Daily Stock Market Report (Wed 6th August 2025) - LGEN, PAY, VID, TCAP, CTA, THG, SWC, WATR

Good morning!

All done for today, thank you.

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Spreadsheet accompanying this report: link (last updated: 10th July) (work-in progress).

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Companies Reporting

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Graham's Section

PayPoint (LON:PAY)

Up 2% to 755p (£527m) - Trading Update - Graham - AMBER/GREEN

Roland has been AMBER/GREEN on this one in recent months. I tend to be very positive on it, as I’ve been a fan of this company for many years, so let’s see if today’s update might allow an upgrade.

The opening salvo from CEO Nick Wiles:

“As we indicated at our full year results in June 2025, the Group has had an encouraging start to the current financial year. We remain confident in our operational plans, continued progress towards the delivery of our £100m EBITDA target in the current year and our longer-term growth targets for the next three years to the end of FY28.

He outlines various growth initiatives in Parcels, Open Banking and Digital Payments, in Local Banking, and in Community Services for Retailers. This is truly a multi-pronged business and while it has always been a fair criticism that parts of the business are ex-growth or even shrinking, at the same time, there have always been parts of it that are more inspiring.

On the economy:

In the meantime, against the background of a generally weak economy, there continues to be consumer uncertainty and cautious behaviour in a number of our markets, which we are actively monitoring and seeking to mitigate, with tight cost discipline and a focus on the strong execution of our growth plans.

While there is some exposure to the consumer, I would view PayPoint’s positioning as quite defensive overall. Its main customers are convenience stores, after all - not a place where the consumer is making too many extravagant or unnecessary purchases.

And then some financial figures at last: Q1 net revenue is up 7.5%

Shopping Division: net revenue +0.6%. Nothing too dramatic except for much higher Business Finance, with £7.4m lent to merchants in Q1, +63% year-on-year.

E-commerce Division: net revenue +20.8%. Strong growth in parcels through Collect+.

Payments & Banking Division: net revenue +4.9%. Two high street banks on track for launch of consumer deposits in H1 FY26. SME deposits in development for launch in H2.

Love2shop division: net revenue +21.7%. Expansion through Sainsbury’s convenience stores. PayPoint has been an excellent owner of this business so far. Even Park Christmas Savings is still growing, average saver value up 3.5%.

Net debt is £109.6m (March 2025: £97.4m). The final dividend is increased slightly and the £30m buyback is ongoing. The company wants dividend cover to improve to 2x and a leverage multiple of 1.2-1.5x.

Estimates are unchanged at Panmure Liberum. Adjusted EPS is forecast at 75.7p this year (FY March 2026), rising to 90p the following year.

Graham’s view

Roland looked at the company’s full-year results in June and noted that the profit figure wasn’t very clean. I tend to agree that the amount of adjustments was disappointing.

I’ll be anxious to see an improvement on that front this year.

I do think that the company’s planned dividend cover (2x) and leverage multiple (1.2-1.5x) are fairly reasonable, although personally I’d prefer to see leverage of 1x or less, giving themselves more flexibility for acquisitions (seeing as Love2Shop was so successful). But the leverage multiple they are targeting is fine, in my view.

Of course it will make some people nervous to see PayPoint buying back their own shares while they have over £100m of net debt, and for good reason - the company can’t be accused of running an “inefficient” balance sheet, that’s for sure!

PayPoint is on my 2025 watchlist and I do think it’s worthy of further research at this valuation:

In StockRank terms it's a High Flyer - it’s interesting that the StockRanks give it high quality and high momentum, but don’t see it offering much value!

Given the unclean profit figures and the slightly aggressive debt position, I’m comfortable leaving this on AMBER/GREEN for now, although my instinct, as usual, is to have this on GREEN!

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Roland's Section

TP Icap (LON:TCAP)

Down 9% to 278p (£2.1bn) - Half-Year Report - Roland - GREEN

(At the time of publication, Roland has a long position in TCAP.)

This interdealer broker group is a member of both Ed’s current NAPS portfolio and my current SIF folio. The shares are also highly rated by the Stocko algorithms, with Super Stock styling and a high StockRank:

Today’s results flag up record growth, but have received a cool reception from the market.

The headline figures show that TP ICAP benefited from volatile markets during Q2 and do not seem to suggest any obvious cause for disappointment:

• Revenue up 9% to £1,224m (at constant currency)

• Adjusted pre-tax profit up 4% to £167m

• Reported pre-tax profit up 3% to £123m

• Adjusted EPS up 9% to 17.6p

• Interim dividend up 8% to 5.2p

• Further £50m share buyback

• Net cash: £867m (Dec ‘24: £1,066m)

While the performance of this business is always dependent on market conditions, adjusted earnings of 17.6p seem comfortably in line with the 32.1p consensus figure for the full year.

So why are TP ICAP shares falling today? I think there are a couple of possible reasons.

Profit miss? According to Reuters, TP ICAP’s adjusted EBIT of £184m fell below at least one analyst’s forecast for a figure of £189m. We don’t have access to detailed half-year forecasts, but a c.2% miss on H1 figures doesn’t seem that significant to me.

Parameta spinout: perhaps a more tangible disappointment is that the company is continuing to push back the planned US IPO of its OTC (Over-The-Counter) data unit, Parameta Solutions. This had originally been expected in Q2, but this plan was postponed in May due to “market volatility”.

Today’s update is non-committal:

The Board continues to keep under review the appropriate timing for any potential minority listing in the US. As previously reported, in the event of a minority listing, we would expect to return most of the proceeds to TP ICAP shareholders.

It’s easy to blame market conditions for the delay, but I wonder if one problem might be that Parameta’s growth has slowed. This could potentially make it harder to achieve the >£1bn valuation estimate suggested by some analysts.

According to management, Parameta has an estimated 70% share of the OTC interdealer broker data market. It’s a high margin business with 98% of revenue subscription-based, but top-line growth has become sluggish and profits actually fell in H1 – not ideal ahead of an IPO:

The company says Parameta is seeing longer sales cycles at the moment and is investing in talent and product innovation. Price increases planned for this year are said to have been “moderated to support sustainable growth”.

I am not familiar with the market for OTC data, but I wonder if competition is growing or if Parameta’s market share might be reaching a natural limit.

Divisional summary

Moving on, most of the company’s core broking and trading venue operations seem to have performed well in H1, as I’d expect given the increased level of market volatility:

Global broking: revenue rose by 12% to £712m, lifting adjusted EBIT by 19% to £131m (18.4% margin). Revenue per broker rose by 11% and the company reported double-digit growth in Rates, Equities and Credit.

Energy & Commodities: revenue fell by 2% to £238m with adjusted EBIT down 18% to £27m (11.3% margin). This decline is relative to a record performance in H1 2024, but still seems a little disappointing given the volatility in markets such as oil and gas this year.

Management reports a “highly competitive broker market” and says the business is “investing in broker talent”. Overall, this seems a little disappointing to me, perhaps suggesting TP ICAP’s position in the energy and commodity sectors isn’t as strong as in its core global broking markets.

Liquidnet: this is a trading venue for institutional investors, dealing in equities and some other asset classes. Revenue rose by 15% to £195m supporting a 38% increase in adjusted EBIT to £33m (16.9% margin).

Outlook

The company’s outlook statement highlights the link between market conditions and operating profit. This is a business that benefits from volatility:

Our outlook is largely subject to macroeconomic events which impact market conditions, and therefore levels of trading in the OTC market. Ongoing geopolitical tensions, including uncertainty surrounding global trade policies, inflation, as well as future interest rate movements, should continue to drive volatility that will broadly support our business in the second half for 2025.

Another factor that could affect the year-end result is the group’s USD exposure – 60% of revenue and 40% of costs. However, subject to FX movements, “the board remains comfortable with current 2025 market expectations for adjusted EBIT”

According to the consensus forecasts provided on TP ICAP’s website, 2025 adjusted EBIT is expected to be within a range of £340-354m, with a consensus of £347m.

This suggests adjusted EBIT of perhaps £163m in H2, lower than the £184m reported today. So forecasts already seem to be pricing in a weaker H2.

Assuming consensus EPS estimates are unchanged, this leaves TP ICAP trading on a FY25E P/E of 9 after this morning’s drop, with a 6% dividend yield.

Note: Legal liabilities

In the comments today, some subscribers have flagged up the laundry list of ongoing legal cases where various TP ICAP subsidiaries are defending themselves against various allegations.

These are buried in the accounting footnotes, but may be worth reading for shareholders or interested investors. Many of these cases seem to have been rumbling on for years, in some cases relating to events that took place nearly 20 years ago. Some are covered by indemnities.

In many cases the management commentary concludes with a statement that the level of uncertainty involved means that it is not yet possible to estimate the potential financial impact.

Naturally, I don’t have any insight into these issues. As far as I can see, there is some risk the company could end up with some costly settlements, but I’ve no idea how likely this is, or when it might happen.

One point I would make is that these issues aren’t new. As far as I can see, the list is very similar to that included in last year’s full-year results, with the exception of one regulatory issue that’s been closed with no action taken against the group.

This could come back to haunt me – but at the risk of sounding naive, I am not too concerned about these liabilities. Personally, I don’t see them as a deciding factor in this investment.

Roland’s view

TP ICAP has been a strong performer this year:

I’m encouraged by today’s results, although one point I would make is that profit adjustments are quite extensive in TP ICAP’s accounts.

While the group’s adjusted operating margin of 15% seems quite healthy, the reported operating margin for H1 was just 11.4%, implying a trailing 12-month return on equity of 12.5% – not that exciting.

The market reaction to today’s results may also be worth a pause for thought – will City analysts tweak their estimates down? I’ll be watching consensus estimates in the coming days to see if they change.

Niggles aside, I think that TP ICAP’s core business remains market leading and potentially attractive as an investment, with natural hedging qualities against market volatility.

The group’s cash-rich balance sheet is also an attraction for me, especially as guidance today suggests the business could generate “in excess of £200m in surplus cash” across the next two years. As I understand it, this could be available for further buybacks (in addition to the dividend).

I’m going to stick my neck out and maintain Graham’s previous GREEN view today, as I think there is still plenty of value here, with the potential catalyst of a Parameta IPO at some point.