NEX EXCHANGE
Peel Hunt has edged up its pre-tax profit forecast for brewer and pubs operator Shepherd Neame (SHEP) following the publication of its figures for the year to June 2019. They showed revenues of £145.8m and pre-tax profit of £11.4m, which was slightly better than expected. Brewing profit more than halved to £900,000 after the Asahi contract ended, but this was more than made up for by the contribution from managed and tenanted pubs. Own-brewed volumes have risen by 5.8% in the first few weeks of the year and managed ad tenanted pubs are showing like-for-like income increases. Debt costs will be lower than previously expected so the 2019-20 pre-tax profit forecast has moved from £11.5m to £11.7m, which will allow a slightly higher anticipated dividend of 31p a share – twice covered by earnings. There is potential to acquire more pubs.
In the 17 months to May 2019, pubs operator and automotive dealer Barkby Group (BARK) made a pre-tax profit of £75,000 on revenues of £6.29m. Stripping out the amount acquisitions were made under net asset value and acquisition cost, the profit is £135,000. The addition of pub sites, taking the total to six gastropubs and inns, and the purchase of Centurian Automotive, will significantly increase revenues in the latest 12-month period. The plan is to have up to 12 pub sites within five years.
Karoo Energy (KEP) is changing its name to IamFire and raising £143,000 at 2.4p a share. Burns Singh Tennent-Bhohi has been appointed as an executive director and Jeremy Ross joins as a non-executive. They are both directors of cannabis company Eurocann International (BUD). The existing business is being sold to Noel Lyons and other opportunities in the oil and gas and base and precious metals sectors will be assessed.
National Milk Records (NMRP) has been hit by a cyber attack and this will reduce profit this year. It has interrupted IT operations and EBITDA is set to be 10% lower than expected in the year to June 2020.
WH Ireland has published a broker note on Cadence Minerals (KDNC) and this suggests that the 27% stake in the Amapa iron ore mine in Brazil is a potential company maker, even before any benefits from the lithium project investments. The mine produced between 2007 and 2014 before being closed because of an incident at the port on the Amazon and a falling iron ore price. The total resource is estimated at 245Mt grading 41% Fe, but this figure dates back to 2012. The mine life could be 15 years. Capex of $168m will be required to restart mining and processing. The 27% stake will effectively cost Cadence less than £6m. The other shareholder is Singapore-based commodity trader IndoSino. If other investors are sought, then Cadence has the right to increase its stake to 49%.
Primorus Investments (PRIM) plans to consolidate every 20 existing shares into one new share. A general meeting will be held on 16 October. Primorus expects its A$500,000 loan note with Zuuse to be repaid, plus interest, in the next couple of weeks.
St Mark Homes (SMAP) reported an improvement in interim pre-tax profit from £18,000 to £84,000. The housebuilder achieved this improvement because of a much larger share of the operating profit in a joint venture and increased interest receivable. Admin expenses rose even though revenues were lower. NAV is 126p a share.
Recently floated cash shell World High Life (LIFE) plans to acquire Love Hemp in return for £4m in cash and the issue of 30 million shares. A further £2m could become payable in the next three years depending on the achievement of turnover targets. If more than target turnover is achieved in any year then the vendors will receive 5% of the excess. Love Hemp is a supplier of CBD and hemp products and it made a pre-tax profit of £532,000 on turnover of £2.5m in the year to June 2018. World High Life plans to raise up to £5m in order to finance the acquisition.
Ananda Developments (ANA) says joint venture DJT has applied for a licence to grow >0.2% THC cannabis and has been registered with the Drugs Licensing and Compliance Unit of the Home Office. DJT has acquired Aristaeus Elements, which is setting up as a cannabis extraction and processing facility, for £1 and assumption of debt of £51,000 – the deposit paid for the equipment for the plant. The plan is to finance the investment in the facility through debt secured against offtake contracts.
Blockchain-related investment company Coinsilium Group Ltd (COIN) reported a dip in revenues from £1.33m to £109,000, but a reversal of an impairment charge and gains on financial assets meant that it still made a pre-tax profit of £242,000, down from £554,000 the previous year. The non-cash gains meant that cash fell from £592,000 to £475,000 over the six months to June 2019. NAV increased from £2.36m to £2.59m.
First Sentinel (FSEN) reported a fall in interim revenues from £963,000 to £710,000, while the loss increased from £46,000 and £114,000.
Panther Metals (PALM) says that early identification of an area of the Big Bear project in Ontario shows high gold grades. The 100% owned area has been extended via the acquisition of four additional mining claims.
NQ Minerals (NQMI) generated revenues of £14.2m in the first half of 2019. The Hellyer polymetallic mine was not in production in the corresponding period last year. There was still a £17.9m loss because of high admin expenses. There was £65.6m of debt at the end of June 2019 and management believes that it can get more favourable terms now the mine is up and running.
AIM
Domain name registry Minds + Machines (MMX) is improving the quality of its earnings and it is nearer to sorting out legacy problems. Renewal revenues almost cover costs. Interim net revenues increased from $5.3m to $7.4m, while pre-tax profit trebled to $1.8m, helped by a full six month contribution from ICM. A full year pre-tax profit of $4.1m is forecast. Operating expenses should rise much slower than revenues and cash generation should be strong. A $5.1m cash payment will be made in the second half in order to cover those legacy costs. Even after that, the company should have net cash of more than $5m at the end of 2019. Longer-term, Minds + Machines could become a dividend payer.
Pelatro (PTRO) is dependent on fourth quarter licence sales to achieve forecasts following the 14% increase in interim revenues to $2.7m. That means that second half revenues of the telecoms marketing services and technology provider need to be $7.8m to achieve the 2019 target. There are some large potential sales in the pipeline, but delays of a few weeks could mean that they drop into 2020. Repeat revenues more than doubled in the first half because more of the business won has been in the form of revenue gain share contracts that take time to build up and produce revenues over a longer period than a one-off licence, which is recognised as revenue straight away.
Maestrano (MNO) has conditionally agreed to acquire Airsight Holdings, which offers engineering surveying services using Light Detection and Ranging (LiDAR) technology. Airsight had revenues of A$1.04m in the year to June 2019 and it is loss making because of development spending. Maestrano will issue 73.4 million shares to pay for the acquisition. There could be further payments depending on revenues. The Maestrano chairman is a shareholder in Airsight.
Escape Hunt (ESC) increased revenues from £800,000 to £2.2m in the first half of 2019 but it remains loss-making. Franchise revenues were flat, and all the growth came from the operated sites. Escape Hunt has signed an agreement with Proprietors Capital Holdings for the roll-out of franchise sites in North America.
Mattress supplier eve Sleep (EVE) reduced its loss but cash is still flowing out of the business. Net cash was £12.5m at the end of June 2019 and it is expected to be £8m by the end of the year.
MAIN MARKET
S and U (SUS) is adding new motor finance business even though loan standards have been tightened. Motor finance business Advantage Finance is on course to achieve its 20th year of profit growth. Bridging loans provider Aspen made a profit of £502,000 in the first half. Interim pre-tax profit rose by 3% to £17.1m and the dividend was increased by 6% to 34p a share.
Suit hire and retail business Moss Bros (MOSB) broke even, before the IFRS16 accounting changes for leases, in the six months to July 2019, which was slightly better than expected. A full year loss is still expected because despite like-for-like retail sales growth, hire revenues are declining and the IFRS16 changes will knock £2.5m off pre-tax profit. There was cash of £18.2m at the end of July 2019.
finnCap has reduced its 2019-20 forecasts for InnovaDerma (IDP) following its figures for the year June 2019. The beauty and health products supplier increased revenues by one-fifth to £12.9m and pre-tax profit more than doubled to £1.4m. This year’s pre-tax profit is expected to be £2m, down from £2.3m previously, because higher costs relating to marketing more than offset improved sales expectations. To put this in perspective, the 2019-20 pre-tax profit forecast back in August 2018 was £2.6m. InnovaDerma needs to start meeting forecasts rather than having them downgraded on a regular basis.
Tex Holdings (TXH) has appointed Price Bailey LLP. Trading appears to be picking up in the plastics and engineering businesses. There is a record order book of £12m.
Andrew Hore