Good morning!
Wrapping up there, thanks everyone. Spreadsheet accompanying this report (updated to 24th November): link.
Companies Reporting
| Name (Mkt Cap) | RNS | Summary | Our View (Author) |
|---|---|---|---|
AstraZeneca (LON:AZN) (£211bn | SR74) | Enhertu plus pertuzumab approved in the US as first new treatment in a decade for the 1st-line treatment of patients with HER2-positive metastatic breast cancer. | ||
GSK (LON:GSK) (£75bn | SR91) | Exdensur (depemokimab) approved in the UK for treatment of asthma with type 2 inflammation and chronic rhinosinusitis with nasal polyps. | ||
Anglo American (LON:AAL) (£33.6bm | SR65) | Regulatory approval from the Government of Canada under the Investment Canada Act for the merger of equals between Anglo American and Teck. | ||
Centrica (LON:CNA) (£7.8bn | SR48) | Sale of producing assets in the Greater Markham Area and Southern North Sea, to Serica Energy plc. Total value to Spirit Energy £98m (£57m plus transfer of £41m of decommissioning liabilities). CNA’s 69% share of headline consideration is expected to be £39m. | ||
IG group (LON:IGG) (£4.0bn | SR92) | SP +5% Confident of meeting market expectations for EBITDA and cash EPS in calendar year 2026. Expects to deliver revenue growth around the mid-point of the guided range of mid-to-high single-digits, in calendar year 2026. | GREEN = (Graham) Lots to like in this overwhelmingly positive update. While the EPS outlook is merely "in line", revenue trends are very positive and I think the chance of an earnings beat in 2026 has likely increased. However, markets are unpredictable and I wouldn't get too precise about the likely outturn in 2026 at this stage. But the company seems to be doing everything right and I do agree with its buyback at this level (forward P/E of about 10x). | |
Harbourvest Global Private Equity (LON:HVPE) (£2.3bn | SR87) | Five fund positions sold at a blended discount to NAV of 6% generating net proceeds of $300m. Chair is confident this will support efforts to narrow the discount to NAV and strengthen HVPE’s financial position. | ||
Goodwin (LON:GDWN) (£1.62bn | SR55) | SP -9% Trading profits for the six months to 31st October 2025 of £37.2 million (October 2024: £ 17.1 million). Workload currently £330m. Net debt increased to £53m at the end of November, in line with expectations, following payment of special dividend. | AMBER/GREEN = (Graham) I do think that this can grow into its current valuation, as I'm inclined to trust the positive sentiment of the Chairman. This is not a promotional company - or at least it has never been particularly promotional in the past - and so when they have a positive outlook, I'm inclined to believe it. The shares are undoubtedly very expensive on a historical earnings multiple, but based on full-year guidance (which even looks like it could be conservative) the earnings multiple is more sensible. | |
PPHE Hotel (LON:PPH) (£737m | SR44) | New £88 million facility has been arranged by Santander UK plc and ABN AMRO. 90% is hedged at 3.9%. | ||
Allergy Therapeutics (LON:AGY) (£669m | SR27) | Marketing authorisation in Germany for the Group's subcutaneous grass pollen allergen immunotherapy, Grass MATA MPL, which will be commercialised in the German market as Grassmuno®. | ||
Serica Energy (LON:SQZ) (£633m | SR90) | Acquires a portfolio of Southern North Sea assets from Spirit and certain affiliates. Upfront consideration is £57 million (c.$74 million) with the effective economic date being 1 January 2025. Completion is expected in H2 2026. | ||
Hunting (LON:HTG) (£617m | SR88) | $40 million buyback programme announced on 28 August 2025 is to be extended by up to a further $20 million in light of the Group's “sustainable cash generation and strong balance sheet”. | ||
Saga (LON:SAGA) (£512m | SR53) | 20-year partnership has gone live. Saga will receive £60m from Ageas this week, less a £5m trade fund paid in advance, of the total £80m. Saga will receive the outstanding £20m in Q2 2026. | ||
Hollywood Bowl (LON:BOWL) (£466m | SR52) | Revenue +8.8% to £250.7m (+0.6% LFL), pre-tax profit +3.6% to £44.3m. Outlook: well-positioned for future growth. | AMBER/GREEN = (Roland) A solid set of results that are in line with expectations. This 10-pin bowling operator is generating sufficiently high ROCE to fund shareholder returns and expansion, while its move into Canada also appears to be going well. While long, hot summers and consumer affordability pressures represent potential external headwinds, I don’t see any reason why Hollywood Bowl can’t continue to make progress. The current valuation looks fair to me and I’m comfortable retaining our moderately positive view on the strength of these results. | |
Intuitive Investments (LON:IIG) (£247m | SR41) | Hui10 (Chinese lottery) investments represented over 99% of portfolio at year end. NAV -2.3% to £328.04m (150.3p). | ||
SThree (LON:STEM) (£220m | SR73) | FY25 results to be in line with previous £25m PBT guidance. Group net fees -12% YoY, with sequential quarterly improvement and US returning to growth. FY26 guidance reiterated. | ||
Frontier Developments (LON:FDEV) (£180m | SR95) | Jonny Watts plans to step down from Board for personal reasons, including family. He’s been at Frontier for 27 years. CMO Jo Cooke has been appointed as the next CEO, from 1 Jan 26. | ||
Sovereign Metals (LON:SVML) (£161m | SR7) | Agreement to support sustainable development of Kasiya (world’s largest rutile & 2nd largest graphite deposit). IFC has financing rights to fund Kasiya. | ||
| Jersey Electricity (LON:JEL) (£109m | SR92) | Full-year results | Revenue +8% to £146.2m, pre-tax profit -6% to £14.2m. Return on assets 7.4%, dividend +5% to 20.8p. | |
Watkin Jones (LON:WJG) (£71m | SR86) | Revenue -23% to £280m, adj op profit -41% £6.3m. Net cash £70.5m. Outlook: c.£340m of contractually secured revenue for FY26, £2bn pipeline of opportunities. | AMBER/GREEN = (Roland) Some risks remain in my view, relating to the company’s uncertain pipeline and existing liabilities. But on balance I can’t help feeling that there should be some value here, given the strong net cash position and c.40% discount to tangible book value. I’m happy to leave my moderately positive view from October unchanged following these results. | |
Time Finance (LON:TIME) (£50m | SR93) | SP -5% Revenue +3% to £18.8m, pre-tax profit +10% to £4.3m. Arrears reduced to 4.5%, gross lending book +12% to £235m. Positive momentum, expect FY results to be “at least in line” with market guidance. Cavendish forecasts: FY May 2026 EPS 6.8p, FY May 2027 EPS 7.6p. | GREEN = (Graham) I'm a fan of this one - a cheap, high profitable and growing lender. This "at least in line" H1 update sees the share price dropping back 5% , but it's only down 1% compared to last week, and it's higher month-to-date - so this seems to be a case of the good news having been priced in already (and probably some investors were expecting a beat). While H1 revenue is only up 3%, the lending book is up 12% which augurs well for the future. Also, H1 PBT is up 10% (to £4.3m) which is likely due to a combination of operational leverage and reductions in both net arrears and net bad debt write-offs. The two core products (Invoice Finance and "hard" Asset Finance) are now 87% of the lending book. Based on the FY27 EPS forecast (for the financial year that starts in five months), the stock is trading on a PER of less than 7x and at only a small premium to net tangible assets (£47m). As such, I have no reason at this stage to change my positive stance. | |
Van Elle Holdings (LON:VANL) (£37m | SR84) | Trading for 6mo to 31 October in line with exps. Expect H1 revenue +12% to c.£73m. Confident FY results will be in line with market expectations. | ||
Pathos Communications (LON:NEWS) (c.£20m | new listing) | Pathos is “a technology-enabled, human-led PR company”. Listing today following £5.6m fundraising (£5m new shares, £0.6m selling shareholder). FY24 revenue $11.4m, profitable every year since inception. | ||
Tavistock Investments (LON:TAVI) (£18m | SR48) | Court hearing on 11 Dec 2025 ruled in favour of Tavistock on all matters, awarded costs with Titan due to make interim payment of £250k within 28 days of hearing. | ||
GEO Exploration (LON:GEO) (£12m | SR15) | Raised £1.25m at 0.18p per share (21.7% discount to last night’s close). Proceeds will fund Gorge Project explo, Juno drilling + other operating activities. | ||
Oxford Biodynamics (LON:OBD) (£11m | SR3) | Revenue +83% to £1.1m, operating loss £11.1m (FY24: £12.9m). PSE orders more than doubled year on year to c.1,900. £1.4m of cash at year end, subsequent £7m fundraise. |
Graham's Section
IG group (LON:IGG)
Up 5% to £12.28p (£4.2bn) - First Quarter Trading Update - Graham - GREEN =
(At the time of writing, Graham has a long position in IGG.)
After the relief of Budget day - which saw spread betting excluded from higher taxes - we now get a pleasant trading update from IG.
It has been a good month:
Unfortunately, IG is changing its financial year end from May to December, which complicates things a little for us.
Today’s update is for the three months to November 2025, which is Q2, but we are now going to get a 7-month financial year from May to December.
(I will say that this is better than when companies have 15-month financial years, dragging out the confusion for as long as possible!)
Key points from today’s update:
Firstly, they are confident of meeting market expectations for EBITDA and “cash EPS” in calendar year 2026.
Cash EPS is how IG refers to their version of adjusted EPS and is simply EPS excluding amortisation.
They maintain an “Analyst Consensus” page on their website
Given that the calendar year 2026 hasn’t even started yet, it’s still a little early in my mind to start talking about confidence for the result in that year - but it’s certainly not a bad thing that they are confident of hitting analyst consensus.
In the short-term, revenue trends are very positive:
Organic trading revenue for the quarter up 29%, with double-digit new customer growth and high single-digit active customer growth.
If active customer numbers are only up by high single-digits, compared to organic trading revenue up 29%, then revenue per active customer must be very strong indeed.
This bit is eye-catching:
Guidance accelerated; expect to deliver revenue growth around the mid-point of our guided range of mid-to-high single-digit, in calendar year 2026.
Compare it to what they said at the last full-year results:
Beyond FY26, we expect total revenue to compound in a mid-to-high single-digit percentage range per annum on an organic basis, accelerating within this range over time, with cost discipline enabled by digital servicing.
So they have moved from promising mid-to-high single-digit organic growth after 2026, to promising it in 2026 and beyond.
Mid-to-high single-digits is 4% to 9%. So in my mind they are guiding for 7% organic growth next year.
Why all the fuss? Well, IG tends to trade on a cheap-ish earnings multiple, as the market (rightly) worries about low visibility in the sector, and the potential for profits to fluctuate.
Personally, I still wouldn’t assume we are getting organic revenue growth of around 7% next year - market conditions between now and December 2026 could easily derail or accelerate progress. If there is one thing we know about market volatility - the key driver of trading activity - it is that it’s unpredictable!
A few other bullet points from today’s update:
Buyback: the £125m buyback announced in September continues, with £84m bought so far. But there’s more: £75m is added on, making it a £200m buyback. It’s expected to continue until March.
And there’s even more:
The Board will consider a further share buyback programme alongside the Group's full year results, subject to share price performance and other demands on capital.
If you scroll back to 2021, the dilution caused by the tastytrade acquisition was one of the worst things about it. The share count shot up from 370 million to 431 million.
That dilution has now been fully reversed, with the share count dropping back to 340 million:
Using round numbers, if the company bought back another £120m of shares at the current share price of c. £12, that’s another 10 million shares out of the picture.
That’s only a few percentage points of the total share count, but it’s incremental and it keeps adding up. There is a good chance we see another buyback in March, and the process continues.
As noted by Mark Carter in the comments below, the current valuation seems to be a reasonable level to keep doing this - unless trading deteriorates dramatically, IG probably aren’t overpaying for their own shares. So those of who keep holding our shares will enjoy another nice tailwind to EPS.
Elsewhere in today’s update:
The US is IG’s fastest-growing market, with tastytrade (the retail options trading platform) generating revenues up 51% on the prior year and 19% on the prior quarter. Perhaps I’ve been too sceptical of this acquisition - the enthusiasm of US retail traders never ceases to amaze me!
Total net trading revenue up 33%, helped by the acquisition of Freetrade.
Net interest income fell 13%, costing a few million pounds of income, as interest rates fell and more interest was passed onto customers.
At the core “OTC derivatives” product, which includes spread betting, we get the following comment:
Strong OTC derivatives net trading revenue growth reflected enhanced product velocity, including the launch of 24/5 trading, pre-IPO markets and an improved professional client offering, alongside actions to improve customer income retention which increased compared with the prior year and the 12 months ended 31 May 2025.
In the last annual report, IG said it had increased customer income retention by “capturing more spread income and lowering hedging costs”.
I think the first initiative refers to having wider spreads for larger trades.
The second initiative is to do with hedging “more passively”, thanks to the deployment of new algorithms.
There is always some element of trust in any investment and the main point of trust when it comes to investing in IG is that they are hedging responsibly. News that they are saving money on hedging might raise some alarm bells in this regard but personally I’m happy to trust that they have genuinely increased the efficiency of what they do. I certainly trust them far more than one or two of their competitors.
In stockbroking, it sounds like they might finally be gaining some real traction: organic share dealing volumes rose 99% on the prior year and 20% on the prior quarter.
The recently-acquired Freetrade is also doing impressively well, with assets under administration up 36% year-on-year and 11% during the quarter. Quarterly net trading revenues at Freetrade were up 32% year-on-year.
Budget - IG was a winner of the Budget, in terms of dodging any tax hikes, and they also welcome the reduction of the cash ISA allowance:
The Group has publicly backed this ISA change, which it believes will encourage more people to invest in the UK equity market.
I’m not sure about that but it certainly wasn’t bad news for IG, as less money can flow into a product that they don’t provide!
Graham’s view
I’m struggling to find anything negative in this update.
While EPS expectations are unchanged, perhaps there will be some upward pressure on estimates given the strong revenue outlook?
Although as I’ve already said, I am not banking on the 2026 revenue guidance actually happening - we always have to allow for the potential of markets to surprise us (either with very high volatility, or with boring, range-bound markets that don’t motivate people to trade).
This is a fairly important position in my portfolio - it’s in third place, and it’s 14% of my single-stock portfolio. It’s also a “bagger” for me, having more than doubled in value (while also paying very many dividends along the way).
So I’m talking about my own book here. I’m definitely biased by having held this one for such a long time. But for whatever it’s worth, I’m more confident about IG right now than I usually am. A big reason for that is the current CEO, who has the same degree from the same university as me, but more importantly, he has extremely strong pedigree in the trading/betting industry thanks to many years at Paddy Power and then Betfair.
That is an excellent background to bring to IG and I think it shows in the company’s performance over the last two years.
My bullish outlook is consistent also with the StockRanks, who view IG as a Super Stock:
Of course I may have underestimated the risks here - if you are bearish on IG, please let us know in the comments!
Goodwin (LON:GDWN)
Down 9% to £195.60 (£1.5bn) - Half-year Report - Graham - AMBER/GREEN
This has been a multi-bagger over the past year, and it's even better over longer timeframes:
Last month we noted that some members of the Goodwin family reduced their stake.
We had previously been guided by the company for a trading PBT of over £71m in the current financial year (FY April 2025).
Today's half-year report shows the company generating more than half of that in H1, with "trading profits" of £37.2m.
It's a multifaceted business:
- Goodwin Steel Castings and Goodwin International: demand is "robust" from the defence and nuclear sectors.
- Pumps: results are "consistent".
- Easat Radar Systems: various orders received.
- Refractory Engineering: "resilient".
- Dupré Minerals: profits are "marginally lower".
Again I'd invite you, if you're so inclined, to check out Goodwin's list of businesses.
Net debt is unusually high at £53m as of the end of November, but I expect that to be a peak level as it's just after the payment of a £40m special dividend.
Some financial highlights:
- H1 revenues +27% year-on-year.
- H1 trading profit has more than doubled year-on-year.
- Adjustments are light: only a £0.4m loss on an interest rate hedge. So actual PBT is very close to "trading profit".
H1 capex is £9m, up from £6m in H1 last year but still very modest given the size and growth of the business.
Outlook:
The Group has delivered a pleasing first-half performance and continues to benefit from a strong workload pipeline across its principal markets. Order intake, ongoing programme execution and sustained demand in several specialist areas provides visibility for the medium term. The Board continues to expect full-year profitability to be above £71 million. Against this backdrop, and supported by current workload levels, the Group considers itself well positioned, with operational capacity, technical capability and order cover underpinning activity through the remainder of the financial year and into the medium term.
Graham's view
This is a business where investors have to do their own due diligence, without hand-holding: there are still no City forecasts. Perhaps this will change at some point, but up to now there hasn't been appetite for City coverage: the Goodwin family themselves don't need it, and the banks have little prospect of earning much commission income or M&A fees. But perhaps that will change if the market cap keeps rising?
Today's results are stellar of course, but the near-10% drop in the share price is consistent with the ValueRank of 6 says: that the shares are fully priced.
Indeed, let's suppose that Goodwin produces £75m of PBT, beating its own guidance. With c. £56m of after-tax net income, that would put the shares on a PER for the current year of 27x. Not outrageously expensive, but still requiring more growth in FY April 2027 to help justify it.
That's one thing that the StockRank can't do - make up its own forward-looking estimates in a situation where there are no broker forecasts. So actually I do believe that the ValueRank of 6 is a little harsh on the company, as it's based on trailing earnings and a historical PER of 66x.
And I am willing to assume, based on the the words of a very credible Chairman, that the company is set up well for the medium-term. So I would not bet against Goodwin growing into its current valuation.
I'm therefore willing to leave our moderately positive stance unchanged. We've had this stance since the company's full-year results in July, when the share price was only £88!
Roland's Section
Hollywood Bowl (LON:BOWL)
Up 1% at 283p (£470m) - Final Results - Roland - AMBER/GREEN =
Graham upgraded our view on the UK and Canada’s largest ten-pin bowling operator in October, following a strong trading update. Today we have the corresponding full-year results, which appear to be in line with expectations.
CEO Stephen Burns strikes a fairly bullish tone on FY25 performance:
We delivered a fourth consecutive year of record revenue and adjusted EBITDA, against a backdrop of industry-wide challenges. We achieved double digit revenue growth in amusements and are the number one bowling operator in Canada. Our focus on the customer proposition and operational excellence yielded strong results, with uplifts in spend per game across all categories whilst maintaining accessible pricing.
A closer look suggests to me that most of Hollywood Bowl’s revenue growth came from new openings and expansion rather than improved trading at its existing locations:
Revenue up 8.8% to £250.7m
Like-for-like revenue up 0.6% (1.3% constant currency)
Pre-tax profit up 3.6% to £44.3m
Adjusted earnings down 1.9% to 21.51p
Dividend up 10.1% to 13.28p per share
Without wanting to be unfairly critical, I would speculate that +1.3% LFL is unlikely to have covered LFL inflationary cost increases last year.
Looking at the LFL figures in more detail suggests a combination of lower customer numbers and price rises, with average spend per game rising far more quickly than LFL sales:
UK LFL +1.1%, with spend per game up 9.2%
Canada LFL +3.2%, with spend per game up 14.8%
The company says it has kept price increases “well below inflation”, instead using dynamic pricing to “stimulate bookings and optimise yield at centre level”. Looking at my nearest centre, pricing seems to be 30%-40% higher at peak times.
BOWL says a family of four can bowl in the UK for £26, which I guess compares well to a cinema – albeit I would guess additional spending is likely on food/drink/additional games to fill a c.2-hour time slot.
However, the commentary in today’s results suggests to me that customer numbers were indeed lower, in the UK at least:
Despite the UK experiencing the hottest and driest spring and summer on record, which presented trading challenges for the indoor leisure sector, the resilience of our model, the investments we have made in technology, and our agile and proactive management approach, meant that we were able to stimulate demand through additional marketing spend, CRM and dynamic pricing, and manage costs effectively to drive efficiencies, which supported our performance.
Expansion: capital expenditure was cut by 30.6% to £36.5m last year, but this still supported a number of new openings and refurbishments:
Opened five new sites in UK and two in Canada
On track to reach 130 centres by 2035 (currently has 92 centres)
Five refurbishments in UK and seven in Canada
New sites/refurbishments performing in line or ahead of expectations
Four centres secured to open in FY26
A further reduction in capex to £25-£30m is expected for FY26, although this “may increase” if additional new centre developments in Canada start during the year.
Canada now accounts for 15% of revenue and management believe they are “successfully replicating” the group’s UK operating model in Canada.
Interestingly, last year’s centre openings appear to have been achieved without many additional staff – while the number of centres open during the year rose by 8%, the number of operational staff only rose by 1.6% (to 2,743). I guess the company is finding ways to manage headcount, perhaps with greater automation in areas such as foodservice.
Profitability & cash flow: rather like pub chains, this kind of leisure business is quite capital intensive. Regular upgrades and refurbishments are needed to keep centres fresh and competitive.
Fortunately, Hollywood Bowl seems to have the pricing power it needs to generate meaningful returns on capital employed. Looking at today’s results, I calculate an operating margin of 23.2% and return on capital employed of 15% for FY25.
This result is consistent with last year and is pretty credible for a business of this type, in my view:
Profitability at this level means that the company is generating returns above its cost of capital. In turn, this means cash generation is enough to support both growth and shareholder returns.
My sums show free cash flow of £22.5m last year, including all capex.
While this wasn’t sufficient to fund both the share buybacks (£15m) and dividends (£21m), I’d guess that if I was able to separate growth capex from maintenance capex, the shareholder returns probably would be fully covered.
Balance sheet: the company renewed its (unused) finance facility last year but does not have any drawn debt and ended the year with £15m of net cash (exc leases).
However, with lease liabilities totalling £235m at the end of September, I’m pleased to see there’s no additional risk from debt leverage.
Outlook
CEO Stephen Burns’ outlook commentary today is positive but doesn’t include any specific financial guidance:
We are well positioned for future growth, supported by a robust UK and international pipeline, ongoing capital investments, a high performing team and a differentiated and resilient business model. We continue to lead the competitive socialising market in both the UK and Canada, and we are confident about our prospects for another exciting year ahead.
I don’t have access to any freshly-updated broker forecasts today, but consensus forecasts for FY26 suggest earnings of 23.5p per share, giving a forward P/E of 12 and useful 4.8% dividend yield.
Roland’s view
These results support my view that this is a well-run business with good scale in a sector it understands well. The Canada expansion appears to be going to plan and may allow this to become a much bigger business than it ever would have been as a UK-only operator.
While I wouldn’t want to pay a high multiple of earnings for a capital-intensive leisure business like this, I’m reassured by the stable profitability and cash generation demonstrated by these results.
Like other sectors that rely on low-paid staff, Hollywood Bowl appears to be making operational improvements to protect profitability at a centre level without adversely affecting service.
I think it’s probably fair to say there’s still some macro/cyclical risk here, in terms of demand. However, on this showing I am comfortable leaving Graham’s previous AMBER/GREEN view unchanged today.
Watkin Jones (LON:WJG)
Up 1% at 28p (£72m) - Full Year Results - Roland - AMBER/GREEN =
It’s not often we get a chance to buy a profitable, established business where the market cap is roughly equal to the company’s net cash – a classic value scenario.
As I suggested in October, AIM-listed property developer Watkin Jones appears to be in this position at the moment. Today’s results show the group ended its FY25 financial year (on 30 Sept) with net cash of £70m, excluding lease liabilities. A further £10m has been received since then.
Looking at today’s balance sheet as a whole suggests a tangible net asset value of 44.6p per share. With the stock changing hands at around 28p as I write, that means the stock could be trading at c.40% discount to its theoretical breakup value.
Is this a slam-dunk buy for value investors? As I discussed in October, I am increasingly optimistic about the opportunity here. But today’s results do also suggest to me that some risks remain and that the recovery of this business is not yet fully assured. Let’s take a look.
FY25 results summary
If we’re willing to accept the adjusted profit figures, Watkin Jones remained profitable last year despite a 23% slump in revenue:
Revenue -22.8% to £279.8m from, primarily from previously sold developments
Adjusted operating profit -40.6% to £6.3m
Reported operating loss £(5.8m) (FY24: £3.6m profit)
Adjusted earnings per share -34.3% to 2.3p
Adjusted net cash -15.5% to £70.5m
Perhaps one clue that the net cash position isn’t sufficient to make a compelling case for buying the stock is that the company’s net cash position was actually higher one year ago – even though its share price was lower!
Profit adjustments: I have mixed feelings about the adjustments to profit last year, too. These included £5m of Building Safety provision costs which were recognised in the group’s operating expenses. I don’t see this as an exceptional item at the moment. Watkin Jones (like other listed housebuilders) has significant remaining provisions for Building Safety repairs. As far as I can see, these are likely to remain real cash outflows for a number of years yet:
The other big adjustment last year was a £6m impairment charge to one of the group’s land assets. We are told:
During the year the Group obtained an independent valuation of one of its land assets which identified that, as a result of adverse market conditions specific to that location and the circumstances of the property in question, the realisable value for the asset was below its carrying value. As a result, the Group has taken an exceptional impairment charge of £6,100,000.
Finally, there was also a £1m impairment charge to one of the group’s leased student properties, where occupancy was lower than expected.
This last point is perhaps a reminder that lease liabilities of £33.7m on the balance sheet, typically excluded from net cash, are not risk free.
Trading & Outlook
Leaving aside these niggles, I don’t have any serious concerns about the company’s solvency or ability to keep trading. I think the net cash position should cover any near-term risks as total operating expenses were only £33m last year.
The main risk I can see to the recovery story here is the uncertainty about the company’s pipeline of new projects.
The pipeline for FY26 seems reassuring, suggesting a significant increase in revenue from FY25:
Going into FY26, we have c.£340 million of forward sold revenue and a total pipeline of £2 billion of development opportunities. The short term outlook for the market remains uncertain but we are well placed to execute those opportunities when it does improve.
However, the pipeline for FY27 and beyond still looks notably weak to me, remembering that FY27 starts on 1 October 2026 – around nine months from now. That’s not all that long for large property developments.
To illustrate this, I’ve copied the pipeline tables for each of the company’s two main operating segments from today’s results and pasted these below:
Build to Rent (FY25 revenue £180m, gross profit £16.0m):
Purpose-Built Student Accommodation (FY25 revenue £67.7m, gross profit £4.4m):
In addition to these core divisions, the company has identified two main complementary markets where it sees opportunities for growth:
Refresh (FY25 revenue £10m, gross profit £1.5m): refurbishing older student properties and similar. Management see strong prospects in PBSA and are tracking c.£94m of opportunities.
Single Family Homes (FY25 revenue £13.7m, gross loss £0.8m): work has begun on a development that’s expected to generate £48m of revenue over c.40 months
Roland’s view
Consensus forecasts prior to today suggest a continued recovery in FY26, pricing Watkin Jones on a P/E off 23.
This high P/E multiple is a stark contrast with the large discount to book value. This highlights the current problem – the company is not generating sufficient profitability from its assets to justify a higher rating.
As I’ve commented above, I think there are still some risks to the outlook, both from existing liabilities and uncertain forward prospects.
However, given the company’s strong balance sheet and secured pipeline for FY26, I don’t see any reason to take a negative view on the shares at the current valuation. On balance, I think there probably is some value here. I’m going to leave my AMBER/GREEN view from October unchanged today.
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