Good morning! Hoping for another batch of "ahead" updates, but yesterday will be hard to beat...

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Today's Agenda is complete.

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Companies Reporting

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Graham's Section

Currys (LON:CURY)

Up 5% to 132p (£1.47bn) - Profit guidance above market expectations - Graham - GREEN =

It’s an excellent trading update from this retailer that has impressed us so much over the past year or so, covering the 10-week period to 10th January 2026 (referred to as “Peak”).

Key points:

• Like-for-like revenue growth accelerated to 6%

• UK +3% with progress across the board in recurring service revenue (+7%) credit adoption up to 25%, B2B sales +21% and new categories +42%.

• Nordics +12%, “a standout performance” (important because Nordics are 40% of the total group).

• Market share gains in both the UK and Nordics.

Outlook (bearing in mind that year-end is in April):

Group adjusted profit before tax is expected to be £180-190m, +11-17% YoY and ahead of consensus expectations

£50m share buyback programme underway, bringing total cash returned to shareholders to c.£75m for the year.

Expect year end net cash to finish above £100m target

The £50m buyback is not news - it has been going on for a while.

The big news is of course the “ahead of consensus” PBT. The company helpfully points out that the consensus forecast is £180m, and that is now the lower bound of official guidance.

Clear and detailed guidance is provided on a range of important inputs such as interest and capex, but these are largely unchanged.

CEO comment snippets:

"Our Omnichannel model is winning. We gained market share in both UK&I and Nordics, in both stores and online, and our fastest growth was where customers use both channels together. This is a competitive advantage we'll keep building....

In the UK&I, we grew sales in our core business and the growth areas we've targeted. Our sales to small and medium-sized businesses grew by +21%, iD mobile reached 2.5 million customers, and credit adoption of 25% was double that of five years ago. These are all sources of higher-margin and recurring revenue. We maintained healthy underlying gross margins which, alongside cost savings, are offsetting unhelpful cost headwinds."

Longer-term guidance: there is an unchanged target EBIT margin (3%), capex is to remain below £100m annually, and exceptional cash costs should be kept below £10m for the upcoming financial year FY April 2027. All of this sounds fine.

Pension contributions will be £13m per annum for five years, starting next year.

Balance sheet net cash is to remain over £100m: this is excellent. I wish more retailers were as careful as this!

Grahams’ view

Over the years, we’ve seen so many mishaps in the retailing sector, that I am sometimes tempted to avoid it completely. But there are exceptions.

Over the last year, we’ve been very positive on Currys (LON:CURY). Originally, around the time that higher NICs were announced, I was impressed by management’s transparency.

Since then, they’ve continued to report with what I perceive to be a very high degree of clarity and transparency, which definitely helps to inspire confidence in their strategy.

Additionally, they’ve run a cash-rich balance sheet, which I see as a form of insurance policy against macro conditions (and well worth it).

My positivity is aligned with what the StockRanks are saying:

The shares continue to trade on a PER of around 10x and I don’t have any major objection to the company buying back its own shares at this level - perhaps they aren’t buying at an enormous discount to fair value, but I’d still argue that it’s a reasonable use of surplus cash.

Overall, then, no reason to change my positive stance after an “ahead” update. And we have yet another good reason to think that the UK consumer is not so weak after all!

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Burberry (LON:BRBY)

Up 5% to £12.84 (£4.6 billion) - Third Quarter Trading Update - Graham - AMBER =

At the time of publication, Graham has a long position in Burberry.

I’ve been holding this through thick and thin, and it hasn’t been pleasant:

Fortunately there are some green shoots of recovery with this trading update. Importantly, the operating profit outlook is in line with consensus expectations.

Key points:

• Retail revenue +3% at constant exchange rates, +1% at actual exchange rates.

• Comparable stores sales +3% (compared to -4% last year)

• Best performance in Greater China (6%) and Asia Pacific (+5%)

• EMEIA region flat (Europe, Middle East, India and Africa!)

• Americas +2%

For a company that has been on the back foot for some time, this is not a bad showing during the important Q3 period.

Also, the “quality of revenue” is said to have improved, with a “shorter, shallower and more discreet markdown period”.

The CEO comment strikes a triumphant tone:

During the festive quarter, we continued to build momentum with our Burberry Forward strategy, delivering sequential improvement in comparable sales growth and an improved quality of revenue across channels and geographies. Our customers responded to our immersive Timeless British Luxury campaigns and experiences while the continued strength in our core outerwear category is now extending into accessories and ready-to-wear. As we move into 170 years of Burberry, these results reaffirm the enduring strength of our iconic brand and give us confidence in the path ahead.

FY26 outlook:

As we move into the final quarter of the year, the impact of our initiatives continues to build, giving us increased confidence in the direction of the business. We expect adjusted operating profit to be in line with consensus for FY26*. We are confident that we can build on the progress we’ve made in quality of earnings, continuing to improve performance and driving sustainable long-term value.

Estimates: for a stock in the FTSE-100 (although it was temporarily dumped from this index last year), you expect decent information from the company itself re: estimates. Burberry provides:

Graham’s view

Unfortunately, the adjusted EPS figure for FY March 2026 doesn’t give rise to a sensible P/E ratio (the latest stock price is £12.84, vs. adjusted earnings per share of only 20p!).

As I noted in November, the stock is already pricing in a recovery of profits to more than double the current level. As I said then, we would realistically need clean after-tax profits over £200m+ to justify the current market.

Forecasts in the market do suggest that profitability is about to bounce back next year, with earnings per share of nearly 40p pencilled in for FY March 2027 (the financial year starting in less than two months).

From that perspective, the P/E multiple is a much more sensible 32x.

Even though I’m a holder of this stock, I’m inclined to leave our neutral stance unchanged here. Today's update is merely "in line", after all. And we will still need further progress in FY28 to justify the current market cap. There is plenty that could go wrong between now and then (if I’m not careful, I’m going to talk myself into selling out!).

So while I still count myself as an admirer of this business, I think caution remains justified.

The StockRanks agree, seeing little value to back it up at this level:

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J D Wetherspoon (LON:JDW)

Down 6% to 691.2p (£763m) - Trading Update Announcement - Graham - AMBER/RED ↓

This one is always a bit of a guessing game, as we decipher the words of Sir Tim Martin. He tends to speak very plainly when it comes to his view of the government, but his company outlook statements can be rather cloudy.

Here are the key points from today’s update, for the 25 weeks to 18th January (roughly speaking, H1):

• LfL sales +4.7%, which is better than we saw in Q1 (3.7%), as Q2 saw LfL sales up 6.1%.

• Bar sales +6.9%, food +1.3%, slot/fruit machines +9.1%.

• Total sales are only a little higher than LfL sales at 5.3%, as the estate is barely growing.

All of this is fine, but the big issue is costs, not sales.

Let’s hand it over to the Chairman:

"We are pleased with the sales growth in the financial year, and with the increased momentum in the second quarter.

"Costs have been higher than anticipated, with energy, wages, repairs and business rates, for example, increasing by £45 million in the first 25 weeks.

"Profits in the first half are likely to be lower than the comparable period in the previous financial year.

"If the current sales momentum continues, the company currently anticipates a full year trading outcome slightly below that achieved in FY25.

"We will provide updates as we progress through the financial year."

Graham’s view

Funnily enough, I don’t think the profit outlook published today is all that bad, compared to current estimates.

Last year, adjusted PBT was £81.4m, and adjusted operating profit was £146.4m.

I think that current forecasts already suggest that FY26 results will be similar to, or slightly below, these numbers.

But perhaps what has really spooked the market is the disclosure of £45m of additional costs across the four categories mentioned (energy, wages, repairs and rates).

It’s a reminder of just how operationally leveraged this business is. On sales of £2.2 billion+, earning a net profit margin of about 3%, these hikes in expenses could have a disproportionate impact on profits at some point.

That’s what I’ve been worried about, although I don’t see today’s update as a vindication of my stance.

But I am going to reduce us down to AMBER/RED, seeing as it comes on the back of another cautious trading update in November (which we categorised as “BLACK” that day). It appears that this stock remains vulnerable to more bad news.

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Roland's Section

Volex (LON:VLX)

Up 6.5% at 435p (£822m) - Trading Update - Roland - AMBER/GREEN

Booming demand for AI Data Centres has allowed cabling manufacturer Volex to upgrade its full-year guidance today.

The company says that revenue and underlying operating profit for the full year are now expected to exceed previous consensus forecasts of $1,152.3m and $112.7m respectively.

By the numbers:

Strong trading reported in H1 continued into the company’s third quarter, which saw revenue rise by 14.8% on a constant currency basis. CEO Nat Rothschild says the company’s Data Centre business saw “elevated demand”, reflecting global investment in AI and digital infrastructure.

Growth from other industrial customers was said to be robust, with flatter performances in other markets such as Electric Vehicles, Medical and Consumer Electricals.

Operating margins are said to have remained strong, “around the upper end of the group’s 9-10% target range”. This result has been supported by price rises, cost control and efficiency gains.

Net debt is also said to have fallen, with covenant leverage now around 1.0x. This appears to address a concern I flagged in November.

Improved Outlook for FY26

With the year end approaching in March, Volex now has sufficient visibility to upgrade guidance:

With good momentum into the final quarter, we now expect to exceed current market expectations, thereby giving increased confidence in achieving our five-year plan targets.

Volex helpfully provides details of FY26 consensus forecasts in today’s update:

• Revenue: $1,145.1m to $1,167.4m (average: $1,152.3m);

• Underlying operating profit: $111.7m to $114.9m (average: $112.7m).

We already know that brokers upgraded forecasts following November’s half-year results:

Today’s upgrade should extend this positive trend. While I don’t have access to any updated broker forecasts this morning, the c.7% share price rise this morning suggests to me that we could see full-year results perhaps 5% above previous estimates.

Based on Stockopedia’s FY26 consensus earnings of 37.5 cents per share, I’d estimate updated forecasts could be 39-40 cents per share, equivalent to a FY26E P/E of 15.

Roland’s view

I highlighted Volex as a UK-listed beneficiary of the AI data centre boom in our Stockopedia Panel discussion at November’s Mello. The company reported an 80% rise in Data Centre-related sales during H1, driving 48% revenue growth in its Complex Industrial Technology division.

Q3 sales growth appears to be a little more measured than this, but was still strong. My impression from today’s update is that Data Centres were the only substantial area of growth during the quarter.

I continue to see both risk and opportunity here. While demand for Data Centre products remains strong, Volex seems well positioned to benefit.

However, weaker sales performances elsewhere highlight the risk of a slowdown at some point.

In November, I concluded that the valuation and outlook were both broadly positive. That view is unchanged today, so I’m going to remain at AMBER/GREEN.

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Premier Foods (LON:PFD)

Up 6% at 179p (£1.57bn) - Q3 Trading Update - Roland - AMBER/GREEN =

The maker of brands such as Mr Kipling and Bisto is the top riser on the Main Market this morning after a strong Christmas trading update. Full year trading profit is now expected to be at the upper end of expectations.

By the numbers:

• Q3 branded revenue up 5.2%, total revenue up 4.1%

• Grocery Branded revenue up 5.8%, Sweet Treats Branded revenue up 3.1%

• Market share gains in Grocery and Sweet Treats

• Revenue from new categories up by 29%

• International revenue up 10%

• Recent acquisitions delivered double-digit sales growth

Why it matters:

As we’ve discussed recently, Tesco reported sales growth of 3.8% over the comparable period, while Sainsbury’s managed 4.9%.

This means that Premier Foods’ performance appears to have broadly matched that of its supermarket customers.

In the Grocery category, which includes Christmas staples such as Paxo, Bisto and Ambrosia, it looks like Premier Foods’ sales may have been ahead of the biggest supermarkets.

Double-digit sales growth from recent acquisitions such as FUEL10K and Merchant Gourmet is also encouraging. In addition to providing evidence of the company’s successful approach to buy-and-build, these brands (which sell various high protein/fibre products) are also seen as having good potential in the weight-loss drug era, as consumers seek out healthier products.

While International revenue remains below 10% of the group total (as of H1 26), my feeling is that this could be a promising route for growth beyond the natural limit the company’s UK-centric brands are likely to face in their home market.

Outlook & Broker Estimates

Outlook guidance for the year to March 2026 is upbeat:

Trading profit for the FY25/26 financial year is now expected to be at the upper end of market expectations.

Premier Foods helpfully cites previous market expectations for trading profit (adjusted operating profit) as being £193.0m to £198.2m, with an average of £195.3m.

This is already a fairly narrow range. This suggests to me that any upgrade to broker estimates will be fairly modest.

Indeed, house broker Shore Capital has left its FY26 forecasts unchanged today, commenting that its estimate for a trading profit of c.£197m is already “broadly within that guided zone”.

On this basis (and given its status as the house broker), it seems logical for me to use Shore’s earnings forecasts as a guide to updated expectations:

• FY26E adj EPS: 15.0p

• FY27E adj EPS: 15.5p

These numbers are already similar to the consensus numbers on the StockReport and leave Premier Foods trading on a FY26E P/E of 12 after this morning’s gains.

Roland’s view

After a strong four-year run, Premier stock has cooled recently:

Despite this, earnings estimates were already moving higher before today’s update:

Assuming limited increase to EPS estimates, today’s share price gain means investors have re-rated the stock modestly higher. The P/E of 12 implied by Shore Capital’s latest forecasts compares to a P/E of 11 prior to today:

A QualityRank of 87 is encouraging, supported by mid-teens operating margins. But Premier Foods’ return on capital employed of <10% is a reminder that this is a relatively capital-intensive manufacturing business:

I would imagine that pricing will always be under pressure from the group’s much larger supermarket customers, too.

For these reasons, I wouldn’t want to pay a high multiple of earnings for this business. Looked at differently, the stock’s price/book ratio of 1.05 looks about right to me for a business generating a sub-10% return on equity.

This caveat aside, I am encouraged by progress and have a positive view of management. On balance, I’m going to leave our AMBER/GREEN view unchanged today.