Bought @ c35p (Sep25, Jun26). Collected 3p of dividends. Sold @ c34p (Jul26)

I found the latest trading update from Topps Tiles to be very disappointing. With cost inflation (labour, utilities, transport, etc) running at 3-5%, they really need to consistently generate at least single digit revenue growth to maintain or grow margins, and therefore profits. Q3 LfL growth of +0.6% YoY doesn’t come near it.

Management blame the weather… often used as an excuse by retailers to hide the real reasons. Here, they say the heatwave has caused lower tile buying and installations. I’m skeptical of this for two reasons. The first is that the majority of their tiles sold are indoor tiles - for bathrooms and kitchens - not outdoors. Secondly, in the past they crowed about how the majority of their sales are to Trade, not direct to end consumers. I can understand if amateur Dave (who has procrastinated on DIY for two years) uses the heatwave as an excuse. However, I can’t see professional tilers doing that. First, they will already have jobs lined up in advance; a week less work means a huge headache having to reschedule. Second, their income depend on laying tiles. Did they really decide to forgo weeks of their income because “it got too hot”?

No - I think it feels like there is another reason why Topps Tiles is trading badly, and they are using the weather as a convenient excuse.

Furthermore… Tile Giant went into liquidation at the end of April 2026. ALL 40+ stores were immediately shut. Tile Giant claimed to be the second largest tile retailer in the UK (behind Topps). So shouldn’t their closure benefit Topps Tiles and CTD trading in May and June? If so, this means that the baseline performance of Topps Tiles was worse than the +0.6% LfL recorded.

This brings me on to the second reason I sold out of Topps Tiles. For several years, a key investment thesis here is that Topps Tiles is the number #1 seller of tiles in the UK (20%+ market share), AND they are beating the market in growth. The combination should mean that they keep getting stronger, feeding a virtuous flywheel that results in amazing competitive strength and margins when market growth returns.

Management continuously cite that their YoY growth rate is faster than the industry - they take the Barclays Consumer Spend Report as the benchmark, comparing against the Home Improvements & DIY category.

Between the end of 2024 and end of 2025, I calculated that they beat that benchmark by 6-9 percentage points; that’s a good outperformance. However, for the first half of this year, that has now quickly decelerated to approximately only a 1pp outperformance.

So for me, a key pillar of the investment thesis here is now on shaky ground. With no sign that market demand will pick up, and Topps looking like they will start underperforming the market going forwards, I struggle to see how they will get to at least 5%+ LfL sales, in order to mitigate the pressures on the input cost side, and grow profits. There is a lack of any upside drivers in the next 12 months, and only downside risk for me.

One potential upside driver would be if Andy Burnham unveils policies that stimulates the home improvement and DIY market. Maybe. One to watch out for.

Brokers have slashed forecasts for FY Sep26; at the 2.8p EPS forecast, the shares are currently trading at 12x PE. Too rich IMO, given that there’s a risk of further downgrades, and limited probability of upgrades. I’d be taking a 10% safety to that EPS and looking to buy at 8x, which means a 20p target buy price. So I see a big risk these shares slip below 30p from the current 34p.

PARTIAL SELL : YouGov #YOU $YOU.L

Bought at 180p (Mar26), sold two thirds at 250p (Jul26), locking in a 38% gain.

I expected to hold YouGov for longer, as I have high conviction of the resilience of their business model and I strongly believe they will be a net winner from AI. You can read my thesis here, here, and here.

Since buying, the shares have steadily gained 38%, on no new information, just sentiment. I usually buy shares that have BOTH low sentiment AND tangible positive catalysts that I don’t think the market is pricing in. As the combination of the two flipping often results in explosive share price re-rating. Here, it looks like sentiment has recovered strongly ahead of the catalysts playing out.

So why did I sell two thirds of my holdings early? To lock in the substantial gains. A trading update is due imminently, and I don’t think it will be a positive surprise, so there is little upside left to the share price in the short term. The new AI product they have launched, I think is good but my initial scan is that uptake amongst marketers has been slow and steady, not explosive. So that will take some more time to build into a story. Meanwhile, I see evidence that they have slowed hiring down since April, suggesting bottom line pressure going into the end of FY Jul26 and a less confident outlook. Meanwhile, their “strategic review” of their Shopper division, most likely to result in a sale, is probably not happening before Sep or Oct, given the European summer holidays.

So while I still have belief in the medium term potential here at YouGov, I think the share price had gotten ahead of itself for now, and crystallising a near 40% gain was just too tantalising. I still hold a decent stake, c4% of my portfolio, and will look to add if there is share price weakness.

Notes : Bango #BGO $BGO.L

Bought at 59p in May26. Still hold.

They came out with a Trading Update for the HY to May26. Top line growth only +3%, lacklustre. But this is a story of two halves. Their Direct Carrier Billing (DCB) business declined -5% YoY. But their high growth DVM business grew +13% YoY. The two divisions are now almost 50/50 in terms of revenue. Here, I think investors still view Bango as the “cigar butt” slowly declining DCB business. But soon, DVM will be the majority of revenues (and profits) and therefore the narrative should flip.

I wrote about Bango a few months ago when I bought. The thesis has not changed.

Their legacy DCB business delivers 50%+ EBITDA margins, and probably doesn’t need any more capex going forwards, given they and Boku have pretty much the entire global market stitched up between the two of them. Who will enter a declining market to challenge?

Their new DVM business delivers 90%+ gross margins. Most of the growth here isn’t at the start of a new contract, but builds over time. Here is the breakdown of how revenues scale:

• There is some upfront revenues from initial deployment of the DVM platform into Telcos

• There is then an annual recurring revenue from the Telcos themselves. A subscription fee for the platform. That goes up in tiers, based on the number of end consumers that take up bundles with their mobile plans from the Telco.

The second, I believe, is not well understood by investors so far. The growth here is linear in the first 2-4 years of deployment. This is because in any one month, only a portion of existing end consumers come to their contract renewal (usually 24-36 months), at which the Telco markets heavily for them to sign a new 24-36 month contract including a bundle. So you can imagine that growth of DVM platform usage in a Telco is a linear line for the first 24-36 months.

This graph below shows one of their first DVM customers, from a recent management presentation. You can see end consumer subscriptions increase quite linearly over a 4 year period, and the Telco tiers increasing at various points.

The first DVM deployments only started end of 2022. Limited bundle options.

• FY23 saw 9 new DVM customers.

• FY24 saw 9 as well.

• FY25 saw 12, a nice step up in run-rate.

• FY26 looks on course for 12 again.

So you can see from the above that we’re just only starting to get to maturity of the first batch of DVM customers in FY22/23. But over the next 1-2 years, the step up to 12 new DVM customers in FY25 will accelerate DVM growth further and be the driving force until FY28, FY29.

Having already signed up the top 7 out of 8 telcos in the USA, which is the largest market globally… it makes it hard for any new challengers to enter and disrupt. The strategy is to go global - Europe, South America, Asia telcos. And also to expand to other verticals where there is a desire to keep subscription-type customers sticky through offering bundling. Banks, supermarkets, etc.

On the consumer side, there is also a clear driver towards bundle uptake : cost of living crisis and the need to save money, as well as reducing stress of managing a plethora of subscription services individually.

All the metrics point to a healthy recurring revenue business growing nicely:

• ARR +31% 12m, +12% 6m.

• Net Retention Rate (NRR) of 119%, which shows that Telcos are going up the subscription tiers as more of their end consumers take up bundling.

• DVM new contracts on course for 12 this year, same as FY25, higher than the run-rate of 9 in previous years.

• And all this at a 90%+ gross margin on the DVM side the business.

Meanwhile, the DCB division has seen major surgery over the past two years, and seems like it is trending towards an acceptable managed decline of a few percentage points a year. FY25 saw a -15% decline in revenues, but H1-26 only saw a -5% decline. And probably a 40-50% EBITDA margin maintained here.

The one gripe most investors have is the heavy capex spending. A whopping $13.6m was spent in FY25, and management guide that FY26 is likely to be the peak before decline, so expect similar. On a $50-55m revenue business, that is some heavy capex. But the end is near; DCB heavy surgery now complete. DVM core platform build out also largely complete. The next year or two should see some strong cash conversion.

The other gripe that investors have is that it is not yet PBT positive, only EBITDA positive. But that is always going to be the case for a heavy-investment upfront approach that Bango has decided to take. The jury is still out whether all that capex with result in a good ROCE. But given the high EBITDA margins in DCB, and the high gross margins in DVM, that looks likely.

If one assumes that top-line revenue can grow another c30% to like $75m, and EBITDA margins at 40%, that results in a $30m/£22m EBITDA on a £52m market cap, £60m EV business.

D&A was $15m in FY Dec25; even if I conservatively upweight it by another 20% to $18m to reflect a further year of strong capex, we’re still getting about $12m/£8.9m operating profit on a £60m EV. A bargain multiple for a growth business, and one where the next few years of DVM growth is already baked in given the DVM deployments. The only risk is if Telcos decide not to bundle anymore, or if consumers decide they don’t want to sign up to bundles. Neither is likely to happen.

So where do I think this can go? Based on the above, Bango should be closer to a £100m market cap instead of the £52m it is currently, leaving a nice +100% potential gain, all possible within the next 12 months as the DVM growth story builds and gains acceptance as the core thesis of investing in Bango, instead of the focus on the legacy DCB business and the high capex / low PBT profitability.

Notes : Character Group #CCT $CCT.L

This is a business I have been tracking for a while, as it had some stumbles post-COVID. Partly market-driven, due to the post-COVID slump in discretionary purchases like toys. But also because I think they didn’t have good enough toy ranges and lost out to competitors. Its not a very durable business - they constantly need to find the next new toy that will sell well. They do have a few enduring licenses (Doctor Who, Peppa Pig, Teletubbies). But kids are known to eschew anything their older siblings or parents played with.

However, it was with interest that I saw that this year, Character have started to stock toys that are from content creators and social influencers. Yes - these famous personas from the likes of Youtube, Instagram, and TikTok are leveraging their “personal brands” to launch all sorts of products - including toy ranges.

Character Group have really leaned into this. An example of this is Aphmau Meemows toys. Aphmau (real name Jess Bravura) is an American YouTuber who has built one of the platform’s largest gaming channels since 2012 around family-friendly, narrative-driven Minecraft and Roblox roleplay content, amassing over 25 million subscribers and roughly 29.6 billion views as of 2026.

One of them - MushyKinz - seems to be really taking off. It is a copycat of a really popular squishy toy in the USA called Needoh, which has really taken off due to social media hype. Stores have run out of Needoh in the USA, apparently. Whatever hypes in the USA, usually will hype in the UK too.

The shares, however, are already up +30% from lows earlier in the year, so perhaps it is all priced in? Broker forecasts are thin on the ground. With hyped/viral products that are high margin like toys, it is hard to predict the potential profit upgrades possible if one of them really takes off. But potentially, this might be the turning point for Character Group.

For those that have young kids - go ask them about the range of social-media-first toys that are in Character Group’s portfolio for this Christmas : Mushykinz, Caylus, PrestonPlayz, Unspeakable, Aphmau. If the hype is there for a few of these, then Character Group is a nice bet for outperformance later this year.

Seems priced about right for now. At £100m revenues, likely to be able to get 7% operating margins, so £7m operating profits on about £52m market cap, £13m net cash, £40m EV. Seems a pretty decent value, should maybe easily be 20% higher? Hard to see enduring catalysts, albeit in the short term if they have a couple of big toy hits, the market might get excited that it is enduring and re-rate them upwards, as what happened in 2021-2022 when the SP was double what it is now (caveat share count has gone down -30%).

This 5-year share price chart below of Portmeirion #PMP $PMP.L will drive most people to bargepole this company before they even hear the pitch. And then there is the fact that the share price has crashed -50% in the past month, driven by a deeply discounted and urgent fundraising that quadrupled the number of shares.

But for those that have the nerve to stay, I present 4 positive catalysts that are imminent. Only one or two needs to come home to cause this bombed out share to rerate +88% from these lows.

What do they do

I won’t spend too long here, as it’s not critical for any of the catalysts. They are a ceramics maker selling quite high-end dining ware to consumers. They own some heritage brands - Portmeirion, Spode, Royal Worcester. Manufacturing is now mostly in the UK. Markets are quite international, with sales mostly in UK, USA, South Korea. Their dinnerware is the “special” type - most buyers won’t use it day-to-day, but saving it for a special occasion. They are also bought as collectibles. Two of their most popular ranges, Spode Christmas and Portmeirion Botanic Garden, are below.

Not the style I would ever go and buy. But they have a loyal demographic. Many investors think these heritage patterns will die out. But as we see with the likes of Sanderson Design (heritage patterns on fabrics) too, there is a stubborn loyal following and a new audience emerging too (more on that later).

Why Portmeirion shares are unloved

For the good reasons below, these shares in the last 12 months have been unloved, hence the continual drop in the SP. You'll notice that many of these stop being weaknesses going forwards, as I will detail in my Catalysts section.

#1 - Demand Not Growing

FY Dec25 saw roughly flat YoY revenues. The big drag was the USA, they were heavily impacted by the Tariffs. Excluding USA, revenues were up +8.6% CCY.

| Tariffs are now no longer an issue this year.

#2 - Inventory Glut in Distributors

They saw a boom of purchases during COVID, especially in Korea. Then they stuffed too much inventory into their distributors, as demand waned post-COVID. They are still clearing that - will take until 2027 to get to a clean position. Internally, they also have too much inventory of aged ranges and “second quality” ranges that they need to clear, slowly.

| This seems to be past the worst point, as sales to South Korea actually grew +26% YoY in 2025. More on South Korea in the Catalyst section.

#3 - Rapidly Rising Costs

Cost inflation has been terrible for Portmeirion. UK manufacturing means they have been buffeted by rising labour costs, energy costs, business rates, etc.

Loads of ceramic manufacturers went bust last year. The most notable one this year is Denby. They are competitors; albeit not hugely overlapping in target customers.

| They have 100% of electricity and 80% of gas costs hedged until Mar27. There is also HUGE government subsidies to come… see the Catalysts section.

#4 - High Debt

At FY Dec25 they have £24m net debt, and Adjusted EBITDA of £2.6m. Against a market cap of c£13m. Clearly a distressed situation for equity holders. On top of that, they are a seasonal business (H2 weighted) so by June-July 2026 it would be even worse.

| This is now no longer an issue after the £18m fundraising. And there is still more cash to come….! Stay tuned in the Catalysts section.

#5 - Management Distraction

Management over the years thought they had the magic touch, and could do other homeware businesses. Like scented candles (Wax Lyrical) and wood dining ware (Nambe).

| Chairman, CEO, and CFO are all new in the last two years. New management, a fresh start, new strategy. Hopefully the right one.

The huge value on offer here…

Before I go into the catalysts, I want to emphasize that these shares are so UNLOVED that they are currently trading at the price of the deeply discounted fundraising, 50p. Not closer to the price before the fundraising (95p).

Even more astonishing is that they are trading at a HUGE DISCOUNT to NTAV. I calculate it with the following adjustments, which are very conservative:

• Fundraising cash, 10% goes to fees

• 30% haircut to inventories

• £3m cash burn this year

This comes out as c£45m NTAV, 87p per share. You can currently buy the shares at a 42% discount. Wow.

I calculate that, with the fundraising cash, Net Debt is now less than £4m. Very manageable vs the £45m NTAV and the £26m market cap. So debt is no longer an issue, the balance sheet is fairly decent.

The elephant in the room is of course the £39m of inventories on the balance sheet. But my calcs above have already assumed a 30% haircut. Management also completed a £2.9m impairment for the FY25 results. So unlikely more to come this year, given that the impairment to be scrutinised by the auditors to be a fair amount and not larger.

Management have guided a small loss for FY26, and then back to profits in FY Dec27. I actually think, given some of the Catalysts below, that they could be on a profitable run-rate before the end of FY26.

The 4 Imminent Catalysts within 12 months

All of these are not in the distant future, or low probability. They are all pretty certain to land within a year. Hence why I was gobsmacked at the current share price, at such a huge discount.

Catalyst #1 : Further shoring up the balance sheet - £6m+ to come in

• Wax Lyrical to be sold. My estimate is £1.5m. It did £0.3m EBIT last year. Should be able to find a trade buyer easily, as its a decent enough brand, just non-core for Portmeirion.

• Sale & Leaseback of Distribution Centre. Think this could fetch £3-5m minimum. Cash will come in, AND it seems like its on the balance sheet at half the value. So NTAV accretive too.

• USA Tariff refunds. £2.2m worth. Might take some time to come through, but surely Trump is good for it? This is also not on the balance sheet so will be NTAV accretive too.

| This brings the net debt of £4m to a positive net cash position! So further strengthens the balance sheet. Also adds another 7-9p potentially to the 87p NTAV.

Catalyst #2 : Demand growth acceleration in USA, South Korea

Now, these dinnerware products are very discretionary buys. Customers buying them don’t need them, they want them. The state of household finances are important. Here, we have a plethora of tailwinds at play:

• South Korea stock market doing well. Portmeirion buyers are typically the older cohort. They have wealth & pensions that likely have exposure to the KOSPI. In addition, a big number of Samsung employees just got huge bonuses this year.

  This is backed up by LVMH calling out South Korea specifically in their Q1 earnings call of being positive compared to all other Asian markets. Then there are the Q1 updates from the big Korean department stores, all reporting around +30% YoY increase in luxury handbag sales, and +50% in jewelry sales. Sounds like a big boom in luxury consumption is taking place.

• USA stock market doing well. 401ks are doing well. Same reason as above.

• Grandma-core trend among GenZ. Its a thing. GenZ increasingly seeking comfort of what their grannies have - think Spode Christmas, Portmeirion Botanical Garden.

  Pinterest revealed that one of the fastest growing categories is “grandma-core kitchen”, suggesting that people are looking for that aesthetic and look. Both Portmeirion and Spode designs are firmly in the “grandma” aesthetic… and it is easier to buy a set of grandma-core plates, rather than a whole new set of kitchen cabinets.

• Rise of the collectibles. Many more people are on the collectibles craze. Every year there are limited edition items released in the Spode or Portmeirion catalogue.

• Less competition. Picking up Denby customers, as well as many smaller UK British brands that have gone bust over the past year.

| Hard to estimate how much these will contribute, but positive contribution it will be. Given that last year growth was +8% CCY excluding the USA Tariffs, this could push growth to 15%+. At that growth rate, would investors still value Portmeirion at 40% discount to NTAV?

Catalyst #3 - £120m UK government support

The government finally got its act together and found £120m to support the ceramics industry. A bit too late for Denby… which went into administration weeks before the announcement. But more for the survivors!

No details yet. Broadly, will be used to fund capital investment into projects towards energy efficiency and automation projects. As well as just directly subsidise inflated costs (eg energy).

| Conservatively, I would expect Portmeirion to get a big share of the £120m. Possibly at least £20m? If not up to £40m. Probably over a 3 year period. Against a market cap of £26m currently, getting £20m-£40m of “free money” from the government is substantial…!

#4 Interesting new investors backs up my catalysts, and more

With the 50p fundraising comes some interesting new investors. The most high profile is Lord Lee. He is followed in the investment community. Just look at the buzz around PZ Cussons, which he has been consistently vocal about. He could become a very vocal cheerleader for Portmeirion shares. In addition, he has an investment style which makes me believe that he thinks management are credible (he’s probably been able to meet them) and that he thinks the business is fundamentally sound.

Then there are the Swedes. Peter Gyllenhammar and AB Traction. Both were existing shareholders, but have also put in more money. AB Traction specialises in turnarounds. So they must like the potential here. Peter has a good eye for deep value. Probably sees the same NTAV value I do.

Finally, Onward Opportunities Fund. They are a specialist in UK small and mid caps. Their process leans very much into Value Investing, starting where there’s a strong balance sheet bedrock, good management (they often want to actively engage with management), and a “specific identifiable trigger” such as a hard tangible catalyst. Similar to my thesis here… maybe I should ask the fund manager to hire me :)

| With this group of investors, and knowing their investment styles, it is clear to see that there are numerous ways that a re-rating here could happen. Between the four of them, it seems like they might be happy to roll up their sleeves and get “active” in one way or another with their Portmeirion investment. For the benefit of small, minority shareholders like me that never get a say.

The Potential Returns

So there you have it - four compelling catalysts, all of which will land within the next twelve months.

How much potential do I see for a re-rating?

Taking a 94p NTAV (including 7p from Catalyst #1), I think if they manage to show strong growth and a return to profitability, the shares should make a full recovery to trade at NTAV or above, which will be an +88% gain from the current 50p share price.

You’ll notice that I haven’t done any of the usual P&L analysis and valuation metrics here. I did have a detailed look, and nothing stood out as a red flag. Portmeirion are clearly struggling to maintain profitability, but the drivers (cost inflation, Tariffs, low growth) are well known. And all of them I think are overcome by the Catalysts above.

As the company starts to report more Results and Trading Updates in the coming year, and the direction of strategy execution and profit recovery gets more certain, I will relook based on the usual valuation methodologies, which I expect to show a SP target well in excess of 100p+ at that point.

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YTD: +0.8% vs +4.7% (FTSE All-Share Benchmark)

Since Jan 2021: 13.2% yearly IRR

This year so far has been a disappointing one for me in terms of returns. Basically flat and trailing the FTSE All-Share. Not keeping up with inflation. And doing worse than if I had just stuck it all in a savings account.

My portfolio has trailed the FTSE All-Share due to three things:

• Not having Banking, Energy, and Commodity shares, which were a big driver of the FTSE gains this year

• Quite an exposure to the domestic consumer (THG, Nichols, Topps Tiles, etc), who have continued to be buffeted by the weak UK economy and now soaring inflation due to the prolonged Iran conflict

• Portfolio has been 27% cash, 13% inverse S&P ETF, as I struggled to deploy the cash as well as taking a bearish view on US equity valuations

So definitely not a good position to be in, 5 months in. At this point, I was hoping to be 3-4% above the FTSE All-Share, not below.

But I have done quite a bit of restructuring to my portfolio over the last few months, as you will see below. I’m moderately optimistic about the next few months ahead. A continued cessation of the hostilities in the Middle East, whether temporary or permanent, will mean more oil and gas flow out, keeping a lid on inflation.

The huge capex expenditures from AI will trickle down somewhat, offering a stimulus-like impact to offset economies still struggling to grow.

There is going to be a massive burst of IPOs in the next few months, kicking off with SpaceX and followed by a tsunami of PE-backed companies who have been waiting to list. Many will pop, there will be a frenzy of trading, and the paper gains made will propel the market and also add stimulus to the real economy.

However, more than 6+ months out, I am less optimistic. But when the sun is shining, its time to make hay right? So having closed my S&P500 short, I am now 29% in cash and actively looking to deploy in the next few weeks.

Portfolio Trades

Quite a number of trades over the last 5 months! 8 buys, 8 sells.

The order is from oldest to newest (Jan to May).

» SOLD ALL: Surface Transforms #SCE $SCE.L (1.7p)

This was lucky! Exited with no loss, just 45 days before it went into Administration and zero. I sold out because the latest trading update showed missed progress against operational ramp-up / fixes that I was expecting to propel the SP.

Its a good example of being decisive to sell out quickly when the company veers off-track to what your investment hypothesis is.

» SOLD + BOUGHT: System1 #SYS1 $SYS1.L (sold 212p, bought 178p)

Sold some in Jan as I thought it was fairly valued at that point, given the balance of risks. The USA and UK advertising markets were showing signs of being softer than expected for the rest of the year. Turns out I was right, and a month later in Feb the SP had drifted down to a more attractive price, after the Trading Update that disappointed the market.

However, I felt the trading update was actually not too bad and the signs were there of a strong recovery. So bought back in at 178p. It was quite fortuitous, and not long after, Brave Bison amassed a big 28% stake (at c250p), and they’re clearly on an acquisition intent to expand their marketing services group. I fully expect them to make a bid at some point for System1. The synergies are clear: cross-selling complementary services, combining sales teams to cut costs, and giving Brave Bison easy access to the US market.

Cherry on the cake was the strong Q4 update, and I think the Q1 will show even better progress, as marketing budgets in the USA have continued to be robust despite the Iran conflict.

🎯My fair value here? At 450p it starts to get fair value, but with continued strong growth, should reach 550p+ within the next year. Currently at 305p.

» SOLD ALL: Ashmore #ASHM $ASHM.L (238p)

Sold in batches in Jan and Feb. Quite good timing too - last batch sold 2 days before the Iran conflict started! Rightly, this has now drifted down to 208p, given that the Iran conflict has caused issues with Emerging Markets government bonds and equities, as investors worry about how those smaller countries will cope with the surging inflation and potential oil shortages.

Their latest AuM update was no surprise - outflows and negative performance returns.

With the US equities market still continuing to roar and suck up capital, as well as rising US government bond yields, I don’t see a supportive environment for EM assets. Sentiment might go back to what it was last year, and Ashmore traded at 160p lows then. I’m waiting to see if it trades back down to those levels, before considering buying back.

» SOLD SOME: LPA #LPA $LPA.L (62.3p)

The shares recovered some from their 37p lows. There was a lack of news flow of either new contracts or the start of any of the big delayed rail contracts. So I’m expecting their next update to be disappointing. They’re probably bumbling along at break-even levels.

My investment thesis had two main pillars. One, those big delayed rail contracts will commence and drive strong revenue and profit growth. Two, that they will sell off their pension scheme surplus and unlock a substantial cash return to shareholders. Neither has happened; but the SP has recovered strongly. So I have decided to sell out here.

In the right conditions, these could be worth 80p+. But I think that is probably still at least 6m+ away. If this gets value again in the next few months at 40-50p, I’d happily pick up a few more.

Edit 01/06: HY results came out today. Order entry was weak at £10.6m, which isn’t a profitable level given £13.8m of revenue generates £1m EBITDA. As I suspected, long-term rail contracts starts are still challenging, and the company confirms H2 will be softer than H1 for rail. Overall still no signs that the company can generate a meaningful (£15m+) of order wins every half year, to then be meaningfully profitable, given their fixed cost factory base.

» TOPPED UP: NICHOLS #NICL $NICL.L (968p)

Shares were knocked back, due to Middle East exposure to Vimto sales, as well as rising aluminum can prices and plastic bottle prices.

However, management re-iterated on a call that Saudi Arabia is their largest market, and as long as things got back to normal in June, then the impact would be limited in supply chain disruption to that market (and others).

The more worrying risk is the rapid rise in aluminum prices as well as plastic prices, which do make up a big part of the overall costs of each drink. Nichols doesn’t seem to use any derivatives or hedges for these two raw materials, so will be exposed to rising prices.

Here, I suspect that Nichols will be fairly resilient. They went through this in 2023 and 2024, and came out somewhat OK with their strategy, as you can see from their fairly stable EPS delivered in both years, and their operating margins maintained (13.1%, 12.4%). In addition, during those two years, they invested heavily in sourcing recycled plastic and aluminum, which will help cushion the impact of rising virgin material prices this year.

I’d be worried if these shares were on a 15-20x PE ratio. However, they are currently at 13-14x, so I think the market has already marked the shares down, and the current price at c940p has little downside, and and recover to 1200p-1400p once the inflation risks subsides and the company confirms Middle East demand goes back to normal.

Meanwhile, the growth engine that is North Africa continues, and the UK steady progress in increasing market share progresses too, alongside increasing licensing income from the likes of MyProtein, Buzzballs (both of which are rapidly growing in sales).

🎯 My fair value here? This should really trade at least 17-22x PE, from the current 13x. In addition, 5-10% yearly growth for the next few years is conservative, given its international growth prospects and also UK share increase. 1400p to 1500p is where I have my target. Currently at 940p.

» TOPPED UP: THG #THG $THG.L (31.6p)

Matt Moulding, the founder, did a big £8.5m top-up at 34.9p. A good vote of confidence in the turnaround here. All the hard transformation of the operations is done, and now is firmly in the growth stage, so a buy from him as an insider is a vote of confidence that the transformation work was successful, and the new THG has the capabilities for this growth phase.

My investment thesis here still holds; two crown jewel brands (MyProtein and LookFantastic), both are miles ahead of competitors.

In LookFantastic, there is just no credible competition in the UK market against it, and beauty is the one category that is still growing strongly in consumer spending when you look at the Barclays spend reports. In addition, with more GLP-1 usage, more women will now have the confidence to invest in beauty products. Growth in LookFantastic has had increased momentum last few quarters, and I think it will continue for a while yet.

In MyProtein, the top-line growth is robust. But the bottom line is the worry, as increasing whey raw ingredient prices hit their profitability last year. The bad news is that whey continues to increase this year due to lack of supply, surging demand. That surging demand is why I’ve invested - it comes from more strength-based focus on gym training, as well as GLP-1 usage (doctors advise to eat more protein).

Supply will be fixed by end of year, as new factories come on-stream. So this input price issue fixes itself in 6-9 months.

Meanwhile, MyProtein as a large buyer globally, probably has robust supply contracts and long-term pricing in place. It is the smaller brands that will struggle to secure whey supplies, and need to buy at spot prices. I am expecting consolidation here as only a few of the big players survive, growing their market shares.

In the next 6-12 months, these will happen:

• Proven, strong, ongoing growth at 10%+.

• EBITDA margins expansion, as whey prices decrease.

• Rapid swing to PBT positive, with upgrade momentum, as DA & I are declining while EBITDA increases

• Net debt not an issue, as goes below 1x

All of these are negatives at the moment, weighing down on the share price, but all four narratives are likely to turn positive in 6-12 months.

At that point, the PE buyers who were circling a few years ago at 70p-150p mooted bids, might come back…

🎯 My fair value here? Really difficult especially for fast growing segments they have that have lots of runway still, and unproven where their operating profit margins will settle. I see 60p+ as easily achievable, and in best case scenarios 80p+. Currently at 32p.

» NEW POSITION: BARRATT REDROW #BTRW $BTRW.L (305p)

This went below 0.7x NTAV, and I thought… great! Can’t go any lower. Turns out, it can. Now at 0.6x at 260p.

The story isn’t amazing, is it? Mortgage rates on the rise. Construction costs on the rise. House prices are flat or modest increases.

My bet on this is the classic - “when the night is darkest, is the moment just before dawn breaks”.

Things are unlikely to get worse. The red tape can’t get any worse, only better. The lack of government subsidies / onerous taxes can’t get any worse, only better. And structurally, the market does need more housing. Even in the current dire housing market situation, Barratt Redrow will survive and still be profitable; the current 5.4% dividend might at worse see a modest cut.

The big housebuilders are, in my opinion, almost cartel-like. And so wherever house prices land, and construction costs land, they will force landowners to sell them land at a price that allows them to goal-seek a profit margin.

When optimism of a recovery comes back to the housing market, these will trade above 1x NTAV. So buying now at 0.6x gives a 67%+ gain potential. The downside? Could this really go much lower than 0.6x NTAV?

🎯 My fair value here? When we get back to optimism in the housing market and with some government support, these could easily recover above NTAV to around the 450p mark or more. Currently at 262p.

» SOLD ALL: Spaceandpeople #SAL $SAL.L (206p)

I was holding out for my fair value of 240p+, but decided to sell because I think they will struggle to maintain their growth momentum for H1 (Jan to Jun) of FY27. Last year, they had some exceptional client billings - one from Samsung (which hasn’t repeated this year) and also from vaping brands (before the ban on vaping advertising came in).

The core business I think is progressing very well. And they are very likely to win some more shopping mall contracts in the UK and Germany. Their cost base is now lean.

The shares have now drifted down to c165p. I think they could further deflate with a weak H1 trading update or results, and I’d look to buy back in at that point for the medium-term underlying core growth.

» NEW POSITION: Yougov #YOU $YOU.L (180p)

This share has been hammered by fears of AI disrupting the market research sector. But as I explored in my recent post about how I think about AI disruption, I don’t think what Yougov does can be replaced by AI. Any marketer that thinks AI will give them “real” insights into how customers think is laughable; for one, all the raw data isn’t public and available for models to pre-train on. For two, even if it was, it would be outdated data from last year, year before. Would any business make marketing and product decisions based on what a consumer thought two years ago?

Second, I think Yougov might actually be able to leverage AI to create new services for unmet marketer needs. The last few investor presentations on the Yougov website are worth a watch, where they demonstrate and walk through the new AI services they are testing and trialing now with customers. As a marketer, it immediately struck me as something that replaces expensive in-person moderated customer panels. Thus, YouGov can offer the same output as these valuable customer panels, using AI, but at much cheaper cost.

The key problem here though is the Shopper business which they acquired at great cost, and which is also straining their balance sheet with debt. However, they are now looking to offload this underperforming division, and if they do, then the debt worries also disappear.

For a business that has a strong moat around its core business (hard to replicate its worldwide network of consumers and historical data), potential growth from AI, and a clear pathway to fix its balance sheet… it’s too cheap, trading at an 8x PE to FY Jul26 forecasts.

🎯 My fair value here? For me, easily back to 300p+ if they manage to sell off the Shopper division for a decent price, reduce debt, and the main business grows modestly. But if they start to show traction with their AI product…. or if an AI company comes to license their very unique proprietary data set on how consumers think… could be 2x or 3x as the valuation goes back to 20+ PE from 8x this year. Currently at 213p.

» SOLD ALL: Rank #RNK $RNK.L (89.6p)

After the Iran conflict, I dug into tourist arrivals and outlook for London, and confirmed that it had dropped and the outlook was weak. This is because a good chunk of tourists come to London via the Middle East airlines, especially from Asia.

Both Asian and Middle East tourists are decent segments of casino customers in London. And Rank has many Grosvenor casinos in London.

Combined with the uncertainties from the tax hike on online gambling, I thought it was a good time to sell and wait and see what happens.

Unfortunately, I sold out a bit too early! The shares surged to 110p on a good trading update from the company. The company did acknowledge that less international travelers could impact Grosvenor, but still guided that they “expect to see continued revenue growth in Q4 [Apr-Jun]”. Growth in Q3 was +5%, so they’ve left it vague; growth could be anything from 1%+ for Q4.

However, the shares have since drifted back down to 98p, maybe because other investors have similar concerns like me.

Overall, I think the medium term story is compelling. The Mecca Bingo operations now have a transformed operating profitability due to abolishment of betting duty on Bingo, and I expect new venues to be feasible. Second, the extra slot machines in Grosvenor Casinos (and potentially Bingo halls too in the near future) also transforms operating profitability upwards. Thirdly, I expect many small online casino players to exit the market given the rise of Remote Gaming Duty, and Rank mopping up more market share.

I’m keeping an eye out for a weak Q4 due to drop in international travelers, and caution from domestic gamblers (due to rising inflation hitting discretionary income), for share price weakness to re-enter.

» SOLD ALL: Robert Walters #RWA $RWA.L (86p)

Robert Walters was so close to stabilising its business! I was expecting it to stem the revenue declines in the first half of this year, which combined with its deep cost cuts, would mean it can trade at break-even or return to profitability.

This all went out the window with the Iran conflict; caution has returned to the European and Asian job markets — the number of job instructions they've received is now down another 10%+ YoY.

However, their trading update in mid-April was more optimistic than my view. The “hiring market impact” was “limited to the region itself". But they did leave the door open to an impact if “tensions be protracted”.

This probably explains why the shares popped to 100p+ after the TU, but has since dropped back down to 85p, less than what I sold at.

I suspect their Q2 (Apr-Jun) trading update won’t be pretty, and show them still somewhat short of break-even, and continued burning of their rapidly dwindling cash pile. Medium-term, I still believe they will be able to get to a break-even equilibrium, given they have flexibility on the cost side, and the market cannot keep shrinking forever. But the share price has no floor, especially when there is no clear pathway back to profitability yet.

» NEW POSITION: Flowtech Fluidpower #FLO $FLO.L (46p)

This one has all the ingredients of a successful turnaround. After years of painful restructuring and surgery, digging into the H2 (Jul26-Dec26) numbers specifically revealed a business that was improving rapidly in profitability. Furthermore, the outlook statements around the momentum and pipeline, in both the FY results statement and the Investor Meet Company presentation, left little doubt in my mind that H1 is going to see further progress in top line, and profit margins.

That would give two solid half years of P&L progress, which should be the catalyst for broker upgrades, and valuation re-rating by investors.

Balance sheet was a worry - FY26 Net Debt/EBITDA leverage was more than 2x. But with EBITDA rapidly increasing now, and much less capex and restructuring costs this year, we will also see a meaningful reduction in net debt, so I wouldn’t be surprised if it gets closer to 1x and out of the danger zone.

Broker upgrades are ripe for a re-rating upwards; two brokers (Singer and Panmure) both indicate in their latest note that they have been cautious at setting FY Dec26 forecasts.

Furthermore, it seems like there are plenty of acquisitions to be had cheaply in this fragmented market. They acquired Q-Plus in Feb for only around 5x EV/EBITDA!

Harwood seems to be a fan, having taken a big chunk of the 53p placing to buy Q-Plus. So is the Chair, Roger McDowell, who put in £160k of his own money in the placing too.

The key worry is whether the Iran conflict has impacted them, as the last update was mid-Mar, too early for any indication.

🎯 My fair value here? Even if I take a conservative 6x EV/EBITDA multiple here, that gives me a 65p share price target. And they are easily worth at least 8-10x EV/EBITDA if they stabilise the business, get to decent profitability, and build a bolt-on acquisition machine (at 4-5x EV/EBITDA multiples). That would be a share price of 86p-105p. Currently at 51p.

» SOLD ALL: S&P500 Inverse #XSPS $XSPS.L (419p)

The USA market has just too much momentum at the moment. SpaceX marks the “Euphoria era” in my mind; and we all know that this phase could last for a while, as shares keep going up, sucking more money in, and investors are bullish and start being more risky and use margin to chase the momentum. It can last for a while, and it can be very painful for shorting.

So I decided to close out my S&P short completely a few weeks ago, which was a good decision as the markets have kept rising since then.

» NEW POSITION: Bango #BGO $BGO.L (58.9p)

I will do a longer write-up on this, as I think there’s a really fascinating story here, that needs a longer telling.

But what I see is a share that investors have given up on, because it has been “jam tomorrow” for a good few years. Their acquisition of DOCOMO a few years ago has been a big mess and taken much longer to integrate, more capex, and also not meaningfully delivering incremental profits… until now.

Their new business, Digital Vending Machine (DVM), has also been a big cash burner in capex to develop. DVM is a software platform that enables Telcos to offer Bundles. Think a SIM mobile plan with Netflix and Uber One included as a package. But it is a quality business, and the revenue growth is now locked in for the next few years.

• They have 7 out of the top 8 USA telcos signed up as customers.

• DVM revenues is 95% gross margin - so profitability here will explode with revenue growth.

• Revenue growth has been slow… because it takes time… because Telco customers are on fixed-term contracts (12-24 months) and only on renewal, do Telcos usually convert Sim-only subscriptions to a Bundle. The telling chart is in their Investor Meet Company presentation, where they show the Bundling growth for one of their early DVM customers. The line is straight, slowly going to the top right. They now have 42+ DVM customers.

• Capex here is now peaking this year, after which it will rapidly decrease as the DVM platform is now… mostly complete.

I think fundamentally, investors have not really understood that all Bango need to do is wait for the bundling revenue growth to come, steadily, over the next few years. All at 95% gross margins, all while simultaneously decreasing cash costs on the platform as well as sales & marketing. The P&L is going to be radically different in 12-24 months time.

On the Payments side, the hard (and tricky) work integrating DOCOMO is now complete. It wasn’t as good an acquisition as they expected; lots of business there was “low margin / low value” that they have jettisoned. But its a cash cow.

I’ve tried a few sum of the parts calculations, and the main one I get to is that the current EV indicates a 5x EV/EBITDA multiple for the Payments business; too low for their market leading position, strong cashflows to come. As well as 1x Sales for their DVM business; which is a bargain for a business about to see explosive profits and cashflows from all the investments that are now complete, on the DVM platform and also onboarding Telco clients.

🎯 My fair value here? Easily double, as Payments should be at least 8-10x EV/EBITDA and DVM at 2-3x sales. Even my most conservative scenario in 24 months has them at 84p share price, a healthy gain. Currently at 61p.

» TOPPED UP: BTG Consulting #BTG $BTG.L (118.5p)

Their recent results were solid, especially pleasing was strong organic growth. This coming year, their cash flow will improve markedly, as they had slowed down their acquisitions in the past 1-2 years, so contingent consideration drops significantly this year compared to last year.

However, the big catalyst for me was them picking up lots of MFS insolvency/administration work. As well as their marquee appointment to the Sheffield Wednesday administration. Both for me signal that their strategy of going into more mid-market and larger insolvencies and administrations is starting to work.

Short-term, we’re going to see some nice fat organic revenue from the MFS work, over the next few quarters. So I expect strong, 5-15% revenue growth rates minimum. Medium-term, I think they should be able to pick up more mid-market administrations.

On the property advisory and auction side, it seems like it is growing robustly. I expect the macro conditions here (more pain for commercial property owners, especially with the higher for longer rate environment) to continue to feed them for the next 12-24 months.

BTG is a nice combination of growing EPS in the next 6-12 months (in any economic environment), AND a nice counter-cyclical share that will do especially well if there’s a downturn/recession/crisis, giving a nice hedge to The Boon Fund too.

🎯 My fair value here? I expect 150p+ within 6-12 months as it trades at a higher PE of 14-15x alongside EPS growth. If things go pear-shaped in the economy, then 180p+. Currently at 118p.

» SOLD SOME: Sosandar #SOS $SOS.L (11.2p)

Having bought in at 5.8p at the start of 2025, the shares have now surged to almost double, and I’ve started to take profits.

My investment thesis has played out - I spotted last year that their bold strategy of going full-price was starting to pay off. And now it is proven.

However, my other thesis - that the stores could be a good profitable growth driver - is now in the bin. They have not been able to get them profitable, and it’s doubtful that they will ever get them to be meaningfully profitable. That’s a shame.

In addition, I think management have nothing left in the tank for new growth. There’s nothing else in the pipeline to drive more growth after this year. No new distribution partners signed. International expansion also doesn’t seem to be a priority anymore. Stores are dead. So at most, are we going to see 5% a year growth? In a very competitive sector?

Worryingly, I have seen that in recent months, they have started discounting more of their stock. Which is a reversal of their full-price strategy that I bought into.

I think at 11p the shares are fully priced. So I have sold some, and will continue to liquidate my holdings at this level.

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My view on the conflict is that it will have to end soon. A superpower that doesn’t have popular support for this war, especially when it is exacerbating affordability issues amongst voters, is unlikely to commit to a long campaign. On the other side, Iran doesn’t have infinite resources and rockets and drones. It feels like the war will stretch on, because both sides are escalating the threats to try to intimidate the other to fold.

I’m no political guru so I could be blowing smoke out of my ass. But the above is what I believe. I have decided now is a great time to load up on lots of bargain shares and deploy my 40% cash pile that I had at the end of February.

Below are the four shares I’ve bought so far in March, with a brief commentary on why. I’m now down to 20% cash, so I still have some further dry powder left to deploy. I have a long list (9!) of shares that have triggered my buy prices. So I might be picking up a few more next week. Follow me on Substack, as I’ll likely post them as Notes instead of a full Post.

» Top-up : Nichols #NICL $NICL.L

This share was 1400p not too long ago, and I topped up at 970p. A little too early, as its now drifted to below 950p.

My full write-up about Nichols is here, so I won’t go into lots of detail. I bought before their FY results came out, suspecting that they’ll be strong. They didn’t disappoint.

There are some really strong growth drivers here for FY26 and beyond, that I think is being underestimated. First, they are outperforming in the UK drinks market. In addition, their licensing deals with MyProtein and Applied Nutrition is bringing in high margin fees, as well as free brand exposure in new shops (Holland & Barratt) and new customers (South UK) they didn’t have before.

Then there’s the international angle. Africa has a solid double-digit growth plan for the next few years. Just need to roll out their new locally produced Vimto in Senegal and Ivory Coast (soon). Interestingly, USA and Canada is also double-digit growth, driven by Muslim adoption around Ramadan. That market could be huge.

The fly in the ointment? Middle East sales. Its primarily Saudi Arabia (75%) which is less affected by the Iran conflict. Sales there (to distributors) are in a low season for the year, and picking up in June onwards. So there probably is little impact so far. There’s possibly upside - people stuck at home, more likely to buy and drink Vimto?

In any case, I think these are worth 1400p easily, and I think fair value is around 1600p. So happy to buy at sub-1000p, especially with a nice 4.7% dividend. Strong balance sheet too. It is now my largest position.

» Top-up : THG #THG $THG.L

This has really lost momentum! Drifted down from a 47p high recently, to 29p now. I topped up too early at 31.7p.

I also did a full write-up here on THG, so won’t rehash all the reasons I bought. Since buying in the middle of last year, the story here has unfolded as I expected.

MyProtein has continued to grow rapidly, around 10% YoY growth. And 2026 might be even faster growth, driven by the macro trend of Protein Diets and Strength Training, as well as their global strategy of licensing and signing up retail channels globally. They want MyProtein to be in 100,000 stores globally this year; I think they might actually achieve that.

Beauty went from zero/negative growth, to now between 5-10% growth. Beauty is one of the bright spots of UK consumer spending at the moment. Plus they’ve had competition (eg Beauty Bay) go into administration.

So taken all together, its hard not to see continued 8-10% revenue growth over the next few years. With high gross margins, this then rapidly creates operational gearing to profits. I think the market and brokers are underestimating this, and THG is going to beat forecasts and get to profitability quicker than expected.

Even the shorters have given up despite the SP going into reverse recently. It now has the lowest short interest since it listed.

The founder/CEO, Matt Moulding, also bought £8.5m of shares in Feb at 35p.

The risks? Obviously, Protein and Beauty are non-essential categories of spend. In addition, Dry Whey prices remain stubbornly elevated, crimping MyProtein profitability. They have been “investing” in price to gain market share, expecting the whey price to decrease in 2026 to drive margin growth. Now, they probably have to decide to increase prices. Not sure whether the rest of the protein industry will follow suit.

After topping up, its my second largest position behind Nichols. I think this should be trading at 50p at the next trading update (Q1 update in April?) or after the HY Jun26 results. On a 12-24 month horizon, should be 70p+.

» BUY : Barratt Redrow #BTRW $BTRW.L

I’ve been watching the house building sector for a while now, and the recent SP plunge made this buy too irresistible from a NTAV perspective. Bought in at 305p, although that was way too early, as it is now at 256p.

Why has it gone so much lower? Its because Gilts have gone up, and BoE rate expectations are now for increases, rather than cuts, given where inflation expectations are. Higher BoE rates are bad for mortgage rates, which then crimps demand for new properties.

At 305p it was trading at around 0.7x NTAV, a level which it has never traded before going back eight years. At 256p, it is at 0.6x NTAV. Crazy. At these levels, the market is pricing in a big crash in demand AND house prices.

But for me, the fear is unjustified. On house prices, we still live in a world where demand outstrips supply. Therefore, prices are unlikely to plunge, unless there is a big dearth of mortgage availability or a deep economic recession. In both scenarios, I’ve got more problems than just Barratt Redrow - probably the rest of my portfolio is screwed.

You might ask - what if the land bank is overvalued? That is a legitimate concern. Maybe they’ve overpaid for the land, and need to take a 40% haircut?

I’ve gone back through the last eight years of land purchase data by BTRW. They did overpay per plot in 2022 and 2023, but probably only on the magnitude of 10-20%. And I have to give them the benefit of the doubt here too, because not all land plots are the same - it might be that 2022 and 2023, they bought in more expensive areas or plots that could be more densely built on. So there does not seem to be any sign they vastly overpaid for land in the last few years, to foresee a writedown of 40%.

In normal times, BTRW trade at a premium to book value. So my expectation is a SP around the 450p to 500p range within the next 24 months, which would be a 75%+ gain from the current share price.

» BUY : YouGov #YOU $YOU.L

This came on my radar because it got caught up in the AI-driven tech sell-off. I bought in at 180p.

I work in marketing so have used YouGov products and services before. I wrote about my view on what specific areas of data & tech that I think AI will impact, and which ones it will struggle at. YouGov fits into my “Data - Proprietary” category, where AI isn’t disrupting it at all currently, and unlikely to in the next two years.

YouGov has a huge panel of consumers worldwide, which they know lots of information about, and which have been answering questions from YouGov for many many years. The value of YouGov data to marketers is understanding when consumer preferences shift - and to be the first to capitalise on it with marketing or product development. You can only do this if you have that historical baseline of data, and real-time customer data.

Not only that - if there is a consumer preference shift, you want to know why. It is the classic data problem. Data tells you what, but the why is important because that’s how you create marketing or products that emotionally resonate with customers, and satisfies the core need.

And then you need to break it down - is it all customers that are shifting? Which ones are, which remain loyalists? To be able to create the right marketing for the right audience.

So in the above, an example would be the shifting trend from Cardio workouts at the gym to Weight training. That’s the What. Then the Why… this might be due to a social media trend that’s larger than weights: wellness. Then there’s the Who - its fastest amongst millenial females.

LLMs cannot do this at all - give you the What, Why, and Who. It needs to be pre-trained on published information online - by that time, the trend is well established and “publicly known”. Probably posted by the PR department of a wellness company, having already exploited the trend. What use is consumer insights when all your competitors have acted on it? It also won’t be able to tell you why consumers are shifting from cardio to weights, or the key who (cohorts) that are changing. In short, the LLM answer will be “AI slop”. No half-decent CMO will consider replacing a YouGov service with LLMs.

The flip side is that YouGov could massively benefit from integrating AI functionality into their existing operations.

Firstly, they have way too much data for their team of analysts and data scientists to process. AI will help do that. Each bit of extra insight generated, is another packaged insight they can sell to a client.

Secondly, the data they have is very valuable to LLMs. And LLMs have money. YouGov have already stated an ambition to sell “raw data” from their data lake to advertisers. They will probably have LLMs knocking on their door to license their data, and pay a pretty penny for it.

Thirdly, LLMs can help them generate better data from their panels. Their FY25 Results webinar had a really interesting demo. On top of asking the really standard questions, they added an AI conversation mode. And it turns out, their panel are happy to talk, talk, talk. There are increasingly more and more lonely people out there. This Conversation Mode wasn’t possible before AI, as it would have needed an expensive human on the other side. But now, YouGov can harvest much more data from their panel. And the data is more Why than What, with a detailed profile of Who; gold dust for marketers. Really getting into the psyche of a consumer. The conversation mode might even help with retention. Panelists churn because - lets face it - answering questions about what brand baked beans you buy is not very interesting. But an AI that engages in conversation and appears interested in what you have to say - stroking your ego in the process - might make you stick around.

So here on YouGov, it is a shock to see it trading at barely 5x PE for FY Jun26. I get why - because of the perceived AI threat, and also their debt pile. But that debt pile is decreasing quickly given their pretty decent free cashflow. And in normal circumstances, they should trade at least 13x PE, given their dominance in multiple parts of the consumer insight industry. This is a potential double-bagger for me - 400p is where I see this within the next 24 months.

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What have you bought this month since the Iran conflict started?

Why keep reading?

I am no AI or LLM expert. However, there are three reasons why you should consider my framework:

• I have built my career over the last 20 years in successfully embracing the rapid transformation of marketing - from Digital Marketing to Social to Mobile First to MarTech to Machine Learning. I am good at evaluating and assimilating innovation. For me, AI is just the next “innovation”.

• In my role, both professional and personal, I have spent a lot of time with AI over the last two years. I have a good feel of its strengths and weaknesses in real world applications.

• As a former management consultant, I've got the frameworks to break down and assess what AI actually is, and its potential impacts in different types of businesses.

Below, I present my framework for the type of business activities that I think could be impacted by AI, how effective and quick that disruption could be, and examples of businesses that might be exceptionally vulnerable.

I also deep dive into two example companies, YouGov and Accesso. Walking through how I think AI might disrupt or enhance the competitive positioning of that company going forwards.

What type of businesses will be disrupted by AI

Most companies do several of the above activities, so I have only mentioned the Primary activity. For example, Tripadvisor also organises (Things To Do and Attraction) data, but their core business activity that gives them their moat is the collection of reviews (ie proprietary data).

None of these names would be surprising, most of them have been caught up in the panic selling of software and data companies over the past month.

How much disruption do I predict for each Business Activity?

I think there are three main areas that will see a complete disruption from AI. The first is anything involving generating new data - text, images, videos, software code. This is the torchbearer for AI, and the AI tools here are commonly referred to as “Generative AI” tools. For example, the image in this post was done by Nano Banana. The standard of output here is already very, very high.

The second is data processing. This is a wide category; basically anything that involves analysing some data inputs, making calculations / transformations, and then output into a desired format. Accounting software takes all the individual transactions, and constructs a summary P&L in a certain format. Cybersecurity takes all data on each website visitor, and processes it to evaluate if its a bad actor or legitimate user.

The third is workflow automation. This is where a series of tasks needs to happen, and the software orchestrates it and make sure a set of rules are followed. Think expenses submission in HR software - it makes sure the data is uploaded in the correct format, then orchestrates a set of approval tasks, then triggers a payment.

Currently, I have most AI applications in None or Limited. There is very little real world evidence that AI is doing any of these six things at the same level (quality, speed, consistency, cost) as traditional software. Except for Data Generation.

In two years, I expect AI to still struggle in three categories.

The first - Proprietary Data (collecting & ownership). AI is good at generating data, based on data it is spoonfed and trained on (hence why GPT = Generative Pre-Trained Transformer). Collecting data, in the real world, is still messy and requires hardware. I don’t expect AI companies to want to take on the regulatory burden of data ownership, especially on people data (ie GDPR). More on this in my case study on YouGov #YOU $YOU.L below. AI can also not “backfill” data, so existing companies with proprietary data will have a moat against AI.

In Service Facilitation, there are a variety of reasons why AI will struggle. In marketplaces, the moat is the Network Effect - ie it will be hard for AI to recruit enough users AND riders to challenge Uber. In payments and share-dealing, there are regulatory risks, as well as liability risks; software is a controlled system - if you put in X, you get out Y. Every time. With AI, that’s not necessarily the case with hallucinations and different outputs each time to the same query.

In Physical Goods & Services (but purchased online), there’s the “offline” component; logistics, warehousing, hardware. A very different set of capabilities than building an AI agent or model, so I expect most AI endeavours to steer clear, at least for the first few years.

All this theory is great, but how to apply it? In the next example, I illustrate how I apply them to two companies I’ve looked at recently.

Case Study 1 - YouGov #YOU $YOU.L

What they do in a nutshell:

• They have a huge panel of 30m+ people worldwide, who they survey regularly on all kinds of topics - from political voting choice to their household finance state to what beans they buy at the supermarket. This is the [Data - Proprietary] category.

• They then take all that raw survey data, and provide intelligent insights to governments and companies. What are the top concerns voters have? How did they react to X news? What is on their mind when choosing a washing machine? Are their holiday patterns changing this year? [Data - Processing]

What AI means for YouGov?

• [Data - Proprietary] : AI is not going to build a 30m panel of people. Not overnight. Also, even if they did, they won’t have previous years’ data. A key part of the insight is knowing how people’s behaviours and thinking have shifted, not just what they think now, in order to spot the trend early. No threat.

• [Data - Processing] : If AI could get its hands on data, it would outcompete YouGov’s current manual team of data scientists and analysts. However, its a moot point if it doesn’t have the raw proprietary data. Here, YouGov themselves can leverage AI tools to automate all that data processing, and remove the costs of the data scientists and analysts on their payroll. All those hours spent creating fancy slide packs for clients? Automated with AI. Potentially margin enhancing for YouGov.

Conclusion: the market has punished YouGov unfairly IMO. Its on my watchlist at the moment, as a potential candidate to add to the Boon Fund, given that I think the disruption threat from AI is minimal, and they themselves might turbo-charge profit margins in the years ahead.

Case Study 2 - Accesso #ACSO $ACSO.L

What they do in a nutshell:

• They provide theme parks with software for selling tickets, passes, and add-ons. So the theme parks don’t have to write their own software, they just use Accesso’s software to offer these features to their visitors. [Service Facilitation]

• They provide a queue management system for individual rides, so visitors can join a queue virtually, and see queue time estimates. [Data Organising]

What AI means for Accesso?

• Both of the above Accesso solutions could be disrupted by AI-based competitor solutions, AND there is one other major consideration here. AI is very good at [Data - Generation], ie writing software code.

• Neither of the two solutions (ticket sales, queue management) are complex software. Accesso’s key USP is cost. Instead of each theme park building their own solution, it makes commercial sense for Accesso to build it once, and then license it to multiple theme parks.

• However, with Data Generation AI tools like Claude Code, each theme park can now write their own software at a fraction of the cost compared to before. And fully customise it to their own theme park and business. So why would they buy an off-the-shelf SaaS solution from Accesso?

Conclusion: This case illustrates that when looking at B2B SaaS, one must evaluate what makes the software sticky with their customers. If the key selling point is just cost vs in-house development, then it is in danger of being disrupted by the excellent ability of AI to write software code.

I hope you’ve found my framework useful! I know I’ll be applying it week in week out, when looking at shares to invest in. If you have your own way evaluating the AI threat, do share in the comments below, I’d love to engage in a discussion.

2025 Year : +16.3% vs +20.6% (FTSE All-Share Benchmark)

Over 5 years : +13.6% annualised return and +90.2% in total. More than double the FTSE All-Share.

A glass half empty but also glass half full year. The glass half empty part is that I’ve broken my streak; was hoping to make it five years straight of beating the FTSE All-Share, but it wasn’t meant to be. I’ve talked before that its an imperfect benchmark for my investing (mainly small and mid caps), but it is a suitable benchmark because if I wasn’t actively investing, I would be using a broad ETF like the FTSE All-Share.

The glass half full part was delivering a 16.3% return, which in any year is a great result. On an absolute basis, it was my second best year out of the last five years.

Lessons from the Year

What did I do wrong this year? My fatal blow was not having any exposure to mining or defense, which powered the FTSE gains this year.

Robert Walters (#RWA, $RWA.L) and Macfarlane (#MACF, $MACF.L) were my two biggest losers - should have cut those losses sooner at the first sign that my hypothesis was going off track, instead I’m nursing -50% and -35% losses.

What did I do right? One takeover, H&T (#HAT $HAT.L), provided a nice boost, but the individual gains that powered my returns was quite broad based across many tickers. In hindsight, I liked the sector more than H&T specifically, and should have recycled my money into Ramsdens (#RFX $RFX.L) next. Missed a big gainer!

Personal Group (#PGH $PGH.L), James Cropper (#CRPR, $CRPR.L), THG (#THG, $THG.L) were the other large gainers. But most of my other shares were positive for the year too. In addition, well timed exits from Time Finance (#TIME $TIME.L) and Spectra Systems (#SPSY $SPSY.L) crystallised some substantial profits right at the top.

I’ve realised that my Achilles heel is is not being ruthless in ditching underperformers. When company reality doesn’t follow my hypothesis path, and I stubbornly cling on in hope that it was just a “missed turn” and things will get back on track. For each share I buy, I have a very clear set of hypothesis why I think it can gain more than 40% within 18 months. And I should not hesitate to sell if things don’t progress along that roadmap. Big learning for me going into 2026.

Less activity - but was that good?

In 2025, I made a total of 29 trades. That’s less than 3 per month. 2024 was similar at 28, but the three prior years were higher - 31, 33, 42. On a portfolio of 15-18 holdings, that means my average holding period will be just over a year.

Maybe I’m holding for too long? Whenever I buy, I try to form a hypothesis of the factors that will realise a 40%+ gain within 18 months. In an ideal world, I would ride my winners to 18 months+, and cut my losers early at 6 months. So maybe lets take an average holding period of 12 months.

I usually have 15-18 holdings at any one time. That means I should have about 30-36 trades (buy and sell combined) a year. So I’m currently a bit below that. And this supports my thinking above that I’ve been a bit too slow in cutting the losers early, and holding on for too long.

Looking at “activity” from another angle though…

Executing trades is just a fraction of all the work I put into my share investing. For every buy or sell, hours or days of work has gone into research, analysis, and forecasting. Over the course of 2025, I had updated research dossiers on 82 different shares, some of them stretching back almost 10 years. My longest research dossier spans 100+ pages long, excluding the Excel file!

I continuously update them with RNS, broker notes, company presentations, news, industry stats, the opinions of other investors.

Am I being selective enough in what I invest in? Possibly not, as a simple ratio of 16 holdings currently to 82 shares researched last year, means I’ve not been very picky and invested in 1 in 5 shares I keep a (detailed) eye on.

I’d ideally like that to be 10%. So really, I need to be monitoring 160 shares on an ongoing basis, double my current rate. But that seems an impossibility, while I continue to work full time and only spend evenings and weekends on The Boon Fund.

So here I think I have the answer of what could make my performance even better:

1. Be more decisive, do more ruthless “loss cutting” trades.

2. I’m happy with the current target of 15-18 shares in my portfolio.

3. But I do need to expand the universe of shares I am actively monitoring, to give me more opportunities to choose only the best 15-18 at any one time. As I have no more time to spare, my resolution for 2026 is leveraging AI in my research workflow to be more effective. This I have already started, and I will write an in-depth article more about how I’m using it to be more effective and efficient.

My top picks for 2026

I wrote the section headline above, and then realised… why? Everything in my portfolio IS my top pick for 2026, otherwise I wouldn’t have it in. So have a look at the bottom of this article for my full portfolio.

There’s too many (16) to write about them all in this post. I’ve written about most of them, at some point in the past - search in my Archives for the name or ticker. Or post a comment on this post, and I’ll write back.

But I will choose two to talk about. Not because they are my “top picks”, but because I believe they have a very strong bull case, but also a bear case. Quite a mixed bag. Makes it interesting as there are two very divergent paths possible.

» Rank Group #RNK $RNK.L

(52 week range of 80p to 160p, currently at 94p)

What a year its been with Rank. In the summer of 2025, my initial hypothesis largely played out, where the big transformational shift was starting: a big increase in profitability due to new legislation allowing more slot machines in casinos.

Then came new gambling taxes in the Nov25 Budget, and here we are at 94p, from a 160p high.

The slot machines rollout continues in Grosvenor casinos. Mecca bingo will also benefit from changes in the Nov25 Budget. But there is no escaping that online profits will be hit hard by the higher gaming duties. Up to an additional £46m cost per year in taxes. They only made a £25m UK operating profit in FY25!

However, I think there are many ways for Rank to mitigate that to a much smaller number. Cutting marketing spend is one; if everyone does it in the industry, no-one loses share. The second is giving worse odds to the punter; again if everyone does it in the industry, no-one loses share. The only losers are ITV (#ITV, $ITV.L) and gamblers.

Small online players will exit the market. So Rank will be able to grow market share. In addition, punters may move from online to offline casinos (where Rank has a large share in the UK) for better odds and marketing incentives.

However, there are lots of possible outcomes here. Number of gamblers might drop if odds worsen. They might go to unlicensed online apps or websites instead. Competitors don’t cut marketing spend or odds, so the whole industry settles at a lower profitability equilibrium.

So this is one of interest to watch over the next few months! I’ve spent a lot of time in the last few months modelling out various scenarios, researching more in-depth. And I’ve decided to hold at the current price, as I think the outcome won’t be as bad as the £46m Rank has initially indicated.

» Robert Walters #RWA $RWA.L

(52 week range of 116p to 300p, currently at 130p)

My biggest loser of the year. I’m down -50%, and this was a top 5 position at one point, so the losses have stung.

I got this very wrong. My initial hypothesis was that the recruitment market was in a temporary lull in 2024, and that it would bounce back in 2025. I collated and followed job creation stats in their major markets and none of the numbers suggested a continued decline.

I should have bailed early on, but I stayed on for one reason. Their management team have been brilliant in coping with the big decline. Cutting costs (ie headcount) ruthlessly. But also increasing efficiency; each “Fee Earner” places more jobs and makes more fee each month. Not a sign of a mismanaged business. And this despite what must be low morale in the company, as they are cutting employees constantly.

So on a unit economics basis, they are probably in much better health than ever before. The only problem is the top-line - can they stabilise, and then grow, the total number of jobs they place? The latest quarterly results showed still a steep -14% decline in Net Fee Income YoY. Definitely not stabilising yet…

But dig into the segments, and there are now two green shoots of recovery in the latest Q4 trading update:

Whereas if you look at Half Year (last time they published a breakdown), there was only one:

Sure, you could say “that’s only two small segments!”. But that is how most recoveries start. In certain segments or areas, leading the way. And you have to admit, +25% YoY and +29% YoY are pretty strong growth rates, so those segments are rudely in health now. Might the rest follow soon?

They are lucky they have a big cash pile to keep funding the losses, and the restructurings at the moment. mMany smaller, independent recruiters will be throwing in the towel. This slump is now almost two years old, hard for many small businesses to survive this. and There is opportunity then to mop up a greater share, even in a flat market, for growth.

Another key signal is that they have stopped cutting jobs. There seems to be almost no job losses in the last 3 months, according to my LinkedIn tracking. Unusual, because management have been ruthless in cutting headcount faster than revenues.

So maybe this is where the corner is turned? Or maybe these are my famous last words and I will have egg on my face in a few months time! After all their £25m+ cash pile will only fund losses for so long… and maybe structurally, the recruitment market has completely changed in the last two years.

I’m staying in because even if they hemorrhage another 10% of revenues, and have a subpar operating profit, they’re still on course for 20p+ EPS. At a PE of 10x, that would be 200p, a 50%+ gain from the current 130p price. And that’s not even taking into account their cash pile.

I hope you enjoyed reading this as much as I enjoyed writing it!

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Would you trust my judgement on Surface Transforms #SCE $SCE.L , if I told you that I’d previously invested in 2024 and made a -81% loss?

SCE went as low as 0.25p earlier this year. The shares are now trading at 1.75p, a 6-bagger since April. I wish I’d taken the plunge then, but it truly was on the ropes with a high probability of an equity wipeout.

So here I am, trying to convince you that I’ve got it right the second time round :) Below, I lay out my case why I think this could easily be a 4 to 5 bagger within the next 12 months.

My last two write-ups have had some amazing gains. THG with +91% since June, and James Cropper with +117% since April. So hoping this is three in a row!

What do they do

This is a new manufacturer of ceramic brake discs. I won’t rehash the intro what I wrote earlier this year, except to highlight four key points of the current situation:

• They have secured long-term sale contracts of their ceramic brakes with six car brands for six car model lines. These are exclusive, long-term contracts for the life of vehicle models.

• They have invested heavily to build factories for scaled production capacity. This has been a complete disaster, causing the SP collapse. They have grappled with low manufacturing yields…. but have recently gotten to grips with it, resulting in…

• In this current Q4 quarter (Oct-Dec25), the “start” of serious profitability recovery, Zeus forecasted a 67% gross profit margin, 19% EBITDA margin, and 11% PBT margin. This estimate was made at the end of Sep, so presumably with very high degree of confidence from management feedback. These margin percentages are solid for a stable state, but this is only just the beginning of profitability recovery for SCE….!

• Their current run-rate of revenues is about £25m/yr. By Q1-CY26, they will have finished their factory expansion which will provide £50m/yr of sales capacity. The factory build-out risk is diminishing rapidly as we get to that Q1-CY26.

Why I’ve invested

#1 Based on forecasted Q4 run-rate, they are only valued at 8x PE.

£6.3m of revenues and £715k of PBT in Q4, means taking a straight-line extrapolation gets to £2.86m PBT. They have plenty of tax losses to burn through, so that gives a PAT of £2.86m, and EPS of 0.22p.

I’ve ignored tax credits that they are due, based on the huge R&D they are spending. But that could add another £1-1.5m/yr.

At a share price of only 1.75p, that’s only a 8x PE to pay, for a company that will continue to grow (sales capacity at £50m/yr, now only at £25m/yr run-rate), in-hand signed contracts in excess of that £50m capacity already, and further margin improvements to come too. This should really be closer to 15x at this point in the cycle, so the shares should be worth double.

#2 The very sensible optimistic scenario for next year will result in a 4-bagger.

If I take £40m/yr revenue as very achievable from the current £25m run-rate, given the factory expansion (to £50m capacity) will be complete by Q1.

Company has already stated that production yields can be further optimised, so I expect the 67.4% forecasted Q4 gross margins to increase to at least 69.5%.

I give a generous allowance of +15% increase in admin costs. R&D costs have already been decreasing, so I bake in another -25% drop in R&D spending, as their products and manufacturing processes are now maturing.

Net finance costs will increase, due to the £13.2m loan for the factory expansion being fully drawn down, and at a pricey c11.5% interest rate.

All in - my personal forecast is for a run-rate of £13.8m/yr PBT to be hit sometime in 2026….!

Even if I assume they have zero tax losses to use (they have plenty from years of loss-making), and zero R&D credits to receive (should be £1m-1.5m a year). That gives me a PAT of £10.35m, and an EPS of 0.79p. The current SP of 1.75p is barely a 2.2x PE multiple.

At these types of profit levels, and with secured contracts for a visible runway to £50m/yr, and further opportunity to grow, Surface Transforms would easily trade at 10x+ PE and so this could be a 4 to 5 bagger.

I’ve used quite conservative numbers in my forecast. Surface Transforms expenses all R&D spend (c£12m for FY25 forecasted) instead of capitalising it. In addition, the R&D tax credits and tax losses are worth millions each to the bottom line too.

So why hasn’t this been seized upon by the market?

For one, the broker, Zeus, has suspended giving a FY Dec26 forecast. Probably waiting to see if the company is firmly on the profitability road to recovery in Q4. So we just have to wait for the TU from the company, and then the Zeus forecasts to be published showing a big step change in profitability here.

For two, given the huge value destruction here (70p high share price to 0.25p), and shambolic mess from the botched scaling up of production operations, many shareholders have barge-poled SCE. Earlier this year, it looked like this would be a big Zero in terms of equity, so many investors would had removed it from their watchlists. Surface Transforms is flying under the radar.

#3 Debt risk is rapidly diminishing

Speaking of the existential risk earlier this year, this was a very tangible threat. They’d made a £5.2m EBIT loss in H1 to Jun25. It was uncertain if they would be able to fix their manufacturing processes. Their manufacturing yields were only 41% some weeks. That’s throwing away 6 out of every 10 brakes they were producing!

They were fast burning through their cash.

They had to ask their customers - the car brands - to front them money. They took in more than £12.9m of prepayments from their customers. I feared that their customers might extract a pound of flesh by demanding to convert their prepayments to equity. However, the company’s presentation from July 2025 iterates several times that equity conversion is unlikely.

Their latest HY report also does not indicate that there is any consideration for this path (it doesn’t deny it either though).

But now, with a profitable P&L, and likely cashflow positive position, I think the risk of a debt to equity conversion is getting less and less by the day.

They do have one other major debt. It is a loan, from the Liverpool City Region Urban Development Fund, for the construction of the expanded factory facilities to £50m capacity. They have been drawing down this £13.2m loan this year, expected to be fully drawn down by the end of 2026, when the expansion is complete. It comes with a HUGE 11.5% interest rate. However, it will be very much less than 2x EBITDA at current Q4 run-rates, and less than 1x in my sensible optimistic scenario above. Furthermore, the lender (Liverpool City) has a vested interest in Surface Transforms operating as a going concern, so unlikely to pull the plug.

Once SCE hits a sustained patch of profitability, probably early 2027, they could easily refinance this loan at much lower interest rates of 5-7%.

So while the debt was scary earlier this year, I think the situation is now much more comfortable, and next year will be a non-issue.

#4 Operational risk is rapidly diminishing

Earlier this year, times were indeed dark when they revealed that in some weeks in Q1, they only managed to achieve 41% manufacturing yield. Despite having a very high gross margin (67%+), its impossible to be profitable if you’re having to bin 6 out of every 10 brakes you produce.

The yield went to 75% in Q2. In Q3, it slightly slipped back to 70%, but management say it was because of new processes, new equipment, and reiterated confidence to get to 80% or higher in the final Q4.

Having spent over a year on the problem, it looks like they have finally managed to get the process right. Quite a lot of value destroyed in that time; but if they’ve now solved it, then its all water under the bridge as we look forwards.

#5 Their products are very much in demand and customers desperate for it

In their latest July 2025 update, they claim that they have £300-400m worth of lifetime contract value. This is similar to a £390m number shared in Nov23. They have also revealed in the past that typical car models have an average sales lifecycle of 5 years, before a new platform / model is released, and new contracts are needed. So that is £60-80m a year revenues contracted.

I would guess that 60% of the contracts are for in-production models, or soon to enter production in 2026. After all, many of these contracts were signed in 2022 and 2023 ahead of new models being released, and a 2-3 year forward timeframe seems reasonable. So that would be £36m to £48m revenues. Underpins my sensible optimistic scenario of £40m/year of revenue run-rate in 2026.

Is there a risk that customers cancel contracts? It looks highly unlikely. They could have done so when SCE was really on the ropes earlier this year, unable to get to grips with their manufacturing process. But they did the opposite and doubled down - giving unsecured lending to SCE in the form of prepayments. With no interest, no demands for warrants or convertible clauses. Just straight up prepayments. And to the tune of £12.9m+! I would say that customers seem desperate for SCE’s brakes. Maybe because they are fed up with the monopoly that has been Brembo all these years.

What are the negatives here?

There are a few things you should be wary about.

#1 My thesis is heavily based on the Q4 (Oct25-Dec25) forecast from Zeus in this research note. I think it is sensible forecast, given that it was issued at the end of Sep25, very likely with guidance from management. But there is a risk that SCE disappoints, yet again.

#2 I’m surprised the CEO, Kevin Johnson, is still around after the debacle over the last two years, and overseeing the huge share price destruction. He’s a company lifer, having joined in 2005. So that could be why; hard to get rid of him. The COO is new though (albeit looking a bit junior and inexperienced) and the CFO is new too.

#3 Crazy LTIP granted

Nil-cost options over 6.85% of shares granted to the top three (CEO, CFO, COO) and vests only after 2.5 years. Crazy.

What’s crazier is that there’s ANOTHER part of the LTIP: a mirror-image cash bonus LTIP is also granted, so they will get 6.85% of the market cap in the same 2.5 years. In cash. So the three execs could up end up enriching themselves to the tune of 13.7% of the market cap in 2.5 years time.

AND the performance condition of the vesting is not detailed to shareholders. Only described as “subject to the condition that the number of discs shipped and sold in any rolling twelve-month period prior to 28 April 2028 exceeds specified conditions”. No profit metric, no revenue metric. Just ceramic brake discs shipped….!

For me, this signifies that SCE is probably not a hold for me longer than mid to end 2026. In the short term, however, this LTIP is positive news. Why are they granting it now in early Dec25? I think because management are confident that the problems are behind them, and so have pressured the board to issue this. Also the board must know that this LTIP is very aggressive and get pushback from shareholders, so they must be ready to announce some good progress news too. Investors will… begrudgingly… accept if they can see that the SP will soon be multiples of where it is currently.

Wrapping it all up

So there you have it. I am really optimistic about SCE. It is probably trading at a 8x PE at the moment, we just don’t know it yet because the P&L has been rapidly transformed in Q3 and Q4, and the broker has suspended next year’s forecast.

In my sensible optimistic scenario, 0.79p EPS is in my mind very achievable as a run-rate within 2026. And the share price is currently at 1.75p!

Within a year, this will be seen as a high quality company. Further +20% to +30% growth runway to £50m/yr. Operating at a 70% gross margin, a 35% PBT margin. The company already has further expansion plans to £75m capacity, and only 12 months build required, that they can now dust off. I wouldn’t be surprised if SCE trades at 15x PE, which would be an 11.8p share price, 6-7x what it is currently.

SCE will be in a worldwide duopoly with Brembo, the other major manufacturer of ceramic brakes. These brakes are in a fast-growing market, as heavier EVs will need these for safety, in addition to the ongoing steady growth in the sports car segment.

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Oct: +3.4% vs +4.1% (FTSE All-Share Benchmark)

YTD: +17.7% vs +17.3%

Since Jan 2021: 14.9% yearly IRR

Firstly, my apologies for not updating over the last few months - work got busy, personal life got busy. While I managed to find enough time to get through my core activities for The Boon Fund, the time to write any Substack posts escaped me. So this article will cover three months of updates, from end of Jun to end of Sep, including all my trades during that time.

After outpacing my chosen benchmark by 5.9pp by the end of May, I gave up most of that lead in the last four months. I ended October just slightly ahead (0.4pp) of the benchmark. Disappointing, of course… but I shouldn’t be too hard on myself, as most of my universe is from AIM100 and FTSE-250, which are only up +5% and +7% YTD. So a +17% performance is still a good result.

If I end 2025 now, I would be pretty happy. 93% return over 5 years, with all 5 years positive, and beating the FTSE All-Share every year.

The inner demon bear in my head

I think we have had a year of “the boy who cried wolf”. There has been a deluge of warnings of imminent market crashes and corrections. Yet, shares keep going higher. As I am a bear by default, this has been a very conflicting time for me. So many times in the past few years I have had the urge to liquidate and go more cash. This year I have been, on average, 30% cash. Last year, 20%. Right now I’m 40% “Bear” (25% cash, 15% short).

All that wasted capital! My 14.9% yearly IRR could have been much higher. Recently, I’ve succumbed and added a short ETF to my portfolio - more on that later. But you can see the real internal struggle I’m having.

But I now have a way to safely ignore the perpetual doom-mongering. Crashes and shocks, come as a surprise. Hence the adage that you can’t predict when the next crash is going to come. If there are plentiful articles and commentary in the media that equities are overvalued and a correction is the likely outcome… then it just won’t happen. Because that information is no longer a surprise to the market if it is being reported widely in Bloomberg, FT, etc.

So whenever I spot multiple articles in a day in the mainstream press conclude we are in the bubble / overvaluation / correction is imminent / black smoke signals on the horizon… I know I should just sit tight. Its when there is a lack of any of those articles, that I start to get worried of a hidden risk.

I have thought about whether I would do well in a crash. And I think I will, given my natural bearishness and near 30% cash position (near 45% if counting my short ETF). My approach (value, balance sheet strength, company-specific and industry-specific factors) will probably do well when there is a lack of macro momentum. Plus, with 40% in cash/short at the moment, I will have plenty of liquidity to deploy. So if there is a crash to come…. bring it on I say! I am ready.

Portfolio Trades

Quite a number of trades over the last three months!

» SOLD ALL: Time Finance #TIME $TIME.L

I decided to sell out the last of my holdings in July at 63p+. This was the right call, as the shares have slid to 49p since then, despite continual good news. Very puzzling why - the only explanation is that everyone else is also skeptical of how sustainable the growth can be. But the company keeps confounding the sceptics, at least when it comes to top-line growth.

Very tempting valuation here, 7x PE. It remains on my watchlist. Key things I am watching for is whether the low bad debt and arrears is maintained in the next set of results. The BoE lowering rates would be good too, as it would lower lending rates and stimulate more demand for loans from SMEs.

» SOLD ALL: Oxford Biodynamics #OBD $OBD.L

Calling time on my one and only dabble into blue sky pharma shares. With a 99% loss, this was more about portfolio housekeeping than damage limitation. OBD had great IP, with products approved and in market, but they couldn’t get their P&L and funding requirements in order to prevent value destruction for shareholders. It definitely needs another fundraise (or a take private while distressed), and neither scenario is good for small private shareholders.

» SOLD ALL: Spectra Systems #SPSY $SPSY.L

My patience wore out with this company; after winning a mammoth sensor contract about 2-3 years ago, they haven’t really won anything new. Contracts in their world take a long time from signature to trial to commercial volumes/revenues, so I can foresee a lean 2026-2028 when the revenues from their big sensor contract starts to wind down, and nothing else new to replace it.

Looks like I got out at the right time - having sold at 226p in July, shares have now slid to 147p. Ouch. At these levels, I am getting tempted to buy back in, but IMO there is a high risk of financial discrepancies or fraud in this company.

The founder/CEO has churned through multiple CFOs in the last few years, each of them from un-illustrious professional backgrounds, probably picked because they are green and malleable and ability to “yes sir” everything. In addition, their auditors are a tiny outfit, who doesn’t seem to audit any other listed company. Combined with opaque contracts and anonymous customers…. well, you can see how this script could go.

» SOLD ALL: Camellia #CAM $CAM.L

Another share where my patience has worn out, and I think there won’t be much of a catalyst for another year. Their “value” story is now well known, as they had crystallised much of it by selling non-core divisions, properties, and assets. So there is a lot of cash now backing up that NTAV. Trading at 5800p, real tangible NTAV is probably 8000p+ and full NTAV at like 12000p+ in my opinion. So very tempting for value hunters.

However, it is hard to see how you might realise that as an investor. Their new strategy calls for the bulk of cash they have to be invested into their agricultural operations and to make acquisitions. Given that management are still the same as the ones who delivered poor returns and poor strategy over the last few years, I don’t have confidence in them.

Furthermore, the main agriculture market they are in, tea, is struggling on a macro level in the countries they operate in, and will continue for at least another 6-12 months. So no catalyst there either to boost profits.

So I have exited at 5600p, making a modest c10% gain over 2 years of holding. Not great, but at least not a loss. I continue to monitor, as I think if the macro environment for tea improves, and they show improved profits, coupled with maybe some exciting acquisitions, and maybe a special div or expanded buybacks, this could easily close the NTAV gap and trade at 8000p instead of the 5800p it is now. An almost 40% gain potential, with minimal downside given its big discount to NTAV.

» BUY and PARTIAL SELL: Spaceandpeople #SAL $SAL.L

Having tracked these since 2018, I have seen SAL go through it all: the bull phase, the almost bust phase (during COVID), and the slow recovery (2022-2024). So when they had a positive update in July, the final pieces of the jigsaw fell into place. It is one of those moments where everything is finally together for a great story, and being a micro-cap, very few eyes spotted it.

Here’s why I invested:

• They now have secured “Supply” until 2029, whereas before they were on yearly renewal contracts, which introduced lots of Supply uncertainty.

• Their area of marketing (experiential marketing) as well as retail (pop up retail) are still-growing segments, compared to wider marketing and retail challenges. Hence, many investors had barge-poled this when they just read the keywords “marketing” and “retail”.

• Debt was high, and SAL was in a precarious position. But the corner was being turned - good cash generation paying the debt down, and increasing EBITDA meant the Debt/EBITDA ratio was dropping. The rising share price meant the debt/equity ratio also getting better. I always love to spot companies where debt is an issue…. until it suddenly isn’t.

Having entered at 145p in July (already a high as shares were <100p just months earlier), it ran up to 260p in October as other investors cottoned on too, and the company issued a positive trading update. I took some profits at 206p and 246p, as I was conscious of the low liquidity here and I had entered with a bigger stake than my usual sizing rules.

I am going to ride my remaining stake for now, as I think fair value for this in the next 12 months could be 330p. I think they have a greater than 30% chance of beating expectations for their crucial trading period (Oct to Dec).

The CEO sold some shares at 244p, which caused the SP to dip. But I won’t read too much into it, as she has a modest base salary (£140k) and so she might have wanted the money for something. Also, she sold some last Apr24…. at 102p….!

» SOLD ALL: Personal Group #PGH $PGH.L

This has done very well for me, having bought in at 171p and selling at 287p and 362p. I sold out after their last results, which was very positive and showed all the things investors like - top line growth, increasing margins, fast growing bottom line, promising outlook statements around new products and tech.

For me, the company has done very well in the last two years to get its main engine running again after COVID: face-to-face insurance sales to employees. However, the low hanging fruit is now already plucked. To keep growing, PGH will either need to sign up many more companies (to grow their addressable market of employees they can sell insurance to). Or create new products and services to increase share of wallet from their existing customer base.

On the first, I note they haven’t really won any large clients recently, otherwise they would have done an RNS. On the second, they make noises about new insurance products, but it is not clear if they can drive meaningful growth in the next 6-12 months.

Now that my original hypothesis has more or less been realised and fully understood by the market, and shares trading at a pricey 18x forward, I fully sold out at 362p. For an insurance company with some tech bits, I think I’d only be attracted to buy back in if its 10x or below.

» TOP UP BUY, TOP SLICE SELL: THG #THG $THG.L

Having bought a sizeable opening position in June at 24p, it shot up to 35p, before dipping back to 29p in Sep, where I topped up some more, for this to be my largest position in my portfolio. I had a really strong conviction here.

THG is a share that seems universally disliked; every other investor I have mentioned this to in the last few months, I have gotten a negative or lukewarm reaction. But this is where the biggest contrarian gains can be. I wrote briefly about it when I initially bought, and my investment hypothesis hasn’t changed: MyProtein is the gem here, with growth rapidly accelerating, both from company-specific factors as well as macro factors. Think why Nvidia has done well - they have a good product (company specific factor), and their market was fast growing (macro factor). When both company and macro are excellent, the SP is turbocharged.

• Company-specific: MyProtein rebrand last year went well, and the brand is clearly resonating very well with customers

• Company-specific: They’ve cracked the offline retail distribution channel. Now in Walmart, CVS, 7-Eleven, Costco. And also gobally.

• Company-specific: food brands keep wanting to launch co-branded products. And top-top multinationals, not small companies.

• Market-specific: strength training is fast growing. Guess what you need to consume for strength training : protein.

• Market-specific: whey prices were elevated in the past year, but they are set to reduce as more supply enter the market. Whey is the biggest input cost.

But even their other division, Beauty, is on a roll now. Top-line growth YoY has gone from -9.8% in Q1 to -2% (Q2) to +4.2% (Q3). Company specific factor here, they’re doin something well. In terms of macro factor, Beauty is one of the fastest consumer spend categories in the UK in recent months.

Shorts have gone from 3%+ and 6 firms declared in June, to now only 1.2% and 2 names. So the shorts are in retreat.

After the shares surged to 48p off the back of the positive Q3 trading update, I decided to top-slice some of the gains, as it was approaching 20% of my portfolio, a position I’m not comfortable holding in any one share.

My price target here is 65p+, but honestly I think it can go much higher. There is also a very strong chance of a bid here, most likely private equity - several have already come and been rejected in the last few years.

» BUY: Topps Tiles #TPT $TPT.L

What attracted me to Topps Tiles were two things: non-demanding valuation, and its outperformance vs market.

I kept running it through different valuation methods. Even assuming minimal further growth, the SP at 36p was a bargain.

Then it reported some strong growth rates; H1 revenue to Mar25 was +4.1% YoY, Q3 to Jun25 accelerated to +10%. Q4 to Sep25 was strong too (I don’t have it handy, but it was between +5% to 10%). All this, against a very weak consumer spending backdrop, and minimal YoY growth in the overall Home Improvement and DIY sector, as well as low new build rates both residential and commercial. I think they are doing something right, on a company level, to outperform the market.

So there you have it; a non-demanding valuation and performing better than the rest of the market. AND this has got to be the trough of property activity right? Both in terms of new builds as well as home movers and home renovations. I note that GfK personal consumer confidence survey numbers in Oct were pretty good - better YoY and an improving trend in the last few months.

So I am quietly confident that this could go from 35p to 50p easily with a slight change in sentiment. All it has to do is modestly strengthen its growth rate to c10% and for the outlook to improve slightly. That’s all. And if that doesn’t happen… well, its already at such a low valuation, there is little downside risk. Meanwhile, it is profitable, cash generative, and forecasted to pay a 7%+ dividend going forwards. Nice.

» BUY: Xtrackers S&P500 Inverse ETF #XSPS $XSPS.L

I mentioned earlier in this article my bearish tendencies. I succumbed and took the plunge at the end of Sep.

I had two hypothesis here - the first was that I believe the US markets to be overvalued, and some short term pull-back, 5-10%, is plausible. We have seen how flighty the retail capital can be in the market, and also the volatility caused by the sheer amount of options activity now in the market.

The second was that the pound looked a bit vulnerable, especially with the Budget coming up. And this ETF benefits when the dollar strengthens against the pound.

The first hypothesis hasn’t quite played out yet; the S&P500 has been volatile, but been up slightly since I bought. The second has come true, with the pound weakening against the dollar. Overall, I’m 1% up. XSPS is now 15% of my portfolio, so combined with my 25% cash, I am 40% anti-long at the moment.

Don’t follow me on this. I have no great macro expertise, no USA expertise. I know I’m feeding my inner bear voice here. But if you are like me and want some short exposure to the USA, this is it.

Portfolio Commentary

Wow, this article is pretty long already! I’m going to stop here, and write a separate post soon with commentary on four shares that have quite a lot to discuss about - Rank, System1, Sosandar, and Robert Walters. To come soon.

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Interestingly, my portfolio is still up (+2%) for the month to date; part luck, part good performance from other shares. But also because I haven’t taken any big losses on any of the profit warnings, due to buying at good prices.

It did get me thinking…. are there systematic things you can do, to spot when a profit warning might be coming? After all, if you can even avoid one or two nasty ones a year, that would dramatically improve portfolio returns.

Here, I look at Sosandar - a particularly nasty one with a near 30% drop in the share price.

Sosandar #SOS $SOS.L

Profit warning on 15th July. Shares down -21% on the day (8p to 6.25p), -28% 7 days later.

This one really caught me by surprise. Looking at my research folio on Sosandar, this was my last conclusion as of the 16th June:

Really good momentum here! Top up below 7.3p? But already at my liquidity limits

So what went wrong and was it noticeable from the last update or other data points?

Just to recap the key points that came out, causing a 30% share price plunge:

1. FY Mar25 PBT came in at -£0.1m loss, whereas the last guidance given only 3 months ago in Apr25 was for £0.5m PBT! That’s a huge £600k difference.

2. The difference was mainly down to a big £400k stock write-down.

3. There was then further worse news about the future….

4. Store rollout, which is a key growth pillar here, now paused after the first 6 stores. The current stores, all opened for less than a year, are not profitable yet. And the company fails to give any reassurance that they are confident they can be profitable.

5. Sales hit (unquantified) from Marks & Spencer cybersecurity attack; lower revenue now expected for the rest of the year.

6. FY Mar26 profit warning issued, £0.4m adj PBT now guided instead of £1.5m in broker forecasts. Quite a huge drop.

So as you can see, multiple bits of bad news. Not surprised the shares have dropped close to 30%.

Were any of these predictable in advance?

I decided to go through the last few updates from Sosandar, and see if there were signs and clues that I could have picked up, to predict this profit warning.

» [1] and [2]

Inventories were high in the HY results (£12.2m) and also last FY results (£11m). Total revenues were only £37m for FY Mar25, so these are very high inventory to sales ratios.

However, management seemed positive in the HY results of their stock control, commenting:

Inventory has reduced to £12.2m (H1 FY24: £14.2m) which reflects the planned reduction in stock through both the second half of last year and first half of this year as new styles were complemented by carry over stock to form the whole range. The lower stock holding also reflects the managed reduction as a result of lower orders on our own website and the higher margin being generated. There will be further reductions in stock, although not as substantial as already reported, which is helping to fund the physical store openings from existing resources.

(bold italics is my own formatting for emphasis)

However, the persistent high inventory, in an industry where stock goes out of fashion quickly, was a warning sign that there would need to be a stock write-down at some point.

» [4]

This was a big surprise, as all the commentary by management so far had been very positive on the stores.

From the Apr25 trading update:

We are pleased with the progress of our store portfolio to date, with sales tracking in line with our expectations, we have seen circa 60% of purchases in store being made by brand new customers to the brand and have seen a demonstrable uplift in traffic and conversion on our own site in the areas where our stores are located.

From the Nov24 Half Year results:

We are pleased with the progress of our store portfolio thus far, with sales tracking in line with our expectations. We have hit the ground running with strong footfall and conversion

Looking further ahead, we are increasingly informed by our learnings from the roll-out of our own stores

We opened our first four stores, with one more opening since the period end

So everything that was coming out of management, was positive commentary on the stores, that they were performing to expectations. So it was a bit of a bombshell for them to say in the latest trading update:

We have taken clear learnings from the trajectory of our stores in market towns versus shopping centres and are focused on getting our existing portfolio to profitability before opening any further stores.

Looking ahead, in the current year we are focused on getting our existing store portfolio towards profitability.

The stores we opened in the first two market towns (Marlow and Chelmsford) have the highest revenue and the highest conversion rate and are near to break even profitability within their first year of opening. The second two market town stores (Bath and Harrogate) only opened in February this year and are following a similar trajectory. For the reasons stated above, the shopping centre stores opened in Autumn 2024 are further behind on their path to profitability.

The way management present the store updates, it reads as though it is now underperforming versus expectations, and so they have changed strategy.

It implies that their strategy was to get all stores profitable within the first year of opening, and thus they have lagged behind and are now pausing the roll-out to “fix” the issue.

However, that can’t be right - as no management would set themselves such a strict criteria of getting to profitability within the first year of opening. Especially for a brand new store network.

In any other business, getting to near break-even for a new retail network within the first year would be an incredible success. Also you would expect some of the first few stores to fail, because you are testing out new hypothesis (shopping centres vs high streets).

I wonder if here, management have just screwed up in (1) not clearly managing expectations for the store strategy with investors at the beginning, and (2) the latest update on the stores sound like they messed up, but only if you had unrealistic expectations to begin with.

There were two signs, or should I say lack there-of, that maybe I should have picked up on.

One, management were very positive when describing progress with the new stores. However, I have now noticed in hindsight that not once did they mention profitability. The silence on profits was the warning sign that it was not going well in terms of profitability.

Two, in the last Apr25 trading update, they said nothing about new upcoming stores. The last one was opened on Feb25. If there was to be a continuation of the rollout, they would have mentioned more new stores on the roadmap. Again, the silence here was the signal that something wasn’t right with the store rollout plan.

» [6]

There was a big cut to the FY Mar26 profits, going from £1.5m PBT broker forecasts to only £0.4m! The company states that the two reasons are the lower than expected contribution from M&S, as well as the lower than expected profit contribution from the stores.

The stores we have already discussed above - I think it was a big own goal for management to set such high expectations for themselves to have their store network deliver profits within a year into the new launch. Management never clearly communicated their expectations either, and this is 101 in any relationship, whether personal or company/investor - if you don’t set clear expectations, all parties are going to be disappointed.

What about the scaling back of sales and profits from the M&S incident? There wouldn’t have been anything in the 16th Apr trading update as that was 3 days before it happened. Sosandar also didn’t release any updates after that.

But it was clear that M&S was a big contributor to third party revenues. This was from the HY results in Nov24:

In terms of revenue through our third-party partners, this has continued to be strong, in particular through our largest partners NEXT and Marks & Spencer.

However, Sosandar has never provided breakdowns to show the third party segment revenues. So it was hard to quantify.

In addition, none of the two recent updates mention any expectations of Marks & Spencer being a key growth driver for this year’s revenues and profits.

So could I have predicted this profit warning?

Looking back, possibly. The high inventory and the M&S cyber-attack make clear signs of challenging headwinds. On the stores, that one was harder to predict, but the key signs were what was left out.

So what have I learnt about how to predict profit warnings?

• Profit warnings may come from issues that have been festering in the background. As they say, problems never just come out from the blue, there’s usually a root case. In this case, high inventories was the canary in the coalmine, and very predictably led to a write-off and hence a profit warning.

• Profit warnings may come from an external event. In this case, the M&S cyber hack. Outside of Sosandar’s control of course. But for those eagle-eyed and smart at putting one and one together, it was clear it would be a major headwind to any growth targets for FY26.

• Profit warnings may come from what has been left unsaid. Management avoided talking about store profits in all their updates. Only about Revenue, Footfall, and Conversion. And in their latest update, they failed to give any information on the future store opening roadmap. Sometimes, silence is louder than words. Eagle eyed investors would have spotted the lack of any mention on profitability, and connected the dots.

So here are three simple rules to use when analysing company updates and results. I will be applying them going forwards, and hopefully it helps me to spot upcoming profit warnings before they happen.

I reckon I could boost my returns by 1.7pp a year just by doing this (average position size of 5%, average profit warning drop of -30%) by managing to avoid just one profit warning a year.

However, in the case of Sosandar, it turns out I've been pretty lucky. Or good at spotting where pricing has all upside and no downside. I bought in at 5.8p, and now even after the profit warning, it is at 5.75p. So no loss here from my original purchase price. Of course, I could have sold out when it was 30% higher if I had known this was coming…. 😂

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June: +3.7% vs +0.3% (FTSE All-Share Benchmark)

YTD: +12.7% vs +6.8%

Since Jan 2021: 14.7% yearly IRR

Another good month for returns, right after my best ever month. It does feel like animal spirits are slowly coming back, and while the FTSE All-Share only rose +0.3% in June, the MSCI World Index gained 4.2%, driven largely by the US markets. Who would have predicted back in April with the Tariffs, Ukraine, Iran, Big Beautiful Bill, rising long treasury yields all weighing on investor sentiment. Goes to show that the markets are always unpredictable!

Where do we go from here? I have my personal bearish views that the Tariff impacts are still to be felt, and the Big Beautiful Bill scares the bond and currency markets sufficiently that we’ll have a bit of a wobble at some point. But I also know that I have my own “bear” bias on this topic and am no expert on either topic.

So I’ll just keep doing what I do best and focus on finding good share opportunities to invest in. My goal isn’t to predict what will happen macro-wise, but just focus on beating the FTSE All-Share index.

Specifically in the UK, the AIM100 still looks like the ideal place to focus on. Despite its Growth-focus, it now yields 3.41% dividends on (mean) average, compared to 3.15% for the FTSE-100. It only trades at 3.1x P/B value, compared to 3.6x for the FTSE100. And there is a 19.5% forecast EPS growth rate, compared to 10.7% for the FTSE100. And AIM companies are being picked off weekly by takeover predators, so there’s then an outsized chance of juicy takeover premiums too. Plenty of the Boon Fund gains in the past have been generated by takeover premiums; I’ve been lucky to have one or two every year, despite my concentrated holdings (c15 shares usually).

Currently, my portfolio is 31% cash, similar to end of May (32%) and it is a position I think is too high long-term. Very few shares on my watchlist got to acceptable prices in June, so I’ll have to be a bit more patient.

A reader had commented recently that I hardly flag up any positive recommendations. By nature, I have a very critical eye, so I tend to spot all the negative aspects of a share quicker than the positives. I find this serves me well, as I can always get the positives by reading the broker notes and other investor writings. The negative view on a share is much, much harder to find.

I am very selective in what I buy, as I only add 5-10 new positions to my portfolio every year. I am also very selective in my watchlist of 50-ish shares, as I do this in my spare time after my day job.

What this means is that when I write about a share, it is on my watchlist, otherwise I wouldn’t have done the deep research. The fact that it is on my watchlist means I see potential from making money from that share. I need three things before I invest - EPS Growth Potential, Balance Sheet Comfort, and An Emerging Story. The last one is crucial - I’m not just looking for a company that can grow their EPS. I am also looking for situations where the PE valuation will expand. The intersection of EPS growth and PE expansion is the sweet spot I’m looking for, where 40%+ share price gains within 2 years is possible, which is my internal hurdle rate for choosing what to invest in.

I try to find companies where the Investing Story is not so exciting currently, but where I can see it changing in the future, and therefore drives that PE ratio expansion.

So ergo - while I am not here to recommend any shares, you can assume that any shares I talk about, is on my selective watchlist, and therefore one that I’m likely to buy, when it meets all three criteria above.

Looking forward, shares I’m closely monitoring

I keep looking at Rio Tinto #RIO $RIO.L as a possible buy, having flagged my interest in last month’s report. But resisting to do so as I know that I have very little knowledge of the mining sector. Also as a mega large cap (£69bn), I know there is a huge information asymmetry between myself and the hundreds or thousands of investment funds globally who track it on their watchlists.

Rio Tinto is at lows that making it very tempting to bottom fish. I believe in an emerging thesis that the huge military expenditure earmarked for the next decade will drive huge demand for iron ore and other metals (this is an example of the third criteria I look for - An Emerging Story). But it is, of course, a very slow moving demand trend over a decade, with the first few years the slowest bits. So what to do? If this was a small cap, I would have probably taken the plunge. But I’m second-guessing that smarter, better resourced investors than me have run the rule and concluded the current low share price is fair value.

A few more companies on my watchlist that are in turnaround situations look like they are moving in the right direction, but not quite there yet to be the right balance of reward/risk. Synthomer #SYNT $SYNT.L has spent the last two years on life support, with challenging sales and a huge debt pile. Some green shoots of top-line sales recovery and a new strategy focusing on higher margin, advanced chemicals.

But they’ve now had to secure a further covenant holiday from the banks, so it looks like another 18 months or more of being in the danger zone, balance sheet wise. I think the sum of parts here is probably greater than the current EV. The company is selling off non-core, non-crown jewel divisions at the moment, but I think they might be forced to consider a bigger break-up at some point, to get their balance sheet in order. This might also unlock some equity value. The current market cap of £150m for a c£2bn revenue company, which should be making a decent 7-15% operating margin… that’s a ridiculous bargain territory.

PZ Cussons #PZC $PZC.L is another company undergoing transformation. It has been trying to shed non-core divisions. It managed to exit its JV in Nigeria, but then didn’t manage to sell the St Tropez brand. Some debt is being paid down, which is good. It trades (at 10x PE) at a vast discount to other listed FMCG / Consumer Defensives companies.

The key problem is that PZC is too sub-scale. Investors give a high rating to Consumer Defensives companies like Unilever and Reckitt because they are very diversified, so earnings are more predictable. I think PZC will always stay at a big discount just because they are too dependent on a few brands. The only way to get to a higher rating is to become bigger with more brands.

PZC would make a nice bolt-on for a larger company. Even at a 40% premium (ie 14x PE) it is still less than the 20x PE some of the big Consumer Defensive giants trade at. However, there is no takeover potential here, as the founding family concert party have a majority control of the shares, and seem unwilling to consider a sale as an option.

If PZC manage to demonstrate that they can get good sustained growth in their portfolio brands, the shares could re-rate quite nicely to a 13-15x PE, on top of any EPS upgrades. Hence why I keep tracking it for now, to see signs of that.

Topps Tiles #TPT $TPT.L had a really good Q3 trading update. What makes it so stellar is the economic backdrop - most other home improvement companies are still struggling, consumer discretionary spending is still fragile, and home moves / new homes volumes are still muted. So I definitely think they are doing something right to outperform the market. They have been quietly outperforming the market for a few years now, actually. Steadily increasing their market share. Yet their SP are at multi-year lows, and now yielding a decent 7%+ dividend. I had a buy trigger at 35p; missed out buying when it dipped below that for a few days, and now its 37-38p after the Q3 update. I will be doing a deep dive into TPT next week, and could very well decide to buy some at the current price.

Portfolio Trades

Only two trades this month, one buy and one sell.

» BUY: THG (The Hut Group) #THG $THG.L

I did a detailed write-up on THG when I bought. I picked up a medium sized position (5-10% of my portfolio) here at c24p. The AGM Trading Update validated my hypothesis, that MyProtein has some very good sales growth momentum behind it, which should turbo-charge EBITDA this year and make the Deb/EBITDA ratio look much better come year end. It is now trading at 32p, so am already up c30% in just a few weeks.

It is my biggest holding now, and despite the low market sentiment towards it, I think it is a pretty safe bet.

My thesis still stays the same. There’s accelerating growth from their MyProtein division and the debt position is now dealt with and rapidly improving. There are plenty of buyers sniffing around that I’d be surprised if there were no more offers to buy THG or parts of it. 60p+ is where I think it can go.

The fly in the ointment? There were 6 shorters when I bought and THG was in the top 10 most shorted list in the UK. It has now come down to only 4 shorters and 2.3% and out of the top 25, which I can live with. I always have to question myself, me doing this investing gig in my spare time… what have I gotten wrong or missed compared to these six institutions, all of whom have full time teams looking at this? So that is the potential red flag here. But I have got strong conviction that everything is lining up nicely here for THG, and we will see increasingly better results and more balance sheet strength in the quarters ahead.

» PARTIAL SELL: Time Finance #TIME $TIME.L

With the latest Time Finance trading update showing rapidly slowing growth in the Gross Lending Book and Unearned Income, I decided to exit my very successful investment here.

Having bought in between 16p-23p in 2021 and 2022, I topped up further along the way, and sold out between 60p-63p. As it was fairly illiquid, I had to take several days to sell out, and after month end in early July, I disposed of the last of my holdings.

This has been one of the most successful investments for me, a 3-4 bagger. Kudos to Time Finance management for having spotted an opportunity in SME lending, and going after it and as a result achieving their 3 year plan sooner than they expected. They’ve grown the top-line, improved operating profit margins, even reduced bad debt and arrears percentages despite the rapid growth in the lending book. They have consistently beaten broker forecasts in the past year or two, leading to continuous EPS upgrades.

There is a new 3 year strategic plan now in place. More of the same stuff: keep growing asset financing, invoice financing for SMEs. But for me, my worry is the major slowdown in the Gross Lending Book and Unearned Income metrics. Both of which are leading indicators for revenue and profits in the next 12 months.

There are plenty of investors who have invested for the high growth, and some of them will be jaded and impatient in the next two quarters when revenues, profits rise only by low single digit percentages, and TIME stop beating broker forecasts. I think the shares will probably go sideways or even down for the next 6 months or more. If things dip back to the 40p mark as it has recently, I might be tempted to open up a position again.

Portfolio Commentary

» Rank Group #RNK $RNK.L

Last month, I mentioned that changes to gambling legislation was finally getting on the legislative agenda. Now it has been confirmed - and starts 22nd July. This will allow Rank to increase the number of slot machines in its casinos. We should see quite a big step-change in revenues and profits from their Grosvenor casinos division.

Brokers haven’t really upgraded their EPS forecasts yet officially, so there is likely to be a further surge up in the share price when they do.

Shore Capital, one of the joint brokers, estimates this could add 3p to EPS. The forecast for FY Jun25 just ended was only 8p, so this is quite a substantial step up in profits.

I think Rank should easily be trading at more than 230p. While most investors favour online casinos instead, I actually favour Rank because of its offline arm. New land-based casino licenses are almost impossible to get now in the UK, so there is a natural moat, especially with the increasing adult population and inbound tourism. The government is also cracking down on online gambling, which will drive more hardcore gamblers to land-based casinos. Limits are higher, and there are less restrictions. In this situation, Online is not always better than High Street.

However, Rank is also exposed to online gambling, as a substantial portion of their revenue comes from their online operations. So there is that trade-off to consider.

Regulation-wise, now that the government have passed their big gambling legislative update, I expect there to be a stable no-change environment for the next 2 years at least. The only risk I can see on the horizon is Rachel Reeves increasing gambling taxes in her Autumn Budget. One to keep an eye on.

» Mountview Estates #MTVW $MTVW.L

Disappointing FY results out, and as usual, very short on details. We’ll have to wait for the full Annual Report to get all the details.

I really do need to do a full write-up here on Mountview given it is one of my long-held positions. But if you’re interested, Maynard Paton has been publishing very detailed commentary on Mountview Estates for years. His view is that the NAV is closer to 16,900p compared to the sub-10,000p it trades at currently. It is a special situation, as Mountview mainly holds Assured Tenancy properties, which have tenants paying well below market rents. Landlords have limited avenues for eviction. But when a tenant leaves (usually through death), it can be sold as a “normal” property. So the value of the property is far higher when vacant, compared to with a sitting AT tenant. And that is how Mountview have been generating lots of good returns for shareholders in the last decade or so.

I hold because the 5%+ dividend currently is quite stable and compensates for opportunity cost. It is trading below book-value NAV, and far below realistic present-day-value NAV. Looking at the historic 10-year trend of share price premiums to NTAV that have been possible, I think at some point this could go from the current 6% discount to NAV to 20% premium to NAV. NAV will also steadily rise as more AT tenants vacate, and properties are sold at a big premium to book value. 13,000p is my target sell price here, from 9,750p currently. However, it might take a few years to get there, or never.

There is also a small outsized chance that Mountview changes its strategy and disposes its AT property portfolio in a bulk sale to a trade buyer. It won’t realise the full value (16000p+ Maynard Paton estimate) but maybe in the range of 12,000p to 14,000p.

» Robert Walters #RWA $RWA.L

The woes here continue… with the share price continuing to drift down, now at 180p, far below my 290p initial purchase in Jan25 and 218p top-up in Mar25. I definitely jumped in too early. It is also one of my top 5 positions, so has been a painful drag on my portfolio performance.

Talking to other investors about the recruitment sector, AI is immediately cited as why they aren’t interested in recruitment. On the surface it makes sense - if a HR department can use an AI to sift through all the CVs and identify the best candidates, then external recruiters aren’t required right?

I think of it in a different way. HR departments are rarely tech savvy. Those of you who have worked in large corporate environments - how often have you loved the Corporate Intranet, the various HR systems for Expenses, Annual Leave, Policies? I’d say probably none of you. Companies do not think about HR when allocating Tech and R&D budgets. So why would a cutting-edge technology like AI make its way successfully into HR departments?

More likely, the external recruiters like Robert Walters will invest in AI. Each Fee Earner will be able to handle more roles, so more profit for the Recruiters, or fees will be slashed for the clients (HR departments).

This makes it even more attractive for HR departments to outsource recruitment to external recruiters; high fees has always been the sticking point. HR teams hate to have a big recruiting team and would rather prefer to outsource it, because recruiting volume is very lumpy and unpredictable. When a company is doing well, there might be tons of vacancies opened. In struggling times, new headcount is often frozen.

Success of AI for a specific workflow also requires a good volume of structured data. A company might hire 2 data analysts for example a year. A recruiter will have hired hundreds across all the clients in a year. Which one has better training data for AI to better identify the best data analyst out of the hundreds of CVs sent in?

But I know I am very much a contrarian position here, against the vast majority that believe AI will make external recruiters redundant.

I keep doing the sums, and even with a modest recovery of 10% of revenues from current lows, a conservative assumption of 4% operating margin (they can easily do 5%+), I struggle to see less than 30p EPS as a conservative earning potential in the years ahead. The current SP (180p) is assigning a PE of 6x, which is crazy.

The company has demonstrated that it has no balance sheet danger with its cash pile. It is also very operationally nimble, able to slash headcount and costs in-line with the revenue decline so far.

I am very tempted to have a bit of a top-up at the current levels! But am I just catching a falling knife? I tried catching the falling knife at 290p when I thought it was a bargain, and also at 218p. Do I just have a blind-spot here with Robert Walters, and should cut my losses and not throw any more good money into the pit?

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This company has an interesting niche, producing iodine. You don’t often hear about iodine, but it is quite an essential chemical. Apart from being used to disinfect wounds, it is also extensively used in medical imaging. Also, it is also famous for nuclear radiation scenarios, where a derivative of it helps to protect the thyroid gland.

The company has 10 plants in the USA, and is planning to build a new plant every year. It makes iodine from brine water, a byproduct of fracking. Its 10 plants are located near fracking areas in the USA.

Majority of sales are within the USA, with the second largest region being Asia, and they have some sales to Europe and other regions too. In FY Dec24, none of their customers were more than 10% of sales, albeit a few were between 5-10%.

It is a pretty strange setup, with the Iofina HQ based in UK, but all the manufacturing and most of the sales based in the USA.

There are six key points here for me:

• Big dependency on their suppliers of brine water. They have contracts for the raw material, brine water, that they need to regularly renegotiate. In FY24, their margins declined because they had to pay more for the brine water compared to past years. Also, there is an environmental risk - because of some adverse weather condition over winter, their brine water supply was reduced, affecting production. Water scarcity worries in the future might also be an emerging risk.

• Dependency on the iodine spot price. On top of not having control over their input costs, they don’t have control over their sale prices either. It doesn’t look like it is possible to hedge iodine prices - at least the company doesn’t seem to do it.

• They don’t seem to be one of the largest suppliers globally. Iofina has than 3% share of global production. At least that’s the answer that Perplexity AI gave me. So they could be squeezed by a glut of supply, quite easily.

• The shares are just not cheap enough, yet. For a commodity share like Iofina, there is likely to be a boom and bust cycle. For a single commodity, small producer like this, one yardstick I use is adjusted FCF, adjusting out some of the expansionary capex, but not all. Here, I think they could do 3 US cents a year FCF if they stopped building new plants, and if I think a low valuation point at the bottom of the bust cycle is like 5-7x that, then that is a 11p to 15p share price. Compared to the current 24.50p. Within the past year, the price has gotten as low as 17.50p, so in a bust part of the a cycle, below 15p seems feasible.

• Nuclear could drive demand for Iodine derivatives. Potassium Iodide (KI), a derivative of iodine, is distributed and ingested in tablet form during a nuclear accident, to prevent the thyroid gland from absorbing radioactive iodine. Iofina is a producer of Potassium Iodide. Every time there is a potential nuclear accident, say after Fukushima or even Russia’s invasion of Ukraine, there is consumer panic buying of KI tablets. With Nuclear power making a resurgence, there inevitably will be more accidents in the decades to come. More imminently, increased conflicts between nuclear powers or would-be nuclear powers in the world (Israel, Iran) threatens to also cause a nuclear accident.

• Candidate for a USA takeover? Given that UK markets are definitely undervalued compared to US markets, I wouldn’t be surprised if a US listed company comes with a bid for Iofina. After all, this is almost a 100% US company - production is there, sales is mostly there. So would make an easy addition for a US chemical conglomerate or even an Iodine producing competitor.

In Conclusion…

Interesting share. Probably not one that I am very interested in, given some of the key risks outlined above, and the fact that the share price doesn’t seem to be at Bust Cycle levels yet. But one I’m going to keep checking back in on, and maybe a good punt if nuclear accident fears take off, leading to a big increase in demand and pricing.

Artisanal Spirits #ART $ART.L

I am not quite sure how I stumbled across this company, but when I heard there was a MelloMonday presentation, I thought why not. It does something really unique with no other listed peer. Basically, they run a whiskey membership club. Like a cross between a Diageo #DGE $DGE.L and a Naked Wines #WINE $WINE.L . Artisanal Spirits are a “producer” like Diageo, aging whiskey in casks and then bottling it for retail sale. And it is like Naked Wine in running a membership model for enthusiasts, promising interesting bottles to experience. Just whiskey instead of wine.

The MelloMonday presentation was alright. Nothing really stood out, it was a very average presentation. I couldn’t detect any hint of bullishness for the near term, which probably suggests that current trading is a bit soft? Nothing about their membership operating model really stood out as being operationally excellent, a very compelling value to the customer, or a highly profitable machine. The only “wow” point was management claiming that their c£25m of “inventory” (whiskey in casks) is actually worth £102m as valued by “independent experts”. And probably 5x that - £500m - once it is bottled, branded, and sold for “retail value”. Wowsers.

If that £102m valuation is true, then we’re looking at a 100p+ NTAV here, which compares to a current share price of 47p. Sounds like a bargain, doesn’t it?

However, when I look at the FY24 numbers, I find that Cost of Inventories Recognised as Expense, which I presume is from book value, was £6m. This was used to drive £18m of whiskey sales in the year. So that only makes it a 3x multiple from book value to retail price point? Not the 4x from book to “current independent valuation” and another 5x multiplier to “retail value” that management are claiming… one to investigate further for those interested in these shares?

Despite the membership club (The Scotch Malt Whisky Society) having been around since 1983, I was surprised to see that the company is barely profitable. £1.1m EBITDA on £23.6m revenues! FY23 was even loss-making. I can excuse a poor profit margin if the company has been growing rapidly, but here they also fail.

The membership base only grew by 4% YoY, which is a very paltry number. The key culprit was a 4% fall in the Americas, their second largest membership base. And a modest +6% growth in their largest (>60% of members) region of Europe. I don’t think we could get a better discretionary spending environment in the USA as we did in 2024; all categories from fine dining (eg $1000+ NYC omakases) to luxury travel did extremely well in the USA. In Europe, I can see why growth is anaemic, and likely to be structural going forwards. Asia was the fastest growing membership region at +12%, but it only makes up 13% of the membership base. And I’d be surprised if they can get a double digit growth in Asia (which mainly comprises Japan and China) this year, given the tariff impact on Asian economies.

The other shocker is the Retention Rate : only 71%…! This is down from 74% in FY23. In addition, average revenue per member also declined -13% YoY. These are not good recurring revenue metrics. They have to find almost a third new members every year, just to stand still. So I’m not surprised that the net base growth was only +4%.

The silver lining? They are not spending too much on customer acquisition. c£250 (commissions and marketing combined) per acquisition, compared to a £900+ gross margin earned per customer (over 3.4 years). Somewhat break-even, but again, where’s the healthy profits?

At a £65m market cap, £25.5m net debt, and £90.5m EV… what level of EBITDA do we need to make the maths work? Probably a £10m or more EBITDA? That’s a long way from the £1.1m in FY24. I can’t quite see how the company is going to get there.

There are only a few levers they can pull:

• Increase the gross margin by 67% from £15m to £25m, and hold all other costs flat (unlikely).

• To get that gross margin increase, they will need to sell 67% more whiskey to each member a year. This seems unlikely, especially given that spend per member per year isn’t going up!

• They could also grow their membership base by 67%. But given the anaemic growth in Europe (60%+ of their base) as well as Americas, and Asia being hit by the tariff impacts, this looks unlikely too.

and this is the shocker…

So the company reported a flat revenue growth YoY, from £23.5m to £23.6m. However, all this was “engineered” by doing an “asset sale”… they sold off some whole casks of whiskey, to the tune of £4.0m worth! In the prior year, they only sold £2.7m. So really, adjusting this out, revenue actually fell by £1.2m YoY.

This means that one has to be really careful when looking at the revenue and profit growth every year, as the company is not adjusting out “asset sales” and the resulting profit from either the top line or bottom line. They can easily manipulate the top-line (and also bottom line!) by selling off casks of whiskey from their inventory…

In conclusion….

I could go on and on about some of the red flags here. Actually, I will mention one more. On the surface, it looks like there are LOTS of director buying. But they have all been tiny amounts, a couple thousand pounds here and there by the CEO, CFO, Non-Exec. The Chairman did buy a good £118k worth in an 8 month span in 2024 between 38-49p, but nothing since then. Despite the share price still in that range (and going lower than 38p too at some points). Why? Also, he probably has some serious personal wealth, having been the President & CEO of Molson Coors in the USA until 2019. So £119k is probably not a substantial part of his net wealth. However, I am impressed that someone of his stature in the drinks industry has decided to chair this small cap company. He was also responsible for taking the company public in the IPO. So some more digging there for the story might be illuminating.

Anyways, back to the conclusion - I don’t think I see enough here to give confidence that there is a healthy growth story here, and so I think the EBITDA performance is likely to be muted for the next few years. In theory, there could be some rapid growth here as they expand in Asia, but it is growing from a small base, so unlikely to make a huge impact for a few years. Meanwhile, there is the high “liquid” asset backing here, so if one is comfortable with the company’s valuation of the casks, then there’s a more than 50% discount to NTAV available at the current share price.

Surface Transforms #SCE $SCE.L

This is a share I have owned in the past, one of my all-time worst performers in percentage terms (-81% loss). Although in absolute terms it was much smaller given it was always less than 3% of my portfolio.

This company makes ceramic brake discs, and was poised to challenge the monopoly held by Brembo. Ceramic brakes are superior and mainly used in sports cars, albeit they are also useful in EVs which are heavier than normal cars.

Their end customers (OEM car manufacturers) have been eager for this new supply, to diversify away from Brembo. Surface Transforms now have some impressive long-term contracts to supply ceramic brakes for many upcoming new car models being launched.

The company then embarked on building scaled manufacturing facilities for ceramic brakes. However, this has been a massive disaster, the main reason why the share price went from 50p+ all the way down to 0.25p and now back up to 1p. They ran into issue after issue, and had to do repeated fundraisings.

To date, their manufacturing process is still not giving the right quality and yield to be profitable. They are targeting 85%+ yields; they were only getting 41% to 83% range in Q1 (Jan to Mar25). Inconsistently too; it wasn’t a steadily progression of improving yields over the weeks.

Their Trading Update for Q1 didn’t mention any reassuring statements that they had identified all the root causes. Which is worrying. They are trying to fix a problem, when they don’t know if they have the full understanding of all the issues, or the solution design.

Their FY results issued in early June had an update on operations, and it was what was omitted that was interesting:

• No operational yield numbers given, despite giving them in the Q1 trading update (41-83%). This suggests they are trying to hide bad news - that there has been no progression in getting yield up, or getting more consistency.

• No timelines given for when they expect to hit certain levels of yield or have all their problems fixed. You would expect so, given they have been working on this for a long, long time.

• They’ve started “executing a £13.2m capital investment programme” funded by the ERDF loan. They state that this expenditure is to “enhance the manufacturing process”. However, when the loan was originally agreed, its purpose was to expand manufacturing capacity to meet the 2025-2027 requirements of all the OEM contracts they’ve signed! Now that they’re using the money to fix yields, where are they going to find money to expand production capacity to satisfy all those contractual agreements? Silence on this. In addition, the interest rate on this loan has never been declared I believe. Will the company, even at a 85%+ yield, be able to generate enough EBITDA to cover the financing costs?

• They are also now heavily in-debt to their customers, having taken £11.9m of prepayments from their customers as of 31 May 2025. This figure was £8m as of early Apr25. Combined with the £13.2m loan above, their total gross debt is probably exceeding £25m at this point. Market cap is £13m, even after the 4x rise from 0.25p to 1.0p in the last two months.

• In the Q1 trading update, they also said this:

  “strategic discussions with certain key customers regarding longer-term arrangements are at an advanced stage”

All this suggests that further fundraising is inevitable, as they won’t have the cash to scale up the working capital, after they fix their yield problems. They will also need more debt for the capacity expansion required in 2026 and 2027, to meet the OEM contracts they have signed.

There is not a single word that gives me confidence that they have:

• Identified all the problems causing the low yield

• Have a well defined and low-risk solution that will get to a profitable yield

• Know how much cash they need to fix it, except that they have the £13.2m loan they are drawing down to “try” solutions to fix

In conclusion…

I am puzzled by why the shares have quadrupled from 0.25p to 1.0p. Kudos to those brave enough to invest and seen this amazing gain. Maybe I’m being too pessimistic here, and their manufacturing problems aren’t as bad as it seems? However, they have been trying to fix it for almost two years now… so it seems very complex or deeply rooted. Or maybe even not fixable.

I still have faith that this could be a highly profitable, duopoly-type company in the future, so will be keeping an eye out for when they confirm they have gotten to the 85%+ yields, as well as after they sort out their balance sheet.

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The first rule of writing is make sure to write what people want to read. I reckon this post on THG #THG $THG.L will have the lowest engagement out of all my 48 posts so far, as this share is like Marmite. For good reason, looking at the share price performance since IPO:

I don’t blame those that have completely barge-poled THG due to its abysmal performance. I do the same with many other shares that have lost more than 95% of value - the crap companies that is the muck at the bottom of the barrel. The blue-sky stocks that have no viable business model. The scams. The pre-revenue companies. But does THG really belong here at the bottom of the barrel?

If you look at the list of online eCommerce brands that they own, and their traffic (taken as a proxy for market share in the UK):

• LookFantastic - #1 traffic in Beauty & Cosmetics (Similarweb)

• Cultbeauty - #5 in Beauty & Cosmetics (Similarweb)

• MyProtein - #1 traffic in Nutrition, Diets, and Fitness (NDF) (Similarweb)

So THG have the #1 sites in two big categories in the UK. And both brands also do substantial sales overseas too; more than 50% of group sales are non-UK.

The enterprise value (EV) of THG is just under £600m. Sales in FY Dec24 (continuing operations) of £1.7bn. That gives an EV/Sales multiple of just 0.35x which sounds a massive bargain for what should be decent margin industries of Beauty, NFD, and eCommerce.

So this is what got me starting to dig into THG…..

THG deserves deserved to be a laughing stock

The share price says it all. Its been a diabolical disaster since 2021. They went too aggressive for growth, burnt through loads of cash. They had a division called Ingenuity, which was meant to commercialise their end to end eCommerce stack and offer “eCommerce-as-a-service” to other companies. It failed spectacularly to generate any sort of financial return.

It has been a favourite share in the investment community to ridicule and laugh about. Similar to Boohoo #BOO $BOO.L and Asos #ASOS $ASOS.L. The trio of spectacular online pure-play eCommerce failures in recent years.

THG is saddled with £205m of net debt. Growth last year slowed to a halt (-2.5% Sales YoY). Adj EBITDA margin is a mediocre 5.4%.

Yet…. the THG today, is so different to the one a year ago. But for many investors that long ago gave up on THG…. the transformations, and their implications, might not have been noticed yet.

THG should rename themselves

Because it really is a different company from the one a year ago.

The key changes are:

#1 Jettisoned the Ingenuity part of the business, which was heavily cash burning and capex heavy, and likely to be loss-making for several more years to come.

#2 Massive rebranding of the MyProtein brand, which resulted in commercial havoc last year, as old inventory with the old branding needed to be cleared, empty shelves in some product lines, etc. Nutrition revenues contracted -11% in FY24.

#3 £300m of lease liabilities shifted with Ingenuity - which really helps the balance sheet for THG. Especially when you look at this number compared to the £380m market cap it is currently.

#4 Net Debt / EBITDA ratio has decreased to 2.2x from 3.2x - from the two fundraisings. 3x is danger zone, 2x is uncomfortable. And don’t forget - EBITDA was depressed last year from the declining MyProtein sales, due to the rebranding (#2) but that is a temporary effect.

#5 MyProtein also hit by one-off external factors - spike in whey protein prices and a rapidly weakening Japanese yen had a major impact on MyProtein. However, these look one-off to me. Both headwinds will turn into margin improvement tailwinds this year.

So the situation of THG is really different now.

FY24 EBITDA margin was a very 5.4%. I reckon this should easily recover to the 7-8% range, and there’s no reason why it can’t get to 9-10%. The Nutrition division (aka MyProtein) has done 13-15% before, and the Beauty Division has done 6-8% before.

MyProtein set to drive a strong recovery in profitability

I believe that MyProtein could be worth more than £1bn EV on its own, within a year or two. Its FY24 revenues were only £580m and £34m divisional EBITDA, so definitely still far off that valuation. But here I lay out the case of why it can rapidly improve within the next 24 months:

#1 Rebranding now complete. Remember, the rebranding roll-out chaos led to a -11% YoY revenue decline and -54% in divisional EBITDA decline in 2024. The rebranding is now complete. Q1 revenues recovered to +0.1% YoY. There is positive momentum, rapidly improving.

#2 Diversification to offline. Over the past two years, THG has been busy signing new distribution through offline sales channels: major chains such as Boots, Holland & Barratt, and WH Smith. As well as launching licensed products with Muller Dairy and Iceland Foods. This side of the business will be a growth engine for years to come, as well as provide a conveyor belt of new customers to the D2C online sales channel.

#3 Whey prices to come down, Japan manufacturing now live. The company said this in Apr24: “new global volumes of high-concentrate whey protein entered the market during the first quarter, supporting a more normalised commodity market outlook”. The Japan manufacturing facility went live in H2-24, providing a hedge against FX moves.

#4 Protein demand is strong and growing - you only have to look around the supermarket shelves, and even in some restaurants these days, to see an explosion of “high protein” products. In gyms, cardio is out, weightlifting is in vogue. Women are leading the growth in strength training. Protein shakes and protein products are going to see a surge in demand off the back of this.

It is #4 that really excites me, as it can be THE growth driver for many years to come. I get the sense that this secular growth trend hasn’t hit the investment news yet, so still under the radar with many investors. Just look at this Google Trends chart for the [Strength training] keyword.

Brand search volume for MyProtein, globally, are also growing YoY, which backs up points #1, #2, and #4 are working, and we should start to see this flow through the H1-25, H2-25 revenue numbers.

Just look at the chart below. Since February, there is clear sky opening up between 2025 vs 2024, in search volumes for MyProtein globally. Last year (2024) had negative to zero growth.

And MyProtein sits right at the heart of this shift from Cardio to Strength. Going back to Similarweb, this a list of the top sites, globally, for the Nutrition Diet and Fitness category.

MyProtein is at number 8. The first 7 sites, none of them sell protein products.

Valuation time!

So I’ve now made a strong case for MyProtein, and why I think it can be the key driver for a re-rating of THG shares. I am going to quickly mention Beauty, the other division that is 65% of Group revenues, delivering £80m divisional adj EBITDA (7.2% margin). I think it is in a mature growth phase, but a dominant player (the #1 traffic position in the UK), so will probably drive modest single-digit growth in revenues and EBITDA over the next few years. Lets say they can get EBITDA another +10% over 24 months, so £88m in total.

In MyProtein, I think growth here could be at least 20% total over the next 24 months, given the drivers listed above. That would be £700m revenues. Margins should recover to long-term trends, which have reached 13%+ before, but I will take 10% to be conservative here. So a £70m divisional EBITDA.

So we have a total divisional EBITDA of £158m. I estimate £30m of central costs to take off, so Group EBITDA of £128m. Given their profitable nature, low capex requirements going forwards, and dominant market positions, an 7x EBITDA would be a bargain here, and that implies a £896m EV. Which would imply a 62p target share price, from the current 26p. And this is taking a conservative 7x, and also conservative 10% margin for MyProtein.

So hence why I think this can easily +50% or more, within a 12 month timeframe, when the growth momentum starts to come through in the H1-25, H2-25 numbers. And +100% share price within 24 months.

There is also another valuation data point available. There was a half-serious bid approach earlier this year from Selkirk, valuing MyProtein at a £400-600m EV. Given that MyProtein was only 30% of the total EBITDA in FY24, that implies a £1.3bn to £2bn EV for the whole group, in a very simple extrapolation. Even if you chop that by half - £650m-£1bn EV - the bottom of that range is STILL higher than the current £600m EV.

The current share price is also much lower than recent fundraising rounds, at 49p in Oct24 and 32.5p more recently in Mar25. So there is already a discount to what institutional investors were willing to pay recently.

Red flags, my conclusion

There are still some red flags here. Short interest in THG has been increasing in the last few months, which is worrying. And not just the total amount of short interest, but the number of institutions (six), is worrying.

Matt Moulding is still CEO, despite presiding over a car crash of strategy in the past few years. He may be the founder, but maybe he’s just not the right person to lead THG now that the brands have grown up and matured? Why did he have plenty of free time recently to conduct a pubic spat with an ex-CEO on social media?

Normally, these two ref flags would make me wait and watch, until the shorts clear and I have more confidence in management. However, I feel that next week’s AGM trading update will start to show some progress with growth and profitability.

In addition, I do think industry players, globally, must be circling MyProtein, as it is a crown jewel in the NDF industry that will see secular growth riding on the coat-tails of strength training trends. Nick Candy was circling THG in 2022, and Apollo in 2023, so there is clearly something of value here. I’d cry into my porridge if I held out for a few more pence of lower share prices, only to miss out on a major takeover premium.

So I am now in at just below 24p, and think this can easily get over 40p within a year, and with a good chance of 60p within 24 months.

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This company has been on my radar for a few years, after I read that they were half the global manufacturing capacity for a material called PEEK. Its common name is thermoplastic - having good mechanical strength and able to be used in high temperature environments. Applications for this material span from aviation to medical equipment to cars and electronics. There was a factoid I saw somewhere that over 200m cars have PEEK within anti-lock braking systems (ABS).

The majority of manufacturing happens in their UK facilities, although they have just built and opened a China factory last year.

At a £680m market cap and just under £300m of revenues, plus being a key, dominant specialist in the PEEK industry, the low valuation rating of a UK listing could attract a global bidder at some point from the speciality materials industry.

Victrex have had a few bad years - driven by weak demand in their end markets over the last few years, as well as inflationary cost input pressures as well as energy cost pressures. However, it has now been at least 3 years since they started flagging this all up in mid-2022. They also used to consistently generate operating margins in the 30%+ levels, but not in the last few years. Currently, adjusted operating profit for the HY to Mar25 was 20.7%.

The challenge in the HY performance was due to gross margins declining from 48.0% to 44.1%. Quite a steep drop, and while Product Volume sold increased by +16%! Increasing volume of product normally drives higher gross margin, as operational gearing takes place. So this was unusual to see. The company blames “sales mix”, as more product went to Value Added Resellers (VAR), which buy in bulk cheaply from Victrex. VAR increased as a share from 39.8% to 44.6%. The company says pricing (and by implication gross margins) for VAR are lower.

By doing a goal-seek in Excel, one possible scenario I can see is that they are selling to VARs at negative margins and taking a loss. That would explain the steep falling margins, while VAR share goes up, and the company claims that LfL pricing for other customer types are broadly similar YoY. In effect, have they been “dumping” product into the VAR market, but why?

This would make sense if the company was looking to clear out inventories. Indeed, Victrex last year identified that they had high inventories. It was £126m as of HY Mar24 (compared to total sales of £139m/HY!). This year, it is down to £114m. Still high, on £146m/HY of revenues. Ideally, it should be around £50m or lower, albeit management say they think a good level is £100m (but why?).

Maintaining such a high level of inventory is a luxury they can’t afford, especially as they have £40.7m of net debt and just under £60m of gross debt, and all that debt interest to pay.

So have they been distressed selling PEEK to VARs? That would be a troubling thought. And what if those VARs this year are fully stocked up, and can’t take anymore? Or they then further flood the market with PEEK products, competing directly with Victrex?

I’m no expert in this industry, but it seems like maybe there is much, much more competitive pressure now than before? The current Average Selling Price (ASP) of £72.3/kg isn’t that low by historic standard, as they achieved similar prices in FY22 (£72.1/kg). But back then, their margins were 51%, compared to 44% now. GBP to USD exchange rates were roughly similar now compared to then, so it isn’t an FX thing due to manufacturing in the UK. Obviously, input costs have gone up since FY22.

The company does mention that their new China factory, which is underutilised, is a drag on profits, so potentially it is having a very poor margin that is dragging down the gross margin average.

Talking about the China factory, they say they have encountered ramping-up issues, which means they will only achieve half or a quarter of the production forecast (50 tonnes instead of 100-200 tonnes…!). Worryingly, they do not explicitly reassure that they know exactly what the problems are, only that they have a panel of experts working on it. Sounds like there is a big risk that the ramp-up problems will linger longer than expected, and therefore be a continual drag on profitability and revenue growth.

In conclusion…

So putting it all together, I have a very muddled picture of whether Victrex can ever recover the profitability it once had. Whether they are facing huge competitive pressures and therefore margin pressure. Whether their China factory will be a cost sinkhole for longer. Even their “growth” initiatives - what they call Mega Programmes which are NPD collaborations with OEMs, have been going on for a few years now, and only delivered £10m/revenue in the latest HY out of £140m+. So not very meaningful.

There’s not a clean story here, and I’m not sure management are doing enough to tell a compelling story, and heading off all the concerns. It seems most other investors agree too, as the share price is down -38% in the past year, and -55% in the last 3 years.

Even the CEO might be agreeing that the outlook looks bleak or cloudy - he did consistent buying between Dec23 to Jun24 between 1250p-1400p, a total of ~£130k splashed out… but then nothing since then. Despite the SP continuously dropping to 780p!

Beeks Financial Services #BKS $BKS.L

Beeks is a really interesting company. They’re in the cloud computing business, but not up against the likes of AWS, Google Cloud, or Azure. That would be a tough market. Beeks has carved itself a very interesting niche, playing in the high frequency algorithmic trading space. They started off by allowing any investor (large or small) to run trading scripts on Beek’s hardware, which have been strategically installed to be super close to Financial Exchanges, so as to offer the latest trade latency and a speed advantage. If high frequency trading was expressed in Formula One terms, Beeks has the fastest car, and they’re willing to rent it out to anyone. This side of their business is called Proximity Cloud. Their clients are some of the largest Tier 1 financial services institutions.

In recent years, they’ve decided to open up a new revenue stream, called Exchange Cloud. Not content to be just “close” to the Exchanges, they are now partnering with Exchanges to offer an “official” cloud computing/trading solution. They have signed up many exchanges globally, including NASDAQ, the Johannesburg Stock Exchange (JSE), the Australian Stock Exchange (ASX), and even a crypto exchange recently called Kraken.

Revenue has more than tripled from 2021 to 2025, albeit they are still a minnow, only expecting to do £37m of revenues in FY Jun25. Profits have been more elusive; but maybe we can forgive the company for a lack of profits when they are chasing such high growth and NPD. In addition, it is a capex heavy business; Beeks has to buy and install its own physical hardware, before it starts to rent out its cloud platform and charge a SaaS like fee.

Investors have been happy to pay for this high growth, with PEs consistently much higher than 30+.

Is this now the inflection point where Beeks starts to generate meaningful profits and free cashflow? Management still have ambition to sign up more Exchange Cloud, Proximity Cloud clients and keep that top-line growing healthily.

In addition, they have recently decided to change their contract model for Exchange Cloud. Before, they were happy to do a “licence-like” approach, and take a big fixed payment from the Exchange. They have now transitioned to a revenue-share model. This should be higher revenues over a lifetime, but it does mean very little revenue in the first few years. As Beeks is creating a completely new service with the Exchange partner, it’ll take time to recruit new financial services clients onto that service. This could exacerbate their cashflow problems, as they invest the same capex upfront but it takes longer for the revenue to come in for payback. At the HY to Dec24, Beeks had net cash of £6.6m. A 20% revenue growth from their current levels is an extra +£7.5m a year, and if you work backwards to the “capex” needed to drive it, and say it has a 2 year payback period, then you can see they might quickly run out of cash. Luckily, operational cashflow is at like £5.6m/HY, so looks like they could just about fund an expansion programme that delivers a 10-20% revenue growth rate. They also have a modest £3.5m RCF that they could use.

When companies transition from an fixed fee to a revenue-share type model, there is a period of them when the revenue growth stalls, or even contracts for a while. Its hard to see if this will happen at Beeks, but the Recurring Revenue growth has slowed down, with ACMRR only at £29.2m at Feb25, compared to £28.5m at Dec24 and £28.0m at Jun24. On a headline level, H2 (to Jun25) revenue growth will be minimal given ACMRR has barely grown in the year, and all the new contracts signed and launch in H2 are mainly rev share models. Will this cause some casual investors to lose interest, especially the impatient ones? We’ve seen a bit of that already, with the shares drifting downwards from 280p in Mar25 to 200p in Jun25.

How to value? I’ve run a few different scenarios, and think 160-200p would be a good price to pay. So its not too far off that at the moment.

In addition, the Founder/CEO, Gordon McArthur, is also sending a signal that the share price now might be undervalued. He’s been a regular seller since 2019, decreasing his stake, which now is just over 30%. I don’t take his sells as a bearish signal, given their regularity. However, he does choose the amount to offload, and looking at his pattern, seems like he thinks the current price around 214p is not worth selling too much:

• May25: Sold £556k of shares at 214p

• Nov24: Sold £780k of shares at 260p

• Mar24: Sold £3.6m of shares at 165p (he timed this one wrongly!)

• Apr22: Sold £2.8m of shares at 165p (this he got the timing right)

• Jun21: Sold £890k of shares at 119p

• Apr21: Sold £500k of shares at 115p (he had tried to place £2m of shares in this secondary placing though!)

• Aug19: Sold £150k of shares at 83p

Given that the latest sells have been much less volume than past ones, potentially might signal that Gordon thinks the shares are a bit undervalued at the moment.

In conclusion…

I think Beeks have built themselves a very nice product that has moat like qualities. There’s plenty of growth runway in new Exchanges, new Financial Services clients to sign up. However, the big question I guess is profitability. Its never had a reporting period where they’ve demonstrated high profitability of either Exchange Cloud or Proximity Cloud, so one has to take a leap of faith here. But at between 160p and 200p, I think it doesn’t take much extra top-line growth or margin growth to make the numbers work, so I’d be very tempted to buy there.

Topps Tiles #TPT $TPT.L

Revenues and profits went backwards in the FY to Sep24, so the latest H1 results to Mar25 were pretty pleasing, showing a return to growth of +4.1% in revenues excluding the CTD acquisition.

I last wrote about Topps Tiles in June 2024, where I mentioned:

• Their new Mission 365 strategy could result in EPS of 11p+ a year. That’s double the highest EPS they have achieved in the last 5 years.

• Broker forecasts of 3p EPS for FY Sep24 looked high, and I was expecting 2.3-2.5p. True enough, there was a disappointment, and it actually came in there, at 2.4p adj EPS.

• I thought the price then (40p) was too high and I had set a price of “much less than 30p” to buy. It did briefly get to 29-30p since then, but never went low enough for me to be interested to buy.

Looking at the latest HY results to Mar25:

The YoY revenue growth seems to be nicely accelerating. From +3.3% in Q1 to +4.4% in Q2 to +9.5% in the first seven weeks of Q3. This is pretty stunning, but confirmed by industry sources like the Barclays Spend Data that we have seen a rapid improvement in sales volumes in Home Improvement over the first few months of 2025. Can this growth continue?

I note that Q2 and Q3 last year were exceptionally bad trading periods for Topps Tiles, hence the comparisons were always going to be soft.

For me, there are some negatives for me looking forwards:

• Big jump in Receivables YoY of +21%. Quite a bit higher than the sales growth they have had. No commentary as to why.

• NI and Wage increases in April are going to add £2m extra costs to H2. This is a big pressure when Operating Profit was only ~£5m in H1.

• CTD will continue to be a profit drag into Q4. It lost £1m in H1, so probably will lose another £700k-£1m in H2 as the restructuring and integration work takes place.

Despite the accelerating growth in the Outlook and the upbeat results, the consensus broker forecast went slightly lower, which was interesting. Now at 3.5p EPS, c£9.2m PBT, for the FY Sep25. This seems ambitious, as H1 only did £3.2m adj PBT (excluding CTD). Could do they another £6m PBT in H2? Seems very ambitious, as they won’t be able to adjust out CTD losses then, and also the £2m hit from NI and Wages. Sure, the revenue growth will help, but I don’t think they will get to £6m PBT, so there is likely to be a profit warning coming up IMO.

Long-term wise, I have crunched some different scenarios. Within the next 2 years, they could quite conservatively get to £320m revenues (their Mission365 strategy has a goal of £365m). From there, taking some conservative assumptions on margins, I think a 7.6p EPS is quite achievable within the next 2-3 years. This is much higher than the 3.5p broker forecast for FY25. So if brokers start to put out EPS like my estimate for FY26, FY27 then the shares could nicely double or more.

In Conclusion…

So I remain attracted to Topps, but think there might be further SP weakness in the next few months as they disappoint with their H2 results. For me, a 30-35p entry point is what I’m aiming for.

May: +10.3% vs +3.6% (FTSE All-Share Benchmark)

YTD: +8.6% vs +6.5%

Since Jan 2021: 13.9% yearly IRR

Wow, I have had one of my best months EVER, something I would not have bet on at the start of May. The improving markets helped, but the main drivers were some share-specific news.

This +10.3% outperformance has also been achieved despite being 28% cash at the start of the month and rising to 32% at the end! If only I’d gone fully invested…

Anyways, some notable rises and fallers this month:

Rank #RNK $RNK.L rose by +48% as the market finally priced in the upcoming reforms to the gambling legislation, that was flagged well in advance by the company, and was a major part of my buying thesis back in July 2024 (FINALLY came good). I’ve got a deeper update below in the Portfolio Commentary section on all the extra profits to come from the new legislation.

James Cropper #CRPR $CRPR.L rose by a whopping +111% as the markets realised it wasn’t going to breach covenants, as well as renewed optimism around new green hydrogen projects in the UK. This was a pleasing quick gain, as I only bought a month ago in April, having flagged up both points in my in-depth buy post of James Cropper. I think it still has more to go; my fair value here is 400p+, and its currently around 300p. Given the rebounding optimism and hype around Green Hydrogen (search for HAR1 and HAR2), this could really soar way above that 400p fair value, if they announce a contract or two.

Sosandar #SOS $SOS.L rose +50% on no news…. probably was just way oversold, and benefited from a positive momentum in UK consumer sentiment in the last few months, as well as the spring weather that couldn’t get more perfect (for fashion dress retailers like Sosandar).

Across my portfolio, every one of the 17 shares gained in May, except for Robert Walters #RWA $RWA.L. This is one of the biggest unrealised losers in my portfolio at the moment. It lost -8.4% in May. Having bought at 295p in Jan25, I topped up at 219p in Mar25, and the shares ended May25 at 207p. I haven’t written about my buying thesis yet, so maybe I should soon. In short, it has a rock solid cash position, shown it can nimbly cut costs to match revenue declines, has a leading brand name and client relationships, and unless jobs cease to exist or employees cease their desires to move jobs, it should see a bounceback to normal trends. AI is the key concern here; but I haven’t been able to find concrete evidence that executive recruiters are being disrupted by AI in a big way yet.

Looking forward, shares I’m closely monitoring

Where do we go from here into June? I feel that markets are complacent about the impact that tariffs are going to have, even if TACO plays out and the majority of tariffs are watered down. They won’t go to zero and will still be a big tax even at 10%. In addition, all US companies have changed their behaviour somewhat since Liberation Day - either pausing or scrapping investment, loading up on inventory, freezing hiring, etc. All these will have an upcoming impact, regardless of what happens to the final tariff rate. Think of the “bullwhip effect” coming out of COVID that caused the Inflation chaos. Could there be a similar “bullwhip effect” of company reactions to Liberation Day, yet to arrive but will in the coming months? Like a tsunami… it takes time for it to reach, and by the time it does there is nothing you can do to stop the destruction.

The Boon Fund is somewhat insulated, with many defensive or counter-cyclical holdings, as well as a more UK domestic focus with very little US exposure. I will continue to buy shares if they reach prices that are tempting. I flagged up THG #THG $THG.L in my latest Shares I Looked At This Week post, and it is getting to an entry point price I can’t resist. Albeit I’m wary that the shorters are continuing to up their bets there, ever so slightly.

Rio Tinto #RIO $RIO.L is another share on my watchlist that has gotten to an interesting price. I held this before in 2021-2022, making a slight capital gain and collecting lots of chunky dividends. I’ve not done deep research, given its large cap nature, but it does feel like a good cyclical point to enter, given that commodities is now very out of flavour in the financial media and therefore off the radar for retail investors. All that new military equipment being built over the next few years, and the factories that need to be built to build them - won’t they need metals?

I am also tempted to top up System1 #SYS1 $SYS1.L as the price has gotten to a ridiculous 400p low. I rate the chance of a strategic USA acquirer (adtech SaaS or marketing agency) snapping this tiddler up at >50% sometime this year. The big fly in the ointment, of course, is that System1 has put all its growth eggs into the USA basket. With the Trump tariffs, company marketing budgets are probably under threat. My checks through my marketing network does suggest some lower sentiment and probably budget cautiousness. However, System1 keeps recruiting more salespeople and account management people in the USA, which you wouldn’t do if new client onboarding is slowing down. So a mixed picture. Maybe if it gets meaningfully below sub-400p, I will have a small top-up.

Portfolio Trades

Only two sells this month! No buys.

SELL ALL: H&T Group #HAT $HAT.L

My first takeover offer this year! It was a bittersweet one as I only managed to buy a fifth of the size that I wanted, refusing to buy more when the price went up ~5% above my buy threshold. Should have just sucked it up and paid it… as it rose +90% due to a takeover offer from a strategic buyer from the USA.

The price offered (660p) was ALOT higher than my fair value (500p+) so I am definitely happy with the outcome here. Especially as I only bought three months ago in Feb25, so that was a quick gain.

SELL PARTIAL: Personal Group #PGH $PGH.L

I decided to bank some gains here, and sold just over half my stake. My initial investment thesis from Apr24 has largely played out and now accepted knowledge in the market. I’ve crystallised a +68% capital gain with some dividends too. The current price is c280p, but I think there’s a very strong chance it can get to 330p, and some chance of 380p+, hence why I’ve decided to only sell partial and not fully, to retain some upside. It has a winning sales growth formula in its insurance arm; all they need to do is keep adding lots of field sales agents. The blue collar workers it targets are the highest beneficiaries of the big minimum wage rise in April, so with more money in their pocket, the smart ones will opt to buy some insurance. I wouldn’t be surprised if we see the next trading update with a modest beat to forecasts. Their other main division, a SaaS platform to manage employee benefits and perks, has also launched a “version 2.0” last year, so should see some strong growth too in client sign-ups this year. So firing on all cylinders. Its no surprise that many investors have cottoned on and driven the share price higher in the last few months.

The big risk? A loss of a big client. They don’t disclose the size of their clients as a percentage of revenue, but I suspect some of them might be like 5%-15% of total size. The mitigating factor here though is that the existing insurance policies sold are with individuals, and those keep running until cancelled, so the revenue decay is gradual rather than a cliff.

Portfolio Commentary

» Camellia #CAM $CAM.L

The company announced a Tender Offer to distribute some of the returns from the BF&M insurance sale. It was disappointing - only offering buy up to 12.5% of shares outstanding, at a 5400p price that was a small premium.

The largest controlling shareholder, Camellia Foundation (52% shareholder) and all the Directors have elected not to participate in the tender. I guess they believe that the company is worth much more than 5400p? This will probably get Camellia Foundation closer to the 75% mark, which raises the risk of a potential delisting, given that they look like don’t have any intention to sell in the short or medium term.

The latest InvestorMeetCompany presentation on the new Value Enhancement plan was disappointing. Barely any details, just very broad strategic strokes and slides that could have been done by a first year MBA student. It all makes sense, but I get the feeling that they believe their Operations are already well-performing, and that they have just had bad luck with the Bardsley acquisition in the UK, as well as market driven headwinds across their various crops and geographies.

Clearly market forces have been challenging. Management stated an ambition of the Value Enhancement plan to get back to 5% ROCE; my rough calculations show that if they manage to, that could be a 400-450p EPS (after the Tender offer), and therefore the current share price (5200p) is still well in excess of 10x PE, which is high for an agricultural business.

The investment case here therefore lies on whether management can grow top-line revenue, as well as hit >5% ROCE. If there is a revenue recovery of say 20%, then we get an EPS around 480-540p; better in terms of the current 5000p share price valuation.

Further shareholder returns looks off the cards for the rest of the year, bar the dividend which looks 99% sure, giving a 5% yield this year.

My conservative NTAV calculations is at 8800p, and the current SP is at a whopping 40% discount. They should be able to realise greater than book value for the property sales (Linton Park, London, Bristol) as well as their “Heritage Assets” like paintings and collectibles. So I’m loath to sell anything less than a 15% discount to my-conservative-NTAV, which is a 7,500p share price target I’m hoping for. I bought in at 5000p and this would represent a 50% gain, plus being paid 5% dividends while waiting. So I will continue to hold, and did not take part in the tender offer at 5400p.

» Begbies Traynor #BEG $BEG.L

Their FY25 trading update came out, and showed some pleasing revenue growth rates of +12%. While acquisitions do cloud the picture, in this case the organic growth rates were strong for both divisions. Business Recovery was +11% growth, and Property Services +7% growth. It seems that H2 had good growth momentum that carried on from H1 (+12% and +8% respectively).

Headcount in both divisions are now +9% YoY and +7% YoY, so they are banking on continued growth in FY Apr26. I had a check of their open vacancies, and in Business Recovery it is at the highest number of vacancies compared to the last 24 months. In Property Services, it was the same story. So looks like they are still recruiting strong going into FY26, so current trading and pipeline visibility must be good.

Indeed, they mentioned in their commentary for Business Recovery that “… increased fee pipeline on appointed cases underpins continuing growth into FY26”. My checks of their insolvency appointments suggest that they have won quite a number of cases in the last 6 months. In Administrations, which are larger fees, they’ve won +14% more cases in the last 6 months to Apr25 compared to the prior 6 months.

There was, however, no commentary in the trading update, on the pipeline or short term trading prospects for Property Services. A purposeful or accidental omission?

I think brokers are currently underestimating the EPS for FY26. They have only a 0.15p increase to 10.65p. However, my calculations show that if there is an undemanding 7% increase in revenues YoY, that could result in an EPS of 11.25p. When brokers started covering FY26 back in 2023/24, they had estimated 11.3p, so this seems definitely within the realm of possibility.

In fact, one of the brokers, Canaccord state in their latest report “we see the risk to (our 10.5p for FY26) forecasts being to the upside”.

The bear cases? There is quite a few.

• The first is that while revenues grew +12%, adj PBT only grew +7%. Poor operational gearing. We will have to wait till the full results are published to see why, but this is disappointing.

• Sequential growth between the two halves was low. Revenue was +0% HoH, adj EBITDA actually went backwards -4%! There might be seasonality at play here, but I note that in the last few years, they have always had a stronger H2 than H1.

• Very high contingent consideration payments still being made. £4.1m in H1, £5.2m in H2…! Despite the slowdown in acquisitions within the past year. This sucked up a big chunk of the £19.4m FCF generated in the year. And don’t forget, there has already lots of new shares issued to the vendors of the acquisitions! Equity Development, in their latest note, estimate that there is still another £13m of contingent consideration to pay out until Dec27…! It does feel that maybe Begbies Traynor paid too much for their acquisitions?

I think there is little downside in the next 6 months here at Begbies, and a more than 50% chance that we see an upgrade to EPS earnings for FY26. However, organic growth is firmly in the single digit range, and it looks like investors are not keen on their acquisition growth model, and unlikely to re-rate this to a higher premium. In the past, this would have traded on a 12-15x PE, for the acquisition premium as well as the counter-cyclical premium. That would be a SP of 130-170p. Can Begbies get either premium rating back? Otherwise it would probably languish in the 8-10x PE, which is 85-110p share price, the range it is trading at now.

I continue to hold as a counter-cyclical balance in my portfolio, and for the decent dividend (4%+) to keep me somewhat rewarded. I’ll probably pick up more if it dipped below 90p, and my sell target here is 140p or more.

» Rank #RNK $RNK.L

It is really pleasing when an investment thesis all starts to come true, isn’t it? All that hard work to research, analyse, create a point of view, calculate valuations…

In this case, the core plank of my Rank thesis took a year to come to fruition! Last July, it seemed imminent that reforms to the gambling legislation was due, but then it was delayed due to the elections. It was a painful few months to wait, but the government have now released a draft bill (updated 16 May) before it goes to vote in July time.

Rank’s own response and positive impact assessment (14 May) now means my thesis is fully priced into the market. The shares are now at 125p, well up from the 70p I bought in at.

Note, however, that the government had an update to the draft proposal a few days after Rank’s assessment. I’m 99% sure that the key difference here was one additional change that was not in the first draft, but was in the 16th May draft. And this change might have an even bigger impact on Rank’s profits.

This change relates to, quoting the gov.uk webpage:

Machines in arcades and bingo halls: allowing a 2:1 ratio of Category B to Category C and D gaming machines in arcades and bingo halls, implemented on a device type basis.

I believe that this is going to be a gamechanger for the Mecca Bingo Halls that Rank owns. They have spent the last 3 years restructuring Mecca so that it is now slightly profitable. Very difficult, given the decline in Bingo as a hobby.

Now that they are allowed to have more Category B slots in each Mecca Bingo, which has higher maximum bet per spin and so generates much more revenue per day, they can increase revenue per square foot without increasing any of their fixed costs, so all that Net Gaming Revenue falls to the bottom line. In fact, it doesn’t even need capex as all they need to do is update the software on the slot machine to accept a higher bet and have a higher prize structure!

This, I think, isn’t being priced in by most Rank investors yet. They have all read the Rank release on the 14th May, which talks about Casinos and more slots there. There are 51 casino venues and 51 bingo venues in Rank. So the bingo venues could have equal power to produce a profitability uplift.

This is an IP company that owns the rights to many famous fabric designs and patterns. They operate three divisions. The first is Brand, which manufactures fabrics and wallpapers using the IP designs and patterns. The second is Manufacturing, which does contract manufacturing for third parties, presumably also wallpapers and fabrics. The third is Licensing, where the designs are licensed out to other brands (Next, H&M, etc) to use in other products (eg furniture, homewares, etc).

Sanderson has been on my watchlist for a while, for two reasons. One is the very strong NTAV backing, my personal calcs show a 93p per share NTAV, and 60p if I take a conservative view on the high inventory. The shares are currently trading at 42p, so are way deep in NTAV bargain territory.

The second reason is that they own very valuable IP, in the form of their fabric designs and patterns. This value is on top of the NTAV calculations above. In the last few years, they have been trying to grow their Licensing part of the business to further unlock this value. Their list of partners they have licensing agreements with are impressive: NEXT, Williams Sonoma, H&M, John Lewis, Zara to name a few.

In their latest FY Jan25 results which I looked at, Licensing is only £11m out of £101m of revenues, but at 100% gross margin, it probably contributes the majority of the (heavily) adjusted underlying PBT of £4.4m. Licensing is the crown jewel here, with the other two bits (Brand and Manufacturing) unprofitable. On top of that, B + M also saw steep revenue declines last year, of -9.5% and -10.0%. Ouch.

The FY25 results aren’t pretty reading. Not many positives to take out of it. Even in crown jewel division of Licensing, there are hardly any positives. Only +1% growth YoY.

And when you dig into the breakdown of the Licensing commentary, it is even more depressing. Despite focusing on it for several years, they don’t seem able to generate consistent, growing licensing revenues year on year. Sanderson break out Accelerated Income (which is the minimum guaranteed income from a licensing contract) and Variable Income (which is the ongoing licensing fee, based on volume/value of licensed products sold). If their licensing partners are able to successfully take Sanderson designs and use them to create hot-selling products, then one would expect Variable Income to grow over the years.

Despite being in the licensing game for years now, and growing their list of licensing partners, this is the Variable Income revenue reported through the years:

• FY25 = £3.1m (H1 = £1.4, H2 = £1.7m)

• FY24 = £4.4m

• FY23 = £4.1m

• FY22 = £3.8m

• FY21 = £2.8m

Hardly any growth to talk about here! So are licensees really able to turn Sanderson designs into hot-selling products? They must to some extent, given the license renewals we hear about. But why is there no growing Variable Income year after year to show for all the hard work in Licensing?

And then there’s the car crash of the Brand division and Manufacturing division. These two divisions are where most of costs of the Group are incurred.

Sanderson reported, on a Group level, that Distribution & Selling costs increased +1.5% YoY, and Admin Expenses increased +3.0% YoY. This is very bad commercial management… in a year where the two divisions declined -9.5% and -10% in revenues. They have clearly let costs get out of control in relation to revenues. And the revenue declines didn’t come out of the blue - they started a year earlier, in FY23! So plenty of time for management to proactively right-size the cost base, which they failed to, in FY24.

Management also decided to do some derisory share purchases. To fool gullible investors? There was a concerted buy recently by the Chairwoman, CEO, Global Commercial Director, and a Non-Exec of amounts… £10k, £15k, £5k, £5k. Clearly token amounts. The CEO herself has a base salary ok £383k in FY24; clearly paid enough to dip more into her pocket. The CFO did not even participate in this derisory share purchase - that speaks volumes.

On top of that, one of the major shareholders, Octopus, has been trying to sell down their 13%+ stake since May23. They currently still have 10%, having sold down from 11% in Mar25. This selling overhang in the market will keep the share price on a downward trajectory.

Then there are the Trump Tariffs. A major plank of the Sanderson turnaround plan is to grow their wallpaper and fabric sales in the USA. Manufactured in the UK. They claim no tariff impact, but how can that be? There is now a 10% tariff on imports. Plus the tariffs have caused 30 year Treasury yields to increase, which directly influences (30 year) mortgage rates in the USA, which will impact house transactions, which will impact renovations, and therefore fabric and wallpaper demand.

So not many positives here on Sanderson. In fact, I’m usually one to find at least a few positives in every share, and here I am struggling to find any. The only positive thing is that discount to NTAV. It would probably be too tempting to pass up the deep value at c35p mark, so I’d probably pick up some at that level, but not at the 43p level it currently is at.

Eurocell #ECEL $ECEL.L

This share s a favourite of retail investors, and had a nice increase last year driven by optimism around the new Labour government and the expected surge in housebuilding to come. That optimism has now faded, and recently the company issued a Trading Update for the first four months (Jan25 to Apr25), warning on profits. This resulted in the broker consensus forecast for FY Dec25 to be slashed -14%. Ouch. It is currently at 17.4p EPS, which is not much more than the 17.1p achieved in FY Dec24. Despite having the benefit of an acquisition, Alunet, that contributes c8% of additional revenues.

Looking at other Home Improvement shares like Wickes and Topps Tiles, it is clear that Eurocell’s share price has lagged way behind since the start of the year. How are other Home Improvement players seeing better prospects and improved trading, whilst Eurocell does not?

Then there is the case of the weather. Companies love to play the weather card when it is a negative to their performance. In Eurocell’s case, its clients (professional installers) are heavily dependent on the weather. uPVC windows, conservatories, composite decking, fencing. All work that is outdoors, where good weather means faster work, more productive days, more installations done. And should therefore mean more sales to each installer.

The weather in the UK has been the best for outdoor home improvement in decades. The Met Office declared March the sunniest March ever since records began. And then another monthly record was broken, with April the sunniest since records began too. And this compared to last year, which was one of the least sunniest Springs we have ever had.

All of this, should have meant a boost in LfL sales, YoY. Yet not a single word was mentioned in the Trading Update from Eurocell, which can only mean that March and April were not terribly good months. So does this suggest that they have lost market share? Or did the RMI market really struggle to grow, despite the better weather?

The Topps and Wickes updates recently seem to suggest the market is improving.

The Barclays Spending data shows that Mar was +0.9% YoY, April was +4% YoY. Compared to -2.4% and -2.7% YoY in Feb25 and Jan25.

So the data seems to suggest that Eurocell is struggling, singularly, rather than the market struggling as a whole.

I keep it on the watchlist, as I do like the fact that it has got low debt, and is highly cash generative. Eurcell generates the equivalent of 20-25% of its market cap in Operational Cashflow each year, with negligible debt costs and modest capex costs. However, I think the current 160p share price is already pricing in a recovery, when it seems like maybe Eurocell is struggling vs the market as a whole.

Dianomi #DNM $DNM.L

The FY Dec24 results were very disappointing, despite management last year flagging up that H2 would be better, especially with the boost of the USA elections happening.

What was the actual result?

Revenue declined to £13.8m in H2 from £14.2m from H1.

Adjusted EBITDA declined from a +£0.1m profit in H1 to -£0.4m loss in H2.

On the operations side, Publisher numbers were flat YoY to 341. Advertiser numbers dropped a steep -18% YoY, which was not really explained by the company at all. As an investor, I expect such a steep fall in an important metric to be explained.

As a Primer, Dianomi operates an Ad Network, with the two sides of the marketplace being Publishers (eg Websites where the ads are shown) and Advertisers (companies that pay to have their ads shown). To create a healthy system attractive to both sides, you need many Publishers and many Advertisers. A big Ad Network is a strong moat.

Most of their advertisers are Financial Services companies in the USA; I struggle to think that they had a bad year last year as a whole? Did the advertisers see Dianomi as a low quality network and took their advertising dollars elsewhere? Even among their Top 100 advertisers (who were presumably happy to keep spending with Dianomi), spend dropped -3.9% YoY. Not a sign of a high quality growing ad network, as spend would increase otherwise.

The bad news keeps coming; this year we will see lower gross margin, as the contract with their largest Publisher means less rev-share. They are also going to increase spending on Sales headcount, to try to recruit more advertisers from non-Financial Services industries. Again, is this a sign that FS companies now see Dianomi as not very good? This is an existential question as Dianomi has been trying to build **The** Financial Ad Network in the USA.

There were some positives. Expansion of a contract with their largest publisher, CNN, to include CNN News in addition to the current CBB Business. As well as a new publisher signed, Associated Press, which would be top 10 Publisher volume. Not bad.

The other positive investment thesis for Dianomi are:

• NTAV is at 28p, of which the bulk is the £8.8m cash (no debt) which is now more than the share price.

• A private investor has built a 17% stake in the last two years, from Mar23 to May25. Scobie Dickinson Ward. I’ve tried to find out more information on him, but haven’t pierced together much. He was also invested in Plant Health Care, and 4Global, two other small cap companies too. He may be the same person as the Scobie Ward in Hong Kong that runs Ward Ferry Management, an investment fund focused on the APAC region? Nothing I could find suggests that he has an intrinsic expertise in the AdTech industry. However, he is deep underwater, buying in around 70-80p in Mar23, and then 45-55p in Sep23. The share price is now 27.5p.

• This could be a take-over target for a USA based AdTech company. Most of their revenues are US-based. A bigger Ad Network could strip out all the fixed costs, and retain most of the £7.3m/year gross profit generated, get the £8.8m cash pile, AND the valuable network of Publishers and Advertisers that Dianomi has built up in the Financial Services space. Looking at it from this way, it could be worth a £20-40m bid, which would be 2-5x the current share price.

For me, given that this year is going to be loss-making, and there looks like a big seller (Canaccord Genuity) still looking to sell down another 11%, the shares will likely drift further down. I think it becomes an absolute bargain below the 20p mark, and as we’ve seen with small cap illiquid shares, they can get to really ridiculous territory.

This is a B2B software company that specialises in Customer Data Platform (CDP) software for large enterprises. A CDP is a critical part of any marketing and customer data tech stack, allowing companies to store, manage, and activate on customer data to maximise business value. A CDP is what drives many marketing activities, as well as personalisation enhancements on websites, apps, and emails. Also can be used for things like Billing, and creating personalised upgrade offers (ie the sort you get from your Broadband or Mobile company).

Personalisation and the “unlocking of first party customer data” is very much in vogue at the moment in Marketing and Digital teams in almost every company. So CDP is a fast growing subsector of SaaS software.

Celebrus has a focus in the Financial Services and Insurance industries, and has a wide geographic spread of clients globally.

They recently announced a revenue warning, albeit profit was good. However, two more shocks were included in the announcement - changing how they recognise revenue, and also a potential revenue drop from one of their largest clients.

The revenue recognition change is often a red flag, as companies in trouble will do this to mask their underperformance in the short-term. Here, it seems sensible; changing from recognising the revenue at the date of sale, to over the lifetime of the contract.

The potential large customer revenue drop later this year also seems sensible. It seems like Celebrus has been a reseller of third party software to the client for years. Now it is changing the scope to just Celebrus software. Makes sense, focus on the core. But it seems like the third party reselling activity was profitable (otherwise they would mention that it wasn’t), so we will likely see a revenue and profit headwind later this year.

Both of these are not quantified at all, which is very bad form from management. At least give a range to work with! Brokers have withdrawn their future forecasts… so we’re swimming a bit blind here.

On top of this, the ARR growth rate is now only +14% YoY as of Mar25. Even after the change in the revenue recognition policy. Which is low for a high-growth SaaS company, that is sub-$50m/yr revenues.

So how to value? We have no idea of profit and revenue for FY26 onwards at this moment. Could be significantly lower given the accounting change, and large customer renegotiation. The market cap is currently trading at ~2x Sales, which is low for a SaaS company. When you strip out the $31m net cash, then it is barely ~1.4x Sales, which is a bargain.

ARR is currently less than half of Sales, which means the company is still heavily dependent on one-off license sales still. They are, slowly, transitioning to fully recurring model instead.

Given the geographic footprint and stronghold in certain industries, it is probably only a matter of time before a USA-based SaaS business at a much higher valuation comes bidding for Celebrus.

So what price to buy? I’ve done some calculations - assuming the worse case of a 15% revenue drop, and think that if this drifts to below 148p (currently 168p) then the risk-reward balance is way too skewed. At such a low price, a strategic buyer could easily justify offering a 40-60% premium to secure a takeover.

THG #THG $THG.L

I last wrote about THG in Aug24, when it was trading at 60p+. Back then, I decided to keep it on the watchlist. That was a smart decision, as the shares are now at 25p.

However, the company has gone through some major changes since then. It has spun off the Ingenuity business, which was heavily loss-making and cash-burning. It has raised quite a bit of equity financing, at 49p in Oct24 and 32.5p in Mar25, to pay down debt. Currently, debt is 2.2x adj EBITDA; not comfortable but also not bad either.

Clearly, there are many investors barge-poling THG, and for good reason. However, as a contrarian investor, I love these situations where there is barge-poling happening, YET the company is in a very different place now than it was 6 months ago.

What has changed? Probably three major things in my mind:

• Debt paydown, now just 2.2x adj EBITDA, and likely to reduce further for the next two reasons…

• Hiving off Ingenuity and now focused on just two mature, profitable divisions: Beauty and Nutrition. Very easy to understand. Capex much reduced, focused on cash generation, and profit generation.

• Nutrition had a horrid 2024 as it went through a rebranding exercised that really hit revenues and profits. On top of that, Whey input prices saw a massive spike. All these are now in the rear-view mirror, as evidenced in the latest trading update. On top of that, their licensing activities globally for the MyProtein brand, as well as distribution through offline partners (eg grocery stores) are accelerating.

• And Beauty is doing OK? Highly profitable, and somewhat of a stronghold in the UK market.

THG is still not pink in health, but could the current share price be too low? When I do a conservative scenario of only +10% revenue growth and a modest 7.5% EBITDA margin, and then assume a fire-sale bargain 5x EBITDA to EV valuation, that gives me a 23-24p share price which is not far off the 25p it currently trades at.

Then if you take the £400-£600m bid approach for Nutrition recently by Selkirk, whose CEO used to be on the board of THG until 2024…

Nutrition was only a third of the revenues in FY24, Beauty was the other two thirds. Both can get to roughly the same margins IMO in the medium-term, so the bid is roughly valuing the whole group at a £800-£1200m EV, compared to the current £350m market cap + £200m net debt (£550m EV). So clearly value here.

Frasers last bought in early April to up their stake to 11.1%, but haven’t bought more to cross 12% since the FY results and trading update at the end of April. Why? Either they see something bad in that release. Or maybe they are in negotiation for a bid, and of course can’t buy now?

I’m very tempted to buy, so might actually pick up some this week and could be a holder by the time you read this!

MONY #MONY $MONY.L

This used to be Moneysupermarket, but they decided to do a name-change, which is sensible given the range of websites they now own.

There’s a recent AGM Trading Update, but what got my attention was the flurry of director selling. Lets see who has been selling….

CEO - Receives vested shares in Mar25, sells only to cover taxes, retains £121k worth. Did the same last year, so no change in behaviour.

CFO - No activity

Chief Risk Officer - Receives vested shares, sells ALL £153k worth at 201p. Last year, he only sold to cover taxes. He has also done sales in Feb25 (£24k worth) and Oct24 (£30k worth).

For a company that is in regulated industries (telco, energy, insurance, etc) then the CRO is quite important in the company.

Chief Commercial Officer - same, sells ALL his vested shares, £328k worth. Last year only sold to cover taxes.

Chief People Officer - sells only to cover taxes, retains the rest of vested shares.

Editor of Moneysavingexpert - Sells all his vested shares in two tranches, and then sells even more (£43k worth) in May25.

Chief Data Officer - also sells all his vested shares, £162k worth. Last year only sold to cover taxes.

Chief Technology Officer - same here, sells all £59k of vested shares, didn’t do this last year.

Chief Customer Officer - sells all vested shares, £204k worth. Didn’t get any vesting last year.

General Counsel - same, sells all £165k worth, no vesting last year. Along with the CRO selling, this is worrying given the role the General Counsel will play in the regulated nature of their business lines.

So really, the only 2 people doing positive Vesting trades this year was the CEO as well as the Chief People Officer. Compared that to 8 of the C-suite choosing to get rid of all their Vested shares, many of whom last year only sold to cover taxes.

And this is not because the share price is high either; MONY was trading slightly below the price at the Vesting Period in 2024!

So I take this as a barge-poling signal, and while I quite like the company as a whole, I’m going to avoid for at least the next 12 months, to get through a full cycle of HY and FY results, before evaluating again.

April: -0.5% vs -0.6% (FTSE All-Share Benchmark)

YTD: -1.5% vs +2.8%

2024 : +11.8% vs +5.7%

A whipsaw month! The steep plunge of the markets at the start of the month saw The Boon Fund outperform the FTSE All-Share for about a week, until the recovery happened. So I end the month roughly similar to where I started, 4.2pp behind the index.

I should have deployed more of my 30% cash pile during that plunge, as many shares I was tracking tripped my buy alerts. However, a combination of a hectic week at work as well as a bearish personality meant I stayed on the sidelines, apart from one buy, which hasn’t quite turned out such a good buy yet (more on that below).

Where to go from here? I sense there is a lull before the storm. Indexes have recovered almost fully or more. Yet, it is hard to see Trump reversing back to the status quo before, as it would be a great embarrassment. Maybe we see a low level of 10-20% of tariffs. However, consumer and business confidence is already shot. You just have to see the profit warnings and downgrades from the USA airlines; travel is the most discretionary area of spend, and that cutback has started already. Other categories might follow. All bull markets require Confidence, and so if that has disappeared, the best you can hope for is a flat market. If that’s the most positive case of staying invested at the moment then cash seems a better place, with a 4-5% interest yield. Especially as the negative scenario is a recession and a market correction.

Is my portfolio geared towards a recession? Bits of it, such as:

• Begbies Traynor #BEG $BEG.L - Insolvency practitioner and commercial property auctioneer. Both will benefit.

• Mountview Estates #MTVW $MTVW.L - super discount to NTAV. Winner in a recession if residents can’t pay and are evicted - the Regulated Tenancy properties see a huge increase to market value, faster than waiting for tenants to die or leave naturally.

• Spectra Systems #SPSY $SPSY.L - long term contracts with central banks. Cash printing might dip in a recession, but is fairly resilient.

• Nichols #NICL $NICL.L - fairly resilient - cheap product (Vimto) and people still need a small treat once in a while, even in a recession.

• H&T #HAT $HAT.L - pawnbroker, will see a surge in demand.

• 30% of my portfolio value is currently in cash

But I also have some very exposed names, such as :

• Time Finance #TIME $TIME.L - lender to SMEs. Very very risky in a downturn.

• Robert Walters #RWA $RWA.L - executive recruitment. Volumes will be hit.

• Rank #RNK $RNK.L - gambling, especially in-person casino gambling.

• System1 #SYS1 $SYS1.L - their ad intelligence platform to help companies with their brand advertising will see diminished demand; marketing budgets always the first to be cut.

• Cavendish #CAV $CAV.L - there goes any hope of a recovery of the IPO market.

What to do? Radically changing my investment strategy to respond to Tariffs is probably not the right thing. My goal isn’t to generate positive returns all the time. It is to beat the FTSE All-Share consistently every year, and let the compounding do its magic. After a +67% return after 4 years (2021-2024) compared to the FTSE All-Share at +22%, I can take a down year.

I have belief that that the shares I have in my portfolio, will do better than the average company in the index. I would be foolish to keep hold of them if short term pressures emerge; so these days I’m keeping an eagle eye on the Exposed list above, to cut loose.

However, the next few months are going to be interesting. Trump is now moving into his next phase: instead of looking at Tariffs by country, he’s going to look at Tariffs by industry. The Film industry just got slapped with a potential 100% tariff. How practical is a Film tariff to enforce? What’s the probability the final tariff is at 100%? Who knows! But my commiserations to anyone holding Facilities by ADF #ADF $ADF.L or ITV #ITV $ITV.L as both are going to get clobbered this week.

Portfolio Trades

Just one trade in April!

BUY: James Cropper #CRPR $CRPR.L

I wrote up a detailed post on why I am bullish on James Cropper. My view on the company hasn’t changed since I bought in early April, so there’s nothing more to add. I am, however, annoyed that despite all other shares having recovered, I am underwater on my 157p buy price. Still, I believe this could double or more easily, so what’s a 10-15% temporary loss.

Portfolio Commentary

There were some updates that came out on a few portfolio holdings. Here are my thoughts below.

In the coming weeks, I’ll be writing up on some of the shares on my watchlist I have relooked at in the past month, especially those that have released a market update.

» Sosandar #SOS $SOS.L

The company uses the word “Inflection Point” in their latest Trading Update. Indeed, it does look like it has:

• Q3 (Oct24 to Dec24) revenue was -15% YoY

• Jan25 was -10% YoY

• Feb25 was -20% YoY (exception says company)

• Mar25 was flat YoY, and

• Apr looks like positive YoY.

The past year has been one of a huge strategic shift by the company. They had very boldly decided to wean themselves off the drug of discounting; an especially hard thing to do in the fashion industry. Indeed, the rest of the industry is still addicted to it; the British Retail Consortium says “fashion price deflation” was a major driver for keeping inflation low in Mar25.

But is their new full-price model more profitable? H2 did £1.3m PBT on £21m of revenues. Last year’s H2 did £1.5m PBT on £21.5m of revenues. Singer the broker, in their updated note, says that new store openings incurred one-off costs of £0.4m in H2, so that’s actually more like £1.7m adj PBT for H2. So better than the £1.5m YoY, on similar revenues.

The fashion industry has probably shrunk since H2-23. So arguably, a strong result YoY for Sosandar, likely gaining market share.

So where do we go from here? Singer kept their FY Mar26 forecasts unchanged, which calls for adj PBT going from £0.9m to £1.5m, a whopping increase. Revenues are expected to increase +24% to drive this profit growth.

It’s sounds like a stretch - even with more new stores, as well as the NEXT homeware licensing income kicking in from Autumn 2025.

In addition, the latest Barclays consumer trends data shows that Q1-25 (Jan-Mar) saw a recovery of sales volume, c+3%, for Clothing Retailers. In value terms, it was c+0.3%, so price deflation is still happening.

I take a different view of FY26; I think revenue growth will be muted, of +10% instead of Singer’s +24%. However, I think Sosandar will be able to squeeze more operating margin. More owned stores and website sales (higher margin, full price) than 3rd party (Next, M&S, etc). In addition, the Trump tariffs will make their sourcing of clothing much cheaper. Both production costs and also shipping costs.

My own calculations show that at a +10% revenue growth a 7% operating margin (they have achieved this historically too) we can get a 0.87p EPS. Higher than the 0.5p EPS that Singer have. This puts the current 6p share price at a 6.9x PE, which for me is cheap, if you believe there is further growth to come.

Further growth above +10% does look possible; there are two main avenues. The first is the continued roll-out of the store network. They seem confident that it is profitable, as they have now gone up to 6 stores from the initial 3.

The second is international distribution; they have proven the model in the UK via M&S, NEXT, etc. So why not do it with more partners globally? This seems logical and capital light, saving it for the store roll-out in the UK.

Hence I can easily see Sosandar’s share price doubling or more in the next year, as the brand gets back to YoY growth numbers, and shows excellent gross margins and operating margins, the fruits of its full price strategy. In addition, there will also be the store growth story, and possibly an international growth story too. This is a winning combination to interest and excite investors.

I am now at my maximum position size given the low liquidity here; otherwise I would have topped up more after this trading update.

» Spectra Systems #SPSY $SPSY.L

FY results to Dec24 were released, and the SP is about 5% lower. Their results aren’t the easiest to read; very condensed and economical use of words. One has to really know the company, and read things thrice, to understand.

I have been invested here since 2021, from around 140-160p, up to the highs of 250p, and now back to 200p. The dividends (c4-5%) have helped me stay patiently interested. This company moves slowly, given all their contracts are super long term.

Therefore, any major re-rating rests on the outlook statements - can they land a whopper contract? They did that in 2023-2024 with the sensor development and manufacturing contract with a central bank. Hence the huge EPS jump for FY Dec24 and FY Dec25.

The question is what’s next to keep the EPS momentum going? Brokers have FY26 EPS contracting by -30% as the sensor manufacturing contract ends…!

There are three main growth opportunities here:

#1 - A multi-year maintenance contract with the central bank they are manufacturing sensors for, to be announced imminently

#2 - Use of their covert optical materials (primarily used in banknotes) into “industrial applications” combined with smartphone verification technology

#3 - Selling polymer substrate materials for the first time to a central bank

Now, #1 is pretty much in the bag. The central bank is not going to get maintenance of sensors that were built by Spectra, from anyone else. Just a matter of waiting for that signature to be signed. This isn’t in any of the broker forecasts for FY26 yet! So expect an EPS upgrade.

I rate #1 opportunity as a 95% chance.

#2 has already been validated with an industrial partner for tax stamps, and the company is already talking about “scaling up production”, so it seems more than a 50% chance they will win some contracts in this area? It is mentioned five times in the FY results.

I rate #2 opportunity as a 70% chance.

#3 is the big one if they can crack it. They are looking to break the duopoly of CCL and De La Rue. The latter just got a takeover bid (more of that later). First, they need to be added to the “qualified” list of suppliers of a central bank. They have been waiting for this from a Middle East Central Bank since last year; it was meant to come in Q4, so that they could take part in Q1 tenders. They still haven’t gotten it. And they say they expect it sometime in 2025 now. So earliest they might win a tender is end of 2025. I think revenues from polymer, at the earliest, might be 2027 onwards. However, just winning a contract here, would re-rate the valuation towards a 20x+ PE from the current sub-10 PE.

I rate #3 opportunity as a 25% chance.

So where does this leave us?

Given the three opportunities and the high likelihood of two of them, I think the FY26 EPS forecast of 22.7c stands a strong chance of being upgraded.

I’m not knowledgeable or smart enough about their business to quantify what #1 and #2 might be worth in terms of EPS.

But even if I bearishly use the 22.7c (17.0p) broker forecast for some calculations... when the two contracts come through, investors will re-rate this again to a growth share. Spectra has consistently been able to get a 23x+ PE valuation in the past. If I further take a haircut here to say 20x, given we’re projecting out to FY26, that’s a potential share price of 340p, once opportunities #1 and #2 are in the bag. Representing a 65% gain from the current share price.

So I continue to hold here; I see the current SP weakness as just stale bulls exiting because of the time it is taking for the opportunities to crystallise. I will also be looking to top up on any share price weakness here.

PS - a trump card (no pun intended!) here is that Spectra’s HQ and manufacturing facilities are based in Rhode Island, USA. I wonder if they are now able to pick up more contracts from non-USA based competitors?

I have been monitoring James Cropper #CRPR $CRPR.L for a while now, since 2022 to be exact. Looking back at the Boon Fund archives, I did a write-up back in Jan24, where I said that the situation looked grim and there was a chance of covenant breaches. That was the right call, as the SP went from 400p+ to c150p now. CRPR have had to seek covenant waivers from their bank. Luckily, they have not been forced into a rights issue.

In a post in Dec24, I wrote that the situation still looked grim, albeit with a new CEO coming in (and a new CFO that joined Nov24), a clean set of management might be able to do a turnaround?

So overall, I’ve been gloomy on this share for a while, and rightly so - the fortunes haven’t turned around, and the SP has been on a continuous decline. This is the 5-yr chart of their share price:

So why have I decided to buy now? And what are the key risks? I lay it out below.

A brief summary of what they do

James Cropper is a manufacturing company. They have two divisions: Paper and Advanced Materials.

In Paper, they produce packaging for retailers and luxury brands. Think the fancy high end boxes that cosmetics are shipped in when you buy online. Its not the standard cardboard or shipping boxes.

In Advanced Materials, they manufacture technical fibres, composites, and materials used in industrial, aerospace, defence, and energy sectors. One of the more promising sectors they sell to is hydrogen production, where their materials are used for PEM electrolysers.

So their business is very much B2B. They do their manufacturing in the UK for Paper, but for Advanced Materials they also have a manufacturing facility in the USA.

Over the past few years, the Paper division has been very challenged, as the eCommerce space has seen flat or negative growth after the COVID buying boom. This division is currently loss-making, and have undergone some restructuring in 2024 (but not enough, IMO).

In the Advanced Materials division, they had some good success in 2022, 2023 riding the optimism of Hydrogen as an energy source/storage, but as that industry has also struggled in 2024, so have revenues there. This division is highly profitable (20%+ operating margins).

In the latest HY to Sep24, Paper revenues were -12% YoY. Advanced Materials was -12% too. Ouch! Both divisions going backwards is never a good thing. However, they managed to roughly break-even on an operating profit and PBT level, not a bad outcome despite steep revenue drops.

Why I have invested

» Advanced Materials on its own could be worth multiples of the current EV

This is the hidden gem in this group.

Despite the -12% revenue drop YoY in H1 to Sep24, they managed to have “margin growth” in H1. This suggests strong pricing power, and a product that has a serious competitive moat, despite challenging Demand conditions. Unfortunately, in the HY results they don’t give a division breakdown of the P&L, so we’re left guessing the quantum.

But the Advanced Materials division is highly profitable. In the FY to Mar24 results, it achieved a 27% adj EBITDA margin (£9.3m), and a 22.3% operating margin (£7.7m). Both are before central costs, but that’s not huge at only £600k.

If you value the division on a standalone basis at a bargain 6x EBITDA, even after taking out the central costs, that’s a £52.2m EV valuation. The EV of the whole CRPR group is currently £28m (£15m market cap, £13m net debt). The share price should be at least 2.6x where it is currently, even if you give zero valuation to Paper.

In the UK, the government is favourable towards Hydrogen as a clean energy technology, and is investing to boost the number of new projects. Recently, 27 new hydrogen projects have been selected for UK government funding and support. This is on top of 11 projects awarded £2bn back in Dec23.

» Advanced Materials looks like it has bottomed-out, back to growth?

H1 to Sep24 revenues were £16.7m, which was down -12% YoY. However, it was up +8% H1-on-H2, so there are signs of stabilisation. The outlook statement given state “growth momentum to continue” and “order books have strengthened in the last few months”, so it would be surprising if we didn’t see further revenue growth progression in H2 vs H1.

Coupled with already strong profitability metrics (see above), I think investors will start thinking about James Croppers as more glass half full rather than half empty, when the FY Mar25 results are published. Especially if management assure that the AM division will continue growth for FY Mar26.

» Solid NTAV means bank pulling the rug is low

I make NTAV to be c330p per share, and the current share price is at 157p.

Inventories are OK at 2 months of revenues, Receivables also OK at less than 2 months. Current account position is healthy positive, so no immediate cash crunch.

However, I have not included the pension deficit, c£17m, in these calculations. Taking this into account, the NTAV is c150p, which is pretty much where the shares are trading at now. So still very healthily asset backed.

There is £6m of freehold on the balance sheet, compared to £13.1m of net debt (Sep24) so arguably they could do a sale and leaseback in the worse case scenario and reduce their net debt by almost half. The property could also be worth more, I haven’t checked if the £6m value is at cost, or recently updated valuation.

» USA manufacturing facility

Their Advanced Materials division has a manufacturing facility in the USA. Their main competitors in this space are USA-based as well as Europe-based. I haven’t been able to find any evidence of China-based competitors, but they probably do exist.

Needless to say, in these Trump Tariff times, having a manufacturing facility in the USA is now a huge benefit. Perhaps they will be announcing big growth in their order book soon…

» New management in, shows the family in control is happy to get outsider expertise

New CEO just started, new CFO started end of 2024. They also brought in a new MD for the Advanced Materials division last summer, from Victrex. So clearly, they are happy to have outsiders come in and shake things up.

» It has the potential to be a story stock

The dream of any value investing, of course, is not just a reversion to “Average” valuation, but where a company goes from unloved to being a story stock.

James Cropper has the potential to be that, with the Advanced Materials division. It sells into two sectors that could see frenzy over the next year or so - Defence and Hydrogen. It is currently trading at c0.15x Price/Sales ratio. Imagine if it became a story stock - easily to 0.5x, maybe 1x or more. That’s a huge possible multi-bagging.

The Big Hairy Risks

» Covenant breach possibility

Their debt facility with HSBC has two covenants to be tested quarterly. It is the usual Net Debt to EBITDA, as well as EBITDA cover to net interest. There was a covenant holiday for the Jun24, Sep24, Dec24 quarters but back to normal as of Mar25, which I assume they have passed now given there has been no RNS announced.

I think as long as Paper losses do not increase, and they manage to stabilise them at the same levels of Sep24, then they are OK.

Advanced Materials should see a growth in revenues, and EBITDA in H2 to Mar25 and beyond.

And with these assumptions, I have calculated that they should be OK for the normal covenant levels going forwards.

Obviously, if macro-economic trends deteriorate, then covenants are a risk. One to keep an eye on.

» Pension deficit of £17m and continued contributions

Not a huge deficit, but its not small either. Sucking up £1.3m of contributions yearly from profits, and the yearly pension payments are only expected to peak in 2040, so its still got a long way to go.

This, I think, is probably the biggest obstacle to the company being able to sell off or spin off the Advanced Materials business, which will be the quickest way to realise value here.

» Closure of the Paper business might be unpalatable to the founding family

The founding family, as a concert party, still hold c38% of the total shares, so they have a blocking vote for any major decision. One of the family, Mark Cropper, is Chairman on the board. The business was built on Paper, and maybe the family will be stubborn in terms of legacy?

So we might get a case of them stubbornly trying to orchestrate a turnaround for a few more years to come, each year incurring heavy losses and distraction from the main investment case, Advanced Materials.

The potential gains I see

Where do I see this going?

I see Paper getting back to EBITDA break-even within 12-18 months. Its not rocket science, trying to get a manufacturing business back to break-even.

I see Advanced Materials back into growth mode, and easily getting to £11m/yr EBITDA, if not more.

Strip out £600k of central costs, and then £4.6m of D&A, and £1.2m of debt interest costs, and its looking like £4.6m PBT and c36p EPS.

At an £11m EBITDA, the net debt of £13m is seen as manageable, just over 1x ratio.

And for a “growth” company in high tech products, with operating margins of 20%+, it really should be trading at least 10x PE, if not much higher. At this, we’re looking at a 360p share price, if not another +50%, +100% higher.

That’s more than double the current SP of 150-160p, so hence why I’ve bought in.

Q1-2025: -1.0% vs +4.4% (FTSE All-Share Benchmark)

2024 : +11.8% vs +5.7%

Wow! What a first three months it has been. Firstly, I apologise for not posting anything. I was away in New Zealand, and then other commitments got busier than usual, and before I knew it, a whole quarter had passed by. I will try to keep up a more regular rhythm of posting, maybe using Notes more often (so make sure you follow/subscribe to The Boon Fund or my personal profile to get those!)

The FTSE100 outperforming the S&P500, who would have thought that? All driven by the policy uncertainty around Trump tariffs and US government spending.

Despite the bright performance of the FTSE100 (+5% Q1), the FTSE250 (-5.6%) and the AIM100 (-5.2%) are still performing poorly. My underperformance vs benchmark is largely driven by the FTSE250 and the AIM, as most of my shares are from those two, instead of the FTSE100.

Meanwhile, lots of policy announcements have been made in the UK leading up to and at the Spring Budget. But actually, it is all just tweaks around the edges. A couple of billion savings on spending, on a £1tn+ annual government budget. Some tweaks to some rules here and there. Mostly coming in over a few years, rather than a big bang right now. Hardly the sort “Change” with a capital C promised by Labour.

The NI and Wage increases coming in this month are probably a much bigger impact. As an investor, I am worried, but given companies and investors have had six months to digest, I think its probably all priced in. Maybe why the FTSE250 and AIM100 are down so far this year? The silver lining is that many companies might benefit; ones who focus on minimum wage consumers like Greggs and Wetherspoons maybe? And that’s not been priced in yet. We might get a mini-stimulus to consumer spending coming, and that can be good for the UK, as we are a consumer spending driven economy.

One thought I had recently… as Trump has slapped HUGE tariffs on most exporting nations, that we in the UK also import from… think China, Vietnam, etc… exporters will have excess capacity, and will need to seek new markets for their goods. The inflation outlook for the rest of the world becomes more deflationary. You can imagine that clothing brands in the UK, like Sosandar (I hold) and Boohoo will be able to negotiate much better prices with their manufacturers in countries hit by huge USA tariffs. For the UK as a whole, an economy that does a lot of importing of physical goods, that means the Bank of England could cut rates faster later this year. Good for shares and businesses? And housebuilders? Bad for Pound strength though, especially if the USA is forced to hold or even increase rates due to inflation. Food for thought.

Loads of shares have gotten cheaper in Q1, especially on the FTSE250 and AIM100, and I have been taking the opportunity to top up some existing holdings, as well as start new ones, more details below. However, I have also realised profits on a few positions and sold, so overall I am now nearly 30% cash, which is the highest percentage since 2021.

This won’t be for long though, as almost weekly I am getting buy price triggers.

The value out there is astounding; but there will be some landmines that will do badly from the Trump Tariffs, as well as the labour cost increases in the UK. Some of the buy price triggers that I’m now monitoring daily for a possible entry:

• Macfarlane (top-up)

• Celebrus Technologies

• Churchill China

• Cavendish (top-up)

• Sanderson Design

• James Cropper

However, there are reasons why I haven’t pulled the trigger yet! So treat these as ideas for inspiration for potential good entry prices, rather than a flashing bat signal to buy.

Portfolio Trades

SELL: Comptoir #COM $COM.L

Sold out my entire position. The c-suite had a reshuffle, with former executive members returning who were ousted a few years back. In addition, they don’t seem to have a clear growth plan, and their rate of progress on operational metrics don’t excite me. On top of that, the NI and Wage increases to come in pretty much negates any profitability improvements this year. So another “wasted” year. Overall, I realised my initial thesis wasn’t true anymore, and the new “facts” don’t interest me. So time to sell out and wait.

A pity. I thought they were on track for a decent turnaround with new management, new strategy, when I bought in. It now looks like old management, struggling strategy. I think they have a good format, and my analysis of restaurant ratings is that they are liked by customers. So I’ll keep monitoring, to see if there’s a re-entry point later this year. After selling at c4.2p for loss, the shares have now drifted down to 3.2p. At sub-£4m market cap and a near 50% shareholder, the delisting risk looks quite high.

SELL: Gem Diamonds #GEMD $GEMD.L

I decided to exit this completely too. I bought in initially at May24 on the thesis of bumper profits from unearthing large diamonds and a fast reduction of net debt. This happened for the two quarters after, and at one point I was sitting on a 50%+ paper gain on my 9.4p entry price. Wish I had sold, as the shares then crashed when the largest shareholder tried to sell down their stake in an illiquid market...

Towards the end of 2024, it became apparent that the boom of large diamonds was drying up. In addition, their new mine plan for the next few years didn’t seem promising for profitability. Average diamond prices also continued to fall, which is bad news for miners given the fixed cost structure.

So I decided to exit; again like Comptoir, as the facts change my my initial thesis failed to play out, that’s when one should sell rather than cling on stubbornly to some hope. A bit unlucky with this one, with that large shareholder putting a spanner in the works on the SP rise as my thesis played out. Sold out at 10.7p, now trading at 9p, so that was the right call.

BUY & TOP-UP: Robert Walters #RWA $RWA.L

Bought in here for the eventual cyclical recovery in recruitment. I don’t know when that will happen, but I see companies still needing senior and mid level management in the future? If anything, more will be required - you could replace a team of 10 junior people with AI, but someone’s still got to orchestrate the AI, feed it inputs, and quality check the outputs. So maybe, for every 5 junior jobs cut from AI, one mid or senior level job gets created? That’s where Robert Walters plays in, mid and senior level jobs.

In the meantime, I have been impressed with management efforts to make redundancies, and stay profitable. A big risk with downsizing is that morale goes to the dumps and productivity drops, causing a vicious cycle. However, they have managed to maintain Net Fee Income Per Fee Earner, which is impressive. They have a sound balance sheet too, no sleepless nights despite the steep revenue drops.

In times like these, small independent recruiters are the ones that go out of business first. Through lack of diversification. Robert Walters will emerge in the next upturn with less competition, more market share.

Bought in initially at 295p in January, maybe too early it seems. Topped up more at 220p in March. Think this could easily go to 500p, maybe even 800p. So there’s potential. However, the share price chart really does look like a falling knife at the moment…

BUY: H&T Group #HAT $HAT.L

I’ve owned H&T back in 2021, but bought/sold at no profit. I can’t quite remember why; but it was at 255p back then, and I should have held as its now up near 400p. I’ve kept it on my watchlist ever since then, waiting for an opportune moment to invest.

That moment came in February, when the SP went below 340p, my buy trigger. A combination of bad market sentiment, plus jaded investors, and also lack of faith in management, who snuck out a shock profit warning last year via the brokers rather than in the RNS. Really bad form.

However, in the recent investor presentations I sensed that management have eaten humble pie, and appear to want to be more transparent going forwards.

Meanwhile, they have had a very good Q4 (Oct24 to Dec24) operationally in terms of increasing their pawnbroking pledgebook, which should drive revenue growth this year. Their other divisions should see growth too; retail jewellery and watches should continue brisk growth, and FX should continue to benefit from increased holidaying volumes this year. So overall, I actually think EPS growth this year could be 10% or more, compared to broker forecasts of 6-7% growth. And its still only trading at about 7-8x PE.

As I started building my stake, unfortunately the SP got away from me. Should have started a bit earlier or just swallowed a higher price for the full position I wanted. Anyways, its rocketed from the 338p I bought to 400p, and now settled at 385p. I’m probably not a buyer at this price, but if it does get back below 360p I will complete my position building. Think this could be a medium to large position size for me (5-10% of portfolio).

BUY: Sosandar #SOS $SOS.L

Another share I have owned before. I did really well in 2021-2022 when I bought at 23p and sold at 32p. Its crazy how far these shares have fallen, to 6p, given that revenues have almost quadrupled in that time-frame.

I’m being contrarian here to the market. Sosandar’s strategy is to have pricing/discount discipline, and become omnichannel by opening high street stores. It seems like the market thinks these strategies are going to be failures. I have the contrarian view that these are the right things to do.

Many women’s brands targeting 35-60 year olds have either gone bust, or moved to a heavy discounting model. However, that target audience is now richer than ever; much more disposable income than the average Brit. They are less price sensitive, and therefore if there is a brand that has products they need, they will buy. I think Sosandar has a winning formula here; and this is me speaking from my marketing and branding experience hat on.

They have had some horrid quarters, with fast declining revenues as the “discount sensitive, no loyalty” segment of their customer base moves on. But their profitability metric has increased, and I suspect that as the unfavourable comparative period falls away, we’ll see YoY revenue growth come back, and the fruits of their labour: much higher profit growth.

The second part of their strategy, high street stores, also has investors bargepoling Sosander. Sure, plenty of fashion high street retailers have gone bust in the last few years. However, if you look at why, its mostly down to legacy issues. Expensive leases locked in years ago. Sites with nosebleed business rates. Outdated ERP, POS systems. Inefficient store operations. Tired looking stores starved of capex.

All of these disappear if you are a completely new retailer, looking to set up a high street operation now. All of these issues do not plague Sosandar.

How are the stores performing? Management have been coy and haven’t really shared any concrete metrics here. They have continued their store opening programme, now on to their fifth store I believe. They could have stopped if the first 2-3 were underperforming, but they haven’t.

The fashion industry as a whole is still struggling in Q1. Barclays Spend data, and other industry data, point to static volume growth at best and heavy discounting putting pressure on prices. But after two years of this, I suspect we will start to see a stabilising and maybe improvement come about over the next year.

PARTIAL SELL: Nichols #NICL $NICL.L

This has played out to my thesis, having risen from 990p when I bought in Sep24, to now 1300p+. My full initial thesis is here so I won’t rehash it completely. The share price at that time was not pricing in the fast growth of Vimto (both UK and international), the rapid improvement in profitability in their Out Of Home division, and the Africa growth opportunities and new potential markets for Vimto.

All of those are now FACT in their latest results and update, and it was nice to see the shares go above 1300p.

What now? I still think there is enough momentum in the underlying business to drive modest EPS growth in the next year or two. However, I was disappointed with management’s ambition. In new markets, they have launched in Malaysia, but don’t seem to have another market ready yet, and that takes time to prep. In Africa, they have some growth initiatives in progress, but it seems like a low level of investment. In OOH, they seem to treat it as job done, instead of taking further steps to growing that segment.

All in all, I think this should be trading at between 1400p and 1500p. But I struggle to see higher potential, and hence why I banked some profits at 1320p.

TOP-UP: Ashmore #ASHM $ASHM.L

Been suffering with this one, having bought in Jun23 at 220p, and now trading at below 160p. I have had 33p of chunky dividends in that time, so that has lessened the pain, but still underwater.

Last year, it looked like Emerging Markets were coming back into favour again, and the shares rallied back up to 220p. Only for USA markets to suck back in all the capital with Trump coming into power.

Now with US stock markets wobbling, and investors wondering if the USA isn’t the stable political and policy environment they thought, there has been capital flows to other geographies worldwide. Europe has been the main beneficiary, as widely reported. But so has emerging markets, quietly.

Ashmore is about to announce a Q3 (Jan to Mar) trading update soon, and I wouldn’t be surprised if there were Assets Under Management (AuM) inflows as well as positive investment returns.

With the low share price at the moment, I took the opportunity to top up at 158p. It is now my largest position, as I sold my previous largest position which was….

SELL: Phoenix Group #PHNX $PHNX.L

On the third anniversary of holding Phoenix, since Mar22, I decided to exit. The company has recently released great FY results, beating broker forecasts and also upping targets for the years ahead.

It is an astounding share for income seekers. Even after the recent share price rise, it is still giving off a 9.5% dividend yield, which is very well covered by the predictability of future cash flows, given its annuity and life insurance focus.

The flip side is that it has highly complicated financial statements. I gave up trying to understand the entire FY results, and I’m the type of investor that loves looking at numbers. This issue plagues most other insurance and finance businesses as well. You have to have faith that the management team are solid, ethical, and balancing risk and growth appropriately.

My initial thesis back in 2022 was on declining life expectancies coming out of Covid as well as the booming Bulk Annuities Purchase (BPA) market, where companies offload their defined benefit pension schemes to insurers like Phoenix. Both of which I felt weren’t priced in to the SP at that time.

By and large, both have now come true and are FACT, reflected in Phoenix’s good results over the last two years.

So without a current thesis, I struggle to justify holding Phoenix any longer. Despite my thoughts that the 9.5% dividend yield seems too high and that income investors should be rushing in and driving it down to around 8%, which would be a share price of 675p instead of the 570p currently.

However, the dividend yield has been stubbornly high for a while now, so I have accepted that maybe this is the right level, and decided to sell and move on. Exiting at 576p, it is about the same as the blended 560p I bought in three tranches over the years. So not much capital gains for 3 years holding… however, I have also had three years of dividends since then, all c10%, so its not a bad return overall. A textbook example of how dividends can turbo-charge returns, when the share price is flat / sluggish.

2024 Year : +11.8% vs +5.7% (FTSE All-Share Benchmark)

Performance over the last 4 years:

I’m fairly pleased with how 2024 turned out, as at the end of June I was trailing behind and underperforming, in some cases by as much as -6 percentage points (pp). So to end the year +6pp up vs benchmark meant a barnstorming H2 performance to dig myself out of the hole.

My target is to outperform the FTSE All-Share by 5-10pp each year. This was achieved in 2024, as well as in all three years prior, to make it four years in a row. You can see the beauty of compounding outperformance, even over a short 4 year period, as my total return has been +67% compared to +22% of the FTSE All-Share.

Furthermore, I’ve delivered double-digit returns every year for four years - I’ll be super pleased if I can continue this forever, even if I don’t beat the benchmark in some years.

While The Boon Fund hasn’t gone through a full economic cycle that includes a deep recession and a big market decline, I would say that the last three years in itself has been a strong test, especially as it included a high inflation environment and the great struggles of the AIM index (-39% 3yr), of which many of my shares are listed on. I’m happy with my performance, having well outperformed through these three challenging years (2021-2024) AND also outperformed too in a one good year for the market (2021).

Drivers of outperformance

What can I credit the H2 performance to? One key thing was that I had taken a sabbatical from full time work from April onwards. During that time, I was able to spend more time on analysing and researching companies. In some weeks, I was spending 25-35 hours on shares; not that far off a full-time job. Compared to previously, when I was spending maybe 5-8 hours a week in total.

However, as you will see from the Best and Worst performing shares below, many were bought in 2023, so I cannot give full credit to the fact that I spent more time actively managing my portfolio.

Nor did more time spent looking at shares mean more trading activity; the average number of transactions I did in 2024 was the lowest in the four years at 29 transactions (buy & sell) in total. This is barely just over 2 trades a month. The three years prior (2021-2023) had 51, 36, and 33. I am definitely holding onto shares for longer, and running a more concentrated portfolio.

Looking through the list of Best Performers below, they all adhere to the four key pillars of what I look for to invest. All of them took more than 6 months to re-rate in terms of value, which suggests that potentially I’m investing a bit too early. But better to be early than to miss out, I think… as long as I can still realise value within my goal of a 1-2 year horizon.

Looking through the list of Worst Performers below, one trend is my susceptibility to investing in “blue-sky” type of exciting situations. I need to be better at having patience to wait for companies to demonstrate a proven ability to scale supply and demand, before jumping in. Luckily, my biggest percentage loss (Surface Transforms at -81%) was a small position, and my other two biggest losses in absolute terms were limited to less than -30%. This I take solace from, that my selection and sizing process has meant that none of my largest positions has suffered catastrophic losses during the year.

I now deep dive into my Best 5 Performers, my Worst 3 Performers, and some of the shares that have had a Puzzling Performance during 2024.

Best Performers

» Direct Line Group #DLG $DLG.L +65% return

Lots of drama with this share in 2024. I bought in Mar23, on the hypothesis that it was a strong brand and decent enough balance sheet, and that the one-off headwinds and factors were very fixable. This proved to be largely the case, albeit the fix and improved performance has taken a bit longer than usual to show up in the results and share price. Two industry players decided to pounce on the disconnect between share price and the underlying momentum in improving performance. Ageas made a bid earlier this year at c230-250p, and was beaten back by the board. Frustratingly, I saw big gains from my 152p entry, only for it to fall back to the 160p mark after the bid rejection.

Luckily, Aviva came in with a better offer, now accepted, and I took the opportunity to sell out at 250p, for a very nice +65% gain in just over 18 months.

» Paypoint #PAY $PAY.L +45% (excluding chunky dividends!)

Paypoint was also a 2023 vintage, bought in June 2023 at 442p and sold out just a year later in Jun-Jul 2024 between 610p and 660p. Annoyingly, the shares ran up further to 800p, so I lost out on another chunky gain.

My hypothesis was that the market was valuing it as a legacy declining business rather than a monopoly-like platform with a big moat and solid growth from new products and services. Over the year, more investors cottoned on to the story as the company managed to grow new revenues and profits faster than the legacy business decline.

I sold out as I believed the company would be hitting a soft patch of trading, and wanted to lock in gains. Unfortunately, the market continued to chase up the price, but the subdued outlook / softness has now been announced and the share price has pulled back to 740p from 800p. So I was a bit too early with my view, and should have held on for another month or two before selling out to maximise my gains. This illustrates one of my key weaknesses, which is selling too early and missing the positive momentum to the top. I missed out on similar with Costain and Mcbride in 2023 for example, selling out way too early while the SP continued to increase.

» On The Beach #OTB $OTB.L +31% return

As I mentioned in my Nov24 Monthly Post, I have started a new role with the company so I sold out not wanting to have no liquidity during trading blackout periods. While my gains here were pretty decent, I was unlucky to make the decision to sell for non-valuation reasons at 166p, as the shares have now risen to 250p after the FY results. This would have resulted in an almost +100% gain from my entry point of 127p.

» System1 #SYS1 $SYS1.L - still hold, +110% in 2024

I’ve held System1 in past years (2021-2022) but bought back in in Nov24 at 190p. Top-sliced some in Feb24 at 408p (again, selling too early!) and it reached a high of 780p and now trading at 620p.

For me, this share epitomises the unreasonably bearish sentiment that UK markets have towards fast-growing tech companies. They have a proven product with a unique moat, that is fixed cost in nature and high gross margins. They have a huge growth runway in a big market (USA) where they have already won many blue chip clients. Quarter after quarter of the right financial numbers and strong growth percentages.

If this was listed in the USA, the PE ratios will be in the 50x to 100x range. Here in the UK, it is trading at 25x. I don’t think we will ever see US valuations here, but I hope that SYS1 either it gets a takeover offer, or investors start to cotton on and this gets to the 1000p range from the current 620p share price.

» Safestay #SSTY $SSTY.L +56%

This was a small holding, so the absolute contribution to total gains was small. However, still a sizeable gain in just over 20 months from Jan24 to Oct25. My original hypothesis included a hope that they would be able to rapidly expand their hostel beds inventory through franchise or management contracts. This has started, but management also got distracted by buying and setting up new owned & operated hostels as well. Trying to do two different strategies, they have split their resources and not made meaningful progress in either. I wait and see if management wisely decide to stick to one or the other, going forwards. Decided to take my gains here. Think this could drift back down to sub-20p from the current 25p.

Worst Performers

» Eco Animal Health #EAH $EAH.L -28%

This was a frustrating holding, as at one point in my holding, it was a +47% gain but then had a crash. I bought in for two main hypothesis, one was for a recovery play in the main revenue & profit centre, and the other was for their new product portfolio, which I thought was getting zero value attributed to it.

The one big risk with this investment came true, causing the share price to collapse. The markets were just about happy to tolerate the huge cash burn on the blue-sky new product development, as the bread-and-butter business was churning out enough profits to cover the NPD cash burn.

However, a shock profit warning came. And while the company was not in any immediate danger of running of cash, the share price collapsed. Investors were already lukewarm on EAH, and with this new bearish news, I think many investors exited.

I decided to hold on as I could see the longer term value. However, I also threw in towel a month or so later as I suspected that the profit warning was not going to be the last. This didn’t come to pass, the next trading update was in-line, and the shares have recovered a bit from the 64p I sold at to 70p.

For now, I’m monitoring for share price weakness and a further profit warning. The new product portfolio won’t have any tangible news to announce until Q2-25 or Q3-25 at the earliest, so there are no positive catalysts for a share price re-rating yet.

» Surface Transforms #SCE $SCE.L -81%

Took a HUGE loss here on this blue-sky share. Exited at 6.5p, but a good decision as now they are at 0.4p. My key mistake here was not being critical enough and investigating whether the company could build a scaled manufacturing capability for its new product, ceramic brake discs.

Sure, the product was good and had lots of clients signed up for the next few years. Yes, they had done some manufacturing already and some of their products have been bought and used successfully.

However, the big question I failed to ask before investing was whether they could go from producing small quantities to producing large quantities. It turns out the answer is a resounding no. Despite numerous fundraisings to throw money at fixing the manufacturing problem, it is still un-fixed. Can they fix it? If SCE ends up surviving and they can demonstrate over a 6-12 month period of profitable and scaled manufacturing production, then I think it would be a good buy back in.

This reminds me of another company that went through similar issues: Accsys. I’m not monitoring this company, as they have fixed their manufacturing and scaling issues. However, they have a new problem now, which is soft demand… not what you want when you’ve just scaled up production capacity!

» Ashmore #ASHM $ASHM.L - still hold, -25% in 2024 (excluding dividends)

My hypothesis here was that their solid balance sheet as well as the strong brand and owner-run business meant that they would be able to weather the storm until Emerging Markets investing became fashionable again. I expected this to be within 12 to 18 months from my purchase (Jun23).

It is now 18 months. There was a false dawn in the Aug-Oct24 time period, where Emerging Markets sentiment looked to be turning, with big institutions and also private investors contributing to positive flows into EM assets.

However, Trump’s election was the catalyst for that all to be disrupted, with his talk of tariffs on the whole world. The surging US equity markets, as well as a slower rate of Fed rate cuts, means there is a lot of compelling reasons to invest in USA, and not in ROW at the moment.

I am well aware that my hypothesis here all rests on some macro-economic changes. Which isn’t my usual style. Otherwise I’d be playing the FX markets or the oil markets instead of bottoms-up investing in UK shares. I’m torn between selling out, or hanging in there. So far, the comfort of the three Ashmore strengths I mentioned (balance sheet, brand, owner-manager) has won in the battle going on in my head.

I think a key lesson here is to avoid shares where the fortunes of a company is too far out of the hands of management. Sure, every company has part of their destiny exposed to factors outside their control. But when is it too much out of management’s control? Other companies that springs to mind where the fortunes are largely dictated by outside factors include Rio Tinto and Gresham House Energy Storage Fund. In the former, the demand and price of iron ore in China dictates their fortune. In the latter, demand and rates set from their sole customer, National Grid.

Meanwhile, I sit and collect the 10% yearly dividend from Ashmore; so far it has been useful to make a dent in my capital losses.

The Puzzlers

» Phoenix Group #PHNX $PHNX.L - still hold, -3% (excluding dividends, c10% yearly)

I’ve been a holder for almost three years now (since Feb22). Plenty of chunky dividends means that I’m in profit overall, but still frustrating that the capital gains have not arrived.

My hypothesis here is two-fold. The first is that there would be a wave of pension buy-outs (Bulk Purchase Annuities to use industry jargon). This has started, and Phoenix has done well, but has not caused the share price to re-rate.

The second is that their cashflow visibility for the years ahead are very solid, given that their products are long-term, insurance-like, and has a high degree of modelling predictability. The cashflow projections support the current yield (10%+). I was expecting that this would cause the dividend yield to compress to c7-8%, thus giving a strong capital gain.

Both hypothesis has played out, but the share price has not moved. I am probably missing something, so unless something changes soon, I am likely to throw in the towel and move on. I was happy to hold PHNX while I still had spare cash to deploy in the Boon Fund, but when I start to run out of dry powder I will be looking to recycle my PHNX cash into other holdings.

» Personal Group #PGH $PGH.L - still hold, -0% in 2024

The shares have done nothing in 2024, despite very strong progress operationally. Client numbers have grown, and their main insurance division is growing very briskly in terms of policies sold and revenues. In addition, their new products such as their benefits tech platform Hapi, has shown strong growth too. So far, so good for my initial investment hypothesis.

So when will this re-rate? Probably will take a while, as this is a share that has a low profile with many investors. The couple of investment hypothesis that made me invest in May24 still holds, and typically it takes a few financial reporting cycles (ie 12-24 months) for the markets to see the operational progress being reflected in financial progress. The same happened with On The Beach and Paypoint.

So I have quiet hopes that PGH might be a solid gainer in H1-25, and be a key driver for outperformance for the year ahead!

» Spectra Systems #SPSY $SPSY.L - still hold, +3% in 2024

Another share where the company has made solid operational progress in 2024, yet the share price reaction has been muted. They have now secured a BIG contract, which assures profits and financial stability for the next few years.

On top of that, they’ve bedded in a very key strategic acquisition (Cartor), and launched a new product (polymer banknotes) into market. The first opportunity for new contracts will come in early 2025. All it takes is one contract or two, as they will be BIG £ and will be LONG (at least 5-10 years, in line with cycles of banknote development).

However, I’m not really sure investors will ever warm to this share enthusiastically, unless they diversify their client base away from central banks. That is because use of banknotes globally is on the wane, and the company has some pretty big client concentration risks with just a few central banks.

Still, every time I run the ruler again over Spectra, I come to the same conclusion that it doesn’t take much for this to increase to over 350p fair value from the current 240p. If they manage to crack the polymer banknote market next year, then we’re talking 2x, 3x multiple of the current share price. Meanwhile, there is little downside, given their long contractual revenues as well as the big bumper sensor contract they have for the next few years.

So that’s it! A wrap up of my 2024 performance. And a reflection on The Good, The Bad, and The Puzzling.

My next post is probably going to be about Macfarlane, my most recent buy in Dec24. I still haven’t gotten around to writing up an in-depth article about my investment hypothesis in it!

Meanwhile, I asked AI to generate a greeting card image for all of you lovely readers, wishing you a prosperous and profitable 2025… here is what I got….! AI for me is still not investible, yet.