Daily Stock Market Report (Tue 25 Mar 2025) - MGNS, AO., ABDP, MPE, TIME, GAMA, POLN, KGF, JNEO, MBH, FEVR, PGH, TON, XAR

Good morning! We're expecting a lot of results announcements today, please stay tuned!

Phew! I think that's everything - let us know if we missed anything.

1pm: all done for today! Thank you for reading and thanks to Roland and Megan for making this truly a team effort today.

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Companies Reporting

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Graham's Section

Pollen Street (LON:POLN)

Up 5% to 750p (£457m) - Full Year Results - Graham - GREEN

This is a growing asset manager and an investor of its own funds that I’ve been slowly familiarising myself with.

The opening paragraph of today’s results is worth quoting in full:

2024 has been a pivotal year for Pollen Street with strong financial performance and strategic progress marked by growing Asset Management revenue and profits together with consistent Investment Company returns. Assets under Management ("AuM") increased 29%, with healthy growth across both private equity and private credit strategies. Pollen Street has entered 2025 with strong momentum and, with continued focus on its core specialisms, it looks forward to continued growth towards its medium-term target of £10 billion total AuM.

The medium-term target represents a near-doubling of current AUM (£5.4m).

Today's summary income statement shows a 72% increase in “Fund Management EBITDA”, from £14.9m to £25.7m. This is what I’d hope and expect to see from a fund manager that is scaling up - higher income dropping down efficiently into profits.

Pollen Street also earns income on its own portfolio, so that its total EBITDA is £57.5m. This is converted extremely well into £49.6m of after-tax net income.

I note that the company returned £48m to shareholders in 2024 - more than 10% of the current market cap.

Outlook: their priorities for 2025 are all eminently reasonable. They want to complete the fundraising efforts for their latest private equity and private credit funds, grow AUM towards the £10bn target, pay a progressive dividend, and return capital to shareholders through buybacks “subject to relative attractiveness compared to other value-creation opportunities”.

The €1 billion fundraising target for their latest private equity fund (mentioned here) was surpassed by the end of 2024.

CEO comment excerpt:

2025 has started well with continued fundraising momentum, solid asset performance and a promising pipeline of deployment opportunities. Looking ahead, we are strategically positioned to capture future growth with our specialist focus, diversified investor base and long track record of performance setting us apart.

Graham’s view

The company claims to have a specialist focus - I want to dig into this a little.

In private equity, their strategy is “buying and building great businesses serving the financial ecosystem across five key sub-sectors”, namely:

• Payments

• Wealth

• Insurance;

• Technology-enabled services

• Lending.

In private credit, they provide “asset-based lending ("ABL") to mid-market companies across Europe”.

We provide funding to support everything from building homes, to funding SMEs, to vehicle financing…

Our team focuses on the mid-market where we believe the greatest opportunity and largest financing gap exists meaning we can create the most favourable risk-reward profile. This has increasingly led to Pollen Street having a reputation as the "go-to" provider in the market.

So it seems to me that the private equity strategy is very well focused on particular sectors, whereas the private credit strategy is more focused on a particular size of company rather than any specific sectors.

Their fund management fee rate on AUM was a very healthy 1.5% in 2024. This is much higher than we see at conventional fund managers (more vulnerable to competition from passives). Pollen Street are guiding for their rate to be 1.25% - 1.5% long-term.

On the balance sheet there is net equity of £579m, of which about £350m is tangible.

I’m going to upgrade my stance on this to GREEN as this is my second time looking at Pollen Street in recent times. I’m finding almost nothing to dislike and plenty to like:

• The StockRank is 97 - it’s classified as a Super Stock.

• PER only about 10x.

• Operating leverage kicking in as the fund management platform grows

• Attractive fee rates.

• Shareholder orientation with lots of cash being returned to shareholders in a mix of dividends and buybacks.

There must be some risks I’m missing - please let me know in the comments!

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Megan's Section

Gamma Communications (LON:GAMA)

Up 4.5% to £12.60 (£1.21bn) - Full year results - Megan - GREEN

Gamma Communications (LON:GAMA) never does an awful lot to generate huge excitement. It’s a telecoms company, operating across Europe and developing (or acquiring) communications technology to support businesses.

But it’s always been high quality. In the last five years, sales growth has averaged 13%, operating profits have climbed by an average 14%, operating margins have averaged 14.5% and ROCE averaged 23%. In 2022 and 2023, those super high quality metrics took a little bit of a stumble (nothing too drastic, but enough to stop the previously high performing share price in its tracks). It’s good to see that in 2024, those quality metrics seem to have returned to previous strengths.

Strong sales growth across the board

Underlying sales growth driven by price rises and greater uptake of newer products was reported across both of the group’s core divisions (business and enterprise). And this was supported by the first-time contribution of three acquisitions.

Debtor days for the company have risen slightly to 55 (that means it takes an average of 55 days for the company to collect the cash for services delivered), which isn’t anything too concerning.

Gross margins have widened slightly, which means the cost of delivering its services hasn’t risen as quickly as sales have. Operating costs ticked up slightly owing to the expenses arising from acquisitions. But overall operating margins have returned to 15.5%.

Resilient cash flows to fund further acquisitions

Cash generated from operations fell slightly to £117m, equivalent to an operating cash conversion of 129%. Capital expenditure was also slightly lower than the previous year at £19.2m - the majority of which was spent on development costs (and a small fraction on maintaining the network infrastructure).

Gamma rarely leans on its debt facilities to acquire new businesses and the same was true in 2024, with £24.9m of cash spent on the three acquisitions (or £12.5m net of the cash brought in with those businesses). Net cash inflows after taking into account the acquisitions, £27m of share buybacks and £17m of dividends was £17.8m.

Asset-lite business model

Both Gamma and its acquisitions are very light on assets. Most of the value on the balance sheet lies in the cash (£154m at the year end) and the value of its intangible assets, many of which are customer contracts.

The same is true of the businesses Gamma acquires. In 2024, the three newly acquired businesses brought in £21.7m of intangible assets, £10m of which was in customer contracts.

Megan’s view:

There’s really nothing bad to say about Gamma Communications. It’s generating cash which it uses to fund a sensible acquisition strategy and expand its footprint, especially in Europe. The market has been unimpressed of late, despite the fact analysts keep upgrading their forecasts. Based on current expectations for the year to December 2025, Gamma is trading on a quite-reasonable 13x forecasts. I have no reason not to stay Green. But investors really shouldn’t expect anything other than consistent (boring) growth.

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Journeo (LON:JNEO)

Down 1% to 260p (£44.5m) - Full year results - Megan - GREEN

I am often surprised to find out that companies which provide vital infrastructure systems (like the technology which powers real-time information systems in transport hubs) are small companies listed on Aim.

The good news is that for these types of companies (and Journeo is one of them), the opportunities for growth are exciting. In 2024, the company made just under £50m of revenue selling its technology and transport management systems to the operators of rail, bus and airport travel hubs, mostly in the UK. Not one customer contributed more than 10% of the total revenue and there are plenty more of these types of customers who could be persuaded to use Journeo’s services.

In 2024, the 8% sales growth was largely thanks to a series of significant purchase orders across both of the company’s main divisions. The Fleet division signed two purchase orders for the company’s camera monitoring systems (designed to improve the safety of buses) with organisations operating bus services in London. The Passenger Systems division welcomed a number of new councils in the UK as customers.

Signing new customers is significant because most of the services provided are quite sticky. Although recurring revenues only contributed 14% of the total sales, customers signing up to install Journeo cameras in all their buses are unlikely to switch to another supplier any time soon. That means that it doesn’t cost the company very much to keep its customers and most of the operating expenses go towards signing new customers. Operating margins are climbing towards 10% - a good sign of this improving operating leverage.

Megan’s view:

I am struggling to really identify the type of stock Journeo is. It’s been listed since 2006 and it’s been a star growth company in the last five years, but it’s still not trading on a particularly steep price to earnings multiple.

Earnings have risen at a phenomenal pace in the last couple of years and they’re up another 46% in these numbers, which is ahead of consensus analyse expectations.

But the forecasts for next year are less impressive and investors seem wary of this - the share price has dropped sharply in the last year and the market hasn’t responded especially positively to these numbers.

There are questions that the company should maybe start to pay a dividend - after generating £7.5m of cash but only spending just over £1m on investing and financing activities. I would argue that it’s not a dividend that should be paid for, but a more aggressive growth strategy, one that can sign up slightly more material contracts which promise to deliver more recurring revenues.

I can’t tell which way this one is going to go, but leaning on the numbers and the statistics (which is what we like at Stockopedia) suggests that this is a decent investment. The quality metrics are ticking in the right direction and there is definitely scope for some further earnings upgrades if the company can keep up its track record of signing new customers. GREEN. 

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Roland's Section

Kingfisher (LON:KGF)

Down -12% to 246p (£4.4bn) - Final Results - Roland - AMBER

Today’s results from B&Q and Screwfix owner Kingfisher have received a poor reception, despite appearing to be in line with expectations.

For the first time in over six years, we grew our market share in all key regions. We delivered profit and free cash flow in line with or ahead of our initial guidance, with strong delivery against our strategic objectives.

Kingfisher is the biggest mover in the FTSE 100 today and is also a member of Ed’s 2025 NAPS portfolio, so I thought it might be worth a closer look on this crowded results day.

2024/25 results summary (y/e 31 Jan 25): trading commentary in today’s results highlights focuses on the positive factors – Kingfisher says it gained market share “in all key regions” and expanded its ecommerce operations in UK, Ireland, France, Poland and Iberia. Trade penetration also improved through the group’s main brands (excluding Screwfix, which is already focused on trade).

The UK was more resilient than France, with LFL sales up 0.2% despite a 7% LFL decline in big-ticket sales such as kitchens. In contrast, LFL sales in France fell by 6.2% with weakness across all categories.

Online is becoming an important channel for the group. Total ecommerce sales rose by 8.3% to £2.5bn last year, accounting for 19% of group sales (23/24: 17.4%). Most of these are click-and-collect, so won’t necessarily reduce the need for a large, costly store estate – but online capabilities may help to protect and enhance Kingfisher’s market share.

Turning to the numbers, there are not many positives on offer:

• Sales down 0.8% at constant FX to £12,784m

• Gross margin up 0.5% to 37.3%

• Adjusted earnings down per share 5.2% to 20.7p

• Reported earnings per share down 44.7% to 10.1p

• Dividend unchanged at 12.4p per share

The improvement in gross margins did not translate into an improved operating margin figure, even at an adjusted level – Kingfisher’s retail profit margin fell by 0.4% to 5.4%.

At a statutory level, operating margin fell to 3.2% (23/24: 4.5%). This is well below historic average levels:

Perhaps the only bright spot was cash generation. The company’s own measure of free cash flow was stable at £511m (23/24: £514m). However, my sums suggest a slightly lower figure of £466m, versus £501m in 23/24. Not a disaster – but a more material decline.

Even so, Kingfisher’s cash generation remains a significant attraction – £466m of free cash flow gives a c.10% free cash flow yield after today’s drop.

The only problem I can see with this is that if the business doesn’t return to growth soon, future cash generation could be threatened by onerous leases.

My sums suggest net lease liabilities on the balance sheet of £440m (23/24: £486m). This reflects the present value of future lease payments, in excess of expected cash generation from these stores. In other words, it seems that a substantial proportion of Kingfisher’s store estate is potentially loss making.

These figures are regularly recalculated and may improve if trading picks up. But as things stand, this is a headwind to future profitability and free cash flow.

Outlook: Kingfisher is guiding for an adjusted PBT of £480m to £540m for 25/26, with free cash flow of £420m to £480m.

Adjusted pre-tax profit last year was £528m, so taking the mid-point of this fairly wide range suggests to me that adjusted PBT could fall to £510m this year. Assuming this drops through similarly to earnings, this appears to be a downgrade from previous expectations for a recovery in earnings this year:

Earnings estimates have trended downwards for much of the last 18 months:

Assuming flat earnings would leave Kingfisher on a P/E of 12 with a 5% dividend yield after this morning’s slump.

Roland’s view

Fundamentally, I think Kingfisher’s problem is that it’s pushing on a piece of string. CEO Thierry Garnier may be improving operations, but the group’s end markets are weak. Kingfisher’s long-term share price chart tells the story of its dependence on consumer spending and housing cycles – the shares are trading at similar levels to 20 years ago:

However, this business continues to generate plenty of cash and the shares can deliver a decent result for investors who are willing to trade in and out of them. The 5% dividend yield also continues to look fairly well supported to me, providing a useful income.

Meanwhile, a further £300m buyback programme could theoretically create shareholder value, as Kingfisher stock is currently trading below its book value of £6.3bn.

In my view, Kingfisher is reasonably cheap and remains in reasonable financial health. On the other hand, profitability is weakening and the company is exposed to headwinds such as next month’s minimum wage and NI increases.

In addition to this, Kingfisher appears to have very little ability to stimulate customer demand and is instead dependent on economic conditions and consumer sentiment.

The StockRanks scored Kingfisher highly prior to today, but I think this rosy view could be downgraded when the algorithms digest today’s results. I’m going to go AMBER here to reflect the combination of value and today’s downbeat guidance.