RM still has its fans

Andrew Hore
-
5
RM still has its fans

Educational supplies company RM (LON: RM.) disappointed investors with a profit warning on Monday. The share price slumped 24.3% to 20.6p, which values the company at £17.3m. This was not a total surprise to one shareholder, though.
RM Technology, which provides managed IT services to schools and colleges, and RM Assessment, which provides assessment and marking software for exam bodies and governments, are trading well. However, RM Resources, which supplies education products to primary and secondary schools, is still finding trading difficult because of a botched ERP software installation. T...

Attractive income opportunity

Andrew Hore
-
3
Attractive income opportunity

Growth is not everything when it comes to assessing an investment. Even a business where profit is flat can be attractive at the right price. This is particularly true if it is able to pay an attractive and well-covered dividend.
A strong market position with long-term contracts provides some security for revenues even if the company’s market is on the decline. Investors understand this and will discount the share price and give the shares a low rating. However, sometimes this pessimism can be overdone by investors and that provides an opportunity.  
This is true of the newspaper and maga...

Softbank sells THG stake

Andrew Hore
-
5
Softbank sells THG stake

Softbank has sold its entire holding in online retailer THG (LON: THG) to Qatar holding and founder Matthew Moulding at a large loss. The sale price is 39p a share. The current share price is 45.84p, up 5.25p on the day, valuing THG at £649m. That is less than estimated NAV of £1.47bn.

Softbank owned 7.09% of THG. Qatar Holding will buy 67.8 million shares and Matthew Moulding 12.8 million via FIC Shareco Ltd.

Matthew Moulding raised £10.8m from share sales in May 2021 and January 2022. There were 7.3 million shares sold at much higher share prices. He has subsequently bought shares worth £2.73m prior to the latest purchase, which costs £5m.

In September, THG warned that its margins are worse than expected. A loss of £175m is forecast and a loss of more than £100m is expected for each of the following two years. Net debt of £351m is forecast for the end of 2022.

Seraphim Space IT’s unwarranted discount

Andrew Hore
-
9
Seraphim Space IT’s unwarranted discount

Seraphim Space Investment Trust (LON:SSIT) has managed to grow its portfolio value slightly since floating in July 2021, but the share price has slumped from the offer price of 100p to 51.8p, down 1.25p on the day.

NAV increased from £175.1m at the time of flotation to £239.3m at the end of June 2022, while net assets per share are 99.97p. That means that the 4.3% increase in fair portfolio value to £186m almost covers float costs and the costs of running the investment trust. There was a decline in portfolio value during the fourth quarter because of a fall in the share prices of quoted investments.

There was £57.7m available for further investment and £8.9m has been subsequently invested in three new and four follow-on investments. There is no lack of opportunities.

New investments include Voyager Space Holdings, which wants to build a commercial space station, and Taranis, which uses earth observation data to optimist crop yields.

There are 26 companies in the portfolio. Most of the investments are unquoted, so there is not likely to be any short-term movements unless there is a fundraising.

Seraphim Space IT has always been a long-term investment and many investee companies will not be successful. There was always a higher level of risk than for a standard investment trust. The fund managers are in a strong position to pick some companies that will prosper and push the share price ahead over the coming decade. There is an opportunity to gain exposure to space investments at a significant discount.

EnSilica forecasts upgraded

Andrew Hore
-
10
EnSilica forecasts upgraded

Semiconductors designer EnSilica (LON: ENSI) generated more than 50% of its revenues from its design and supply division for the first time last year. Figures for the year to May 2022 were slightly better than initially expected and forecasts have been edged up.  

EnSilica joined AIM at the end of May, so these figures cover a period before it raised £6m at 50p a share. Revenues increased from £8.61m to £15.3m with design and supply’s contribution jumping from £2.82m to £8.02m. This is down to contracts starting to move from the design to supply stage. Consultancy and IP licensing operations also grew their contribution, but this contribution is likely to reduce over the coming years.

A loss was turned into a pre-exceptional profit of £165,000. That is before R&D tax credits of £683,000. EnSilica capitalised £2.2m of development spending last year.

The semiconductors are specifically designed for a customer, which would fund the design phase and buy them from EnSilica – although manufacturing is outsourced. EnSilica has already started shipping semiconductors to an automotive customer and forecasts deliveries of 2.7 million semiconductors over the next 12 months. A major contract with an industrial customer should commence production within two years.  

There are at least eleven potential clients that range from the enquiry to specification stages. Decisions on these should be made within 12 months. It can then take two to five years to reach production.

EnSilica has taken on a group of skilled engineers based in Bristol from Blu Wireless Technologies and it will also design a semiconductor for Blu.

Prospects

The share price went to a premium in initial dealings, but it has fallen back to 49p – although that is 3.5p higher on the day. There has been limited trading in the shares since May. The higher cost base after investing in new hires means that there could be a small loss this year. This is a long-term investment, though.

Allenby forecasts a 2023-24 pre-tax profit of £582,000 rising to £3.79m the following year. Earnings would rise from 1.79p a share to 4.83p a share. That means that the shares are trading on 27 times 2023-24 prospective earnings, falling to ten the following year.

Of course, this all depends on the timing of new design deals and orders. Given that generally customers will use the EnSilica semiconductors there should be good longer-term prospects as more contracts are added.

The 2024-25 forecasts for any company are normally too optimistic, but even if this is the case the shares are attractive for an investor willing to take a long-term view.

FTSE 100 housebuilders and finance shares cheer Hunt’s tax cut retreat

UK Investor Magazine
-
7
FTSE 100 housebuilders and finance shares cheer Hunt’s tax cut retreat

After weeks of uncertainty and speculation whether the Uk government would U-turn of their radical tax changes, the new Chancellor today confirmed many of the mini-budgets tax cuts would be binned.

Jeremy Hunt has wasted no time in his mandate to bring stability to UK assets by scrapping almost all of the measures first proposed by Kwarteng in his mini-budget.

“The simplest way to adjust the fiscal plan was always going to be to just reverse it and by and large that is what has happened,” said Guy Foster, chief strategist at wealth manager RBC Brewin Dolphin.

The FTSE 100 rallied on the news with housebuilders, banks, insurers and asset managers surging.

The housebuilders produced the most notable gains with Barratts, Taylor Wimpey and Persimmon all gaining more than 4%. Changes to stamp duty are one of Kwarteng’s mini-budget measures likely to remain.

Fears about bond market complexities for pension funds subsided with benchmark 10-year gilt yields falling below 4%. Legal & General, Phoenix Group, Aviva, M&G and Prudential were among the FTSE 100’s wealth management and insurance providers cheering Hunt’s roll back.

Short term reprieve

Despite investors stepping in to pick up bargains in sectors most heavily hit by the doomed mini-budget in September, questions still remained about the longer-term trajectory of the UK economy.

Hunt’s rollback has remedied market volatility in the short-term, but the decision to end current energy bill measures in April brings the health of the UK economy back into the spotlight.

“Markets have reacted positively to the news. However, with taxpayers back to footing the bill, it means little has been done to address the cost of living, except for a temporary cap on energy bills,” said Will Stevens, Head of Financial Planning at Killik & Co.

Today’s announcement will also do little to avert a 75 – 100 bps hike in UK rates at the Bank of Englands’s next meeting in November, piling more pressure on UK households.

Investing in the resurgent UK watchmaking industry with the Marloe Watch Company

UK Investor Magazine
-
6
Investing in the resurgent UK watchmaking industry with the Marloe Watch Company

The UK Investor Magazine was delighted to welcome Oliver Goffe, the co-founder of the Marloe Watch Company, for a discussion around the UK’s watchmaking industry and how Marloe are targeting a revival in UK watch manufacturing.

The Marloe Watch Company designs and assembles ‘refreshing, heirloom-quality’ watches here in the UK and are at the forefront of a resurgent UK watchmaking industry.

Oliver describes a company that is as focused on the service they provide as the mechanical watches they design. Marloe are a community oriented watch designer and it is evident they want their customers to be involved in every step of their journey.

We discuss how the company was established, the industry they operate in, Marloe’s future expansion, and how they plan to deliver shareholder value.

Marloe are currently raising funds on Crowdcube and having already met their target, are now in overfunding. Get more information on Crowdcube here.

Visit the Marloe Watch Company’s website to explore their range here.

Sterling surges on UK tax plan U-turns

UK Investor Magazine
-
9
Sterling surges on UK tax plan U-turns

Jeremy Hunt, the fourth UK chancellor in four months, marked his first full working day in office with an astounding move to scrap almost all of the measures outlined in Kwasi Kwarteng’s catastrophic mini-budget.

Hunt’s first – and primary – job as chancellor was to calm markets and early signs from GBP/USD and UK gilts were he was enjoying a notably more successful reaction than his predecessor.

In a thumbs up from the markets, GBP/USD rose 0.8% to 1.1272 and UK 10-year gilt yields fell below 4% to 3.97%.

The chancellor said his measures were designed to bring ‘confidence and stability’ and reiterated the word stability numerous times in his speech.

Hunt tore up all tax measures announced in September apart from the changes to stamp duty and reversal of national insurance increases made under Johnson’s leadership.

There was also amendments to energy bill support with the current measures now set to end in April. In total, Hunt’s announcement would save £32 billion.

“Perhaps the largest news is the earlier cut off to the energy price cap to April next year. This is a significant development both financially and politically,” said Joshua Raymond, Director at online investment platform XTB.com.

“Financially, the energy price cap is one of the largest contributions to the black hole in the fiscal budget and gives the government more headroom for tighter fiscal cuts especially should a global recession force energy prices lower than expected in the medium term.”

AIM movers: ADM Energy premium funding, while Rockfire Resources discounts

Andrew Hore
-
5
AIM movers: ADM Energy premium funding, while Rockfire Resources discounts

Oil and gas company ADM Energy (LON: ADME) has agreed a £500,000 subscription at 1.2p a share and a $250,000 loan with Tennessee Black Gold. This is more than double Friday’s closing price and the shares jumped 22.7% to 0.675p. There will be a strategic review of the company’s assets, so that it can focus on cash generating assets. The Tennessee Black Gold loan will be drawn down in five tranches of $50,000 and matures on 28 October 2024. The interest rate on the loan is 6%. The cash will pay off creditors and fund working capital while costs are being reduced. Osa Okhomina is stepping down as chief executive when the money is received. Tennessee Black Gold can appoint two directors.

Mosman Oil & Gas (LON: MSMN) announced a quarter-on-quarter decline in net production from 8,815 to 6,958 barrels of oil equivalent, but that was due to there being no contribution from Falcon. Production was halted prior to the latest period. Otherwise, the net production is higher. Oil sales prices were lower, but gas prices increased. Production should increase in the fourth quarter. The share price is 15.4% higher at 0.075p.

Third quarter trading figures from CentralNic (LON: CNIC) sparked a further upgrade for the online marketing and internet domains supplier. Zeus has increased its 2022 pre-tax forecast from $57.8m to $68.7m, while net debt is expected to be lower than previous forecasts at $47.6m. There could be net cash by the end of 2023. So far this year, organic growth has been 66%, which is up from 62% at the half-way stage. The current forecast assumes that the rate of growth slows in the fourth quarter. Debt facilities of $250m have been secured to finance any suitable acquisitions that are found, and the interest rate will be lower than on the bonds currently in issue. The share price is 7.1% higher at 128.5p.

Floorcoverings supplier Victoria (LON: VCP) says interim revenues were more than £700m and EBITDA £100m, which is in line with forecasts. Cash flow should be stronger in the second half following the integration of recent acquisitions. The full interim figures will be published on 29 November. The share price edged up 3.1% to 414.5p, which is around nine times prospective 2022-23 earnings.

Gold and base metals explorer Rockfire Resources (LON: ROCK) has raised £375,000 at 0.125p a share with senior management contributing one-fifth of the funds. That is a big discount to the previous market price and there was a 48% slump to 0.1325p. The cash will fund a geophysical survey and initial drilling at the Molaoi zinc, lead and silver deposit in Greece.

Revenue recognition disagreements over a multi-year contract between auditor EY and MJ Hudson (LON: MJH) mean that the full year EBITDA of the asset management services provider will be lower than anticipated. EY is also questioning cost allocation and capitalisation. Management is positive about current trading. The shares dived 29.8% to 16.5p.

PipeHawk (LON: PIP) shares have fallen 11.3% to 13.75p because a contract with Ventive will be delayed because the customer is still trying to raise development funding. This means that revenues from the contract are not likely to be booked in the year to June 2023.

Naked Wines (LON: WINE) confirmed that an operational and financial update will be held on 20 October. The shares fell a further 5.8% to 79.65p, which is near to the recent low and the lowest the price has been for more than two decades.

Hargreaves Lansdown revenue jumps but sees uncertain economic environment

UK Investor Magazine
-
3
Hargreaves Lansdown revenue jumps but sees uncertain economic environment

Hargreaves Lansdown revenues grew in last quarter after rising interest rates helped boost the wealth manager’s net interest margin.

Revenue grew to  £162.9 million in the quarter end September, up from £142.2m in the same period last year. Hargreaves Lansdown’s increase in revenue reflected rising interest on cash that mitigated the impact of falling share dealing transaction.

Hargreaves Lansdown are now operating in a world where competitors are offering share dealing services for free, meaning Hargreaves have had to broaden their offering to remain competitive.

This is evident in the upcoming launch of the new HL US Fund, scheduled to open to investors 1st November. The fund will be managed by external fund managers and is aimed at long term growth in US mega caps. Investors are able to invest in the fund from £100. They also plan a similarly managed UK-focused fund.

Net inflows for the period were £0.7 billion, but assets under administration (AuA) fell £1.8 billion due to adverse market conditions. Hargreaves also warned of an ‘uncertain economic environment’ which may put further pressure on clients’ assets.

“The impact of the challenging macroeconomic and geopolitical backdrop on asset values, client confidence and propensity to invest has been seen across our industry. Against this backdrop we have delivered £0.7 billion of net new business and welcomed a further 17,000 net new clients in the quarter, reflecting both the diversified nature of our platform and also the trust clients place in us,” said Chris Hill, Hargreaves Lansdown Chief Executive Officer.

“Our focus remains on helping new and existing clients navigate these tough times and engaging with them to help improve their financial resilience. Cash savings are high on the agenda for clients and we have seen a further £0.7 billion of net flows into Active Savings leading to a record £5.3 billion of assets. Although flows into risk based investments remain subdued, both client and asset retention rates remain strong and in line with last year.”

The trading statement comes days after Hargreaves Lansdown were targeted by 3,200 former Woodford investors seeking £100m for Hargreaves involvement in recommending the failed Woodford Equity Income Fund.

The fund held a number of illiquid investments that were central to the funds collapse and claim alleges Hargreaves Lansdown knew the problems with Woodford’s fund, but continued to encourage investors to invest.

1...604605606...1,805Page 605 of 1,805