Midwich Group launches retail offer

Andrew Hore
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Midwich Group launches retail offer

Audio visual products distributor Midwich Group (LON: MIDW) is acquiring SF Marketing Inc, which has a similar business in Canada for £26.7m. Midwich is also raising £50m via a placing at price to be set when the bookbuilding is finalised. A Primary Bid offer could raise up to £2m more at the same price.

The retail offer will not go ahead if the placing is unsuccessful. Existing and new shareholders can subscribe for shares. The minimum subscription is £250. The offer closes at 9pm today.

The acquisition and fundraising were announced just after 4.30pm and the share price closed at 450p.

The cash raised will help to reduce debt, which had risen to £119.4m by the end of 2022, although that includes £23.4m of lease liabilities. That is before the acquisition of SF Marketing.  Further earnings enhancing acquisitions are likely.

Midwich already has a north American operation called Starin. Last year, revenues increased by 78% to £123.1m, but gross margin declined to 14%. Adjusted operating profit rose 41% to £6.4m. That is around 12% of group operating profit. The majority of profit is currently generated by European activities with the UK and Ireland the biggest contributor.

In the year to May 2022, SF Marketing generated revenues of C$94.7m and adjusted operating profit of C$6.1m, so it will be a significant boost to the North American operations.  There is £1 to C$1.66. The deal should be earnings enhancing in the first full year.

Premier African Minerals shares steady after lithium offtake agreement clarity

UK Investor Magazine
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Premier African Minerals shares steady after lithium offtake agreement clarity

Premier African Minerals continued the rally on Wednesday after announcing it received the support of their lithium offtake partner Canmax Technologies yesterday.

Premier African Minerals have an offtake agreement with Canmax that stipulates Premier African Minerals must supply lithium to Canmax by 30th May, or Canmax has the right to terminate the agreement.

Premier African Minerals announced this date would not be met in May and raised concerns about their ongoing agreement. PREM shares sank as a result.

Yesterday, Premier African Minerals announced that Canmax were not seeking to terminate the agreement and were instead exploring amendments to the agreement. The clarity sparked a rally in Premier African Minerals shares yesterday, and the price held steady on Wednesday.

George Roach, CEO commented: “I am deeply appreciative for the constructive discussion, further assistance, and confirmation of our relationship with Canmax “.

Canmax holds a 13.14% stake in Premier African Minerals and would likely see the value of this stake diminish considerably if they imposed damaging terms on PREM.

Premier African Minerals are around 33% higher than the lowest traded levels in May.

FTSE 100 reverses early losses; housebuilders dip on UK housing data

UK Investor Magazine
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FTSE 100 reverses early losses; housebuilders dip on UK housing data

We start today’s coverage of trade in London by paying respects to Sir Ivan Menezes, the CEO of Diageo, who sadly passed away after a short illness.

“This is an incredibly sad day. Ivan was undoubtedly one of the finest leaders of his generation,” said Javier Ferrán, Chairman, Diageo.

“Ivan was there at the creation of Diageo and over 25 years, shaped Diageo to become one of the best performing, most trusted and respected consumer companies. I saw first-hand his steadfast commitment to our people and to creating a culture that enabled everyone to thrive. He invested his time and energy in people at every level of the company and saw potential that others may have overlooked. This is one of many reasons why he was beloved by our employees, past and present.”

Sir Ivan was instrumental in turning Diageo into one of the world’s leading drinks companies and oversaw steady and measured increases in the share price for investors.

“Sir Ivan Menezes will be remembered for transforming Diageo’s fortunes and making it the powerhouse it is today in the spirit sector. He was greatly admired by the business community and by investors,” said AJ Bell investment director Russ Mould.

“In his 10 years as chief executive, he focused on high-end brands, recognising that consumer tastes were evolving and that people were prepared to pay a premium price for a quality product.

“Sir Ivan paid a lot of attention to culture within the business, while also making sure Diageo was a leader in the fields of sustainability, inclusivity and diversity.”

FTSE 100 Movers

The FTSE 100 was broadly flat at the time of writing on Wednesday, having reversed early losses. Poor Chinese economic data meant the FTSE 100 started the day on the back foot, but buyers gradually stepped in throughout the session.

China is reported to be considering stimulus measures to help support the economy. The hopes for action from the Chinese authorities contained sentiment on Wednesday.

CNBC reports economists predict stimulus measures will be focused on the property sector, a key driver of the wealth effect in China.

“The stimulus package could be centered on the property sector, with expansionary monetary and fiscal policies to keep up growth momentum,” Citi economists wrote in a note.

UK housebuilders were weaker after the Halifax House Pirce Index recorded the first annual decline in UK house prices since 2012. Taylor Wimpey, Persimmon, and Berkeley Group Holdings were all weaker at the time of writing.

Associated British Foods was the FTSE 100’s top riser a day after announcing a cash acquisition of National Milk Records for £48m or 215p per National Milk Records shares. National Milk Records is listed on the AQUIS Stock Exchange.

DX settles with Tuffnells

Andrew Hore
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DX settles with Tuffnells

Parcel and freight delivery company DX (LON: DX.) has come to a settlement with rival firm Tuffnells Parcels Express. This is one of the things that has held back the share price this year despite the strong trading.

Tuffnells Parcels Express made a claim relating to confidential competitor information it says was obtained by DX. Past and current management of DX were previously at Tuffnells and helped ot turnaround its performance.

AIM-quoted DX says that it has not admitted liability and the details of the settlement are confidential. It should not have any impact on the 2022-23 figures or thereafter.

In the year to June 2023, pre-tax profit is forecast to improve from £20.6m to £25.4m and a total dividend of 1.5p a share is expected to be paid for the financial year.

Net cash could be more than £35m by the end of June 2023, which is nearly one-quarter of the market capitalisation. The cash pile should continue to rise even with expected capital investment and the dividend payment.

The share price edged up 0.5p to 26p, which is seven times prospective 2022-23 earnings, falling to just over six next year. The forecast yield is 5.9%.

Past corporate governance problems still hang over the business, but settling with Tuffnells Parcel Express is a good sign. Confirmation of the progress made when the 2022-23 figures are published should further help to spark a re-rating.

Baillie Gifford foresees strong growth in this US tech small cap

UK Investor Magazine
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Baillie Gifford foresees strong growth in this US tech small cap

Baillie Gifford holds this US tech small cap in their American Fund alongside NVIDIA, Tesla and Amazon.
UK Investor Magazine discussed the company with Baillie Gifford when we sat down with managers at their Edinburgh offices last month.
Kirsty Gibson, co-manager of the Baillie Gifford American Fund, said they have been watching the company since its IPO but only bought in after the share price declined.
Baillie Gifford's American Fund focuses on 'Atoms and Bytes' businesses that solve real-world problems with online solutions. Managers of the fund seek out companies with high-growth potenti...

AIM movers: Jersey Oil & Gas farm-out approved and IOG gas flow problem

Andrew Hore
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0
AIM movers: Jersey Oil & Gas farm-out approved and IOG gas flow problem

Jersey Oil & Gas (LON: JOG) has received approval for the Greater Buchan Area farm-out to NEO Energyfrom the regulator and the deal should be completed by the end of the month. An extension has been granted to the Buchan licence to enable a field development plan to be compiled. The share price is 3.9% higher at 200p.

RUA Life Sciences (LON: RUA), which has developed Elast-Eon biostable polyurethane medical device technology, increased revenues by one-third to £2.18m – £1.63m from contract manufacturing and biomaterials generated £550,000. R&D spending increased from £887,000 to £1.07m. The full year loss could be £2.4m. There was cash of £1.48m at the end of March 2023. The vascular business is getting ready to commence an FDA approved clinical study for vascular grafts. The structural heart business has been assessing the performance of polymeric heart valve leaflets. The share price moved 3.75% ahead to 41.5p.

Embedded computing technology supplier Concurrent Technologies (LON: CNC) has secured a new distributor agreement with SoC-e, which will enable the AIM company to offer SoC-e’s Relyum advanced networking solutions. The share price rose 2.96% to 69.5p.

Serabi Gold (LON: SRB) says underground exploration at the Palito project is extending the G3 vein and at depth beyond a fault zone. There should be an updated resource estimate in the third quarter of 2023. The share price increased 2.8% to 27.5p.

More bad news for oil and gas company IOG (LON: IOG), which says that the Blythe H2 well in the North Sea is producing gas at a constrained rate. There could be a mechanical blockage. The well could be brought onstream this month. The volatility of the gas market and the declining price has increased pressure on the company. Management is seeking pre-emptive waivers of potential covenant breaches. The company’s bond matures in September and that will need to be refinanced.  The share price slumped 41% to 3.95p, which is a new low.

In-content advertising company Mirriad Advertising (LON: MIRI) lost £15.6m in 2022 as revenues fell by one-quarter to £1.5m. Management is hopeful that trading could improve in the second half of 2023. The share price declined 17.8% to 3.125p. The recent placing was at 3p.

Late last evening, Jadestone Energy (LON: JSE) announced an $85m funding package. This includes a $52.6m gross, $50m net, placing at 45p a share and a $30m standby working capital facility from Tyrus Capital. There is also an open offer to raise up to $8.3m at the placing price. The cash will be invested in oil and gas asset development. The share price slipped 14.8% to 41.75p.

Last Friday, Eco Buildings Group (LON: ECOB) was readmitted to AIM following the reverse takeover of Eco Buildings by Fox Marble. The business supplies prefabricated modular housing, initially in the Balkans. As part of the deal there was £2.7m raised at 55p a share. The share price has fallen below the deal price and today it fell a further 13.3% to 32.5p.

Evgen Pharma (LON: EVG) made a higher 2022-23 loss than expected. It was £5m instead of the forecast £4.1m. Net cash was £5m at the end of March 2023. Evgen says it has enough cash until next year. There are potential milestone payments that could add to the cash. The share price is 7.59% lower at 3.65p.

Upgraded forecasts for City Pub Group

Andrew Hore
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0
Upgraded forecasts for City Pub Group

Peel Hunt has upgraded its forecast for City Pub Group (LON: CPC) following its AGM trading statement and believes further upgrades are possible. Like-for-like sales are 13% ahead through a mixture of price increases and volume gains. This compares with estimated growth of 8% for the pub sector.

Sales are 12% ahead of pre-pandemic levels. Refurbishments have helped to improve revenues and the figure could have been higher without train strikes.

Cost pressures are easing, and management has fixed 35% of energy costs until March 2025. Utilities costs are expected to fall this year. Food costs are still high, but food generates less than one-quarter of revenues.

The purchase of a further 4% of Mosaic for £700,000 will take City Pub Group’s share to 52% and the business will be consolidated. A further £4m is expected to be spent over the coming year to take the stake to 75%.

This increases the pub estate from 43 to 52. Mosaic lost money last year, but it should make a positive contribution when integrated into the group.

Peel Hunt has increased its 2023 pre-tax profit forecast from £5.8m to £6.3m, with a further increase from £7.2m to £7.6m for the 2024 figure. A return to dividends is forecast for this year with an estimate of 1.2p a share, which would be covered 3.8 times by forecast earnings.

The share price rose 2% to 100.5p, which is the highest it has been since the beginning of 2022 but around 50% of the level in early 2020. The shares are trading on 22 times prospective 2023 earnings, falling to less than 20 the following year. Net assets were 93.6p a share at the end of 2022.

Halifax records first annual drop in house prices since 2012

UK Investor Magazine
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Halifax records first annual drop in house prices since 2012

Halifax’s House Price Index shows house prices have fallen 1% in the year to May – the first annual drop since 2012.

Halifax’s data corroborates recent house price data from Nationwide. Although their methodologies and price changes differ, both organisations are recording declines in the average UK house price on an annual basis.

Rising mortgage rates and the cost of living crisis have eroded confidence in the housing market. Adding fuel to the fire, The Bank of England is expected to hike rates again this year and have lenders reacted by increasing mortgage rates. Analysts at interactive investor suggest we could see further declines this year.

“It is becoming increasingly clear that the resilience of the property market in the first quarter of the year was a flash in the pan, with the impact from the affordability squeeze from high mortgage rates and high inflation filtering through. The constrictions imposed by affordability culminate in a diminished pool of buyers capable of participating in the market, exerting downwards pressure on price growth,” said Myron Jobson, Senior Personal Finance Analyst, interactive investor.

“The recent rises in the mortgage rates which has seen rates climb by 0.4% within a fortnight could further fuel further declines in house prices in the coming months.”

Stubbornly high inflation rates are to blame for the latest bout of uncertainty around borrowing costs. UK inflation was higher than expected in May, which caused a repositioning in market pricing of interest rates.

“This is far from over,” said Sarah Coles, head of personal finance, Hargreaves Lansdown.

“Core inflation sent shockwaves through the mortgage market at the end of May, and we’re still feeling the effects as major lenders bump up prices.

“The market now expects rates to be higher for longer, which means fixed rate mortgage prices are increasing. Today Halifax will push up rates on its two-and five-year fixed rate deals, which is likely to depress prices even further in the coming months.”

New standard listing: Ashington Innovation

Andrew Hore
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2
New standard listing: Ashington Innovation

Ashington Innovation is a shell seeking to acquire a technology business. It has not narrowed the potential sectors down by much, but it is likely to be something developing a newer technology.
The share price ended the first day of trading at 4p (3p/5p). There were 150,000 shares traded in three deals, including one for a single share.
The NAV is 0.85p/share and the share price is more than four times that level. High enough.
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Ashington Innovation (LON: ASHI)
Technology shell
www.ashingtoninnovationplc.com  
Market: Standard list
Placing
Flotation date: 6 June 2023
Share price:...

New standard listing: Becket Invest

Andrew Hore
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0
New standard listing: Becket Invest

Becket Invest is a shell seeking a reverse takeover of a company involved in big data, ecommerce or online marketplaces. An established business would be preferred, but it could be one requiring urgent seed capital. The target will need to be one that will attract the interest of investors.
The share price started at 2p and has fallen to 1.25p (1p/1.5p), although there are no stated trades on the first two days of trading. The company is not classed as a SPAC, because it is not valued at £100m, so trading in the shares will have to be suspended when a possible acquisition is announced.  &...

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