Perhaps the writing was beginning to show up faintly on the wall when Zytronic (LON:ZYT) earlier this year signalled lower year-on-year sales.

In mid-May, when announcing its Interim Results to end-March, the Blaydon-upon-Tyne based group, which is a leading specialist manufacturer of touch sensors, reported sales down from £4.7m to just £3.3m at half-way.

The Business

The group’s operating subsidiary, Zytronic Display, is a world-renowned developer and manufacturer of a unique range of internationally award-winning optically transparent interactive touch sensor overlay products for use with electronic displays in industrial, self-service and public access equipment.

ZDL’s products employ a sensing solution that is readily configurable and is embedded in a laminate core which offers significant durability, environmental stability, and optical enhancement benefits to meet system-specific design requirements.

The ZDL service is relatively unique in the touch eco-system as it offers a complete one-stop solution including processing internally of the form and factor of glass and film substrates, the assembly of the associated touch overlay products, in environmentally controlled cleanrooms to customers’ specific requirements and the development of the bespoke firmware, software and electronic hardware which links the manufactured touch interactive overlays to customer’s integrated systems and product.

Yesterday’s Pre-Close Trading Update

The group guided that it expects to report unaudited revenues for the year to the end of September of £7.2m (£8.6m), and that is despite a 22% increase in revenues in the second half.

It noted that trading conditions remained challenging and based on current order intake, that the Board does not anticipate a material recovery in volumes over the short to medium term.

Strategic Review

As an extension to the Update the group announced its intention to undertake a strategic review, in conjunction with shareholders, to assess the future options for the company.

The group’s Management considers that those options are:

1.     the implementation of a new strategic business plan;

2.     an orderly solvent liquidation of the group’s assets;

3.     the potential sale of the company;

4.     de-listing and continuing as a private company, either continuing with the business as currently undertaken but without the considerable costs associated with maintaining the company’s admission to trading on AIM, or through implementing its Transformation Plan; or

5.     selling the company’s assets and continuing as a ‘cash shell’.

Solvent Liquidation

As at the end of March, the company’s notified statement of financial position, stated that it had net assets of £12.9m, of which £8.4m comprised property, plant and equipment and cash.

The company’s cash balance as at end-September was £3.7m (H1 FY24: £3.7m).

The Potential Sale Of the Company

The company noted that it is not in discussions with, nor in receipt of any approach from, any potential offeror.

In My View

Yesterday the group’s shares collapsed to a 40p low at one stage, down 25% in reaction to the news.

However, by the close of trading they had picked up to 46.75p, valuing the company at just £4.75m.

At that price I would suggest that Zytronic shares could well prove to be an exciting gamble on any of its options coming to a successful conclusion.

Protected by its solvent position, its quoted status, with some 45% of its 10.16m shares in ‘professional’ hands, I would consider that it is now coming up on corporate screens as a potential play, most likely as a very usable vehicle for a technology entrepreneur looking for a quick quote.

N Brown Group is to leave AIM after agreeing to a takeover by a group controlled by an existing shareholder and pursue its ambitious growth plans as a private company.

Falcon 24 Topco Limited, controlled by Joshua Alliance, has agreed to acquire N Brown Group plc in a recommended cash offer. The deal values N Brown at approximately £191 million, with shareholders receiving 40p in cash per share.

N Brown owns and operates outlets and websites including Jacamo, JD Williams and Simply Be.

The price represents a significant premium of 111.0% to the 12-month average closing price.

The acquisition will be implemented through a Court-sanctioned scheme of arrangement. Joshua Alliance currently owns 6.6% of N Brown’s shares, with other Alliance family members holding an additional 53.4%.

Falcon 24 Topco cites several reasons for the acquisition, including N Brown’s limited benefits from its AIM listing due to low trading liquidity and the costs associated with being public.

N Brown sees an opportunity to acquire well-established fashion brands and an innovative financial services platform. It appears they feel AIM can no longer support such ambitions.

The company asserts that N Brown can better achieve its growth potential as a private entity, considering market dynamics and the competitive landscape in the UK clothing and footwear market.

Helium One shares were higher on Thursday after the company provided an update on its Colorado operation and approval from authorities to begin exploration activities.

The Colorado Energy and Carbon Management Commission (ECMC) has approved five new helium development well locations at the Galactica-Pegasus project in Las Animas County, Colorado.

The newly approved wells, located south and southwest of the successful State-16 well, are expected to contribute to the initial gas gathering for the jointly developed Galactica helium production facility. This development satisfies a crucial condition precedent to the farm-in agreement between Helium One Global and Blue Star Helium covering Galactica facility.

Drilling at the Galactica Project is anticipated to commence in Q4 2024, subject to final drilling permit approvals. The project builds on Blue Star’s previous successful exploration campaign, which included the State-16 well capable of producing up to 441 Mscf/d of gas with 1.9% helium content.

Investors will be pleased the approvals further strengthen the diversification of Helium One’s asset base, expanding its portfolio beyond its primary Tanzanian projects. Both companies are currently finalising the definitive governing agreements for the farm-in, with further announcements expected in the near future.

“This is a positive advancement for the Galactica-Pegasus project and we’re very much looking forward to working with the Blue Star team and commencing the drilling phase for this development,” said Lorna Blaisse, Chief Executive Officer.

“We look forward to providing further updates on this and our operations in Rukwa in due course.”

The FTSE 100 was firmly higher on Wednesday as UK-centric stocks helped London’s leading index outperform amid a sell off in technology shares.

Interest rates were again in focus ahead of next month interest rate decision after lower inflation data almost cemented a 25bps interest rate cut by the Bank of England on 7 November.

UK inflation has fallen to 1.7%, well below the Bank of England’s 2% target, leaving them little choice but to ease borrowing costs. It was likely the bank would cut rates before today’s inflation data with the economy struggling to produce any growth.

As one would expect, most stocks with exposure to the UK economy were having a good day on Wednesday and were among the top gainers.

“On a day when investors are dealing with the headache of a big sell-off in many tech stocks, the UK has come into its own and been a shining light on global markets,” said Russ Mould, investment director at AJ Bell.

“The FTSE 100 climbed 0.7% to 8,309 thanks to commodity producers taking centre stage, together with a healthy dose of gains from AstraZeneca, Rolls-Royce and HSBC.

“Providing back-up support was a group of stocks that stand to benefit from interest rate cuts in the UK.

“Housebuilders Taylor Wimpey and Persimmon, kitchens group Howden Joinery and DIY retailer Kingfisher were all in vogue after UK inflation hit a three-and-a-half year low, strengthening the argument for the Bank of England to cut the cost of borrowing next month.

“Investors are taking the view that financial pressures are easing on households and the public will soon be in a stronger position to spend money. This would be good for the economy and good for the army of stocks on the UK market that rely on consumers to make money.”

Whitbread was the FTSE 100’s top riser after announcing a bumper round of share buybacks and set out plans to return £2bn to shareholders over the next five years. Shareholders love share buybacks and the stock rose over 4% on Wednesday.

Miners also found support on Wednesday after days of steady selling. Antofagasta rose 2.8% and Endeavour Mining added 2.7%.

Insurance companies Admiral and Beazley were residing at the bottom of the leaderboard with losses around 2%-3%.

Tekcapital shares are primed for a rerating, according to a research note released on Wednesday by SP Angel analysts who see 60% appreciation in Tekcapital as interest rates fall and investment company discounts return to normal.

“The estimated value of Tekcapital’s equity investments, either at current market prices (77% of portfolio) or conservative estimate of unlisted investments (23% of portfolio), currently stands at $36.7m. This equates to an asset value per share of 15.6p meaning the shares are trading at a discount of 52%,” SP Angel analysts wrote in a note.

SP Angel explained higher interest rates had led to large investment company discounts to NAV through higher weighted average cost of capital (WACC) and that as interest rates start to fall, WACCs should fall and provide support for the valuations of investment companies such as Tekcapital.

In addition to the external macro influences on the Tekcapital share price, SP Angel highlighted welcomed the boost to NAV by the GenIP IPO and the creation of value in the business where there had previously been no value attributed to Tekcapital.

Investors may be interested to see SP Angel account for broad discounts in the investment company space by adjusting their NAV assessment of 18.5p per share by 35% when deriving their fair value target.

Even with a 35% discount to NAV factored into their fair value, SP Angel’ research concluded Tekcapital’s fair value target should be 12p, offering 60% upside from the current price.

“If we target fair value for Tekcapital in line with an average discount to fair value currently seen in the market for investment companies of c35%, we arrive at a target price of 12p. This lies 60% above the current share price. Buy,” SP Angel explained.

Is it now a good time to have a gamble with The Rank Group (LON:RNK) – I think it is a fair bet.

Tomorrow morning the company, which is a leading international gaming, leisure, and entertainment group offering exciting and entertaining customer experiences, in venues or online.

The group’s mission appears to be ‘excite and to entertain’.

Ahead of tomorrow’s AGM Trading Update could buyers of the shares get excited and will they be entertained by seeing the group’s shares react positively.

The Business

To briefly describe the company, it has some 112 casino and bingo venues regularly entertaining its 3.1m active customers, who also use its 80 plus digital brands covering casino, bingo, slots and sports betting.

Grosvenor Casinos is Rank’s casino-led brand that focuses on table and machine gaming, with 51 venues, it is the UK’s largest casino operator.

Mecca is the group’s very well-known bingo brand, its community-based gaming operates in 52 venues, making it the UK’s second largest bingo operation.

Over in Spain, the group has a strong presence with another community-based bingo brand, Enracha, that is currently operating through nine venues.

The group has a strong three-year programme of growth initiatives in place for each of its businesses focused on: cash maximisation in land-based bingo; recovery and growth in the Grosvenor venues business; scaling the digital business both in the UK and internationally and maximising the opportunities of the anticipated land-based legislative reforms for the UK’s casino and bingo sectors.

Management Comment On The Recent Results

CEO John O’Reilly stated that:

“This has been a year of strong financial, operational and strategic progress for Rank. We are continuing to rebuild profitability following the impact of lockdowns and the material inflationary pressures experienced in recent years. Trading continues to improve due to ongoing investment in our people, our products and the facilities within our venues businesses, and the continued development of the proprietary technology which is driving the growth of our digital business.

With some important developments within our proprietary technology now in place, we are increasingly delivering a seamless and tailored cross-channel experience for our customers, leveraging our key area of competitive advantage.

We are well-positioned to take advantage of the much needed land-based reforms which will help to further modernise our casino and bingo propositions to better meet the expectations of today’s customers and we look forward to the Government confirming the timetable for the required secondary legislation.  

We have started the new financial year as we finished the previous one, with good momentum across all businesses. With inflation receding, disposable incomes improving, investment continuing to be made in the customer proposition and a strong pipeline of growth initiatives underway, we are confident in the future prospects of the Group.”

In My View

Analysts who follow the group rate the shares as a Buy, with the highest Price Objective for its shares set at 120p compared to the current 86p, at which level the whole group is valued at £400m.

I have seen one analysis suggesting that the fair value for this group’s shares is 136p.

I am impressed that recent ‘insider’ purchases have been sizeable at prices up to nearly 83p a share.

Without any inside knowledge, I take the view that the AGM Trading Update tomorrow morning will be bullish, possibly enough to help to push the group’s shares back over the 100p level.

So, I repeat the question, is this the time to take a gamble with The Rank Group?

Whitbread shares were nicely higher on Wednesday after the hotel and leisure group posted interim results revealing robust demand in Germany but a slightly less positive performance in the UK.

The driving factor for shares on Wednesday was a fresh £100m share buy back and 7% increase in the interim dividend. The group also set out a plan to return £2bn shareholders over the next five years.

Group revenue for the period was flat, largely as a result of soft market conditions in the UK. However, outperformance of the wider market seems to have provided some encouragement for investors as shares rose 3%.

“Premier Inn operator Whitbread continues to outperform the market but that’s not quite enough to shrug off a weaker demand picture. In the UK, both occupancy and room rates were down on last year, with London feeling the pinch a little more than the regions,” said Derren Nathan, head of equity research, Hargreaves Lansdown.

“Overall, revenue per available room (RevPAR) fell 4% to £72. This was offset by continued expansion in the estate. Food and Beverage sales fell 7% reflecting both a 3% decrease in like-for-like sales and planned consolidation of the estate towards a more hotel-based dining offering.”

Analysts highlight how less competition after the pandemic has provided a boost to Whitbread as they cement their market leading position.

“There is no doubt just how much the pandemic hurt Whitbread. As COVID-19 tore through the hospitality sector, hotels and hospitality outlets were forced to adapt in a bid to survive. However, as is often the case in times of crisis, there comes opportunity,” said Mark Crouch, market analyst at investment platform eToro.

“Following the pandemic, Whitbread’s competition has significantly thinned out, allowing the Premier Inn owner to consolidate its position as the UK’s leading hotel chain and further bolster its standing in Germany, where total accommodation sales grew by 22% in the first half of the year.”