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Quoted Micro 29 May 2017

NEX EXCHANGE

Crossword Cybersecurity (CCS) has taken advantage of the high profile of cyber security to raise cash at a premium to the market price. Crossword raised £145,000 at 230p a share. The current mid-price is 195p a share and the most recent trade was at 197p a share last September. Brenlen Jinkens took up 50% of the new shares and he has 5.13% of the company.

Wheelsure Holdings (WHLP) reported a dip in interim revenues due to the lack of funding so the planned £500,000 fundraising should enhance progress. In the six months to February 2017, the loss increased from £126,000 to £159,000 as revenues fell from £133,000 to £94,000.

Mechan Controls (MECP) improved its underlying 2016 operating profit from £518,000 to £594,000 on revenues that were 5% ahead at £4m but there have been significant changes since last year. Nirvana is the only subsidiary left. At the end of 2016, there was £829,000 in the bank and the NAV was £2.41m. Mechan is paying a final dividend of 2.27p a share and the shares go ex-dividend on 1 June. Once all the operations are sold money will be returned to shareholders.

Secured Property Developments (SPD) had cash in the bank of £341,000 and an NAV of £689,000 at the end of 2016. The company is valued at a 47% discount to NAV.

Social housing finance provider Queros Capital Partners (QCP) has raised an additional £875,000 by issuing 8% unsecured bonds 2025. That takes the bonds in issue to £3.5m – from 19 separate placings. So far, short-term bridging loans have generated income to fund the interest payments on the bonds. Longer-term, there are plans to acquire social housing properties.

Blockchain technology company investor Coinsilium Group Ltd (COIN) says that investee company RSK Labs has raised $3.5m. Coinsilium retains the right to 1% of RSK via a convertible. RSK has developed a sidechain to the Bitcoin that enables smart contracts. There could eventually be scope to handle more than 20,000 transactions per second but that requires the additional investment.

NQ Minerals (NQMI) has raised £751,000 at 0.3p a share. Colin Sutherland has been appointed as finance director.

AIM

Enterprise software provider Sanderson (SND) is growing strongly but the cost of investment in the business will hold back short-term profit. The digital retail division is growing fastest but its operating profit was flat as management investors in order to maintain the strong growth rate. In the six months to March 2017, revenues were 10% higher at £10.9m and operating profit was 5% ahead at £1.55m. There was net cash of £4.51m and the dividend was increased by 10% to 1.1p a share.

Software supplier Cerillion (CER) continues to grow its revenues as it starts to build its customer base outside the mobile sector. In the six months to January 2017, revenues were 10% ahead at £7.5m and underlying profit was nearly one-third higher at £900,000. Orders worth £9.4m were won during the period. The interim dividend was 8% higher at 1.4p a share. Directors’ sold 4.2 million shares at 120p each, which could help to improve the liquidity in the shares.

Redx Pharma (REDX) has failed in its attempt to juggle its cash requirements and its debt and administrators have been appointed. Liverpool City Council has previously extended the maturity date of its £2m loan but Redx did not repay the debt when it became due at the end of March. There is also interest due and that could total more than £1m. Redx nominally raised £12m in February – an equity swap agreement meant that not all of this was raised immediately – but does not appear to have raised enough to pay the loan. That is blatant bad management which has ended up destroying the investments of shareholders. Iain Ross recently took up the role of chairman so it would be unfair to blame him but the other directors, including those that have recently departed, were responsible for running the business properly and they knew when this money had to be repaid. The directors are Dr Neil Murray, Norman Molyneux, Dr Bernhard Kirschbaum and David Lawrence, while Dr Frank Armstrong, Peter McPartland, Dr Peter Jackson, Philip Tottey and Dr Derek Lindsay have resigned since Redx joined AIM. Investors’ should be aware of these people if they are or become involved in any other companies.

Lombard Risk Management (LRM) increased its revenues from £23.7m to £34.3m in the year to March 2017. The pre-tax loss was reduced from £2.2m to £1.6m. The year-end order book was worth £10.1m. Management expects the company to be cash profitable this year. Legislation continues to drive demand for reporting and risk software.

Flowgroup (FLOW) could not find a buyer for its energy supply business at an appropriate valuation so it is raising up to £29m in shares (at 1p each) and bonds, including more than £600,000 raised at 1p a share via PrimaryBid, to finance its development. This is highly dilutive even before any conversion of the bonds at the conversion price of 0.95p a share. Flowgroup also requires £1m to market its Flow boiler in Europe and £4m to end the manufacturing contract with Jabil. In 2016, there was a loss of £23.7m on revenues of £99m. Net cash was £3.7m at the end of 2016. An increasing number of smaller competitors are entering the energy supply market and this led to a reduction in customers. The funding will help Flowgroup to compete and build up its customer numbers.

Big data software supplier Fusionex International (FXI) plans to leave AIM and it already has the backing of shareholders owning 41.9% of the company for the general meeting vote on 15 June. Management blames the lack of liquidity in the shares and paucity of independent research. The also blame political uncertainty in Europe. Fusionex had a gravity defying rating in the first year or so of trading on AIM but the share price is currently less than one-fifth of the peak at the beginning of 2014. The company’s growth strategy will remain unchanged. There are plans to arrange a trading facility in the shares.

Safestay (SSTY) has paid €3m in cash for U Hostels, which operates a 226 bed hostel in Madrid. U Hostels also owns an apartment block near the hostel, where managed apartments are expected to be completed during 2018, and a building in Paris that is being converted into a 260 bed hostel, which has a 12 year lease that can be extended by a further 12 years. Safestay will have to invest up to €2.3m in the Paris development, which should be completed in early 2019. In total, including development spending, the acquisition cost will be up to €6.5m. The original Madrid hostel made a small loss on revenues of €1.3m. Earlier this year, Safestay raised £12.6m from the sale and leaseback of the Edinburgh and Elephant & Castle hostels – the leases are for 150 years.

Strategic Minerals (SML) made a maiden pre-tax profit in 2016. The $351,000 profit was after $691,000 of other income – predominantly the settlement of a rail dispute. The Cobre tailings business continues to generate profit and cash.

Thor Mining (THR) says that the Pilot Mountain tungsten resource inventory has risen to 11.73 million tonnes at 0.28% WO3. This does not include the GunMetal and Good Hope deposits.

Greatland Gold (GGP) has granted access to Newmont to the Ernest Giles tenements for a period of six months and it will have first right of refusal for a disposal or joint venture. An airborne survey has identified new structural targets suitable for gold mineralisation. Metal Tiger (MTR) has exercised 15 million warrants at 0.2p a share.

LED lighting systems developer PhotonStar LED (PSL) cut its full year loss from £3.03m to £1.43m on lower revenues. The first quarter of 2017 was tough but there have been orders for its Halcyon devices. R&D has been reduced.

Fairpoint (FRP) has delayed its full year figures yet again. They are promised at some point in June. If they do not come out then then trading in the shares will be suspended.

Arian Silver Corporation (AGQ) has raised £600,000 has raised at 0.5p a share. The cash will be used for exploration of silver and lithium projects.

Mortice (MORT) has won UK contracts worth £2.25m via its Elite subsidiary that take it into new sectors. Elite has won a three year cleaning and waste contract with Surrey and Sussex police and after securing a place on BMW’s approved supplier list a two year contract with the car maker.

Orogen (ORE) intends to acquire Thread 35, which owns e-commerce womenswear brand Sosandar. Orogen is lending up to £250,000 to Thread 35. Sosandar is targeted at 35-55 year old women. Trading in the shares has been suspended.

Active Energy Group (AEG) has entered into an agreement in principle with the Province of Newfoundland and Labrador which will provide a timber licence and a forest management agreement covering 1.2 million hectares. The licence would enable the harvesting of up to 140,000 cubic metres of wood annually.

MAIN MARKET

Thomas Charlton has further increased his stake in North Midland Construction (NMD) taking it to 7.24%. Finance director Daniel Taylor recently acquired 23,321 shares at 305p each. North Midland says that its first quarter profit has increased from £237,000 to £580,000 on a 5% rise in revenues to £62.2m. The main reason behind the improvement was a swing from loss to profit by the telecoms infrastructure division but the construction and water divisions generated a lower profit. Management still believes that margins can be improved. The order book is worth £254m helped by the AMP6 water investment cycle getting going. There is the promise of growing dividends.

Shareholders have agreed to the proposed bonus issue by Sealand Capital Galaxy Ltd (SCGL). On 1 June, existing shareholders will receive nine bonus shares for each one they own, leaving them with ten times the number of shares and the share price would be adjusted from 28.5p to 2.85p. The November 2015 flotation price was 10p (1p adjusted) and earlier this year a further £1.4m was raised at 20p (2p adjusted) a share.

Dukemount Capital (DKE) has signed a binding letter of intent for its first deal with a housing association to develop supported living accommodation. The plan is identify properties worth up to £5m which will be leased to Larch Housing Association on a 50 year lease at 6.5% a year plus inflation. Dukemount floated on 29 March.

Health food products supplier World Trade Systems (WTS) has entered into memoranda of understanding with Germany-based Naturemed and Germany-based Biestmilch, which will help it to widen its product range. Naturemed is a new company but Biestmilch was formed in 1999. Trading in the shares has been suspended for years and it is approaching ten years since there was a trade in WTS shares.

CIC Gold Group Ltd (CICG) left the standard list on 25 May. Management believes it will get a better valuation on another designated exchange.

Andrew Hore

Quoted Micro 9 January 2017

NEX / ISDX

 

Capital for Colleagues (CFCP) invested a further £2.44m in employee-owned businesses in the year to August 2016. Revenues improved from £523,000 to £560,000, although realised and unrealised gains fell from £459,000 to £228,000. Pre-tax profit fell from £426,000 to £158,000. Net asset value was £5.25m at the end of August 2016. The NAV dipped to £5.21m at the end of November 2016, which is equivalent to 54.1p a share.

Strand Hanson has resigned as corporate adviser to United Cacao (UCL) as well as its nominated adviser for AIM. Trading in the 7% secured convertible bonds 2019 has been suspended as has the trading in the shares on AIM. The Peru-based cacao plantation operator says that it has entered into an exclusivity agreement with existing investors in order to try to secure the long-term financial viability of the business. United Cacao has raised $150,000 from the issue of additional 7% secured convertible bonds 2019 at 60 cents for each $1 nominal value – the mid-price was $1 but there had been no trades – and a further issue of convertibles is likely as part of the longer-term strategy. Redundancies at the plantation will reduce monthly costs by $85,000 but the company has trade payables of more than $1.25m. Dennis Melka, Anthony Kozuch and Graeme Brown have all resigned from the board.  

Hot Rocks Investments (HRIP) had £14,000 in the bank at the end of September 2016. The NAV improved from £664,000 to £901,000 thanks to unrealised gains on the portfolio of resources investments.

IMC Exploration (IMCP) has raised £150,000 at 1p a share. Global Resource Investment Trust has subscribed £50,000 and IMC director Liam McGrattan has invested the same amount.

AIM

fastJet (FJET) is raising even more money. This time it has raised £23.4m at 16.3p a share Last August £19.2m was raised at 50p a share. Loss-making fastJet has secured a deal with Johannesburg-based commercial aviation firm Solenta, which will provide three aircraft that fastJet will operate under its own name for five years and pay an hourly rate. The $19.2m cost of the lease will be paid through an issue of 95.6 million shares equivalent to 28% of fastJet. Cost savings have reduced the company‘s existing fleet and the number of routes has been reduced but the one-off costs have been higher than expected. The head office is being relocated to South Africa. By the first quarter of 2017, there will have been a one-quarter reduction in fixed costs and a one-third reduction in variable costs.

Churchill China (CHH) says that fourth quarter trading was better than expected, helped by export sales, and it has more cash than forecast. The overall 2016 performance is ahead of market forecasts and much higher than in 2015. The full year figures will be published on 28 March.

Low carbon energy business Cogenpower (CGP) has increased the heat output from its Borgaro power plant by 12.5% to 20.1GWh and the average selling price was higher. Cold weather helped to boost demand in the final quarter. Cogenpower is also improving efficiency and gas costs have been reduced. The exit from the retail division is almost complete. The Italian government still owes €1.3m to Cogenpower, including €900,000 of Green Certificates where the government is trying to change the basis of calculation. However, the Italian parliament is due to vote on a proposal that would stop any changes.

Crawshaw (CRAW) says that the decline in like-for-like revenues has abated but it is still going on. The reduction in the past five weeks was 3.8%, compared to 8.1% in the previous four week. Gross margins have fallen. Total sales were 13% higher in the past five weeks. Peel Hunt still expects a £1m loss for the year, plus a lower loss in 2017-18.

Mobile software provider Immobile (IMO) says trading is in line with expectations and the company’s largest customer has renewed its contract until 2018. A global contact centre business will be selling product licences for IMIconnect and IMIchat.

FinnAust Mining (FAM) has completed the acquisition of Avannaa Exploration from Cairn Energy following approval from the Greenland authorities. FinnAust is paying £500,000 in shares at 6.6p each. The two main assets are the Disko nickel sulphide project, where more than $50m has been previously invested, and the Kangerluarsuk high grade zinc, Pb and silver project.

Touchstar (TST) has been hit by delayed orders and a bad debt and this has led house broker WH Ireland to more than halve its 2016 pre-tax profit forecast to £215,000 on a £1m reduction in revenues to £7.7m. This comes at a time when the business is moving to a SaaS model. The bad debt relates to the access control business. At the moment the 2017 profit forecast of £600,000 is not being changed.

The cruise business owned by All Leisure has stopped trading as the financial difficulties of the formerly AIM-quoted leisure business continue.

MAIN MARKET

CIC Gold Group Ltd (CICG) says that is still in discussions with the UKLA about the standard list readmission prospectus for the acquisition of 80% of Gobi Minerals. The acquisition was announced in 2015 and it is nearly one year since the enquiry from the UKLA. CIC issued 280 million shares for the acquisition and 70 million of these will be sold at 1.45p a share in order to maintain a free float of at least 25%.

Andrew Hore

 

Quoted Micro 9 November 2015

ISDX

Leni Gas Cuba Ltd (CUBA) joined ISDX on 2 November and its shares went to a sharp discount to the 5p a share offer price. The share price ended the week at 1.875p (1.5p/2/25p), which values Leni Gas Cuba at £9.3m, which is still more than double the pro forma net asset value of the company. There have been 2.3 million shares traded at prices ranging from 1.25p to 2.5p. Most of the cash that has been raised by the company was at 2p a share but the majority of shares in issue at the end of July 2015 were issued at 0.01p a share. Leni Gas Cuba has set up a joint venture trading company with Cuba-focused Groombridge Trading Corporation, which is a Canadian company with approvals to trade in Cuba.

Chapel Down (CDGP) brewing subsidiary Curious Brew has raised £790.500 in its crowdfunding offer via Seedrs.com. This is more than double the level a fortnight ago. The minimum investment is £1m and the maximum is £3.65m and the offer closes in 112 days. Meanwhile, the wine maker has reported its second largest harvest, following last year’s record harvest. Chapel Down is holding a general meeting to get permission to issue a new type of share. The growth shares will be issued to management and will only have value if the Chapel Down share price exceeds 33.6p. The management will each receive £2,000 of ordinary shares in returning for giving up redundancy and other employment rights. There will be a total of just over 18.1 million growth shares. If the share price reaches 60p then the board says that the growth shares would have a value equivalent to 14% of the market capitalisation of Chapel Down, which is £32.8m at 32.5p (31p/34p) a share.

Capital for Colleagues (CFCP) is investing £200,000 in Cotswold Valves Ltd, a Stroud-based supplier of specialist valves for the process industries. This will give the employee owned businesses investor a 49% stake in Cotswold Valves, while the cash has been used to provide the company’s employee ownership trust with the funds to acquire the other 51% from the retiring owner. Capital for Colleagues has also made a further loan of £75,000 to The Homebuilding Centre.

Via Developments (VIA1) joined ISDX on 5 November having issued £530,000 7% debenture stock 2020. The Manchester-based residential property development funder is raising up to £3.5m.

Western Selection (WSE) has acquired 600,000 shares in AIM-quoted Northbridge Industrial Services (NBI), taking its stake to 13.6%. Western Selection director David Marshall is a non- executive director of the electrical testing and oil equipment rental business and along with chief executive Eric Hook and chairman Peter Harris a total of 4.6% of the share capital was acquired. Investec halved its stake to 3.74%. Although the share price has recovered since these purchases, it is still well below the peak of just over 600p less than 15 months ago. The share price was more than 300p six months ago. Northbridge depends on demand from the oil and gas sector and it has slumped into loss this year. Reduced need for capital investment and working capital means that net debt could be halved to £9m in the two years to the end of 2016 despite reported losses and the expected final dividend of 1p a share. Banking covenants are being renegotiated. At 91p a share, Northbridge is trading at a discount to its net tangible assets of around one-quarter.

AIM

Transportation software and services supplier Tracsis (TRCS) has reported another set of better than expected full year results. The underlying profit for the year to July 2015 improved from £5m to £5.8m. The total dividend was increased from 0.8p a share to 1p a share. As expected, the revenues from remote condition monitoring equipment fell sharply due to ordering patterns. This was made up for by a full year contribution from software company Datasys and organic growth. There was net cash of £13.3m at the end of July 2015, with just over £2m of this spent on two subsequent acquisitions. SEP provides event parking and management services and fits into the traffic and data division. Mobile analytics provider Citi Logik, where Tracsis acquired a 29% stake, analyses the interaction of people and transport via the Vodafone network. WH Ireland forecasts a 2015-16 profit of £6.2m but history shows that the final outcome should be better than that, particularly if the remote condition monitoring orders pick up faster than forecast. The shares are trading on 24 times prospective earnings.

Document storage services provider Restore (RST) is paying £55.7m for Wincanton’s records management business and this will consolidate the AIM company’s number two position in the sector. The purchase will be financed by a £34m placing at 260p a share and new debt facilities, which total £80m. Wincanton Records Management has operations in the UK and Ireland and the occupancy level of its premises is 71%. In the year to March 2015, the business made a pre-central charges operating profit of £4.9m on revenues of £22.4m. Last year, Restore’s document management division made an operating profit of £11.5m on revenues of £37.4m.

Alliance Pharma (APH) has agreed compensation of £6.7m in settlement of its claims against Sanofi following the suspension of manufacturing of bladder cancer treatment ImmuCyst in the middle of 2012. Alliance hopes to recommence selling ImmuCyst in the UK before the end of this year but there could be supply constraints. Net debt was £26.5m at the end of June 2015.

Premature ejaculation treatment developer Plethora Solutions (PLE) has agreed in principal to an all share bid from Hong Kong listed Regent Pacific. Regent is offering 15.7076 shares for each Plethora share, which on 3 November valued Plethora at £102.9m or 12.5p a share. Regent already owns 29.9% of Plethora and it will be able to provide the finance to help commercialise the PSD502 premature ejaculation treatment.

NWF (NWF) has boosted its fuels division through the acquisition of Staffordshire Fuels, which will increase its annual fuels volume by 8%. The business was established in 1996 and sells 32 million litres a year under the Jet brand.

EKF Diagnostics (EKF), which recently ended talks with potential bidders, says that it will not have to pay any earn out for molecular diagnostics business Selah Genomics. EKF paid an initial $32m (£19.2m) when the return of the shares in escrow is taken into account. The total cost was going to be up to $70.6m (£42.3m).

Magnolia Petroleum (MAGP) says that Continental Resources is drilling 10 wells on the Woodford formation in Oklahoma. Magnolia has a 0.525% working interest in each of these wells. Five will be drilled in November and the rest next March. Gas is being targeted. Magnolia has proven reserves independently valued at $21m and these reserves are still profitable at the current oil price. Magnolia’s share of the production of the wells it is interested in is running at 309 barrels of oil equivalent per day.

MAIN MARKET

CIC Gold Group Ltd (CICG) has announced the potential acquisition of Gobi Minerals Ltd for £5.6m in shares at 2p each but it depends on a share issue raising sufficient cash for the deal to go ahead. Trading in the shares was suspended at 1.4p a share. Due diligence still needs to be completed on the acquisition. Gobi owns 100% of the mineral title to the Tsagaan Suvarga gold and copper prospect in the South Gobi region of Mongolia. There is no proven resource in this mineral interest so the valuation appears high but it is hard to judge without further information. HE Barsbold Ulambayar will be appointed as chief operating officer.

Commercial aircraft leasing company Avation (AVAP) is acquiring an eight year old Boeing 737 operated by a major Chinese airline. The remaining leases term is 5.5 years. This is the first Boeing aircraft acquired by Avation and it takes the number of aircraft owned to 34. .

Electronics designer and distributor Acal (ACL) has acquired magnetic components Flux AS for £3.7m. Flux will broaden the product range and provide an additional customer base. Next year’s profit forecast has been edged up slightly to 18.6p a share.

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