Daily Stock Market Report (Wed 23 July 2025) - PGH, CMCL, BREE, JDW, INF

Good morning! Let's see if we get another day without any major profit warnings.

Today's Agenda is complete. Breedon are at the lower end of expectations but apart from that, there are a lot of "in line" updates, and even a few upgrades! So it's another day of mostly good news, I think.

Today's report is now complete.

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Companies Reporting

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Roland's section

Breedon (LON:BREE)

Down 10% to 350p (£1.2bn) - Interim Results - Roland - BLACK (AMBER/RED)

Breedon Group plc (Breedon or the Group), a leading vertically-integrated construction materials group in Great Britain, Ireland and the United States, announces unaudited results for the six months ended 30 June 2025.

Today’s half-year results include a warning that profits for the full year are likely to be at the lower end of expectations. The market appears to have interpreted this as a profit warning, with the stock down by nearly 10% at the time of writing.

Breedon is primarily an aggregates specialist and this can be an attractive business model for companies with decent scale; quarries tend to have high local market share as it’s not economic to transport such materials over long distances. My general long-term impression of Breedon is positive, but today’s headline numbers don’t look very encouraging to me and flag up several potential areas of concern

H1 2025 results summary: like-for-like revenue fell during the first half and while the contribution from a recent acquisition lifted overall sales, this wasn’t enough to prevent a sharp fall in profits:

• Revenue up 7% to £815.9m (-3% LFL)

• Adjusted pre-tax profit down 20% to £48.9m

• Adjusted EPS -19% to 11.2p

• Net debt up 37% to £648m

• Adjusted Return on Invested Capital: 7.8% (H1 24: 8.8%)

The contrast between total revenue and like-for-like revenue is explained by the acquisition of US firm Lionmark for $238m in March. Lionmark reported $246m of revenue in the 12 months to 30 November 2024, so I’d estimate its contribution since the acquisition completed in March might be c.£62m. This squares up roughly with a 3% decline in underlying group revenue, so seems a reasonable assumption.

Figures provided with the acquisition suggested that Lionmark would be slightly margin-dilutive, with a FY24 EBITDA margin of 12.6% versus 15.6% for Breedon. Unfortunately the decline in the group’s UK business in H1 has exacerbated this impact, with lower volumes leading to negative operating leverage.

UK: The company seems to have faced a number of challenges during the first half. In the core UK market, which generates nearly 60% of revenue, conditions were described as “challenging”. Decisions on new projects were slow and lower levels of housebuilding were also a headwind.

UK EBITDA fell by 8%, reflecting a 2% drop in revenue and the impact of negative operating leverage.

Ireland: revenue fell by 7%, although creditably underlying EBITDA was unchanged at £17.5m.

US: revenue rose by 8% on a like-for-like basis, or by 140% to £127.2m including Lionmark. However, this higher revenue did not drop through to profits, with total underlying EBITDA up by just 27% to £13m. The US EBITDA margin fell from 19.2% in H1 24 to just 10.2% in H1 25.

This big fall in profitability seems to be due to a mix of weather disruption and seasonality, perhaps with some margin dilution from Lionmark. We’ll have to see how the full-year numbers pan out.

Debt: the increase in net debt looks concerning to me on both an absolute and leverage basis. The net debt/EBITDA of 2.2x is now above the company’s previously-stated target range of 1-2x. Management says leverage is expected to fall in H2 due to the seasonality of this business, which is fair. But if trading conditions remain weak, then there's a risk that deleveraging could be slower than expected, while finance costs will remain elevated.

Outlook & Estimates

Breedon has stopped short of cutting its guidance for the year today. But management has come close, guiding expectations downwards:

Given the difficult first half and the macroeconomic headwinds we now expect our result for the full year will be at the low end of the current range of market expectations

Broker consensus range for FY25 EBITDA is given today as £291.4-£311.5m, with an average of £302.8m.

I would guess we can expect a figure below £300m. The comparative figure from last year was £270m, so this would still represent modest growth.

I don’t have access to any updated broker notes today, but today’s 10% share price drop suggests to me that the market is pricing in a modest reduction to forecasts.

Roland’s view

Megan flagged up the risks of Breedon’s debt-funded expansion in March, when market sentiment towards construction stocks was notably more positive. She took a neutral view at the time, even though Breedon’s 2024 results were slightly ahead of expectations. This turns out to have been a prudent move.

Today’s fall has left the company with a market cap of £1.2bn, only slightly above today’s reported net asset value of £1,15bn.

The long-run average return on capital employed from this business seems to be around 8%, so I would argue that a share price somewhere around NAV is fair and potentially attractive.

However, I am inclined to view today’s update as a modest profit warning, so I’d be cautious about getting involved just yet. We often find that a period of weaker performance follows an initial profit warning.

I note that the consensus trend has been drifting lower since March:

Given the combination of weaker trading and elevated leverage, I think the risk of further problems is higher than it might otherwise be.

I’m going to downgrade our view to AMBER/RED today to reflect these reservations, although on a longer-term view I think Breedon’s asset base is likely to remain attractive.

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Informa (LON:INF)

Up 5% to 870p (£11.3bn) - Interim Results - Roland - AMBER

This FTSE 100 trade show, data and publishing group enjoyed a strong first half and has upgraded its guidance for full-year underlying revenue growth slightly today, which I read as organic growth. The main areas of growth seem to have been the Live B2B Events business (undlerying revenue +8.5%) and Taylor & Francis academic publishing (und. Revenue +11.5%).

However, it’s worth noting that performance enjoyed a significant boost from acquisitions in H1, with non-underlying growth seemingly contributing 12% of the 20% growth in total revenue.

As a result, overall revenue and earnings growth expectations for the year seem broadly unchanged at $4bn and c.10% respectively today, despite the upgrade to underlying revenue growth guidance.

Informa’s adjusted operating margin of 28.4% certainly looks impressive and suggests a high-quality portfolio of businesses. I don’t know this company in detail and this may indeed be the case. But the StockReport shows a statutory ROE and ROCE of c.5%, almost certainly below the group’s cost of capital:

This combination of high margins and low returns suggests to me that Informa may have paid a high price for some of its (many) past acquisitions.

This view is reinforced by today’s £484m goodwill impairment charge, which relates to the Techtarget (NSQ:TTGT) business.

Informa has a 57% stake in the NASDAQ-listed JV, which was formed in 2024 through a combination between TechTarget and the Informa Tech business. Informa contributed $350m in cash and its existing Tech division and the combined business had a market cap of $1.4bn at the start of this year.

Today, TechTarget’s market cap is around $530m (£390m), around 60% lower than at the start of the year:

The company says today’s impairment charge is due to a subdued market backdrop among its enterprise technology customers, who are apparently preferring to spend money on AI development:

An impairment indicator was identified due to the market capitalisation of Informa TechTarget falling below its net assets and a 4.3% decline in underlying revenues being reported for H1 2025. This performance reflects a subdued market backdrop, with enterprise technology customers continuing to prioritise AI-related research and development over investment in product marketing and sales support.

The upshot of today's £484m impairment this is that $350m in cash paid last year and some of the value of Informa’s original Tech division has now been written off. This merger – much-hyped by management – does not seem like a very good example of shareholder value creation to me.

Outlook

Assuming that consensus earnings remain broadly unchanged after today’s results, Informa shares are currently trading on c.16x 2025 forecast earnings, with a dividend yield of 2.7%.

Roland’s view

This is not a company I’ve followed in any detail, in part because I’ve always been discouraged by the low quality metrics and low dividend yield. In combination, these don’t suggest an attractive combination of value and quality to me.

I’m also discouraged by the high levels of acquisitions and resulting high levels of debt. Net debt excluding leases was £2.7bn at the end of June, which the company says is equivalent to leverage of 2.5x EBITDA. This is somewhat above my comfort zone for a cyclical business like this.

In fairness, underlying cash generation seems quite strong and Informa does seem to have good market share in some sectors. Performance may be stronger when cyclical conditions improve and if management scales back acquisition spending.

However, on initial inspection, I don’t see any compelling reasons for me to consider getting involved at the moment. I’m going to initiate our coverage by taking a neutral view today.