below the current market consensus of £81.6 million. Lower project-based revenue, continued client caution and a slower ramp up of new business wins than expected. | ||
ROSEBANK INDUSTRIES (LON:ROSE) (£76m | SR4) | Highly confident full year expectations will be achieved. Expects net debt to be below expectations of $500m, leverage to be approx 2.5x. | ||
ImmuPharma (LON:IMM) (£49m | SR24) | Now aims to complete a partnership deal as soon as practicable in 2026 (previously wanted to complete a deal by the end of 2025). Cash runway now extends into Q4 2026. | ||
Ondo InsurTech (LON:ONDO) (£42m | SR11) | Nationwide has placed a further order for LeakBot devices and services to expand the program into ten additional states. | ||
MTI Wireless Edge (LON:MWE) (£37m | SR72) | Revenues +12%, profit from operations +21% ($4.2m). $4m net cash from operating activity. Outlook: Positioned for a strong full year outturn, driven by all three divisions performing well. | AMBER/GREEN (Roland) [no section below] There are no changes to broker forecasts today after a solid Q3 for this Israeli technology group, which generates much of its revenue from the defence sector. Taking each of the divisions in turn, the antenna business benefited from “rising demand for military antennas globally”, but more mixed demand for its 5G backhaul and ABS antenna solutions (both aimed at mobile operators). The MTI Summit business also enjoyed good demand from defence clients, while in Mottech (which sells electronic water management and irrigation solutions), management reported continued growth from businesses and governments. Segmental profits were fairly evenly split across the business, ranging from $1.1m to $1.5m for each division. The balance sheet remains strong and quality metrics are respectable. I continue to see this as a decent business at a reasonable price. However, it’s family-controlled, overseas-based and has some geopolitical exposure. Full-year forecast EPS growth is also relatively pedestrian, so I’m going to leave my previous moderately positive view unchanged today. | |
EnSilica (LON:ENSI) (£36m | SR23) | Purchase order for the next phase of development of a satellite payload ASIC. Increases company’s contractual coverage against FY26 revenue guidance and will be worth $ millions over FY27 and FY28 if it continues to progress as expected. | ||
Powerhouse Energy (LON:PHE) (£23m | SR3) | PHE’s consulting division has progressed contracts previously announced as well as gained new contracts. Now necessary to grow this team further. | ||
Fusion Antibodies (LON:FAB) (£14m | SR17) | Revenues £0.84m (H1 last year: £1.2m). Loss reduced to £0.51m. Cash £0.25m. Going concern warning. | ||
DSW Capital (LON:DSW) (£13m | SR63) | Trading “resilient” and in line with management expectations. Results are typically H2-weighted. “The business continues to trade well but the Board remains mindful of… uncertainties, particularly regarding the forthcoming Budget”. |
Graham's Section
M&C Saatchi (LON:SAA)
Down 12% to 111p (£137m) - Graham - BLACK (AMBER)
Some unfortunate timing from me recently, as on 3rd November I upgraded our stance on M&C Saatchi from neutral to AMBER/GREEN.
The reason for that decision was takeover interest in Saatchi’s “Performance” division, at an enterprise value of £50m.
However, it looks like I’m going to have to take our stance on Saatchi today back to neutral, at best.
Full-year trading update:
Trading in the second half of the year has been adversely impacted by the unprecedented US Government shutdown, the longest in history, affecting our Issues specialism which is a significant contributor to the Company's fourth quarter revenue and profit.
This must be the “Global and Social Issues” service, listed on their website. “Our clients include governments, NGOs, multilaterals, foundations, philanthropies and consumer brands.”
They say there is no impact to ongoing contract agreements or long-term growth prospects, but:
…the Company now expects a LFL net revenue decline of around 7% (or a decline of around 1.5% excluding Australia) with operating profit in the range of £26m to £28m, indicating an operating profit margin of around 12.5% - 13.0%, which is below the expectation set out in the Company's interim results announcement.
Estimates: my thanks to Panmure Liberum for publishing on this today.
They note that the “Issues” business is worth about 30% of SAA’s total revenue, and at a higher than average margin - that’s huge.
FY 2026 revenue forecast £210m (previously £212.7m), adj. EBIT forecast £26m (previously £31.4m).
FY 2026 revenue forecast £218.6m (previously £227.2m), adj. EBIT forecast £28m (previously £37.3m).
I note that although the company says the long-term prospects are unaffected, that doesn’t spare 2026 from seeing a major cut to its profit forecast, as Panmure pencils in more damage arising from the US government shutdown.
More positively, the company says it’s on track for its £12m cost saving programme.
Australia: this business has been restructured, including a “reset of the overhead cost base”. This business is set to be a big drag on Saatchi’s overall LfL revenue growth for the year, considering that the company is guiding for a decline of 7% including Australia, or only 1.5% excluding. But hopefully that sets it up for better performance moving forward.
£5m share buyback:
The Company believes that its strong balance sheet provides the opportunity to repurchase shares given the current market position.
At the most recent interim results, the company had £11m of net cash. Given that it is still profitable, it should be able to afford this buyback and it is a meaningful figure, given the current market cap of just £137m.
So rather than viewing it as an unnecessary sop to shareholders, I find myself agreeing with this buyback.
Graham’s view
In a situation where I could be neutral or negative on a stock, I like to let the balance sheet decide for me.
Again turning to the interim balance sheet: it’s not as bad as I’d typically expect from companies in this sector, with positive tangible net worth and the net cash figure I’ve previously mentioned.
Admittedly the positive tangible net worth relies on items whose real value might be difficult to fully realise in an emergency (things like deferred tax assets and PPE), but I think the overall list of positive factors is compelling enough:
Net cash (prior to a small acquisition in October)
Still profitable according to forecasts, with a double digit operating profit margin.
Reasonably-sized share buyback to take advantage of the shares hitting mult-year lows.
Recent £50m bid for its Performance division, which was rejected on the grounds that it was too low.
Putting all of this together, I’m happy to stick to neutral on SAA. I'd even want to upgrade it to AMBER/GREEN again, if it was clear that trading had stabilised.
The latest P/E multiple for 2026, using the share price as of writing this (111p) and the new Panmure forecast (£14.5p) is only 7.7x.
Not bad value for a profitable business with a net cash position, although of course there’s going to be a wide range of possible outcomes for 2026.
In Stockopedia terms I acknowledge that it’s a Falling Star, which is a losing StockRank style:
The profit forecast for next year has just been cut by 25%, which is a serious financial event no matter which way you look at it.
On the other hand, the US government shutdown has ended, as of a few days ago. Perhaps we could even get a positive earnings surprise from this stock next year?
Roland's Section
Microlise (LON:SAAS)
Down 29% to 99p (£115m) - FY25 Trading Update - Roland - BLACK (AMBER/RED)
Commiserations to anyone holding shares in Microlise this morning. The company has issued what looks like a fairly serious profit warning to me, including cuts to both 2025 and 2026 expectations.
We haven’t covered this 2021 IPO in any depth previously, but I am loosely aware that it’s a telematics business. Checking the website, I see Microlise describes itself as a “leading provider of transport management software to fleet operators” .
According to AI, Microlise has a 58% market share among large UK HGV fleets (>500 vehicles). It also offers additional functionality such as route and schedule management for haulage fleets. Sales include hardware, software and support services.
Some well-known names are highlighted on its website:
What’s gone wrong?
Today’s statement highlights two main areas of weakness that have prompted today’s downgrade to FY25 expectations.
Global OEM customers: lower order volumes from global OEM customers in the automotive and construction sectors mean that OEM revenues are expected to be lower than in FY24. This is said to be mainly due to tariff disruption, along with “general weakness” in the macro environment.
The company says global OEM customers are expected to deliver 27% of FY25 revenue, down from 33% in FY24. My sums suggest this could equate to a drop in global OEM revenues from £26.2m in 2024 to c.£23m in 2025.
Worryingly, this trend is expected to continue in 2026 – current expectations are for FY26 revenue from OEM customers to be below FY25 levels.
Softer UK sales: direct sales to UK customers have been weaker this year, impacted by delays in a “a small number of customer projects”. One project in particular is mentioned, “a British multinational retailer which was hit by a cyber-attack earlier this year”. I’d speculate this might be Marks & Spencer.
Revenue from these delayed customer projects is now expected to be recognised in 2026.
Cost savings are now underway – the company expects to reduce headcount by approximately 10% by the year end. This is expected to generate annualised savings of “at least £4.0m” at an upfront cost of c.£1.5m.
Outlook & Estimates
Helpfully, Microlise has provided details of both its revised expectations and previous consensus forecasts in today’s RNS.
FY25 revised outlook: revenue of at least £84m, with EBITDA of at least £8.3m (previous consensus was £91.3m and £12.7m, respectively)
This equates to an 8% reduction in revenue guidance and a 35% cut to EBITDA expectations. This appears to be a nasty case of reverse operating leverage. With the prospect of further weakness next year, it’s easy to see why the company is cutting headcount quite significantly.
Broker forecasts: with thanks to Canaccord Genuity on Research Tree, we have updated earnings forecasts for both 2025 and 2026 – big cuts have been made:
FY25E adj EPS: 3.1p (-43% vs 5.5p previously)
FY26E adj EPS: 4.9p (-25% versus 6.6p previously)
Notably, CG has withdrawn its 2027 forecasts – an unusual step at this stage, suggesting a lack of confidence in the outlook.
Roland’s view
The shares are down sharply today, reversing recent momentum. It looks like investor sentiment has got out of kilter with reality:
In fairness, earnings expectations for 2025 had been edging lower for some time:
However, I can’t help feeling that Microlise’s management may have left today’s warning as late as possible – after all, weaker trends in the automotive and construction sectors have been reported for some time.
Stepping back to take a broader look at this business, I have mixed feelings. Microlise floated in 2021 and has so far proved an unrewarding investment for shareholders:
Profitability has been weak and inconsistent in recent years:
However, even after today’s fall the shares still seem to be priced for growth, on a FY26E P/E of 20. Despite this, the company’s quality metrics don’t seem consistent with its presentation as a growing software-focused company:
In fairness, Microlise does have some attractions. The balance sheet looks fine with no drawn debt and expected net cash of c.£11m at the end of 2025.
CEO Nadeem Raza also remains a 50.05% shareholder in the business, according to our data. The downside of this is that he retains almost sole control of the company – minority shareholders are unlikely to have a strong voice. However, the value of his shareholding has fallen from c. £80 million to around £58 million today. I would imagine he is now well-incentivised to find ways of returning the business to growth..
On balance, I’m intrigued by Microlise, but would like to wait for the next set of accounts to form a more detailed assessment. In the meantime, I’m going to take an AMBER/RED view to reflect the declining earnings forecast trend, weak profitability and our knowledge that companies often underperform for a time after warning on profits.
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