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Quoted Micro 1 February 2016
ISDX
Property investor Ace Liberty & Stone (ALSP) has had a busy week of acquisitions and disposals. Shildon House in Gateshead has been acquired for £1.825m, while Hume House in Leeds is being sold for £3.55m – a profit of £1.88m – although the deal is not expected to complete until the end of this year. Ace has bought out the 62% shareholder in Radcliff Property, the company that owned Telephone House which was sold in October, for £1.235m. Ace has already received £2.8m from the Telephone House sale but there is a dilapidations claim on a former tenant and Ace will now get 100% of any settlement. In the six months to October 2015, revenues jumped from £404,000 to £990,000, while pre-tax profit increased from £282,000 to £514,000. There was a £252,000 cash inflow from operations and net debt was £2.64m at the end of October. Of course, this is before the latest deals and some others that have been announced since October. NAV was £13.8m and the property portfolio, valued at £20.1m, generates more than £2.26m of annual rental income. Hybridan has been appointed as broker. At 3.75p (3.5p/4p) a share, Ace is valued at £21.9m.
Wheelsure Holdings (WHLP), which develops locking nut devices for railway tracks, reported a sharply reduced loss in the year to August 2015. Revenues improved from £144,000 to £240,000 and combined with lower admin expenses this helped the loss decline from £406,000 to £228,000. House broker Daniel Stewart forecasts more than doubled revenues and near break even this year.
Hydro Hotel, Eastbourne (HYPD) reported a higher profit in the year to October 2015. Revenues edged up from £3.07m to £3.13m, while pre-tax profit moved from £124,000 to £134,000. There was £1.15m in the bank. Hydro has already announced an unchanged total dividend of 18p a share, although it is not fully covered by earnings. At 750p (725p/775p) a share, Hydro is valued at £4.5m. Second half trading improved after a weak first half. Staff costs are rising this year.
Investing company Globe Capital Ltd (GCAP) raised £100,000 at 0.105p a share and there is a warrant exercisable at 0.0025p each attached to each placing share. Globe had £11,000 left in the bank at the end of June 2015 and there had been a cash outflow of £188,000. The chief executive has resigned and this could mark a change in focus. Globe had been focused on investing in debt and equity of businesses but failed to find a suitable investment. New director and 3.3% shareholder David Barnett has a background in the fashion industry. Globe was previously known as Ford Eagle Ltd and when it changed its name in June 2013 it raised £207,000 via an open offer at 1p a share and it was capitalised at nearly £250,000 at the open offer price. Later that year, £199,000 was raised at 0.4p a share. At 0.625p a share, Globe is valued at £1.2m, although the bid offer spread is 0.25p/1p and there are no reported trades on the ISDX website suggesting that this is not necessarily fully reflective of the business particularly as the placing is at such a discount to the bid price.
AfriAg (AFRI) has decided to leave AIM and concentrate on its ISDX quotation and it says this could save up to £40,000 a year. Trading via ISDX has been increasing since this quotation was obtained. If shareholders agree AfriAg will leave AIM on 24 February. Although the strategy will stay the same AfriAg has hinted that it is assessing strategic options.
AIM
Vertu Motors (VTU) has bought three Honda dealerships from fully listed rival Lookers for £2m. Vertu has 12 Honda dealerships and this makes it the largest Honda car retailer in Europe and it also operates two motorcycle dealerships. All three sites adjoin existing dealership areas and they broke even last year. Vertu says that the acquisition will be earnings enhancing in its first full year.
Cathexis has increased its offer for Interior Services Group (ISG) from 143p a share to 171p a share. This bid is open until 17 February and will not be extended unless there is a rival bid. There were acceptances for the previous bid equal to 1.7% of the ISG share capital. Cathexis has taken its own stake above 30% so this is a mandatory bid.
Online business and marketing platform operator blur (BLUR) reported a decreased cash burn in the fourth quarter partly due to lower development spending. The quarterly cash burn more than halved to $1.5m. More of the projects put on the site are being taken up and completed, while the move towards larger customers is paying off. Revenues are estimated to have been $2.7m in 2015, while the underlying loss is around $10m. That loss is expected halve next year and the rate of cash burn will slow further and net cash is forecast to fall from £6.3m to £2.2m.
Learning Technologies Group (LTG) has expanded its US e-learning interests through the $26m acquisition of Nashville-based Rustici Software. The business is international and it is involved in a wide number of sectors. In 2015, revenues were $6.6m, mainly recurring, and EBITDA was $2.7m. Up to $11m more may become payable depending on performance. Watershed Systems Inc has been split from the rest of the business with LTG taking a 30% stake and the former Rustici owners will own the rest. Watershed is developing a new learning analytics platform that will gather and analyse learning data and LTG is injecting $3m for its stake.
Specialist IFA Frenkel Topping (FEN) says that 2015 figures are broadly in line with expectations with assets under management of £666m at the end of the year. House broker Shore has been updating its forecasts and it has reduced the 2016 figures but increased the 2017 ones. This is because 2016 is a transitional year as assets under management are moved to come under its own management. This still requires final FCA approval. A profit of £1.74m is forecast for 2016, rising to £3.28m in 2017.
IP-focused investment company FastForward Innovations Ltd (FFWD) has raised £5.6m from a placing at 15p a share – a premium to the then market price although it was as high as 18.25p earlier in the month. The share price ended the week at 15.25p. The shares issued are just under one-quarter of the enlarged share capital. The previous placing raised £3.17m at 8p a share. The latest placing follows the appointment of board director Lorne Abony as chief executive and he invested more than £800,000 taking his stake to 19.7%. He stood down from the boards of two investee companies – Vested Finance Inc and Vemo Education Inc – and he will not be involved in future investment decisions relating to them. There are seven investments in the portfolio. Abony has been the boss of two other AIM-quoted (and TSX-listed) companies that were based in Canada – Fun Technologies and Mood Media Corporation.
Tissue Regenix (TRX) has signed a joint venture with GTM-V to form a tissue bank in Rostock, Germany and management believes that this model can be used to expand internationally. Tissue Regenix has invested €250,000 in cash in the joint venture, which has been granted licences for human dCELL . Regulatory submissions for EU approval are being prepared and the first human tissue treatment products based on the dCELL decellularisation technology could be launched in Germany next year.
Call centre and outsourced customer services provider IBEX Global Solutions (IBEX) says that it has won two new clients in financial services and consumer electronics and it has opened a new operation in Nicaragua. There are plans for an additional site in the next few months. Focusing on higher margin business means that the interim figures will be in line with expectations and the second half will benefit from the new customers. The interims will be published on 24 February. House broker Cenkos forecasts 2015-16 earnings equivalent to 14.3p a share, which puts the shares on eight times prospective earnings.
MAIN MARKET
A strong final quarter meant that publisher Quarto Group (QRT) beat 2015 expectations. A better than expected contribution from the Ivy Press acquisition and the strong performance of adult colouring books were behind the improved trading. A profit of around $13.5m is anticipated. Net debt was $59.7m at the end of 2015 – Northland had forecast $60.7m. A profit of around $15m is expected for 2016. At 217.5p a share, Quarto is trading on little more than six times prospective earnings.
Interim figures from automotive manuals and information publisher Haynes Publishing (HYNS) show an improvement in profit in what is the weaker half of the year. In the six months to November 2015, revenues were 3% ahead at £12.2m, while pre-tax profit increased from £55,000 to £295,000. However, capitalised development spending, net of amortisation, increased from £48,000 to £464,000. Net debt was ££475,000 at the end of November 2015. Haynes continues to review its structure and costs. US and Australian revenues were much lower and this was made up for by higher European revenues. There was growth in UK manual sales but against a weak comparative period but the focus is developing the digital platform. Digital revenues were more than one-quarter of the interim total. An unchanged interim dividend of 3.5p a share was announced. A full year profit of £2.47m is forecast. James Bunkum has joined the board as chief financial officer designate and he takes over the role in May.
Standard list investment company Highlands Natural Resources (HNR) has published its prospectus for the acquisition of 75% of patents and know how rights for DT Ultravert and it has raised £765,000 at 12p a share. The cash will cover the costs of field trials for the technology that are part of a potential licence agreement with Schlumberger.
ANDREW HORE
Quoted Micro 28 December 2015
ISDX
Blockchain technology Coinsilium Group (COIN) has joined ISDX and raised £1m from a placing at 10p a share. The Seedrs crowdfunding offer raised an additional £123,000 at 10p a share from 161 investors. Daniel Stewart has been appointed joint broker and granted a warrant to subscribe for one million shares exercisable at 20p a share. The share price ended the first day of trading at 11p, valuing the company at £7.8m.
Renewable energy generator and supplier Good Energy (GOOD) is applying for a dual quotation on the Social Impact segment of the ISDX Growth Market 41 months after it switched from ISDX to AIM. A placing at 85p a share in July 2012 valued Good Energy at £10.6m. The share price has risen to 205p, valuing the company at £30.5m. Since joining AIM, Good Energy has paid dividends of 10.6p a share.
Personal care products supplier Sutherland Health Group (SHGP) reported a small reduction in its interim loss from £38,000 to £33,000 even though revenues fell from £343,000 to £286,000 in the six months to September 2015. Sales to the NHS are declining but online sales are being built up. There was £28,000 in the bank at the end of September 2015.
Capital for Colleagues (CFCP) increased its annual revenues from £212,000 to £523,000, while unrealised investment gains jumped from £34,000 to £459,000. A pre-tax profit was reported for the year to August 2015 but excluding the unrealised gains there was a small loss. There was an additional £400,000 invested during the year. The NAV was £4.13m at the end of August 2015. A further four investments have been made since then, including an investment in a new company, which takes the total of unquoted investments to 12.
AIM
Speciality pharma company Diurnal (DNL), which is an investee company of former AIM company Fusion IP (now a part of IP Group), joined AIM on Christmas Eve. Diurnal was spun out of Sheffield University but it is now based in Cardiff – Finance Wales has a 22.1% stake. Founder Professor Richard Ross is still with the company and owns 3%. A placing at 144p a share raised £25.4m, before £1.6m of costs, and values Diurnal at £75.2m. An additional £4.65m was raised via a convertible issue. Diurnal Ltd, now a subsidiary of the company that joined AIM, had £6m in the bank at the end of June 2015. There are two main treatments in development are Infacourt and Chronocourt, which are treatments for diseases of the adrenal gland. Infacourt is the first product designed for children of less than six years old suffering from Congenital Adrenal Hyperplasia and Adrenal Insufficiency. Chronocourt mimics the body’s natural cortisol circadian rhythm which should improve disease control in the same areas as Infacourt. Longer-term, Diurnal wants to become a wider-based endocrinology treatments specialist. There is currently a phase III trial in Europe for Infacourt and a phase III trial of Chronocourt is expected to start in the first quarter of 2016. IP Group still owns 45.6% of Diurnal. The share price ended the first day at 153p.
Den Harthogh is making a recommended 9p a share cash offer for Interbulk (INB), which values the bulk transport container rental business at £42.1m. The bid is more than double the previous closing price. Interbulk has high borrowings – net debt was £53.2m at the end of September 2015 – and they come up for renewal in March 2017. The two companies have a good geographic fit. In the year to September 2015, revenues fell from £256.3m to £225.3m and underlying pre-tax profit was flat at £3.16m.
EKF Diagnostics (EKF) is selling its loss-making molecular diagnostics business back to its co-founders. Selah Genomics was acquired for $35.6m in shares during April 2014 and it had been in the EKF balance sheet at £41.4m. The disposal consideration is nominal and the balance sheet value is being written off. There should be annual cost savings of £2m for EKF which will either receive 10% of the proceeds of the future disposal of Selah or if new equity is raised within 12 months EKF will obtain a 10% stake. EKF is borrowing £3m from Zwanziger Family Ventures, where non-executive chairman Ron Zwanzinger has interests, at an interest rate fixed at 5 percentage points above LIBOR. The debt is secured via second charge on EKF’s assets – HSBC has the first charge. The loan can be converted at 14.25p a share – a 20% premium to the market price at the time – or at a 15% discount to the next substantial fundraising.
Paragon Diamonds has not found a new nominated adviser and its quotation will be cancelled on 29 December. Paragon is still trying to raise the cash to bring the Lemphane kimberlite pipe project in Lesotho to production and trying to obtain an exploration licence for the Mothae kimberlite resource. Management hopes to obtain another London quotation later in 2016.
Non-executive chairman Peter Johnson and his interests have sold 50.2 million shares in Park Group (PKG) at 65p each. This is the whole of their 27.3% stake. Artemis has increased its stake to 6.16%, while Schroders has raised its stake to 13%.
Castle Street Investments (CSI) is in negotiations with a potential IT managed services acquisition but the cash shell has failed to secure an acquisition within 12 months so trading in the shares has been suspended. Cash, excluding liabilities should be £22m at the end of 2015 but further cash will be required to pay for the acquisition and finance its growth.
Tracsis (TRCS) is selling its Australian business to its management. This company became part of the business after the Sky High acquisition. Tracsis will focus on its core markets and it does not believe the Australian data capture operation, which made a pre-tax profit of £250,000 on revenues of £2.2m in the year to July 2015, has critical mass. The initial payment is A$285,000 with deferred consideration of A$799,000 payable over three years.
The board of ISG Group (ISG) says that the 143p a share bid from Cathexis does not offer an adequate premium for control. The argument is that the level of the offer does not reflect recent growth and future potential of the fit-out business. Investment company Cathexis took its 29.6% stake at a much lower share price.
Andrew Hore
Quoted Micro 14 December 2015
ISDX
Netalogue Technologies (NTLP), which is an ecommerce platform developer, has announced its first dividend since 2012 when it paid 0.123p a share. The latest dividend of 0.246p a share and the shares go ex-dividend on 17 December. Netalogue had cash of £807,000 at the end of September 2015 and the dividend will cost around £120,000. Interim revenues fell from £689,000 to £552,000 and profit dipped from £165,000 to £38,000. Netalogue has withdrawn from the hosting business. At 3.95p (3.7p/4.2p) a share, Netalogue is valued at £1.9m.
Hydro Hotel Eastbourne (HYDP) is maintaining its annual dividend at 18p a share. A dividend of 6p a share will be paid on 14 January (ex-dividend 17 December) and the 12p dividend on 5 May (ex-dividend 21 April). A slight increase in profit is expected this year. At 750p (725p/775p) a share, the yield is 2.4%.
Titania Internet Ventures (TITP) is considering changing its investment strategy so that it can become involved in the renewable energy sector. The proposal involves entering into a relationship with a British wind turbine manufacturer. Titania had been involved in online penny auctions, but this business ceased more than two years ago, and before that it investigated a nursing home acquisition in Finland. The company was originally called Uranium Prospects. At 2.5p (2p/3p) a share, Titania is valued at £44,000.
Leni Gas Cuba (CUBA) had net assets of £4.1m at the end of September 2015. Since then, £200,000 was raised at 5p a share but that went towards paying the £326,000 cost of joining ISDX. The pro forma NAV is around 0.8p a share. David Lenigas has bought one million shares at 1.437p a share, taking his stake to 142 million shares (28.7%).
Lombard Capital (LCAP) has raised a further £122,500 at 3.5p a share via a share issue to one of its directors, Mark Jackson. His stake is 28.2%. At 4.5p (4p/5p) a share, Lombard is valued at £102,000.
AIM
Unmanned aerial vehicles (UAV) services provider Strat Aero (AERO) is acquiring communications, flight control and hardware technology developer Aero Kinetics for $1.2m plus the taking on of working capital commitments. This will be financed by the issue of a $775,000 convertible promissory note with a 7.5% interest rate and a 6p a share conversion price, with the rest in cash. There will also be $80,000 0f legal fees and $150,000 will be required to finance an application for FAA Certification, which could be achieved in the middle of next year. There is potential contingent consideration, including warrants depending on certification and achievement of sales targets. This deal is part of the strategy to develop a vertically integrated business, which can offer a full solution to global clients. It also brings Aero Kinetics founder W Hulsey Smith to the group and he will take charge of the group’s technology operations. The acquired operations made a loss of $269,000 on revenues of $246,000 but this is under US accounting rules and all R&D is written off – more than $5m has been invested so far. Strat Aero is also raising £1.6m at 6.25p a share.
Moving into software has helped to offset the volatility of the hardware division but it will not prevent Vislink (VLK) reporting disappointing 2015 figures. The broadcast and surveillance technology supplier has found market conditions for the hardware business tough and new product launches have yet to generate the hoped-for sales. Expected full year revenues will be in the range of £54m-£58m. The company’s debt facility has been increased from £10m to £15m because late hardware sales will increase debtors. Net debt is expected to be £5.8m at the end of 2015. The 2015 profit could be as low as £4.2m, down from £7.1m. There could be a partial profit recovery to £6.3m in 2016 – helped by cost savings. Standard Life trimmed its stake to 4.6%.
Begbies Traynor (BEG) is expanding its property services business in order to offset the weakness of its core corporate insolvency business. In the six months to October 2015, revenues improved from £20.8m to £25.5m, while pre-tax profit rose from £2m to £2.5m. That is after a contribution from property of £6.11m in revenues and £1.16m in EBITDA, compared with nothing in the corresponding period. Corporate insolvency revenues and profit were lower. The interim dividend was unchanged at 0.6p a share. Net debt was £11.9m at the end of October 2015. A full year profit of £4.6m is forecast.
Surface coatings developer Hardide (HDD) had a tougher second half as oil and gas demand declined. In the year to September 2015, revenues were flat at £3m and Hardide fell from profit to loss. The majority of revenues were in the first half. This year it is likely to be the other way round. The new facility in Virginia should be open soon. An £800,000 loss is forecast for this year and a much smaller loss expected next year. There was £2.33m in the bank at the end of September 2015, which provides enough headroom on current expectations.
Snoozebox (ZZZ) is raising £5m at a hefty discount to the market price. The placing price is 6p – a 28.2% discount. The cash is required for the 2016 events season plus the evaluation of other opportunities. Snoozebox has already said that it has established a partnership with Dutco in the Gulf region. An EBITDA loss of £5m is forecast for 2015. Further cash will be required to take advantage of growth opportunities.
Investment group Cathexis has taken advantage of the recent weak trading statement by construction and fit-out company ISG (ISG) and bid 143p a share. ISG believes that this unsolicited offer is too low. The bid values ISG at £70.8m. US=owned Cathexis has been an investor since 2012, when the share price was below the bid level, and it made a bid approach in June. It currently owns 29.6%. The current year profit forecast for ISG had been slashed from £17m to £11m. The bid is at two-fifths of the share price 12 months ago.
Educational services provider Wey Education (WEY) made its move from ISDX to AIM on Friday and it raised £1.75m at 3.5p a share. Wey is capitalised at £3.29m.
Retail stockbroker Share (SHRE) is taking on up to 3,000 nominee share dealing accounts from Barclays, which is exiting the services. The accounts will be transferred by the end of February 2016. Share previously took on nearly 8,000 certificated dealing customers from Barclays.
MAIN MARKET
Property services provider Waterman (WTM) has set a 6% target for its operating margin by 2019. Waterman’s business is predominantly in the UK and both the property and infrastructure sectors are strong. Sanlam forecasts a rise in profit from £2.7m to £3.7m in 2015-16. If Waterman can achieve its margin target then pre-tax profit could be around £6m in 2018-19. A dividend of 2.8p a share is forecast for this year.
Bluebird Merchant Ventures Ltd, which plans to join the standard list,has a copper concentrate trading business combined with a stake in a potential gold mining project. The former can generate cash for investment in the mining project and other projects in the Philippines. Bluebird’s management lives in the Philippines so it has local knowledge. Bluebird’s trading operation is taking advantage of the difference between the price of copper concentrate in the Philippines and the international price. So far, 18MT has been shipped and once Bluebird is shipping 100MT /month then it should be generating enough cash to cover its corporate overheads. The plan is to increase monthly shipments to 500MT/month, which would provide a sizeable surplus of cash to invest in other ventures. This includes other commodity trading opportunities as well as mining projects that are near to production or have been in production in the past and can be reopened. The potential gold mine will cost $15m to bring into production. It will take around 18 months to construct the mine once the necessary permissions are obtained from the authorities. At a gold price of $1,160/ounce, the NPV of the project would be around $13m. That is based on production of 100,000 ounces over five years.
Challenger Acquisitions (CHAL) has finally completed its deal to acquire the businesses of Starneth, which develops observation wheels, and been readmitted to the standard list. AIM-quoted Teathers has sold its stake for an average price of 50.3p a share, raising nearly £72,000 – a gain of £21,000. The Challenger share price ended the week at 41p.
ANDREW HORE
Latest edition of AIM Journal, including why AIM volumes are likely to decline and Purplebricks flotation, available here.