Daily Stock Market Report (Tue 26th August 2025) - FTC, WG., CKT, AT., BNZL, TMO, EMR, MPAL

Good morning! I hope you're all feeling refreshed after the long weekend.

Today's report is complete!

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Spreadsheet accompanying this report: link (last updated to: 11th August).

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Companies Reporting

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Graham's Section

Checkit (LON:CKT)

Up 5% to 13.9p (£15m) - Interim Results - Graham - RED

Checkit plc (AIM: CKT), the automated monitoring platform for operational leaders, announces its unaudited half year results for the six months to 31 July 2025 ("H1 FY26").

What it does: operational monitoring for industry, medical monitoring (sensors - temperature, humidity, gas levels, pressure), food safety.

As noted by Mark in April, Checkit has taken a more defensive posture, focused on cost savings, in a bid to reduce its losses.

That theme is evident today with the company reporting £3m of annualised cost savings - this helps to drive a £0.9m reduction in the adjusted EBITDA loss (or “LBITDA”), from £1.4m to £0.5m.

When it comes to analysing unprofitable companies, negative adjusted EBITDA is a major warning flag for me. Typically, adjusted EBITDA is the metric that companies focus on when they wish to “put their best foot forward” - it can make profitable companies look highly profitable, and barely profitable companies look respectable.

When a company cannot yet report positive adjusted EBITDA, this implies it’s still at an early stage on the road to profitability.

Checkit’s actual pre-tax loss for the H1 period, without any adjustments, is £2.1m. That is a £0.5m improvement compared to H1 last year.

Growth: revenue is up by 3%, much slower than previous growth reported by the company, which I think goes back to the more defensive positioning it has taken in recent months.

Net revenue retention is 104%, lower than before, but anything above 100% is good.

Cash reduces to £2.7m (July 2025) (£5.1m as of January 2025).

Outlook: in line. “The Company remains on track to achieve adjusted EBITDA profitability and cash flow breakeven during calendar year 2026.”

CEO’s comment refers to “difficult but necessary actions”. It sounds like the cost savings were primarily in the form of redundancies:

"Despite challenging market conditions, Checkit has delivered a solid operational and financial performance. We have taken difficult but necessary actions to strengthen the foundations of the business, and now our focus is on accelerating growth. Encouraging pipeline momentum, coupled with a sharpened sales process, increasingly gives us confidence in the future."

Graham’s view

The recurring revenue model is attractive, but on its own that’s not enough for me to take a positive stance on a company at this early stage of its development.

Tangible equity is modest at £2.3m, and similarly that cash balance of £2.7m is only enough to cover losses at the current rate for a limited time.

I note that cash used in operations in H1 was £1.9m, and another £1m went out the door in investing activities. The only major saving grace was a £0.7m tax credit received.

So really, the company has to stop bleeding cash now, if it’s going to avoid an equity raise.

And remember that EBITDA or “cash flow breakeven” doesn’t mean that the company will be in the black - it will probably still be in the red. That is what current estimates say:

It might be a little harsh (Mark was only AMBER/RED on this last time), but I think a downgrade to fully RED is justified here, as I lack confidence that the current equity is safe here. Perhaps an equity raise will be easy to get away, but the point of RED is to highlight situations where I think the existing equity is unsafe.

With only £2.7m of cash and with further losses expected for the foreseeable future, I think RED is reasonable now.

With redundancy payments having been made and the focus now on growing from a leaner base, I wish the company every success. But from a value investor perspective or someone who is concerned about the potential need for further funding, this is one that I’d steer clear of, for now.

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Roland's Section

Filtronic (LON:FTC)

Up 6% to 143p (£314m) - Roland - New $62.5m order with SpaceX - AMBER

Filtronic secures $62.5m order with SpaceX for next generation technology

For some time now I’ve been commenting that we’ve had little visibility on Filtronic’s progress with the next-generation technology required to generate orders under later phases of the company’s agreement with satellite internet provider SpaceX.

Today’s news seems to address this quite emphatically, with a $62.5m (£47.3m) order for a “next generation, proprietary gallium nitride (“GaN”) E-band product”:

The contract is the first GaN product from Filtronic's next generation product lines, delivering more than double the output power of the existing gallium arsenide ("GaAs") product line. GaN processes enable higher power, improved efficiency, and greater thermal performance-critical advantages for satellite communications and aerospace and defence applications.

Here are the main details of the contract:

• First production units will ship in FY27 (June 26-May-27);

• Contract expected to deliver material revenues in FY27 and FY28;

• Terms of the second tranche of warrants relating to the SpaceX partnership have been amended to include E Band GaN “alongside other bands in development;

• Vesting criteria amended to double the volume required for full vesting. Warrants will also now vest on product delivery rather than placement of the purchase order

Today’s contract win seems to relate to this product development comment, which was included in July’s FY25 results:

Accelerated transition from Gallium Arsenide (GaAs) to Gallium Nitride (GaN) technology enabling higher performance for satellite and defence systems with the GaN based product range to be launched in 2026.

At the risk of sounding cynical, I’m slightly intrigued as to why this “next generation” product wasn’t originally included in the qualifying list of “next technologies” that could trigger the second tranche of SpaceX warrants.

Could it be that this was not originally the product envisaged for sales under the second phase of the agreement? I don’t know.

The financial changes to the warrants seem easier to understand. The strike price for the warrants is 33p, so they provide some (dilutive) cash inflows for Filtronic, while effectively providing a rebate for SpaceX (on the assumption that SpaceX sells all the shares it receives, which I believe to be likely).

Filtronic’s rising share price means the potential benefit to SpaceX from this warrant arrangement has increased, while the benefit to Filtronic has not changed.

The changes to the terms outlined in today’s update seem to be intended to reduce that imbalance by increasing the order volume required to trigger vesting and delaying the point at which SpaceX can receive new shares.

Perhaps we might interpret this updated agreement as a signal that Filtronic is becoming increasingly important to SpaceX – not just the other way around.

Outlook & Estimates

There is no indication in today’s update of whether these forecasts are included in current broker estimates for FY27 (there are no forecasts yet for FY28).

There are no updated broker notes available to us today, either. However, the previous broker note from Cavendish includes this comment, which seems to suggest that today’s contract win may not be included in the broker’s FY27 forecasts:

We assume a resumption of growth in the rate of ground station installations for SpaceX in 2027 albeit not yet including any contribution from next generation technologies, which will be developed under the partnership for use in future years.

We’ll have to wait to see if updated forecasts filter through to the market in the coming days. No change seems likely for FY26, but I can see some potential for an upgrade to FY27 expectations:

However, it’s worth remembering that profits are currently expected to fall sharply in both of these years, relative to FY25:

• FY25 EPS: 6.05p

• FY26E EPS: 2.76p

• FY27E EPS: 3.29p

On these numbers, the shares currently trade on a forward P/E of >40.

Roland’s view

Filtronic’s share price has doubled this year and the stock has now risen by 750% in two years – congratulations to holders who saw the early signs of promise and have held on:

There’s no doubt the company’s work with SpaceX has been deeply impressive and highly profitable.

However, I’m reluctant to ignore the significant customer concentration that has resulted from this.

SpaceX generated 83% of Filtronic’s revenue in FY25, up from 48% in FY24.

My sums suggest that this means revenue from customers other than SpaceX fell from £13.2m in FY24 to just £9.6m in FY25.

The company talks about diversifying its customer base and has announced some promising contract wins with other customers over the last six months or so. But when so much depends on a single customer, I imagine that there’s a risk other more speculative or lower-return work might be deprioritised in order to focus on the golden goose.

If the SpaceX gravy train keeps rolling, this might not be a problem. The difficulty for investors is gauging when the situation might change. While the SpaceX rollout could have years left to run, we don’t know whether this will be mirrored by continued demand for Filtronic products.

Today’s contract win looks like good news to me. But Filtronic’s valuation remains elevated and the customer concentration risk remains unchanged, in my opinion.

For these reasons, I’m going to maintain my neutral view today, which I think also reflects the stock’s low value and declining momentum scores:

I recognise that my view may turn out to be short sighted, but I think it’s a fair balance of the potential risks and rewards in this situation.

As always with richly valued growth stocks, it’s important for investors to DYOR and form their own conclusions. AMBER

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Ashtead Technology Holdings (LON:AT.)

Up 6% to 365p (£296m) - Roland - Half-year Report and Update on move to Main Market - AMBER

Ashtead Technology Holdings plc (AIM: AT.), a leading provider of subsea technology solutions to the global offshore energy sector, announces its unaudited results for the six months ended 30 June 2025 ("HY25" or "the period").

Today’s results are reassuringly in line with those set out in the half-year update on 17 July, which I interpreted as a minor profit warning. I covered this update here and took an AMBER/RED view on the stock, due to my concern about the speed at which trading had deteriorated and the risk of further weakness.

Do today’s half-year results contain enough good news to persuade me to upgrade to neutral? Let’s take a look.

H1 results summary: today’s reported numbers are skewed by the £63m acquisition of Seatronics and J2, which was completed in November 2024. Fortunately, Ashtead has provided a split of revenue growth to aid our understanding:

• Revenue +23.2% to £99.1m

• Organic revenue: +1.3%

• Revenue from acquisitions: +22.7%

• FX impact: -0.8%

Essentially, revenue for the half year from the continuing Ashtead business was flat on an organic basis.

Within this, the group generated £73.7m of revenue from oil and gas and £25.4m from renewables.

Source: Ashtead Technology H1 25 presentation

The company acknowledges that Seatronics and J2 have been dilutive to margins, and this is reflected in adjusted profits:

• Adjusted EBITA +19.7% to £27.0m

• Adjusted EBITA margin -0.8% to 27.3%

• Reported pre-tax profit up 0.8% to £17.8m

• Adjusted EPS +14.5% to 21.9p

The flat performance in pre-tax profit relative to adjusted EBITA mostly reflects a £2.4m increase in finance costs during H1, due to the use of debt funding for last year’s acquisitions.

While leverage remains a little elevated, at 1.6x adjusted EBITDA, the company does expect this to reduce to 1.4x by year end. I don’t think this level of debt should cause any problems if trading remains in line with expectations.

Fortunately, the group’s post-acquisition profitability still seems very respectable, with an operating margin of 23.4% (reported) and 27.3% (adjusted).

Annualising the H1 results gives a return on capital employed of 15.9%, according to my calculations – a respectable result that’s in line with last year’s performance:

Trading commentary: the company says that slower H1 growth than expected was due to a range of (mostly) US-centric factors:

...the reduced revenue growth influenced by a number of external factors including the US administration's policies on tariffs and offshore wind development, military activity in the Middle East and US dollar FX movements.

However, customer projects delayed in H1 are now said to have mobilised, with customers reporting “sustained, record project backlogs”. CEO Allan Pirie says Ashtead “secured significant contracts” during the first half.

He also flags up recent market research suggesting industry demand for both offshore oil and gas and offshore wind is expected to continue growing over the next few years, expanding Ashtead’s market opportunity.

Ashtead certainly seems to be investing in the expectation of continued healthy demand – the company spent £19.4m updating its rental fleet in H1:

… adding cutting edge technologies to our Survey and Robotics service line as well as expanding our technology development programmes within our Mechanical Solutions and Asset Integrity service lines.

FY25 capex is expected to be around £35m, suggesting a slightly lower level of expenditure in H2.

Move to the Main Market: Ashtead is progressing its plans to graduate from AIM and expects to commence trading on the Main Market on 6 October 2025.

Outlook: I don’t have access to any broker notes for this business, but today’s outlook statement seems quite clear to me (my emphasis):

We remain confident in our ability to execute on our strategy and based on current trading levels and market outlook through the remainder of the year, we are confident of delivering an outturn in line with the Board's expectations.

Current consensus forecasts suggest FY25 earnings of 43.8p per share, putting the stock on a forward P/E of 8.4 after this morning’s gains.

Roland’s view

Ashtead’s share price has followed a post-IPO trajectory that is (sadly) all too familiar:

However, today’s results seem solid enough to me and the outlook for the remainder of the year sounds quite confident.

One possible caveat to this is the risk that the disruption in H1 – largely in the US – might not be over. For example, the US government halted a $1.5bn offshore wind project on Monday, seemingly without any warning (FT paywall).

The StockRanks have highlighted Ashtead as a Falling Star and we know that statistically, companies often experience further problems after an initial profit warning. Ashtead’s StockRank profile remains weak:

However, I suspect the StockRank may improve a little when today’s H1 results are digested by Stockopedia’s computers.

Although I still have some concerns about Ashtead, today’s accounts look acceptable to me and I don’t see enough to stay negative on this stock. I’m upgrading our view to neutral. AMBER