The FTSE 100 was firmly on the front foot on Wednesday morning after a US technology stock rally helped boost global equity sentiment. However, the gains diminished as the session progressed, taking the index into the red.

London’s leading index was 0.1% down at the time of writing.

‘An uptick in confidence has sent the FTSE 100 higher, after US tech staged a rebound, particularly the chipmaker Nvidia. Fears of a big imminent market wobble are now receding,” said Hargreaves Lansdown’s Susannah Streeter.

After Nvidia briefly became the world’s largest company by market cap, the chip maker shed around 10% at the end of last week raising fears of frothy valuation in AI-related stocks. Such is the size of Nvidia, any volatility in the price can move the S&P dramatically and sparked a wave of risk aversion.

However, a sharp rebound in the stock yesterday and further buying in the US premarket has dispelled fears of an imminent meltdown.

There was a notable risk-on tone in trading in UK stocks on Wednesday morning, with cyclical sectors at the forefront of Wednesday’s rally. Miners Glencore, Fresnillo, Rio Tinto, and Anglo American were having a good session. These gains ebbed as the session progressed.

Burberry rose over 1% despite RBC cutting its price target to 1,100p. Easyjet was the top faller, declining 1%.

Legal & General

Legal & General shares were among those trading in the red after HSBC downgraded the stock to hold. HSBC analysts slashed their price target to 260p from 310p citing disappointment with the company’s recent capital strategy announcement and future dividend growth.

“L&G’s new strategy and financial targets were (like its share price performance) underwhelming, and below our expectations. We see it as no longer offering a relatively attractive profile versus peers,” contributing HSBC analysts wrote in a note.

“L&G’s 9.3% normal dividend yield and 10.7% total capital return yield for 2024e might be attractive on an absolute basis, but not on a relative basis in our view. We see its UK peers offering either faster DPS growth over 2023-26e or a higher starting DPS yield for 2024e. Meanwhile the introduction of share buybacks by L&G (GBP200m in 2024) to potentially offset its lower DPS growth rate may not be sustainable for the long term.”

Phoenix Group shares fell on Wednesday after announcing its intention to explore the potential sale of its SunLife Limited business.

Phoenix Group shares were down 1.04% at the time of writing.

SunLife, which specialises in providing financial protection products to the over-50s market reported a profit after tax of £16 million in 2023.

The decision to consider divesting SunLife comes as Phoenix Group refocuses its strategy on becoming a leading force in the UK’s retirement savings and income sector. While SunLife has been a profitable entity within the group’s portfolio, its alignment with Phoenix’s core vision has diminished, prompting the exploration of a potential sale.

The sale process is in its early stages, with Phoenix Group having received several initial expressions of interest from third parties. This suggests a healthy appetite for SunLife’s business model and financial performance. However, the company has emphasised that there is no guarantee of a transaction at this point.

AO World has announced its audited financial results for the fiscal year ended 31 March 2024, revealing a significant improvement in profitability despite challenges in revenue growth.

AO World shares were up 2.13% at the time of writing.

The company reported an adjusted profit before tax of £34.3 million, marking a substantial increase of £22.3 million compared to the previous year. This growth pushed the profit before tax margin to 3.3%, reflecting the success of AO’s strategic pivot towards profit and cash generation.

AO World has a 15% share of the UK’s Major Domestic Appliances.

Revenue performance met expectations following the company’s decisive actions to streamline operations. AO World eliminated non-core channels and loss-making sales, which initially impacted top-line figures. However, the company reported a return to growth in the fourth quarter, signalling a potential turnaround in revenue trends.

“It’s been a volatile ride for the company and its shareholders over the past few years, after lockdowns saw demand surge for electrical goods and then pull back as it became clear that many customers had simply brought forward purchases,” said Susannah Streeter head of money and markets, Hargreaves Lansdown. 

The balance sheet saw notable strengthening, with overall liquidity reaching £116 million at the end of March 2024, up from £89 million in the previous year. Net funds also improved significantly, rising to £34.4 million from £3.6 million in 2023. Additionally, AO World secured an extension of its £80 million Revolving Credit Facility until April 2027, further bolstering its financial position.

“We have made good progress on our profit performance in FY24, which is a testament to the success of our strategic pivot to focusing on profit and cash generation,” said AO’s Founder and Chief Executive, John Roberts.

“We are now a much simpler, more efficient business and are performing better than ever for customers, with excellent and sustainable unit economics.

“Our focus now is on delivering profitable top line growth with an ambition for double digit revenue growth in FY25.”

AO World has set ambitious targets for FY25. The company aims to achieve double-digit revenue growth while projecting adjusted profit before tax in the range of £36 million to £41 million. In the medium term, AO World is targeting an adjusted profit before tax margin of 5%, maintaining double-digit growth with earnings per share outpacing revenue growth.

Investors will be delighted if these targets are met.

There are signs of life in the UK’s small cap market. The hopes of lower interest rates later in the year are easing financial conditions and investor sentiment is improving.

The volley of takeover bids for exciting UK growth companies suggests the smart sees value in the space. The number of growth company IPOs is increasing, and recent listings have performed very well in the early days of trade. These are both signs of not only stabilisation but also opportunity for investors in the sector.

In this article, we explore a blend of FTSE Small Cap, AIM and AQUIS companies.

Bloomsbury Publishing (BMY)

Bloomsbury Publishing posted stellar 2024FY results earlier this year. Strong growth in its consumer business helped drive a 30% increase in revenue from £264m to £343m. Profit jumped 57% from £31m to £49m.

When results were released in May, Bloomsbury CEO Nigel Newton said:

“This dramatic increase arises from our entrepreneurial diversification strategy which has forged a portfolio of portfolios combining consumer and academic publishing across formats, territories and subject areas, a resilient model delivering long-term success.”

The company has shaken up its strategy, and investors have been rewarded for sticking with Bloomsbury. A shift in focus to consumer fantasy titles is bearing fruit, with renewed social media campaigns helping to drive sales growth.

The group’s diversification means slower sales in its academic division have been more than offset by strong sales of fantasy titles by authors such as Sarah J. Maas. Harry Potter titles continue to provide a reliable revenue 26 years after the first book was published.

Investors who pay too much attention to the charts and like to seek out perceived bargains may balk at Bloomsbury’s consistent uptrend. However, investors who like a mix of value and growth in a company will find Bloomsbury has many attractive attributes.

The stock trades at 13.3x historical earnings, suggesting there is still plenty of room for multiple expansion. In addition, should sales and profit momentum continue into the current financial year, this multiple will fall, making Bloomsbury shares look very good value. The question is whether they can maintain 30% sales growth into a second year.

Bloomsbury shares are up 31% this year, but this does not mean they are expensive. The company will release a trading statement 16th July.

Download 5 Stocks that could benefit from a Labour government

hVIVO (HVO)

hVIVO is one of the best companies London’s junior markets has to offer. It is a world leader in bespoke end-to-end human challenge trials and early-stage clinical development services.

hVIVO operates FluCamp, a specialist testing programme for vaccines. FluCamp recruits healthy volunteers for the testing of vaccines under controlled quarantined conditions in the group’s facilities. hVIVO’s world-class facilities have attracted a plethora of Big Pharma clients and smaller, more innovative biotechs. Many of its contracts are worth more than £10m.

hVIVO’s numbers speak for themselves.

Sales have grown consistently as it wins new contracts with tier 1 customers. Revenue grew 16% to £56m in 2023FY and EBITDA soared 44% to £13m. The company’s contracted orders point to further revenue growth in the future.

Speaking at a UK Investor Magazine event held at the London Stock Exchange Group in March of this year, CEO Mo ‘Yamin’ Khan presented the company’s ambitious growth plans, outlining a £100m revenue target for 2028.

Its most recent contract win was a £2.5m award to establish the world’s first Omicron BA.5 challenge model. This will be the first use of hVIVO’s Omicron BA.5 challenge agent in COVID-19 trials, which will take place at hVIVO’s state-of-the-art new facility in Canary Wharf.

Investors will look forward to news of additional contract wins.

The UK government has identified the life sciences industry as an area of focus and support. In the recent budget, the chancellor set out plans for life sciences hubs in Cambridge and Canary Wharf as part of a drive to secure foreign investment into the sector and further the UK’s prowess. hVIVO was one of the first companies to announce it was taking the opportunity to open a new facility in the Canary Wharf.

hVIVO has a deep and growing MOAT. It wouldn’t be a surprise if an interested party bid for the company before long.

Tekcapital (TEK)

Tekcapital is an intellectual property investment company that has built a portfolio of technology companies with expansive commercial opportunities and the potential to improve the lives of a great many people.

Tekcapital’s portfolio consists of four companies, three of which are listed and one privately held. There is a straightforward valuation mismatch between Tekcapital’s share price and the underlying value of its holdings. These types of disconnects can persist but rarely last forever.

Macroeconomic conditions have not been kind to many AIM shares, and investment companies have been particularly hard hit. This has created a deep opportunity in Tekcapital, which, along with the broader early-stage knowledge-intensive constituents of London’s AIM, is primed to explode higher as monetary policy eases.

TEK’s underlying portfolio companies have taken material steps forward in 2024. MicroSalt has IPO’d, Innovative Eyewear launched new Nautica and Eddie Bauer ranges as revenue jumps, Belluscura has secured growth capital, and Guident launched groundbreaking strategic partnerships with globally recognised autonomous vehicle companies.

MicroSalt listed in London in early 2024 and was met with a rapturous reception. Floating at 43p, the company quickly doubled and then tripled, reaching a high of 142p. The value of Tekcapital’s 77% stake in MicroSalt – worth around £31m – exceeds Tekcapital’s current market capitalisation by some margin.

Guident, an autonomous vehicle safety specialist, is considered Tekcapital’s most exciting prospect in some corners of the market. Tekcapital’s only privately held portfolio company, Guident, is rolling out autonomous vehicle safety solutions with an array of strategic partners. The company recently launched the first remote control and monitoring centre of its kind in North America and will service MiCA autonomous shuttles as the company broadens the scope of applications.

Innovative Eyewear recorded more revenue in the fourth quarter of 2023 than the preceding three quarters. Revenue growth continued into 2024 amid the launch of Eddie Bauer and Nautica branded ChatGPT-enabled smart eyewear. Innovative Eyewear will launch Reebok branded smart eyewear later this year.

After announcing a step change in revenue generation and order flow last year, Belluscura has embarked on a funding journey to support increased production of concentrated oxygen units for distribution across Asia and the US.

Tekcapital has alluded to launching a Generative AI venture this summer to harness the explosion in AI adoption. We have few details on the new company thus far, and investors will be watching closely.

Adsure Services (ADS)

Adsure Services will be under many investors’ radar. The business assurance company listed on AQUIS last year, setting out its mission to grow revenues organically and bolster shareholder returns through dividends.

The company is one of just a few AQUIS-listed companies to pay a dividend, an accolade we discussed with CEO Kevin Limn during a podcast in June.

The company provides a range of business assurance services to government-funded organisations such as health trusts, emergency services, and education institutions.

Through its operating subsidiary, TIAA Ltd, Adsure earns recurring revenues from long-term contracts, typically ranging between 2 and 5 years. Around 85% of Adsure’s revenue is considered recurring. The clear revenue visibility these contracts provide enables Adsure to pay a dividend—the company has been paying a dividend for years before listing. TIAA has been operating for over 20 years.

In the last half year ended 30th September, Adsure’s revenue grew to £4.25m. Positive EBITDA growth meant the company had cash balances of £1.27m at the end of September last year. For context, Adsure’s revenue for 2023FY was £8.99m.

Adsure Services has embarked on a 5-year corporate plan to grow the business, both organically and by entering new markets.

Although internal audit is the company’s core service, it offers a wide range of additional services that its clients can benefit from. These include cyber security, sustainability audits, AI planning and risk management, and safeguarding audits, to name but a few.

TIAA has a material opportunity to offer existing clients additional services, as well as to enter new markets and win new customers.

Adsure is an interesting prospect in that, being a profitable growth company, it didn’t raise any funds during the IPO process, and its main motivation for the listing was to diversify its shareholder register.

As the new pinnacle of ferocious front-engined Aston Martin limited edition specials, the group is about to launch its new Valiant model.

Aston Martin Lagonda Global Holdings (LON:AML) anticipates that first deliveries are due to commence in Q4 2024, with the Valiant making its public debut within the next fortnight, at the 2024 Goodwood Festival of Speed (July 11-14).

Brutish New Model

Combining the brutal style and blistering performance of a bygone evocative era of brutal V12 performance with state-of-the-art contemporary engineering, lightweight materials and spectacular design, the Valiant pushes the boundaries of performance and engagement to evolve, intensify and reimagine the ultimate Aston Martin driver’s car.

Imminent Launch

The company plans dynamic demonstrations of the model on the famous Hill Climb course, one of the demonstration runs will be in the hands of Valiant’s first customer; two-time Formula One^® World Champion and Aston Martin Aramco Formula One^® Team driver, Fernando Alonso. 

Alonso stated that:

“Valour was a spectacular celebration of Aston Martin’s 110th anniversary, and stirred me to create a more extreme, race car-inspired version that was track focussed, while also delivering a thrilling drive on-road.

Valiant is born from my passion for driving at the limit and I have enjoyed working closely with the Q by Aston Martin team on both the design and technical specification and believe we have created a masterpiece.”

Pre-sold Model

Production will be strictly limited to 38 units globally, with first deliveries expected to commence in Q4 2024.

I understand that all of the 38 units have been pre-sold.

With the Valiant the company continues the brand’s long tradition of developing highly collectable special edition models.

My View

The group, whose shares just a month ago were down to 125p, should be declaring its Interim Results, for the six months to end June, before the end of July.

Last night they closed at 154.80p, valuing the group at £1.27bn.

Within the next month, I would expect to see the shares edging higher on the back of greater investor interest sparked by more items of corporate news.

The Isle Of Man registered Petro Matad (LON:MATD) is looking to raise $8.5m by way of a Placing and a Subscription by a Director, together with a $0.5m Retail Offer of new shares at 2.0p each.

The net proceeds of the Capital Raising will primarily be used to complete and put Heron-1 on production, drill, complete Heron-2 and put on production, drill the Gobi-Bear 1 exploration well and develop renewable energy projects.

The Capital Raising is being handled by Joint Bookrunners – Shore Capital and Zeus Capital, with the gross proceeds expected to be up to $9.0m before expenses.

The Use Of The Proceeds

CEO Mike Buck stated that:

“This capital raise will allow Petro Matad to commence the development of the Heron oil discovery with the goal of generating sufficient production revenue to cover the operating costs of the company and to accumulate cash to allow for the drilling of future appraisal and development wells to increase proven reserves and production.

The raise also includes funds to drill the low cost, high impact Gobi-Bear 1 exploration prospect at the southern end of the prolific Tosun Uul sub-basin.

The prospect has estimated recoverable resource potential of circa 100 million barrels close to the Heron field.

In addition, with Petro Matad’s SunSteppe Renewable Energy joint venture already having secured two development projects, a number of new opportunities are being worked up and ranked to prioritise the most attractive near term targets.

The raise includes a small amount of extra development funding to bring the high-graded projects to internationally bankable, build ready status.

Petro Matad expects to sign two new Production Sharing Contracts with the government of Mongolia later in 2024 or early in 2025, and the company is keen to advance these projects in parallel with its existing business.

We are pleased to have been able to access the funding needed to kickstart development operations and to offer participation in the raise to existing shareholders through the Bookbuild platform.”

The Company’s Interests

Petro Matad is the parent company of a group focused on oil exploration, as well as future development and production in Mongolia.

Currently, Petro Matad holds 100% working interest and the operatorship of two Production Sharing Contracts with the government of Mongolia.

Block XX has an area of 214 sq.km in the far eastern part of the country, and Block V has an area of 7,937 sq.km in the central part of the country.

Just a week ago, when announcing the 2023 Final Results to end December, CEO Mike Buck informed the group’s shareholders that:

“2023 proved to be a frustrating year on Block XX, where the significant step of Cabinet approval of State Special Purpose Certification for the area did not translate into a rapid renewal of Petro Matad’s licence to operate.

Whilst that certification is still to be finalised and is having to wait until after the imminent Mongolian parliamentary elections, the fact that we were recently able to secure locally approved land use agreements for the areas in which our next operations are planned, ends a very long wait.

We share our shareholders’ relief and excitement that the completion operations on Heron 1 will go ahead with contractors planned to mobilise in July to prepare the well for production.

Negotiations with PetroChina for oil transport, processing, export and sale are ongoing with the support of the industry regulator.

The Company will be focussing maximum effort on moving the Heron development forward through the second half of 2024 and I look forward to updating you further.”

The group’s shares, which a year ago were 5.7p each, closed last night at 3.75p, valuing it at £42.95m before the Capital Raise at the deeply discounted 2.0p per share.

Selling pressure in the United States slipped into the European session on Tuesday as cyclical names dragged on the FTSE 100.

The UK doesn’t have the weighting towards the technology sector in the way the US does, so traders looking at declines in US indices overnight picked out the closest thing to it in stocks sensitive to investors’ sentiment.

London’s leading index was down by 0.2% at the time of writing with stocks such as Rolls Royce, Burberry, Melrose, and a splattering of banks, leading the declines.

Rolls Royce was the top faller, with a 4% drop after Airbus said it was experiencing supply chain issues and cut its profit forecast. Airbus is a major Rolls Royce customer, suggesting Rolls Royce itself may be encountering difficulties.

Although the FTSE 100 was in the red on Tuesday, the selling was contained by a tick-up in US futures, implying the dip in the US will be short lived.

“Last night’s sell-off in certain US tech stocks doesn’t appear to have had any lasting damage given how futures prices are pointing towards an ‘up’ day for Wall Street on Tuesday,” said Russ Mould, investment director at AJ Bell.

The nature of the US selloff should be of little concern for UK investors. The declines were limited to a select few tech stocks, including Nvidia, who have made astronomical gains amid the AI gold rush.

“Admittedly, a near-7% decline in Nvidia might have sounded the alarm bells that we’re seeing a shift in the market. It’s important to remember that stocks don’t always travel in a straight line and there is a herd mentality with big-name companies on the market,” Mould said.

The AI boom has driven global equities higher over the past 18 months, and any hints it could be overheating will undoubtedly be met with risk aversion.