Daily Stock Market Report (Mon 17 Mar 2025) - QQ, SAG/RCDO, BKS, MWE, SRC, BAKK/GNC, HEIT/FSG

17th Mar by Graham Neary

60 comments 7003 reads

Good morning and welcome back!

Megan published The Week Ahead, the preview for this week's set of announcements, on Friday. Here's the link.

Today's Agenda is complete (we think!).

12.55pm: all done for today's report, thanks!

Companies Reporting

Name (Mkt Cap)	RNS	Summary	Our view (Author)
Phoenix group (LON:PHNX) (£5.3bn)	Full Year Results	Op cash generation +22% to £1.4bn, in line with targets. CSM +14% to £3.3bn. Div +2.5% to 54p.
Qinetiq (LON:QQ.) (£2.9bn)	TU	Delays in UK/US contract awards. FY25 rev exp +2% at 10% margin, vs 11% prev. FY26 downgraded.	BLACK (PW) / RED (Roland) I fear today’s profit warning could be the start of a more difficult period for this UK defence group. Comments on difficulties in the US do not seem encouraging to me and I am puzzled by management’s decision to increase cash allocated to buybacks against this backdrop. May’s FY results will hopefully provide further detail and clarity on trading conditions and outlook.
Sigmaroc (LON:SRC) (£1.1bn)	Full Year Results	Adj EPS +2.8% to 8.35p, “*modestly ahead* of consensus”. Outlook: 2025 “started positively”. Underlying EBITDA £224.6m (consensus: £221m). Underlying EPS 8.35p (consensus: 7.6p). Net debt is over £500m after a major limestone acquisition that also saw a large increase in the share count.	AMBER (Graham) [no section below] Roland already covered the corresponding full-year trading update from Sigmaroc in February. The “proforma” results are the only ones I think are worth focusing on, to understand the organic performance of the ongoing businesses. These figures show very modest growth on an underlying basis (revenues -2%. EBITDA +2%). Adjustments are enormous: £42m in 2023 and nearly £70m in 2024. Many of the adjustments relate to M&A activity which may be reasonable, but the result is that statutory profits are modest given the £1bn+ market cap. I’ll maintain our neutral stance.
Bakkavor (LON:BAKK) (£1.0bn) (14 Mar pm)	Possible offer	SP +17% on Friday Greencore (LON:GNC) made two offers for Bakkavor that were both rejected. Second offer: 85p in cash plus 0.523 Greencore shares plus final dividend, total value 189p, 25% premium. Bakkavor shareholders would own 40% of the combined group.	PINK (Graham) [no section below] A 25% premium can sometimes be enough but in reality it might be the bare minimum to get the attention of a company board. And that's when we're talking about all-cash offers. Where it's a mix of…

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Rusty2

17th Mar

You can just order online, then pick up from the shop, that is what l do, then no wasted journeys. I don't buy M&S jeans though.

I have a lot of M&S clothes because last so long, some are 30 years old, l still wear. Many other brands the collars, get worn after a few years and then the cuffs. I don't know about the newer stuff yet, but will probably outlast me.

topvest

Pershing Square Holdings (LON:PSH) - in Berkshire Hathaway style the annual report is released over the weekend, signed Friday. I still like Bill Ackman and his approach. Very large discount. He now wants to build Howard Hughes into a Berkshire Hathaway vehicle, acquiring controllin stakes in private businesses, but again the deal is not guaranteed. He's had a few aborted deals over recent years.

CautiousValue

It's not quite as user friendly but Interactive Brokers are cheap for trading, allow multi-currency cash, and cheap for FX anyway.

Brookeda

Beeks Financial Cloud (LON:BKS) was an highly valued company and so expectations were high. I have been in it since sub 100 and top sliced about 40% of my holding at 300 at the expectation that results would dissapoint (as they so often have.) MIght start re-adding a bit more once the bottom as been found as they still we get taken out later at a significant premium, well least I hope :-)

shopping365

I visited a large M&S last week looking for some women’s trousers and encountered the same problem as reported with the men’s. I would have had a great choice if I was a size 8 or 20 or 22, but as I am a size 10 or 12 my choice was very limited.

Berksbee

They are excellent in range, size and and quality and can be ordered on line. Also my youngest son is now a firm M&S fan.

TEIN

Very good point Rusty, so we now have retail headwinds of:

National insurance
Minimum wage
Business rates
Packaging regs
'Equal' pay

In food retail these challenges are coming up against price competition meaning margin pressure.

There's some inflationary/ potential stagflationary pressure. On the flip side interest rates are coming down.

We do have some very good retailers though!

Interest rates not coming down much, the longer term ones have gone up recently, you can get 4.5% on fixed rate 5 year quite easily.
lf the war in Ukraine does end, gas prices should come down, which will help some food suppliers and retailers.

ACounsell

Well adopting the ‘sell on a profit warning’ I exited at a profit c. 35% over original cost - purchased 3 years ago. Guess not a total disaster but you can bet that despite the profit warning and the recommendations of Ken Mitchell (sorry Ken!) to sell on the first sign of bad news the share price will recover from the c. £4.14 I sold at. In fact it is already up 6p from my exit price!

Ken,

Can definitely agree with you on this. Hold all the shares you mention (except. Aberdeen (LON:ABDN) for the rock solid dividend yields. Capital growth may be limited but for income they are difficult to beat. However obviously not exciting enough for investors (traders!) who want to catch that multibagger.

Mark Parsons

Yep, and who'll foot the increased cost bill? Of course, the public through increases in prices......

Monty Carlo

Yes - Interactive Brokers are interesting.

However, no direct SIPP at present, and their monthly inactivity fee of £3 on an ISA means they are not that much cheaper than AJ Bell for buy & hold.

ken mitchell

Assuming you’re posting about Qinetiq (LON:QQ.) I would have sold on the first signs of bad news ahead in January. It’s one of the few examples where my tactic didn’t work as QQ. joined in the big rally for defence shares and soared around 80% before tumbling today. It’s not a share I’ve followed but with a red rating along with the commentary from Roland today, I’m not tempted to look further.

Hope the big dividend paying shares we both hold do well for you. Sometimes there is good upside as well if using the tactic of buying the big dips. e.g I’m up over 50% on both Aviva (LON:AV.) and Legal & General (LON:LGEN) where the dividend at my 155p buy price is 13% and with small annual increases. Aberdeen (LON:ABDN) is the lowest quality one, and the only one not increasing the dividend, but looks oversold and might tempt a bidder.

raggedtp

Can't help with your question, Ken, just share that I too have held for around 4 years, and was thinking, in spite of quite a large position, of buying a few more on Friday. Ah well. I did get in on most of the results presentation and like the look of the new COO. They're not going to shoot the lights out, but they look pretty powerfully set up for continued modest growth now, with div sort of inline with inflation. They certainly look good for my target of 640p.

Yes should have included Qinetiq (LON:QQ.) in posting!

Beeks Financial Cloud (LON:BKS)

Not one I know well - but there are a few things that have kept me on the sidelines to date:

1. The share based payments are high, or perhaps in the context of being almost the same as the profit, even very high..and they conveniently remove them for their "underlying" PBT....

2. I don't quite understand the revenue recognition, in that the trade & other receivables are higher in the non-current assets than they are in the current assets. How are they accounting for multi-year contracts? The notes in the interims didn't explain much. If you go back the last set of Finals you find in Note 13:

Contract assets primarily relate to our rights to consideration for goods or
services delivered but not invoiced at the reporting date. The
associated performance will either be the delivery of the bundled
appliance for proximity/exchange cloud contracts or the delivery of the
licence key for software contracts. The contract assets are transferred
to receivables when invoiced.

So these non-current receivables are over a year away and they haven't invoiced for them yet? Have I got that right??

3. The capitalisation of development costs - not that this is unusual in IT/software, but more because if they expensed them that would be the profit largely gone.

Then if you start adding some bigger depreciation numbers on all that hardware in the new revenue model that isn't going help. Are they in effect "vendor financing" by providing the hardware, and what does that do their return on capital? Are they now bearing the risk of installed servers sitting there waiting for customer demand to catch up?

Hmmm. More digging required.

NewInvestor1972

All good points, I think I got caught up in the hype of this one. The new model seems to carry a lot more risk, underutilisation, maintenance etc...

I have to ask again, if it was such a good business model why have the sneaked through this major change that seemed to have been leaked to the market judging by last weeks share price movement, do we have another pump and dump/ lifestyle company special on our hands

I haven't seen Gordon McArthur in one interview today, que surprise

Brothersinarms

18th Mar

Re the Beeks Financial Cloud (LON:BKS) contract assets, I think it’s because they generally have 3 to 5 year contracts and they’re trying to match the costs with the revenues as per IFRS. So on those contracts, as most of the costs are upfront, they’re taking 40-50% of the revenues upfront and then invoicing for them annually or monthly over the term of the contract. They won’t do that with the revenue sharing exchange cloud model so it should become a lower proportion of revenues over time.

Archer

Well done with the top slice it’s a strategy I’ve rarely pursued but will start to consider this more. Agree on the expectations.

stowmarket500

I have never seen the womens range to be so good in M&S as it is now. It has become one of my go to shops and I would rate it up with Next for quality and stock. Can't comment on the mens clothes. The food is always top quality.

Daily Stock Market Report (Mon 17 Mar 2025) - QQ, SAG/RCDO, BKS, MWE, SRC, BAKK/GNC, HEIT/FSG

Companies Reporting

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Graham Neary

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