The significance of Innovative Eyewear’s tie-ups with Nautica, Eddie Bauer & Reebok

UK Investor Magazine
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The significance of Innovative Eyewear’s tie-ups with Nautica, Eddie Bauer & Reebok

Tekcapital portfolio company Innovative Eyewear has secured promising licensing deals with Nautica, Eddie Bauer & Reebok, which will see Lucyd’s smart eyewear technology distributed through hundreds of leading activewear stores.

The agreements pay testament to not only Innovative Eyewear’s commercial prowess but also the attractiveness of their underlying technology, which provides access to ChatGPT generative AI.

Securing a licensing agreement with Reebok is the latest win for Innovative Eyewear. It can now look forward to its technology being utilised by one of the world’s leading sporting brands.

Innovative Eyewear has carefully selected brands that cover different areas of the sports and lifestyle market.

Reebok will appeal to the global mass market and a younger, trendier audience, while Nautica will cover the more sophisticated leisure consumer.

By securing agreements with leading activewear brands, Innovative Eyewear now has the opportunity for their products to be stocked in hundreds of stores globally and provide consumers with the opportunity to try Nautica, Eddie Bauer & Reebok brand smart eyewear powered by Innovative Eyewear technology.

Future sales

With the licensing agreements only recently inked, investors can look forward to sale figures in Innovative Eyewear’s future earnings releases.

To gauge the potential market opportunity and what future sales could look like, Innovative Eyewear has made comparisons to the smartwatch market.

Research predicts the smartwatch industry is set to reach US$44.91bn in 2023. Innovative Eyewear CEO Harrison Gross feels smart eyewear can mirror smartwatch growth as the adoption of smart eyewear technology accelerates.

Smart eyewear is a number of years behind smartwatches but should smart eyewear become anywhere near as successful as watches, Innovative Eyewear is set to benefit from substantial first-mover advantages.

AIM movers: Biome Technologies contract and poor flows for Falcon Oil & Gas

Andrew Hore
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AIM movers: Biome Technologies contract and poor flows for Falcon Oil & Gas

Biome Technologies (LON: BIOM) has been awarded a £452,000 contract to supply an induction furnace system to a manufacturer of scientific glass products. This is a new application. The installation should be completed in 2024, although some revenues may be recognised in 2023. The share price is 11.8% higher at 142.5p.

Offshore services provider Tekmar Group (LON: TGP) continues to rise on the back of the increased interim revenues announced yesterday. Management believes the company can reach EBITDA breakeven for the full year – based on forecast revenues of £40m. The share price is a further 8.8% rise to 12.375pp.  

Sound Energy (LON: SOU) has received court papers confirming the withdrawal of the court case with the Moroccan tax authority. The $2.5m settlement compares with a claim of $23.95m. The share price rose 5% to 1.575p.

Quadrise (LON: QED) says that parts and spares have been delivered to Morocco and it is ready to recommence the demonstration test that was paused in May. The share price increased 2.12% to 1.6825p.

Falcon Oil & Gas (LON: FOG) reports that flow testing at the Amungee NW-2H (A2H) well in the Betaloo sub-basin, Northern Territory, Australia identified a potential skin inhibiting the flow of gas from the shale. The gas flowed at an average of 0.97mmcf/day over 50 days. Management believes this does not reflect the potential. The planned drilling programme will be modified to reflect the additional knowledge. The share price declined 33.5% to 6.65p.

Energy projects developer Oracle Power (LON: ORCP) is raising £363,000 at 0.1p a share. This will finance the development of the company’s joint venture green hydrogen project. Global Investment Strategy has been appointed joint broker. The share price slipped 19.2% to 0.105p.

Alpha Financial Markets Consulting (LON: AFM) exceeded expectations in the year to March 2023, but the chief executive warns that there is increased competition and lengthening sales cycles due to overcapacity in the market. Even so, management remains confident that it can achieve pre-tax profit of £42.6m this year, down from £44m in 2022-23. The share price declined by 17.4% to 412.5p.

Hornby (LON: HRN) swung from an underlying pre-tax profit of £3.2m to a loss of £1.1m. That is before a £2.92m goodwill impairment charge and costs of £910,000 related to Hornby World customer experience. Hornby warned in April that it expected to make a loss. Revenues were lower than previously expected. Management hopes that the operational gearing on growing revenues will help Hornby to move back into profit. The share price fell 11.1% to 20p.

Ex-dividends

Alliance Pharma (LON: APH) is paying a final dividend of 1.18p a share and the share price is 1.15p lower at 53.05p.

Duke Royalty (LON: DUKE) is paying a dividend of 0.7p a share and the share price fell 0.5p to 32.75p.

Flowtech Fluidpower (LON: FLO) is paying a final dividend of 2.1p a share and the share price is unchanged at 105p.

GB Group (LON: GBG) is paying a final dividend of 4p a share and the share price fell 5p to 245.6p.

Gooch & Housego (LON: GHH) is paying an interim dividend of 4.8p a share and the share price is 12p lower at 618p.

Learning Technologies Group (LON: LTG) is paying a final dividend of 1.15p a share and the share price declined 1.55p to 89.65p.

Rurelec (LON: RUR) is paying a special dividend of 0.2p a share and the share price fell 0.175p to 0.625p.

RWS Holdings (LON: RWS) is paying an interim dividend of 2.4p a share and the share price declined 6p to 247.2p.

Tribal (LON: TRB) is paying a final dividend of 0.65p a share and the share price fell 1.45p to 37.5p.

Ocado shares soar on takeover speculation

UK Investor Magazine
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Ocado shares soar on takeover speculation

Ocado shares surged on Thursday as takeover speculation built after The Times reported that Amazon could be eyeing the premium food retail and technology company.

Ocado shares were over 20% higher at the time of writing on Thursday.

The company has reported falling average basket sizes, and its premium food delivery offering has struggled after the pandemic’s boost.

However, a potential bidder will be more interested in Ocado’s food distribution technology and solutions business with global operations and a blue-chip client base.

“Bid chatter helped lift web-based food delivery firm Ocado. The shares have been about as flat as an open bottle of lemonade since the pandemic but third parties, including reportedly Amazon, may still see value in the brand, technology and infrastructure,” said AJ Bell head of financial analysis Danni Hewson.

“Ocado’s hopes of becoming an online groceries partner to businesses across the globe has only had limited success and shareholders may be open to a bidder putting them out of their misery.”

Ocado shares were trading at 522p, up 21% shortly before 10 am on Thursday.

Sound Energy shares rise as tax settlement finalised

UK Investor Magazine
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Sound Energy shares rise as tax settlement finalised

Sound Energy shares opened higher on Thursday after announcing they had received written confirmation from a Moroccan court that a tax claim against them has been finalised.

Sound Energy announced the withdrawal of all tax claims against it in the final results earlier this year – today’s announcement confirms written acknowledgement by the Moroccan authorities.

In a short statement that offered little detail, Sound Energy said they ‘the court has now confirmed in writing its judgement – with both remaining court cases now formally closed.’

In full-year results issued in May, Sound Energy said:

“The ongoing dispute with the Moroccan authorities over tax continued to be an unhelpful drain on the Company’s time and resources.”

Sound Energy is developing LNG assets in Morocco, including the advanced Tendrara project. Having undergone extensive funding activities this year, Sound hope to deliver its first revenue in early 2024.

FTSE 100 falls as 6% interest rates weighed

UK Investor Magazine
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FTSE 100 falls as 6% interest rates weighed

The FTSE 100 felt the pain of millions of households across the UK on Wednesday as hotter-than-expected inflation spelt trouble for mortgage holders and highlighted the ongoing pressure on household budgets.

The FTSE 100 was trading down 0.25% to 7,549 at the time of writing.

UK inflation for May came in at 8.7%, much higher than the 8.4% estimated by economists. Higher inflation means the Bank of England will have to maintain its hawkish stance and push on with increasing borrowing costs.

“Markets had been erring on the side of caution when it came to pricing in how quickly UK inflation is falling, but the news that there’s been no change in the headline CPI rate will send something of shiver through even the hardiest spectator,” said Danni Hewson, AJ Bell head of financial analysis.

“Inflation had been expected to fall – at least a bit – but it hasn’t obliged, remaining stubbornly sticky and cementing the prospect of a rate rise tomorrow as well as raising expectation that the hike will be higher than had been previously anticipated.”

Traders are now pricing interest rates as high as 6.2% before the end of the year. 

The Bank of England’s commentary released alongside the interest rate decision tomorrow will be pored over for hints of the future rate trajectory. It is a near certainty the Bank of England will hike by 0.25% to 4.75% at midday tomorrow. 

Pound weakness

The recent GBP/USD rally appears to have priced in higher interest rates, and traders booked profits as UK economic uncertainty increased.

The weaker pound supported overseas earners and offset some losses in UK domestically facing shares.

The FTSE 100’s top risers included BP, Shell and CRH.

FTSE 100 movers

The FTSE 100 is typically driven by overseas economies such as China, with the UK economy having little impact on its performance. Not so today when the focus was on domestic sectors and the impact of higher rates. 

Housebuilder shares were the most obvious victim of today’s inflation data, and the threat of higher mortgage rates sent Persimmon, Taylor Wimpey and Barratt Developments sharply lower.

Berkeley Group Holdings was down over 3% despite releasing upbeat full-year results on Wednesday.

Even banks that benefit from higher interest rates are now being consumed by concerns about the health of their mortgage businesses.

Deterioration in economic conditions may force UK banks to increase provisions for bad debts and eroded profits in the coming quarters. 

NatWest was down 3.4%, while Lloyds dipped 1.7%.

Esken falls despite significant break up value

Andrew Hore
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Esken falls despite significant break up value

Aviation and renewables company Esken (LON: ESKN) is the largest faller on the Main Market today following its full year results. The share price slumped 23.8% to 2.82p. The company does have significant break up value, though.

In the year to February 2023, revenues increased from £104.6m to £130m, while the underlying loss reduced from £35.7m to £27.7m. However, the loss is expected to increase this year on lower revenues following disposals. The forecasts loss ranges from £43m to £53.7m.

Net debt jumped from £88.1m to £166.7m at the end of February 2023. That was before the announcement of the £9m disposal of Mersey Biomass and even after this sale net debt is expected to increase to more than £190m by next February.

Divisional prospects

London Southend Airport is the focus of the aviation operations. This is a high fixed cost business so increasing volumes will move the operation closer to profitability. Canaccord Genuity believes that passenger numbers could nearly double to 160,000.

Larger London airports are becoming busier and that provides scope for demand to switch to an airport such as London Southend, particularly the shorter flights. Operational gearing means that the financial performance could improve rapidly.

Esken has a portfolio of renewable assets, where it has invested small amounts in equity, and this provides significant upside. Biomass outages are continuing, but there are improvements in plant performance and gate prices.

The strategy is to dispose of the main businesses when there are realistic selling prices. The renewables business is likely to be sold first with the timing of a sale of the aviation business depending on the rate of recovery in operations.

Canaccord Genuity has a target share price of 12p, which is similar to its current break-up value estimate – although that rises to 15.4p by February 2026. Zeus has a range of sum of the parts valuations from 14.8p at the low end to 19.8p at the high end.  These are all much higher than the share price, which reflects high debt levels and the risks of the different businesses.

AIM movers: i-nexus convertible funding and Live Company’s late accounts

Andrew Hore
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AIM movers: i-nexus convertible funding and Live Company’s late accounts

Software company i-nexus Global (LON: INX) is raising £500,000 through unsecured convertible redeemable loan notes with a conversion price of 10p a share. The share price jumped by one-fifth to 4.5p. The cash will provide working capital. Existing convertibles will have their redemption dates extended.

Offshore services provider Tekmar Group (LON: TGP) increased interim revenues by 36% to £17.7m and the loss was reduced. Management believes the company can reach EBITDA breakeven for the full year. That is based on forecast revenues of £40m, which is 90% covered by existing revenues and orders. The share price is 12.2% ahead at 10.375p, although it is still 10% down since the beginning of 2023.  

Oriole Resources (LON: ORR) has discovered significant mineralised intervals at Mbe in Cameroon. The best of the six sample lines showed 2.2 metres at 8.47g/t gold. Maiden drilling is planned in 2023-24. Project funding for the wider licence area should be completed by the third quarter. The share price rose 10.5% to 0.21p.

Avacta Group (LON: AVCT) says that following the fifth dose escalation cohort in a phase I clinical study of AVA6000 for tumour targeted chemotherapy. There has been a marked reduction in frequency and severity of toxicities associated with doxorubicin chemotherapy. The sixth dose will be increased as Avacta tries to identify the maximum tolerated dose. The share price improved 8.06% to 114p.

Live Company Group (LON: LVCG) will not be able to publish its 2022 accounts by the end of June, so trading in the shares will be suspended on 3 July. MHA MacIntyre Hudson has been appointed as auditor. The accounts should be reported by the end of July. The share price slumped 29% to 1.35p.

Fortune Mojapelo is stepping down as chief executive of Bushveld Minerals (LON: BMN) and former De Beers director Craig Coltman will take over the role. There was a $24m impairment loss in 2022. Revenues were 39% higher at $148.4m. The share price declined 14.6% to 3.075p.

A strong performance in the US by Haydale Graphene (LON: HAYD) has led finnCap to edge up its 2022-23 revenues forecast from £4.1m to £4.3m, although admin expenses were higher. However, growth expectations have been reduced. The share price fell 9.52% to 0.95p.

Polarean Imaging (LON: POLX) has appointed Dr Christopher von Jako to replace Richard Hullihen as chief executive. Dr von Jako has been chief executive of BrainWay, a Nasdaq listed developer of non-invasive neurostimulation treatments for mental disorders. He has been granted 5.325 million options with an exercise price of 29p each. The share price is 6.96% to 26.75p.

FTSE 350 Housebuilders sink on mortgage worries

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FTSE 350 Housebuilders sink on mortgage worries

FTSE 350 housebuilders were deep in the red in Wednesday morning trade as hotter than expected increased the chances of higher mortgage rates in the coming months.

Hundreds of thousands of households will see fixed-rate deals come to an end this year and will face significantly higher mortgage rates. Variable-rate mortgage holders have suffered higher mortgage payments over the last year and will continue to do so.

“For anyone with a variable mortgage, the likelihood of another rate rise tomorrow means yet more pain. Plenty of those who moved onto a variable deal when their fixed rate expired had expected rates to have started to ease by now, so there’s a growing risk of rises that people hadn’t expected and cannot afford,” said Sarah Coles, head of personal finance, Hargreaves Lansdown.

“For anyone looking for a fixed rate, the picture is even bleaker. It has already been a torrid few weeks, as mortgage rates have shot up. The market is pricing in several hikes over the coming months. Just ahead of the announcement, it was expecting rates to peak at 5.81% in February, and only start to fall gradually from there. 

“This has pushed the average two-year fixed rate mortgage over 6%. Higher core inflation is likely to reinforce the market’s conviction that rates will need to go significantly higher, and could power even higher rate expectations further down the line. Even the concern that rates could rise would bring more mortgage misery for anyone looking for a new deal or facing a remortgage.”

The UK government has ruled out providing direct fiscal support to mortgage holders. Instead, they are encouraging lenders to work with households in financial difficulties and provide options to avoid repossessions. Some are sceptical of the real-world outcome of these efforts.

FTSE 350 Housebuilders

The headwinds facing the UK housing market were reflected in the FTSE 350’s housebuilders on Wednesday with Persimmon, Taylor Wimpey, Barratt Developments, Crest Nicholson, Redrow and Vistry among the worst performers.

Berkeley Group Holdings was down over 3% despite releasing upbeat full-year results on Wednesday.

“Berkeley delivered a solid set of results despite the housing market sitting on shaky ground. The group sold more houses in the period and pricing remained resilient across the group’s London-focused operations, helping pre-tax profits to rise higher,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

Markets price in 0.75% UK interest rate increase as inflation tops estimates

UK Investor Magazine
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Markets price in 0.75% UK interest rate increase as inflation tops estimates

UK CPI inflation for May came in hotter than expected at 8.7%, topping estimates of 8.4%.

“UK CPI rose 8.7% in May, the same level we saw in April but ahead of forecasts that were looking for 8.4%. Everyone’s new favourite metric, core inflation, which strips out things like energy and food was also disappointing rising 7.1% on expectations of 6.8%,” said Matt Britzman, equity analyst at Hargreaves Lansdown.

“This read won’t do policymakers any favours who are under increasing pressure to keep inflation coming down in the UK, but it’s looking stickier as the months roll by.”

Markets are now pricing 0.75% in UK interest rate increases over the next two Bank of England rate decisions. Some traders are now pricing a terminal rate – the highest point rates will rise to – of 6.2% by December.

The upside surprise in inflation sent waves through markets, with the UK 2-year gilt yields jumping back above 5% and FTSE 350 housebuilders sinking on the prospect of higher mortgage rates. GBP/USD spiked higher before traders faded the rally.

The Bank of England will issue their interest rate decision tomorrow, and the subsequent press conference and accompanying commentary will be closely scrutinised for hints of the future rate trajectory.

Gear4Music has platform for recovery

Andrew Hore
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Gear4Music has platform for recovery

Online musical instruments retailer Gear4Music (LON: G4M) has put in place measures to help it improve its performance, but the benefits will take time to show through. It should be enough to return the business to profit this year, though.

In the year to March 2023, revenues improved from £147.6m to £152m with all the growth coming from Europe. The business made an underlying pre-tax loss of £200,000, compared with a £5.1m profit the previous year.

A reduction in inventories helped to cut net debt to £14.5m. Even with growing revenues, the net debt figure should continue to fall.

AIM-quoted Gear4Music plans to build its own-brand sales, which are currently around one-quarter of the group total, and this will help to improve margins. The Premier drums range has been redesigned and a new brand called Vision will compete with third party Amazon sellers.

The company has moved into the second hand market with a new platform. Gear4Music will offer an instant price and collect the instrument, then list it for sale on the website. This has launched in the UK and will be launched in other European countries.

The new AV.com consumer electronics platform is being rolled out to other European countries. It is still early days for this platform, but it is a large potential market.

There are concerns about discretionary spending, so the recovery could be slow. Singer forecasts a 2023-24 pre-tax profit of £1.1m, but there is a long way to go to get near to the bumper profit of £14.8m in 2020-21. The broker believes that Gear4Music has the capacity for revenues of up to £400m and EBITDA of £30m.

The share price fell to 95.5p, which is not far above the all-time low. The prospective multiple is 27, falling to ten the following year. Once there is more confidence in the recovery, the share price should start to rise.

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