Tekcapital further confirmed the canyon-sized disparity between the net asset value of its portfolio and its current market cap when it released its full-year results on Wednesday. 

Outlining a year of progress for its portfolio companies in the full-year period ending 31 December, Tekcapital confirmed that its portfolio’s valuation at the end of the period was $47.9m.

However, investors will be most interested in the post-period evolution of the portfolio’s net asset value, which stood at $75m as of 20th May. This compares to a current market cap of just £21m. 

Should Tekcapital shares close the gap on the portfolio’s NAV, it would suggest an upside in the shares of roughly 200%. And this is not taking into consideration any further growth in the portfolio’s value.

“The Group has made good progress during 2023,” said Tekcapital CEO, Dr Clifford Gross.

“Our portfolio companies have demonstrated solid business growth, and we believe they should achieve additional significant milestones by the end of 2024. Notably during the year, Innovative Eyewear Inc. launched the world’s first ChatGPT enabled eyewear.

“Guident signed re-seller agreements with both Auvetech a leading Estonia autonomous minibus manufacturer and Adastec a leading AV software provider. Guident’s RMCC software will be included in all Auvetech MiCa vehicles and as part of Adastec’s autonomous software stack for future deployments.

“Additionally, Guident has continued to improve and rigorously test its regenerative shock absorbers. Numerous Tier-1 companies are evaluating the shocks for potential inclusion in their electric vehicles.

“We are also pleased to highlight Microsalt’s strong progress ending the year by growing its revenues, signing up additional customers and launching its low sodium saltshakers in approximately 400 supermarkets and engaging its advisory team for their AIM IPO which was completed on 1 Feb 2024.

“Our financial results were negatively impacted by the reduction in the observable, closing share prices of both innovative Eyewear and Belluscura at the end of the period, which we believe were in large measure the result of exogenous macro-economic and capital market factors.

“We remain steadfast and excited about the commercial progress of our portfolio companies in 2023 and for their future prospects for the remainder of 2024. As per our mission and investment objective, we believe that all of our key portfolio companies have the potential to make a positive impact on the lives of the customers they serve, as well as produce meaningful returns on invested capital for our shareholders over the long term.” 

Tekcapital’s bottom line reflects underlying portfolio company valuation, and judging by the NAV as of a few days ago, 2024 will be a bumper year for profitability, should share prices hold at current levels. 

We spoke with the upbeat and bullish Tekcapital CEO, Dr Clifford Gross, who provided an intriguing insight into the company’s plans for a new Generative AI company that he says will launch this summer.

Tekcapital have previously announced plans for a fifth portfolio company and these plans now look set to spring into action with a new entity to capture growth in the burgeoning Generative AI industry.

Adsure Services has announced its operating subsidiary TIAA ltd has been awarded the coveted ‘B Corporation’ Certification, paying testament to the AQUIS-listed company’s dedication to social and environmental performance beyond shareholder value creation.

Adsure Services listed on the AQUIS Exchange in 2023 and has quickly set about delivering on a five-year corporate plan to grow its business assurance operations across the housing, healthcare, government, education and charity sectors.

Receiving the ‘B Corp’ certification is the result of a rigorous assessment that examines five main impact areas: governance, workers, community, environment, and customers.

To qualify for certification, TIAA demonstrated responsible practises in energy supplies, waste and water use, worker compensation, diversity, and corporate transparency. 8,000 businesses globally have been certified as a B Corp.

“We are delighted to be joining the B Corp community,” said Kevin Limn, Chief Executive Office of Adsure Service PLC.

“To be part of a growing network of businesses seeking to make a positive impact, is an honour. It is great news for our staff, customers, and shareholders, validating the great work our teams do to support our clients in providing public services of the highest quality. We want to make a difference in all that we do and will utilise this certification to enable us to expand our reach to do more.”

Today’s news follows a strong set of interim financial results released at the end of last year pointing to revenue growth and a 20% increase in underlying EBITDA.

Marks & Spencer shares were sharply higher on Wednesday after the group announced strong sales and profits growth for the year ended 30th March 2024.

Statutory revenue for the period grew 9.3% to £13bn, up from £11.9bn in the same period a year prior. Investors will be over the moon with a 33.8% surge in operating profit to £836m.

“Two years into our plan to Reshape for Growth we can see the beginnings of a new M&S. Food and Clothing & Home grew volume and value share ahead of the market and sales increased across stores and online,” said Stuart Machin, Chief Executive.

Marks & Spencer has had its doubters. The clothing business was slow to adopt new trends and was tarred with the association of only being for the older generation. However, a 5.3% increase in home and clothing sales shows the company is on the front foot in terms of delivering products that resonate with a broad audience.

“M&S has had an excellent year and there is now enough evidence to suggest this isn’t a flash in the pan,” said Charlie Huggins, Fund Manager at Wealth Club.

“Sales have grown strongly, with 12 consecutive quarters of growth for Food and Clothing and Home. Profit margins have also risen nicely as a result of greater efficiency, and cash flow has been strong, enabling M&S to return to the dividend register.

“The most impressive thing about the M&S turnaround story so far has been the market share gains, in both Clothing and Food. They have been able to achieve this while reducing discounts, which is a good sign. In other words, they aren’t just slashing prices in the hope of getting quick sales growth. They have been focused on reinvigorating branding and designs, which ought to be more sustainable.

“All-in-all, M&S’ execution has been impressive in a difficult retail environment. Encouragingly, it sounds like there are plenty more self-help initiatives to go for, to keep this momentum going.”

The interim results from Greencore (LON:GNC), the major manufacturer of convenience food, saw a 6.4% fall in revenues to £866.1m (£925.8m), while its adjusted pre-tax profits were up 397.1% to £16.9m.

In reaction its shares leapt nearly 20% to 165.60p.

Major Recovery

As I suggested in my article in late March this year, the group has undergone quite a reorganisation over the last few years, while rejuvenating its operating margins, with the recovery now beginning to show through with the results for the six months to end March this year.

Conveniently Tasty

Greencore is the world’s largest fresh pre-packaged sandwich maker, making nearly 800m sandwiches and other food to go items each year.

It is not only in sandwiches that it is big, but also in other major convenience food categories, such as salads, sushi, chilled snacking, chilled ready meals, chilled soups and sauces, chilled quiche, ambient sauces and pickles and frozen Yorkshire Puddings.

Its 645 vehicles make over 10,400 ‘direct to store’ deliveries each day as it supplies all of the supermarkets in the UK, with over 1,600 of its products spanning across 20 categories.

Management Comment

Commenting upon the excellent recovery shown in the interims CEO Dalton Philips stated that:

“Greencore delivered excellent progress against its strategic priorities in the first half and continued to outperform the market in a difficult consumer spending environment.

The Group’s accelerating financial performance is very encouraging as we focus on driving profitability and returns. 

We are working with our major retail customers to develop new products and new offerings which are driving the growth of our Food to Go segment ahead of the market.

We have exited low margin business and are undertaking a range of actions to increase the returns profile of each element of the portfolio.”

My View

On 29^th March I noted that after some tough remedial work in its recent efficiency drive it looks as though far better times are ahead for this group, suggesting that its shares are too cheap.

They were then just 112.90p, so the subsequent 46% rise to 165.60p over the last two months is more than pleasing.

However, I do feel that there is even more to come, especially with the group’s second half year always being its strongest in performance.

The FTSE 100 dipped on Tuesday after investors were served an unwelcome reminder that the Federal Reserve rate cuts were by no means a certainty over the summer.

Comments from a Fed official overnight sparked a wave of concern about interest rates that washed up on the shores of UK stocks. Fed Vice Chair Jefferson suggested the Fed had not yet made up its mind on interest rates in a speech last night. The markets have priced in a very different story.

“It is too early to tell whether the recent slowdown in the disinflationary process will be long lasting,” Jefferson said.

After a series of softer inflation readings, both in the US and the UK, equity markets have quickly priced in rate cuts this summer.

Interest rate hopes have translated into an equity market rally that helped the FTSE 100 break to fresh record highs and stemmed a period of weakness in US stocks. The mere suggestion that these rate cuts may not transpire until later in the year has been enough to cause wobbles in stocks, and the FTSE 100 was down 0.4% at the time of writing. 

“Investors want the Federal Reserve to say inflation is comfortably on track to hit its 2% target and that interest rates will undergo a series of cuts. However, the central bank is loathed to make such a commitment and so we’ve got underlying uncertainty in the market even though data points are supportive to this line of thinking,” said Russ Mould, investment director at AJ Bell.

“Comments from Fed Vice Chair Philip Jefferson at a conference in New York triggered a sense of nervousness in the market as he played down talk of imminent rate cuts. European markets weren’t impressed and opened Tuesday mostly in the red.”

AstraZeneca was a notable riser after outlining plans to boost annual revenue to $80bn per year by 2030. The Pharma giant has delivered on such promises before and investors bought into shares on Tuesday as the company detailed a strategy to launch 20 new medicines in the coming years.

The targeted $80bn revenue will represent a significant jump from the $45.8bn generated in 2023.

“Having stepped up to the plate and delivered on its $45 billion revenue goal set a decade earlier, AstraZeneca is now reaching for the stars with a new target to hit $80 billion revenue by 2030. The market liked the bold ambition, sending the shares to the upper part of the FTSE 100 leader board,” Russ Mould said.

“An easy way for AstraZeneca to achieve such a goal would be to go on a spending spree and buy up rival companies. However, AstraZeneca implies it will hit the goal through organic means which would be all the more impressive.”

Kingfisher was slightly weaker after announcing poor Q1 sales for their French business, which dragged on reasonably positive news from the UK.

“It’s a much tougher market these days for Kingfisher in comparison to the pandemic DIY boom,” said Adam Vettese, analyst at investment platform eToro.

“The Screwfix and B&Q parent company reaped the benefits of consumers stuck at home with a few extra pounds in their pocket and now we have the opposite in that people are returning to the office and feeling the pinch in terms of cost of living. Full year profit outlook has been maintained so it may not be time to panic just yet but there are indications of tougher trading conditions in other key markets such as France.”

Kingfisher shares were down 1.1% at the time of writing.

Premier African Minerals shares were trading down over 10% on Tuesday after announcing the results of a placing. 

Premier has completed yet another placing to keep hopes for success at its Zulu lithium mine alive as the company ploughs ahead with a schedule of works designed to bring the plant up to the standards required by an offtake agreement with Chinese partners.

The company has raised £1.25m at 0.16p per share to fund the optimisation of the Zulu plant which has been dogged by delays and questions about the grade of its offtake.

Premier African Minerals shares were down 9% at the time of writing, trading at the placing price of 0.16p.

“The Company provided a full discussion on the Zulu plant performance in our announcement of 8 May 2024. The Company expects that periodic updates will be provided on the overall plant performance until such time as a steady of state of continuance production has been achieved, Premier expects thereafter to begin providing quarterly production reports for Zulu from Q3 of 2024,” said

“Over and above this, we are encouraged with mining operations and the ROM ore grades that consistently exceed our resource estimate and this is mitigating for the moment, the ore sorter deficiencies. This also supports the review of overall operations and production costs and the likely reduced production costs discussed below.

“Inspections required as a prelude to export have commenced, and this precedes any export. We do not expect any delays in regard to export permits required.

“This was confirmed in recent meetings with Government of Zimbabwe when the issue of RHA Tungsten Private Limited (“RHA”) was also discussed and we are encouraged that there is now likely resolution of this issue. The rising price of Tungsten is noted”.

Kingfisher was one of the pandemic’s winners. The company’s sales grew as people spruced up the homes they were confined to over an 18-month period.

Unfortunately for Kingfisher, we are now in a very different world, and sales are suffering. Its B&Q and Screwfix outlets are at the mercy of higher interest rates, rising commodity prices and general consumer concerns. That said, UK & Ireland sales grew 2.7% with Screwfix doing a lot of the heavy lifting.

Investors may take some positives from the company maintaining profit guidance, but today’s results are very difficult to get excited about.

Q1 group sales slipped 0.3% on a reported basis and 0.9% on a like-for-like constant currency basis. Sales fell 8.1% in France, but this was partially offset by strength in the rest of Europe, where sales grew 7% from a much lower base.

Kingfisher shares were down 0.9% at the time of writing.

“It’s a much tougher market these days for Kingfisher in comparison to the pandemic DIY boom,” said Adam Vettese, analyst at investment platform eToro.

“The Screwfix and B&Q parent company reaped the benefits of consumers stuck at home with a few extra pounds in their pocket and now we have the opposite in that people are returning to the office and feeling the pinch in terms of cost of living. Full year profit outlook has been maintained so it may not be time to panic just yet but there are indications of tougher trading conditions in other key markets such as France.

“As the macroeconomic situation begins to ease and consumers start to see some relief in terms of high interest rates and high inflation, conditions should start to improve for retailers such as Kingfisher as a home improvement budget is back on the table for many households.”