Daily Stock Market Report (Tue 6 May 2025) - The end of an era, FTC, ADF, ABF, SYNT, ALPH, AGFX, KGH, GTC, HUD, ROO
Good morning! And welcome back after the long weekend.
1pm: we are wrapping up today's report now, thank you.
The end of an era
(NB. I'm long BRK.B.)
This weekend we learned that Warren Buffet was retiring as CEO of Berkshire Hathaway, effective January 1st 2026.
Buffett was born in 1930, and has been CEO of Berkshire since 1970, so it is reasonable that he may wish to take a break at this time. However, he will remain Chairman of the Berkshire Board.
Buffett has had an immense, immeasurable influence on the investing community, through his many shareholder letters and interviews, but perhaps above all through his actions and decisions as CEO of America's most famous conglomerate.
Without him, both "value" and "quality" investing would be very different.
As for the future of his company, it will hopefully not be all that different from the past, at least for now. It has been known since 2021 that Greg Abel would be the next CEO.
Greg Abel has been part of the Berkshire Hathaway family of companies since 1999, and has been Vice-Chairman of non-insurance operations since 2018. Aged 67, I hope and expect that he will provide a steady pair of hands for the foreseeable future.
As for Warren Buffett, I very much hope that he enjoys his additional free time, even if he can't spend it with his greatest friend and colleague Charlie Munger. The discipline of investing will move on, but it is difficult to imagine that anyone will ever match their impact.
Companies Reporting
| Name (Mkt Cap) | RNS | Summary | Our view (Author) |
|---|---|---|---|
Associated British Foods (LON:ABF) (£14.8bn) | ABF confirms talks are underway on a possible transaction involving Allied Bakeries. | AMBER (Roland) [no section below] Sky News has reported that ABF is in “prolonged discussions” with private equity house Endless over a possible deal to combine the two companies’ bakery businesses. Competition issues could be a stumbling block, with Hovis and Allied Bakeries said to have 24% and 17% market shares respectively, against 34% for Warburtons. I’m going to leave our neutral view unchanged today following our 29 April review of ABF’s interim results. | |
Deliveroo (LON:ROO) (£2.6bn) | 180p offer from Doordash. The bid is at an EV/EBITDA multiple of 13.4x, and there are irrevocable undertakings from 15% of Deliveroo shareholders to support it, including founder-CEO William Shu. | PINK (Graham) [no section below] | |
International Workplace (LON:IWG) (£1.9bn) | Rev +2%, increase in new signings & openings. FY25 guidance unchanged. | ||
Alpha International (LON:ALPH) (£1.2bn) | SP up 3% | PINK (Roland) [no section below] | |
Kosmos Energy (LON:KOS) (£572m) | Rev -30% to $290m, net loss of $111m ($0.23 per share). Q1 prod 60.5kboepd due to maintenance. | ||
Filtronic (LON:FTC) (£209m) | Revenue and EBITDA expected to be ahead of expectations for both FY25 and FY26. | AMBER/GREEN (Roland) Filtronic says that increased manufacturing capacity is allowing it to deliver “increasing customer demand”, supporting upgrades to expectations for both FY25 (y/e 31 May) and FY26. However, updated estimates from broker Cavendish show that earnings are still expected to fall sharply next year, as revenues ease back and the cost base expands. I respect Filtronic’s recent momentum and timely LEO market positioning, but I can’t help having some concerns about the near-term outlook. | |
Synthomer (LON:SYNT) (£152m) | Agreement to sell its inorganic chemistry business for £30m, representing 7.5x 2024 EBITDA. | AMBER/RED (Roland) I review the details of today’s disposal and consider the broader picture as a possible turnaround. High leverage means that I must take a cautious view. But I am inclined to think this well-established business could be nearing a turning point where trading will start to improve. In my view, Synthomer could be worth further research and monitoring as a possible turnaround. | |
Knights group (LON:KGH) (£122m) | £10m initial cash consideration, deferred cash of £6.6m. FY24 adj PBT for Birkett Long was £1m. The acquired business has 91 fee earners and is split equally between business and private clients. It also has a wealth advisory team, providing an entry point into this market for KGH. Adding Birkett Long is expected to take group revenue over £200m (FY24: £150m). | AMBER/GREEN (Roland) [no section below] Another debt-funded acquisition for this listed law group, two months after its last deal. Once again, the figures provided imply that Knight’s management expects to be able to increase the profitability of the acquired business significantly once integrated. I estimate this could equate to a purchase multiple of c.10x FY24 pro forma PBT. This roll-up group appears to have good momentum and enjoys Super Stock styling. Personally, I’m a little wary about Knight’s average profitability (ROE: 11%) and heavily-adjusted profits. While the forward P/E of six looks cheap, adjusted EPS appears to exclude some large and recurring cash items, such as payments to partners from acquired firms. Using reported EPS, the shares trade on 13x FY24 earnings, which looks fair to me. | |
Victoria (LON:VCP) (£93m) | FY25 rev “at least” £1.11bn, EBITDA margins broadly in line with exps. UK trading is improving. | ||
Argentex (LON:AGFX) (£52m) | SP down 91% | PINK (under offer) (Graham) [no section below] | |
MTI Wireless Edge (LON:MWE) (£42m) | MTI has increased its PSK stake by 9% to 60% for $170k. Previous issues with PSK now resolved. | ||
Maintel Holdings (LON:MAI) (£32m) | Rev -3.4%, adj PBT +33% to £7.3m. 75% recurring rev. FY25 outlook in line, H2 weighting. | ||
XP Factory (LON:XPF) (£19m) | FY March 2025: rev +17% (£57m), LfL +2.5%. Adj. EBITDA at upper end of exps (£6.2 - 6.4m). | ||
Facilities by ADF (LON:ADF) (£19m) | Loss before tax £2.8m. Net debt £13.8m (hire purchase). Q1 in line. Timing of projects uncertain. | RED (Graham) Estimates are unchanged but I'm reducing my stance to RED in the light of these results. Tangible balance sheet support for the stock has reduced year-on-year and visibility remains highly uncertain, with the added uncertainty of tariff risk now thrown into the mix. | |
Eden Research (LON:EDEN) (£16m) | Rev +34% (£4.3m). Op loss £2.2m. 2025: revenue forecast £5m. Overheads to increase. | ||
Huddled (LON:HUD) (£11m) | Rev +490% (£14.2m) (boosted by M&A). Loss before tax £4.0m. The new year has started well and the company says that FY25 is now a year of transition from heavy cash investment to operational cash generation. Challenges are "operational and solvable, rather than customer demand led". | RED (Graham) [no section below] There are signs of underlying progress including impressive growth at Discount Dragon, which has doubled revenues to £10.8m. But cash has reduced to £1.6m (Dec 2024). Today's going concern statement says there is no "material uncertainty" indicated, but I don't trust this and the prior paragraph in the statement concedes that the company might need to access fresh debt or equity. Broker Zeus is forecasting a pre-tax loss of £1.4m in the current year. If there was a similar loss in cash flow terms, that would nearly wipe out the cash balance. To reflect what I perceive as a high risk of additional funding needs, I'm taking a RED stance. | |
Getech (LON:GTC) (£2.5m) | Rev +16% (£4.7m). Reduced EBITDA loss £0.56m. Cash £0.9m. Current trading: rev +8%. | RED (Graham) [no section below] I’m RED on this to highlight that its subscale for a stock market listing. Today’s results do show progress, including a reduction in the cost base (£1m) and reduced losses, although the operating loss (£1.5m) remains significant relative to the size of the business and its revenues (£4.7m). No tangible balance sheet equity worth talking about. It may have some speculative potential but I don’t find the numbers appealing, and in any case its extremely small size would rule it out for me. |
Graham's Section
Facilities by ADF (LON:ADF)
Down 16% to 14.6p (£16m) - Final Results - Graham - AMBER/RED
Facilities by ADF, the leading provider of premium serviced production facilities to the UK film and high-end television industry ("HETV") announces its audited final results for the year ended 31 December 2024 ("FY24").
Shareholders here have had a torrid time in the last six months, suffering a major profit warning last November and then another one in March.
From the perspective of this report, I cut my stance down to neutral in November, and then took a moderately negative stance in March.
2024 results are in:
2024 results were boosted by an acquisition during the year of a company called Autotrak, which contributed revenues of £2.6m. Take them out and 2024 revenue was down vs. 2023.
There were “continued project delays across the film and HETV industry as it recovers from the USA Writers and Actors strikes”. ADF continues to suffer from this slowdown, even though the strikes officially ended in September 2023.
Net debt increases to £13.8m, being the difference between ADF’s hire purchase liabilities (£16.3m) and its cash balances (£2.4m). ADF paid an average interest rate of 6.8% on its new hire purchase contracts in 2024.
Dividend: 1.4p for the year, unchanged on the previous year. This should cost c. £1.5m.
Balance sheet: tangible net assets of £13m, down from £19m year-on-year.
Outlook: Q1 is in line and the CEO is positive on the long-term outlook.
Overall, however, the outlook sounds rather mixed. Visibility remains low:
The level of enquiries is increasing, although the timing of projects continues to be uncertain as the market has remained relatively subdued and production companies face frozen budgets, reduced production spend and rising costs.
Estimates
If I scroll back to pre-November 2024, ADF was expected to generate revenues of £67m, adj. EBITDA of £20m and adj. PBT of £12m in 2025.
Two profit warnings later that had been reduced to revenues of £42.6m, adj. EBITDA of £10m and adj. PBT of £2.1m.
Those estimates have been issued again today, unchanged.
Broker Cavendish also acknowledges that “it is too soon to assess” any impact that a 100% Trump tariff on non-US made films could have. But I doubt that it would be positive!
The Head of the Broadcasting, Entertainment, Communications and Theatre Union has said on Sky that this tariff could deal a “knock-out blow” to the UK’s film and TV industry. I'm not sure how it would be implemented, though - tariffs on non-physical services are far more complex than tariffs on physical goods.
Graham’s view
I view the company as both unlucky and enjoying very little visibility - a bad combination.
Unlucky: the company has been challenged by Covid and then by Hollywood strikes, and perhaps a Trump tariff will be the next problem. And if it’s not a Trump tariff, I fear that it will be something else.
Low visibility: the abruptness with which revenue and earnings estimates were cut for 2024 and 2025 was alarming. I note in particular that the 2024 revenue forecast was cut by 28% in November 2024.
The utilisation by customers of ADF’s fleet (as a percentage of the total fleet) is not provided by the company itself and was last estimated by Cavendish at 55%. I assume that utilisation remains around this level - in plain English, ADF simply has far too many vehicles, far more than it needs to meet industry demand these days. It expanded its fleet too much and now it can only hope that demand picks up again, but it is impossible to predict when this might happen.
Also, I’ve noticed a slight change in language today. Last year, the company said that it targeted £100m of revenues (a near trebling from their current level) “in the medium term”.
Today, that timeline has been pushed back to a more realistic “long term”.
I should remind readers that insiders not including the CEO, but including the founder, sold £10m of ADF stock last year at 50p. Unfortunately it now looks as if that was the smart money.
Stockopedia categorises it as a Value Trap:
Overall, I’m inclined to reduce my stance on this further again, right down to RED. There is some balance sheet support in terms of tangible assets but I’m struggling to find other reasons to invest here.
Roland' Section
Filtronic (LON:FTC)
Up 5% to 101p (£220m) - Trading Update - Roland - AMBER/GREEN
Filtronic plc (AIM: FTC), the designer and manufacturer of products for the aerospace, defence, space and telecoms infrastructure markets, is pleased to announce the outlook for both FY2025 and FY2026 is expected to exceed current market expectations.
A short but positive update from this popular UK electronics stock today. Investment in additional manufacturing capacity over the last year seems to be bearing fruit, supporting higher levels of activity:
Investments in manufacturing capacity during the financial year are fully online allowing the Company to meet increasing customer demand. This will deliver stronger revenue and adjusted EBITDA in H2 of FY2025 and result in us beating current market expectations for the current year.
Outlook: Filtronic CEO Nat Edington is also optimistic about the year ahead:
The strengthened trading performance in FY2025 is expected to carry through to FY2026 as anticipated new programmes come through with new and existing customers.
Updated estimates: Filtronic has not included any specific financial guidance in today’s update. Fortunately we do have an updated note from house broker Cavendish – many thanks.
Cavendish has made a substantial change to its FY25 estimates – a big increase given that the current year ends in less than a month, on 31 May:
FY25E revenue +9% to £55.0m (prev. £50.4m)
FY25E EPS +18% to 5.9p (prev. 5.0p)
However, the broker is remaining more cautious about FY26, lifting revenue but leaving profit forecasts unchanged. It seems Cavendish expects to see much lower profit margins next year, due to increased spending on engineering capability:
FY26E revenue +9% to £50.0m (prev. £46.0m)
FY26E EPS unch at 3.2p
Roland’s view
Filtronic’s share price has paused its ascent since tariff Liberation Day at the start of April:
Cavendish believes tariffs are unlikely to have a significant impact and I suspect this is true.
My reading of the share price pause is that it reflects the expected fall in both revenue and earnings next year, and the lack of visibility these imply.
As I understand it, Filtronic’s current programme of work with Starlink has been boosted by a one-off retrofit programme to upgrade existing ground stations. Further growth with Starlink is at least partly dependent on new products achieving technical milestones in order to secure orders.
This situation is reflected in the consensus trend chart, which shows repeated upgrades to FY25 earnings but no change to FY26 expectations.
As far as I know, the company hasn’t provided any update on progress with these new products, although CEO Edington does mention “anticipated new programmes” in today’s update.
Dependence on new products always carries some risk. They may be delayed or fail to perform as hoped. However, if these products do gain acceptance from Starlink as intended, my understanding is that there’s scope for significant new wins with the group’s largest customer.
Of course, in addition to Starlink, there is potential for Filtronic to win new contracts with other customers.
Stockopedia’s algorithms continue to rate this stock as a High Flyer, despite the potential drop in earnings next year. This combination leaves the stock looking quite fully valued, in my view:
However, I do respect Filtronic’s recent momentum and its timely positioning to benefit from the explosive growth in the Low Earth Orbit satellite market.
I can see that it’s quite possible we will see earnings upgrades over the coming year that could help to reduce the current FY26 earnings deficit.
For these reasons, I’m going to leave my view unchanged at AMBER/GREEN today.
Synthomer (LON:SYNT)
-3% to 90p (£148m) - Divestment of William Blythe - Roland - AMBER/RED
Synthomer plc ('Synthomer' or 'the Group') today announces an agreement to divest William Blythe limited, its inorganic chemistry business, to its management team alongside H2 Equity Partners, for consideration of £30m.
William Blythe was founded in 1845 and appears to be a niche chemicals business serving customers in sectors including life sciences, performance coatings and electronics.
However, this unit was identified as non-core by Synthomer in its October 2022 strategic review and its disposal is expected to help with deleveraging and simplification, according to Synthomer CEO Michael Willome:
… the business has limited synergies with the rest of the Group and its divestment will further reduce the complexity of our site portfolio and enhance our focus on higher value, higher growth specialty chemicals markets where we have strong and sustainable leadership positions.
Terms: William Blythe generated revenue of £54m and adjusted EBITDA of £4m in 2024. So today’s sale equates to a multiple of 7.5x EBITDA.
This seems a reasonable valuation at face value, although a quick check at Companies House suggests this business generated an after-tax profit of £4.2m in 2023, implying that EBITDA would have been significantly higher. I don’t know if last year’s decline was due to cyclical pressures or some other factor – presumably the buyers (management & PE) are confident they can return the business to growth.
Roland’s view
I decided to look at Synthomer this morning to see whether it could be shaping up into an interesting recovery story.
This business generated record profits during the pandemic when demand for latex gloves soared. But it’s suffered a terrible slump since then, reporting three years’ of losses and culminating in a rights issue to help repair its debt-laden balance sheet.
However, my general impression is that the cyclical slump in the chemicals sector may now be bottoming out, with demand stabilising (see our coverage of the recent update from Croda International).
I’m wondering if Synthomer’s fortunes could also start to improve. Despite recent problems, this business has a long-heritage in its core rubber market and benefits from a supportive controlling shareholder:
I’ve also noticed that Stockopedia’s algorithms have recently upgraded their view on Synthomer from the losing style of Value Trap (26 March 25) to the winning style of Contrarian:
Last week’s Q1 trading update reported an increase in EBITDA and margins vs Q1 2024, despite slightly lower volumes than last year due to favourable comparatives (customers were restocking last year).
Management reiterated expectations for “further earnings progress and positive free cash flow in 2025”, despite the potentially mixed impact of tariffs:
Our Health & Protection customers that are based in Malaysia are in a strong position to benefit relative to their China-based competitors as a result of the tariff changes. At the same time, geopolitical tensions have made end-market demand more unpredictable, particularly in the USA, which represents around 25% of our revenues.
Balance sheet/debt: scrolling back to look at the 2024 accounts, it’s clear that debt remains a significant risk here.
The 2024 results showed year-end net debt of £597m, equivalent to 4.6x EBITDA on a covenant basis. That’s far higher than the 2.0x-2.5x I’d normally see as a comfortable maximum.
Profit forecasts also remain minimal, relative to the c.£2bn annual revenue. Based on these consensus forecasts, progress on debt reduction could be slow without further material divestments:
However, the trend is improving and Synthomer does seem to be making some progress with its self-help measures.
The valuation could also be approaching a reasonable level, with the stock trading broadly in line with its tangible net asset value of c.£150m.
On balance, I think this business is approaching a point where momentum could turn positive. But from an equity perspective, I think the high level of leverage means risk remains above average.
Balancing risk and opportunity, I think it’s fair to take a moderately negative view. AMBER/RED.
About Graham Neary
I've been a full-time stock market analyst and investor since 2009, with the exception of one "year out"!
I was a chartist (technical analyst) for three years, analysing the fixed income and futures markets for hedge funds and investment bank traders.
After that I moved over to the buyside where I got my CFA qualification and learned how to manage equities and fixed income portfolios for a large institution. When given the chance to manage a diversified UK equity portfolio, I generated a return of 28.5% in two years (benchmark: 17.1%). Avoiding the mining sector was a big help!
I then took my year out to study Mandarin in China. Ever since, I've been spreading the word on how individuals can find exciting investment opportunities. I've spoken at countless events, taught financial statement analysis to private investors, built up a small following on social media, and have been a regular fixture here at Stockopedia for many years. The stock market continues to fascinate me and I'm sure it always will.
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I may take a little look at this JASVFS... only £2.5m market cap though! Thanks.
Saw at week end Sarah J Maas had 5 of top 6 bestsellers in Fiction in Times list.
These are all new entries.
It occurred to me this should boost their performance.
They have trading details out this month.
I took an opening position this morning.
Tom
AGFX: The valuation of AGFX is far cheaper than a p/e of 19 you mention if you take the Statutory figs that include the Net Interest Income and also take-off the £250m+ of cash holdings. The management chose to adjust-out the NII which makes the shares look far more expensive. Taking account of these factors and you get a p/e of 11 - so one would hope that a fair value take-out price would be considerably higher than the current market price.
Nice words Graham on Warren Buffet. Let's hope he can beat Charlie's record and stay on the board as Chairman until his 100th birthday. It was very sad that Charlie Munger passed away just before his 100th. For me Warren is a true gentleman and role model. His record, wise words and integrity are unmatched over a 60 year timescale. The AGMs are not quite the same without Charlie's no nonsense comments like I have nothing to add. The two of them worked together fantastically as a double act. They will live on as possibly the best investors of all time! I wouldn't like to be in Greg Abels shoes. What an act to follow...mission impossible!
Bloomsbury Publishing (LON:BMY) (I hold)
I’m confused
I don’t think there were any SJ Maas releases in last financial year to Feb/25 and think expectations are for 1 new release this financial year to Feb/26. I think that is not reflected in current market forecasts.
I do not subscribe to Times so can’t seem to access what list you are referring to but interested if you can explain more.
Times newspaper May 3
Bestsellers list
Paper Fiction
Nos 1, 3, 4, 5 & 6
Not sure what part you don’t understand.
All by Sara J Maas.
Published by Bloomsbury at £9.99 each.
Ferrari NV (BIT:RACE) Ferrari NV (NYQ:RACE) isn't a car manufacturer really
it's a race team
that happens to sell (barely) road legal cars while leveraging it's brand as luxury & high-status (with it's logo on hats, t-shirts, keychains etc.) in order to fund said race team
can't treat it like your Ford Motor Co (NYQ:F) , your Mercedes-Benz AG (FRA:MBG) , your TOYOTA MOTOR (TYO:7203) etc.
Synthomer (LON:SYNT)
I am still looking at it and no holding.
But if they can deleverage further at 2X EBITDA this is a £5 stock.
To reduce the risk, look out for Alexander Catto to dip into his wallet. Over the long term this has been a reliable indicator of better times to come. Although he last did so in a meaningful way in October 23 and has since lost 90% - so not foolproof.
Re: Bloomsbury Publishing (LON:BMY) The bit that is not understood: Why are these 5 Sara J Maas novels NEW entries in the Times list when the novels themselves are not newly released?
Bloomsbury Publishing (LON:BMY)
Hi Tom
Bizarrely I can only see 4 SJM books in The Times Top Fiction Paperbacks section this week. Indeed the blurb at the top of the page says:
"there are four Sarah J Maas novels, all volumes in her Court of Thorns and Roses series, in the paperback fiction charts this week."
I have no idea why they have suddenly appeared, but a couple of counter points:
- The US market is far more important if you want to use SJM sales as a proxy for how well the company might be doing.
Amazon.com publish a list of the top 20 most sold books each week.
SJM has not appeared for a while, but one of her books does occasionally pop up. - There have been odd times on the aforementioned Amazon.com Most Sold list where several of SJM's books to pop up in 1 week.
I've tried to find out why, but I wasn't able to.
I can only assume that some celebrity somewhere made a shout out and SJM book sales rapidly, and momentarily, increased.
I do not hold Bloomsbury Publishing (LON:BMY)
A
*Past performance is no indicator of future performance. Performance returns are based on hypothetical scenarios and do not represent an actual investment.
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CRH (LON:CRH) - One thing to watch out for with all the moves across the pond - CRH reported TU yesterday (US Mkt was not closed) and it seems to have got missed over here., as its no longer on the FTSE list - yet still traded on LSE. Presumably same applies to Flutter - PaddyPower and others...