Good morning! We have a backlog section from Roland to kick us off.
Spreadsheet accompanying this report: link.
The Agenda is complete.
We ran out of time for today, thanks everyone.
Companies Reporting
| Name (Mkt Cap) | RNS | Summary | Our view (Author) |
|---|---|---|---|
Rio Tinto (LON:RIO) (£68bn) | Rio & Hancock Prospecting are developing a new iron ore mine in the Pilbara, W. Australia. | ||
Bunzl (LON:BNZL) (£7.6bn) | H1 revenue +4% CCY, organic rev flat. Trading in line with exps, op margin c.7%, adj op profit lower. | ||
Telecom Plus (LON:TEP) (£1.7bn) | Adj PBT +8.1% to £126m, in line with exps. Customer nos. +15%. FY26 adj PBT to be £132-13 | GREEN (Roland) This unusual business continues to perform well and support an attractive dividend. While the business model has some inherent risks, in my view, Telecom Plus has executed successfully for over 20 years as a listed business. I don’t see any reason why this can’t continue. Management believes growth opportunities remain and I would tend to agree. While the shares aren’t obviously cheap, I think the current valuation can continue to support attractive returns for income investors. | |
Sirius Real Estate (LON:SRE) (£1.46bn) | New facility to support acquisitions and provide refi liquidity. Margin c.3.2% (1.2% + EURIBOR) | ||
Trainline (LON:TRN) (£1.2bn) | Confirms DPAYG trial contract signed, as we recently discussed here. Trials start Sep-Nov for 9mo. | ||
Foresight Environmental Infrastructure (LON:FGEN) (£503m) | NAVps -6.3% to 106.5p, dividend of 7.8p, 1.32x cover. £88.6m from disposals. £30m buyback ongoing. | ||
Hunting (LON:HTG) (£436m) | UK firm FES is a subsea fluid transfer specialist. Acquired for £50m (7.5x adj EBITDA). | ||
Mears (LON:MER) (£335m) | Strong H1 trading, FY25 results to be modestly ahead of expectations; revenue >£1,055m & adjusted PBT >£54m. Updated forecasts from PanLib: | AMBER/GREEN (Roland) [no section below] | |
SThree (LON:STEM) (£285m) | Net fees -14% YoY, reduced decline in Q2. Net cash £48m, FY25 to be in line (£25m PBT), | AMBER (Graham) I'd like to be positive on this and will upgrade my stance as soon as I have an excuse to do so. But after such a protracted downturn in the recruitment sector, I worry that it could have a structural problem, which could fundamentally undermine any investment thesis. Therefore, even though I view SThree as best-in-class, I'm going to wait for tangible signs of a turnaround instead of predicting one in advance. | |
Saga (LON:SAGA) (£246m) | Trading in line with FY exps. Strong start for Cruise, insurance sale on track. Net debt £569.5m. | ||
LBG Media (LON:LBG) (£197m) | Rev +8%, PBT +165% to £8.6m. Net cash £32.9m. Outlook: confident of 10% FY rev growth. | ||
Mobico (LON:MCG) (£161m) | Exp sale closure Jul 2025. Net proceeds exp c.£275-290m. Exp FY25 adj op profit £180-195m. | ||
Accsys Technologies (LON:AXS) (£139m) | Rev +8.2% & volume +13% (inc JV). Adj EBITDA +125% to €10.8m. Outlook: in line. | ||
Intercede (LON:IGP) (£106m) | Rev -11.5% to £17.7m, PBT -18% to £4.6m. Adj EPS ahead of exps at 6.5p. Current trading in line. | AMBER (Roland) Today’s results showcase high margins and strong cash generation. But forecasts for the next couple of years leave earnings below FY24 peak levels. I’m not convinced the growth outlook justifies the current valuation, so I am remaining neutral. | |
RM (LON:RM.) (£69m) | On track for FY25 exps. H1 adj op profit to be £0.7-0.9m. £70m bank facility extended to 2027. | ||
Dialight (LON:DIA) (£55m) | “Underlying” profit £4m but again statutory losses. Positive start to FY26. Material uncertainty. | ||
Gear4music (HOLDINGS) (LON:G4M) (£39m) | Sales momentum and gross margins have increased recently: the Board is uplifting FY26 exps. | GREEN (Graham) This is not a sleep-sound at night type of stock, but it does have a StockRank of 88 and (in my view) multiple green flags to take away from today's results. I'm therefore happy to be fully GREEN on it, until something changes. | |
CML Microsystems (LON:CML) (£36m) | PW? FY25 adjusted PBT £0.9m (last year: £2.5m). “Measured approach to exps” for H1. | BLACK (Graham) [no section below yet] ShoreCap previously said they would seek to introduce forecasts for FY26 before these results were published. But now, “reflecting ongoing market uncertainties and the company’s limited visibility”, they have chosen not to provide FY26 forecasts yet. I interpret this as being effectively a profit warning. | |
Tpximpact Holdings (LON:TPX) (£18m) | LfL rev -8%, adj. EBITDA +21% (£5.6m). Loss-making. Outlook unch (FY25 adj. EBITDA £6-7m). | ||
Polarean Imaging (LON:POLX) (£17m) | Agreement with a non-exclusive independent manufacturer’s representative in four US states. | ||
Quantum Blockchain Technologies (LON:QBT) (£13m) | Pre-revenue bitcoin/AI. Very late results. Loss €3m. Raised €2.4m in January. Material uncertainty. | ||
Tandem (LON:TND) (£10m) | On track to meet market expectations. Sales +15% (Bikes +52%). Favourable weather. | ||
Petards (LON:PEG) (£5.0m) | Subsidiary RTS solutions receives a renewal order worth £360k over two years. |
Backlog: SSTY
Graham's Section
SThree (LON:STEM)
Up 9% to 243p (£311m) - Trading Update - Graham - AMBER
SThree plc ("SThree" or the "Group"), the global STEM workforce consultancy, today issues a trading update for the half year ended 31 May 2025.
I have previously described this as my favourite recruitment stock. However, the malaise across the sector has made me question whether I should be positive on any stock in the sector.
The key takeaway from today’s update is that SThree are expecting FY 2025 performance “in line with previously announced £25m PBT guidance”.
Some bullet points:
H1 net fees -14%, “reflecting a modestly reduced rate of decline in Q2 underpinned by an improved US performance”.
Checking the Q1 update, I see that net fees were down 15% in the first quarter.
H1 regional net fee performance:
Continuing:
Contractor order book (down 8% to £164m) provides five months of net fees, “sector-leading visibility”.
Net cash £48m is up £3m since the end of February. Would be up £15m if not for the company’s buyback programme.
Technology improvement programme “on track and on budget”. A further £6m of in-year net savings on track.
CEO comment:
"Whilst market conditions remain challenging, the Group delivered a stable first half performance, with a modest sequential improvement quarter-on-quarter. Strong Contract extensions continue to underpin performance, providing sector-leading visibility and reflecting our customers' priority to retain critical STEM skills. …
With our agile, future-ready technology infrastructure, coupled with a robust business foundation, deep industry networks, and a specialist STEM focus, we are well placed to guide clients through the evolving workforce landscape. We are ready for the opportunities that lie ahead."
Graham’s view
The market has breathed a sigh of relief that there hasn’t been another profit warning from SThree (see the Dec 2024 trading update), with full-year adjusted PBT still heading for £25m.
However, I don’t think I can maintain my previous AMBER/GREEN stance.
My concern is that based on what I’ve seen over the past six months, all recruitment companies have struggled badly, across most geographies. And it is not as if we are suffering a global recession. This leads me to believe that recruiters are much more economically sensitive than I previously thought, or that something structural is happening, with companies and workers using new methods to find each other.
The bull case is that we just need GDP growth of 2 - 3% and that will “fix” the sector. SThree still has a large net cash balance, has been buying back shares, and will be too cheap at current levels if prior profitability is restored.
But as I now fear that there is a structural problem, I’m reluctant to back the recovery idea with a moderately positive stance. So I’m switching to neutral.
I also note that the cash balance is below the level (£60m) that the company previously indicated was needed to fund business as usual and expected contractor growth.
Given that the reason for the decline in cash is their voluntary decision to buy back their own shares, I will conclude that they are not betting on rapid contractor growth in the short-term.
SThree is still my favourite recruitment stock, with arguably the best technology platform and also the best focus on contract rather than permanent recruitment. I’d like to be more positive on it. But for now I think a cautious approach makes more sense. I note that the StockRank style is neutral.
Gear4music (HOLDINGS) (LON:G4M)
Up 8% to 200p (£44m) - Final Results - Graham - GREEN
This one issued a profit warning as recently as April (market cap at the time: £28m) but things are already looking up.
Megan reported on one of their asset purchases, buying up the stock of a failed competitor, along with “commercial data and trademarks”.
The company did a similar deal last week.
The two failed companies were “GAK” (Guitar Amp & Keyboard) and “PMT” (Play Music Today”).
Customers looking for those companies are likely to end up on a G4M landing page (here or here) with G4M relaying the bad news. If you had an outstanding order with GAK or PMT, it will not be fulfilled.
I’ve said before that when it comes to M&A, I have a very strong preference for opportunistic purchases out of administration - which are forced sales, and usually offer great value - rather than expensive buyouts, which require much more skill (and luck) to get right.
G4M has been buying its competitors’ assets for pennies on the dollars, and has been getting their valuable intellectual property thrown in for free. It’s surely impossible not to do well when you’re buying on those terms.
What’s more, the failure of these smaller rivals has resulted in weaker competition. An excerpt from today’s commentary:
On 16 April 2025, we reported a return to double-digit sales growth from mid-March onwards, and we are pleased to confirm that since then, both sales momentum and gross margins have continued to increase.
This encouraging performance reflects the early positive impact of our revised strategy, alongside a more favourable competitive landscape following the recent failure of two UK competitors. As previously reported the Group subsequently acquired selected assets from their Administrators, further strengthening our market position.
Although it remains early in the new financial year, the Group has benefited from these developments and the Board is uplifting its expectations for the Group's financial performance for the year ending 31 March 2026."*
New estimates: many thanks to Progressive for publishing on G4M today. Here are their FY March 2026 forecasts.
Their sales forecast increases 1% to £155.5m (FY25: £146.7m)
Their adj. PBT forecast increases 10% to £2.7m (FY25: £1.6m)
Until today, the existing consensus forecast for adj. PBT was £2.65m, which is near Progressive’s new estimate. So it seems that other analysts have been more bullish on G4M than Progressive have been.
Net debt: £6.4m at year-end for FY March 2025.
Adjusting items: kudos to G4M for giving an adjusted EBITDA figure that’s the same as actual EBITDA, and adjusted PBT that’s the same as actual PBT. A clean set of accounts.
It's backward-looking (hopefully FY26 will be better), but progress on commercial KPIs in FY25 was fairly modest:
The CEO describes the 2025 performance in his outlook statement. I’ve highlighted what I find most interesting:
In FY25 in light of continued pressure on discretionary consumer spending and the impact of aggressive discounting by financially distressed competitors in both the UK and Europe, the Group maintained a prudent balance between revenue growth ambitions and disciplined cost and working capital management.
There is now clear evidence of market consolidation and rationalisation with a number of weaker competitors ceasing operations in FY26 to date and this is creating opportunities for us, as seen by our purchases of the GAK and S&T Audio/PMT brands. This trend may signal a more favourable competitive landscape ahead.
Graham’s view
I’ve tended to view this as a box-shifter in the music scene: a company that lacks significant pricing power, and that ought to trade on a cheap multiple.
My view on that hasn’t changed radically but I am really impressed by the asset purchases.
These are green flags in my book: they signal patience (G4M didn’t try to buy these companies when they were performing well) and opportunism (they did swoop when they were available for sale cheaply).
I am also impressed by the clean accounts, without any adjustments made.
And we have expectations being raised for the year ahead.
So there are multiple green flags at work here.
I’m therefore going to raise this all the way to GREEN, leaning a little on Ed’s insights on the “post-earnings announcements drift” (or: why “ahead of expectations” announcements repeat themselves).
If G4M hits FY26 EPS, it’s trading at a PER of 21.5x. If it hits FY27 EPS (a tall order, I know), it’s trading at 16x.
That is expensive, and does not even take into account that the company is carrying some debts. But I’m still willing to go GREEN on this on the basis that further upgrades are possible. Being a low-margin business is a double-edged sword: bottom-line profits can evaporate quickly, but they can also surge when conditions are favourable.
Roland's Section
Safestay (LON:SSTY)
Down 2% to 24.5p (£16m) - Final Results - Roland - AMBER/RED
These 2024 results from this travel hostel operator are very late, coming almost a full six months after Safestay's 31 December year end. That's not a great start.
A quick review of the numbers also appears to highlight some worrying trends. While revenue rose slightly to a new record of £23m, the group reported a net loss of £0.9m.
Checking the income statement shows that for the last two years, Safestay's entire operating profit has been swallowed up by interest and lease payments.
The operating metrics appear to suggest that Safestay has really struggled with pricing power over the last year:
Bed nights +10% to 931,688
Occupancy +3.8% to 75.2%
Revenue per Available Bed -2% to £18.56
The combination of increased occupancy and lower rate implies a 10% reduction in the average bed rate over the year. That seems a big worry to me, against an inflationary backdrop. Perhaps this is why management comments on a "competitive pricing environment" in the outlook comments.
Net debt: a second reason for the company’s operating loss may be excess leverage. A discussion of net debt is relegated to the footnotes of these results. I can see why this might be.
Reported net debt rose by £1.7m to £49.0m last year, representing 7.5x EBITDA or 64% of Safestay’s reported property assets (both figures including leases).
This looks too high to me, given the ongoing finance costs. This may explain why Safestay recently confirmed reports it's considering the sale of some freehold assets.
These results also note that Safestay’s bank covenants have been amended after the year end, without stating the nature of the amendment. I read this as suggesting covenants have been relaxed – a potential warning flag.
Roland’s view
Safestay’s lack of profitability, elevated debt levels and apparently weak pricing power look worrying to me.
We’ve previously been neutral on Safestay, but I have no choice but to downgrade our view to AMBER/RED after reviewing these results.
Intercede (LON:IGP)
Down 2% to 177p (£101m) - Final Results - Roland - AMBER
Intercede, the leading cybersecurity software company specialising in digital identities, today announces its preliminary results for the year ended 31 March 2025 ("FY 2025").
Today’s results appear to be ahead of consensus forecasts for FY25. Broker Cavendish has also upgraded its forecasts for FY26.
Even so, the market seems unimpressed, with the shares down in early trading. Let’s take a look.
FY25 results summary: today’s results show the expected drop in revenue and profits relative to the record results reported in 2024, which were boosted by a seemingly one-off £6m licence sale.
Revenue down 11.5% to £17.7m
Pre-tax profit down 17.9% to £4.6m
Diluted EPS down 32.3% to 6.5p
These figures appear to be substantially ahead of consensus forecasts for adjusted EPS of 5.6p.
However, checking today’s note from broker Cavendish suggests the scale of the beat may be slightly smaller than this. Cavendish had a FY25 forecast EPS of 5.4p following April’s update. Today, the broker has recorded an actual FY25 figure of 6.0p per share.
That’s still a respectable beat though and today’s accounts look fairly high quality to me.
My sums show almost 100% conversion of net profit to free cash flow, excluding working capital movements.
Profitability is also excellent, with an operating margin of 22.3% and 24% return on equity.
Finally, net cash of £18.7m provides plenty of dry powder for growth and generated a useful net interest income of £650k last year.
Outlook & Commentary: Management trading commentary highlights a number of contract renewals and new wins over the last year. These seem to be weighted to a) US federal agencies and b) Middle Eastern companies.
However, guidance for the year ahead is limited.
The company says it has seen no impact from US DOGE directives and believes there could be potential upside from higher US Department of Defence spending over time. However, management warns that government decision cycles remain long relative to the private sector.
Comments such as “primed for growth” don’t suggest imminent acceleration to me. The company’s own guidance today is limited to an in line statement:
Current trading is in line with Board expectations with our Tier 1 client base continuing to grow and diversify, reinforcing the Group's strong market position.
Updated estimates: interestingly, despite Intercede’s in line outlook statement, house broker Cavendish has upgraded its FY26 estimates today. Make of this what you will.
With thanks for making this coverage available, here are the new numbers:
FY26E EPS: 5.5p (previously 5.2p)
FY27E EPS: 5.8p (new)
FY28E EPS: 7.4p (new)
These forecasts leave Intercede trading on a FY26E P/E of 32, falling to a FY27E P/E of 31.
Roland’s view
Intercede shares are expensive, but this might be justified for a fast-growing software firm with high margins and a strong balance sheet.
The main problem here for me is that earnings are still expected to be below FY24 levels in FY28.
Perhaps in an effort to distract investors from this, Intercede has now introduced a new annual recurring revenue measure. This is given at £10.6m for FY25, but the comparative figure for last year isn’t provided, although the Cavendish note mentions a figure of £7.3m for FY23.
Intercede may well be following the wider trend in software and prioritising subscription growth over licence sales. However, this narrative about underlying growth seems of limited value to me – the reality is that the company is potentially expected to be playing catchup for several more years.
Even if we are happy to use FY25 as a baseline, today’s forecasts from Cavendish suggest revenue will only rise at a compound average rate of 7% between now and FY28.
This leaves me wondering about the market potential and competitive advantages of Intercede’s products. Clearly the company has some customers who are willing to pay attractive prices. But with cybersecurity spending rising fast and on every CEO’s agenda, why isn’t growth stronger?
Answering this would require more detailed research than I can do here, but I think it’s an important question for an investor considering buying Intercede shares on a P/E of 30+.
In fairness, the company has developed a reputation for underpromising and overdelivering over the last year:
Further upgrades could improve the outlook for the shares. As things stand, I’m going to maintain my previous neutral view. The quality metrics are good, but the combination of growth and valuation don’t stack up for me at this price. AMBER.
Telecom Plus (LON:TEP)
Down 4% to 1,994p (£1.6bm) - Final Results - Roland - GREEN
Trading as Utility Warehouse, this business resells utility, mobile and broadband on a single bill to a legion of customers who are recruited by an army of self-employed agents.
It’s an unusual business model that seems outdated and even risky – but in nearly 25 years as a listed company, Telecom Plus has delivered compound average share price growth of more than 9% a year, accompanied by (almost) unbroken dividend growth.
Today’s results suggest the group’s momentum remains positive. While revenue fell by 10% to £1,838m, this reflected a 20% drop in the UK’s energy price cap. Adjusted pre-tax profit for the year rose by 8.1% to £126.3m, which the company says was in line with expectations.
While the company is always aiming to increase the number of services provided to each customer, the strong growth of recent years has been driven by new customer growth. This remained at double-digit levels last year, with total customer numbers up by 15% to 1,163,608 during the year.
Stripping out c.25,000 broadband customers Telecom Plus acquired from TalkTalk, organic customer growth was 12.6% last year – still a strong result.
Cash generation and profitability are typically strong in this business and this remained true last year. While operating margins are low, the capital-light nature of the group’s business means returns are high:
My sums suggest the FY25 results are fairly consistent with the numbers above. Leverage isn’t a concern for me, with year-end net debt at 0.8x EBITDA, consistent with recent years.
Outlook: customer numbers have grown at an annualised compound rate of around 15% since FY21 as Utility Warehouse has steadily taken market share. This was driven by the widespread failure of retail energy suppliers during that period and UW’s ability to offer very competitive pricing on energy during a period of high prices through its long-term wholesale agreement with E.ON.
Chairman and founder Charles Wigoder believes the company still has a significant medium-term growth opportunity to grow the group’s customers base to over two million households. In today’s commentary, he highlights the difficult new entrants to the retail energy market face in both pricing competitively and generating adequate returns on capital.
We don’t have access to any updated broker notes today, but FY26 guidance from the company seems clear:
Adjusted pre-tax profit of £132m-£138m, slightly below expected customer growth due to employment cost headwinds
Total customer growth c.15%
Dividend growth in line with increased adjusted post-tax profit
This looks like an in line set of guidance to me, suggesting we can rely on Stockopedia’s consensus figures for the year ahead of 128p in EPS and 103p in dividends. This implies a P/E of 16, with a near-5% dividend yield:
Roland’s view
Today’s note on cost headwinds is a reminder that Telecom Plus’s customer service and back office functions have expanded considerably in recent years. The company is subject to regulatory scrutiny and I would imagine a customer base of 1.2m taking multiple utility services generates a significant administrative overhead.
Utility Warehouse is aiming to expand into the insurance market, but having launched this business a few years ago the company paused insurance sales for much of last year pending an FCA review. According to today’s result, the insurance offering is now ready to relaunch, so may now offer a new stream of growth.
I see this insurance episode as a useful reminder of the regulatory risks that must be embedded in this business. After all, UW’s agents sell multiple regulated services in informal home settings to customers. I think it’s probably a testament to the company’s strong management and good processes that it has avoided serious problems.
Telecom Plus’s dividend policy is to pay out 80%-90% of adjusted post-tax earnings. This is possible as cash generation is strong and capex requirements are limited. This policy means the shares still offer an attractive 4.7% yield at current levels, despite the high-teens P/E multiple.
The StockRanks view this as a High Flyer, with strong quality and momentum scores:
See what our investor community has to say
Enjoying the free article? Unlock access to all subscriber comments and dive deeper into discussions from our experienced community of private investors. Don't miss out on valuable insights. Start your free trial today!
Start your free trialWe require a payment card to verify your account, but you can cancel anytime with a single click and won’t be charged.