Daily Stock Market Report (Thur 31st July 2025) - SRB, RWA, EMR, APTA, NARF, NXT, VINO, BATS, SPEC, NICL, SDR, JUST

Good morning!

In macro, the Federal Reserve has left rates unchanged, as expected.

I've published a profile of some companies with "Bitcoin Treasury policies", and discussed the concept of companies having such a policy - here's the link.

Today's agenda is, at last, complete!

14.15pm: finished for today, thanks!

Spreadsheet accompanying this report: link (last updated: 30th June).

Companies Reporting

Graham's Section

Next (LON:NXT)

Down 1% to £121.80 (£14.9bn) - Trading Statement - Graham - AMBER/GREEN

(At the time of publication, Graham has a long position in NXT.)

The markets have grown accustomed to Next under-promising and over-delivering. So I guess I should not be too shocked to find that the share price is down slightly after yet another “ahead of guidance” update.

Let’s point out some of the highlights:

• Full prices sales +10.5%, ahead of +6.5% guidance.

• UK: better than expected weather and trading disruption at a major competitor (not named, but it’s M&S).

• International: digital marketing proved more effective than anticipated, enabling Next to increase profitable market expenditure.

New H2 guidance: full price sales +4.5% (previous guidance: +3.5%).

With a strong H1 and increased H2 sales guidance, the new adjusted PBT guidance for the year is £1,105m (an increase of £25m compared to previous guidance). PBT is therefore expected to grow year-on-year by 9.3%, versus previous guidance of 6.8% growth.

Sales breakdown: growth is led by “Online International” (+28% in H1), while the slowest growth is from interest income (+0.5%) and UK retail stores (+5.4%).

Surplus stock is up 5% versus last year, which I have absolutely no problem with as full price sales were up over 10%.

Outlook

It seems very conservative of them to say that full price sales in H2 will only increase by 4.5%, after a 10.5% increase in H1. But as shown by today’s share price reaction, investors will form their own view based on the track record here.

Next do acknowledge that their guidance is cautious. Everything is seen slowing down in H2.

As before, they remain very bearish on the economic effects of higher NICs, with fewer employment opportunities feeding through to weak consumer spending. I don’t have a strong opinion on this matter myself, but I am inclined to trust Next’s judgement, due to their practical understanding of how this tax change will impact employment.

And when it comes to the weather and the disruption at M&S, they don’t see those tailwinds being relevant for H2. That’s fair.

They have upgraded their International Online guidance (from 13.1% to 19.4% growth), thanks to their positive experience with digital marketing in that channel.

Buyback/dividends: Next is one of the vanishingly few companies that provides objective guidance as to when it will or won’t buy back its own shares. The rule it uses is that it must achieve at least an 8% return, when dividing forecast PBT by its market cap.

It therefore tells us in today’s RNS that its buyback limit is currently around £118.

The current share price is £121, so it doesn’t anticipate buying back shares and will instead return surplus cash via special dividends (assuming it doesn’t need the cash for acquisitions).

This is the type of rational capital allocation that makes me a happy shareholder!

Graham’s view

I don’t see any reason to change my AMBER/GREEN stance.

To clarify: I am extremely happy with management and with the business. I’ve held these shares for many years and have no current intention to sell (but of course I reserve the right to change my mind!)

The reason I’m not fully GREEN on it is the same as before: valuation.

By refusing to do buybacks at this level, Next themselves are making it pretty clear that they don’t consider their shares to be priced at bargain levels here.

The P/E multiple is still about 17x, which is not a level that I’m used to seeing for Next:

At this level, I have to acknowledge that the company might be fully priced, given the risks involved in retailing.

I do view Next as best-in-class in the retail space, and as a sort of “last man standing” on the high street. But it is still vulnerable to fickle consumer tastes, to economic headwinds, to the weather, and to competitive disruption.

As such, I think AMBER/GREEN continues to make a lot of sense here.

Mark's Section

Virgin Wines UK (LON:VINO)

Up 9% to 64p - FY25 Trading Update - Mark - AMBER/RED

The market has liked this trading update, presumably focussing on the RNS headline:

Key growth drivers performing strongly with EBITDA and PBT ahead of expectations

However, looking into the details this isn’t as good as it sounds. Their broker, Cavendish reveal that this is a miss on their revenue estimates, saying:

FY25 revenue came in £2.3m below our forecasts and we have therefore trimmed our revenue forecasts in the outer years.

And while they may have beaten PBT expectations, these were for a big fall and instead we got a reasonable fall:

EBITDA of £2.3m (FY24: £2.8m) and PBT of £1.6m (FY24: £1.9m) ahead of market expectations by over 4.5% and 23.1% respectively. As expected, EBITDA and PBT were marginally lower than last year due to investment in the Group's growth strategy, which we announced alongside our interim results in March 2025.

The reason given is increased investment in growth. However, FY25 hasn’t grown on FY24, and sales growth into FY26 is forecast to remain single-digits. In addition, EPS forecasts for FY26 were significantly downgraded in March when Cavendish released their initiation note on the company following interim results. (They switched broker from Panmure Liberum to Cavendish in January.)

So the cynic in me wonders if they may have guided the new broker conservatively on initiation to allow them to release this “beat” today.

Despite the big March downgrade, the shares have been strong:

Part of this is due to the company announcing that they wanted to buy back 15% of their share count. However, when Graham last looked at this on the DSMR, he didn’t see the attraction, saying:

Forecasts out to FY27 suggest that the company will be barely profitable in the years ahead and even if it might be able to earn £7m of EBITDA in five or six years, I'm not sure that's worth significantly more than the current market cap today. So I'm not convinced that these shares are cheap and therefore I'm not convinced that the buyback is the best use of cash.

The valuation here looks better on a EV-basis, as the company highlights their significant cash balances:

The Group's balance sheet remains strong, ending the Period with net cash of £9.3m (FY24: £10.3m), and the business remains highly cash generative. The current cash position is stated after £2.0m of shares were repurchased during the year, as well as there being £1.6m of outstanding duty pre-payment carried into FY26.

However, that positive cash-generation appears to be abandoning them if forecasts are to be believed, with £1.1m outflow in 2026 (excluding buybacks) and £0.6m in 2027 estimated by Cavendish.

Mark’s view

I agree with Graham on valuation. 2027 estimates are for just 0.4p EPS and an adjusted EBITDA that is below 2023 levels, when the shares were trading at 30p. With the price having risen over 30% since Graham rated this AMBER, and forecasts looking similarly poor, I am downgrading this to AMBER/RED. Their commitment to the buyback may support the price in the short-term, but ultimately it looks like it will destroy shareholder value if they buy back shares anywhere near the current price.

Nichols (LON:NICL)

Down 2% to - Interim Results - Mark - AMBER

This is a high-quality business, with a significant moat due to its brands, and this is reflected in its high Quality Rank:

And excellent ROCE metrics:

It is good to see management focus on this key metric in these results, and that these are improving even further (at least on an adjusted basis):

However, a high historical ROCE has very little value to shareholders unless there are opportunities to deploy incremental capital at similar rates to drive revenue growth. It is here that the company has failed. The revenue CAGR is just 3%, broadly in line with inflation:

These results give little indication that anything is about to change on this front:

They say:

Full year adjusted profit before tax is expected to be in line with current market expectations

And helpfully quantify these:

Current market expectations refers to Group compiled market consensus for FY 2025 Adjusted PBT of £33.1m at 30 July 2025

Given the H1 figures above, this leaves a lot to do in H2 to hit forecasts. They may be relying on adjustments to hit these figures, but none of their exceptional items look exceptional or non-recurring:

There is decent cash flow and a reasonable amount of net cash:

· Strong net cash and cash equivalents at £61.6m (H1 2024: £70.3m, 31 December 2024: £53.7m)

- Free cash flow of £14.2m (H1 2024: £9.0m) driven by lower working capital requirements

However, the cash balance isn’t big enough to move the needle on valuation for a £500m market cap company, and the cash flow seems unable to be re-invested at reasonable rates, leaving it building up and returned as the occasional special dividend.

All of this makes the current valuation look distinctly unattractive:

Mark’s view

The valuation here simply looks too high for a company where any top-line growth has proven elusive over the years, and there is little sign in today’s results that this is about to change. The algorithms rate this as a High Flyer, but there has been little flying in the results. Graham rated this GREEN in March but the share price has risen 40% since then. With the Momentum rank having fallen from 91 at the start of June to 83 today, this is starting to look worrying, and our research at Stockopedia suggests investors are better off getting out sooner rather than later when the Momentum Rank starts dropping. I’m sure the Quality Rank will remain high, but with a H2-weighting, questionable adjustments and a share price looking toppy, the Momentum Rank could easily head further southwards. If it does, it could be a long way down before valuation metrics would provide any real support. However, the strength of the financials mean this is unlikely to ever be in financial trouble, and there is always the chance that management can generate some limited growth over time. AMBER