Daily Stock Market Report (Mon 5th October 2026) - ENSI, QTX, GFD

Good morning! The main news story overnight is the election in Brazil whose relevance to investors here doesn’t seem particularly compelling to me. So instead l’d like to revisit Friday’s IG group (LON:IGG) story with a short follow-up (disclosure: I’m long IGG).

After warning of lower-than-expected revenue retention, IG’s share price closed 23% lower on Friday evening. There was little meaningful recovery from the low.

CMC Markets (LON:CMCX) was affected by the news despite the warning being related to IG’s profitability, not to overall customer numbers or activity. CMC was down 10% at its worst before recovering to close down 4%.

Plus500 (LON:PLUS) was down 14% at its worst before recovering to close down 5%.

At CMC, both Lord Cruddas and his Head of Global Strategic Partnerships revealed on Friday afternoon that they had bought shares in CMC that day.

At Plus500, they announced on Friday morning that they continued to trade “in-line with current market expectations for FY 2026”. In what sounds very much like a reference to IG’s troubles, they said that their “proprietary risk management framework has been through various market cycles over the years and has demonstrated an established and robust track record over time”.

Unfortunately for me, it seems that I was right: IG’s profit warning was very much an own goal, and its rivals are likely unaffected.

Overnight market movements:

• The FTSE is up 0.5% at 10,505

• S&P 500 is flat at 7,720

• Brent crude (December) is down 0.9% at $101.25/bbl

• Gold is up 0.2% at $4,150/oz

• Bitcoin is up 0.2% at $86,000

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AO World (LON:AO.) stock pitch: we published a Stock Pitch on Friday for AO World, by Dr James Fox.

James argues that AO is:

...a high-quality, cash-generative retailer on a modest multiple. It has net cash (at end of year), a 21% return on capital, a credible path from 4% to 5% margins, and is returning £20 million this year to shareholders while it waits for the market to notice.

Here's the link.

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The Agenda is complete. Spreadsheet accompanying this report: link.

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Companies Reporting

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Graham's Section

Galliford Try Holdings (LON:GFRD)

Down 2% at 697p (£703m) - Contract - Graham - AMBER/GREEN =

The market has shrugged its shoulders at this:

Galliford Try, a leading UK construction group, announces that it has been appointed to the latest iteration of the £3.0 billion Constructing West Midlands Framework.

The framework covers public sector buildings for local authorities across sectors including education, housing, health, and leisure. Galliford Try has been selected in the Major Works lot for projects worth in excess of £10 million.

For context, Galliford’s forecast revenues this year (FYJune 2027) are over £2 billion.

So how much will Galliford earn from this framework, and how material is it? More digging would be needed - or perhaps it’s too soon to say for sure.

When it comes to the Constructing West Midlands framework as a whole, I suspect it would be more interesting (and negative) news if the company had not been appointed to it. Getting appointed to it, on the other hand, is business as usual. Galliford has been involved with CWM since at least 2020 and I think it was probably involved with it before then, too.

For more background, here’s the CWM website although I think its list of partners may now be out of date.

The government’s official tendering website has a more complete list of 36 suppliers, published last month, and confirms that Galliford are among the six firms providing works whose value is generally over £10m.

Graham’s view

We’ve been moderately positive on GFRD: it’s a Super Stock which raised expectations earlier this year.

It's excellent StockRanks are shown below, although I agree that Value is not too obvious at a PER of 14.5x, given the sector:

Earnings forecasts have held firm, with FY June 27 rising recently:

Indeed, checking Panmure Liberum’s note published a few weeks ago (in the aftermath of full-year results), I see that they increased their FY27 adjusted PBT estimate from £63m to £66m.

And the upgrade had something in common with what Roland said all the way back in January: that the upgrade was driven by a slightly higher profit margin, not by an increase in the revenue forecast. Panmure slightly trimmed their revenue forecasts for FY27, FY28 and FY29.

I’m inclined to leave our AMBER/GREEN unchanged today, which may be a little harsh but reflects my view that this sector ought to trade cheaply, even for its most successful companies.

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Roland's Section

EnSilica (LON:ENSI)

Up 12% at 83p (£106m) - Final Results - Roland - AMBER/RED ↑

We’ve maintained a negative view on this fabless semiconductor stock this year (Jan & Feb) to reflect concerns around debt, weak profitability and declining earnings forecasts.

Today’s results cover the year ended 31 May 2026. They show a big rise in revenue and reveal that the company ended the year with a modest net cash position, following an equity placing in March. Ensilica has since raised cash again in July, sensibly capitalising on seemingly strong demand for its stock.

Can I justify a more positive view following today’s results? Let’s take a look.

Full-year results summary

Last year’s headline revenue growth looks extremely impressive and Ensilica returned to profitability last year. However, gross margins fell and the business continued to burn through cash, albeit at a reduced rate.

• Revenue up 53% to £27.8m

• Gross profit up 31.5% to £9.6m

• Gross margin down 5% to 35%

• Pre-tax profit of £2.3m (FY25: loss of £3.5m)

• Earnings per share of 1.23p (FY25: loss of 3.26p)

• Free cash outflow of £2.9m (FY25: £5.7m)

Revenue: I think it’s worth understanding the big increase in revenue. Ensilica’s business model involves charging customers for non-recurring engineering work (design and customisation) and then securing supply or royalty revenues from chips that reach production:

This embeds EnSilica in the customer's product for its entire lifetime, typically seven to ten years and longer in automotive and industrial applications, and converts one-off engineering income into a compounding stream of silicon supply revenue.

Last year’s 53% increase in total revenue was largely driven by non-recurring engineering work, or NRE as the company describes it.

NRE revenue doubled last year, while chip supply revenues rose by a more modest 16% to £6.7m. The company says that chip supply revenue growth was held back by a cyber attack that affected “an automotive customer’s supply chain”.

Management makes the point that this is a slow-burn model that has the potential to deliver much higher recurring revenue in the future:

• 5 chips in supply, “shipping in volume today”

• 14 chips in design, “future supply expected”

• 4-5 new contracts a year, “design-and-supply targeted”

This illustrative chart is provided to show a potential route to Ensilica’s target of c.£100m revenue (note: this is not a company forecast):

Source: Ensilica FY26 results

According to CEO Ian Lankshear, last year was a turning point for this business model:

FY26 is the year that model began to pay. Five ASICs are now in volume supply, our supply-only proposition has matured into a repeatable offering, and supply revenue is set to take an increasing share of the mix as each programme moves into volume production. Every additional programme that reaches production adds wafer volume, margin and operational leverage without a proportionate increase in cost.

Profit vs cash flow: Ensilica’s improved profitability wasn’t reflected by positive cash generation last year. The main reason for this is that the company capitalises much of its R&D expenditure on to the balance sheet as intangible assets.

£6.5m of R&D costs were capitalised onto the balance sheet last year, but only £2.0m were amortised. This is a completely legitimate approach and this spending may well deliver increased revenue in the future. But the upshot for now is that Ensilica continued to burn cash last year, despite reporting improved profits.

When R&D expenses are largely salary costs, as I would guess is true here, my preference is for such costs to be fully expensed as incurred. This can push profits further into the future, but it usually means that when profits are achieved, they will also be converted into free cash flow. I consider these to be higher quality profits.

Trading commentary: the automotive sector is the company’s longest-established market, but Ensilica is targeting growth in the growing market for satellite terminals (i.e. end user equipment), which it sees as a potential high volume market.

Trading highlights from the last year suggest steady progress:

• $75m automotive contract win with a German tier-one supplier, “our largest automotive win to date”.

• Two contracts with a leading European satellite operator to develop two chips for its next-generation satellite network, potentially worth over $50m from 2030 onwards.

• Two tape outs completed in FY26, three tape outs completed in FY27 and a further two expected to complete later in FY27 (a tape out is when a finished chip design is sent to the foundry for production).

FY27 order book: more than 80% of expected FY27 revenue is already visible from “existing contracts, supply agreements and customer orders”.

Balance sheet & fundraising: Ensilica continued to burn cash last year, but the company’s previously indebted balance sheet has been strengthened with not one but two equity raises:

• March 2026: raised £10.0m at 47p per share

• July 2026: raised £14.9m at 91p per share

At the year-end of 31 May 2026, this left the company with a small net cash position of £0.7m.

No comment is provided in today’s results about the current position. However, given that Ensilica raised c.£15m in July, I think it’s fair to assume we can stop worrying about the company’s balance sheet for the time being.

The flipside of this is that shareholders will have to accept some dilution to expected earnings.

Outlook

Today’s FY27 guidance is in line with expectations:

We are therefore pleased to re-confirm market guidance of £32 million to £34 million in revenues and EBITDA of £5.5 million to £6.5 million for the year ending 31 May 2027.

The EBITDA range quoted by the company is fairly broad and neatly avoids the question of whether profits are expected to increase this year.

Fortunately we have access to broker forecasts that provide more clarity and suggest profits will fall in FY27.

With thanks to Allenby and Panmure Liberum for publishing on Research Tree today, I can see the following estimates:

• Allenby - FY27E adj EBIT: £2.6m (FY26: £3.0m)

• Panmure Liberum - FY27E adj EBIT: £2.5m (FY26: £2.9m)

From what I can see, it looks like growth in Ensilica’s cost base is expected to outpace revenue growth next year, before profits return to growth in FY28.

Investors reviewing the stock also need to consider the dilution that’s resulted from recent share issues.

Earnings per share estimates have been cut significant to reflect dilution from July’s equity raise:

• FY27E adj EPS: 1.0p (previous consensus: 1.83p)

• FY28E adj EPS: 1.6p

• FY29E adj EPS: 3.3p

This recent dilution is not yet reflected in the consensus estimates on the StockReport, so it’s likely to have a big impact on Ensilica’s headline valuation metrics.

With the shares currently trading at c.80p, Ensilica’s forecast P/E rises to 80x for FY27E and 50x for FY28E. Both figures are well above previous levels:

Roland’s view

These results show a return to profitability and highlight recent repairs to the balance sheet. It’s clear to me that our negative RED view is no longer justified. The company’s decision to raise a good chunk of equity when the share price peaked in the summer looks sensible to me.

The valuation is a potential concern, as it looks like shareholders may need to wait until 2028/29 before profits catch up with the valuation.

The group’s profitability also remains pretty average – my sums suggest a return on capital employed of 8.3% last year, with an operating margin of 11%.

The caveat to all of this is that I can see the potential for this to become a much more profitable and valuable business in the future. It seems quite possible to me that the company’s slow build of recurring chip supply revenue could support a marked increase in revenue and margins over time.

I’m also encouraged by the ownership structure – CEO Ian Lankshear is that company’s second-largest shareholder, at 11.95%.

Our algorithms styled EnSilica as a High Flyer prior to today’s results, but the StockRank warned of the risks of a demanding valuation:

I was originally minded to move up two notches to a neutral (AMBER) view today, but I’ve decided to err on the side of caution and go with AMBER/RED. The main reason for this decision is that a closer inspection of broker forecasts today suggest to me that there’s a good chance Ensilica will continue to consume cash over the next couple of years.

While I don’t expect the company to need to raise funds again for the foreseeable future, I think there’s a fundamental difference in risk between a growth business that’s self-funding from free cash flow and one which is not.

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Quartix Technologies (LON:QTX)

Up 4% at 235p (£112m) - Trading Statement - Roland - AMBER/GREEN =

Today’s third-quarter update from this vehicle telematics specialist includes a modest upgrade to profit guidance and shows continued recurring revenue growth.

For a more in-depth review of this business, Mark recently covered Quartix in a Stock Pitch.

Key points:

• Annualised Recurring Revenue (ARR) has risen by 11% to £39.7m over the last 12 months

• Q3 ARR growth was £0.9m

• ARR growth for the nine months to 30 Sept was £3.0m

Net revenue retention – effectively a measure of customer churn – remained stable at 97.3%, albeit below the 100%+ I’d ideally like to see. Management notes that improving NRR is “a priority across all territories”.

Quartix uses ARR as its primary growth metric, but customer acquisition is also important. The group’s customer base has continued to expand this year:

• Customer base +6% to 33,873 over the last 12 months

• Total subscriptions up 7% to 347,702 over the same period.

I’m encouraged to see ARR growth that’s greater than customer growth. This suggests to me that Quartix has been able to increase pricing or upsell newer customers to more expensive offerings over the last year.

This is important, in my view, because price erosion has historically been a challenge for this business.

Geographic split - US drag? Quartix’s efforts to expand in the US are bold and could potentially open up a large market. But this remains the weak point of the group’s performance, with ARR flat and subscription numbers down 4% over the last 12 months.

In contrast, France, Italy, Spain and Germany have all seen double-digit ARR growth over the last year. Perhaps the company should abandon the US and focus on the UK and Europe?

Outlook

Today’s full-year guidance is confident and nudges profit expectations higher:

• Full-year revenue is expected to be in line with expectations

• Adjusted pre-tax profit is now expected to be “modestly ahead of current market expectations”

The increase in profit is due to £0.2m of cost savings earlier this year that will not be reinvested until 2027. So we might argue it’s a fairly marginal gain, but it’s positive nevertheless.

Quartix helpfully indicates its view of consensus forecasts as being for revenue of £40.3m, adjusted EBIT of £10.1m and free cash flow of £4.9m. The company confirms that it’s already achieved c.£4.7m of free cash flow in the first nine months of this year.

Updated broker estimates from Cavendish today are positive:

• FY26E adj EPS: 16.7p (+2% vs 16.3p previously)

• FY27E adj EPS: 17.6p (unch)

Cavendish also notes that full-year free cash flow is now expected to be £5.3m, an increase of 7% versus previous consensus of £4.9m.

Today’s upgrade is the latest in a series we’ve seen over the last 18 months:

Roland’s view

Quartix’s share price has drifted lower over the last year, even as profit expectations have risen:

In July, Graham suggested the stock could offer value on a P/E of 14. The valuation has since slipped even lower:

Quality metrics also remain strong, as Mark highlighted in his Stock Pitch.

So why is Quartix getting cheaper? One concern might be that on a free cash flow basis, the share price is arguably up with events. Using today’s upgraded forecasts from Cavendish suggests a free cash flow yield of around 5%.

Another potential issue is that underlying growth is relatively modest. Today’s forecasts from Cavendish suggest revenue growth of 13% in 2026, slowing to 8% in 2027. As I mentioned above, the group’s continuing efforts to expand in the US might not be helping overall performance.

A broader concern is that Quartix’s core business of selling telematic solutions to small fleet operators is always going to be price sensitive and potentially exposed to macro pressures.

Finally, long-term shareholders will also remember what happened when founder Andy Walters tried to retire a few years ago. The resulting snafu required him to return to the business, eject hired management and take control again. Walters is now in his 70s, so will his succession be managed more successfully next time?

One possible exit route might be through a trade sale. Many previously-independent telematics firms have been consolidated or swallowed up by larger businesses, such as tyre companies. I wouldn’t be surprised to see Quartix follow a similar path.

On balance, I think the opportunity here outweighs the potential risks. I’m going to leave our AMBER/GREEN view unchanged today.