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Andrew Hore Quoted Micro 15 April 2019

NEX EXCHANGE

High Growth Capital (HASH) is increasing its stake in Sentiance to 15% and is negotiating an option to acquire a majority stake in the artificial intelligence and machine learning business. The additional 5% stake will cost £7m in shares issued at 0.8p each. The option would enable an increase in the total stake to between 51% and 84.8%. The company would offer 100,000 of its own shares for each Sentiance share and the option is subject to High Growth Capital raising at least £25m. High Growth Capital has also acquired the intellectual property of Malta-based BDD, a company founded by Chris Akers, for £4m in shares at 1p each. The project involves an annual blockchain raffle that would raise money for social impact and environmental initiatives.

EPE Special Opportunities (ESO) had a net asset value of 205.2p a share at the end of January 2019, which was 12.5% lower than the year before. The stake in fully listed LED lighting products manufacturer Luceco (LUCE) is a significant part of the portfolio and its valuation fell by 27.7%. There has been a recovery in the Luceco share price since the end of January, even though there was a decline of three-quarters in 2018 pre-tax profit to £3m. The EPE NAV had risen to 232.8p a share on 9 April on the back of Luceco share price rise. The EPE share price is 180p.

Angelfish Investments (ANGP) is subscribing £150,000 for a 9.14% stake in Just Bee Drinks and is also providing a loan facility of up to £100,000 at a annual interest charge of 10%. Just Bee has developed a natural juicy water drink sweetened with honey. This means that there is no added sugar. More than one million bottles were sold last year, and revenues doubled. The drink is already sold in Waitrose and Boots. Just Bee had net assets of £83,000 at the end of March 2018. Angelfish has also provided a £100,000 debt facility at the same interest rate to Wallet Ads. The previous loan of £150,000 was converted into a 20% stake.

NQ Minerals (NQMI) nearly doubled zinc concentrate production at the Hellyer mine in Tasmania to 3,015 DMT in the first quarter of 2019, while lead concentrate production increased by 18% to 4,712 DMT. Pyrite concentrate production jumped by 331% to 18,488 DMT.

AIM  

Video games developer and services provider Sumo (SUMO) reported better than expected 2018 revenues of £38.7m and pre-tax profit of £9m. Sumo has been acquiring businesses to give it extra capacity as well as opening new studios. There is plenty of demand for Sumo’s services so utilisation rates are high and there is further upside from performance-based royalties and its own IP.

Destiny Pharma (DEST) had £12.1m in the bank at the end of 2018 and this will last into 2020. That should be long enough for the phase IIb study of XF-73 for the prevention of post-surgery infections.

Maiden full year results from legal services and credit hire business Anexo (ANX) have led to an upgrade by its broker Arden. The 2019 pre-tax profit forecast has been edged up from £17.8m to £18.1m, up from £16.1m in 2018, and the 2020 figure is 4% higher at £20.1m. Net debt is expected to increase from £17.3m to £26.3m in order to finance the growth of its legal business.

RA International (RAI) continues to win contracts, but larger contracts are taking longer to secure. RA provides services to remote locations in nine countries in Africa and the Middle East. Having joined AIM last summer, RA has $27.8m in the bank and this is helping it to tender for and win larger contracts. The average contract term is 4.4 years. This makes revenues relatively predictable and they are expected to rise by 10% this year to more than £60m.

Property investor Safeland (SAF) intends to leave AIM and secure a matched bargain facility on Asset Match. It is tendering for shares at 42.5p each, which compares with an NAV of 140.2p a share at the end of September 2018.

Having sold the RTLS SmartSpace business, the continuing revenues of geospatial software and services provider IQGeo (IQG) fell from £16.5m to £9.98m, although recurring revenues were 22% higher, and gross margin improved. There were lower software revenues, but the main decline was in the sale of third party products. There is a significant market for the company’s products and new modules are being launched. However, the full benefits of changes being made by management will probably not show through until next year. There is £30.9m in the bank and some of this will be returned to shareholders after a capital reorganisation is completed.

Interim revenues generated by LightwaveRF (LWRF) have more than doubled to £2.5m which is nearly as much as the £2.8m generated in the previous 12 months. Direct sales, e-commerce and telesales have contributed to the growth, as has the development of retail clients.

Legal firm Gordon Dadds (GOR) has acquired Gibraltar-based Rampart Corporate Advisers for up to £1.34m depending on performance. Rampart specialises in e-gaming, fintech and distributed ledger technology, and made a profit of £400,000 in the year to June 2018. Five former Ince network firms are joining Ince Gordon Dadds, although they remain independent. This would add £23m to existing group annual revenues of £77m. The firms are based in Hong Kong, Singapore, Dubai, Greece and Germany. This will boost profitability.

Strategic Minerals (SML) says the Cobre magnetite operations generated cash of $206,000 in the first quarter and the group cash balance was $1.24m at the end of March 2019. Volumes were lower because customers were undertaking plant maintenance and the continued suspension of a major client’s contract. There should be seven years of magnetite stockpile. The company expects to acquire the other 50% of the Redmoor tin/tungsten project by the end of May. This will cost £2.66m.

PhotonStar LED (PSL) says that it has enough cash for its immediate needs, but the blocking of the issuing of more shares by shareholders means that there is not enough cash to follow the strategy to find a reverse takeover target. The company may launch an open offer or ask shareholders for a second time for the authority to issue shares without offering them to existing shareholders a second time. Having become a cash shell, the company has been dropped from the FTSE AIM All Share index. It has six months to find an acquisition. A number of potential acquisition targets have been met by the board. Additional directors will be appointed.

Rose Petroleum (ROSE) has raised £275,000 at 1.1p a share in order to finance the appraisal of projects. The shares are being acquired by new executive chairman Robert Bensh, who has experience of the US oil and gas sector. Chief executive Matthew Idiens has more than doubled his stake to 2.52% by acquiring two million shares at 1.75p each. The finance director Chris Eadie has also more than doubled his stake to 1.2% at 1.67p a share. New non-executive director Tom Reynolds also bought shares.

Concepta (CPT) is raising £2.3m at 3p a share to finance marketing and further development of its myLotus fertility test.

MAIN MARKET 

Cadmium-free quantum dots developer Nanoco (NANO) had £6.2m in cash at the end of January 2019. There was a total cash outflow of £4.57m in the latest six month period. The main capital investment at the Runcorn site is almost complete. Non-executive director Chris Batterham has bought 125,000 shares at 47.354p each. Miton has reduced its stake to 4.96%.

Bonmarche (BON) says the mandatory cash bid of 11.445p a share by Spectre undervalues the retailer. Bonmarche is reducing costs. Cavendish Asset Management has edged its stake up to 10%.

Standard list shell Contango Holdings (CGO) has entered into an agreement to acquire the Lubu coalfield project in Zimbabwe for £6.45m in shares at 5p each. Once regulatory approvals have been gained the acquisition should go ahead and trading in the shares can recommence. That should happen by the end of June. There will be a placing to raise cash to fund initial trial mining.

Telecom services provider Toople (TOOP) says that it had more than £1.1m in the bank at the end of March 2019. That is a £1m reduction on the level at the end of September 2018, when there was also a shareholder loan, which was assigned a value of £572,000 in the balance sheet but has a cash value of £607,000. There is no indication if this loan has gone down. Last year, admin expenses were £1.55m, net of other income, and that was more than revenues. Revenues have grown but even if gross margin were to improve there will still be a significant first half loss.

Nuformix (NFX) has signed an agreement for cannabinoid therapeutics development, licensing and commercialisation for an initial upfront payment and other research and development and milestone payments that could total up to £51m. Canada-based Ebers Tech Inc will use Nuformix technology to develop a range of consumer and pharma products.

Zegona Communications (ZEG) has increased its stake in Euskaltel to 21%.

European High Growth Opportunities Securitization Fund has transferred 35.4 million shares in WideCells (WDC) to David Sefton and Linton Capital, which has promised to hold them for 12 months. European High Growth Opportunities still owns 18.2% of WideCells.

Andrew Hore

Andrew Hore: Quoted Micro 17 September 2018

NEX EXCHANGE        

Renewable energy supplier Good Energy (GOOD) reported a 19% increase in interim revenues to £61.8m. Pre-tax profit has more than trebled to £2.4m, if discontinued activities, including the investment in the proposed Swansea Bay Tidal Lagoon, are excluded. The interim dividend is unchanged at 1p a share. A brand relaunch is planned for the second half.

Eight Capital Partners (MORE) has made its first investment in the financial services sector. It is acquiring €111,100 worth of 8% corporate bonds 2020 in Italian financial services company Finance Partners Group. Management believes the link up with the Italian company will fit well with other potential investments.

EPE Special Opportunities (ESO) has completed its migration from the Isle of Man to Bermuda. Trading in the shares has been suspended. Trading should be restored by 21 September.

KR1 (KR1) continues to invest in new token issues. A $200,000 investment has been made in Foamspace Corp for 3.63 million FOAM tokens. This business intends to develop a protocol for a network of beacons providing location services. A further $100,000 has been invested in the Althea Mesh project tokens. This enables decentralised internet service providers to be set up. There has been $100,000 invested in Etherisc tokens. Etherisc is developing a blockchain service for the insurance sector.

Sandal (SAND) has launched an installer service for its MiHome smart home range. The service will be provided by Icon Heating Solutions.

Tectonic Gold (TTAU) has initiated a ten hole drilling campaign at the Specimen Hill discovery in Queensland. Four holes have been completed. The drilling should be complete in four weeks.

Panther Metals (PALM) has acquired the Bear Lake project, which is a package of gold and base metal prospects in north wester Ontario. The consideration is C$133,000 (£77,000) in cash and shares.

AIM  

Manx Telecom (MANX) reported relatively flat interim figures but a deal by one of its developing investments could mean that the business could become significant in a couple of years time. The interim dividend was raised by 5% to 4.1p a share. Full year pre-tax profit is expected to edge up to £15.2m with a similar increase in the final dividend. Investee company Goshawk has developed a hearing loss product and signed up BT’s mobile subsidiary EE, which could provide a potential market of 3 million people.

Property Franchise Group (TPFG) grew all its letting brands in the first half of 2018 and its online estate agency eweMove went from loss to profit in the period. Full year profit is expected to increase from £4.3m to £4.6m.

Anexo Group (ANX) has reported growth in interim revenues and profit although the cash raised in the recent flotation has yet to be put to use. The legal services and credit hire provider is expected to increase full year pre-tax profit from £13.8m to £14.7m in 2018, and then to £16.4m in 2019.

STM Group (STM) increased interim revenues by 6% to £10.8m and pre-tax profit by 11% to £2.1m. The interim dividend was increased by 17% to 0.7p a share. The main growth has come from the pensions business.

K3 Capital Group (K3C) continues to go from strength to strength. The mergers and acquisition adviser increased revenues by 53% to £16.5m and net cash more than doubled to £7.5m by the end of May 2018. Pre-tax profit could dip from £7.3m to £7m, which would lead to a small reduction in dividend from 11.2p a share, but there is scope for upgrades in expectations.

Gatemore continues to build up its stake in TLA Worldwide (TLA) by taking advantage of the share price decline following TLA’s latest profit warning, which was released in the morning for a change, but there is no news about a replacement nominated adviser. The shareholding has been increased from 12.2% to 13.7%. No news about a new nominated adviser.

Audio visual equipment distributor Midwich Group (MIDW) increased its interim, constant currency, revenues by 24% to £264.1m. Organic growth was around 9%. Underlying pre-tax profit was 22% higher at £9.78m. A full year pre-tax profit of £28.4m is forecast.

Potatoes producer Produce Investments (PIL) is recommending a 193p a share cash bid by Promethean Investments. This values the company at £53m.

Orosur Mining (OMI) has secured a $2m investment from Newmont Mining at more than treble the pre-deal market share price. This will provide investment for the Anza project in Colombia. Orosur had been profitable and cash generative but it fell into loss in the year to May 2018 as gold production costs were in excess of the selling price.

Education services provider Malvern International (MLVN) made a small first half loss but it is on course to move into profit in the full year. The number of students signing up for courses means that enough revenues should have been secured for a full year pre-tax profit of £300,000. There will also be a second half contribution from the recent Manchester acquisition.

MAIN MARKET  

Photovoltaic silicon wafers supplier PV Crystalox Solar (PVCS) had net cash of €39.6m at the end of June 2018. This could be returned to shareholders or used to finance an acquisition. The decision will be made before the end of this year. Multicrystalline silicon wafer production ceased in April 2018 and the focus is cutting of quartz and glass. Interim revenues more than halved to €6.2m.

Toople (TOOP) is raising £2.2m at 0.3p a share, following its recent contract news. This is no surprise, but the share price has fallen back from just over 0.9p near the end of August.

Contango Holdings (CGO) continues to undertake due diligence on a near-term producing asset in Zimbabwe. This potential deal was announced last December. There was nearly £638,000 in the bank at the end of May 2018.

Standard list cash shell Auctus Growth (AUCT) had £962,000 in the bank at the end of June 2018. The NAV is 35.5p a share.

Andrew Hore

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