Fri 4 July 2025 - Paul Scott's Small/Mid Cap Value Report

Starters: FUTR, AVAP, CLAI, THRU Mains: GLE

Good morning from Paul & Alun, on Free Friday - when I give away the daily report, and the podcast, to all our thousands of free subscribers. We usually get a handful of free members converting over to paying (it’s still only £100 pa, or £10 per month), so it’s worth doing. VAT will have to be added on top soon, I’m talking to my accountants about registering shortly.

EDIT: My apologies for forgetting to send out the usual 07:50 email, it’s been done now (at 11:40).

Extremely quiet for news today, so today’s report is only a fraction of the usual size on Tue, Wed & Thursdays.

I would also like to wish our American cousins happy Independence Day! I just looked up our Substack subscriber records, and I see we have 101 subscribers based in the USA! I wonder if these are UK ex-pats, or Americans interested in UK shares? I’m hoping to build our US subscriber base, and become a trusted source of independent news & views on UK shares. After all, UK shares are cheap compared with American shares, that’s why so many UK companies are receiving takeover approaches from US companies.

Whilst obviously also recognising the exceptionalism of US companies, particularly their domination of tech. It’s rather depressing that the UK (and indeed Europe) have so miserably failed to develop any tech leaders, whereas US companies seem to dominate everything online. Maybe it’s the can-do, entrepreneurial spirit in America that I so admire? Plus of course vast pools of capital, and a willingness to take risks. We badly need more of those qualities here in the UK.

So do leave a comment if you’re reading this in the USA, I’d love to hear from you!

Vox Markets - no small caps roundup this week, because Paul Hill is on holiday in sunny Wales! We’ll be back next week, at 2pm on Thursday. Here’s the link to bookmark us.

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ShareScope Tip

I sometimes get caught out by sharp falls in share prices, which turn out to be because something has gone ex-divi. I’ve found a useful column on ShareScope which I’ve added to my customised view, shown below, which flagged several share price moves yesterday that were ex-divi moves. Quite useful, so thought I’d share it here -

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No paywall today, as it’s Friday!

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MrC's Smallcap Sweep: Throwing truth a life belt

GLE, APTA, THRU, AFC, PR1, HUD, ROAD, AVAP

Note: 👍 👎 ❓mean positive, negative or mixed/confusing. No symbol = neutral. All Alun's opinion only on each specific RNS, not the company itself.

◄MJ Gleeson (GLE)► 👎 guides FY25 in line but warns FY26 adj pretax c.£24.5m, the lower end of market expectations. Blames planning delays plus Gleeson Homes operating from fewer sites than expected. [SP=387.69 Cap=227m]

◄Aptamer (APTA)► £2m placing at 0.3p, a 21% discount, to accelerate the commercialisation of its Optimer technology... (a long list including repainting the bogs and buying a beggar's hat). [SP=0.39 Cap=8m]

◄Thruvision (THRU)► 👍 £2.5m rescue placing at 1p (28% discount) + £250k retail offer, concluding strategic review. Co confident of winning new orders in this and next FY. Targets cashflow breakeven in FY27 if rev reaches £10m [SP=1.5 Cap=3m]

◄AFC Energy (AFC)► 👍 to form JV with chemicals giant ICL to produce hydrogen from ammonia. Claims hydrogen will be cheap and will "disrupt the UK market, without reliance on Government subsidies". Initial revenues expected in early 2026, subject to permitting, generating up to 400kg/day of H2. [SP=15.6 Cap=134m]

◄Pri0r1ty Intelligence (PR1)► 👍 recent acquisition Halfspace wins £100k three month contract. May be extended. [SP=5.88 Cap=9m]

◄Huddled (HUD)► 👍 to partner with e-commerce solutions provider THG Ingenuity to help accelerate its growth plans. Also an approach from Shard Capital Partners to invest £1.5m at 3.2p/sh (par). It had said it did not need to raise new money to move the business into operational profitability but the money is too good to pass up and the offer "came at exactly the right time". Ain’t that grand? I hold a scrap. [SP=3.12 Cap=11m]

◄Roadside Real Estate (ROAD)► buys a petrol station for £1.25m. [SP=50 Cap=69m]

In line: AVAP

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Very little news today, even by quiet Friday standards, this is all I could scrape up at 07:55 - updated 08:30 with early price moves - final version at 15:20 -

Paul’s Section:

MJ Gleeson (GLE)

Down 6% to 364p (£213m) - Trading Statement (mild Profit Warning FY 6/2026) - Paul - PW / GREEN

What does it do? -

“Gleeson Homes is the leading low-cost, affordable housebuilder. Its two-bedroom homes start from circa £100,000.”

Gleeson Land is the Group's land promotion division, which identifies development opportunities and works with stakeholders to promote land through the residential planning system.”

Previous coverage here - historically I’ve liked GLE, due to its niche of starter homes in the Midlands/North seeming more resilient to economic downturns, cost of living crisis, etc. Although recent performance has disappointed, and I’m not so sure that it’s as resilient as I’d hoped. However, despite the 3/6/2025 profit warning we remained at GREEN due to the now hefty discount to NTAV.

Today’s news - is another (mild) profit warning for the new financial year, FY 6/2026, and management changes, so it seems they’re now acknowledging that some of the problems are due to inadequate execution (the first step to fixing things, so I don’t necessarily see this as negative).

I’ll summarise today’s trading update, key points -

FY 6/2025 “concluded in line with market expectations”, which of course were lowered in 3 stages from the original >80p, to only 28p (light green line below from ShareScope is FY 6/2025 forecast EPS). The darker green line is the FY 6/2024 actual result.

This is how it defines market expectations for FY 6/2025 -

“The Group is expected to deliver a profit before tax and exceptional items for FY2025 within current market expectations which range from £21.0m to £22.5m.”

Gleeson Homes forward order book is usefully up, at 845 plots (30/6/2024: 559)

Gleeson Land - further delays to land sales, 3 of which have slipped into FY 6/2026.

Year end net debt is almost neutral, at £0.8m, although the way it’s phrased this sounds as if it’s worse than expected, but clearly negligible debt is not a worry given the balance sheet strength.

Gleeson Homes - reorganisation. For the first time I think, GLE is acknowledging poor internal execution. It mentions headwinds as -

• Increased build costs,

• Flat selling prices,

• Use of selling incentives,

• Several bulk sale transactions (at discounts I presume),

• Planning delays pushed back the opening of higher margin new sites,

• Absence of wider market recovery,

• Costs from legacy site issues,

• Cost over-runs due to internal failures of process & compliance.

As a result, the anticipated H2 margin improvement “did not materialise”.

Organisational & management changes have been made to address these issues.

CEO of Gleeson Homes, Mark Knight, has taken the blame, and has gone.

Reorganisation costs of £1.2m will be treated as exceptional in the accounts.

“The strengthened management structure is expected to lead to a marked improvement in performance and delivery, improving pace and quality of build and management and control of costs.”

Outlook -

The housing market “remains subdued”, with “no short term catalyst for any substantial improvement”.

“Continuing capacity issues” in the planning system are delaying new site openings.

It’s not all doom & gloom though -

“However, our strong pipeline and improvements in our own process give us confidence in our ambitious growth plans.”

Revised guidance for FY 6/2026 is helpfully provided -

“the Board expects that profit before tax and exceptional items for FY2026 will be at or around £24.5m, the lower end of current market expectations…

"Whilst we do not expect any significant economic recovery in the short-term, we are maintaining a robust sales rate. This, along with our remedial actions, gives me confidence that we have a stronger business which will deliver our projections for the current year and our significant growth plans over the medium-term."

That’s not a disaster. I can’t see any new broker notes today, but ShareScope forecasts tab shows consensus of £26.0m PBT for FY 6/2026. Therefore a drop to c.£24.5m is only a 6% fall in profit guidance, which is mirrored by + 6% fall in share price at the time of writing, 12:33.

Balance sheet - was very strong when last reported, at 31/12/2024 with £297m NTAV. That compares very favourably with the market cap of £213m. That’s a price to tangible book value of 0.72x - an attractive discount.

There’s no indication that any assets will need to be written down, so I think there’s a strongly asset-backed position here, that should end up being a decent entry point, once the operational & macro factors have improved.

Downside risk is if there’s a widespread, and substantial fall in house prices, which seems unlikely given the already very low prices of Gleeson’s starter homes.

Paul’s opinion - mildly disappointing news today, but not a disaster.

I actually quite like that they’ve ‘fessed up to internal problems, and have done something about it.

Looking at the 7-year chart below, the 340-350p level has provided very strong support, where buyers have overwhelmed sellers multiple times. Hence at 364p, we’re getting into what could be a good buying price, I reckon.

Obviously GLE needs to start delivering more consistently from now on. That said, another profit warning today only knocked 6% off the share price, so I don’t think investors have to worry too much even if there is another disappointment.

Overall then, recognising that the disappointing trading is not good, but the share price seems to have fully compensated for the downside, and I think risk:reward is actually now looking quite good. Hence I’d be interested in thinking about opening a small opening position myself here, especially if it continues falling.

Looking at other housebuilders in descending market cap, the table below from ShareScope, you can see that only troubled Crest Nicholson offers a similarly low P/TBV.

Overall I think GLE looks strong value, so despite the problems, I think it should remain GREEN here - taking a long-term view, the problems look fixable, but might require investors to be patient.

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