BAE Systems shares rose on Tuesday as the defence group revealed strong orders in the second half and said they reached a milestone with the delivery of four Typhoon Jets to Qatar.
BAE Systems said their guidance for the year remain unchanged on a constant currency basis, but saw a tailwind in currency fluctuates.
Free cash flow for the year is expected to be in excess of £1bn and underlying EBIT is expected to be 10-12% higher than last year.
BAE also noted a number of contract awards from the US since their interim results.
BAE Systems shares were up 2.5% at the time of writing. The defence is company is one of the FTSE 100’s top performers so far in 2022 as the invasion of Ukraine by Russia drives interest in defence shares.
Indeed, the UK Prime Minister yesterday said he would be placing orders for five battleships with BAE as he discussed global tensions at the G20.
“There are a few things that BAE is beholden to, and one of those is government defence budgets. We’ve learned today that many of the countries the defence giant operates in are upping their defence spending in response to the more threating geopolitical climate,” said Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown.
“This should feed into a sticky source of revenue for the group. New government contracts tend to be long-term in nature, giving BAE exceptional visibility over demand, which is hard to find in today’s uncertain environment. Since the half year the defence group has seen £10bn of order intakes and profits on a constant currency are expected to come in in-line with expectations.”
Standard listed BSF Enterprise (LON:BSFA) reports that its subsidiary 3d Bio-Tissues has produced three small prototype fillets of cultivated meat, which is a step towards a full-scale cultivated meat fillet. The share price has risen by 68.2% to 9.25p on the back of the news, having been higher earlier in the morning.
The cultivated meat fillets were 30mm in height and 15mm in diameter and weighed 5 grammes. They were some of the first 100% cultivated meat fillets produced in the world. The comparisons with conventional meat were described as “comprehensively positive”. Two were pan-fried and they kept their shape with minimal shrinkage.
The company’s patented, serum-free and animal-free cell booster City-mix, which means that a plant-based scaffold is not required.
The first full-scale cultivated meat fillet should be showcased early next year.
Shell company BSF Enterprise acquired 3d Bio-Tissues in May. There was £1.75m raised in a placing at 7.37p a share at the same time. The share price is the highest it has been since just after the acquisition.
There have been many trades this morning. They have all been for less than £10,000 worth of shares.
Hutchmed (China) (LON: HCM) says there were positive results from a phase 3 clinical trial that combined its gastric cancer treatment fruquintinib combined with paclitaxel. There was a statistically significant improvement in progression-free survival. The share price jumped 11.6% to 183.2p on the news, but it is still two-thirds down on the start of the year.
Small company finance provider Time Finance (LON: TIME) rose 7.69% to 17.5p after non-executive director Ron Russell bought 344,821 shares at 17.4p each. He owns 12.2% of the company.
Final results from communications and events services provider Aeorema Communications (LON: AEO) show a return to profit on a 140% jump in revenues to £12.2m. Net cash inflow from operations was £922,000. The share price moved 5.26% higher at 80p, which values the company at £7.36m.
Shares in Alba Mineral Resources (LON: ALBA) rose 6.52% to 0.1225p after its 54%-owned investee company GreenRoc Mining (LON: GROC) said that the latest drilling results at the Amitsoq graphite project in Greenland confirm exceptional grades. GreenRoc Mining shares improved 6.02% to 4.4p.
Maritime location systems developer SRT Marine (LON: SRT) interim revenues soared on the back of two major systems contracts getting underway. There will be a further large increase in the second half and SRT Marine is on course to return to profit. A small contract won last week could lead to a much larger one in the future. There is a pipeline of potential contracts. The share price has been strong recently and rose a further 6.04% to 48.25p
Trading in Joules Group (LON: JOUL) shares was suspended at 9.22p this morning. Interpath Advisory will be appointed as administrator to the group. Attempts to secure bridging finance were unsuccessful.
Third quarter revenues of programmatic advertising services provider Tremor International (LON: TRMR) were below expectations and finnCap has reduced its full year forecast. Forecast 2022 earnings have been cut from 65.3 cents a share to 53.9 cents a share. Expected cost savings have been increased from $50m to $65m a year. The share price slumped 26.3% to 279.2p.
Tanzania-focused Shanta Gold Ltd (LON: SHG) has decided not to continue merger discussions because the potential deals did not work for the company. Shanta believes it can achieve gold production of 100,000 ounces in 2023. The share price has fallen back 12.6% to 9.4p.
Mobile Streams (LON: MOS) has signed a 5-year contract to provide NFTs for LPGA golfer Gaby Lopez, who will receive an initial cash payment and $10,000 of shares. The target revenues over the length of the contract are $3.6m. The shares declined by 6.06% to 0.155p.
Arkle Resources (LON: ARK) raised £200,000 at 0.4p a share and the cash will fund the drilling programme for the Stonepark zinc joint venture in Limerick. The share price fell 4.55% to 0.525p.
The FTSE 100 was up 0.4% at 7,346 while S&P 500 futures dipped 0.35% to 3,984. The tech-heavy NASDAQ rose over 7% last week and futures were down 0.55% on Monday.
“The burst of euphoria which erupted over US markets and spread more widely at the end of last week is ebbing away after fresh warnings that the fight against inflation is still a hard slog yet to be won,” said Susannah Streeter, senior investment and markets analyst Hargreaves Lansdown.
“This latest reminder comes from US Federal Reserve Governor Christopher Waller, who said at a conference in Sydney that the endpoint to rate increases is likely ‘ways off’.”
Analysts also once more raised the question of whether the recent gains in stocks were simply a ‘bear market’ rally that could be sold in to.
“The risk with any sudden surge in the stock market amid headwinds such as rising inflation and higher interest rates is that it is a short-lived event,” said Russ Mould, investment director at AJ Bell.
“It’s common to see a bear market rally when stocks are down, but they often cannot be sustained. To see many stocks and shares move higher for the second week in a row is encouraging but it’s too early to declare this a bona fide recovery rally.”
Frasers Group
Frasers Group was one of the biggest fallers on Monday on reports the retailer could be eyeing up Saville Row tailor Gieves & Hawkes. Frasers Group is famous for buying up distressed retail companies and Gieves & Hawkes fits the bill, albeit in a slightly different area of the market they are known for.
Frasers Group was down 6.9% at the time of writing.
Informa shares jumped 6.5% and were the FTSE’s top riser following a racketing up of full year revenue and profit targets.
The lack of capacity in the UK grid and difficulties connecting clean energy technology to the grid is one of the biggest hurdles in our race to low carbon power supply, according to Jonathan Hick, Fund Manager at Triple Point.
The need to adopt greater levels of renewable power has never been more prevalent. The impact of geopolitical events and tragic global weather disasters has exposed weaknesses in our energy supply security, and highlighted the catastrophic effects of rising temperatures.
However, the UK’s power infrastructure is not yet capable of facilitating the necessary connections, or able to transmit the additional power, from renewable sources.
Triple Point Fund Manager, Jonathan Hick, alluded to the deficiencies at the UK Investor Magazine Virtual Investment Trust Conference.
Mr Hick manages the Triple Point Energy Transition trust which invests in a diverse range of renewable power assets including hydropower, battery storage and low carbon gas facilities.
The Triple Point trust’s ‘holistic’ investment approach ensures they have exposure across the entire renewable power supply chain, from generation through to consumption.
UK Grid Upgrades
The UK government’s incoherent policy on renewables has seen measures to ban more onshore wind farms and lacks any meaningful plan to increase low carbon energy supply.
Such a scenario seems ridiculous in the current climate, but the realities are the current infrastructure of the UK grid does not have the capacity for new large scale renewable projects.
According to Jonathan Hick, the manufacture of a wind turbine would take around a year, but the necessary connections points to feed the power into the grid won’t be available for up to 7 years.
So, if Rishi Sunak was to tomorrow back up his recent comments at COP27 with a legislative agenda that saw the commissioning of large scale onshore and offshore wind facilities, or help to increase the number of solar plants, the grid is not ready to take the power.
For example, National Grid says they have seen a quadrupling of connection applications in the last four years in the Midlands and Mid-Wales region and the earliest connection date is now 2030.
This means with all the will and money in the world to invest directly into new renewable facilities in this particular region, we wouldn’t be able to increase the UK’s power supply for 8 years – over that already agreed.
This isn’t to say there isn’t progress being made. This region has 17 gigawatts of contracted connections over the next decade, most of which is solar.
As new connections are agreed, enabling works to increase the capacity of the network are required. These could be additional overhead lines, underground cables and general reconductoring work.
National Grid say they will invest £40 billion in the critical clean energy infrastructure between 2022 and 2026 but it’s not clear what impact that will have on the capacity for additional clean power connections.
The current scenario means opportunities are being created in downstream clean energy infrastructure such as clean power storage and distribution, rooftop solar, and EV charging points. This supports Triple Point’s holistic approach to the energy transition.
ONDO reported its first interims to August since listing in March at 12p having raised over £3m to develop its claims prevention technology for home insurers. Comparison with its former self as part of the larger HomeServe are awkward, although the 55% headline increase in revenue to £1m suggests progress. The shares are unchanged at 7.5p with a MKt Cap of £5m although due buyout from Homeserve there is £6.5m of ‘sweetheart’ debt that can be converted but gives an Enterprise Value of £9.6m as net cash is £1.9m.
Ondo owns LeakBot, which can detect a water leak anywhere in a house when...
The interim results for the six months to end September reported a substantial uplift in the group’s prospects.
The £82m capitalised company, which is based near Bath, is the global leader in Automatic Identification Systems based maritime domain awareness technologies, products and systems, which are used for vessels, ports, environment agencies, fisheries, and coast guards that deliver enhanced monitoring, surveillance, safety and security.
It markets its ranges across the globe to port owners and operators; and national authorities such as national defence agencies, fishery ministries, navies and coast guards who require sophisticated maritime surveillance and monitoring systems.
Excellent interims point to recovery continuing apace
For the six months to end September the group has reported £18.8m in revenues, up from £4.7m previously, while pre-tax profits came out at £2.1m compared to a £3.1m loss last time, with earnings of 1.17p (1.91p loss) per share.
Commenting upon both the business divisions performing well, CEO Simon Tucker stated that the trend is expected to continue going forward driven by the fundamental demand for maritime domain awareness. He went to note that
“Our systems business is now busy delivering on existing projects, preparing for new projects that we expect to come under contract in H2, as well as progressing a growing list of future prospects.”
Analyst Opinion – 100p Target Price plus new contracts
At finnCap, the company’s brokers, its analysts Lorne Daniel and Kimberley Carstens have fixed a Target Price of 100p against the current 45.5p.
They estimate that the group could see a major increase in current year revenues, to end March 2023, of £56.6m (£8.2m), with adjusted pre-tax profits of £6.8m (£6.4m loss) and generating earnings per share of 3.8p (3.3p loss).
They stated that after securing a small new coastguard deal last week, management continues to expect significant new Systems contracts to be announced in the coming months; five in particular worth £200m are currently in the final stages of lengthy contracting processes.
Conclusion – 27% gain in last two weeks – now to 55p?
At the end of last month we concluded that the shares of SRT Marine Systems, then just 35.75p, were for buying.
Although the group’s shares are now up over our initial 45p price aim in just two weeks, a near 27% gain in a very short period, we reckon that there is a great deal more left in this company’s upside.
Reflecting the group’s potential, perhaps a recovery to 55p, the pre-Pandemic share price level, is very possible in 2023.
Tekcapital’s portfolio company Guident has announced another major milestone in the development of their electric autonomous vehicle technology with their selection to provide an autonomous shuttle service is Florida.
Guident has developed autonomous vehicle technology that utilises a Remote Monitor and Control Center (RMCC) to meet the safety requirements of autonomous vehicles.
Guident will implement this technology at the Boca Raton Innovation Campus (BRiC) in Florida and deliver a 2-mile autonomous vehicle shuttle service that will connect the most frequented station in South Florida to the campus.
“We are delighted to have been selected to provide an autonomous and remotely monitored shuttle service for the Boca Raton Innovation Campus. The campus’ historic past and promising future make the perfect fit for our technology,” said Harald Braun, Chairman & CEO of Guident Ltd.
The Boca Raton campus was originally built in 1969 for IBM’s Research and Development and is home to the world’s first computer.
“We are pleased to have executed a letter of intent (LOI) with Guident to have them provide our autonomous and remotely monitored shuttle service throughout BRiC,” said Michael Perrette, General Manager of CP Group, the owner-operator for BRiC.
“Innovation and sustainability are driving forces for our business model. We look forward to partnering with Guident to contribute to these goals and the use of autonomous vehicle technology in the 21st century.”
Igraine (LON: KING) says Conduit Pharmaceuticals is reversing into Nasdaq-listed Murphy Cannon Acquisition Corp. This will provide nearly $150m of funding for Conduit. Via a 2% stake in Excalibur Medicines, Igraine has an economic interest in AZD1656, which is a potential diabetes treatment, one of the assets of Conduit. Excalibur Medicines has exclusive rights to the patents on AZD1656. The Igraine share price jumped 20.7% to 0.875p.
Gunsynd (LON: GUN) investee company Rincon Resources says a preliminary report highlights similarities between its Pokali prospect and a nearby niobium rare earth discovery. The Gunsynd share price rose 12.5% to 0.45p.
EPE Special Opportunities (LON: EO.P) announced net assets of 239.2p a share at the end of October 2022, down from 242.3p a share the month before. Even so, the share price rose 7.69% to 140p.
Guanajuato Silver Company Ltd (LON: GSVR) has discovered a new transverse vein at the El Cubo mine in Guanajuato, Mexico. This has been named the San Luis vein. The company has been reinterpreting previous data. This vein is likely to have a higher gold component than the primary structures. Vein widths are close to one metre or above. The share price improved 3.64% to 28.5p.
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Fallers
Goodbody Health Ltd (LON: GDBY) shares slumped 37.5% to 3.75p on the week. The full year outcome will be worse than expected. Third quarter figures showed a 6% decline in revenues to £9.29m due to reductions in Covid testing revenues, while margins declined. The loss nearly doubled to £1.67m. The cost base is being reduced.
Valereum (LON: VLRM) continued to decline following the previous week’s news that it gained regulatory approval for the acquisition of the Gibraltar Stock Exchange and the deal should be completed in the first quarter of 2023. There was £132,000 of the funding facility converted into shares at 10.8769p a share. The share price fell by a further 20.7% to 10.9p.
PayPoint (LON: PAY) is bidding for Appreciate (LON: APP) in a deal that values the prepaid vouchers and Christmas savings group at £83m – based on a PayPoint share price of 580p. The offer is 33p in cash and 0.019 of a PayPoint share for each Appreciate share. A 0.8p a share dividend will also be paid to Appreciate shareholders. The PayPoint share price has fallen to 547p, so the bid is not worth quite as much now. PayPoint believes the acquisition will be earnings enhancing. The Appreciate share price has jumped 60.1% to 41.7p.
Schroders has been building up its stake in musicMagpie (LON: MMAG) from 10.1% to 12.4%. This sparked a 58.9% share price increase to 16.05p. The April 2021 flotation price was 193p. The company has completed the roll out of SMARTDrop Kiosks in Asda stores. There are 290 stores with kiosks providing a way of recycling mobile phones.
Biome Technologies (LON: BIOM) increased third quarter revenues by 77% to £1.9m. Both bioplastics and radio frequency divisions grew. Even so, Biome is being more cautious about pre-commercial customer projects and full year revenue expectations have been trimmed from £6.8m to £6.29m, which is still higher than the £5.73m generated in 2021. A full year loss of £1.1m is forecast. The share price jumped 50% to 72p.
Harland & Wolff (LON: HARL) has secured a debt refinancing term sheet with Astra Asset Management. This would increase the available facility from £70m to £100m. The initial period would be two years. Financial close should be before the end of the year. This will provide working capital for large contracts. There has been a delay to the hearing date of the proposed Islandmagee gas storage project. Even so, the share price rose by 44.5% to 8.96p.
Further director buying at Inspecs (LON: SPEC) has helped the share price recover 43.8% to 69p. Chief executive Robin Totterman bought 850,053 shares for his pension fund at 47p each. He owns 18.3%. He sold 6.3 million shares at 195p each when the company floated in early 2020. The eyewear supplier warned about weak trading a fortnight ago.
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Fallers
Companies that are running short of cash are finding it increasingly difficult to raise money and they are dominating the fallers this week. Applied Graphene Materials (LON: AGM) and PCF Group (LON: PCF) have both been hit by sharp share price declines due to failure to secure cash. Applied Graphene Materials has not been able to raise cash from a share issue and more cash will be required at the beginning of 2023. The share price fell 61.2% to 4.75p. PCF Group has also been unable to raise money or secure a strategic transaction, so PCF Bank is withdrawing from the UK banking market. The PCF board wants shareholder approval for the cancellation of the AIM quotation. The PCF share price is down by 63.1% to 0.6p this week.
Sareum (LON: SAR) says the UK authorities have not approved the proposed SDC-1801 clinical trial. A further review of non-clinical data is likely to be required so the safety and tolerability trial will not happen this year. The shares declined 34.5% to 90p.
Fashion brand Joules Group (LON: JOUL) is still assessing financing options, which includes CVA planning. Joules says trading for the eleven weeks to 30 October 2022 and working capital is worse than expected. Bridge financing is required. Outerwear and knitwear sales have been hit by milder weather. Online sales have been weak, but store sales are slightly better than expected. Higher levels of promotion have held back margins. Net debt was £25.7m at the end of October 2022, which leaves little headroom after other requirements. The share price slumped 32.7% to 9.22p.
