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Andrew Hore – Quoted Micro 17 December 2018
NEX EXCHANGE
Ecommerce software provider Netalogue Technologies (NTLP) moved into profit in the first half and had £648,000 in the bank at the end of September 2018. Revenues increased by £168,000 to £647,000, even though subscription-based pricing is reducing the initial revenues from B2B clients. A loss of £60,000 became a pre-tax profit of £142,000, helped by lower operating expenses.
Veni Vidi Vici Ltd (VVV) is acquiring a 51% stake in a licence in the Shangri La gold, silver and copper project in Western Australia for A$220,000, which is payable to Goldfields Consolidated in the form of 190,000 shares and A$20,000 in cash. The shares cannot be sold for three months. VVV will spend an initial A$300,000 over three years and Goldfields will receive a 10% management fee.
Coinsilium Group Ltd (COIN) has raised £367,000 at 4p a share and each new share comes with a two-year warrant exercisable at 7.5p a share. If the share price averages more than 15p for five consecutive days, then the company can require the warrants to be exercised.
Gastropubs operator Barkby Group (BARK) has signed heads of terms to acquire Northamptonshire-based upmarket car dealer Centurian Automotive Ltd. The most recent accounts were for a dormant company and shows £200 in the bank.
Quetzal Securities Ltd sold 6.75 million shares in Pelican House Mining (PHM) for 0.5p each and Eight Capital Partners (ECP) acquired 8.25 million shares at 0.491p each. Quetzal subsequently sold a further 6.75 million shares in Pelican shares, leaving a 13.2% stake, to Eight Capital at 0.5p a share, taking its stake to 15.3%.
Hydro Hotel, Eastbourne (HYDP) has declared an unchanged total dividend of 21p a share for the year to October 2018. An interim of 7p a share will be paid in January (ex-dividend 20 December) and a final dividend of 14p a share paid in May (ex-dividend 18 April).
Ace Liberty and Stone (ALSP) has appointed Northland as broker.
EPE Special Opportunities Ltd (EL.P) had a NAV of 200.95p a share at the end of November 2018. The shares are trading at 160p.
Construction consultancy Driver Group (DRV) reported a 2017-18 pre-tax profit of £3.8m, up from £2.5m, and it is returning to paying dividends with a 0.5p a share payment. Net cash is £6.9m, helped by a property disposal, and this could reach more than £10m by September 2019 even after dividend payments. The Diales expert witness business is becoming an increasingly important revenue generator and overall utilisation levels have improved. There has also been a focus on better margin work in the Middle East.
SigmaRoc (SRC) is in the process of acquiring precast concrete products supplier CPP Building Products for £15.2m, although the deal requires shareholder approval for share issues, so it will not happen until early January. CPP is based in north west England and fits well with the existing precast concrete business. In the year to August 2018, revenues were £20.9m and EBITDA was £2.6m. This year’s trading is in line with expectations. There are plans to refinance the convertible loan notes.
Nexus Infrastructure (NEXS) had already warned about delays to its utility connection contracts with housebuilders and the 2017-18 figures were slightly better than expected with flat pre-tax profit of £9.2m. Nexus has a strong order book and could increase its 2018-19 pre-tax profit to £10.4m. The new electric vehicle charging points division will take time to build up.
Advanced coatings provider Hardide (HDD) has benefited from an upturn in demand from the oil and gas sector. It is also getting nearer to obtaining its first aerospace orders. Hardide remains loss-making and this will still be the case next year as it continues to invest in increasing capacity in the UK and US as demand grows.
Curtis Banks (CBP) has purchased around 600 SIPPS with assets of £180m from Hargreaves Hale, which will continue to manage the assets. Curtis Banks will launch a new SIPP product in January.
Clinical trials manager Venn Life Sciences (VENN) is collaborating with Open Orphan DAC. The two firms will share resources in the orphan drugs market. Venn is raising £1m from a two-year loan note issue.
WH Ireland has upgraded its forecast for banknote authentication and brand protection technology business Spectra Systems (SPSY) for the second time. The underlying pre-tax profit forecast has been raised by 10% to $4.5m. The 2019 forecast, which had previously been upgrade by 16%, is maintained for the time being.
Kibo Energy (KIBO) says that its 60%-owned subsidiary MAST Energy Developments has an exclusive option to undertake due diligence and acquire three peaking power sites totalling 31.3MW. This would provide initial revenues for Kibo later next year. Kibo has renewed its memorandum of understanding with Mozambique-based electric utility Electricidade de Mocambique for the financing and operation of the Benga independent power project.
eServGlobal Ltd (ESG) says that 2018 revenues will be lower than expected due to weak trading at the PayMobile business and the failure to close orders. The PayMobile business may be sold and the focus will be the HomeSend remittances business.
NWF (NWF) says feeds demand was strong in the summer because of a lack of natural grazing. In contrast, the hot weather held back demand for fuels. A Solihull-based fuel distributor has been acquired. The food distribution business continues to trade at around capacity because of contract wins. The interims will be published on 29 January.
ReNeuron (RENE) has important clinical trial results coming up in the next 18 months. A retinitis pigmentosa treatment is in phase I/II trials and there should be data in mid-2019. A phase IIb trial for a CTX cell therapy-based treatment for chronic stroke is due to report by early 2020. There was £30.7m in the bank at the end of September 2018. Management is seeking partners to help it to make the most of its technology.
PhotonStar LED Group (PSL) has raised £100,000 at 0.02p a share and this will enable the board to assess new business opportunities.
Property adviser Fletcher King (FLK) is maintaining its interim dividend at 1p a share even though pre-tax profit has dipped from £148,000 to £132,000. Ratings appeals revenues were lower. There is £2.28m of cash in the balance sheet.
Kromek (KMK) has secured an initial contract with the US Department of Defense worth $2m over 12 months. The plan is to develop a proof-of-concept device for a vehicle-mounted biological threat identifier.
Crossword Cybersecurity (CCS) started trading on AIM on Friday and the share price ended the day at 272.5p. Crossword raised £2m at 290p a share.
Volex (VLX) is buying cable assemblies and connectors manufacturer GTK for £14.3m in cash and shares. in the year to July 2018, GTK generated a pre-exceptional operating profit of £1.7m. There was £1.3m in the bank. The deal is earnings enhancing.
African Battery Metals (ABM) has found it difficult to raise the cash it requires and trading in the shares has been suspended. The company wants to come to a settlement with creditors so that it could continue to trade.
Smaller company mergers and acquisitions business K3 Capital Group (K3C) is cautiously optimistic but the full year outcome will depend on the timing of deals. There could be a small dip in pre-tax profit to £7m this year and there could be a corresponding dip in dividend from 11.2p a share to 10.8p a share.
Telit Communications (TCM) says that it will not complete the sale of its automotive business until next year. Telit is expected to make a 2018 loss. Further cost savings are being made in the Internet of Things operations.
More bad news from Filtronic (FTC) with sales of Massive MIMO antennas lower than expected. The main customer has reduced its forecast demand. The capitalised development costs of £500,000 will be written off and options are being reviewed. The rest of the business is trading in line with expectations. Filtronic will be loss-making this year. Net cash was £2.3m at the end of November 2018.
Science Group (SAG) has ended its formal sale process because of stockmarket and exchange rate uncertainty. The strategic review continues. Trading is in line with expectations and the company will recommence the share buy back programme. Net cash was £6.4m at the end of November 2018.
Like-for-like sales growth has been slowing at DP Poland (DPP) and this means that progress in 2019 is unlikely to be as good as expected. This means that it will take longer to reach profitability. Rivals have been spending money on marketing and warm weather has also held DP Poland back. A full year trading update will be published on 29 January.
Taptica International Ltd (TAP) plans to spend up to $10m on buying back shares and it has already spent nearly £110,000. There was net cash of $42.1m at the end of June 2018.
Tristel (TSTL) says that the US regulatory process for its disinfection products is on track and interim pre-tax profit should be £2.2m.
TomCo Energy (TOM) has managed to secure £550,000 at 2p a share. The previous £532,000 placing at 8.5p a share was pulled. Laurence Read has become a non-executive director.
RA International (RAI) has won a five year contract worth up to $5.6m from a US corporate client in Central Africa.
MAIN MARKET
Circassia Pharmaceuticals (CIR) is moving to AIM and it has decided to exercise its option to acquire US rights to COPD treatment Tudorza from AstraZeneca. This deal should complete by the end of the year and it will trigger a payment of $5m. A further $20m is payable upon approval of Duaklir and then there is further deferred consideration of $100m.
Tex Holdings (TXH) has warned that second half earnings will be lower than anticipated due to delayed deliveries and reorganisation costs.
Cadmium-free quantum dots developer Nanoco (NANO) is on course to complete the expansion of its Runcorn facility by the end of 2018 with commercial volume manufacturing by the middle of 2019.
Lb-shell (LBP) is being wound-up because of potential litigation relating to before it became a shell. There is unlikely to be anything left for shareholders.
Giant Saint Technologies Ltd (GST) is installing a $1m data centre in Singapore.
Andrew Hore
Andrew Hore – Quoted Micro 11 June 2018
NEX EXCHANGE
There are eight companies in the running for the NEX Exchange company of the year at the Small Cap Awards. The awards will be held at The Montcalm Hotel, Marble Arch.
Kent-based wines maker Chapel Down Group (CDGP) has built up a significant presence in the English wines market. The company has a winery in Tenterden and it is building a new brewery for its beer operations. Chapel Down reported a 15% increase in annual sales to £11.8m. Wine sales were one-fifth higher at £8.12m with cider and beer sales, via associate Curious Drinks, were 7% ahead at £3.68m. Operating profit improved from £346,000 to £470,000 but there was a much larger loss from the Curious Drinks associate so pre-tax profit was lower. The new brewery should be open in the first quarter of 2019.
Cyber security technology developer Crossword Cybersecurity (CCS) is still at a very early stage of its development but it more than doubled its revenues in 2017. The loss still increased from £950,000 to £1.24m despite the improvement in revenues from £345,000 to £737,000. The cash outflow was £1.06m, which left £490,000 in the bank. Since then, £2.16m was raised via a placing at 270p a share. Crossword has interests in a number of early stage businesses, including CyberOwl, a joint venture between Coventry University and Crossword, which has backing from Mercia Fund Management. CyberOwl is developing network security software for target-centric monitoring.
Field Systems Designs Holdings (FSD) has one of the longest track records on NEX and it has its highest share price in more than one decade of trading. Field Systems designs, installs and supplies electrical, instrumentation and control systems, for the water, power and transport sectors. In the six months to November 2017, revenues jumped from £8.47m to £12m, while pre-tax profit improved from £114,000 to £211,000. There was £3.34m of cash in the bank and NAV was £3.31m, which is more than the market capitalisation.
KR1 (KR1) has had a successful year buying and trading various coins and tokens. The KR1 share price has more than quadrupled over the past year. KR1 generated gains of £4.3m on its trading in digital coins and tokens during 2017. There was also a total unrealised gain of £10.8m on these investments and a £1.18m foreign exchange gain. The total pre-tax profit was £14.5m, with a tax charge of £2.87m.
Dairy and livestock services provider National Milk Records (NMR) was originally part of the Milk Marketing Board and after it was spun off it joined the forerunner of NEX. National Milk Records generated revenues of £5.32m in the three months to March 2018. This means that revenues are £1.51m ahead so far this year, although the comparatives are weak. Herdwise, the screening service for Johne’s disease and other testing services are providing growth with a small improvement from milk recording services. Rising milk supply has started to hold back milk prices.
Energy saving electrical products supplier Sandal (SAND) reported flat interim revenues of £1.88m but it masks the growth in the sales of MiHome products. This growth will continue in the second half. The interim pre-tax profit edged up from £35,000 to £44,000. Sandal secured a term loan of up to £500,000 from major shareholder Greenbrook Industries Ltd and £250,000 was used to buy back 862,068 shares from Greenbrook. The shares were cancelled and this will enhance earnings per share.
Daniel Thwaites (THW) is a brewer, hotels and pubs operator that has been trading for more than two centuries. It has also been on NEX for more than two decades, since the London Stock Exchange closed rule 4.2, which was a matched bargains facility for unquoted companies. Some of these former rule 4.2 companies moved to AIM, while others, including a number of regional brewers, moved to Ofex/NEX. In the six months to September 2017, revenues improved from £44m to £48m and underlying pre-tax profit were flat at £5.9m. The shares are trading at a near-50% discount to NAV.
Walls & Futures REIT (WAFR) is an ethical housing REIT and it is also on the shortlist for the impact company of the year. The company develops new housing for people with learning and physical disabilities or needing extra care. Earlier this year, Walls and Futures raised £80,000 from an open offer at 94p a share. In 2017, Walls and Futures achieved a total return on its portfolio of 11.5%, ahead of its benchmark total return of 7%. Walls and Futures has joined the MSCI IPD UK Residential Property Index.
The winner will be announced on Thursday 14 June.
Cannabis investment company Sativa Investments (SATI) is widening its remit. It is asking shareholders to agree to investments outside of Canada.
Ace Liberty and Stone (ALSP) has completed the acquisition of offices in Leicester for £4.385m. The Leicester Crown Prosecution Service pays an annual rent of £290,000.
St Mark Homes (SMAP) is paying a maintained interim dividend of 5.5p a share and the ex-dividend date is 5 July. The dividend will cost £247,000. The carbon emissions trading business has also started electronic currency mining.
China CDM Exchange Centre Ltd (CCEP) reported a small dip in revenues from £898,000 to £888,000 but it managed to increase its profit from £2,000 to £35,000.
Karoo Energy (KEP) has secured Contax Partners as technical partner and project manager for the shale gas project in Botswana. Contax will accept £800,000 worth of shares in Karoo as payment for services. Karoo hopes to apply for admission to AIM by 1 July.
Wishbone Gold (WSBN) says full production at its Honduras processing plant has been delayed because permits have not been received for the processing of larger amounts of gold ore.
EPE Special Opportunities (EL.P) had an NAV of 228.16p a share at the end of May 2018.
AIM
Property investment adviser First Property Group (FPO) reported flat pre-tax profit of £9.23m in the year to March 2018. The final dividend is 3% higher at 1.18p a share. The underlying NAV rose from 47.6p a share to 53.1p a share. Third party assets under management were 45% higher at £454m, which is mainly down to the new office fund. Progress this year will be held back by the departure of the tenant in a building in Poland. Some of the space has already been re-let and the rest should be during the year.
Pawnbroker Ramsdens (RFX) continues to grow on the back of strong foreign exchange revenues. Last year, they were 26% higher at £11.3m. Group revenues were 16% ahead at £39.9m, while underlying pre-tax profit rose 60% to £6.5m. Net cash was £12.7m, although that does include foreign currency stocks. The total dividend was 6.6p a share.
Gooch and Housego (GHH) increased interim revenues by 7% to £55.6m and underlying pre-tax profit was13% ahead at £7m. Aerospace was the main growth area as subsea telecoms demand was weak. The photonics and optical equipment company is on course for a full year profit of £18.5m.
Artilium (ARTA) is recommending a cash and shares bid from Pareteum. The offer is 0.1016 of a Pareteum share and 1.9p in cash for each Artilium share, which values the telecoms software supplier at £78m. The offer follows a strategic alliance between the two companies that was announced last year.
IT managed services provider Redcentric (RCN) says that some public sector contracts have been cancelled and there will be upfront costs for a new contract with the NHS in Yorkshire. That means that 2018-19 EBITDA will be 10% lower than previously forecast.
Imaginatik (IMTK) has completed its strategic review and the chairman and chief executive are both leaving and they are waiving compensation. This will help to reduce annual costs by £750,000. The business is no longer up for sale because no suitable bid was received. Annualised revenues are £2.8m and the innovation software business could move into profit after a full year’s benefit of the cost savings. Former chairman Matt Cooper has sold £225,000 worth of shares at 0.5p each and reinvested the cash in a new £225,000 convertible, interest free loan note. Octopus has reduced its stake from 27.2% to 7.1%.
Mass spectrometry instruments supplier Microsaic Systems (MSYS) has raised £5.5m at 2p a share and an additional £102,000 via a PrimaryBid.com offer.
Trading in cash shell Monreal (MORE) has been suspended because the former Cogenpower has not completed a deal. The board is asking for shareholder approval to move to NEX after the AIM quotation is cancelled on 3 July. The investment strategy will focus on technology, media and telecoms.
Education-focused virtual reality content supplier VR Education (VRE) has delayed the full launch of the latest version of its Titanic VR product until August but it is not expected to affect full year expectations. Work has started with the BBC on 1943: Berlin Blitz.
Driver Group (DRV) continues to improve its margins and profit helped by the growth of the Diales expert witness business. Middle East revenues were lower but profit was higher, while high utilisation rates in Asia Pacific meant that was a sharp swing back to profit in the region. Underlying pre-tax interim profit doubled to £2.1m om the six months to March 2018 and Driver ended the period with net cash of £800,000. The sale and leaseback of the company’s head office was completed in April and net cash is forecast at £5.5m for the end of September 2018. A full year profit of £3.5m, up from £2.5m, is forecast. A return to dividend payments is a possibility in the next year or so.
Rose Petroleum (ROSE) has enough cash to push forward with the exploration of its Paradox basin acreage in the US. Rose is still earning its 75% working interest in the acreage and it has already received interest from potential farm-in partners that could help finance the first well, which could cost $7m-$8m. A competent person’s report will provide an updated resource in the next few weeks.
The smart machines division was behind the small improvement in profit at Vianet (VNET) in the year to March 2018. That was helped by a contribution from the Vendman acquisition. The smart zones drinks dispensing technology made a slightly lower contribution to profit as it lost more pub customers but the US side is making progress. Research and development spending on technology peaked at £1.5m last year and should fall this year. Net cash fell to £1.27m because of the extra spending but the dividend was maintained at 5.7p a share. The investment should start to pay off this year and pre-tax profit is expected to rise from £2.7m to £3m.
MAIN MARKET
LED lighting supplier Luceco (LUCE) is closing its loss-making US business at a cost of £2m. The US business lost £1.9m last year. Luceco announced an operating profit of £14.2m in 2017.
Quarto Group Inc (QRT) has appointed former finance director Mick Mousley as interim finance director following the departure of Carolyn Bresh. This follows the change of control at the AGM.
Lb-shell (LBP) is asking for shareholder approval for the creation of £435,000 of unsecured convertible loan notes with a conversion price of 0.025p a share. That requires the par value to be reduced to 0.025p a share. Full conversion could mean the issue of shares equivalent to 89.4%. Three directors will own a total of £290,000 of the loan notes. The former Intelligent Energy will offer shareholders the chance to sell their shares for 0.025p each.
Andrew Hore