Investors must consider the Enterprise Investment Scheme (EIS) to support the NHS and economic recovery
Enterprise Investment Scheme (EIS) investments are sought by investors around the end of the tax year as they seek mitigate tax with investment in exciting innovative companies.
This year more than ever, investor focus will be on innovative medical opportunities, especially those promising to provide relief in the NHS battle against COVID-19.
There have been a number of high profile products from listed companies helping the coronavirus crisis such as Novacyt’s COVID-19 testing kits, but some of the real innovations may be unlocked in unlisted companies that could benefit from EIS investment.
Andrew Aldridge, Partner at Deepbridge Capital, has highlighted investors can help innovations in the healthcare sector by investing in companies that are directly providing treatments and researching therapies and vaccines for COVID-19, as well as those developing ventilators.
In addition, Andrew Aldridge suggested EIS investors should also consider companies providing relief to the ongoing strains on the NHS such online healthcare delivery platforms, technologies to assist with remote working and devices designed to minimise human contact.
“These companies are quite rightly receiving commercial interest in the acquisition of products but in order for them to be able to scale up research development and manufacturing, they also need venture capital. The EIS is therefore a key Government weapon in this current fight,” said Andrew Aldridge.
“By utilising the EIS, investors can benefit from generous tax reliefs (potentially including income tax relief mitigation, CGT deferral, IHT mitigation and loss relief), whilst also directly assisting the UK’s healthcare and economic battle with Coronavirus. Delaying investments should not be an option. Investors and financial advisers should be speaking with EIS product providers in the life sciences and tech sectors and asking how they can help raise much needed funds.”
“The NHS staff, the supermarket workers, those ensuring the UK continues as best to continue to operate with some vague degree of normality are quite rightly the heroes of the hour. However, investors can have a major impact on this scenario by ensuring that innovators have the resources to expedite their innovations which can make a real distance.”
Investors choosing to invest through the Enterprise Investment Scheme get numerous tax benefits including 30% tax relief and exemption, capital gains tax and relief on any losses.
EIS Opportunity: Help Me Stop – Rehab in The Real World
Help Me Stop (www.helpmestop.org.uk) is a breakthrough non-residential alcohol and drug treatment service launched in recent months in London. The Help Me Stop “Dayhab” service is based on the successful US Intensive Outpatient Programme model, which has been proven to produce the same results as the traditional residential treatment model, but at only one tenth of the cost.
With COVID-19 keeping many of us in our homes, and access to addiction treatment becoming much harder, Help Me Stop has now launched a Digital Dayhab solution to operate alongside the Company’s existing first centre in West London.
The UK is currently failing in the way alcohol and drug addicts can access suitable treatment. Every year in the UK 500,000 people are looking for addiction treatment, but less than 3% are accessing rehab due to the very high cost of residential treatment. Price and disruption to lifeare the two most common reasons for clients not finding suitable Rehab.
A typical residential centre will charge £25,000 for 4 weeks – the Help Me Stop Digital Dayhab service provides 75 hours of intense treatment over 4 weeks for £1,750 – less than 10% of the cost. The service consists of a combination of group and one on one sessions, and there is also a supplementary recovery service and family programme available alongside the core programme.
The first Help Me Stop Dayhab centre was successfully launched in the summer of 2019 and has to date performed to plan. Due to the current epidemic, however, the Company has temporarily paused its branch expansion programme, to focus on the launch of its new online service, which is already signing up clients and showing signs of taking off successfully.
It should be noted that the new online service has the potential to attract clients from all over the UK and is not geographically restricted. Help Me Stop therefore has the ability to bring affordable Dayhab to both the home and the high street.
Help Me Stop is not only generating significant demand and demonstrating its viabilityin the UK market, mirroring the US experience, it is also a totally scalable business with potential to expand quickly across the UK in the next 3-5 years with a combination of online and high street units, in the process disruptingthe marketplace by putting recovery within reach for many thousands of people.
The current offer document for Help Me Stop assumes a branch roll out to up to 12 branches by 2023. The Directors believe that the new Digital Service has the potential to easily replicate and possibly exceed that growth pattern. The business is projecting Ebitda of £3.5m by 2023, which based on an exit multiple of 10 (industry average is 9-13) would produce a value of £35m, equivalent to a return of 8 x cash.
The business qualifies for EIS and will be issuing shares both before and after the tax year end, providing the ability for investors to carry income tax relief back to 2018-2019 tax year, if required.
The Greatland Gold share price offers a buying opportunity
The Greatland Gold share price (LON:GGP) has pulled back from their recent highs and as it finds support, analysts are suggesting now is a good time to buy.
Greatland Gold has outperformed during the period of volatility in stock markets in 2020 due to an exciting series of updates from its gold projects in Australia.
The company is operating six exploration licenses in Western Australia and Tasmania in areas that have not previously been subject to heavy prospecting.
The Gold safe haven?
Gold has been long though of as a safe-haven and the perfect place to allocate capital during periods of uncertainty and Greatland Gold could be seen as a proxy for the underlying price of gold. However, the safe haven gold thesis has tested and somewhat disproved during the recent the selloff. As coronavirus started to negatively affect global stock markets, true to form there was a move higher in gold as investors flocked to safe havens such as gold and bonds. Though gold initially rose, as market volatility picked up in stock markets it feed through to the gold market with market participants being forced to liquidate positions in the gold futures and options markets to cover requirements elsewhere. Gold prices sank $250 and have not yet again tested to the upside. With such moves causing volatility in gold, it suggests Greatland Gold should not be seen as a safe haven proxy investment on the price of gold. This is not where the opportunity lies for Greatland Gold, or where investors will find share price appreciation. In the same vein, it is unlikely volatility in the price of gold will negatively impact Greatland Gold in the short term.Greatland Gold shares
Greatland Gold shares have risen not because of a move higher in the price of gold, but because of progress in it’s exploration program in Australia, which has yielded very encouraging drill results. The most recent of these announcements was an update on the Havieron deposit in the Paterson region of Western Australia. The company said the Havieron project had demonstrated high-grade mineralisation with a 0.5m section yielding 159 grams of gold per tonne and a 3m section yielding 91 grams/tonne. There are currently eight rigs operational in the area and testing continues, providing the opportunity for further positive updates in the near future. Gervaise Heddle, CEO of Greatland Gold plc, commented on the results: “We are delighted by this sixth consecutive set of excellent results from Newcrest’s drilling campaign, which continue to demonstrate the continuity of high-grade mineralisation and expand the mineralised footprint.” “These latest results represent one of the best sets of drilling results at Havieron since Newcrest began its exploration campaign and reinforce the potential to accelerate the timetable for commercial production.” Since the update Greatland Gold has pulled back from the recent high of 5.68p but equity analysts remain positive in the shares. “I would suggest investors use the recent pullback to pick up the shares,” said John Woolfitt, Director of Trading at Atlantic Capital Markets.JLEN reaffirms dividend
JLEN (LON:JLEN), the diversified renewable infrastructure investment trust, has reaffirmed its dividend in the face of uncertainty created by the spread of coronavirus.
The trust said it was committed to paying its quarterly dividend of 1.655p and guided on a full year dividend of 6.66p. With shares trading around 106p, JLEN provides a yield of 6.2%.
The news will increase investor confidence in the JLEN dividend as scores of Bluechip FTSE 100 companies scrap or reduce their dividends in an effort to conserve cash during the decline in economic activity caused by coronavirus.
No material long-term impact
JLEN operate a portfolio of renewable energy assets including wind, solar, hydro and biomass in the UK and is a strong financial position having just completed a placing and is conservatively geared through a revolving credit facility which isn’t due to refinanced until 2022. Although they are conscious of COVID-19, their operations have remained largely unaffected by the spread of the virus. The investment trust said in a release they saw no material long-term impact from COVID-19 on its ability to continue to meet their investment objectives. In the short-term, it is expected JLEN will experience lower power prices as demand drops inline with economic activity, but this isn’t expect to cause significant disruption to operations. JLEN have price floor or fixed price arrangements for summer 2020 and winter 2020/2021 for 49% and 48% of their power generation respectively. The has seen an impact to it’s food waste projects that are reliant on commercial waste food which has seen a reduction in collections. Residential food collections are said to remain stable. The food waste business makes up less than 5% of the JLEN portfolio. The company said it will monitor COVID-19 developments closely but the health and safety of all employees, stakeholders and their staff is of primary importance. JLEN (LON:JLEN) shares traded at 106p in early trade on Thursday.Remote opportunities for cyber security firm ECSC
Cyber security is a growth area and the expansion of remote working due to COVID-19 is likely to highlight its importance. AIM-quoted ECSC (LON: ECSC) is set to benefit. ECSC is still losing money, albeit a reduced amount, but it has started to generate cash.
ECSC provides cyber consulting services to organisations and businesses. Some of these clients then become managed services customers, although some sign up for managed services even though they have not received consultancy.
ECSC is an interesting comparison with Novacyt (LON: NCYT) because the share price soared on the back of high-profile cyber security events and was approaching £6 at one point. The valuation was not sustainable, and the share price has not been near those levels since. Novacyt is selling tests, but the short-term boost is unlikely to be sustained and it will be difficult to justify the valuation even if it is. However, there is underlying growth.
Cyber growth
Cyber security is not something that will go away. The UK market is estimated to be worth £8.3bn and it continues to grow at around 9% a year. In 2019, ECSC revenues grew by 10% to £5.91m. Managed services revenues increased by 48% to £2.61m. Consulting revenues dipped slightly to £2.9m, although they did grow in the second half. The other revenues come from third party products and other services. There are more than 100 reseller partners and these generated 17% of new clients during the year. This partner programme enables ECSC to engage with a broader range of clients. The reported pre-tax loss declined from £1.26m to £750,000. Operating costs were maintained so most of the growth in revenues dropped through to profit. Managed services has additional capacity and as more work is won its margins are set to continue to rise. Gross margins were 68% in 2019, up from 53% the year before. Cash was generated in the second half. This offset the outflow in the first half. There was an inflow from operations of £52,000 with a further boost of £152,000 from a tax credit. There was a £634,000 operating cash outflow in 2018. Capitalised AI software development costs and other capital investment meant that cash did fall from £650,000 to £351,000, although that is an increase on the June 2019 figure. The order book was worth £2.6m at the end of 2019 and since then two three-year managed services contracts that are worth £590,000 have been won from a charity and a high street retailer. There are tax losses of £5.67m, so future profit should be covered for many years.Future
There are opportunities and challenges for the business during this period of uncertainty. Higher levels of remote working are likely to unearth problems with many organisations’ cyber security and the ECSC rapid response operation could benefit. However, longer-term decisions may be put on hold and delay new contracts, particularly in consultancy. ECSC hopes to breakeven during the COVID-19 outbreak. Forecasts are impossible for any company at the moment. ECSC has made a strong start to 2019 with a 9% increase in revenues, though, and it has cash in the bank and debt facilities of £500,000. That, and £2m of recurring revenues, means that it will be able to withstand a limited slowdown. This year’s figures may not end up as would have been hoped for – a pre-tax profit was expected for 2020 before forecasts were withdrawn. However, the underlying trend in the cyber security market will continue and ECSC will be able to progress towards a pre-tax profit even if it is not this year. Looking at a long-term graph of the share price will not provide an accurate view of the progress made by ECSC. The share price has risen 5p to 82.5p on the back of the results, compared with a low of 62.5p. This is a growing business and the increased remote working due to COVID-19 will make it clear to businesses and organisations just how crucial cyber security is to them.Talks between airlines and government “ongoing”
The British Airline Pilots Association (BALPA) released a statement on Wednesday concerning talks between airlines and the government as the COVID-19 outbreak escalates.
“Talks are ongoing with airlines and the Government to look at how best to support the aviation industry though the current coronavirus crisis,” the BALPA said in a statement.
It continued to add that claims that the government is not going to support the aviation industry are “misleading”.
Instead, the BALPA emphasised that discussions concerning unique measures for individual airlines are “ongoing”.
The aviation industry is one to have been hit particularly hard in recent weeks as many countries have imposed travel restrictions in order to contain the spread of the illness.
Italy, Europe’s worst-affected country, was put on lockdown two weeks ago.
This lead to Ryanair (LON:RYA) lowering its passenger target for 2020 as flights to and from Italy were suspended.
Last week, Ryanair noted that “Italy, Malta, Hungary, Czech Republic, Slovakia, Austria, Greece, Morocco, Spain, Portugal, Denmark, Poland, Norway and Cyprus have imposed flight bans of varying degrees”.
With travel bans of this scale occurring, it is no wonder the aviation industry has been hit particularly hard by the spread of the illness.
Elsewhere in the industry, Flybe (LON:FLYB) collapsed, with the immediate crash of the airline blamed on COVID-19 related impacts.
“I’ve said before that there is no ‘one size fits all’ solution, due to the different structures and needs of each airline,” the BALPA General Secretary, Brian Strutton, said.
“Each airline will need to be reviewed to ensure a good use of taxpayers money. The Government will be looking at areas such as the airline’s financial state, whether it could raise the cash in other ways, or if it’s crucial to the UK transport system. These deliberations still are ongoing so we should await the outcomes,” Brian Strutton added.
UK average house prices grow 1.3% in January
New data on Wednesday from the Office for National Statistics revealed that house prices grew at a slower rate in January.
Average house prices in Britain rose by 1.3% over the year to January 2020, down from the 1.7% growth seen in December 2019.
The data from the Office for National Statistics is before the COVID-19 outbreak began in the UK.
Since then, the outbreak has developed significantly in the UK, with the government accelerating measures to help contain the spread of the illness.
Earlier this week, Boris Johnson addressed the nation and delivered strict social distancing rules to ensure people stay at home.
However, before the situation escalated, average house prices increased in England to £247,000, Wales to £162,000, Scotland to £152,000 and Northern Ireland to £140,000, the Office for National Statistics said.
House prices in London continue to be the most expensive, averaging at £477,000.
“Over the past three years, there has been a general slowdown in UK house price growth, driven mainly by a slowdown in the south and east of England,” the Office for National Statistics said.
Commenting on the COVID-19 outbreak, the Office for National Statistics added: “During the coronavirus (COVID-19) outbreak, we are working to ensure that we continue to publish the UK HPI. The price collection for this publication has been largely unaffected.”
“As this situation evolves, we are developing several solutions to meet potential scenarios depending on the amount of data that is able to be collected by our data suppliers to ensure we are still able to produce the publication over the coming months,” it added.
Persimmon closes offices and construction sites
Persimmon plc (LON:PSN) posted an update on Wednesday concerning the evolving COVID-19 outbreak.
Shares in the British housebuilding company were up by over 3% during trading on Wednesday.
Since the British government announced new lockdown rules at the start of the week, Persimmon has taken “further measures”.
The housebuilding company will close all of its sales offices from Thursday onwards until further notice.
Persimmon added that all customer care site visits will stop except for emergencies, but it will continue to support existing and new customers on the phone and online.
Meanwhile, all of its regional offices will close, with only a skeleton staff to assist the wider workforce working from home.
“Construction sites are commencing an orderly shutdown with only essential work taking place which will be focused on making partly built homes safe and secure and where failure to complete the build could put customers in a vulnerable position,” Persimmon said.
Dave Jenkinson, Group Chief Executive, commented: “Our primary concern is the safety and well-being of our customers, staff, contractors and suppliers and we have today set out a number of further measures throughout the business to protect them for the duration of the pandemic. We will listen carefully to the Government’s future advice as the situation develops and will make further adjustments where necessary.”
“The Group’s long-term strategy of minimising financial risk and maintaining capital discipline over the long term through the housing cycle, ensures that we are well placed as we enter this period of uncertainty,” the Group Chief Executive continued.
“Whilst the impacts of this pandemic go beyond the normal cyclical nature of the housing market, the Group’s high quality land holdings, significant liquidity and strong balance sheet will allow us to work through these challenges and emerge in a strong position for the benefit of all our stakeholders,” the Group Chief Executive said.
As the outbreak of COVID-19 continues to develop in the UK, the government has accelerated measures to help contain the spread of the virus.
Boris Johnson addressed the nation on Monday evening and delivered stricter lockdown rules, instructing everyone to say at home.
Shares in Persimmon plc (LON:PSN) were up on Wednesday, trading at +3.52% as of 10:50 GMT.
Sterling strengthens shurgging off dismal economic data, oil moves higher
Sterling rallied against the dollar on Tuesday after an instalment of economic data from Europe which revealed one of the worst contractions in economic activity in history and the Federal Reserve unleashed unlimited stimulus.
Sterling rose to $1.1780 on Tuesday as the dollar sank against all major currency pairs.
The Euro was also up against the dollar with EUR/USD rising to 1.0810.
The rally in European currencies came as services and manufacturing data revealed some of the worst economic conditions history. If anyone was unsure about the impact of coronavirus on the European economy, today’s data gives a very clear picture.
Both the manufacturing and services sector contracted, but the services sector was the most heavily hit.
UK Services PMI plummeted to 35.7 from 53.2 previously, while Manufacturing PMI fell to 48 from 51.7. Anything below 50 represents a contraction.
With the services sector making up a large part of the UK economy, it is almost inevitable the UK economy will shrink in the first quarter.
Whether the UK enters a technical recession of two quarters of economic contraction will depend on the speed economic recovery, once the coronavirus health crisis eases.
Oil rallies
Oil was also trading higher on Tuesday in a broad risk-on rally that saw WTI and Brent both rally sharply on reports the G7 were pressuring OPEC to resolve their issues and help bring supply under control whilst the United States suggested a US-Saudi alliance. The strength in oil fed through to equity markets sending oil majors BP and Shell up over 10% and lifting the FTSE 100 in the process. Oil analysts have turned increasing bearish on oil prices recently as Saudi Arabia and Russia engage in a price war that has rocked the global oil markets. Markets fear increased supply will far outweigh current demand and both Russia and Saudi Arabia have showed no signs of reconciliation during the COVID-19 outbreak. WTI oil was trading $23.30 and Brent at $27.81 in afternoon trading on Tuesday.Social distancing: how to pass the time indoors
“You must stay at home,” Boris Johnson told the nation on Monday evening.
As COVID-19 continues to spread across the world, the British government has accelerated measures to help contain the spread of the virus.
This means that we must all stay indoors as much as possible. Whist many will rejoice at the thought of watching Netflix shows back-to-back, others will struggle and become restless.
I’ve been social distancing for almost two weeks, and though I fell into the Netflix binge-watching category at first, it became clear after a few days that I was getting very, very bored.
So I spent some time jotting down some really simple activities that I can take part in to pass the time indoors.
I’ve decided to share the list I came up with to help you overcome the boredom.
If you’re lucky to have a garden right now, make the most of it whilst social distancing. You can exercise, read and have a hot drink out there, or even just spend a few moments outdoors each day for fresh air.
Reading
I’ve accumulated a large list of books that I’ve been meaning to read “when I get the chance”. This list goes years back, right to the start of my time at university when I promised myself that once graduated I’d find the time to read all the books I wanted to read that weren’t part of my degree. Well, naturally, I graduated and still didn’t start unpicking the list of books. But now that I’m indoors, it’s time to finally sit back and start reading.Gardening
Sod’s law, the sun has come out right when we are meant to be social distancing. Social distancing doesn’t mean you can’t enjoy the nice weather; for those of you who have a garden, you can take part in a variety of outdoor activities. One that I am hoping to try is gardening. Have you neglected your garden all winter? Or just in general? Now’s the time to cut the grass and plant some vegetables and flowers. You can purchase seeds online so you don’t have to leave the house. Now might even be a good time to start growing your own vegetables, especially with all the chaos in supermarkets across the UK!