AIM movers: RUA Life Sciences global partnership and Inland Homes sells land

Andrew Hore
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AIM movers: RUA Life Sciences global partnership and Inland Homes sells land

RUA Life Sciences (LON: RUA) has announced an exclusive global commercialisation partnership with medical device company Corcym for its large-diameter vascular grafts. The share price jumped 35.9% to 62.5p – the highest it has been for one year. RUA’s products are for straight and aortic root grafts and fit with the current portfolio of heart valves supplied by Corcym, which has operations in more than one hundred countries. Gross margin will be shared equally.

The CPP Group (LON: CPP) share price continues to rise even though yesterday afternoon it put out a statement saying it did not know why it had increased. A further 15.3% rise takes it to 219p, up from 110p at the start of the week.

Velocys (LON: VLS) shares rose 13.9% to 4.72p, after it announced a relationship agreement with Bechtel for developing sustainable aviation fuel projects. Bechtel will provide engineering and processing expertise.

Clinical studies operator hVIVO (LON: HVO) did better than expected in 2022. Revenues were 31% ahead at £50.6m and margins were higher than forecast. Pre-tax profit of £5.4m is anticipated. Net cash was £28.4m at the end of the year, when the order book was worth £76m – more orders have been added since then. The share price has picked up this year and it rose a further 12.1% to 167p.

Builders merchant Lords Group Trading (LON: LORD) is growing faster than expected even though markets remain tough. The 2022 pre-tax profit forecast has been maintained at £16m, even though revenues were 3% higher than forecast. Broadening the product range has helped. The share price increased 9.74% to 84.5p. The July 2021 placing price was 95p.

Tracking systems developer t42 IoT Tracking Solutions (LON: TRAC) has secured an order for 1,000 Tetis cargo tracking units from a US-based client. The share price rose 6.5% to 5.75p.

Following the departure of the recently appointed chief executive last week Inland Homes (LON: INL) has sold its greenfield strategic land portfolio. There was a £3.5m profit on the sale that raised £9.5m. There will also be fees for assisting the purchaser. Despite the disposal, net debt has risen to £100m and trading conditions have deteriorated. The 2021-22 loss is expected to be £91m and NAV has fallen to 40p a share. The share price slumped 32.9% to 11.75p.

Beowulf Mining (LON: BEM) is raising up to £9.1m to finance the development of the Kallak iron mine. This includes a £2.1m PrimaryBid offer at 2.06p a share, compared with a market price of 3p, down by one-quarter on the day. The cash will fund a pre-feasibility study and resource drilling, as well as reducing debt.

South America-focused electricity generator Rurelec (LON: RUR) says it is running short of cash and there is little prospect of a dividend from its Argentinian subsidiary. The majority shareholder is against issuing more shares. Management hopes to sell the investment in the Argentinian business and become a shell. The current cash should last into the second quarter of 2023. The share price dipped 13.6% to 0.475p.

Jangada Mines (LON: JAN) says that commodity price volatility is holding up its development plans. Management is waiting for the right time to start the Pitombeiras iron, vanadium and titanium project in Brazil. The completion of the Brazilian election should make it easier to progress discussions with local customers. The share price has fallen 18.7% to 3.7p.

FTSE 100 flat as US tech implications considered

UK Investor Magazine
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FTSE 100 flat as US tech implications considered

The FTSE 100 outperformed US indices significantly in 2022 as US tech stocks cratered while the FTSE 100’s defensive sectors provided support during economic uncertainty.

However, a recent tech rally has started to lift global equity sentiment and provided support for the FTSE 100. Layoffs by major tech companies combined with relatively upbeat earnings has helped spur investment into a tech sector which is responsible for large proportion of the returns in broad global equity indices.

News last night Microsoft – 3.2% of the MSCI World Index – were concerned about the outlook for 2023 has raised questions about the ability for US tech to ignite a global equity rally.

“Microsoft has proved one of the more durable names in the tech sell-off over the last year so its gloomy outlook will do nothing to improve weak sentiment towards the sector. It also sets an uncomfortable tone ahead of updates from its tech rivals,” said AJ Bell investment director Russ Mould.

Wait and see mode

US futures were falling while the FTSE 100 was broadly flat at the time of writing, as investors digested the implications of Microsoft’s comments, and whether a recent global equity rally can be sustained.

Investors will be in wait and see mode and looking forward to US GDP figures tomorrow to judge how far the Federal Reserve will go with additional rates hike in early 2023.

“Thursday’s fourth quarter GDP figures for the US could either reinforce or blow-up expectations for a soft landing for the American economy, with core inflation numbers on Friday helping to provide some insight into the Federal Reserve’s decision making ahead of its crunch meeting next week,” Mould said.

Wetherspoons sales continue recovery but still below pre-pandemic levels

UK Investor Magazine
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Wetherspoons sales continue recovery but still below pre-pandemic levels

Wetherspoons fared better than most of their competitors during the second half of 2022 as sales grew 13.1% in the period 25 weeks to 22 January 2023, compared to a year ago.

Despite sales rising 13.1%, trading for the period was still 0.7% lower than before the pandemic.

During the 12 week Christmas trading period, Wetherspoons like-for-like sales were 17.8% higher than the same period a year ago, but were 2% lower than the pre-pandemic trade.

The jump in sales reflects the absence of fears around coronavirus, as well as drinkers choosing the more cost effective Wetherspoons offering.

However, Wetherspoon feel the cost-of-living crisis capped sales gains as consumers chose to purchase alcohol from supermarkets and stay at home to save money.

“Supermarkets pay zero VAT in respect of food sales, whereas pubs and restaurants pay 20%. This tax benefit allows supermarkets to subsidise the selling price of beer,” said Wetherspoon chairman Tim Martin.

Wetherspoons estimate supermarket have taken around half of pub beer sales since 1979.

“Naturally, pub chain Wetherspoons did better in the Christmas just gone than the Omicron-marred festive period in 2021 – that’s not really news. It would have been difficult to do worse given restrictions are no longer in place and the fear factor associated with going about normal life has receded,” said AJ Bell investment director Russ Mould.

Mould went on to explain why investors could be disappointed with today’s update and reasons for today’s 2.7% drop in Wetherspoons shares.

“What is damaging for Wetherspoons is that trading is still behind where it was pre-pandemic. Wetherspoons has always had a model of prizing volume over margins, so when you consider how fast costs are rising it is not surprising profitability is under pressure.

“Outspoken chair Tim Martin points to the threat posed by supermarkets, with people buying booze in stores and drinking at home – a situation he notes is exacerbated by the disparity in tax treatment.

Jangada Mines shares sink on Pitombeiras delays

UK Investor Magazine
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Jangada Mines shares sink on Pitombeiras delays

Jangada Mines shares were deep in the red on Wednesday after the mining group said they would hold off pushing forward with the Pitombeiras iron ore project as they waited for the ‘right pricing environment’.

The delays at Pitombeiras were not taken well by investors and Jangada Mines shares were trading 20% weaker at the time of writing.

Pitombeiras has a $96.5 million post-tax Net Present Value (NPV) with estimated $145.9 million post-tax undiscounted operating cash flow.

Despite the strong financials of the Pitombeiras project, the company is yet to secure an off-take agreement which is hindering feasibility evaluation of titanium mineralisation. This admission suggests today’s fall is more a display of impatience by shareholders, as opposed to poor project fundamentals.

Nonetheless, progress with their investments in Blencowe Resources and Fodere were not enough to offset frustrations with the setbacks at Pitombeiras.

“Jangada has a highly experienced Brazilian centric legal, financial and operational management team able to source and execute on projects,” said Brian McMaster, Executive Chairman of Jangada. 

“The Board and team have a proven track record of being able to find high value low-cost opportunities, such as the acquisition of the Pedra Branca Platinum Group Metals Project, which was vended to TSX listed, ValOre Metals.  Pitombeiras is technically sound and has excellent upside potential, the Board is just waiting for the right pricing environment to push the button on its development.”

easyJet, Cadence Minerals, and UK stocks relative performance with Alan Green

UK Investor Magazine
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easyJet, Cadence Minerals, and UK stocks relative performance with Alan Green

We are joined by Alan Green for our regular deep dive into a selection of UK stocks and key market themes.

We discuss:

  • easyJet (LON:EZJ)
  • Cadence Minerals (LON:KDNC)
  • hVIVO (LON:HVO)

Our discussion starts with a comparison of the UK’s FTSE 100 and FTSE 250 and the factors that could see the FTSE 250 outperform in 2023. We also make comparisons to US indices S&P 500 and NASDAQ.

Cadence Minerals has completed the sale of their stake in the Yangibana Rare Earths project to Hastings. Cadence Minerals will receive 2.45 million shares of Hastings in return.

We finish by discussing the latest updates at hVIVO.

Greatland Gold shares dip despite ‘tremendous progress’ at Havieron

UK Investor Magazine
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Greatland Gold shares dip despite ‘tremendous progress’ at Havieron

Greatland Gold shares slipped in early trade on Wednesday after the company released a brief update on the ‘tremendous progress’ made at their Havieron gold discovery in Australia.

Greatland has a 30% stake in Havieron through a joint venture with Newcrest Mining.

Drilling at the Eastern Breccia and Northern Breccia areas of Havieron have yielded further high grade gold encounters including 86.0m @ 0.88g/t Au & 0.05% Cu from 2,056m and 42.0m @ 2.4 g/t Au & 0.43% Cu from 1,542m.

Greatland Gold shares were trading down 1.2% at 8.1p at the time of writing.

“Tremendous progress has been achieved in advancing the decline in recent months. The improved ground conditions has enabled record rates of advancement,” said Shaun Day, Greatland Gold Managing Director.

“Results from the growth drilling programme towards the end of 2022 continued to identify higher grade extensions to the mineralisation in the Northern Breccia and Eastern Breccia.”

“The success of the drilling programme supports the expectation for Havieron to deliver an expanded mineral resource estimate.”

Dekel Agri-Vision buys cashew minority

Andrew Hore
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Dekel Agri-Vision buys cashew minority

Cote d’Ivoire-based Dekel Agri-Vision (LON: DKL) is raising its stake in the Tiebissou raw cashew nut processing project. This project is going to build up its contribution over the next couple of years potentially reaching revenues of €12m in 2024. The share price rose 3.23% to 3.2p.

The minority stake is being bought for €600,000 in the form of 20 million shares. The project should build up to full production in the first half of 2023.

Palm oil prices remain high with the November average crude palm oil price at €1,102/ton, which is 14% higher than December 2021.  

WH Ireland has downgraded its forecast revenues for 2022 and 2023. The 2022 pre-tax profit is still expected to be €400,000, but the 2023 figure has been cut from €4.2m to €3.2m. This is due to additional caution concerning volumes.

Net debt was around €28.4m at the end of 2022 and it could reduce to €24.4m at the end of this year.

The shares are trading on eight times prospective 2023 earnings.

2022: what doesn’t kill you makes you stronger

Aberdeen Investment Trusts
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2022: what doesn’t kill you makes you stronger

Ben Ritchie and Rebecca Maclean, Investment Managers, Dunedin Income Growth Investment Trust PLC

The painful adjustment to an environment of higher inflation and interest rates was the financial market story of 2022. A tough combination of the war in Ukraine, the legacy of the exceptional policy response to the pandemic and disrupted supply chains pushed prices higher for energy, agricultural commodities and, increasingly, labour. Central banks were forced to raise interest rates to curb these pressures.

These stresses were mostly felt in short-term inflation expectations, while longer-term expectations moved only slightly. Nevertheless, the short-term moves were severe. In the UK, inflation hit levels of 13-14%, the highest levels seen since the early 1980s. The Bank of England raised rates nine times from December 2021, pushing up gilt yields, peaking at the time of the shambolic Truss/Kwarteng mini-budget.

Whilst this created an extremely difficult backdrop for stock markets, 2022 was not without its success stories: the UK’s larger companies were flattered by a weaker sterling (a significant share of their revenues comes from overseas) and by the strong performance of commodity-related sectors. However, the domestically-focused FTSE 250 saw double-digit falls for the year. 

Sector performance was significantly influenced by the interest rate cycle. Companies with high debt, or little pricing power struggled as the economic environment weakened and borrowing costs soared. Energy was the year’s stand-out performer, but there were other pockets of resilience, including healthcare, utilities and consumer staples. The worst-performing sectors were domestic cyclicals such as real estate, consumer discretionary and technology. There was a significant rotation away from growth and towards ‘value’ sectors. 

Sentiment towards UK assets was volatile. There can be little doubt that the mini-budget left the UK on the naughty step for many investors. The subsequent Autumn statement stabilised the situation, but the UK is still viewed carefully for any signs fiscal discipline may be lapsing. 

The trust in review

It was a year of two halves for Dunedin Income Growth Investment Trust (DIGIT). Amid the uncertainty during the first six months of 2022, our main focus was to test the thesis for all the companies in the portfolio against the new economic environment, and make any adjustments. Selectively, we added to existing holdings when share prices fell back and made a few selective sales. We exited GSK (formerly GlaxoSmithKline) and Haleon, for example and added to Unilever, Aveva and the London Stock Exchange. These are all good quality businesses with long-term growth prospects that had been sold down. 

In the second half of the year, as more clarity emerged and markets adjusted to higher inflation and interest rates, we started to look more closely for new opportunities. This included switching out of Persimmon and adding Taylor Wimpey, adding insurance group Hiscox, while also introducing Oxford Instruments, a specialist industrial manufacturer of high tech industrial equipment. At the moment, we are finding the most significant opportunities among domestic cyclical companies, where share prices have been hit hard. That includes companies such as Morgan Sindall and Marshalls. 

The trust is well-balanced for defensiveness and recovery. It should be resilient if the economic environment worsens – the earnings and balance sheets for companies in the portfolio are likely to be more robust. However, if investors become more confident and enthused, we have been increasing our exposure to UK mid cap, domestically-focused businesses, so would hope to participate in that recovery. We are minutely focused on getting company selection right – if we do, share prices will follow. 

The year ahead?

At the start of 2023, the market remains focused on inflation and interest rates: where will inflation level out? How quickly will it subside? Will it become embedded in wages? In all scenarios, markets will be watching central banks’ next move. It is likely that, barring a significant shock, we are closer to the end than the beginning of the tightening cycle. 

Perhaps this may even mean that investors will have a less intensive focus on interest rates and inflation this year. The market had a significant adjustment to make in 2022, but expectations now appear more settled. This may finally allow a greater focus on the specific characteristics of individual companies, after a year when inflation data and the latest guidance from the US Federal Reserve occupied investor attention. 

We would certainly welcome more focus on individual businesses. This is where we spend our time, looking at how a business is performing from a revenue, profit, cash flow and dividend point of view. Broader market sentiment and macroeconomic data are important, but these factors tend to be unpredictable. In the year ahead, we hope to spend less time talking about inflation and more time talking about profitability. 

Optimism versus pessimism

There are a wide range of outcomes for 2023 and we believe share price performance may vary considerably depending on the company and individual subsector. There are plenty of reasons for caution with UK consumers facing the rising cost of living, higher mortgage rates and interest costs. Similarly, forward-looking global economic indicators are negative, and some of the more economically sensitive sectors may have to lower their forecasts. The key questions though are how much of this is priced in and do companies have the strength of balance sheet and cash generation to trade through what may be difficult times ahead. In that regard we are optimistic that for those able to take a medium-term view that there are attractive opportunities emerging.

There also remain pockets of strength. For example, The US Inflation Reduction Act and the need to drive energy security will support sectors such as renewables across the world. Likewise there remains strong structural growth drivers in areas such as healthcare, speciality chemicals and financial services. We are also more optimistic on the prospects for consumers in emerging markets, particularly in Asia. Companies providing essential products and services to these end markets, with strong competitive positions and resilient financials should be well-placed to navigate an uncertain period ahead. Looking to balance the portfolio between exposure to both structural growth and selective cyclical opportunities is where we see the best combination of risk adjusted returns in 2023.

Companies selected for illustrative purposes only to demonstrate the investment management style described herein, and not as an investment recommendation or indication of performance.

Important information

Risk factors you should consider prior to investing:

  • The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested. 
  • Past performance is not a guide to future results. 
  • Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years. 
  • The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV. 
  • The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares. 
  • The Company may charge expenses to capital which may erode the capital value of the investment. 
  • Derivatives may be used, subject to restrictions set out for the Company, in order to manage risk and generate income. The market in derivatives can be volatile and there is a higher than average risk of loss. 
  • There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value. 
  • As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen. 
  • Certain trusts may seek to invest in higher yielding securities such as bonds, which are subject to credit risk, market price risk and interest rate risk. Unlike income from a single bond, the level of income from an investment trust is not fixed and may fluctuate. 
  • Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.

Other important information:

Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG. abrdn Investments Limited, registered in Scotland (No. 108419), 10 Queen’s Terrace, Aberdeen AB10 1XL. Both companies are authorised and regulated by the Financial Conduct Authority in the UK.

Find out more by registering for updates. You can also follow us on social media: Twitter and LinkedIn.

FTSE 100 stumbles on weak manufacturing data

UK Investor Magazine
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FTSE 100 stumbles on weak manufacturing data

The FTSE 100 dipped on Tuesday after manufacturing data from the UK and Eurozone sapped confidence from markets, despite a roaring session in the US overnight.

The FTSE 100 was trading down 0.25% at 7,764 in early afternoon trade following news the UK and Eurozone manufacturing sector contracted, but at a slower rate than expected.

“It seems there’s no such thing as good news, as a brighter outlook painted by the PMI numbers for the eurozone also led to a slip in stocks. Manufacturing activity shrank the least in five months for the region, but the realisation is washing over investors that although this is certainly progress, there is still a long way to go at a time when a hawkish ECB is preparing to hike rates further,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

“The UK snapshot shows how low consumer confidence, widespread strikes and the ratcheting up in interest rates are clearly taking their toll, with business activity falling to a two-year low. The flash reading for January dropped more sharply than expected to 47.8 from 49, in December with below 50 indicating a contraction.’

UK-focused stocks such as the housebuilders and retailers were actually stronger on Tuesday, but those exposed to global growth felt the pain of mixed manufacturing data.

Miners were down heavily, as were the oil majors BP and Shell.

AB Foods

AB Foods were weaker on Tuesday after releasing a relatively upbeat set of festive trading figures. Revenue was 20% on an actual currency basis in the 16 weeks to 7th January, but a warning of future cost pressures evidently caused concerns among investors.

Strong US session

The softer session in Europe followed a strong session in the US driven higher by technology names including Meta, Tesla and Alphabet. US futures were falling going into the US open on Wednesday.

The disparity between the FTSE 100 and US stocks yesterday was reminiscent of the variability in performance last year when the FTSE 100 outperformed the major US indices significantly. 

UK stocks secured a rare outperformance compared US stocks in 2022 in the face of rising energy prices and economic uncertainty that favoured London’s defensive nature.

This is now showing signs of reversing with US tech storming ahead and the defensive attributes of the FTSE 100 becoming a drag on the index, compared to US counterparts.

AIM movers: Norman Broadbent

Andrew Hore
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AIM movers: Norman Broadbent

Shares in executive search firm Norman Broadbent (LON: NBB) jumped 42.9% to 5p on the back of a 27% increase in net fee income to £7.34m in 2022. The fourth quarter was stronger than the previous quarters and the new year has started well. This has enabled 2022 EBITDA of £100,00 compared with a loss in 2021. Sub-letting excess London office space is paying for a new Edinburgh office.

Some better news from Fire Angel Technology (LON: FA.) where the loss was reduced last year, even after higher procurement costs, and it expects significantly enhanced margins this year. The share price jumped 20.5% to 9.7p. That is the highest the share price has been since September when the interims were published.  The home safety products supplier increased 2022 revenues by nearly one-third to £57.5m. A further reduction in loss is expected this year with helpful currency movements providing potential for further upside.

Trading at energy supplier Yu Group (LON: YU.) continues to beat guidance. Liberum has increased its 2022 earnings forecast by 13% to 30.3p a share. Renewal rates have increased as customers seek to lock-in prices and margins have improved. The share price rose 9.72% to 700p, which is the highest it has been since 2018.

Broadcast software provider Pebble Beach Systems (LON: PEB) figures for 2022 were in line with expectations with pre-tax profit expected to be £1.7m. Recurring revenues have increased. The share price improved by 9.38% to 8.75p.

Positive interims from toilet tissue supplier Accrol (LON: ACRL) have sparked upgrades. Interim revenues were 64% ahead at £121.1m and pre-tax profit jumped from £500,000 to £3.2m. Zeus has increased its full year pre-tax profit forecast from £6.7m to £7m. There is still room for margin improvement. Net debt is expected to be £22.9m at the end of the financial year and it will fall rapidly from then on. The share price moved up by 7.18% to 31.35p.

Results from aerospace composites kits supplier Velocity Composites (LON: VEL) were as expected following the trading statement at the end of 2022. In the year to October 2022, revenues were 22% higher at £12m, while he loss was flat at £1.5m. A further loss is forecast for this year. The share soared on the back of the US deal with GKN Aerospace and there has been profit taking. The share price declined by 6.25% to 60p.

Yesterday Kropz (LON: KRPZ) reported the first bulk sale of phosphate concentrate from the Elandsfontein project. The share price rose from 3.55p, which is the all time low, to 4p, but today it has fallen back 6.25% to 3.75p.  

Revenues remain modest at diagnostics company Oxford Biodynamics (LON: OBD) even thought EpiSwitch CiRT prognostic test was launched in the US last February. Sales have started to build up so there should be a significant improvement this year on the 2021-22 revenues of £200,00. Pro forma cash is £10.3m following the October fundraising. The share price fell 5.24% to 14.475p.

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