Kinovo continues to improve performance

Andrew Hore
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Kinovo continues to improve performance

Compliance and maintenance services provider Kinovo (LON: KINO) continues to improve its profit in the six months to September 2022 and it has a strong order book.

Three-year visible revenues total £146m, which includes contracts and predictable spend. That underpins around 90% of the 2022-23 forecast revenues of £62.1m.

Revenues improved by one-quarter to £29.8m in the first half. Margins continue to rise with underlying pre-tax profit recovering from £1.61m to £2.1m. Cash generation was strong even though delayed VAT payments had to be made in the period.

The changes in regulation over the next 18 months provide further growth prospects. Fire safety legislation has recently come into force and the building inspector and building control approver registers will start in April 2024.  

Financing

Net debt has fallen to below £100,000. However, in the short-term debt will increase again because of the requirements to finish contracts that are part of DCB, which was sold and then went into administration. Part of the deal was that Kinovo would guarantee the completion of projects. This could cost a total of £4.3m.

Net debt could reach £1.7m at the end of March 2023. If Kinovo achieves its forecasts, then there could be net cash by March 2024.

Canaccord Genuity forecast that pre-tax profit should improve from £3.8m to £4.8m. A further improvement to £5.6m is expected in 2023-24. Inflation of wages and other costs is a challenge, but Kinovo has managed to cope with this so far.

At 36p, the forecast multiple is six. That reflects the DCB overhang. If this can be paid for out of cash generation then investors will come round to the shares given the low rating.

RM sells non-core operations

Andrew Hore
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4
RM sells non-core operations

Educational supplies company RM (LON: RM.) is disposing of two non-core businesses that are part of its RM Technology division to The Key for up to £16m. This will help to bring down net debt.
The businesses RM is selling (RM Integris and RM Finance) have technology that is used by single-site primary schools. The customer base is increasingly multi-academy trusts and investment would be required to update the technology. The Key has been building market share for single sites. The move in the education market should benefit other parts of RM.
The businesses generated operating profit of £2.1m...

AIM movers: Windar Photonics returns from suspension and Inspiration Healthcare slides

Andrew Hore
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6
AIM movers: Windar Photonics returns from suspension and Inspiration Healthcare slides

Windar Photonics (LON: WPHO) shares returned from suspension after it published its 2021 accounts and 2022 interims after the market closed on Friday. The share price doubled to 16p. Windar Photonics has raised £1.8m at 15p a share. The wind turbine optimisation technology developer remains loss making.

C4X Discovery (LON: C4XD) has signed an exclusive worldwide licence deal with AstraZeneca that could be worth up to £402m. This relates to the use of the NRF2 activator programme to develop an oral therapy for the treatment of chronic obstructive pulmonary disease. There is an upfront payment of $2m with up to $14m more receivable for pre-clinical milestones. The hare price improved by 26.8% to 26p.

Energy supplier Yu Group (LON: YU.) says 2022 figures will be much better than expected with revenues expected to grow by 67% to £260m. This strong trading will continue into 2023. EBITDA margins are expected to exceed the 2.1% reported in the first half. Net cash will also be better than expected. The share price rose by 14.7% to 390p.

Anglesey Mining (LON: AYM) says a review of the Northern copper zone at the Parys Mountain copper zinc lead project in Wales shows a large body of copper mineralisation. Further drilling is planned over the next year and this zone could be more important than previously expected. The share price is 9.3% higher at 2.35p.

Inspiration Healthcare (LON: IHC) says that it expects 2022-23 revenues to be similar to the previous year because of market uncertainty, particularly in China. Cenkos has reduced its forecast revenues from £45m to £41.1m. Because the reduction relates to higher margin products it means that pre-tax profit will dive from £3.96m last year to £540,000 this year. The share price slumped 28.8% to 59.5p.

On Friday evening, energy efficiency as a service provider eEnergy Group (LON: EAAS) raised £2.525m of subordinated debt lasting until 2024, which was issued at a discount. That discount equates to 2% repayment fee and 1.25% interest each month. The 2021-22 figures were announced at the same time and were in line with the previous trading statement. Net debt was £3.2m at the end of June 2022. First quarter revenues were 90% ahead at £7.6m. The share price dived 17.5% to 4.95p.

Condor Gold (LON: CNR) has issued £1m of convertible loan notes to a company related to its chairman Jim Mellon. The conversion price is 15p and this will happen if an open offer raises at least £1m for other shareholders. There are also 2.5 warrants exercisable at 15p for each converted share. The one-for-six open offer at 15p a share could raise up to £3.2m. A reduction in the nominal value of the shares from 20p to 1p is required to issue the shares. The share price slipped 11.8% to 18.75p.

Digital health technology company Induction Healthcare (LON: INHC) increased revenues in the year to March 2022, helped by acquisitions, but the loss also increased from £8.12m to £9.57m. The latest interims will be released on 5 December. The share price fell by 11% to 32.5p, which is not much higher than the all-time low.

5 Things Moving Markets 28th November

UK Investor Magazine
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5 Things Moving Markets 28th November

Chinese protest dents sentiment

Widespread protests in China hurt investor sentiment on Monday as Chinese citizens came out on to the streets in major cities. Protests are not unheard of in China, but the calls for the Communist party and leader Xi Jinping to step down have grabbed the world’s attention. Long lockdowns and deaths from a fire in a Chinese tower block have sparked unrest across China’s major cities.

Oil prices fall

Oil sank with risk sentiment on Monday with WTI trading down to $74 and Brent Crude $81.

FTSE 100 miners dip

The FTSE 100’s miner’s profits are inextricably linked to Chinese growth and the weekend’s developments will raise questions about the performance of country’s economy in the coming months.

7Digital wins contract with Pinterest

7Digital has won a contract with global social media company Pinterest to support content creation by allowing 7Digitial’s music service to be accessible through Pinterest’s library.

The dollar gains

The dollar gained against most major currencies as traders bought into the safe haven of the greenback in the face of uncertainties presented by China.

Superdry confirms possibility of replacing £70m funding facility

Mark Watson-Mitchell
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5
Superdry confirms possibility of replacing £70m funding facility

The Cheltenham-based ‘cool’ clothing group has confirmed that talks are underway with the Elliott Advisers-backed Bantry Bay Capital to help the refinance the £70m asset-backed facility that has to be completed in January.

Superdry (LON:SDRY) designs trend-setting affordable, premium quality clothing, accessories and footwear and its products are sold globally.

With some 695 branded stores, 220 physical stores and 475 franchisees and licensees, spanning 50 countries and employing some 4,000 people globally, the group has a strategy for delivering continued growth through its multi-channel approach that combines operating Stores, its Ecommerce sites, and through offering Wholesale.

The company has a declared mission “To be the #1 sustainable style destination” through its very distinct collections and defined by consumer style choices.

The group currently has an Asset Backed Lending Facility of up to £70m which is due to expire at the end of January 2023.

As of the end of October the group had only drawn down £45.3m of that facility, while current projections suggested the group would remain cash positive throughout most of the first half of the calendar year. 

With the early October Final Results Statement the company reported that it had positive discussions with prospective lenders but had not yet secured committed funding beyond January. 

Until those discussions conclude, the Directors stated that a material uncertainty exists around the going concern of the group, although they remained confident of a positive outcome.

Bantry Bay is a London-based specialist lender providing commercially-driven and creative debt capital solutions to corporates undergoing change.

The Elliott Advisors supported company focuses on asset-based financings, ranging from £10m to £100m+, for corporates underserved by the mainstream debt market, across a wide array of industries.

During the summer it was involved in a £60m facility out to Matalan, while it is said to be involved currently in discussions to fund some £35m to the Wilko retail chain.

The £104m capitalised Superdry group’s shares responded rapidly to the news with a heavily traded 4p rise to 130p.

Aquis weekly movers: One Health Group makes debut

Andrew Hore
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5
Aquis weekly movers: One Health Group makes debut

One Health Group (LON: OHGR) joined the Apex segment of the Aquis Stock Exchange on 24 November. The NHS-funded medical procedures provider raised £1.56m at 150p a share, giving One Health Group a market capitalisation of £15.1m. The share price ended the week at 156.5p. Demand for the company’s services should continue to be strong as the NHS tries to reduce the backlog of operations. In the six months to September 2022, revenues were £9.7m. The plan is to pay 50% of post-tax profit in dividends. Net cash was £3.68m at the end of March 2022. The additional cash will provide working capital.

Diesel additives supplier SulNOx Group (LON: SNOX) has appointed Steele Environmental as a US distributor for shipping markets and land-based transportation and revealed a positive evaluation with Caspian Marine Services. The share price rose 7.69% to 14p.

A company owned by NFT Investments (LON: NFT) chairman Jonathan Bixby and non-exec Mike Edwards have has acquired 20 million shares at 0.8p a share. The uncertainty around cryptocurrency and NFTs has hit the shares, which rebounded 2.7% to 0.95p – still three-fifths lower than at the start of 2022.

Marula Mining (LON: MARU) has increased its stake in the Blesberg lithium mine from 5% to 100%. The cost is $1.7m. This is subject to regulatory approval. Mobile mining equipment and the majority of processing equipment is on the site and the infrastructure is being upgraded. First deliveries of lithium ore are expected in December. The share price increased by 2.08% to 2.45p.

Finance boss Rob Smith has purchased 724,503 Chapel Down Group (LON: CDGP) shares at 25.5p each. The share price rose 1.92% to 26.5p.

Electric vehicle drivetrains developer Equipmake Holdings (LON: EQIP) edged up revenues by 3% to £3.71m in the year to May 2022. A much greater proportion of the revenues came from commercial and production contracts. The loss was more than trebled to £5.2m. There was still £1.88m of cash in the balance sheet and since then it raised £10m gross at 4.25p a share in its Aquis flotation. A partnership with an electrical aerospace specialist will generate initial orders for prototypes worth £400,000. The share price improved by 1.89% to 6.75p.

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Fallers

EDX Medical (LON: EDX) shares have fallen back 2.38% to 5.125p this week. The reversal was done at 6p a share. EDX announced a collaboration for the European cancer biomarker programme with Tianjin Bioscience. This should result in the development of cost-effective cancer tests.

Good Energy (LON: GOOD) was one of 17 energy suppliers criticised by Ofgem for failing vulnerable customers. Good Energy was one of five deemed to have severe weaknesses, such as setting debt repayments too high. The share price fell 1.25% to 197.5p.

AIM weekly movers: Increased share trading at Mobile Tornado

Andrew Hore
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3
AIM weekly movers: Increased share trading at Mobile Tornado

Trading in Mobile Tornado (LON: MBT) shares increased to levels not experienced since April and this pushed up the share price by 94.7% to 1.85p (1.7p/2p). On Thursday, there were 1.63 million shares were traded on Friday this rose to 5.24 million shares. This was still a small number of shares in relation to the issued share capital. There were no individual trades worth more than £10,000. Mobile Tornado has announced that it is entering the Guatemala and El Salvador markets.

Real Good Food (LON: RGD) has secured additional financing of £2.5m from Hilco Private Capital. This lasts for 12 months and is in addition to the £6.3m from the Leumi ABL. This will help to fund restructuring and cost reduction. Gail Lumsden is leaving the board in February and a replacement non-exec is being sought. The share price recovered 76.2% to 1.85p.

Semiconductors supplier EnSilica (LON: ENSI) says that it is trading in line with expectations. The order book and pipeline should ensure further growth in future years, as well as sharp improvements in profitability. The share price increased 54.1% to 75.5p. EnSilica joined AIM in May at 50p a share.

Zanaga Iron Ore Company (LON: ZIOC) says it is acquiring a controlling shareholding in the Zanaga iron ore project from Glencore Projects in return for the issue of shares that will give Glencore a 48.26% stake. Glencore can appoint two directors and has to retain the shares for six months. Glencore has exclusive marketing rights for the iron ore produced at the mine. A general meeting will be held on 13 December to gain shareholder approval for the deal. The Zanaga Iron Ore share price rose 43.3% to 4.5p.

North Sea oil and gas company IOG (LON: IOG) has restarted production from both Blythe and Elgood gas fields into the Saturn Banks pipeline system. The Southwark gas field should be linked up to the pipeline by the beginning of next year. The share price jumped by 42.5% to 16.1p.

DeepMatter Group (LON: DMTR) plans to cancel the AIM quotation because management believes that it will be easier to raise cash as a private company. The digital chemistry data analysis business. Says major shareholders support the plan. DeepMatter wants to raise £1m before leaving AIM and then a larger amount after the departure. This year’s revenues will be at least £1.5m.  The share price slumped 62.5% to 0.045p.

Shares in Myanmar Investments International (LON: MIL) are rarely traded, but last week there was an uptick in activity, and this knocked 45.5% off the share price to 9 cents. The largest trade was in 200,000 shares at 5 cents each.

Drilling delays at five development Russian wells has hit the Petroneft Resources (LON: PTR) share price, which fell by two-fifths to 0.45p. The oil and gas company could not obtain the finance required.

Molecular diagnostics company Genedrive (LON: GDR) generated revenues of £49,000 in the year to June 2022 and the cash burn averages £400,000 each month. Net cash was £3m at the end of October. Genedrive is seeking additional funding to enable it to grow revenues. The share price fell 29.4% to 9p.

Osirium Technologies (LON: OSI) is raising £1.53m at 2p a share. The share price slumped 28.7% to 2.85p. This cash will provide additional working capital and help the cyber security business reach cash breakeven earlier than previously expected. Annualised cost savings of £1m have been identified and £650,000 of these have already been implemented. Sales director Stuart McGregor is replacing chief executive David Guyatt and he will become executive chair instead. Allenby has increased its forecast 2022 revenues to £1.8m and slightly reduced the expected loss to £3.22m. Osirium will go back into net debt during 2023.

SSE agrees sale of 25% stake in transmission business

UK Investor Magazine
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3
SSE agrees sale of 25% stake in transmission business

SSE has agreed the sale of a 25% stake in their SSEN Transmission business to Ontario Teachers’ Pension Plan Board in a £1,465m deal.

SSE says the sale will help boost the growth of the network and provide an opportunity to invest in SSE’s other core businesses.

Investment in electricity transmission is key to achieving net zero targets. As an integral element of the energy supply chain, transmission infrastructure facilitates the distribution of renewable energy generation. If transmission capabilities are not improved in the UK, additional renewable power will struggle to reach people’s homes.

“We are delighted to agree a transaction that will help unlock the full potential of our growing electricity transmission business, which remains core to our strategic direction as a clean energy champion specialising in electricity infrastructure,” said Gregor Alexander, Finance Director of SSE.

“As we set out in our Net Zero Acceleration Programme last year, due to the scale of potential growth and the associated investment required across SSE’s businesses, including in electricity networks, bringing in minority partners will balance capital allocation and support further growth, creating greater long-term value for all our stakeholders. 

“In Ontario Teachers’ we have a strong long-term partner who we have worked with successfully over the past 18 years and, whilst we will retain operational control, they will be critical to SSEN Transmission’s ongoing future success.”

FTSE 100 grinds higher in thin trade, housebuilders fall

UK Investor Magazine
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3
FTSE 100 grinds higher in thin trade, housebuilders fall

Thanks Giving in the United States typically reduces volumes in markets with traders away from their desks. This year has been no expectation.

European indices took the reduced liquidity as an opportunity to grind higher yesterday, and these gains continued into Friday’s session. 

The FTSE 100 was 0.3% higher while European indices were broadly flat, although in positive territory.

After Federal Reserve minutes on Wednesday, analysts at AJ Bell highlighted a subtle shift in markets that are now becoming slightly more optimistic we could be approaching an inflection point after a year of tighter monetary conditions.

“Investors might not realise it, but we’ve just had an important week in terms of the potential direction of markets going forward. Signs that the Federal Reserve might slow down the pace of interest rate hikes is the first step towards the pivot in strategy desired by so many investors,” said Russ Mould, investment director at AJ Bell.

China

As political disruption in the UK and the US midterms fade into the rear view mirror, China has increasingly stole investors attention as the world’s second largest economy battles with COVID.

Rumours the Chinese authorities were considering the end of their Zero Covid policy have been quickly followed by reports of empty subways and deserted streets in China’s largest cities.

Nevertheless, investors have been betting on a response from China by buying into Chinese stocks and have been rewarded with a cut in the Chinese RRR to help stimulate the economy.

The cut will unleash billions of yuan into the system and ease financial conditions ready for the resumption of normal activities. 

The FTSE 100’s China-exposed stocks provided little reaction to the news with miners and Asia-focused banks such as HSBC and Standard Chartered hardly moving. These sectors have moved higher in recent weeks and the move to ease by China is largely priced in.

UK Housebuilders

The UK housebuilders were among the FTSE 100 worst performers after Berenberg cut their price forecasts in a bearish note.

“It has slashed pre-tax profit forecasts for the sector by 40% on average, saying a trough in earnings won’t happen until 2024. This may surprise investors who took the view that so much potential bad news was already factored into the value of housebuilders’ shares,” Russ Mould said.

AIM movers: finnCap ends merger talks and IOG recommences North Sea production

Andrew Hore
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5
AIM movers: finnCap ends merger talks and IOG recommences North Sea production

finnCap (LON: FCAP) has ended bid talks with fellow broker Panmure Gordon. It was not possible to find a mutually acceptable structure or terms for the merger. The finnCap share price dived 21% to 14.625p. finnCap will report its interim figures in December.

Trading in Thor Mining (LON: THR) shares has been suspended on the ASX ahead of a fundraising, but trading continues on AIM and the share price has fallen by 11.1% to 0.4p. Thor Mining will use the cash to accelerate the exploration activity in its uranium projects in the US. Drilling has commenced at the Wedding Bell project in Colorado, US. Some cash will go on the Ragged Range gold lithium nickel project in Western Australia. This follows news of a farm-in agreement for the non-core Molyhill project in Australia.

Fuel technology developer Quadrise Fuels International (LON: QFI) continues to make progress in its strategy to generate commercial revenues in the year to June 2023. The share price declined 4.71% to 2.43p.

LED lighting and electro-mechanical systems manufacturer LPA Group (LON: LPA) says trading improved in the second half. Increased prices and supply problems are still hampering progress, but the problem is being managed. There should still be a small trading loss for the year. The order book is worth £28m. Earlier this month, Peter Gyllenhammar increased his stake from 18.4% to 19.2%. There was a 3.36% dip in the share price to 72p.

North Sea oil and gas company IOG (LON: IOG) has restarted production from both Blythe and Elgood gas fields into the Saturn Banks pipeline system. The Southwark gas field should be linked up by the beginning of next year. The share price jumped by 42,8% to 16.775p.

Tertiary Minerals (LON: TYM) has received government approval for the earning of up to a 90% interest in the Konkola West and Lubuila copper projects in Zambia. The share price rose by 16.2% to 0.215p.

Omega Diagnostics (LON: ODX) has received the £4m deferred consideration for the sale of the CD4 business. Net cash is expected to be £6.2m by the end of March 2022. This can be used to expand the health and food intolerance operations. The US is a market where more investment is planned. Omega Diagnostics remains loss making but could move into profit in 2023-24. The share price improved by 6.94% to 3.85p.

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