Daily Stock Market Report (Mon 13th October 2025) - SQZ, COST, LLOY, TSTL, BYG, SAG, OXIG

Good morning! I hope everyone is doing well. Wrapping it up there, thanks everyone!

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Spreadsheet accompanying this report: link (last updated to: 5th September).

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Graham's Section

Lloyds Banking (LON:LLOY)

Up 1% to 84p (£49.8bn) - Motor Finance Update - Graham - AMBER/GREEN

We have a reassuring share price reaction in response to news of an additional £800m charge.

Further to the recent FCA announcement and consultation paper on an industry wide redress scheme for motor finance, following the Supreme Court judgment handed down on 1 August 2025, the Group has now undertaken an assessment of the implications and impact of the proposed redress scheme.

The FCA made an announcement last week, with news that they are consulting on a motor finance compensation scheme.

The FCA’s point of view:

“Many firm broke laws and regulations in force at the time by failing to disclose important information. Our extensive review, covering data from 32m agreements, found widespread failures to adequately disclose the existence and nature of commission and contractual ties between lenders and brokers.

Of the agreements reviewed involving a discretionary commission arrangement (DCA) - where the broker could adjust the interest rate offered to a customer to obtain a higher commission - there was no evidence that the customer had been told about the DCA.

They estimate that 44% of all agreements made since 2007 will be considered “unfair” (and therefore unlawful), with total estimated redress of £8.2 billion, including interest.

Impact on Lloyds: they had an existing provision of £1.15 billion, and are now taking an additional £800m charge.

Based on the FCA proposals in their current form, the potential impact is at the adverse end of the range of previous expected outcomes. The proposals are subject to consultation and there remain a number of uncertainties.

Lloyds also make it clear that they do not agree with the FCA’s proposals, and will be arguing their case - this could yet drag on for some time. The FCA’s consultation closes on 18th November.

Graham’s view

The new £800m charge is only a fraction of the group’s forecast after-tax net income this year (£4.6bn).. And so while the FCA’s initial proposed compensation scheme might not be what the company wanted to hear, the big picture is that any amounts paid out are likely to be easily affordable.

Looking at it another way, Lloyds Bank Plc has a book value of £42 billion, within the larger Group that has equity of £47bn.

And the market has had plenty of time in recent months to digest the various announcements from the Supreme Court and then the FCA. The final outcome is becoming clearer: compensation for DCA customers (i.e. those who paid variable commissions), with some wrangling to take place now over the formula used. The FCA may demand that customers receive back the entire commission paid, plus whatever interest they may have overpaid on their car loan, plus interest on this amount. The exact calculation will be debated.

I’m happy to upgrade our stance on this by one notch, to AMBER/GREEN. It’s always risky taking any sort of a view on large banks, but I tend to like them when they’re available around book value and at single-digit earnings multiples. Lloyds is still roughly in that ballpark.

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Roland's Section

Serica Energy (LON:SQZ)

Up 8% at 194p (£750m) - Proposed acquisition of UK North Sea assets from BP - Roland - AMBER/GREEN

Should this transaction complete, it would deliver a step-change for Serica, adding material production and cash flows from the largest producing gas field in the UK.

After last week’s disappointing downgrade to production guidance, today brings some more positive news from North Sea oil and gas producer Serica.

The company has agreed a fairly large deal to buy BP’s stake in the P111 and P2544 licences in the North Sea for $232m, plus two further contingent payments that are dependent on future exploration and tax events.

It’s worth noting that this deal is currently only provisional. BP’s existing partners in the Culzean field, TotalEnergies and NEO NEXT, have pre-emption rights. These give them a 30-day option to acquire BP’s stake in the licences on the same terms as those agreed by Serica. So the deal isn’t guaranteed, at this stage.

What is Serica hoping to buy? The main asset being acquired is BP’s 32% stake in the Culzean gas condensate field (P111). Culzean is the largest single gas producing field in the UK North Sea and generated production net to BP of c.25,500 boepd during the first half of this year.

P2544 is an exploration licence adjacent to P111.

Culzean is operated by French major TotalEnergies and only came onstream in 2019. Unlike some of Serica’s assets, it benefits from modern infrastructure run by a highly-respected operator:

Culzean is a world-class asset, delivering gas from a modern platform with exceptionally high uptime and low emissions."

Culzean has attractive operating economics with a production cost of just $10.7/boe. An updated note on Research Tree today from Auctus Advisors (many thanks) suggests this could translate to annual pre-tax operating cash flow of c.$490m at recent gas prices/production levels.

How will Serica fund the deal? The company says it hopes to offset some of the compensation costs using cash flows that would be accumulated between the economic date of the transaction (1 Sept 25) and its expected completion “around the end of 2025”.

The remaining costs would be funded from current cash and using its existing $525m reserve based lending facility. However, the company says it’s also considering putting in place a new, larger acquisition facility to reflect its growing asset base.

Is Culzean as cheap as it seems? We don’t know why BP is selling. One answer may simply be that while Culzean is a big field for today’s North Sea, a minority stake of this type isn’t really a very big project for BP.

However, the numbers provided today also suggest to me another possible reason for selling, and might also explain the seemingly cheap price:

• Production net to BP of 25,500 boepd, i.e. c.9.3 million boe/year

• Remaining 2P reserves net to BP of 33mmboe (million boe)

• These figures suggest remaining production life of the current field could be just 3.5 years

I still think this looks like a good buy for Serica – it could be highly cash generative. But having invested heavily in modern infrastructure for Culzean, I imagine operator TotalEnergies will be interested in extending its life through active exploration of the P2544 licence.

A quick Google suggests one such project may already be underway, targeting a further 67mmboe. I would guess more such work is planned over the coming years, for which Serica would presumably need to fund its share of costs. Ultimately, of course, Serica would probably also have to fund its share of decommissioning costs.

Roland’s view

Today’s RNS is a little light on detail, presumably because Serica is not yet certain if the deal will go ahead.

Based on what we know today, I can’t really see anything to dislike here. It looks like Culzean should be highly cash generative for Serica, without the reliability issues that have plagued the group’s non-operated production through the Triton FPSO.

Culzean’s H1 production (net to BP) exceeded Serica’s entire H1 production this year, due to the extended Triton outage. Even if all of Serica’s current assets were producing at full potential, the Culzean output would add around 50% to the group’s current production capacity.

I am not sure I have the knowledge required to try and estimate the likely post-tax cash flow from Culzean to Serica. However, I think it’s reasonable to assume this deal would pay for itself well within the current reserve life of the field and leave a comfortable margin.

The only caveat I’d add – as usual with this business and other similar operators – is that I think a modest valuation for Serica shares is appropriate, given the short lifespan and uncertain future costs of its asset base.

It’s also worth remembering that this deal may not go ahead, if NEO NEXT or TotalEnergies decide to buy out BP’s stake.

I’m going to leave our AMBER/GREEN view unchanged today.

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Tristel (LON:TSTL)

Unch at 358p (£172m) - Final Results - Roland - AMBER/GREEN

Another year of double-digit revenue growth, 23% growth in adj. pre-tax profits and strong cash generation

Checking back in the archives, I took an AMBER/GREEN view on this medical device disinfectant specialist at the time of its interim results in February. Graham then left this unchanged when he reviewed April’s update on the company’s US operations – the group’s main priority for growth.

Stocklopedia has adopted a High Flyer styling for this stock and the share price has been relatively unchanged this year, aside from a nasty dip at the time of April’s US tariff announcements:

Today’s full-year results have also left the share price relatively unmoved, despite double-digit earnings growth.

Has the market lost sight of an attractive long-term growth opportunity, or is the share price up with events? The big uncertainty remains the scale and pace at which US hospitals might adopt Tristel products. Unfortunately, today’s results suggest investors may need to remain patient.

FY25 results summary (y/e 30 June)

The headline numbers from today’s results look pretty healthy and appear to be in line with expectations based on July’s trading update:

• Revenue up 11% to £46.5m

• Gross margin: 81% (FY24: 80%)

• Adjusted pre-tax profit up 23% to £10.1m

• Reported pre-tax profit up 18% to £8.4m*

• Adjusted EPS up 12% to 17.15p

• Dividend up 5% to 14.20p per share

• Net cash exc leases of £12.8m

*The difference between reported and adjusted profits was almost entirely accounted for by a £1.4m exceptional charge relating to retirement payments to the outgoing and longserving CEO and CFO, and the recruitment of their replacements. In this case I’m happy to ignore these as they should be one-offs.

Highlights from last year include receiving US FDA clearance for Tristel OPH (a disinfectant foam) and insourcing the manufacturing of Trio Wipes, which is said to have generated annualised savings of £0.8m.

In addition, updated USA standards are now recognising chlorine dioxide foam (Tristel’s core IP) as “a recommended means of high-level disinfectant for medical devices”. Reinforcing this, the company says it completed a 90-day study in partnership with the Mayo Clinic that concluded Tristel ULT is “an effective and efficient method for HLD”.

Of course, the fact that Tristel’s US-related headlines relate to trials and regulatory approvals rather than commercial achievements tells a story in itself. Actual revenue generated through the company’s royalty deal with its US partner Parker Laboratories remained very limited last year, at just £108k (FY24: £74k).

Let’s see what the company has to say about each of its regions.

Revenue by channel: the bulk of the company’s revenue continued to come from its core UK (NHS) market, together with Germany and other countries in Western Europe:

UK: the FY24 results received a one-off boost from the agreement of a new six-year contract with NHS Supply Chain. The FY25 figures are said to reflect 6% growth in the UK business, with “steady, underlying growth across all product lines”.

N.B. I think the mismatch between 6% UK growth in the commentary and the 10% in the table above reflects the inclusion of UK sales to overseas distributors in the table above.

Europe: sales growth was positive last year, up 11% in Germany and 7% elsewhere in Western Europe.

UK & Europe sales growth was respectable last year, but these markets are relatively mature for Tristel and seem unlikely to deliver transformative growth.

North America: Tristel first started operating commercially in the US in FY24. Last year (FY25) was the first full year of commercial operations.

The company operates through a manufacturing and distribution partner, Parker Laboratories in the US. Royalty revenue remained very limited last year, at £108k, but the company says awareness and adoption is building steadily:

To date, we have engaged with around 200 health systems, and adoption is steadily building as Parker leverages its nationwide sales force and distribution network.

Last year’s FDA clearance for the US launch of Tristel OPH (for ophthalmic devices) is said to have been a major milestone, addressing “a long-standing unmet need” for a safe alternative to “outdated and hazardous open-tray methods”.

With 16m ophthalmic procedures annually in North America, the opportunity seems significant and the company says “early customer interest has been strong”.

I think today’s commentary highlights the scale and complexity of this opportunity, when compared to European markets. Here in the UK, the company generates most of its revenue through a single contract with NHS Supply Chain.

In North America, Tristel has already engaged with 200 health systems – and presumably there are others it has not yet reached.

Predicting the eventual level of adoption and the likely timescale for this seems difficult, if not impossible. Understandable, CEO Matt Sassone, who has an extensive background in marketing medical technology in the USA, remains bullish:

We view North America as a substantial long-term growth driver for the Group. With regulatory approvals secured, two FDA-cleared products in the portfolio, and a growing pipeline of hospital engagements, we are confident that the region will make a meaningful contribution to Group revenues over the coming years.

Outlook

Today’s outlook commentary is heavy on words but light on numbers. In essence, Sassone says that he’s confident of incremental growth in the UK and Europe and hopeful of transformative growth in North America. However, he avoids making any specific comment about market forecasts for FY26, instead settling for this generic remark:

We look forward to 2026 and beyond with significant confidence in the prospects for Tristel and its market leading products.

Fortunately for us, house broker Cavendish has provided an updated note on Research Tree today – many thanks.

Cavendish has left its FY26 revenue growth estimate of c.10% unchanged, but has cut earnings forecasts for the current year. The main reason for this is that the broker expects Tristel to increase its US spending in an effort to drive additional sales growth in this market:

• FY26E adj EPS: 17.56p (prev. 19.58p)

• FY27E EPS: 19.39p (new forecast)

These forecasts put Tristel on a FY26E P/E of about 20 at the time of writing, with a useful 4.2% dividend yield that’s reflective of the company’s strong profitability and cash generation.

One side note regarding revenue growth – as US sales are recognised as royalties only, they won’t have much impact on revenue but should feed through quite directly to profits and drive margins higher. So that’s something to watch for in future results, I think.

Roland’s view

I share Tristtel’s view that the US represents an exciting long-term growth opportunity. If Tristel can achieve the kind of market penetration it has in the UK or even some other European markets, then it would surely become a significantly more valuable business than it is today.

However, today’s revised forecast from Cavendish suggests to me that the expected costs and timeframe for US adoption are both expanding.

Gaining a foothold in the world’s largest healthcare market is never going to be easy. In most cases (if not all) I believe Tristel will have to displace incumbent suppliers. Even if its products are both superior and equally cost effective, winning market share in this way will take time.

I think investors have to recognise some risk that Tristel could ultimately fail in North America.

Fortunately, the group’s UK and European operations are scaled and highly profitable in their own right. Today’s results show quality metrics very similar to those on the StockReport:

If we look at Tristel as a UK/Europe business alone, I’d say it was probably fairly priced. Add in the possibility of US success and it could be cheap, in my view. To reflect this range of outcomes – and the group’s strong financial profile – I am going to leave our AMBER/GREEN view unchanged today.