Daily Stock Market Report (Tue 6 May 2025) - The end of an era, FTC, ADF, ABF, SYNT, ALPH, AGFX, KGH, GTC, HUD, ROO

Good morning! And welcome back after the long weekend.

1pm: we are wrapping up today's report now, thank you.

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The end of an era

(NB. I'm long BRK.B.)

This weekend we learned that Warren Buffet was retiring as CEO of Berkshire Hathaway, effective January 1st 2026.

Buffett was born in 1930, and has been CEO of Berkshire since 1970, so it is reasonable that he may wish to take a break at this time. However, he will remain Chairman of the Berkshire Board.

Buffett has had an immense, immeasurable influence on the investing community, through his many shareholder letters and interviews, but perhaps above all through his actions and decisions as CEO of America's most famous conglomerate.

Without him, both "value" and "quality" investing would be very different.

As for the future of his company, it will hopefully not be all that different from the past, at least for now. It has been known since 2021 that Greg Abel would be the next CEO.

Greg Abel has been part of the Berkshire Hathaway family of companies since 1999, and has been Vice-Chairman of non-insurance operations since 2018. Aged 67, I hope and expect that he will provide a steady pair of hands for the foreseeable future.

As for Warren Buffett, I very much hope that he enjoys his additional free time, even if he can't spend it with his greatest friend and colleague Charlie Munger. The discipline of investing will move on, but it is difficult to imagine that anyone will ever match their impact. 

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Companies Reporting

Name (Mkt Cap)	RNS	Summary	Our view (Author)
Associated British Foods (LON:ABF) (£14.8bn)	Response to media speculation	ABF confirms talks are underway on a possible transaction involving Allied Bakeries.	AMBER (Roland) [no section below] Sky News has reported that ABF is in “prolonged discussions” with private equity house Endless over a possible deal to combine the two companies’ bakery businesses. Competition issues could be a stumbling block, with Hovis and Allied Bakeries said to have 24% and 17% market shares respectively, against 34% for Warburtons. I’m going to leave our neutral view unchanged today following our 29 April review of ABF’s interim results.
Deliveroo (LON:ROO) (£2.6bn)	Recommended Offer	180p offer from Doordash. The bid is at an EV/EBITDA multiple of 13.4x, and there are irrevocable undertakings from 15% of Deliveroo shareholders to support it, including founder-CEO William Shu.	PINK (Graham) [no section below] The 180p offer from Doordash has materialised and it's the final offer from Doordash unless another party starts a bidding war. As I said last week, I think Deliveroo shareholders may deserve a better outcome than this, e.g. if we compare Deliveroo's market cap vs. Doordash's own market cap, there is a world of difference between their respective valuations. Normally I would say that 15% irrevocable undertakings was not enough to guarantee that a deal would go through. However in this case, with Deliveroo's founder-CEO planning to vote for it, it may be difficult for other large shareholders to oppose it.
International Workplace (LON:IWG) (£1.9bn)	Q1 Trading Update	Rev +2%, increase in new signings & openings. FY25 guidance unchanged.
Alpha International (LON:ALPH) (£1.2bn)	Possible Offer	SP up 3% A preliminary all-cash proposal has been made by Corpay Inc and rejected by the Alpha Board. Corpay is a US payment technology company providing a range of services for corporate clients, including corporate cards, cross-border payments and fleet solutions.	PINK (Roland) [no section below] This looks like a potential trade bid for Alpha, which offers services such as currency management, international payments and interest rate hedging. The share price reaction has been muted today but ALPH stock is up 27% YTD, aided partly by recent earnings upgrades. At first glance ALPH looks like a good quality business to me, with strong profitability and cash generation. With the stock still only trading on a 2025E P/E of 18, I would guess Corpay will need to be more generous to get support from ALPH shareholders. Under takeover rules, Corpay has until 30 May to make a firm offer or confirm that it doesn’t intend to bid.
Kosmos Energy (LON:KOS) (£572m)	Q1 Results	Rev -30% to $290m, net loss of $111m ($0.23 per share). Q1 prod 60.5kboepd due to maintenance.
Filtronic (LON:FTC) (£209m)	Trading Update	Revenue and EBITDA expected to be ahead of expectations for both FY25 and FY26.	AMBER/GREEN (Roland) Filtronic says that increased manufacturing capacity is allowing it to deliver “increasing customer demand”, supporting upgrades to expectations for both FY25 (y/e 31 May) and FY26. However, updated estimates from broker Cavendish show that earnings are still expected to fall sharply next year, as revenues ease back and the cost base expands. I respect Filtronic’s recent momentum and timely LEO market positioning, but I can’t help having some concerns about the near-term outlook.
Synthomer (LON:SYNT) (£152m)	Divestment of William Blythe	Agreement to sell its inorganic chemistry business for £30m, representing 7.5x 2024 EBITDA.	AMBER/RED (Roland) I review the details of today’s disposal and consider the broader picture as a possible turnaround. High leverage means that I must take a cautious view. But I am inclined to think this well-established business could be nearing a turning point where trading will start to improve. In my view, Synthomer could be worth further research and monitoring as a possible turnaround.
Knights group (LON:KGH) (£122m)	Acquisition of Birkett Long	£10m initial cash consideration, deferred cash of £6.6m. FY24 adj PBT for Birkett Long was £1m. The acquired business has 91 fee earners and is split equally between business and private clients. It also has a wealth advisory team, providing an entry point into this market for KGH. Adding Birkett Long is expected to take group revenue over £200m (FY24: £150m).	AMBER/GREEN (Roland) [no section below] Another debt-funded acquisition for this listed law group, two months after its last deal.  Once again, the figures provided imply that Knight’s management expects to be able to increase the profitability of the acquired business significantly once integrated. I estimate this could equate to a purchase multiple of c.10x FY24 pro forma PBT. This roll-up group appears to have good momentum and enjoys Super Stock styling. Personally, I’m a little wary about Knight’s average profitability (ROE: 11%) and heavily-adjusted profits. While the forward P/E of six looks cheap, adjusted EPS appears to exclude some large and recurring cash items, such as payments to partners from acquired firms. Using reported EPS, the shares trade on 13x FY24 earnings, which looks fair to me.
Victoria (LON:VCP) (£93m)	Trading Update	FY25 rev “at least” £1.11bn, EBITDA margins broadly in line with exps. UK trading is improving.
Argentex (LON:AGFX) (£52m)	Restoration of trading on AIM & Board Changes	SP down 91% As hoped for, Argentex has received a credit facility (£20m) and bridge funding (£10.5m). This allows the shares to resume trading until the company’s planned takeover by IFX Payments, who provided these debt facilities. The interest rate charged is 15%. The CFO and various NEDs step down (note that the CEO already resigned last month).	PINK (under offer) (Graham) [no section below] The sudden need for this amount of liquidity - over £30m - is shocking given that Argentex was not supposed to take any directional bets on currency movements. However, today’s announcement notes that margin might be recovered “as positions naturally unwind or FX movements are favourable to the company’s position”. So the company is now exposed to currency movements. Is this because they have been left holding customer positions, after their customers failed to post margin? Either way, something went badly wrong - a cautionary tale. I’m not sure why the shares are today trading above the takeover price 2.49p (bid offer 3.2p/3.7p according to the London Stock Exchange).
MTI Wireless Edge (LON:MWE) (£42m)	Further investment into PSK Wind Tech.	MTI has increased its PSK stake by 9% to 60% for $170k. Previous issues with PSK now resolved.
Maintel Holdings (LON:MAI) (£32m)	Full Year Results	Rev -3.4%, adj PBT +33% to £7.3m. 75% recurring rev. FY25 outlook in line, H2 weighting.
XP Factory (LON:XPF) (£19m)	Trading Update	FY March 2025: rev +17% (£57m), LfL +2.5%. Adj. EBITDA at upper end of exps (£6.2 - 6.4m).
Facilities by ADF (LON:ADF) (£19m)	Final Results	Loss before tax £2.8m. Net debt £13.8m (hire purchase). Q1 in line. Timing of projects uncertain.	RED (Graham) Estimates are unchanged but I'm reducing my stance to RED in the light of these results. Tangible balance sheet support for the stock has reduced year-on-year and visibility remains highly uncertain, with the added uncertainty of tariff risk now thrown into the mix.
Eden Research (LON:EDEN) (£16m)	Preliminary Results	Rev +34% (£4.3m). Op loss £2.2m. 2025: revenue forecast £5m. Overheads to increase.
Huddled (LON:HUD) (£11m)	Full Year Results	Rev +490% (£14.2m) (boosted by M&A). Loss before tax £4.0m. The new year has started well and the company says that FY25 is now a year of transition from heavy cash investment to operational cash generation. Challenges are "operational and solvable, rather than customer demand led".	RED (Graham) [no section below] There are signs of underlying progress including impressive growth at Discount Dragon, which has doubled revenues to £10.8m. But cash has reduced to £1.6m (Dec 2024). Today's going concern statement says there is no "material uncertainty" indicated, but I don't trust this and the prior paragraph in the statement concedes that the company might need to access fresh debt or equity. Broker Zeus is forecasting a pre-tax loss of £1.4m in the current year. If there was a similar loss in cash flow terms, that would nearly wipe out the cash balance. To reflect what I perceive as a high risk of additional funding needs, I'm taking a RED stance.
Getech (LON:GTC) (£2.5m)	Full Year Results	Rev +16% (£4.7m). Reduced EBITDA loss £0.56m. Cash £0.9m. Current trading: rev +8%.	RED (Graham) [no section below] I’m RED on this to highlight that its subscale for a stock market listing. Today’s results do show progress, including a reduction in the cost base (£1m) and reduced losses, although the operating loss (£1.5m) remains significant relative to the size of the business and its revenues (£4.7m). No tangible balance sheet equity worth talking about. It may have some speculative potential but I don’t find the numbers appealing, and in any case its extremely small size would rule it out for me.

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Graham's Section

Facilities by ADF (LON:ADF)

Down 16% to 14.6p (£16m) - Final Results - Graham - AMBER/RED

Facilities by ADF, the leading provider of premium serviced production facilities to the UK film and high-end television industry ("HETV") announces its audited final results for the year ended 31 December 2024 ("FY24").

Shareholders here have had a torrid time in the last six months, suffering a major profit warning last November and then another one in March.

From the perspective of this report, I cut my stance down to neutral in November, and then took a moderately negative stance in March.

2024 results are in:

2024 results were boosted by an acquisition during the year of a company called Autotrak, which contributed revenues of £2.6m. Take them out and 2024 revenue was down vs. 2023.

There were “continued project delays across the film and HETV industry as it recovers from the USA Writers and Actors strikes”. ADF continues to suffer from this slowdown, even though the strikes officially ended in September 2023.

Net debt increases to £13.8m, being the difference between ADF’s hire purchase liabilities (£16.3m) and its cash balances (£2.4m). ADF paid an average interest rate of 6.8% on its new hire purchase contracts in 2024.

Dividend: 1.4p for the year, unchanged on the previous year. This should cost c. £1.5m.

Balance sheet: tangible net assets of £13m, down from £19m year-on-year.

Outlook: Q1 is in line and the CEO is positive on the long-term outlook.

Overall, however, the outlook sounds rather mixed. Visibility remains low:

The level of enquiries is increasing, although the timing of projects continues to be uncertain as the market has remained relatively subdued and production companies face frozen budgets, reduced production spend and rising costs.

Estimates

If I scroll back to pre-November 2024, ADF was expected to generate revenues of £67m, adj. EBITDA of £20m and adj. PBT of £12m in 2025.

Two profit warnings later that had been reduced to revenues of £42.6m, adj. EBITDA of £10m and adj. PBT of £2.1m.

Those estimates have been issued again today, unchanged.

Broker Cavendish also acknowledges that “it is too soon to assess” any impact that a 100% Trump tariff on non-US made films could have. But I doubt that it would be positive!

The Head of the Broadcasting, Entertainment, Communications and Theatre Union has said on Sky that this tariff could deal a “knock-out blow” to the UK’s film and TV industry. I'm not sure how it would be implemented, though - tariffs on non-physical services are far more complex than tariffs on physical goods.

Graham’s view

I view the company as both unlucky and enjoying very little visibility - a bad combination.

Unlucky: the company has been challenged by Covid and then by Hollywood strikes, and perhaps a Trump tariff will be the next problem. And if it’s not a Trump tariff, I fear that it will be something else.

Low visibility: the abruptness with which revenue and earnings estimates were cut for 2024 and 2025 was alarming. I note in particular that the 2024 revenue forecast was cut by 28% in November 2024.

The utilisation by customers of ADF’s fleet (as a percentage of the total fleet) is not provided by the company itself and was last estimated by Cavendish at 55%. I assume that utilisation remains around this level - in plain English, ADF simply has far too many vehicles, far more than it needs to meet industry demand these days. It expanded its fleet too much and now it can only hope that demand picks up again, but it is impossible to predict when this might happen.

Also, I’ve noticed a slight change in language today. Last year, the company said that it targeted £100m of revenues (a near trebling from their current level) “in the medium term”.

Today, that timeline has been pushed back to a more realistic “long term”.

I should remind readers that insiders not including the CEO, but including the founder, sold £10m of ADF stock last year at 50p. Unfortunately it now looks as if that was the smart money.

Stockopedia categorises it as a Value Trap:

Overall, I’m inclined to reduce my stance on this further again, right down to RED. There is some balance sheet support in terms of tangible assets but I’m struggling to find other reasons to invest here.

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Roland' Section

Filtronic (LON:FTC)

Up 5% to 101p (£220m) - Trading Update - Roland - AMBER/GREEN

Filtronic plc (AIM: FTC), the designer and manufacturer of products for the aerospace, defence, space and telecoms infrastructure markets, is pleased to announce the outlook for both FY2025 and FY2026 is expected to exceed current market expectations.

A short but positive update from this popular UK electronics stock today. Investment in additional manufacturing capacity over the last year seems to be bearing fruit, supporting higher levels of activity:

Investments in manufacturing capacity during the financial year are fully online allowing the Company to meet increasing customer demand. This will deliver stronger revenue and adjusted EBITDA in H2 of FY2025 and result in us beating current market expectations for the current year.

Outlook: Filtronic CEO Nat Edington is also optimistic about the year ahead:

The strengthened trading performance in FY2025 is expected to carry through to FY2026 as anticipated new programmes come through with new and existing customers.

Updated estimates: Filtronic has not included any specific financial guidance in today’s update. Fortunately we do have an updated note from house broker Cavendish – many thanks.

Cavendish has made a substantial change to its FY25 estimates – a big increase given that the current year ends in less than a month, on 31 May:

• FY25E revenue +9% to £55.0m (prev. £50.4m)

• FY25E EPS +18% to 5.9p (prev. 5.0p)

However, the broker is remaining more cautious about FY26, lifting revenue but leaving profit forecasts unchanged. It seems Cavendish expects to see much lower profit margins next year, due to increased spending on engineering capability:

• FY26E revenue +9% to £50.0m (prev. £46.0m)

• FY26E EPS unch at 3.2p

Roland’s view

Filtronic’s share price has paused its ascent since tariff Liberation Day at the start of April:

Cavendish believes tariffs are unlikely to have a significant impact and I suspect this is true.

My reading of the share price pause is that it reflects the expected fall in both revenue and earnings next year, and the lack of visibility these imply.

As I understand it, Filtronic’s current programme of work with Starlink has been boosted by a one-off retrofit programme to upgrade existing ground stations. Further growth with Starlink is at least partly dependent on new products achieving technical milestones in order to secure orders.

This situation is reflected in the consensus trend chart, which shows repeated upgrades to FY25 earnings but no change to FY26 expectations.

As far as I know, the company hasn’t provided any update on progress with these new products, although CEO Edington does mention “anticipated new programmes” in today’s update.

Dependence on new products always carries some risk. They may be delayed or fail to perform as hoped. However, if these products do gain acceptance from Starlink as intended, my understanding is that there’s scope for significant new wins with the group’s largest customer.

Of course, in addition to Starlink, there is potential for Filtronic to win new contracts with other customers.

Stockopedia’s algorithms continue to rate this stock as a High Flyer, despite the potential drop in earnings next year. This combination leaves the stock looking quite fully valued, in my view:

However, I do respect Filtronic’s recent momentum and its timely positioning to benefit from the explosive growth in the Low Earth Orbit satellite market.

I can see that it’s quite possible we will see earnings upgrades over the coming year that could help to reduce the current FY26 earnings deficit.

For these reasons, I’m going to leave my view unchanged at AMBER/GREEN today.

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Synthomer (LON:SYNT)

-3% to 90p (£148m) - Divestment of William Blythe - Roland - AMBER/RED

Synthomer plc ('Synthomer' or 'the Group') today announces an agreement to divest William Blythe limited, its inorganic chemistry business, to its management team alongside H2 Equity Partners, for consideration of £30m.

William Blythe was founded in 1845 and appears to be a niche chemicals business serving customers in sectors including life sciences, performance coatings and electronics.

However, this unit was identified as non-core by Synthomer in its October 2022 strategic review and its disposal is expected to help with deleveraging and simplification, according to Synthomer CEO Michael Willome:

… the business has limited synergies with the rest of the Group and its divestment will further reduce the complexity of our site portfolio and enhance our focus on higher value, higher growth specialty chemicals markets where we have strong and sustainable leadership positions.

Terms: William Blythe generated revenue of £54m and adjusted EBITDA of £4m in 2024. So today’s sale equates to a multiple of 7.5x EBITDA.

This seems a reasonable valuation at face value, although a quick check at Companies House suggests this business generated an after-tax profit of £4.2m in 2023, implying that EBITDA would have been significantly higher. I don’t know if last year’s decline was due to cyclical pressures or some other factor – presumably the buyers (management & PE) are confident they can return the business to growth.

Roland’s view

I decided to look at Synthomer this morning to see whether it could be shaping up into an interesting recovery story.

This business generated record profits during the pandemic when demand for latex gloves soared. But it’s suffered a terrible slump since then, reporting three years’ of losses and culminating in a rights issue to help repair its debt-laden balance sheet.

However, my general impression is that the cyclical slump in the chemicals sector may now be bottoming out, with demand stabilising (see our coverage of the recent update from Croda International).

I’m wondering if Synthomer’s fortunes could also start to improve. Despite recent problems, this business has a long-heritage in its core rubber market and benefits from a supportive controlling shareholder:

I’ve also noticed that Stockopedia’s algorithms have recently upgraded their view on Synthomer from the losing style of Value Trap (26 March 25) to the winning style of Contrarian:

Last week’s Q1 trading update reported an increase in EBITDA and margins vs Q1 2024, despite slightly lower volumes than last year due to favourable comparatives (customers were restocking last year).

Management reiterated expectations for “further earnings progress and positive free cash flow in 2025”, despite the potentially mixed impact of tariffs:

Our Health & Protection customers that are based in Malaysia are in a strong position to benefit relative to their China-based competitors as a result of the tariff changes. At the same time, geopolitical tensions have made end-market demand more unpredictable, particularly in the USA, which represents around 25% of our revenues.

Balance sheet/debt: scrolling back to look at the 2024 accounts, it’s clear that debt remains a significant risk here.

The 2024 results showed year-end net debt of £597m, equivalent to 4.6x EBITDA on a covenant basis. That’s far higher than the 2.0x-2.5x I’d normally see as a comfortable maximum.

Profit forecasts also remain minimal, relative to the c.£2bn annual revenue. Based on these consensus forecasts, progress on debt reduction could be slow without further material divestments:

However, the trend is improving and Synthomer does seem to be making some progress with its self-help measures.

The valuation could also be approaching a reasonable level, with the stock trading broadly in line with its tangible net asset value of c.£150m.

On balance, I think this business is approaching a point where momentum could turn positive. But from an equity perspective, I think the high level of leverage means risk remains above average.

Balancing risk and opportunity, I think it’s fair to take a moderately negative view. AMBER/RED.