Good morning!

08:17 - Agenda is complete

14:03- Report is complete

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

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Companies Reporting

* Market caps at previous trading day’s close

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Mark’s Section:

Van Elle Holdings (LON:VANL)

Down 8% at 34p - Trading Update - Mark - AMBER/RED

This is now the third clear profits warning. This is the recent history:

• In March 2025, their broker Zeus took 6% out of revenue for FY25 and reduced PBT by 33% when the company said that they no longer expected a recovery in 25H2 due to delays in their Canadian business.

• There was a small positive in May as they received a cash injection from outsourcing heavy haulage operations to specialist company, transferring their assets.

• In early June, we got a further profits warning with Zeus reducing EPS by a further 14% to 2.4p for FY25. The company’s narrative suggested that this was a delay of work from FY25 to FY26, but given, that Zeus took similar amounts out of FY26 and FY27 PBT forecasts, this didn’t hold a lot of water, in my opinion, and I downgraded our view to AMBER (it would have been lower apart from the discount to TBV, and presence of an activist shareholder on the register.)

The consensus trend shows a deterioration in outlook that goes even further back:

Today’s further warning is based on a continuation of previously given trends:

As commented on in its results announcement on 23 July 2025, challenging trading conditions experienced throughout FY2025 continued into the new financial year. The expected improvement across the Group's core sectors is yet to materialise, attributable to spending constraints and delays to contract starts across all sectors, particularly related to Building Safety Act ('BSA') approvals for high-rise residential buildings.

Which has led to:

Due to these factors, year to date revenues have not increased as anticipated and consequently, full year trading and profitability is expected to be materially below market expectations, and below the prior year.

This looks to have caught their broker on the hop as there was no updated coverage first thing, but I can now see the Zeus’s updated note in Research Tree, which quantifies the miss:

With FY26 results expected to be significantly below market expectations and below the prior year, we reduce FY26 forecast underlying PBT by c. 50% to £3.0m, primarily driven by a 6.3% reduction in our revenue estimate to £140.0m.

This is a huge downgrade for FY26. However, the company remain positive about the medium term, saying:

The medium-term outlook remains very positive, with significant opportunities in the growing energy and water sectors, where good early progress is being made. The Group continues to maintain a strong order book of £47.3m at 31 July 2025 (30 April 2025: £41.5m).

However, Zeus throw shade on that view by saying:

Zeus FY27 and FY28 revenue forecasts are reduced by 6.4% and 6.5%, respectively, and underlying PBT forecasts are reduced by 31.7% to £5.5m in FY27 and by 16.7% to £7.5m in FY28. The profit downgrade in FY26 reduces our net cash (ex. IFRS 16 leases) forecast from £5.8m to £3.1m, with the Group’s banking facility remaining undrawn.

So again, far from being a short-term shift of demand into the future, this seems to be a permanent downgrade of prospects for the business.

These figures are presumably on a continuing basis as well. In the FY25 results, the company classified their Canadian Rail Operations as discontinued as they expect to sell or close this subsidiary. However, as far as we know this is still operating and the company will still be funding the ongoing losses here. Given that these totalled £1.3m last year, they are material to the reported PBT, which will be lower than the headline figures, at least for FY26.

Valuation:

The original bull case here was that a strong cyclical recovery in trading would put this company on a very cheap multiple. This was backed up by the discount to TBV:

If these assets can be made productive again, then the company should be re-rated. Much larger ground-work contractor, Keller, trades on 2xTBV. However, there is little sign that Van Elle's assets can be made productive in the near-term. Indeed, we now need to go out to Zeus’s FY28 forecasts of 5.1p EPS to make this look good value. The company does trade on a low EV/EBITDA of less than 4, but this is not the sort of business where we can ignore depreciation as a cost. Zeus point out that such metrics are merely in line with peers.

Zeus prefer to utilise a DCF as their valuation methodology and the changes to forecasts today, reduce their valuation from 53p to 44p. This still represents some 30% upside from today’s buy price. However, I really struggle to place much confidence in the forecasts. As such, investors may want to demand a higher discount rate that the 11.5% that Zeus use.

The company highlights their balance sheet strength, and the asset-backing and net cash does give them time to wait for a recovery. However, I also not that Zeus have cut their dividend expectations in line with EPS. The company has been paying 1.2p out each year for the last few years, but are only forecast to pay 0.7p in FY26. There are cyclical companies on the UK market that pay a much better yield while investors wait for a recovery in trading.

Mark’s view

I am torn on this one, and it seems the market often is as well. Despite repeated profit warnings, the share price always seems to bounce from current levels as investors get over the initial disappointment, and focus again on the discount to TBV and chance of a medium-term recovery. 

A sale or closure of their loss-making Canadian subsidiary may help remove management distraction even if the losses here are now excluded from these figures. Equally, further intervention by Harwood in forcing a turnaround or other corporate action may give a positive catalyst. The increasing order book suggests that momentum may now be swinging the other way after the third warning.

However, I don’t tend to invest on such possibilities, and the only metric the company is really cheap on is now the discount to TBV. One could argue it looks good value on 2028 EPS estimates, but given that forward earnings keep being cut by the brokers I don’t put much weight on this.  The StockRank has been declining, and I expect the FY26 results, when they arrive next year, will see further deterioration in most of these metrics:

Everytime the company has warned in the past, and the share price has dropped to these levels, I’ve been tempted to buy, expecting a medium-term recovery. However, the scale of today’s downgrades, including cuts to the dividend payout, and that these forecasts now exclude the large losses from Canada, means that that temptation has disappeared this morning. Hence it is a further reluctant downgrade of my view to AMBER/RED.

Wilmington (LON:WIL)

Unch. 336p - Financial results for the year ended 30 June 2025 - Mark - AMBER

Wilmington describe themselves as a “provider of data, information, education and training services in the global Governance, Risk and Compliance (GRC) markets”. You’d expect this to be a growth area in the market, and the headline figures read well here, with double-digit revenue growth, and operational gearing leading to a 20% rise in EPS:

However, you quickly realise that there are three factors to untangle which add to the complexity: Acquisitions, disposals and adjustments. Let’s take these one at a time:

Acquisitions:

They acquired Phoenix Health and Safety in Oct 2024 and this appears to be responsible for all of the revenue growth:

It is largely this acquisition that means that net cash has declined by £25.5m to £42.2m.

They are proposing to buy Spanish business Conversia for £105m for 13xEBITDA, and their debt leverage ratio will go to 2x. While there are strategic reasons for this acquisition, this is not a cheap price (3.3x sales) and adds to the risk here.

Disposals:

They sold Compliance Week in Feb 2025, and are marketing their US events business, FRA. The £662k loss from sold and closed businesses is excluded, although it seems they have yet to classify FRA amongst this.

Adjustments

While adjusted EPS has grown, statutory results are down, mainly due to a big increase in adjusting items:

They say:

Strategic activities represent acquisition costs comprising earnouts in relation to the acquisitions of Astutis and Phoenix of £5.9m (2024: £nil) and strategic transaction costs relating to acquisitions and disposals of £2.7m (2024: 0.6m).

So this is another company that wants shareholders to give them the benefit of the acquisitions and disposals they make, but not count the costs against them. For wilmington, such costs seems to be an ongoing expense, as they say:

Alongside streamlining the Group since 2020 by selling or closing eight of the 15 businesses, we have consistently delivered notable profit growth over the five-year period.

Outlook:

They say that in the current quarter revenues and profits are in line with expectations. Presumably, current forecasts don’t include any impact of the Conversia acquisition, but even then the high multiple paid isn’t going to have an immediate material positive impact on earnings.

This means that the current forecasts, while not bonkers, don’t look appealing compared to single-digit percentage growth in revenues and profits:

Given the continued sale and purchase on businesses, you can almost guarantee that these figures will include significant adjusting items.

Mark’s view

When Graham looked at this in February, he said:

At 15x earnings it’s not particularly cheap, and that is likely to be before the adjustments are accounted for. Actual reported earnings per share were only 2.88p in H1. I may need to downgrade this further to AMBER, the next time I look at it.

It is a little bit cheaper today, but the risk looks to be ramping up with a strategic, but expensive-looking global acquisition, and no end in sight for the type of adjustments that do impact the company’s cash flow. I am going to cement my reputation as the cynical one and complete Graham’s potential reduction in view to AMBER.

Elixirr International (LON:ELIX)

Unch. at 830p - Interim Results & Acquisition of TRC Advisory, LLC - Mark - AMBER/GREEN

Decent growth in revenue here. Although around half of it comes from acquisitions and hence there isn’t any obvious operational gearing:

29p doesn’t leave much to do to hit the original FY forecast of 49.6p, although there was a seasonal bias to H1 last year. Having upgraded forecasts recently, their broker, Cavendish make further upgrades today, saying:

We have upgraded FY25E EPS by +12% (+8% organic, +4% from TRC), FY26E EPS by +18% (+2% organic, +16% from TRC) and our target price from 1100p to 1240p.

Helpfully, they have split out the impact of trading and from today’s acquisition. The acquisition itself seems reasonable, but not amazing value for a people business on an EV/EBITDA of 4.2x-7.8x dependent on contingent consideration earned during the top-up and earnout period. The initial payment is met by debt facilities and issuing shares:

The headline initial consideration payable under the Acquisition is US$57 million …The cash component of the initial consideration of US$41 million will be funded through the Company's increased revolving credit facility with National Westminster Bank PLCof £65 million and a US$20.25 million term loan with NatWest. The balance of the initial consideration of US$16 million will be satisfied by the allotment and issue of 1,428,526 new Ordinary Shares to the TRC Seller.

The size of the contingent consideration is significant, and adds to the leverage, if we consider this similar to debt, or dilution if they issue shares for this:

Deferred consideration of up to US$68 million, comprised of:

o A post-Completion contingent top-up payment, capped at US$32 million, to be determined by 30 April 2026 and based on the achievement of agreed FY 25 Adjusted EBITDA performance targets for TRC, will, if earned, be payable up to US$24 million in cash and up to US$8 million to be satisfied by the allotment and issue of further new Ordinary Shares (the "Deferred Elixirr Shares") to the TRC Seller.

o A further deferred performance-based payment of up to US$36 million, payable over three years (2026, 2027 and 2028) in three instalments, at the Company's discretion, either in cash or through the allotment and issue of further new Ordinary Shares (the "Performance Elixirr Shares" and together with the initial Consideration Shares and the Deferred Elixirr Shares, the "Transaction Shares") to the TRC Seller.

Back to the results, there are some large adjustments:

SBP is always a debate, and the size of these suggests we should definitely be using fully diluted share count in any valuation, as a minimum. Costs associated with their move from AIM to the main market should be one-off, but given that they have already announced another acquisition today, M&A maybe should be treated as recurring.

Valuation:

Today’s upgrades by Cavendish mean that the valuation metrics look a bit better than we have in the StockReport:

Now we have 14.9x FY25 EPS and 13.1x FY26. Seems reasonable value given the organic revenue growth rates, although some caution is probably required as this is largely a people business, which adds to the risk that the bulk of the returns go to staff not shareholders in the long term. Plus they now have modest net debt forecast, whereas they previously had net cash.

Mark’s view

The organic growth rates in today’s results are probably sufficient to justify the current valuation. When you add in the growth from acquisitions and history of upgrades, this may well be good value, even if one is more conservative than the company about what are really one-off costs. Roland had this is AMBER/GREEN following the H1 trading update and with a further acquisition and EPS upgrades, I am happy to take the same view.