Oil prices jumped yesterday evening after Trump said the US is not seeking an extension of the Memorandum of Understanding with Iran. Fundamentally, it means that the formal diplomatic framework intended to end the six-month war has collapsed. However, it is not immediately obvious what this means on the ground. Both nations claim the other violated the terms almost immediately after signing it in June.

There were reports of drone attacks launched from the Iranian border targeting Kurdish infrastructure in northern Iraq yesterday, though no direct US-Iran kinetic clashes inside Iranian territory followed immediately overnight.

Presumably the Strait of Hormuz Stays Restricted and the US Blockade Resumes. However, traffic hadn’t returned to pre-war levels anyway. Earlier in the day, Iranian officials said they were close to finalising a deal with Oman, which would have allowed transit through Hormuz. Fox News reports that Trump has threatened to bomb US ally Oman if it "gets in the way" of his administration's own talks with Iran.

Oil markets are pricing in no swift resolution to this standoff, and Brent Crude hit $90/bbl. However, the major indices are relatively sanguine about what all of this means for equities, with the S&P 500 dropping just 0.51% overnight, leaving it just 1.4% off all-time highs.

Interestingly, gold continues to show signs of decoupling from its recent negative correlation with oil, and is starting to act like a safe-haven asset again rather than a risk asset; it rose above $4400/oz last night before slipping back down to be largely flat on yesterday's price.

Overnight market movements:

• The FTSE is up 0.1% at 10,737

• S&P 500 is down 0.5% at 7,708

• Brent crude is up 0.8% at $90.04/bbl

• Gold is down 0.6% at $4,388/oz

• Bitcoin is down 0.3% at $64,200

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Spreadsheet accompanying this report: link.

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Dr James Fox joins me (Mark) today. A very quiet news day today, so if readers have any backlog requests, feel free to add them in the comments.

12:30 - Report is complete.

Companies Reporting

* Market caps at previous trading day’s close

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Mark’s Section:

Made Tech (LON:MTEC)

Up 8% at 42p (£57.1m) - Secures largest contract in its history - Mark (I hold) - GREEN =

At the time of writing, I hold a LONG position here.

Public-sector IT Solutions has been a hot sector this year. Last week, I reported on a £25m MoJ contract win for TPX Impact. This week brings good news for Madetech:

…has been appointed as part of a consortium to a significant new four-year contract with a UK government department. The total contract value attributable to Made Tech is expected to be approximately £40 million over the life of the four-year contract award…

The background:

The context is that these companies sit at the confluence of three positive factors at the moment:

• Drive to improve public sector efficiency: IT projects are seen as a key pillar of that aim.

• Catch-up from the delayed Spending Review: Following the July 2024 announcement of a £22bn public sector “black hole", government departments were made to run new approval processes for spending decisions, which immediately slowed the awarding of new digital transformation contracts. At the time, government signalled that these constraints would be lifted once the Autumn Budget and the multi-year Spending Review were done. But the Spending Review itself then slipped from March to June 2025, and crucially, the money it allocated only became available to departments from April 2026. This created a long freeze followed by a release of pent-up demand.

• Shift to SMEs: The bigger picture is a decade-long deliberate policy shift. After the mega-IT-contract failures of the 2000s and early 2010s, the Cabinet Office capped major contracts at £100m and pushed departments to break large systems-integrator deals into smaller pieces. That structurally favours firms exactly like TPX and Made Tech that are digital-native, agile-delivery consultancies built to sell into frameworks rather than win single giant contracts.

The impact:

Unlike with last week’s TPX win, this contract doesn’t appear to be in forecasts, as the company says:

Revenue from the Award is expected to commence in FY27, with a more significant contribution expected in FY28. As a result, the Board now expects revenue for FY27 to be in the range of £63 million to £66 million and adjusted EBITDA for FY27 to be in the range of £6.3 million to £6.6 million, ahead of current market expectations.

Their house broker, Canaccord, raises their revenue estimate from £60.6m to £63.6m, and Adj. EPS is increased by 7% to 3.1p, on Adj. EBITDA of £6.4m. They say “Our new estimates conservatively sit towards the lower end of the guided ranges…”. This company has made a habit of guiding conservatively and beating expectations, a reputation I expect it will want to maintain for FY27.

Indeed, what appears to be hidden in the note is that Canaccord has also upgraded FY26. With FY26 revenue up to £58.9m from £57.4 and Adj. EPS up from 2.2p to 2.4p.

The bigger impact should be on FY28. However, Canaccord does not yet provide a FY28 estimate, so it is hard to gauge the longer-term impact of this win. We do learn a couple of other snippets from the note. Although the customer is unnamed, Canaccord suggest that:

Given the size of this deal, we would assume this to be with an existing customer and believe it highlights the sticky relationships and 'land & expand' potential in UK public sector digital transformation…

Valuation:

Today’s 8.5% rise in share price roughly matches the near-term upgrade to FY26 and FY27 numbers. So the Stock Report figures are largely unaffected by today’s update and the subsequent price move.

The c.13x earnings looks much higher than TPX. However, to do a fair comparison to TPX, we have to account for the differing cash levels:

Even on an EV/EBIT basis, TPX Impact looks like a potentially better value. However, I think there are some reasons to prefer Made Tech (as I have with my own money). They have a much longer history of guiding conservatively and beating expectations. Made Tech's 5-year revenue CAGR is much higher at 53%, versus 9% for TPX.

Overall, I think both companies deserve consideration while the sector's current very positive outlook remains in place.

[For completeness, I should mention the third listed company in this sector, Triad. However, in my opinion, this is a much poorer quality business, where I have some serious corporate governance concerns, and it is on around 3x the current rating of the other two. I ran through why some caution may be required here.]

Mark’s view

9x forward EV/EBIT is towards the upper end of what I would typically consider good value for a UK small cap company, and is above where its peer TPX trades (despite a great share price performance recently). However, today’s contract win shows momentum continues with the sector and the company.

The company has a habit of guiding conservatively. Indeed, despite not mentioning FY26 in today’s RNS, Canaccord took the opportunity to upgrade EPS for that year by 9%, as well as the +7% impact on FY27. Most of the impact of today’s contract win won’t hit until 2028, and without current forecasts for that year, it is hard to see the true improvement in prospects. This uncertainty may be holding back the share price rise today, until we have greater visibility.

Roland kept our positive GREEN view on the company when they reported a further upgrade to FY26 guidance at the end of June. With the share price only 5% higher today than it was then, and today’s material contract win, I am in no hurry to change our stance.

BHP (LON:BHP)

Flat at 3261p (£171bn) - BHP FY2026 Results Announcement - Mark - AMBER/GREEN =

I previewed these results on the Week Ahead. The market's initial reaction was positive, rising a couple of per cent, with profit, EBITDA and dividend all coming in slightly ahead of analyst forecasts. Revenue rose 15%, and underlying EBITDA was up 27% to roughly US$33 billion, both ahead of expectations. The RNS format itself I found particularly hard to read, so I've turned to their presentation for the rest of the highlights:

When I previewed the results, I highlighted three key points to watch: copper's growing weight, China and iron ore demand, and capex guidance. Here's how these landed in these results:

• Copper: At the half-year, copper crossed 51% of group EBITDA for the first time; for the full year, it rose further to 54%, with copper EBITDA up 48% to US$18.2 billion from US$12.3 billion. Copper revenue also overtook iron ore for the first time in BHP's history, underscoring the pivot toward electrification-linked commodities.
• China: Iron ore EBITDA grew only 1%, despite Western Australia delivering a system record of around 290 MT, as higher energy and freight costs squeezed it. On China, management struck a "resilient but not roaring" tone: it reiterated confidence in long-term fundamentals for steelmaking materials, but explicitly flagged that the property sector shows no signs of recovery. This may be why the market didn't respond to the strong results, as investors read the China commentary as confirming near-term demand softness.
• Capital allocation and Jansen: the Jansen potash project remains BHP's single biggest capital commitment. The "mid-CY27 first production" timeline for Jansen Stage 1 held, but costs were poorly controlled. Stage 1 capex has increased by US$1.7 billion versus its original $5.7bn estimate, and Stage 2 saw a 40% cost increase to US$6.9 billion, along with a two-year timeline extension to FY31. Despite these worries, the final dividend was $0.99/share, for a 72% payout ratio, as management tried to reassure investors that Jansen's cost overruns aren't going to crowd out shareholder returns.

Taken together, I can see why the market may have taken a neutral view on these results.

Valuation:

The other issue I have here is the valuation metrics, which don't look particularly good for a commodity producer:

The narrative is that the company is well positioned for a multi-year boom in commodity pricing in electrification minerals such as copper and the growing need for agricultural fertiliser across the world. Jansen is a bet on long-term global food demand as the global population grows and diets shift toward more protein. Potash demand is expected to rise steadily, which is why BHP frames it as a diversification play alongside copper and iron ore rather than a cyclical commodity tied to industrial or construction demand, as iron ore is.

However, it would be naive to think capital allocation cycles have been abolished, and investors still need to take a positive view on commodity pricing to invest at current multiples.

Mark's view

Despite my valuation concerns, there is no denying BHP appears well positioned for future demand from electrification and agriculture. However, whether they can deliver these without also being hit by cost overruns due to higher commodity inflation remains to be seen.

While the algos rate this a "High Flyer", I think it makes sense to remain broadly positive:

However, I'd be quick to change my stance if that Momentum started to drop rapidly. AMBER/GREEN.

James’s Section:

Synectics (LON:SNX)

Down 6% at 195p (£35m) - Interim Results - James - AMBER/RED =

Half-year figures from Sheffield-based Synectics were released this morning, and the market doesn’t like them – as I write, the stock is down 6%, compounding the pullback we’ve seen over the past 12 months (down 38%).

Today's headlines aren’t pretty:

• Revenue down 37% to £22.2m

• Adjusted EBITDA down 76% to £1m

• Gross margin up 6.8pts to 47.8%

• Net cash £10.5m, no bank debt

• Interim dividend held at 2.2p

• FY26 adjusted EBITDA guided to £3.7m–£4.1m (consensus: £4.1m)

H2 Weighting:

In its commentary, the business suggested that trading would be second-half weighted, but also flagged that the second half now has to do an unusual amount of work. H1 delivered £1m of adjusted EBITDA, so hitting the guided range means £2.7m–£3.1m in H2 – roughly three times the first half. The CFO highlighted that these numbers were still dependent on developments in the Middle East.

...there is a limited timeframe by which delayed orders or project restarts from Middle East customers must be received in order to be able to deliver them and recognise revenue.

The disruption isn't new. The Middle East conflict was reported in May, and the AGM update told us FY26 would be in line only "subject to energy sector activity normalising through the second half". What we didn't have until today was the scale: revenue down 37%, and a comparator that turns out to have contained a single £7.8m gaming contract. Energy hasn't normalised, and guidance has moved again as a result.

Margins:

Synectics sells security cameras and the control-room software that runs them, into settings where a failure is a serious problem – casinos, offshore oil platforms, city-centre CCTV, bus fleets. Two divisions: Systems, the higher-margin product arm sold worldwide, which carries the gaming and oil & gas exposure, and Ocular, which installs and maintains systems for UK and Ireland customers.

Before delving deeper into the bad bits, there does appear to be a genuine improvement in the margin story. That’s partly structural, with the broader gains attributed to operational efficiency, and improvements in the Systems division attributed to better pricing discipline and a mix shift towards support agreements – Systems' 57.7% is expected to “drop down moderately” in H2 as mix evolves.

Guidance:

Today’s RNS does raise some concerns. The guidance cut is in a footnote. The body text guides to "£3.7 million to current market expectations" without saying what those expectations are. Footnote 5 reveals these to be: £4.1m, itself the reduced figure following the earlier profit warning. So consensus is now the ceiling of the range, not its midpoint. The sub-headline says the outlook "remains achievable", which is not the same as saying trading is in line.

Order Book:

The order book is called "stable". At £26.4m, it is stable against November's £26.5m. Against £35.1m a year ago, it's down 25%. The gaming contract doesn't explain it either – that £7.8m was recognised as revenue during H1 2025, so the £35.1m was the book after delivering it.

Adjustments:

A few other things are worth digging into. The financial summary carries no statutory profit measure, so you have to go further down for the statutory picture: an operating loss of £(0.5)m, a pre-tax loss of £(0.4)m and basic EPS of (2.2)p against 15.4p last year.

James’s view

The screening data may be a little misleading here. The trailing EV/EBITDA of 3.35x is calculated on FY25 – a peak year inflated by a contract that won't repeat. On today's guidance, it's nearer 6.5-7.2x.

The forward numbers need care too. A rolling 12-month P/E of 10.9 looks undemanding, but with a November year-end that blend is roughly 70% weighted to FY27. The more telling figure is FY26, where we now have some visibility – half the year is reported, and the guidance range is on the table – and on FY26E EPS of 9.0p the shares sit at around 22x. FY27's forecast of 21.5p is what drags the rolling multiple down to 10.9, and that's a year we know very little about – it rests on a recovery the company has yet to demonstrate.

Net cash of 59p a share – around 30% of the market cap – plus 0.8x book and a held dividend are what keep me from going lower. However, this report doesn’t provide enough to change our stance from Mark’s AMBER/RED in June.

Kainos (LON:KNOS)

Up 17.6% to 1,143p (£1.33bn) - Trading Update - James - AMBER/GREEN =

When Roland covered FY26 results in May, he cut his view a notch, and his main complaint was specific: Kainos said nothing about FY27 expectations, which he felt left room for a quiet broker downgrade without an explicit warning. Today they've done the opposite, guiding explicitly and upgrading:

• FY27 revenue and adjusted PBT now expected "comfortably ahead of current market expectations"
• Consensus, as compiled by the company: revenue £509.3m, adjusted PBT £77.1m
• Sell-side range disclosed: revenue £498.0m–£514.0m, adjusted PBT £75.0m–£84.0m
• Digital Services "continues to grow very strongly"
• Workday Services and Workday Products both recording double-digit revenue growth
• H1 results due Monday 9 November 2026

Looking forward, we remain confident in our outlook for the financial year and beyond. A robust pipeline and a significant multi-year contracted backlog underpin this confidence. While the macroeconomic environment remains volatile, Kainos operates in markets driven by clear structural trends and remains well positioned to deliver on its strategy.

Understandably, this has been welcomed by the market:

The business:

Kainos is a Belfast-headquartered IT services provider with three divisions. Digital Services builds and supports custom digital platforms, and is heavily weighted towards UK government departments and the NHS. Workday Services implements and supports deployments of Workday's finance, HR and planning software. Workday Products is its own proprietary add-on software for Workday, and the source of the group's recurring revenue.

Checking the upgrade:

Kainos does at least tell us what it's beating. The footnote gives consensus of £509.3m revenue and £77.1m adjusted PBT, and unusually also the full spread of estimates behind it. That lets you check the claim, and it's worth doing: the top of the range is already £84m, so "comfortably ahead" of a £77.1m consensus could still land inside the spread analysts had. There's a direction of travel here, not a new number.

The momentum behind it looks real. FY26 delivered revenue up 17% to £431.1m, with bookings up 32% to £505.3m and a multi-year contracted backlog up 18% to £433.9m at the March year-end, so Kainos went into this year with decent forward cover. Today adds that Digital Services has won further contracts since April, though it provides no updated backlog figure.

Margins:

One gap – albeit from this relatively short trading update – was on margins. Roland's other caveat was that adjusted PBT margin fell from 17.9% to 15.6% due to greater use of contractors and third-party suppliers. Management guided that this would unwind: "as we replace temporary contractors with full-time employees over the course of the year, we anticipate clear margin improvement." Today's upgrade does cover adjusted PBT rather than revenue alone, which is implicitly encouraging, but it would have been good to see it confirmed.

Valuation:

Today's share price movement significantly shifts a few things on the StockReport. The market cap is nearer £1.33bn than the £1.13bn shown, and the multiples move with it: on unrevised FY27E EPS of 47.8p, the shares are on about 24x, against the 20.3x shown, which is struck at last night's close. FY28E is roughly 20x.

At 1,143p, they are also sitting right on the consensus price target of 1,142p. These P/E figures also put the business on the more expensive end of the sector, and the PEG is nearer 1.2 once today's move is applied, against the 1 shown. Moreover, this is not a business that has looked particularly cheap in recent years:

James's view

The upgrade behind today's move looks smaller than the move itself. Even if adjusted PBT comes in at £84m, the top of the disclosed range and 9% above consensus, EPS gets to roughly 52p, and you are still paying about 22x.

While it's hard to ignore the operational momentum, it might be ambitious to assume much more of a re-rating from here. The shares have already run to the consensus target of 1,142p, and ValueRank has dropped to 22.

Quality isn't a question, with a ROCE of 49.8% and net cash of £82.9m, but it's worth tempering the optimism a little here, and that's why I'm sticking with Roland's AMBER/GREEN.