Daily Stock Market Report (Thu 22 May 2025) - VEL, BKS, WRKS, BMY, JMAT, IPX, SQZ, RBN, IDOX, WATR, THS, QQ., ZTF

Good morning! It's another busy day, with 37 companies on the agenda.

The agenda is now complete.

Today's report is now complete (2.30pm) - see you tomorrow!

Companies Reporting

Roland's Section:

Johnson Matthey (LON:JMAT)

Up 8% to 478p (£2.6bn) - Full Year Results & LTPA Extension - Roland - AMBER

Shares in this FTSE 250 defence group have been volatile this year as the market has veered between optimism about structural growth in defence spending and caution relating to the group’s US performance. Today’s update is the first since March’s profit warning, giving us a chance to learn more about the outlook for the year ahead.

FY25 results summary: today’s figures cover the year ended 31 March 2025. They appear to be in line with revised consensus earnings estimates, which were cut by 18% following March’s profit warning:

Here’s a summary of the main numbers:

• Revenue up 1% to £1,931.6m

• Adjusted pre-tax profit down 13% to £147m

• Adjusted operating margin: 9.6%

• Adjusted EPS 11% to 26.1p

• Dividend up 7% to 8.85p per share

• Net debt down 12% to £133.2m

Operational performance was mixed, with a slight decline in funded orders but an improvement in order intake:

• Order intake up 12% to £1,954.8m (a new record)

• Funded order backlog down 1% to £2,845.1m

EMEA Services: the company says its EMEA business (including the UK) benefited from 21% increase in order intake during the year and delivered 5% organic revenue growth. Highlights included a €284m 10-year order for training services in Germany and “good growth in our UK Defence Sector” (50% of group revenue).

The company has also announced today the extension of a long-term partnership agreement with the UK Ministry of Defence. This is expected to be worth £1.54bn over five years and has initially resulted in the recognition of a “£166m incremental order relating to current investments in test and evaluation”.

The extension of this agreement is clearly positive for QinetiQ. However, without investigating too deeply my feeling is that this was already in the forecasts – the problem would have been if the company had failed to extend this agreement.

Global Solutions: this division includes the USA and suffered “a challenging external market environment” last year. We already know this – one of the main reasons for March’s profit warning was a shortfall in short-cycle work in North America.

Today’s results provide a little more detail on the problems QinetiQ has faced:

we experienced both market challenges, following the change in administration including export restrictions, and operational issues. Orders decreased by 4%, driven by a reduction in US order flow against a strong prior year comparator and a challenging trading backdrop in the second half of the year.

Today’s results include adjusting a £144m impairment charge relating to the group’s US operations:

Our US operations performed below expectations for orders, revenue, profit and cash flow in the year with some key contract losses.

The company has also taken a £45m charge relating to “a number of one-off, largely non-cash charges and provisions primarily relating to inventory and cost recovery in our legacy US operations”.

QinetiQ’s US division has a new CEO who has apparently taken a more cautious view on the outlook for this business under the current US administration:

During the second half of the financial year the change in administration, together with the new US Sector Chief Executive’s perspective on the US business performance and outlook led to a material impact on the future projections of the business and an associated restructuring plan. These factors, together with the impact of the discount rate which increased significantly in H2, has a knock-on impact for future years’ profitability and cash flow and hence an impairment.

QinetiQ appears to be scaling back its US ambitions to reflect the realpolitik of the current world order. I will be interested to see if there will be any read-across from this to other UK defence groups, notably BAE Systems, which generates nearly half its revenue in the US. Watch this space.

In the meantime, QinetiQ says it’s now aiming to shift its focus to using its UK base to “better serve NATO and its allies”. Presumably this means an increased focus on European defence markets.

Outlook & Estimates: today’s results provide fairly clear guidance for FY26 which I’ve been able to compare with the equivalent figures from March. My feeling is today’s numbers are broadly in line with the March guidance, but slightly weaker:

• Organic revenue growth c.3% for FY26 (March ‘25: “c.3-5%”)

• Adjusted operating margin expected to be c.11% due to restructuring (March ‘25: “at margins of 11-12%”)

In today’s outlook statement, management guide for adjusted EPS growth of 15%-20% in FY26.

That sounds impressive, but of course the comparator is the downgraded FY25 earnings.

Current FY26 consensus of 31.2p is effectively flat on the original FY25 EPS forecast of 31.2p that was in place prior to March’s profit warning.

Using today’s adjusted earnings of 26.1p, FY26E EPS of 31.2p is equivalent to an increase of 19.5%. Given this, I would argue that the company’s guidance of 15%-20% EPS growth this year is arguably at the lower end of consensus.

I don’t have any access to broker notes for this business, but it may be worth keeping an eye on the consensus figures on the StockReport in the coming days to see if they edge lower.

Roland’s view

I went RED on QinetiQ in March as I feared its profit warning might herald the start of a longer period of weakness.

Guidance for the current year in today’s results suggests this view might be too harsh. The company’s order backlog and intake appear to be stable, on the whole, with measures being taken to right-size the US business. As a result, performance this year looks likely to be more robust.

Today’s share price gain has left QinetiQ trading on 15x forecast earnings, with a 1.9% dividend yield.

Although quality metrics here are slightly above average, this valuation doesn’t seem all that compelling to me. If QinetiQ hits forecasts this year, earnings will only be marginally above FY24 levels.

My view is also that today’s guidance is weaker than was provided in March (only two months ago), so I’m inclined to remain a little cautious.

The StockRanks were neutral prior to today and I think that’s fair. I’m going to return to the neutral view I took in January. (AMBER)

Megan's Section:

Bloomsbury Publishing (LON:BMY) 

Down 17.5% to 537p (£437m) - Full year results - Megan - AMBER

Investors don’t like heavy adjustments, that much is clear from this morning’s mega share price fall in response to annual results from Bloomsbury Publishing.

They like those adjustments even less when they come just two months after a trading update which reassured that annual results would be ‘ahead of expectations’.

To be fair to Bloomsbury, the last set of forecasts from the company were for adjusted pre-tax profits of £39.6m. In its last research note published in March, house broker h2Radnor was expecting adjusted pre-tax profits of £41.5m. So these numbers (adjusted PBT of £42.1m) are indeed ahead of what they deemed “previous consensus expectations.”

But adjustments (or, what the company calls ‘highlighted items’) were bulky, coming in at £9.7m. This was largely due to amortisation of acquired intangibles which were £3.5m higher than last year at £8.4m. I have a lot of good things to say about the way Nigel Newton and his team manage Bloomsbury, but I am never a fan of companies which strip amortisation out of their chosen profit figures, especially when those companies are routinely acquisitive.

At the bottom line, net profits were more than 20% lower than last year at £25.4m. Company earnings were also down 21% at 31.14p.

Slower growth

Perhaps investors had been hoping the company would pull some magic out of the hat to rescue a year of slower growth. Sales were up 5%, which compares to the company’s five year CAGR of 16%. Worse, on a like-for-like basis, sales were flat year-on-year after stripping out the £19.8m contribution of academic publisher Rowman and Littlefield.

In what seems to be a slightly desperate attempt to remind shareholders that Bloomsbury can deliver growth, management has also chosen to present FY25 numbers compared to FY23 as part of the ‘financial highlights’. Organic revenues were 29% higher than those reported in FY23 and pre-tax profits (the unadjusted ones) were 35% higher.

There are legitimate concerns surrounding the company’s ongoing growth prospects. In the consumer division (71% of the top line), I am always astounded by the contribution made by Harry Potter - a book that was first published 28 years ago. But with growth in the division at just 3%, it seems like the magic growth may finally be drying up. The company’s other super successful author is Sarah J. Maas, but she hasn’t published a new novel since January 2024. The company could probably do with a few more lucrative authors on its books.

In the far smaller non-consumer division (which includes academic, professional and online reading resources), like-for-like sales fell 10% to £63m. This comes amid budgetary pressures on academic reading material. After closely following the struggles of academic publisher Pearson, I am concerned about Bloomsbury’s potential expansion in this market. The newly acquired business Rowman and Littlefield is expecting further headwinds in FY26, which won’t make the remainder of the integration particularly enjoyable.

Outlook uncertain?

These challenges are reflected in the outlook at Bloomsbury. Management has said that trading so far this year has been “broadly in line” with consensus expectations, which feels a little hesitant. Consensus expectations (according to the company) are for revenue down 3% to £349.2m and adjusted PBT up 7% £45.1m (although house broker h2Radnor is more conservative with its forecasts).

Megan’s view:

Bloomsbury’s share price has been on a downward trajectory for much of the last year as concerns over the ongoing growth prospects mount. I think that is justified. But the share price movement this morning feels like an over-reaction.

That said, I am not feeling entirely comfortable with the outlook. Management at Bloomsbury tends to be quite conservative with forecasts, but “broadly in line” doesn’t feel massively confident, which means a price to forecast earnings ratio of 16x is perhaps a bit stretched.

I like Bloomsbury, it’s a well managed, high quality business which generates a lot of cash. But deploying that cash into acquiring academic publishing companies is not a strategy that I am optimistic about.

It’s with regret that I’m going to downgrade Graham’s last view to AMBER.

Mark's Section:

Works co uk (LON:WRKS)

Up 13% to 34.5p - Full Year Trading Update - Mark - AMBER/GREEN

The share price had been perky here over the last month on some increasing volume:

This may have simply been a recovery in general markets, although given today’s good news, this seems a little fishy to me. And it is good news, although LFL sales were flat for the year ending 4th May, it is a multi-year upgrade to Adj. EBITDA. Firstly:

Pre-IFRS 16 Adjusted EBITDA (2) is now expected to be approximately £9.5m for FY25 (FY24: £6m), which is ahead of market expectations (3).

Helpfully, they give us an update on what that means:

Group compiled market forecasts for FY25 and FY26 are currently pre-IFRS16 Adjusted EBITDA of £8.5m and £10m respectively.

That’s an 11.7% beat at the Adj. EBITDA level. However, there are some significant adjustments in there:

Pre-IFRS 16 Adjusted EBITDA excludes Adjusting items in relation to exceptional fulfilment costs (£1.2m) and exceptional restructuring costs (£0.6m).

They had issues fulfilling online orders at Christmas leading to a 12.1% decline in sales through this channel. They have taken action and appointed a new provider:

Following the online fulfilment issues experienced during Christmas 2024 we have appointed a new third-party provider. The transition is due to complete by the autumn and is expected to deliver cost savings in FY26 and beyond as well as providing a higher standard of service to customers.

It seems to me that they are saying that FY25 beats expectations if you ignore all the things that went wrong. If you include these, this is actually a miss versus expectations! However, assuming that they have chosen the right third-party logistics provider, these issues shouldn’t repeat. Which means that they should see improving sales through the online channel in FY26, giving them the confidence to say this so early into the new FY:

The Board expects that the positive momentum seen since Christmas will continue. This, combined with ongoing focus on product margin growth, cost management and execution of our new strategy, means we expect to offset significant cost headwinds and deliver profit growth in the year ahead. As a result, we are targeting profit growth in excess of current market expectations in FY26.

Their broker, Singer, upgrade their FY26 EPS by 30% to 6.7p. This is a forward P/E of 5 despite today’s rise, meaning that the already great VM rank is going to get even stronger:

Net cash has also increased and stands at £4m at the year end. However, they have significant working capital swings during the year, so this isn’t representative of the typical cash position. For example, they had £8.5m net bank debt at the half-year.

It seems the financial position isn’t strong enough yet to consider shareholder returns. Singer don’t forecast any dividends this year or next. It is also worth noting that at the half year, lease liabilities exceeded right of use assets by £19.2m. This means that a significant number of stores must be loss-making. The good news is that this situation should improve with better store trading, and they have relatively short leases. However, onerous lease costs remain significant compared to their market cap.

Mark’s view

The very high Momentum and Value ranks make this a compelling Turnaround stock. The large upgrades to what should be a cleaner FY26 are enough to assuage my concerns as to whether FY25 should be considered a beat or a miss, with more realistic adjustments. This is an AMBER/GREEN for me, with the lack of dividends and large onerous lease liabilities taking the shine off an excellent operating performance in difficult market conditions.

Impax Asset Management (LON:IPX)

Up 3% to 171p - Interim Results - Mark - AMBER/GREEN

The woes of the asset management industry are well known, as was the loss of the St. James Place mandate, meaning the large fall in AUM was expected:

AUM at £25.3 billion (H1 2024: £39.6 billion; FY 2024: £37.2 billion)

So was the impact on EPS:

· Adjusted diluted earnings per share of 12.6 pence (H1 2024: 16.0 pence; H2 2024: 16.2 pence)

· IFRS diluted earnings per share of 9.7 pence (H1 2024: 14.0 pence; H2 2024: 14.2 pence)

In terms of adjustments, there is £1.3m of non-cash intangible amortisation in there, which is normal to exclude. However, there is also £1.7m of redundancy costs for this half year, which will be cash, but should be a one-off. They said they had removed 30 roles during the period, so this works out to be around £57k per person. However, they say they are saving £11m, which means the average role had a total package of £366k. In light of this, the redundancy costs seem reasonable. Their total headcount only went down by 19, though. Which means they also added 11 roles during the period. Overall, this seems a little strange.

What wasn’t expected was the cut in dividends. Many asset managers have held their dividend payments, expecting a medium-term market recovery. Until today, brokers were expecting Impax to do the same. The cut today is a 15% reduction in the interim dividend to 4p. However, the real sting in the tail is this:

We are also rebalancing the split between the interim and final dividend, so that distributions to shareholders are less heavily weighted towards the final dividend, in line with common market practice.

Market norms are for a 1/3rd, 2/3rds split between interim & final payments. Research provider Equity Development are now forecasting a 13p full year dividend, around half the previous forecast. This is still a reasonable yield at 7.6%. However, this is now below the rest of the sector, and won’t please those who held this expecting the very high yield of the previous forecasts. Especially as previous management comments in presentations suggested that maintaining the dividend was a priority.

In a rather strange move considering that they have cut their dividend to conserve cash, they also announce a large share buyback:

As part of the Board's capital management approach, we will also consider returning to shareholders surplus capital through share buybacks, while also ensuring there is sufficient capital available to fund future growth opportunities when they arise. In line with this, we intend to return up to £10 million of capital to shareholders before the end of the calendar year through a share buyback programme, which, combined with our commitment to funding the Company's expansion and our dividend policy, demonstrates our confidence in the Company's future success.

The sceptic in me always thinks this may be due to how directors are remunerated. However, a quick look at the 2024AR shows that the number of options outstanding is relatively limited and although there is a share price component to bonus payments, it is relatively minor. Instead, the risk here is that this represents a lack of consistent strategy, or that the outlook has materially worsened for future years. This is the outlook:

At the time of writing, markets remain fragile as investors continue to digest geopolitical tensions and the implications of U.S. tariff policy. Our focus on managing portfolios of high-quality securities provides our clients with diversification and access to specific areas of the market, and we are encouraged by the improvement in our relative investment performance since the start of the calendar year.

So perhaps the current uncertainty has changed their view on how much regulatory capital buffer they need. Equity Development say that 71% of AUM has outperformed their benchmarks this year and that the fixed income strategy performance has been mostly ahead of benchmarks for a number of years. However, the recent falls in AUM take time to work their way through the financial results and Equity Development’s adjusted EPS is forecast to fall to 19.7p in FY26 versus 21.7p in FY25. This is upgraded from a previous 17.6p estimate for FY26, though.

Mark’s view

The results are in line, and Equity Development have upgraded FY26 EPS by 12%. However, the large cut to a previously flagged as likely to be maintained dividend, combined with a share buyback suggests that there is quite a lot of uncertainty as to what their future strategy should be. This is reinforced by them making 30 roles redundant in the period but hiring 11 people. Still, most of its funds are outperforming benchmarks, and the rating is modest at around 9 times earnings, even if the timing of any recovery is perhaps more uncertain. So it stays as AMBER/GREEN for me.

Serica Energy (LON:SQZ)

Up 3% to 145p - Trading and operations update - Mark - AMBER/GREEN

This is an inline update with production guidance maintained at 33,000-37,000 boepd. This is despite only 26,500boepd produced in the first four months of the year due to the Triton shutdown. This remains on target to be restarted at the end of June, including some new production wells:

The Triton Hub was producing at a rate of approximately 25,000 boepd net to Serica immediately prior to the shutdown. Following restart, both the W7z well on the Guillemot North West field (Serica: 10%) and the EV02 well on the Evelyn field (Serica: 100%), which were delivered on schedule and under budget during the Triton downtime, will be brought onto production for the first time

There is further production growth to come next year, too, from a successful well:

The BE01 well on the Belinda field (Serica 100%) was also drilled and completed ahead of schedule and under budget. The well has now been flow tested through the COSL Innovator rig this week, delivering rates of 7,500 boepd, constrained by the surface well test equipment design specifications. Work is underway on the installation of subsea infrastructure, and Belinda is expected to be tied in to Triton and to enter production in early 2026

Net debt is now $102m but this will improve with higher H2 production and tax receipts.

Mark’s view

Given the recent changes in production, investors need to be careful about relying on the FY25 consensus here. The lack of movement in consensus suggest some stale forecasts:

The only updated research available on Research Tree is from Auctus which has just US8c for FY25 EPS. However, this rises to US75c for FY26. This is close to the consensus for FY26 and is for a P/E of 3. The 21c forecast dividend is still an 11% yield despite recent cuts. Given the scope for further production growth in the medium term, this still seems too cheap. AMBER/GREEN

Robinson (LON:RBN)

Down 7% to 125p - AGM Trading Update - Mark - AMBER

Everything is pretty much flat here with minimal changes in volumes and underlying operating profit in the first four months of the year. They say:

The Company continues to expect underlying operating profit* for the 2025 financial year to be ahead of 2024 and in line with current market expectations.

Their broker, Cavendish, are forecasting a 12.5% increase in EBIT, so they have more to do in the remaining 8 months of the year to hit that figure. The outlook suggests some reasons for optimism:

Our close partnerships with major FMCG customers have generated an improved sales pipeline, and our strategy of widening this blue-chip customer base is generating further substantial opportunities, including important projects that are now close to fruition in new market sectors.

However, without specifics, I can see why the market hasn’t liked the uncertainty around the amount of work they need to do in the rest of the year to make those forecasts.

There is better news on the property front:

We are continuing to pursue the sale of surplus properties in Chesterfield. Subject to the necessary approvals, we would expect further sales of surplus property to be achieved in 2025.

When all of these are made, this will likely eliminate the current £7.3m net debt.

Mark’s view

The forward P/ E of 11 isn’t crazy. However, with work to do to get to the forecast numbers and relatively modest future growth, it doesn’t look particularly cheap either. I can’t get over the feeling that plastic packaging isn’t a great place to be, with a focus from retailers on removing single-use plastics wherever possible. While a completely plastic-packaging-free future is probably not possible, it will constrain the growth of this sort of company, no matter how well they execute. AMBER still seems about right.

Tharisa (LON:THS)

Flat at 62p - Half-year results - Mark - AMBER

The combination of lower production, which was already known, and lower chrome prices mean that the headline EPS is down to 2.9c, from 13.2c the year before. They say they maintain their guidance for FY25 but don’t say what this is, but the Q2 production report says:

Production guidance for FY2025 is set at between 140 koz and 160 koz PGMs (6E basis) and 1.65 Mt to 1.8 Mt of chrome concentrates

They also make no comment on market conditions, with the volatility in the Chrome price a key factor in determining the financial outlook for the year. I can’t see any updated broker coverage to shed light on this either.

They have net cash of $87.6m, which is around £65m and around a third of the market cap. This has given them the financial security to maintain the 1.5c interim dividend and announce a $5m buyback. However, without details of the current commodity outlook, it is hard to judge if they are getting a good deal or not. So far, the market appears to like the signal (or perhaps the price support!)

One of the issues recently is that all their cash flow has been committed to developing Karo, and even at a reduced rate, this is a significant outflow. Here they say:

While we have slowed development at the Karo Platinum Project in line with capital availability, we have nevertheless continued work on infrastructure, water dams and further optimisations including commencing with studies for the future underground mine development, while presenting the opportunity to non-traditional financiers, who like us, see the long-term benefits of the uniqueness not only of this Tier 1 project but of the applications PGMs will play for decades to come.

I assume they are talking about off-take agreements or similar arrangements, which may reduce their capital commitment. Here is the diagram from their presentation:

The good news is that there are multiple sources of additional finance. The bad news is that we don’t know what terms these will be advanced on and whether Tharisa will need to cede equity as part of any of these deals. Until these are signed, Tharisa will be on the hook to keep providing equity finance if they want to advance the project.

Mark’s view

The H1 results themselves look very weak. However, the market has liked the signal from the retained dividend and renewed buyback. There simply doesn’t seem to be enough information to judge which is the right call. There are signs that the cash outflow to fund Karo may be close to ending. However, until alternative financing is signed, this remains a risk. I maintain my AMBER view.