Daily Stock Market Report (Thur 9 Jan 2025) - HAT, GRG, MRK, IPX, BME, TSCO, MKS

9th Jan by Graham Neary

80 comments 7392 reads

Good morning! The newswire has now officially come back to life.

1pm: this report is finished! I'll hopefully get something from the backlog covered for tomorrow.

Analyst Roundtable: last night's webinar with Ed, Megan and me is available on replay here.

Spreadsheet accompanying this report (updated to 3/1/2025).

Companies Reporting

Name (Mkt Cap)	RNS	Summary	Our view (Author)
Tesco (LON:TSCO) (£24.8bn)	Q3 & Christmas TU	‘Biggest ever Christmas’ and largest market share since 2016. Sales +3.1% over Q3 + Christmas.	AMBER/GREEN (Graham)
Marks and Spencer (LON:MKS) (£7.6bn)	Christmas TU	“Another good Christmas”. LfL rev +8.9% (food), +1.9% (clothing). Confident of further progress.	AMBER/GREEN (Megan)
Unite (LON:UTG) (£3.9bn)	Q4 TU	Strong demand and increased rental for 2025/26 academic year. Guidance confirmed.
B&M European Value Retail SA (LON:BME) (£3.5bn)	Q3 TU	Narrows adj. EBITDA guidance to £620m-650m (prev: £620m-660m).	AMBER (Graham)
Greggs (LON:GRG) (£2.7bn)	Q4 TU	Slower Q4 sales, but full year revenue and profits in line with board expectations.	AMBER/GREEN (Megan)
Assura (LON:AGR) (£1.2bn)	Q3 TU	Rent roll slightly down, but disposal programme on track with net proceeds of £48.4m.
Hilton Food (LON:HFG) (£804m)	TU	2024 results in line with expectations. Confident for 2025. FX rates an area of focus.
IP (LON:IPO) (£481m)	Share buyback programme update	Launches £25m buyback extension, bringing it up to £70m.
Boohoo (LON:BOO) (£433m)	Letter from the Board	Again urging shareholders to reject proposals by Frasers. Resolution seeks to remove Mahmud Kamani.
Foresight group (LON:FSG) (£423m)	TU	AUM down 2% over 3 months. Fundraising in line. On track to double core profitability by FY29.
Mears (LON:MER) (£317m)	TU	FY24 marginally ahead of exps. Company increasingly confident of delivering exps for FY 25.
Impax Asset Management (LON:IPX) (£310m)	Q1 AUM Update	AUM falls 8.3% to £34.1bn. Termination of large mandate with STJ takes effect in Feb 2025.	GREEN (Graham holds)
SIG (LON:SHI) (£176m)	2024 Full Year TU	LfL rev -4%. Adj. op profit c. £25m, in line. Continued market softness at least in H1 2025 is expected.
H & T (LON:HAT) (£150m)	TU	Pledge book ahead of expectations. Comment on higher NI costs which management will attempt to mitigate.	GREEN (Graham)
Ground Rents Income Fund (LON:GRIO) (£31m)	Response to possible offer	BoD believes the offer undervalues the…

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Charles Mitchell

9th Jan

Do you know what the planned fund raising by the Government in Gilt market are over the next 6 months ?

Monty Carlo

I just posted this as a response in yesterday's comments, but will repeat here for anyone who might be interested in the thought process of an overseas investor considering a purchase of a gilt (and yes this is simplified, I'm ducking words like "convexity" and "duration").

An overseas buyer of gilts will want to know:
1. Will he get his coupons on time and repayment at maturity?
2. What will £ be worth against his home currency when the bond repays?
3. Will the bond pay a return that is higher than projected inflation over its lifetime?
4. What will the Bank of England do with interest rates while he holds the bond? He looks silly if the BofE hikes rates after he buys such that he could have earned more over the bond's lifetime leaving his money on deposit.
5. Are there other sovereign bonds which appear to be better value on a risk adjusted basis?
6. Is the UK govt likely to flood the gilt market with new issuance after he buys his gilt and depress the value of all gilts trading in the 2nd hand market by permanently altering the balance of supply & demand?
7. Is the maturity of the bond (its lifespan) a good match for his portfolio - are they issuing a 10 year bond when he would really prefer a 20 year bond to match his pension scheme payout profile more precisely?
8. What is the Bank of England planning to do with those gilts it hoovered up during QE (Quanititative Easing) and is sitting on? Will they sell after he buys?
9. Can he lend the bond out in the repo market and is it considered eligible collateral for any derivative positions he might wish to try in the swap market?

Once he has taken those into account he will decide what yield he needs to earn to persuade him to buy the bond. Bonds are usually issued close to par (i.e. a price of 100) and they vary the attraction of the bond by tinkering with the coupon.

So an overseas buyer may see that 10 year US treasuries are trading at 5% and decide he needs to earn a coupon of of at least 5.5% to persuade him to buy a 10yr UK gilt instead. That 0.5% would be referred to as a "50 basis point spread" in bond dealing jargon.

Funderstruck

Impax Asset Management (LON:IPX) I considered the ESG aspect was overplayed as was the Greening of everything ,the target dates were far too soon, should have been linked to the rate that the rest of the world actually achieved, consequently our economy has been crippled and individuals become a lot poorer. There is likely a realisation it was all too fast & folks rethinking across many fronts.....including pulling out of such funds....there are far fewer willing to Buy In..

I think the best signal of crisis is that the Treasury saw fit to comment on markets (or at least certain newspapers said there an "intervention", even if there was no statement on the Treasury website that I could find).

Things can get an awful lot worse than what we are seeing. An uncovered gilt auction for starters (I believe the last one was 2009), not just being forced to nudge the coupon....

The gilt issuance calendar only goes out to Feb at the moment:

https://www.dmo.gov.uk/data/pd...

mrbg

10th Jan

Hi Graham, many thanks for your write ups on Tesco (TSCO) and BME. How did you calculate the net debt figure, excluding leases, for BME using the Stockopedia data? It's something that I have not been able to get to grips with. Thank you.

intuitive6191

I am not sure that the 5 year CDS helps here. If I thought that the UK was not able to honour its debt obligations I would be out of here pretty quickly.

The 10 and 30 year gilt yields at the moment suggest that the market does not believe that the Government can deliver the budget programme.

Sentiment might change, but as a cautious investor I am a little concerned. TSB already reported to have raised mortgage rates. Shows how quickly these situations can develop.

Graham Neary

Micheal,

When I look at the shareholder register I don't see many names who I imagine would want the company to go private, unless Ian Simm himself wanted that.

More generally, all cheap companies are vulnerable to takeover and it will be up to Impax shareholders such as those on the list above to ensure that any takeover happens at an attractive price. Would Ian Simm himself be happy to give away his creation at a bargain price - I hope not!

Listening back to that IMC meeting, what I'm hearing is that Ian Simm didn't rule anything out: the company could private, but it could also graduate to the main market. Personally I would see a move to the main market as being the far more likely change. That's just my opinion!

Thanks for the question

Cheers

Graham

(long IPX)

The Phoenix

11th Jan

Hi Charles I'm not sure other than from what I have been reading they have an avalanche of Gilts to try and shift this year as an aside I have also been reading US will need to roll over a third of their $36 trillion this year (although some google searches say this was 2024) anyone know if they have already rolled it over or if its happening in 2025 as it its this year somehow Donald is going to need to shift $12 trillion of existing debt plus new issuance.

I wonder if they might merge with Liontrust Asset Management (LON:LIO) Graham there was rumours last year that Artemis and Liontrust were going to merge but nothing came of it.

I can't see it being much of a premium though if they did go the merger route.

It looks like a challenging year for the Bond markets. I am just sticking to equities with reasonable-and secure - dividends and see what happens.

rmillaree

How did you calculate the net debt figure, excluding leases, for BME using the Stockopedia data? It's something that I have not been able to get to grips with.

If its not shown in Stockopedia (ie IF debt includes leases in Stocky) - then you simply cant get owt from stocky , normally that means you simply go back to last update where the company has done the donkey work of telling you - looking at the interims looks like the figure was provided at 28/09/2024 - so i have to presume info came from that update. i search for debt in trading update and that drew a blank

per interims

7. Net debt comprises interest bearing loans and borrowings, overdrafts and cash and cash equivalents. Net debt was £788m at the half year end (H1 FY24: £700m), reflecting £973m (H1 FY24: £924m) as the carrying value of gross debt netted against £185m of cash (H1 FY24: £224m). See note 7 of the financial information for more details.

Note the wording is unhelpful here as it doesnt clarify whether leases are included or not (most companies are clear) - but the notes confirm lease liabilities themselves are over £1 billion - so i have to presume above figures simply dont include leases - i know not what thestocky totals are

Logical David

12th Jan

Morning Charles, I've read your interesting comment about it might be a 'challenging year for the Bond markets'.

I would be interested to learn why you believe this might be the case with all the government debt around the world which needs financing?

Many thanks David.

LogicalDavid- For that reason- the amount of expiring Government debt in the US alone is trillions. UK institutions have moved significantly from UK equities to debt- over the last 30 years from 53% to 6%. Possible changes to Pension fund rules could encourage more equity investment, aat a time when the Government will be tapping the Gilt market for large sums. Having said that i am looking at buying Gilts if rates increase another few points.

Samsgrandad

https://www.fenwick.co.uk/bist...Megan, you like Greg's, if you're ever in their home town of Newcastle, try Greg's Benedict at Fenwicks.

Do you think rates on ten year gilts will get over 5% Charles ?

I hope not- if they do mortgage rates looked difficult for those re mortgaging . https://tradingeconomics.com/u...

MIK

13th Jan

Many thanks Graham - I am somwhat comforted by the shareholder register as you mention. I didn't think Ian would be allowing his stake to go at a bargain price, more that if it went private (Ian remaining and other insitutional holders likely remaining until they can sell in an orderly way if they wish) current PI's often rush to the exits and without something in place to protect them e.g. company to buy shares at a fair market price not specifically a premium, then there could be a precipitous drop. Sorry if I didn't make that clear, I am somwhat comforted by the shareholder register as you mention. Best wishes, Michael

ShoeShineBoy

9th Mar

I'm not a Marks and Spencer (LON:MKS) shareholder but I really enjoyed the below 2 part podcast. To a certain extent, it's Stuart Machin blowing his own trumpet but to be fair he talks about the issues that are still to be resolved at Marks and Spencer (LON:MKS) as well as expected headwinds in 2025. I shop at MKS once a week, mainly for fruit & veg, I've got to say the staff are friendly & helpful, you can almost feel the change that has happened at MKS over the past few years.

https://tinyurl.com/2r3n3akz

Podcast 1

Stuart Machin joined MKS in 2018 when clothing generated the majority of the bottom line profit for MKS (SSB: staggering really when you think how popular the food offering is now).

SM has been CEO for 3 years.

SM: “protect the magic, modernise the rest”.

SM joined as MD of the food business & bought every single product plus compared it against some of MKS competitor’s products.

Brixton was the very first MKS store & SM used this store to start the modernisation of the company.

MKS has traditionally been a retailer where you pay a little bit more but it’s worth it (ie: quality but not premium).

SM took clothing completely out of the Brixton store because target was to get to 50% of clothing sales online.

Archie Norman was already Chairman and supported free speech ie: raising concerns.

Celebrate the good news and own the bad news.

All the store managers and food managers have direct access to SM via text message etc.

SM reads all the reports & visits all the stores (SSB: is there a risk that SM burns out and the next CEO cannot maintain the same work ethic ?).

Staff suggestion scheme went from a few hundred every year to a few hundred every day! 25,0000 people have written to SM in 968 days (ie: since SM became CEO). SSB: it’s not clear to me whether these are only staff or customers as well (MKS employs 68,000 people).

SM completely disagrees with the thinking that owner managers understand more and care more about their businesses than employee managers.

SM is the number 1 menswear customer because he tests every item of clothing.

But SM was not the number 1 Xmas food shopper in 2024!

Podcast 2

SM shocked at the state of the technology & realised it would have to be invested in.

Also shocked at the state of the store estate & realised that would have to be upgraded as well. The age of the stores is typically quite old anyway.

The supply chain was not owned by MKS. Plus it was expensive and MKS was in contractual disagreement with the provider.

SM wanted MKS to have fresher produce on offer for customers.

Used similar food retailers in Canada and fashion retailers in Spain especially to learn from.

SM worked for Coles & Target in Australia and learned from those experiences; has encouraged new joiners to question existing practices.

SM is fine with owning up to mistakes and making changes going forward. He questions why people in Government can’t be the same ? SSB: I think this is brilliant and I'd like more high profile business people to say this.

SM is grateful to have Archie Norman as Chairman as he provides guidance rather than making decisions himself.

2025 will be a challenging year because of cost increases (all staff have just been given a +5% pay rise), SM didn’t foresee both changes to Employers NI (ie: rate and threshold). Government has a lack of understanding of business.

Marble Arch store is MKS most profitable store but it’s not a sustainable store and requires re-development.

Focus going forward is on giving the customer what they want whether that be in store or online.

Nonns

18th Mar

Just note that Asda announcements yesterday could have a bad effect on profits for Tesco going forwards at least temporarily.

Daily Stock Market Report (Thur 9 Jan 2025) - HAT, GRG, MRK, IPX, BME, TSCO, MKS

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Graham Neary

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