FTSE 100 turns negative as budget nerves set in

UK Investor Magazine
-
2
FTSE 100 turns negative as budget nerves set in

The FTSE 100 tiptoed towards record highs early on Monday as additional measures by China to stimulate the economy boosted interest in risk assets.

However, the gains were short-lived and the index turned negative as the session progressed with London’s leading index trading down by 0.2% at the time of writing. The FTSE 100 all time record high at 8,445 is providing a difficult mark to reach despite consistent record highs for US stocks.

Early gains were driven by mining companies that managed to hold onto gains as the session developed. It was the domestic facing side of the market that suffered and dragged the market lower as concerns about the budget mounted.

China

After leaving the market hanging for what seemed like an eternity after the pandemic, Chinese authorities have responded to calls for stimulus with a plethora of measures in recent weeks. The most recent area of focus was the consumer and changes to borrowing rates to encourage higher spending. 

The latest developments saw the FTSE 100’s miners rise on hopes of greater demand for natural resources.

“The FTSE 100 has started the week on a positive foot, helped by the extra stimulus being thrown at China’s economy. Miners were among the gainers in early trade after the People’s Bank of China cut key lending rates,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“The one-year and five-year loan prime rate have been slashed by 25 basis points. These benchmarks are used to price consumer loans and mortgages, and the idea is that the move will encourage lending and spending and help mend the ailing property market. There are also hints from authorities that there may be further cuts to the amount banks need to hold in reserve, to try and boost lending further.”

The spectacular rally in gold continued on Monday with the safe haven touching highs above $2,700. Silver also marched higher. This propelled Fresnillo 5% higher to the top of the FTSE 100 leaderboard.

Unfortunately, the optimism around China and the miners was unable to keep the FTSE 100 positive and issues closer to home weighed on the index.

UK-focused stocks

New data from Rightmove has highlighted the impact the Budget was having on the property market. Far from helping the UK economy shift up a gear, the new Labour government’s messaging and rhetoric has done nothing but curtail the UK economy in the early months of the new parliament. 

This was evident in Rightmove’s data that showed the pace of growth in house prices slowed ahead of the upcoming budget as home buyers held off making purchases. The data led to a drop in housebuilding stocks as investors booked gains after a recent rally.

Intertek was the top faller after being downgraded by analysts at RBC Capital.

Tristel beats expectations and is yet to achieve potential in the US

Andrew Hore
-
4
Tristel beats expectations and is yet to achieve potential in the US

Disinfection products supplier Tristel (LON: TSTL) beat expectations in the year to June 2024. There were initial revenues from the US, but they will take time to build up.

Sales grew in nearly every market, with small dips in Australasia and China. A price increase in the UK, combined with higher volumes, helped hospital medical device decontamination jump 38%. The main growth in sales is in the UK and Europe.

In the year to June 2024, revenues improved from £36m to £41.9m, while pre-tax profit rose from £6.2m to £8.2m. There was a reallocation of costs from overheads to cost of sales, so this affected comparatives. The total dividend was raised 29% to 13.52p/share.

There was a £130,000 contribution from royalties on sales of ultrasound disinfection products in the US. It is still early days in the process of recruiting new hospital clients, but distributor Parker has strong relationships in this area.

Management is hopeful that FDA approval for Tristel’s ophthalmology disinfectant will be received by the end of the year. Then the decisions on how the product will be distributed will be made. It is unlikely to contribute to this financial year and there is nothing in the forecasts.

Tristel is expecting European regulatory approval for additional Cache surface disinfectant products, and this should accelerate their growth, which has lagged the rest of the business. This is a lower margin business, but scale could improve them.

The balance sheet remains strong with net cash of £8.8m. Cavendish has raised its 2024-25 pre-tax profit forecast from £7.4m to £8.5m. A dividend of 14.87p/share is estimated. Pre-tax profit could increase to £10.5m in 2025-26, as North American revenues improve – even without a contribution from the ophthalmology product.

New chief executive Matt Sassone has only been in the job a few weeks. He is still reviewing strategy, and he has significant experience in the increasingly important North American market.

The share price dipped 1.9% to 387.5p. That is 22 times prospective earnings with a forecast yield of just under 4%. The high multiple reflects the track record and the potential for revenues from North America.

Cerillion profit upgrade

Andrew Hore
-
3
Cerillion profit upgrade

Panmure Liberum has upgraded its forecasts for AIM-quoted telecoms enterprise software provider Cerillion (LON:CER) following an upbeat trading statement. The company continues to grow faster than its underlying market.

Revenues grew 14% in the second half, enabling profit to be better than expected. There are record new orders and this underpins further growth in the next couple of years.

The €12.4m order from the previously unnamed Virgin Media Ireland is contributing to the growth. It probably generated £6m last year. This is the first contract with a tier-1 telecoms company and could help to win other contracts with this level of business.

In the year to September 2024, revenues were 12% ahead at £43.8m. Panmure Liberum has raised its pre-tax profit forecast from £18m to £19m.

Cerillion’s net cash pile has increased to £29.8m and could reach £50m by the end of September 2026. Panmure Liberum has left its 2024-25 and 2025-26 forecasts alone, but they are likely to be revised at the time of the full year figures.

The target price has been raised from 1700p to 1850p. The share price improved 2.89% to 1780p.

AIM movers: XL Media sells North American operations and Merit Group slips

Andrew Hore
-
9
AIM movers: XL Media sells North American operations and Merit Group slips

Online marketing services provider XL Media (LON: XLM) is selling its North American business for up to $30m in cash, with $20m payable on completion and up to $10m in April – based on revenues and gross profit in 2024. Some cash should be redistributed to shareholders by the end of the year. The company will effectively become a cash shell. The share price jumped 37.1% to 12.75p.

EnergyPathways (LON: EPP) has been asked by the UK government to participate in the Hydrogen Storage Business Model. This will help to define the new investment support scheme. The first Hydrogen Storage Allocation Round should be in 2025. The share price rebounded 23.2% to 4.25p.

Helium explorer Helix Exploration (LON: HEX) has successfully re-entered and deepened the wellbore on the Clink #1 well at the Ingomar Dome project. The well will be completed and tested. There could be multiple zones to test. The share price improved 12.2% to 23p.

Light Science Technologies (LON: LST) continues to win fire protection business. An existing customer has placed a further order worth £1.17m. The full year contribution from fire protection should be between £1.5m and £1.7m with additional visibility for 2025. The share price rose 7.69% to 2.8p.

Oil and gas company Deltic Energy (LON: DELT) has a 25% working interest in the Selene project, where drilling has reached target depth. There are gas shows throughout the Leman Sandstone reservoir. Final results of sampling and logging should be available at the end of October. Deltic Energy is reducing costs and seeking new opportunities, possibly in sub-Saharan Africa. The share price increased 5.43% to 4.85p.

FALLERS

Information and data publisher Merit Group (LON: MRIT) has been hit by the ending of project work and the lack of replacement work. Sales resource is being added, but that will take time to boost revenues. Canaccord Genuity has changed its 2024-25 forecast from a £900,000 profit to a loss of £800,000 after a 11% reduction in expected revenues to £18.5m, which is lower than the 2022-23 figure. A return to profit is forecast for next year. There are management changes that are flagged for next year. The share price slumped 38% to 37.5p.

Ethernity Networks (LON: ENET) has received a £195,000 warrant exercise notice from New Technology Capital Group, which gives it 21.6% of the enlarged share capital. This led to the issue of 195 million new shares. There is a remaining balance of £170,000, although this varies if the exercise price is higher than 0.1p/share. The share price dipped 29.9% to 0.1875p.

Audio visual products distributor Midwich Group (LON: MIDW) says the market remains challenging, particularly in Germany. There is unlikely to be an improvement this year, although gross margin should be maintained. Operating profit will be well below the 2023 level. Three small UK acquisitions have been made for £12m. These are higher margin businesses. There will be a trading update on 20 January. The share price fell 15.9% to 269p, which is the lowest level for eight years.

Vast Resources (LON: VAST) produced 229 DMT of copper at the Baita Plai project in the second quarter, down from 613 DMT in the previous quarter. Reorganisation and delays in obtaining finance held back production. Operational breakeven has been reduced. Gold production and recovery levels improved at the Aprelevka mine, where Vast Resources has a 4.9% interest. Second quarter gold production was 2,878 ounces, up from 1,808 ounces in the previous quarter. Reprocessing of tailings has started, and production costs reduced. Production has recommenced at the Takob project. The share price declined 7.14% to 0.0975p.

Helix Exploration shares jump on Montana helium drilling update

UK Investor Magazine
-
1
Helix Exploration shares jump on Montana helium drilling update

Helix Exploration has announced progress in its helium exploration efforts at the Ingomar Dome Project in Montana. The company provided an operational update on the Clink #1 well, highlighting drill progress and advancements towards testing.

Helix Exploration shares were 12% higher in early trade on Monday following the announcement.

Investors were evidently pleased to learn the company successfully controlled the Mowry formation by setting 7-inch intermediate casing through the entire interval, reaching a depth of 2,622 feet. This was followed by a successful re-entry and deepening of the wellbore to 8,550 feet.

Helix Exploration is now preparing to complete the well with production casing and commence testing. If multiple formations are identified as suitable for testing, the company plans to conduct isolated tests on each zone, working from the bottom up. This methodical approach will allow for a comprehensive evaluation of the well’s potential.

During the deepening process, the company discovered a second thick Cambrian sandstone horizon at 8,290 feet, extending to the total depth. Helix said that while the initial goal of reaching Precambrian rock was not achieved, this new finding could potentially hold significant value for the project.

“The successful re-entry and subsequent deepening of Clink #1 is a significant milestone for the Company.  I am delighted with the re-entry efforts and the exceptional work of our engineering team, as we see promising results in each of the target formations,” said Bo Sears, CEO of Helix Exploration.

Sosandar – Capitalised at £26.7m, with £8m cash, making £1m profit, this growth-focussed women’s clothing group’s shares look inexpensive at 10.75p 

Mark Watson-Mitchell
-
4
Sosandar – Capitalised at £26.7m, with £8m cash, making £1m profit, this growth-focussed women’s clothing group’s shares look inexpensive at 10.75p 

Tomorrow morning Sosandar (LON:SOS) will be announcing its Trading Update for the six months to end-September. 

I have a feeling that the statement could well indicate that the women’s clothing group is going to bounce back into profits in the year to end-March 2025. 

Although its shares are trading on a heavy price-to-earnings ratio, I am not put off because there is a certain determination in its growth strategy. 

The Business  

Sosandar, which was founded in 2016 and listed on AIM in 2017, is one of the fastest growing women’s fashion brands in the UK targeting style-conscious women who have graduated from lower quality, price-led alternatives.  

Over 1m women now have items of the company’s clothing hanging in their wardrobes, its product range is diverse, providing an array of choice for all occasions across all women’s fashion categories.  

The company, which sells predominantly own-label exclusive product designed and tested in-house, states that for its underserved audience it offers fashion-forward, affordable, quality clothing to make them feel sexy, feminine, and chic.   

Sosandar’s success has been built on an exceptional product range, seamless customer experience and impactful, lifestyle marketing, all of which is underpinned by combining innovation with data analysis.   

The group’s growth strategy has been focused upon continuing to grow brand awareness and expand its addressable market and routes to market, reaching customers wherever they wish to shop.   

The company sells through Sosandar.com and has brand partnerships in place with Marks & Spencer, The Very Group, JD Williams, J Sainsbury, The Selfridges Group, and Next. 

Its Strategic Goals 

Its Management is aiming to score at least a 10% pre-tax profit margin going forward. 

It is aiming to more than double its turnover to £100m+ revenue as it progresses. 

High on its agenda is gaining further growth through operating in scale and at greater margin. 

One of its main visible growth pushes is through the opening of stores to complement its online channel. 

And finally, it is focussed upon it expanding its brand. 

The Stores Push 

The group’s Management believes that its clients would spend more money with the group if it had more stores – giving customers the chance to touch, feel and try on product in store.  

Its programme is to put together an estate of its own stores, in various locations, such as affluent market towns, some city centres, a number of shopping centres – all of which need to be situated at the right location within the town, in areas of high footfall. 

Ideally, each planned store should occupy some 1,500 sq ft, be on a 5-year term lease with a 3-year break. Self-funded capex of £250,000 per unit, carrying initially some £50,000 of stock, with an expected £150,000 property cost, helping to contribute between £750,000 to £1m per annum as an average per store. 

Two weeks ago, the group announced that it had signed a lease agreement for its 4th store, in Cardiff’s St David’s Centre.  

That follows the recent store openings in Chelmsford, Marlow and the Metrocentre, as well as its in-store concession at Arnotts in Dublin, Ireland’s oldest and largest department store. 

I believe that a number of other store opening targets are at various stages of negotiation, so it is quickly becoming visible that Sosandar is making quite a determined effort at this side of its business. 

Analyst View 

Matthew McEachran, at Singer Capital Markets, rates the group’s shares as a Buy, with a Price Objective of 31p. 

His estimates for the current year to end-March 2025 are for fairly steady sales at £45.6m (£46.3m), but with a smart turnaround from last year’s loss of £0.3m into a £1m adjusted pre-tax profit. 

That would generate 0.4p (0.2m loss) in earnings per share. 

In My View 

Hopefully, Budget measures permitting, women will continue to spend more money on their attire, and as they do then Sosandar, with its new stores, will stand a very good chance of increasing its sales. 

Better margins will become evident in due course, which should help to bring down the pe ratios. 

At the current 10.75p, I do feel that these shares, which value the company at £26.7m (which has about £8m cash in its balance sheet), are a very interesting play on the recovering retail sector. 

New AIM admission: Pulsar Helium discovers helium in Minnesota

Andrew Hore
-
8
New AIM admission: Pulsar Helium discovers helium in Minnesota

Pulsar Helium Inc shares were already trading on TSX-V and the OTCQB Venture Market and the additional cash raised by coming to AIM will fund further exploration in Minnesota.
The company’s focus is the Topaz helium project in northern Minnesota, close to the Canadian border. So far, an appraisal well has been drilled and this confirmed the presence of helium.
The annual growth rate of the helium market is forecast to be 4.3% with demand from the electronics sector increasing. There is also potential for selling high quality carbon dioxide.
There were 1.47 million shares traded on the first da...

Director deals: Atome boss buys £675,000 worth of shares from chairman

Andrew Hore
-
2
Director deals: Atome boss buys £675,000 worth of shares from chairman

Oliver Mussat, chief executive of fertiliser projects developer Atome (LON: ATOM) bought 900,000 shares at 75p each from chairman Peter Levine. This increases his stake to 5.46%, while Peter Levine still owns 15.9%.
Oliver Mussat earned $731,000 in 2022, up from $543,000 the previous year. Even so, this is a significant investment. The board earned $2.7m in 2023.  
All seven directors bought shares in the recent £2.7m subscription and placing at 75p/share. They invested £750,000 in total. Peter Levine bought 500,000 shares and Oliver Mussat 133,333 shares.
Business
At the end of 2021, Ato...

Aquis weekly movers: ProBiotix Health sets general meeting for 1 November

Andrew Hore
-
4
Aquis weekly movers: ProBiotix Health sets general meeting for 1 November

Invinity Energy Systems (LON: IES) is extending the expiry date of the 8.67 million options, exercisable at 175p/share, held by Gamesa Electric to 10 May 2025. Employee share options will be extended until 21 November 2029. The share price increased 8.11% to 10p.

EPE Special Opportunities (LON: E.OP) has appointed Heather MacCallum as a non-exec director. The share price improved 1.94% to 158p.

FALLERS

Marula Mining (LON: MARU) is finalising negotiations to establish a new joint venture with a Chinese battery manufacturer and lithium offtake partner at the Blesburg lithium and tantalum mine. This would be for a lithium acid leaching processing plant, which could be commissioned by next summer. This will use spodumene from the mine and could produce 2,000 tonnes of high-grade lithium product each year. A subscription of £750,000, which comes through the issue of 15 million shares at 5p each via the AUO Commercial Brokerage LLC subscription agreement, will be used to fund the installation of an ore sorter at Blesburg and the costs of other projects. Gathoni Muchai Investments, where Marula Mining board member Jason Brewer is a director, bought 430,000 shares at 5.96p each. The share price declined 25.5% to 5.125p.

ProBiotix Health (LON: PBX) has sent out a circular for the requisitioned general meeting on 1 November. The meeting has been requisitioned by Seneca Partners and related investors that hold 5.46% in total. Seneca Partners is also an investor in AIM-quoted OptiBiotix Health (LON: OPTI), which is also unhappy with the current management, but a relationship agreement means that it could not requisition a general meeting. OptiBiotix Health and related individuals own 37.95% and will vote in favour of the resolutions. ProBiotix Health wants to block these shares from being voted. The first resolution is to remove the chief executive Steen Andersen and the second is to remove non-exec Frederik Bruhn-Petersen, whose firm recently subscribed for shares, a funding that OptiBiotix Health was unhappy about. Seneca Partners and OptiBiotix Health are also unhappy that the chief executive wanted to leave the Aquis Stock Exchange. The share price is 23.1% lower at 5p.

Oscillate (LON: MUSH) has gained shareholder approval for the acquisition of Quantum Hydrogen and the associated placing, which has diluted the main shareholders. The share price dipped 7.14% to 1.3p.

At the end of the three months to September 2024, Arbuthnot Banking (LON: ARBB) customer deposit balances were £3.8bn and customer loans £2.5bn. Funds under management and administration have grown 18% to more than £2bn in the nine months to September 2024. Arbuthnot Banking has completed its move to new offices in the City of London. Management is assessing the proposed new capital rules and deciding if strategy changes will be required. The Budget could also affect strategy. The share price slid 0.27% to 925p.

AIM weekly movers: CloudCoCo selling managed IT operations

Andrew Hore
-
3
AIM weekly movers: CloudCoCo selling managed IT operations

CloudCoCo (LON: CLCO) is selling its managed IT services business for £9.2m. This will discharge liabilities, including the MXC loan notes, and leave cash of £950,000. If the sale does not go-ahead management will need to consider if there is a future for the group. There are also discussions concerning the sale of the Connect business. The focus will be on the product reseller business. The share price soared 160%, having more than trebled at one point, ending the week at 0.325p.

MicroSalt (LON: SALT) had a sharp share price boost on Thursday afternoon and this initially continued on Friday, but the low-sodium salt developer said that there has been no change in trading and operations. That rise meant that the share price moved up to 57.5p, but it ended the week 46.5% ahead at 52p.  

Mothercare (LON: MTC) shares returned from suspension 40.4% higher at 5p, the highest level since July, following the 2023-24 results publication and refinancing. There is a new £8m two-year loan facility from Gordon Brothers, which receives 43.4 million warrants exercisable at 8.5p/share. There is also a joint venture with Reliance Brands, which will acquire 51% of the businesses operating in the Indian sub-continent for £16m. In the year to March 2024, underlying pre-tax profit dipped from £3.4m to £3.1m. Overall revenues continue to decline, and Cavendish expects a small loss this year.

An acquisition vehicle set up by Joshua Alliance is offering 40p/share in cash for each share in N Brown Group (LON: BWNG) – the share price has not been this high since February 2023. The Alliance family and related parties already own 53.4% of N Brown. This bid values the fashion brands company at £191m. The chief executive and finance director of N Brown will elect for a share alternative. Frasers Group (FRAS) owns 20.3% of N Brown and is accepting the bid. The share price rose 39.6% to 39.1p.

FALLERS

Emmerson (LON: EML) says that the regional authority in Morocco have made an unfavourable environmental recommendation relating to the Khemisset potash project. The full decision is not yet available. Emmerson had previously appealed against the regional authority’s decision not to approve the project under environmental grounds. The share price slumped 72.1% to 0.725p.

Armadale Capital (LON: ACP) proposes a cancellation of the AIM quotation because it believes that being public does not benefit the company because of the costs. Armadale Capital needs to reduce the cash burn and sell non-core assets. The resources company can be more flexible as a private company. A general meeting will be held on 1 November. The share price has fallen by 70% to 0.06p.

It is taking time to build up sales of the EpiSwitch EPE prostate test in the US and Oxford BioDynamics (LON: OBD) is reducing costs so that its cash lasts longer. Management is taking part of their salary in shares. Other diagnostic tests could be licenced or sold to raise money. Spinning off the US business is another option. There will be an update in January. The share price declined 69.5% to 1.115p.

Graphene technology developer Versarien (LON: VRS) is raising £450,000 at 0.0325p/share, which will fund in-house concrete and mortar testing capabilities and other external testing. Versarien has signed 3D construction printed products. There are commercial opportunities worth £1.6m and related grants of £3.1m. The share price dived 45.3% to 0.0328p.

1...218219220...1,776Page 219 of 1,776