Private Investor’s Diary: Where I’m looking for returns this year

Although US markets struggled to make headway in December, that did not derail what turned out to be a good year for equity markets, gold and industrial metals.

A significant theme of 2025 was that those markets that started the year at the lowest price, as measured by price/earnings (PE) ratios, delivered the best returns over the year; the more expensive markets lagged. For all the talk of the Magnificent Seven, just two – Alphabet (US:GOOGL), up 65 per cent, and Nvidia (US:NVDA), up 38.9 per cent – beat the 17.9 per cent total return from the S&P 500.

In terms of equity market returns in December and over the year, Europe led the way. The Italian MIB was up 3.3 per cent in December, making a 45.3 per cent gain for the year, while the German Dax was up 2.7 per cent (23 per cent for 2025), the FTSE All-Share (TR) was up 2.2 per cent (24 per cent for the year) and the French CAC was up 0.3 per cent (14.3 per cent for 2025).

Behind that came the Nikkei 225, up only 0.2 per cent in December but 26.1 per cent for the year. The S&P 500’s return was -0.1 per cent in December. Its 2025 return of 17.9 per cent was mid-table at best. For a sterling-based investor, the US dollar’s depreciation against the pound reduced the return by some 7.5 percentage points. The Nasdaq Composite was down 0.5 per cent in December but up 20.4 per cent (in US dollar terms) for the year. Other notable gainers in 2025 were the Hang Seng, up 27.8 per cent, and the FTSE China 50, up 25.6 per cent.

Copper had a robust end to the year with December’s return of 7.7 per cent, making 36.4 per cent for the year. I was a little early on my copper call, but it is now coming through powerfully. The markets are starting to appreciate that as the world electrifies, supply is not nearly sufficient to meet demand. Aluminium was up 18 per cent, zinc 6.7 per cent and nickel 6.3 per cent over the year.

JIC Portfolio performance

In December, the JIC Portfolio was up 1 per cent (compared with 2.2 per cent for the FTSE All-Share). For 2025 as a whole, the portfolio was up 21.9 per cent – just behind the FTSE All-Share’s 24 per cent gain. This was down to too many mid and small caps, and not enough large.

Since its inception in January 2012, the JIC Portfolio has delivered a cumulative return of 437 per cent, equivalent to an annualised return of 12.8 per cent. By contrast, the FTSE All-Share (TR) Index is up 210 per cent, with an annualised return of 8.4 per cent. Over five years, the JIC Portfolio has risen 31.3 per cent, some way behind the 73.8 per cent for the index. That’s what happens when a good year drops out, to be replaced by an average year. Additionally, it does not help to be overexposed to UK small- and mid-cap stocks. The good news is that 2021 was a poor year for the JIC Portfolio, so if I can have a half-decent year in 2026, the five-year numbers will get back on track.

During the portfolio’s first 13 years (to December 2024), the annualised return had slipped to 12.1 per cent, so it’s good to see it back up towards 13 per cent now.

December’s biggest risers

IG Group (IGG): Up 15.9 per cent, on relief that there was no punitive change to relevant gambling taxation in the Budget. It continues to use its prolific cash flow to buy back shares and pays an attractive dividend. The current yield is 3.5 per cent. I expect further progress in 2026.
Lundin Mining (CA:LUN): Up 13 per cent, helped by the rising copper price.
DLocal (US:DLO): 5.2 per cent higher. Q3 revenue was ahead of expectations.

December’s biggest fallers

Coinbase Global (US:COIN): -17.1 per cent. Bitcoin and other crypto volatility hurt.
EssilorLuxottica (FR:ELP): -12.6 per cent. It gave up the gains of the previous month.
Me Group (MEGP): -7.4 per cent. Disappointment at the end of takeover talks.
Frontline (US:FRO): -7.3 per cent. Profit-taking after a good November.
Fireweed Metals (CA:FWZ): -6.9 per cent. Profit-taking after a good October/November.

Full-year highlights

The top performers over the full year were:

L&G Gold Mining ETF (AUCP): +162 per cent.
Lundin Mining: +140 per cent.
Fireweed Metals: +93.6 per cent.
NGEx Minerals (CA:NGEX): +90.9 per cent.
International Petroleum (IPCO): +47.7 per cent.
Serica Energy (SQZ): +41.1 per cent.
IG Group: +37.5 per cent.

Take a bow, Lundin Group companies. They benefited from robust copper and gold prices and have grown to substantial positions in my portfolio. So far, I have resisted selling (run your winners). The backdrop is in place for another decent year, and I have expectations of good newsflow from these companies over the coming months.

International Petroleum did not, of course, benefit from rising commodity prices. Crude was down. That did not stop the share price rising 47.7 per cent as the company continued to use cash flow to buy back 7 per cent of its outstanding equity per annum. Given that the Lundin family owns around 30 per cent, that equates to buying back 10 per cent of the free float. With its Blackrod 1 development due to come on stream in the third quarter of this year (ahead of schedule), cash flow will receive a significant boost as production should increase by around 70 per cent.

To the NGEx performance, one should add the 1 per cent value added to the portfolio in December from the listing of LunR Royalties Corporation (CA:LUNR). It was a spinout from NGEx based on one share for every four held in the latter. I’m expecting Lundin Royalty to add significant extra value in the years ahead as it signs royalty agreements. Given the importance of having a name like the Lundins behind you, I envisage it signing deals on attractive terms.

The two notable underperformers were, firstly, Bloomsbury (BMY), which fell 26 per cent. It underwent a significant drop in valuation, from around 15.5 times February 2026 forecast earnings per share to 11.7 times. Me Group fell 26.3 per cent. It saw a similar devaluation from around 13.5 to 9.9 times October 2025 earnings forecasts. Trading updates/results from these two in the coming weeks will be important.

The ‘idiot trades’ included selling Sylvania Platinum (SLP) on 4 December 2024 at 42.9p. It ended 2025 at 102.5p. The other was to sell Zegona (ZEG), admittedly for a 60 per cent profit, in May at 640p. It ended 2025 at 1,395p.

Funds Portfolio performance

The Funds Portfolio was up 1.6 per cent in December (compared with -0.4 per cent for the FTSE All-World GBP Total Return Index), leaving it up 30 per cent for 2025. This return was nicely ahead of the All-World Index’s sterling return of 14.5 per cent.

The significant performers over the year were:

L&G Gold Mining ETF: +162 per cent.
BlackRock World Mining Trust (BRWM): +71.9 per cent.
Temple Bar Investment Trust (TMPL): +44.4 per cent.
Argonaut Flexible Fund (GB00BTCLCP27): +36.9 per cent.
Ranmore Global Equity (IE000WSZ17Z4): +29 per cent.
Asoka India Equity Investment Trust (AIE): The sole annual loser, down 9.2 per cent.

Portfolio activity in December

It was a tranquil month on the trading front: just one transaction in each portfolio. I sold Xtrackers AI & Big Data ETF (XAIX) from both portfolios, in each case recording a small profit. The risk/reward trade-off was not sufficient given the high valuations of the big AI tech stocks. Any disappointment could lead to significant setbacks in the share prices. In any case, I was happy to start 2026 with a little more cash in each portfolio.

Lessons

Same old, same old: must be a better seller. The performance of Bloomsbury and Me Group was disappointing, and the share price charts should have alerted me to sell earlier. It’s always easy with hindsight, but getting the balance right between being unemotional and persuading oneself of the value in a stock is key. True, it can lead to selling stocks that then bounce, such as Sylvania Platinum – that is an opportunity lost. What is important is what one holds. Only those stocks can make you money or cause you damage.

Key themes for 2026

Gold will have another good year

Government debt continues to rise in the US and Europe, and there seems to be no serious attempt to reduce deficits. China and other central banks are still buying gold to reduce their reliance on the US dollar. On this front, the recent action in Venezuela will have strengthened the resolve of China. What are the chances that the value of China’s gold reserves grows to such an extent that it backs its currency with gold? As for bitcoin, who knows? If monetary conditions are looser in 2026, perhaps a better year is in prospect.

Space exploration

With talk of SpaceX listing later this year, I think it will focus attention on the sector again. There are other exciting events in this area, such as the direct-to-mobile satellite service being launched by AST Spacemobile (US:ASTS).

Copper and other industrial metals

These should see further strength driven by the drive to electrification. However, given the recent rise in copper prices, one would expect a pause for breath. Miners, though, should continue to perform, reflecting higher prices.

Rising oil

The oil price is expected to end 2026 higher than it started the year. It may go lower initially, but if Opec members start to behave, that leaves the door open for Saudi Arabia to tighten production. Demand continues to grow, with the date for peak demand being pushed out until the early 2030s.

Outlook

All the experts opining on what the year ahead holds can make fascinating reading, but it’s wise not to place too much weight on it. Predicting next week, let alone the following year, is challenging.

Despite last year’s better performance from the FTSE All-Share, the UK market still looks good value relative to other markets. I think larger internationally exposed stocks, as encapsulated in the FTSE 100, will make further healthy gains. Overseas buyers seem to be buying the UK even if domestic investors remain sceptical. The big question is whether this will spill over into mid- and small-cap stocks, which are more sensitive to the health of the UK economy. Will UK consumers who saved in 2025 in anticipation of difficult times ahead loosen the shackles? I see that the total held in cash Isas has risen to £440bn.

As for the US, it is one of President Trump’s stated policies to see a weaker US dollar. Let’s take him at his word. If he manages to push through more interest rate cuts than are perhaps warranted, that should help weaken the dollar and may store up inflation problems ahead. On top of that, he will be pump-priming spending with tax cuts ahead of the midterms. Again inflationary. Against that, AI could lead to substantial productivity gains and another year of robust GDP growth. Overall, I feel more comfortable with exposure to better-value markets.


JIC Portfolio as at 31 December
Name	Price at 31 December (p)	Avg price paid (p)	% of portfolio	% return so far
L&G Gold Mining ETF (GBP)	8022.0	3199.0	10.7	150.8
Lundin Mining C	1598.5	749.4	8.7	116
NGEx Minerals	1387.2	621.9	8.4	123.1
International Petroleum	1345.5	1044.1	5.0	28.9
Pollen Street Group	942.0	706.9	4.9	43.4
Polar Capital Holdings	532.0	446.8	4.9	40.9
IG Group	1315.0	693.8	4.8	84.3
Serica Energy	174.8	200.2	4.7	181.8
Kraneshares CSI China Internet ETF USD	1927.5	1933.2	4.2	-0.3
Rosebank Industries	350.0	338.5	4.1	3.4
Ashoka India Equity IT	272.0	248.5	4.1	9.7
Bloomsbury Publishing	482.0	452.8	3.9	29.4
Me Group International	151.0	141.4	3.8	43.9
Invesco Utilities S&P US Select Sector ETF	46120.0	48650.4	3.6	-5.2
EssilorLuxottica	23574.0	22343.3	2.8	5.5
4imprint	3845.0	3717.6	2.6	5
Fireweed Metals	146.8	92.6	2.5	58.6
Frontline	1621.9	1847.3	2.5	-11.4
XPS Pensions	339.0	339.9	2.0	1.7
DLocal	1051.5	1140.9	1.8	-7.8
Coinbase Global	16816.0	25798.9	1.3	-34.8
LunR Royalties	707.0	663.4	1.1	6.6
Cash			7.6

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• Annual revenue up 22 per cent to £117mn

• Pre-tax profit up 43 per cent to £16.2mn

• Dividend per share up from 11.2p to 16p

• Double-digit earnings upgrades for new financial year

• Forward PE ratio of 10 and dividend yield of 4.4 per cent

Middlesbrough-based diversified financial services group Ramsdens Holdings (RFX:412.5p) posted a small earnings beat and that’s after raising guidance at last autumn’s pre-close trading update. Moreover, given the strength of trading, house broker Cavendish upgraded pre-tax profit estimates for the new financial year by 15 per cent to £18.6mn.

The buoyant gold price has been a key driver of the ongoing outperformance, enticing customers to sell unwanted jewellery, which is either smelted and sold to a bullion dealer or sold through the group’s 169 retail stores. It is also attracting new customers and increasing the weight of gold purchased (volumes up 15 per cent year on year). Gross profit from this activity increased by 52 per cent to £17.9mn, representing 29.5 per cent of the group’s gross profit of £60.7mn in the 12 months to 30 September 2025. Since the period end, divisional gross profit has surged by 50 per cent and prompted analysts to raise their full-year estimate from this business activity by 13 per cent to £20.6mn. I would be surprised if it’s the last upgrade.

The rising gold price and reduced competition are supporting ongoing growth in the group’s pawnbroking book, which increased by 8 per cent to £11.4mn in the financial year. The loan book has since risen to £12.8mn and management reports record lending levels month on month in the final three months of 2025. Ramsdens’ lending ratios are conservative, representing 55 per cent of the intrinsic value of a gold item at the year-end with the average (mean) loan value around £381. Analysts are forecasting 6 per cent higher divisional gross profit of £13.5mn in the current financial year, but given the higher starting run rate of the loan book and the fact that loan-to-value rates have recently been relaxed to 66 per cent of the gold price, the forecast is conservative.

The group’s retail jewellery business also put in an eye-catching performance (gross profit up 18 per cent to £15.7mn from 19 per cent higher revenue of £42.6mn). Revenue from premium watch sales increased by 13 per cent to account for 36 per cent of retail revenue, highlighting how they are now viewed as an alternative asset class. Pre-owned jewellery sales performed even better, increasing by more than a third to account for 38 per cent of divisional revenue, following investment in stock, staff training and website advertising. Since the financial year-end, jewellery retail revenue has increased by more than 20 per cent and management reported an “extraordinary October” and notable customer interest in purchasing gold coins. Cavendish forecast 11 per cent growth in divisional annual gross profit to £17.5mn (upgrade of £1mn).

Potential for bid activity

The low earnings multiple and attractive dividend aside, there is potential for corporate activity in a consolidating sector. Last year, rival H&T was taken private on a multiple of 9.4 times forecast operating profit to enterprise valuation. Ramsdens trades on a multiple of 6.5 times operating profit estimates of £19.6mn to an enterprise valuation of £124mn. The group’s equity could be worth almost 600p a share based on a similar take-out multiple.

Even without bid interest, Cavendish’s raised sum-of-the-parts-derived target price of 490p (upgrade from 480p) is still too conservative given the scope for material earnings upgrades as this year progresses. For instance, the gold price per gramme has increased by 20 per cent in the 15 weeks since the group’s financial year-end. The process of purchasing precious metals to melting and then through to sale takes four weeks, so in a rising gold price environment the group will benefit from even larger gains than embedded in current forecasts. Indeed, analysts at Cavendish note that spot gold prices are now 20 per cent higher than the average assumption in their financial models.

Excluding the proposed 11p-a-share final and special payout (ex-dividend: 12 February), the holding has delivered a 209 per cent total return (TR) in my 2021 Bargain Shares Portfolio, during which time the FTSE Aim All-Share TR index has shed 28 per cent of its value. The outperformance is set to continue. Buy.

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Dan Jones

UK assets’ strong performance has been a feature of the early days of 2026. And while the FTSE 100’s continued prowess is unlikely to be a vote of confidence in the domestic economy, a more plausible case for improved sentiment can be made using the gilt market.

After a rocky 2025, particularly in the summer months when speculation mounted over the chancellor’s future, the early days of the new year hint at a change in attitude.

Concerns over the fiscal position, government policy, economic growth, inflation and interest rates all have a bearing on gilt yields, as do moves in their US Treasury equivalents. Last year, it was inflation and policy concerns that won out, even as the Bank of England (BoE) cut base rates four times. Now, with price growth finally having dipped and major fiscal announcements deemed unlikely until the end of the year, the focus is on potential positive catalysts.

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Why I’m buying this cash-generation machine

Terry Smith has a long road to recovery

Goldman Sachs has gone as far as predicting that 10-year gilt yields (which move inversely to prices) will drop from 4.5 per cent to 4 per cent this year. That represents one of the bank’s highest-conviction forecasts for 2026, and would equate to a total return of 9.6 per cent – well in advance of estimated gains for other government bonds, and not far off the 12 per cent rise the bank sees for the S&P 500.

Ten-year yields have duly fallen to 4.4 per cent over the past fortnight. This doesn’t sound like much but, as always with the bond market, it’s relative performance that matters. German bund yields have also dropped this year, but to a lesser extent; Japanese yields have moved in the opposite direction on rumours (now confirmed) of a snap election; US Treasury yields have also crept higher, albeit the administration’s latest attack on the Federal Reserve did not move the needle this week.

The drivers of this improved sentiment are arguably threefold. First is the belief that the BoE will cut rates more than expected this year. This isn’t wholly good news, given that easing will be in part based on a weakening economy. But with UK base rates currently at 3.75 per cent, compared with the Eurozone’s 2 per cent, the BoE has more room for manoeuvre than its European counterparts. Markets are currently pricing in two UK cuts this year, and the chances of at least one more are on the increase.

Second is the fact that the Debt Management Office (DMO), conscious of the fact that there are fewer buyers of long-dated gilts nowadays, has reduced the amount of these bonds it intends to sell in the first quarter.

Third, and most speculative, is the suggestion that the unsavoury notion of a ‘moron premium’, coined by TS Lombard economist Dario Perkins in 2022 to describe the extra amount that erratic UK governments must pay on their debt, is starting to recede.

The jury is still out on that, and there are other risks to this feel-good scenario. An increase in inflation is one. If price growth were to increase at the same time as employment continues to weaken, the BoE would feel it could not ease policy much further, and stagflationary concerns would reignite.

Yet some think inflation could fall more than investors currently expect. December’s consumer price index inflation reading, due to be published next Wednesday, is expected to tick up from November’s 3.2 per cent rate. Yet Capital Economics said this week it thinks price growth will fall back to the 2 per cent target in April, partly because of lower energy bills, and also because 2025 hikes to water, education and rail prices won’t be repeated. Capital, like Goldman, expects three cuts by the BoE this year.

One other distinctly reasonable concern, however, is that May’s local government elections will increase the chances of the prime minister and the chancellor being replaced. Talk of a leadership challenge has already resurfaced this month.

Nor have long-standing structural weaknesses relating to the UK debt stock gone away. The DMO’s decision to rein in issuance looks helpful, but demand from defined-benefit pension funds – historically one of the biggest buyers of long-dated bonds – is not coming back, and must ultimately be replaced in some form. The UK also continues to have a lot of inflation-linked debt, which means any resurgence in price growth, be it driven by domestic or international factors, would be particularly painful.

As all this implies, the current state of play is contingent rather than definitive. We are still far from a Goldilocks scenario, so named for an economic environment that is deemed to be ‘just right’ rather than too hot or too cold. But UK bondholders, used to things overheating in recent years, are discovering that the temperature is cooling nicely amid continued global upheaval.

Read more from The Editor

How to invest in 2026

MD expects ‘tough’ second half
Discount to peers seems too steep

MS International (MSI) has been attracting a lot more investor attention lately. The 65-year-old engineering business has experienced strong growth through the sale of small-calibre gun turrets used by the US, UK and German navies. It has also developed a system for land-based vehicles to counter drone strikes.

Defence work has driven a 14 per cent compound annual revenue growth over the past five years and a big uplift in operating profit.

Revenue from this business can be lumpy, though, and a one-year gap in orders from the US Navy means MSI’s short-term prospects don’t look great.

“It’s not going to be a good second half, and that might run into the first half of the following year,” managing director Michael O’Connell said.

Still, a one-year order was placed by the US Navy in the first half of this year, and the company is in talks about a longer, three-year deal. It is also hopeful that commitments made by governments on both sides of the Atlantic to spend more on defence will eventually translate into more orders for land-based systems.

And, although talks to sell non-core businesses have only solicited offers from private equity buyers deemed too cheap, the divisions are still trading well and it is extending its approach to trade buyers in a bid to secure better offers.

This short-term earnings uncertainty goes some way to explain why MS International trades at such a big discount to peers – at 16 times trailing earnings, compared with 28 times and 31 times, respectively, for mid-cap defence peers Cohort (CHRT) and Chemring (CHG). For those willing to wait, we think this represents real value. Buy.

Last IC view: Hold, 1,220p, 30 Jun 2025


MS INTERNATIONAL (MSI)
ORD PRICE:	1,328p	MARKET VALUE:	£ 218mn
TOUCH:	1,320-1,350p	12-MONTH HIGH:	1,740p	LOW: 840p
DIVIDEND YIELD:	1.8%	PE RATIO:	15
NET ASSET VALUE:	395p	NET CASH:	£34mn


Half-year to 31 Oct	Turnover (£mn)	Pre-tax profit (£mn)	Earnings per share (p)	Dividend per share (p)
2024	54.7	8.77	39.8	5.00
2025	55.8	8.47	38.5	6.00
% change	+2	-3	-3	+20
Ex-div:	22 Jan
Payment:	20 Feb

Headline 2025 revenue up 10 per cent
On track for 2025 adjusted operating profit of £182mn

Grafton (GFTU) was unable to report a bumper festive trading season, but there were some minor plus points in its trading statement. The Dublin-based builders' merchant and DIY retailer, whose UK brands include Selco and Leyland SDM, reported a 0.1 per cent increase in like-for-like average daily revenue versus the prior year for the final two months of 2025 – a significant step down from the 2.1 per cent growth recorded in the first 10 months.

As was the case for the rest of the year, year-end growth was stronger in Iberia and ‘the Island of Ireland’, but weaker in Great Britain and northern Europe. Management offered few clues as to when conditions will improve in Grafton’s two weaker markets, implying that trading may remain soft well into 2026.

All this meant that Grafton recorded £2.52bn of revenue in 2025 – a 10 per cent increase versus the prior year when adjusted for currency fluctuations. Most of this was driven by inorganic activity, including the impact of its acquisition of Salvador Escoda, a Spanish air conditioning vendor. Grafton’s like-for-like increase in average daily revenue was a softer 1.7 per cent for the year.

The company also confirmed that it is on track to meet 2025 market expectations for adjusted operating profit of £182mn. This reflected “the strong market positions, resilience and agility of our operations across our geographies”, said chief executive Eric Born.

Analysts expect Grafton to deliver high-single-digit earnings per share growth over the next couple of years, even without further acquisitions. This growth, coupled with a 4 per cent dividend yield, means its valuation, at 12 times analysts’ 2026 earnings estimates, appears undemanding. However, positive catalysts for the shares appear few and far between in the near term. Hold.

Last IC view: Hold, 869p, 5 Sep 2025

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No Free Lunch

Until half-way through last year, WH Smith’s (SMWH) global transformation seemed to be paying off. The group had sold its struggling UK high-street business and Funky Pigeon, its online personalised card and gift retailer – its focus was now on its 1,300 global retail sites, mostly in airports, train stations and hospitals. But on 21 August came a shock profit warning. The share price fell from 1,110p to 640p and hasn’t budged much since.

A couple of weeks earlier, Kevin Gotthard, the US chief financial officer, had spotted an accounting error as he compiled the figures for the group’s 31 August year-end. His division had been counting payments from suppliers for promotions and discounts as income when the deals were made. Accounting conventions require products to be sold before such payments are recorded. Gotthard informed the group finance director, Max Izzard, who’d only been in his role since the previous December.

Crisis management kicked in. The FT later reported that Izzard rushed to the US to understand why and by how much the income had been overstated. Carl Cowling, Smith’s chief executive, then had to announce the probable hit to profits and explain publicly what they’d found out so far. He said that Deloitte would be conducting an independent review.

In November, Deloitte reported that for over two years, profits had been overstated because systems, controls and the review procedures had failed to adequately monitor a target-driven performance culture. The finance team should have spotted it earlier – there’d been a limited level of group oversight. Cowling resigned on the day that the report was made public.

Pockets of resilience

It’s hard to ignore the yawning gap in fortunes between food and non-food retail sales, but despite the choppy backdrop, Next (NXT) was rewarded for its unwavering focus on its core business.

Full-price sales came in 10.6 per cent ahead of last year at the fashion and home retailer, allowing for a £15mn boost to full-year pre-tax profit guidance. This marked the latest in a series of now characteristic ‘beat-and-raise’ updates, although Next’s outperformance renders it something of an outlier in the non-food retail market.

Caught in the middle

Elsewhere, businesses with a foot firmly in both the food and the fashion camps fared comparatively worse.

Marks and Spencer (MKS), Primark owner Associated British Foods (ABF) and Sainsbury’s were among those caught in the middle. Exposure to general merchandise and clothing constrained overall sales at each, as discretionary spending came under pressure.

“General merchandise is the most cyclical area of the supermarket economy to be in, so being overweight in this arena can really slow sales down when things get tough,” said Aarin Chiekrie, an equity analyst at investment platform Hargreaves Lansdown.

As the supermarket with the largest stake in general merchandise through its clothing business Tu and its Argos arm, Sainsbury’s shares dropped 6 per cent on the back of the underperformance in its non-food units.

Line chart of Share prices rebased showing SUPERMARKETS COMPARED

Lower footfall, bigger discounts

But Sainsbury’s was not the only ‘food and more’ business where the ‘more’ side of things actually offered less. The impact of lower footfall was keenly felt in M&S’s fashion, home and beauty unit, where Christmas like-for-like sales were down 2.9 per cent on last year.

Management blamed the disappointing result on lower high-street footfall offsetting a recovery in online sales following this summer’s cyber attack.

Higher discounting will also knock bottom lines. M&S was forced to hold a bigger sale than usual to clear its stock backlog, while ABF said Primark resorted to “significantly increased markdowns” to counter a tough trading environment, which “impacted profitability”. Primark reported like-for-like sales growth of 2.7 per cent behind last Christmas.

But while M&S’s total sales were buoyed by its food division, the same could not be said for ABF. Its grocery business was unable to pick up the slack, leading to a profit warning that sent shares in the conglomerate plunging by more than 10 per cent on the day.

The warning comes two months after the London-listed group announced it is considering spinning Primark off from its food business, perhaps in a tacit acknowledgment of the diverging fortunes of food and fashion.

A clear divide

So far, the season’s trading updates have made one thing clear: the divide between food and fashion is real, and those trying to bring the two together under the same umbrella have struggled.

It’s been a tale of two halves; while Christmas demand for clothing and general merchandise took a hit, established food retailers were able to take advantage of customers’ appetite for premium prosecco and fancy mince pies. For those non-food retailers with a strong enough food offering, this provided a sufficient cushion.

But with updates still to come from the likes of Currys (CURY), Wickes (WIX) and DFS (DFS) – all of which rely on big-ticket, highly discretionary purchases – the picture is not yet complete. However, if things were decided on Christmas trading alone, perhaps precious few UK retail stocks would make it into the prudent investor’s basket.

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Core operating profit up 30 per cent
Sales declines in some established US and UK stores

For Games Workshop (GAW) shareholders, the start of the year is increasingly marked by a familiar reward. The creator of the Warhammer hobby hiked its dividend for the third time since November, taking payouts declared so far this financial year to 485p per share.

The FTSE 100 group has again beaten its own expectations for the first half. Core revenue at constant currency increased by 18 per cent to £319mn, driven by a double-digit surge in trade sales as products reach hobbyists in a wide range of countries. The retail channel also grew, up 6.3 per cent over the period.

Not everything moved in the right direction, though. Some established UK and US stores ended the period with declining like-for-like sales, although against a strong comparator period. “I might be being a bit harsh on us, but I know we are way better than these results,” said chief executive Kevin Rountree.

That helps explain why the shares slipped nearly 3 per cent in early trading, although they remain up about 40 per cent over the past year. Licensing revenue was also weaker, as expected following the release of the Space Marine 2 video game in the prior year, almost halving to £16mn.

Even so, total operating profit still rose 12 per cent to £141mn, with a steady margin of 42 per cent. Excluding royalties, operating profit climbed by 30 per cent to £127mn despite higher staff costs and a £6mn hit from US tariffs. Manufacturing and warehousing efficiencies, price rises, more stable commodity prices and lower stock write-offs more than offset the higher costs.

That operational performance has allowed the company to continue to throw off plenty of cash. Net cash stood at £121mn, giving room for shareholder returns but also to fund capital investment. This includes the construction of a fourth factory in Nottingham, due to complete this summer, and renovations across other sites.

Games Workshop is also continuing to build out its intellectual property. A Warhammer World site is planned to open in North America in 2027, although details on the live-action Warhammer film with Amazon MGM Studios and Henry Cavill, announced more than a year ago, are still scant.

The shares now trade on 33 times forward earnings – a premium to history. Jefferies expects further upgrades in the second half and continues to see the company as a “compelling long-term growth opportunity”. We’re still willing to pay for quality. Buy.

Last IC view: Buy, 16,090p, 29 Jul 2025


GAMES WORKSHOP (GAW)
ORD PRICE:	18,390p	MARKET VALUE:	£6.1bn
TOUCH:	18,380-18,400p	12-MONTH HIGH:	19,970p	LOW: 12,250p
DIVIDEND YIELD:	3.6%	PE RATIO:	29
NET ASSET VALUE:	966p	NET CASH:	£121mn


Half-year to 30 Nov	Turnover (£mn)	Pre-tax profit (£mn)	Earnings per share (p)	Dividend per share (p)
2024	300	127	289	185
2025**	332	141	320	325
% change	+11	+11	+11	+76
Ex-div:	16 Apr
Payment:	27 May
**Includes 100p per share dividend declared on 21 November 2025. The board has declared two (post-period-end) dividends of 50p and 110p payable through surplus cash on 27 Mar and 27 May, respectively

Read all the latest stocks & shares news and analysis here

• 2025 earnings miss guidance

• Restructuring to deliver annual cost savings of £1.5mn-£2mn

• Forward PE ratio of 2.8

• 16 per cent share price fall

UK advertising and marketing specialist Mission Group (TMG:15.5p) has reported a slippage in the completion of certain projects into this year and downgraded earnings guidance for the 2025 financial year.

Analysts at house broker Canaccord Genuity reduced operating profit estimates from £8.5mn to £5.1mn, down from £9.5mn in 2024, and cut their annual revenue forecast from £73mn to £68mn (down 11 per cent year on year on a like-for-like basis). The group has a relatively high fixed cost base, so any shortfall in revenue has an accentuated impact on earnings given that a high proportion of incremental gross profit drops through to operating profit.

The shortfall also has an accentuated impact on 2025 pre-tax profit estimates, which are now expected to halve from £6.2mn to £2.9mn (downgraded from £6.5mn). On this basis, underlying earnings per share (EPS) forecasts have been cut by a third to 3p (downgraded from 5.2p). Moreover, although net debt has been reduced from £9.5mn to £9mn over the past 12 months, the deleveraging was shy of Canaccord’s £7.5mn estimate.

New chief executive John Carey, who was appointed in September 2025, has wasted no time making his mark. After assessing the existing structure of the group and working closely with agency leadership teams, Mission’s board is rationalising both its business-to-consumer (B2C) and business-to-business (B2B) agencies and will consolidate capabilities and leadership across these. Simultaneously, management will consolidate the capabilities of the group’s sports marketing and events businesses under one leader.

This simplified structure alongside ongoing investment in AI should unlock significant opportunities, broaden geographic reach, enable more effective deployment of talent and investment, and improve delivery for clients. The restructuring is expected to deliver annualised cost savings of £1.5mn-£2mn with operational efficiencies achieved through shared infrastructure, streamlined processes, and the consolidation of office and technology platforms.

Canaccord also reduced its 2026 operating profit and pre-tax profit estimates to £8.1mn (downgraded from £9.3mn) and £6.9mn (down from £8.1mn) to reflect lower revenue expectations of £70mn (down from £76.7mn). However, this still implies a strong earnings recovery, assuming management can deliver. On this basis, the shares trade on a forward price/earnings (PE) ratio of 2.8 and on a multiple of 2.8 times 12-month forward operating profit estimates to enterprise valuation. Both multiples are materially below those of UK-listed and global advertising group peers.

True, macroeconomic uncertainties increase risk and the group has a chequered history, but cost-saving initiatives should drive margin expansion and operating profit growth, and the new business pipeline is “strong”. So, although the share price has fallen by a third since the interim results (‘This marketing group is in bargain basement territory’, IC, 23 September 2025), I wouldn’t be bailing out at such a depressed level. Canaccord’s price target of 55p is almost four times the current share price. Hold.

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• 2025 earnings beat expectations

• Net cash position materially better than analyst forecasts

• 45 per cent profit growth forecast in 2026

• 2026 forward PE ratio of 10

London-based social and digital media group Brave Bison (BBSN:73p) has upgraded earnings guidance for the 2025 financial year and is in a materially better cash position than analysts had been expecting.

Net revenue of £33.5mn and cash profit of £6.5mn were both 6 per cent ahead of house broker Cavendish’s estimates, and underpinned 41 per cent year-on-year growth in the group’s adjusted pre-tax profit to £5.5mn (5 per cent beat). Moreover, a strong fourth quarter, coupled with improved working capital, meant that the group closed the year with net cash of £4.5mn – an eye-catching improvement on Cavendish’s £5.2mn net debt estimate.

It means that debt facilities drawn to fund acquisitions completed in the second half of 2025 will be repaid ahead of guidance. In fact, the directors anticipate repaying all outstanding borrowings this year, freeing up surplus free cash flow to fund bolt-on acquisitions and dividends. The ambitious management team, led by Theo and Oli Green, made five acquisitions in 2025, including the £19mn purchase of marketing skills and training platform MiniMBA and the £12mn acquisition of MTM, a strategy and insights consultancy. MTM’s customers include global technology and media companies Google, Figma, Samsung and Spotify, as well as sports rights holders Formula E and the England and Wales Cricket Board.

Due to the timing of MiniMBA courses (April to July and September to December), the group’s revenue and profit profile is now more heavily weighted to the second half of each year. Factoring in a full 12-month contribution from last year’s acquisitions, analysts at Cavendish forecast 33 per cent higher net revenue of £44.8mn and 45 per cent growth in both cash profit and pre-tax profit to £9.4mn and £8mn, respectively. On this basis, the shares trade on a modest forward price/earnings (PE) ratio of 10, or a third below peers. Analysts are confident of upside potential to current forecasts, too.

Brave Bison’s share price has doubled since I initiated coverage at 35p (‘Alpha Research: A social marketing profit play for the digital age’, IC, 10 May 2022), albeit it has flatlined since I last reiterated that advice (‘These shares have doubled in value — and are likely to double again’, IC, 11 September 2025). However, a forward PE ratio of 10 is modest for a fast-growing business that should deliver at least 14 per cent earnings per share growth this year. A rating in line with peers is more than warranted, suggesting 50 per cent potential share price upside. Buy.

Read more from Simon Thompson

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Full-year highlights

Funds Portfolio performance

The significant performers over the year were:

Portfolio activity in December

Lessons

Outlook

This small cap’s share price could run and run

Simon Thompson: Earnings estimates have been upgraded by 15 per cent, with more upgrades likely

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Long-serving executives paid a harsh but fair penalty

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Caught in the middle

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A clear divide

Games Workshop defies tariffs and raises dividend

The group behind the Warhammer franchise is managing to more than offset higher US levies as its record run continues

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Simon Thompson: Earnings guidance has been upgraded and the directors now expect double-digit growth