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Andrew Hore Quoted Micro 22 July 2019

NEX EXCHANGE

Arbuthnot Banking (ARBB) improved its underlying pre-tax profit from £2.7m to £3.4m in the first half of 2019. The interim dividend has been raised from 15p a share to 16p a share. The recent residential mortgage portfolio acquisition was after the end of June. The strategy is to diversify the business and asset-based lending and specialist finance are being built up. Savings platform Arbuthnot Direct has recently been launched. The core private banking operations of Arbuthnot Latham are still growing, though. The shareholding in Secure Trust Bank has been sold down to below 10%, which means it is no longer consolidated. The change from associate led to a write down and NAV declined to £13.21 a share.

VI Mining (VIM) has so far paid $9.1m in cash to the vendors of the Minaspampa and Rosario projects in Peru. There is still $42.2m outstanding 18 months after the acquisition agreement was signed. Majority shareholder Sumner Group Holdings is raising money from a security token offering, which could be completed in the autumn. Some of the proceeds will be used to replace existing facilities and help to pay outstanding acquisition considering, pending renegotiation of the deal. Chief executive David Sumner has provided a $10m term loan, plus a £39m facility of which $3m has been drawn down. There is $1.2m outstanding on the Tassili Jewellery LLC loan facility.

AfriAg Global (AFRI) has completed its acquisition of a 2.325% stake in cannabis company Apollon Formularies. The Jamaican subsidiary has produced its first licensed medical cannabis oils for commercial sale on the island.

MetalNRG (MNRG) has published a prospectus for its move to a standard listing on 23 July. It has raised £193,000 at 0.3p a share.

Clean Invest Africa (CIA) says that its CoalTech subsidiary has signed a joint venture agreement with Creon Capital covering Russia and nearby countries. CoalTech is negotiating with other potential partners to set up operations in Europe, Indonesia and the US.

Tectonic Gold (TTAU) says its mining subsidiary has received approval for the R and D tax incentive scheme in Australia for 2018-19. A claim is being prepared.

Share trading has recommenced in Ganapati (GANP) after it published results for the year to January 2019. There was a cash outflow from operations of £23.8m. Since January, two new games have been generated each month.

AIM

Focusrite (TUNE) has acquired Germany-based studio monitor loudspeakers supplier Pro Audio for £16.2m in cash and it will still have £12m left in the bank. Pro Audio supplies ADAM branded products and made a pre-tax profit of €1m. This is an earnings enhancing acquisition. The businesses will operate separately but work together to develop cross-selling benefits.

Swallowfield (SWL) is selling its manufacturing business to the much larger US manufacturer Knowlton Development Corporation for £35m in order to concentrate on its portfolio of personal care and beauty brands. This should leave net cash of £23m in Swallowfield and this will be used to acquire more brands. The company is changing its name to Brand Architekts Group.

Lawyer Gateley (GTLY) grew all its main operations. Acquisitions helped revenues to increase by one-fifth to £103.5m in the year to April 2019, but there was still organic growth of 9.5%. Pre-tax profit improved from £15.4m to £18.1m. The dividend was raised from 7p a share to 8p a share. Corporate business grew more modestly than other parts of the business, but this was impressive given market conditions for corporate deals. A profit of £21m is forecast for this year.

Victoria (VCP) has raised €330m via an issue of 5.25% senior secured notes 2024. This offer was three times subscribed. The floorcoverings manufacturer is using the money to refinance existing debt and will have £80m of cash after the issue.

Packaging machinery supplier Mpac Group (MPAC) is trading significantly ahead of expectations. Equity Development has increased its 2019 operating profit forecast from £4.6m to £5.5m.

Adamas Finance Asia (ADAM) has completed a co-investment agreement with a Hong Kong-based family office for the investment in Japanese resort business Infinity Capital Group. The family office will pay Adamas $1m of the $2m already drawn by Infinity and the other $2m will be provided 50/50 by the two parties. The facility has a coupon of 17.5% per annum. This deal provides cash to invest in other opportunities. Adamas took advantage of a dip in the share price to buy back £30,400worth of shares at 38p each.

Velocys (VLS) has raised £7m at 3p a share on the back of news that Shell and British Airways will co-fund the development of the Immingham biorefinery project. The cash will be used for further technology development and to progress the Mississippi biorefinery project.

Block Energy (BLOE) has completed the increase from a 71.5% to 100% of its working interest in the West Rustavi field in Georgia. The cash and shares payment means tha Georgia Oil and Gas has increased its stake in Block to 7.7%. Miton has cut its stake from 9.17% to 4.73%.

Mortice (MORT) has decided to cancel its AIM quotation and is offering shareholders the chance to sell their shares for 12p each. A lack of liquidity and a weak share price making it difficult to finance acquisitions are the main reasons for leaving AIM.

Albert Technologies Ltd (ALB) also wants to leave AIM, but it is not offering an exit for shareholders. It believes it can attract investors, but they would prefer to invest in an unquoted company.  

Science Group (SAG) has been buying more shares in Frontier Smart Technologies (FST) at the bid price of 35p each and it has built up a 39.9% stake. It also has 3.1% acceptances for its bid.

Mirada (MIRA) has integrated Netflix into its set-top box platform and this will make its technology even more attractive to broadcasters.

Bangladesh has brought in a law that all listed companies have to pay at least 30% of post-tax profit, or an extra 10% tax charge will be levied. Beximco Pharmaceuticals (BXP) is assessing the legislation and will consider how best to manage cash.

Novacyt (NCYT) has sold its loss-making clinical labs business for £400,000 and it will concentrate on diagnostics businesses Primerdesign and Lab21. The first instalment of £100,000 has been paid and £100,000 more is due in September, but the rest will be paid in three equal instalments on the first, second and third anniversaries of the deal.

MAIN MARKET 

Spinnaker Opportunities (SOP) has received a commitment to invest up to £1.4m from a single investor conditional on the deal to acquire medicinal cannabis company Kanabo Research. The investment will be for a maximum of 4.99% of the enlarged share capital, although if there is any of the £1.4m left it could be invested in a convertible loan note. The investment underpins the expected acquisition-related fundraising and a fee of 10% of the investment is payable.

General meeting resolutions to wind-up Avocet Mining (AVM) were withdrawn at its general meeting. This comes after discussions with shareholders. There is a few weeks cash left in the business and any potential transaction would have to come with finance to cover the costs of an acquisition process.

Dukemount Capital (DKE) has commenced construction of 17 specially developed apartments and retail space on its West Derby property.

OTHER MARKETS 

Fashion On Screen has listed on the Vienna Stock Exchange, which has European Growth Market status by the HMRC. This means that there is no stamp duty. The company had previously considered a listing on the Nasdaq First North market in Copenhagen. Fashion On Screen has raised more than £3m prior to its listing. A film based on the kidnapping of racing driver Juan Fangio in Cuba in 1958 could start before the end of the year (for more about the background to the story listen to https://www.bbc.co.uk/programmes/p055fjfx).

Andrew Hore

Andrew Hore – Quoted Micro 22 January 2018

NEX EXCHANGE

Capital for Colleagues (CFCP) reported a decline in full year revenues from £560,000 to £372,000 and there was no repeat of the realised gains on investments in the previous year. There was an increase in unrealised gains from £71,000 to £317,000. However, there was a £1.32m investment impairment. This meant that a profit of £158,000 was turned into a loss of £1.17m. There is £1.28m in the bank. The employee-owned businesses investor is focusing on managing its portfolio and the advisory business spun off into a joint venture. The NAV is 42.7p a share.

First Sentinel (FSEN) has invested the £1.4m it raised when it joined NEX last year. These investments include fellow NEX-quoted company NQ Minerals, where First Sentinel boss Brian Stockbridge is chairman, AIM-quoted UK Oil and Gas Investments and AIM-quoted Premier African Minerals. There is a £65,000 loan to unquoted tea cafés operator Yumchaa, where Stockbridge is 50% shareholder. The loan has an interest rate of 12% and lasts until October.

Block Energy (BLOK) has further delayed the planned move to AIM. The oil and gas company has a new expected admission date of end-February. Trading remains suspended on NEX.

AIM

Mark Watkin Jones intends to step down as chief executive of student and private rental accommodation developer Watkin Jones (WJG) but he will stay until a successor is identified. In the year to September 2017, revenues were 13% higher at £301.9m and underlying operating profit rose by a similar percentage to £42.7m. The dividend was 6.6p a share, equivalent to a 10% increase if Watkin Jones had been quoted for all the previous year. Investor demand for student accommodation and private rental residential property remains strong.

Van Elle (VNL) has an outstanding debt of £1.6m from failed facilities management and construction company Carillion. finnCap has also assumed lower second half profit of £1.3m relating to expected business from Carillion. The specialist piling contractor has a poor record since floating and this does not help.

Engineering and IT recruitment company Gattaca (GATC) says that most of Carillion’s debt to the company is insured with around £100,000 uninsured. Premier Technical Services (PTSG) says that it has £800,000 of annual revenues with Carillion with £300,000 still owed. Elsewhere, business is in line with expectations. Bilby (BILB) says that it does not think that the contract with CarillionAmey will be impacted.

Sinclair Pharma (SPH) directors have been buying shares on the back of the news that it has received regulatory approval of Ellanse pre-mixed bioresorbable collagen stimulating fillers in Brazil, one of the most important global markets. Ellanse will be soft launched immediately and the full launch is a matter of weeks away. Other Sinclair dermatological products are selling well in Brazil.

K3 Capital (K3C) reported interim figures that were better than forecast. This led to a £1m increase in forecast full year revenues but the pre-tax profit forecast is maintained at £5.4m because of additional costs required to accelerate the growth of the business. The business broker and corporate finance adviser announced an interim dividend of 2.85p a share and a total dividend of 8.2p a share is forecast for the full year.

Full year trading at Midwich (MIDW) was better than expected with revenues 28% ahead at £470m, helped by acquisitions performing ahead of expectations. The audio visual equipment distributor has also improved gross margin. The 2017 results will be published on 13 March.

Utilitywise (UTW) has changed its accounting policy relating to initial revenue recognition of new contracts.

LiDCO (LID) has signed up a new Japanese distributor. Merit Medical has a three year exclusive agreement and there is potential to significantly increase last year’s sales of £117,000. The LiDCOunity version 2 monitor has been approved in Japan.

African Battery Metals (ABM) is the new name for Sula Iron and Gold. Prior to the name change, £1.75m was raised and the Riverfort facility terminated with an associated buy back of shares. ABM is paying $100,000 ($50,000 is still outstanding) for a 70% stake in cobalt licences in the Democratic Republic of Congo. The other shareholder will retain its 30% stake up until a decision is made to mine, so ABM will pay the exploration costs.

Orosur Mining Inc (OMI) produced 7,052 ounces of gold at an average cash operating cost of $867/ounce in the second quarter and plans to produce at least 30,000 ounces in the financial year. Although the South America-focused gold producer and explorer generated $2.16m in cash in the second quarter, there was a $251,000 loss in the period because the all in sustaining cost was higher than the gold price received. Asset Chile has forfeited the 16% stake it earned in Anillo because it did not move into phase 2 of the project.

Shareholders have approved share buybacks by China New Energy Ltd (CNEL) until the end of 2019. Up to one-fifth of the shares can be acquired for less than 2p a share. The bioenergy technology developer and operator increased revenues from £8.85m to £24.7m in 2017 and the order book is worth £13.7m. The company was profitable last year and anticipates it will be in 2018.

Data software company WANdisco (WAND) says bookings increased 45% to $22.5m in 2017 with two-thirds generated by WANdisco Fusion software. There was cash of $27.4m at the end of 2017, with $4m from a new growth capital facility.

Thor Mining (THR) has had its stake in US Lithium diluted to 20.8% due to a A$240,000 fundraising at A$0.12 a share, which is four times the Thor acquisition price. US Lithium plans an ASX-listing.

Veltyco Group (VLTY) is acquiring a 51% stake in Varkasso, which has exclusive rights to use the crypto wallet technology platform 8Crypt, for £265,000 in cash and shares. Veltyco will incorporate the 8Crypt crypto wallet in all the gaming platforms it is involved with.

Newmont Mining has decided not to become involved in the Greatland Gold (GGP)-owned Ernest Giles gold project in Australia. It appears that the project was not in the right place or large enough for Newmont to go ahead with, although it took its time to make a final decision. Greatland benefits from the work conducted by Newmont, which has identified a large gold anomaly. Targeted exploration will be undertaken at Ernest Giles in the first quarter of 2018.

Kodal Minerals (KOD) says that the authorities have approved its exploration licences for the Bougouni lithium project in southern Mali. Triumvirat Mining Company will have a 10% economic interest in the licences, which are for an initial three year life. There has been positive drilling news concerning the Ngoualana and Sogola-Baoule prospects.

Electrical accessories supplier Volex (VLX) moved from the Main Market to AIM on 19 January.

Waste gasification technology business EQTEC (EQT) has partially repaid a five-year, £1.1m loan facility with an annual interest rate of 15%. The remaining balance of £621,000 is repayable in July 2020. The £2m of convertible secured loan note with Altair Group Investment Ltd has been extended until July 2020 and the interest rate doubled to 15%.

Renewable fuels technology developer Velocys (VLS) has raised £14m via a placing at 10p a share and hopes to raise up to £4.4m through an open offer at the same price. Last year, there was a £1.16m share issue at 45p a share. The cash will be used to finance initial development of the Mississippi biorefinery and fund the UK waste-to-renewable jet fuel project which has been around for many years.

Generic drugs supplier Beximco Pharmaceuticals (BXP) expects to complete the £18.2m acquisition of a 85.2% stake in Nuvista Pharma by the end of February.

Gama Aviation (GMAA) says last year’s trading was in line with expectations. The business aviation services provider has incurred $1m of costs relating to legal proceedings and there will be a similar amount to come. There will be around $2.5m of restructuring costs and write-downs. Net debt fell from $19m to $13m.

Although Blancco Technology Group (BLTG) says that first half sales declined this is due to the fact that certain contracts were not repeated in the latest period. The data erasure software business is expected to report continuing full year revenues 6% higher at £28.5m. However, higher overheads mean that there will be little profit.

Cyber security software supplier Crossrider (CROS) says that 2017 trading was in line with expectations and revenues improved 16% to $65.8m, while underlying EBITDA was 29% ahead at $8.3m. Profitability from the core activities more than doubled. There was $69.4m in the bank at the end of 2017.

Legend Gold Corp shareholders have agreed to the arrangement for Altus Strategies (ALS) to acquire the entity that owns the Legend gold projects in Mali in return for 41.1 million Altus shares. The mining projects investor is also applying for a dual listing on the TSX-V. Legend shareholders will be issued three Altus shares for each Legend share that they own, giving them 27.6% of Altus.

Toys supplier Character Group (CCT) says it has exited Christmas with “virtually no excess stocks”. International sales were poor but domestic sales grew. Pokemon products will be launched during the summer.

Caledonia Mining Corporation (CMCL) reported higher than guided annual production at the Blanket gold mine. The prediction was 54,000-56,000 ounces but the outcome was 56,135 ounces.

Sustainable pallets manufacturer RM2 International SA (RM2) had unrestricted cash of $4.1m at the end of 2017, but that could fall to $2m by the end of January. That means that there should be enough cash until the third week in February. Management continues to seek additional finance. There are plenty of potential customers but little in the way of orders.

Tiziana Life Sciences (TILS) has raised a further £150,000 at 150p. This is on top of the £150,000, £275,000 and £200,000 raised at the same price during November and December. There is a warrant with each new share and they are exercisable at 160p a share, although the most recent warrants last until January 2024. The cash is being invested in the phase IIa clinical trial for the Milciclib cancer treatment.
Remote tracking and monitoring products developer Starcom (STAR) says that last year’s turnover improved from $5.1m to $5.5m and lower operating costs mean that it will move from loss to breakeven. Strong orders mean that revenues and margins should improve this year.
Condor Gold (CNR) has obtained a TSX listing.

MAIN MARKET

Path Investments (PATH) is cancelling its standard listing even before finalising its acquisition of a 50% participating interest in the Alfeld-Elze licence and gas field in Germany. The plan is to cancel the standard listing on 19 February and raise money and apply for an AIM quotation in the first quarter of 2018. Path has previously been on AIM in a different guise but if the deal does not go ahead the plan would be to maintain the standard listing.

World Trade Systems (WTS) plans a transaction involving the sale of its assets to a new company that will float on the Channel Islands-based The International Stock Exchange. WTS shareholders will be distributed shares in the new company that will be used to acquire the assets.
Loss-making telecoms firm Toople (TOOP) did not publish a full set of figures on RNS. That is always a giveaway. It did announce that the operating loss declined by 23% to £1.31m in the year to September 2017. Cash flow is much more important for a colander company like Toople.

Technology investment company Sure Ventures (SURE) has joined the Specialist Fund Segment of the Main Market, having raised £3.31m at 100p a share. The main focus is augmented reality, fintech and the Internet of Things.

Challenger Acquisitions Ltd (CHAL) has invested $300,000 in a new giant observation wheel for Dallas, Texas. Challenger also has the opportunity to operate the wheel.

Andrew Hore

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