From a long-term shareholders’ perspective, Vela Technologies may as well be trading at zero.

The company has made some terrible investment decisions, and investors are paying the price. In their last quarterly update, the executive director suggested the UK small-cap market was the problem. This argument has some merit, but the real problem is disastrous investment selection and poor portfolio management. 

Investors are understandably calling for a change in management after shares lost 93% of their value over the past five years.

Vela Technologies’ recent RNS archive is a catalogue of disasters and bad news. Quarterly investment updates reveal a steady decline in the portfolio’s value. The investment company has revealed that private company investments are going into administration, and one of their other holdings, Tribe Technology, recently announced it was delisting.

There are valid questions about the overall strategy and the leadership team’s ability to manage a portfolio of early-stage companies. 

An investment in NASDAQ-listed Conduit Pharmaceuticals was an utter catastrophe, with a multi-million dollar investment declining to be worth under £100,000.

In a recent update, the company said it planned to recycle capital into new investments while avoiding crystallising material losses. This isn’t very encouraging, as it suggests they lack confidence in their current portfolio.

As an investment company, Vela should seek out innovations and exciting management teams to make meaningful investments. Instead, through their most recent investment, they have effectively outsourced this job to another investment company, Igraine. 

It seems like the Vela management team has given up.

Vela recently announced the sale of a proportion of their stake in Ensilica at 46p, netting just £10k profit after holding the stock and adding to it since the beginning of 2022.

The company said it needed the cash for working capital purposes. This means the company is selling down investments to keep the lights on, which clearly isn’t a sustainable strategy.

After the sale of the stake in Ensilica and the delisting of Tribe Technology, the company’s listed equity portfolio is now only worth around £1m.

If things keep going as they are, it is only a matter of time before they delist or conduct a heavily discounted placing that obliterates any remaining value in shares. It’s also difficult to see investors having much interest in funding a placing at this point.

Vela desperately needs a big winner in its portfolio. Unfortunately, where that comes from isn’t immediately obvious.

Vela has invested heavily in Aquis-listed Igraine and is required to make further cash investments in the company, totalling £150,000, through convertible loan notes. There is an option for Vela to invest a further £300,000, but they would have to flatten several of their other positions to do so.

Igraine has exclusive investment rights in battery storage company GEM Energia Limited, which is establishing battery systems across the UK. Vela’s investment in Igraine will likely fund the construction of this network. It’s an interesting business, but it’s capital-intensive and unlikely to produce any meaningful returns for many years.

Vela Technologies is on thin ice.

Adsure Services has announced that its operating subsidiary, TIAA Ltd, has entered into an agreement with K10 Vision to implement advanced audit working paper software, marking a substantial step forward in Adsure’s digital transformation journey.

The selection of K10 Vision followed a thorough competitive evaluation process, with the company standing out for its innovative platform capabilities.

This strategic investment aligns with Adsure’s broader initiative to develop specialised Large Language Model (LLM) artificial intelligence tools, specifically designed to enhance operational efficiency for government-funded organisations, including NHS trusts, housing associations and local governments.

The company has previously announced the development of the TIAA Insights tool, which has been supported by an Innovate UK grant.

The new software system promises to deliver substantial benefits for Adsure and TIAA on multiple fronts. For TIAA Ltd, the transition to an online working paper platform will streamline audit processes, improving both efficiency and accuracy.

In addition, the software’s structured data architecture will provide Adsure with valuable datasets for training advanced AI algorithms, strengthening the company’s technological capabilities in the audit and assurance sector.

Large Language Models are trained by large data sets to produce meaningful computation and output for real-world business applications. The new software will play a vital part in Adsure training their model and applying it to boost efficiency across the business.

The implementation of the K10 Vision software is currently in progress, with comprehensive integration expected to be achieved within the coming months.

“Implementing K10 Vision’s cutting-edge audit software is a significant step forward in our strategic roadmap,” said Kevin Limn, CEO of Adsure Services.

“This system will not only enhance our operational efficiencies but also provide a structured foundation for developing next-generation AI tools tailored to audit and assurance services.”

The FTSE 100 has started the week on the front foot. The index ticked higher following the German election, paving the way for higher defence spending and increased investment throughout Europe’s largest economy, lifting sentiment across the region.

London’s leading index was 0.1% higher at the time of writing, while the German DAX rose 0.3%.

The election results were largely in line with expectations, and the leading conservative CDU party will now have to set about forming a coalition government, which could take around two months.

“A dose of more certainty has been injected into European politics, with the Germany’s Conservatives winning the elections. It comes at a crucial time for the continent,” explained Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“Three years on from the invasion of Ukraine, high stakes deal making between the US and Russia continues, Ukraine is out in the cold and the outcome will have huge implications for security in Europe.

“There is a dawning realisation that European nations will have to pull together and present a more united deterrent force, and Friedrich Merz, the CDU leader, is reading from that script. He has pledged to relax fiscal rules, to increase defence spending and inject the economy with much needed investment.”

In London, BAE Systems was one of the biggest beneficiaries of the German election result, with shares gaining more than 2%. The defence stock has been in focus since Trump’s approach to Ukraine appeared to suggest that Europe would be forced to bolster defence spending to help support Ukraine and prevent NATO from unravelling.

Miners were among the top fallers after the sector enjoyed a buoyant week last week. On Monday, short-term profit-taking targeted Anglo American and Antofagasta.

There was also minor profit taking in Standard Chartered and Pershing Square.

Centrica continued its march higher with another 2% gain after releasing an encouraging set of results last week.

Elsewhere in the utilities sector, National Grid shares rose 1.4% after announcing the sale of its US onshore renewables business for $1.7bn as part of its wider streamlining strategy.

“National Grid has to spend a lot of money to upgrade its electricity networks on both sides of the Atlantic and slimming down in other areas of the business has always been a component of that strategy,” said AJ Bell investment director Russ Mould.

“The sale of the company’s US onshore renewables business is not a rushed response to the Trump administration’s more sceptical views on green energy, but something which has been in the works for some time, having first been announced in May last year.

“The fact the company has got the deal across the line in the new political environment might be met with some relief. The price tag looks reasonable for a set of assets which made a modest contribution to the group.”

National Grid has announced a strategic divestment of its US onshore renewables business, National Grid Renewables, to Brookfield Asset Management and its partners in a deal valued at $1.735 billion. The sale aligns with National Grid’s May 2024 strategy to streamline operations and concentrate on its core networks business.

The transaction, which values National Grid Renewables at an enterprise value of $1.735 billion, will be finalised subject to customary completion adjustments. The deal encompasses a significant renewable energy portfolio, including 1.8GW of operational assets and 1.3GW under construction across utility-scale solar, onshore wind and battery storage facilities in the United States.

The sale is expected to conclude in the first half of the financial year ending 31 March 2026, pending necessary regulatory approvals and consents. This strategic move represents a significant step in National Grid’s broader initiative to streamline its business operations and sharpen its focus on network infrastructure.

National Grid shares were 1% higher at the time of writing.

Wood Group is a major casualty of the slowdown in oil and gas upstream activity over the past five years. The company has racked up nearly $700m in net debt and is set for a year of negative free cash flow.

The green energy transition has ravaged Wood Group’s fossil fuel energy business. The decline in upstream spending has directly contributed to Wood Group’s demise. Investors, however, will be rightly critical of the company’s management of the situation.

Although the writing has been on the wall for more than a decade, Wood Group has only recently started to report substantive sustainable energy-related revenues.

Wood Group is doing really interesting things in hydrogen, carbon capture, LNG and waste-to-energy. Sustainable activities made up around 21% of revenue in the recent half-year period, and the company said its sales pipeline is around 40% sustainable solutions related. Some would argue that this is too little, too late. 

Notwithstanding Wood Group’s weighting to fossil fuels and sustainable solutions, the immediate concern is the company’s poor financial position, which was highlighted by a trading update in February. Wood Group shares halved the day it was released.

Be under no illusion that the trading statement released in mid-February deserved the market reaction it got. 

Wood Group is haemorrhaging cash and is being forced to sell off assets to plug an expected negative free cash flow of between $150m – $200m. 

Negative free cash flow is a concern because it raises questions about Wood Group’s ability to manage and improve its debt situation. This is a major red flag and is the main contributor to the 80% decline in the Wood Group share price over the past year.

The company is in trouble. Macro influences have been unkind, and Wood Group could have handled the headwinds better. Adjusted EBITDA more than halved from $885m in 2019 to $423m in 2023.

However, those looking at shares at 26p and attempting to gauge whether now is a good time to buy must consider the future and whether the company has a clear path to recovery.

Shares are trading below 30p for a reason. Wood is struggling to generate cash, and debts are mounting. Cash generation is key to a rebound in shares. The company is disposing of assets to raise cash this year, but selling off assets isn’t a long-term solution. 

Wood is undergoing a cost savings programme that is expected to reduce the cost base by around $145m between 2023 and 2026. Reducing costs will help improve cash generation, but the company desperately needs top-line growth.

Thankfully, the industry may just be turning in Wood’s favour.

The upstream fossil fuel industry is showing signs of increased investment, which will provide much-needed business for Wood Group.

After peaking at $814bn in 2014, annual investment in upstream oil and gas hit lows of around $400bn before steadily picking up to an estimated $580bn in 2024. Forecasters at the International Energy Forum see this increasing to around $780bn by 2030. A continued and steady increase in upstream investment would underpin Wood Group’s growth over the next five years. 

Donald Trump’s approach to oil and gas will be welcomed by Wood Group executives.

Meanwhile, Wood Group continues to win new business from the world’s largest energy companies, including BP, Shell, and Saudi Aramco, and will likely beneift if these major players increase their activity. As an example, Wood recently announced a $120m contract extension with Shell to develop brownfield offshore and onshore assets across the UK.

There could well be a rewarding medium-term trade in Wood Group as bargain hunters step in the hope disposals go well, and cash generation improves. The longer-term picture relies heavily on the company’s ability to become free cash flow positive in the coming year and whether forecasts of an uptick in upstream investment come to pass.

This is a high-risk play for those investors who believe the oil and gas sector will contribute to the global energy supply for years to come but also see renewable infrastructure spending expanding.

Wood Group has attracted private equity interest in recent years. The recent decline may have some licking their lips.