FTSE 100 drops as pound rallies

UK Investor Magazine
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FTSE 100 drops as pound rallies


The FTSE 100 fell on Monday as the inverse relationship between London’s leading index and the pound sprang back into life.

A U-turn by the UK government on tax rates saw the pound gain and hit shares in the FTSE 100’s overseas earners.

“The FTSE 100 fell 1% to 6,827, dragged down by miners, financial services and consumer goods specialists. Many of these earn in dollars and so a stronger pound – if even if it just a temporary move – is bad for them,” said Russ Mould, investment director at AJ Bell.

The FTSE 100 has tracked UK assets to the downside since the doomed mini budget, but loses were contained by a weaker pound.

The FTSE 250, however, has suffered dramatically worse as the domestic facing index feels the pressure of uncertainty around the UK economy.

Despite an improvement in the pound in recent days, Liz Truss’s government is still subject to a high level of scrutiny and upcoming events may lead to further volatility.

“The u turn had been inevitable given the market reaction but there’s every likelihood this will buy the UK government time politically but not necessarily from investors,” said Joshua Raymond, Director at financial brokerage XTB.

“The 45p tax cut has taken around £2billion off extra borrowing. That’s it. The UK government is facing extra borrowing of closer to £150bn and at higher interest rates than in the past decade. That’s the problem. Until investors get clarity in the scale of borrowing needed and costs, which means a detailed OBR forecast, the pound Sterling volatility will likely continue.”

Australian buy for QinetiQ

Andrew Hore
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Australian buy for QinetiQ

Technology company QinetiQ Group (LON: QQ.) is acquiring Air Affairs for £31m, which is based in Australia one of QinetiQ’s core markets.

New South Wales-based Air Affairs is a defence services provider that specialises in air threat representation, unmanned air targets and mission rehearsal. The Australian Defence Force and government firefighting operations are clients.

Air Affairs has its own fleet of aircraft and manufacturing facilities. In the year to June 2022, revenues were A$43m and EBITDA A$5m.

Space sale

QinetiQ is focusing on its core markets, so it is selling QinetiQ Space NV to help finance the latest acquisition. Redwire Corporation is paying £28m for the Belgium-based commercial space business. QinetiQ is still involved in the defence and security parts of the space market.

In the year to March 2022, the space business generated revenues of €49m and EBITDA of €5m.

The QinetiQ share price dipped 5.6p to 324.4p. A second quarter trading update will be published on 12 October.

AIM movers: Argentex benefits from Sterling volatility and Tortilla Mexican Grill slumps

Andrew Hore
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AIM movers: Argentex benefits from Sterling volatility and Tortilla Mexican Grill slumps

Foreign exchange services provider Argentex (LON: AGFX) says that it will exceed expectations for the nine months to December 2022. Sterling volatility has provided additional volumes. The next figures will be for the six months to September 2022. They will be published on 8 November and will show a 75% increase in revenues to £27.4m. The share price moved up by 13.5% to 102.75p.

Maritime technology developer SRT Marine (LON: SRT) says systems and transceivers revenues have grown. More systems are being installed following the ending of Covid restrictions around the world. Interim revenues quadrupled to £18.8m and pre-tax profit should be more than £1.5m. finnCap believes that full year pre-tax profit could reach £6.8m and the trading statement provides more confidence in this estimate. The share price is 10.3% higher at 29.5p.

Security technology provider Thruvision (LON: THRU) has been awarded a framework contract by US Customs and Border Protection. This is for an initial 12-month term with options to extend to 2026. An initial order worth $7m has been made for technology to scan for narcotics and prohibited items. That is as much as the value of all orders from this customer in the past year. The share price rose by 8.6% to 24.1p.

Future Metals NL (LON: FME) is developing a strategy for the Panton PGM-Ni project in Australia. There has been an increase in the JORC minerals resource estimate to 5Moz of contained PGM (3E) and 239,000 tonnes of contained Nickel. A placing raised £500,000 at 7p a share. That is above the current share price even though it rose by 8% to 6.75p.

Tortilla Mexican Grill (LON: MEX) increased interim revenues by 30% to £26.9m, including like-for-like growth of 19%. The restaurants operator reported a slump in pre-tax profit from £2.63m to £264,000. That was mainly down to a reduction in government assistance from £1.88m to £211,000, plus costs relating to the Chilango acquisition. There has also been general cost inflation. The opening programme is ahead of target. The share price has dived 30.1% to 102p. That is a new low.

Digital transformation services TPXimpact (LON: TPX) continues to decline after announcing on Friday trading has been below expectations the departures of chief executive Neal Gandhi and finance director Oliver Rigby. The share price has fallen a further 18.8% to 32.5p, having been 105p on Thursday night.

IT managed services provider IDE Group Holdings (LON: IDE) reported its results on Friday afternoon. Revenues from continuing operations fell from £7.6m to £6.7m and the loss increased from £120,000 to £1.44m. The business was cash generative, though, because £1m of loan note interest is not payable until the loan notes mature. The share price declined by 16.2% to 0.775p.

US oil and gas developer TomCo Energy (LON: TOM) has drawn down the second tranche of £375,000 from its unsecured convertible loan note facility and it is seeking a larger debt funding package. The drawdown is accompanied by the issue of 50 million warrants exercisable at 0.75p each. Part of the first tranche of convertible loan notes (£200,000 plus £10,000 interest) have been converted at 0.351917p a share. The shares fell 16.8% to 0.395p.

Verici Dx (LON: VRCI) has rebranded its post-transport blood test from Tuteva to Tutivia. The commercial launch is expected later this year. The share price fell 6.45% to 14.5p.

The pound gains as government U-turns on top rate tax abolishment

UK Investor Magazine
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The pound gains as government U-turns on top rate tax abolishment

Just ten days after making radical tax changes in an effort to boost the UK economy, Liz Truss’s government have been forced into an embarrassing U-turn.

Having faced a backlash from the markets, PMs and the media, Kwasi Kwarteng tweeted; “We get it, and we have listened,” as they issued a statement detailing a roll back on the abolishment of the top rate of UK tax.

GBP/USD spiked in an immediate reaction as investors started to remove bets against the pound.

“With the Conservative conference this week, and the Downing Street chairs barely warm, the new Government has chosen red faces over continuing pain,” said Alice Guy, Personal Finance Editor, interactive investor.

“The initial surprise tax reduction spooked the market and confidence is still shaken – lesson number one is the need to be open and transparent about the numbers behind the plans to stabilise the UK economy.”

While the short term market reaction was one of relief, the Liz Truss government is limping through through its first weeks in charge and is in a precarious position.

Tekcapital shares jump as Lucyd announce landmark partnership

UK Investor Magazine
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Tekcapital shares jump as Lucyd announce landmark partnership

Tekcapital shares rose in early Monday morning trade after their portfolio company Innovative Eyewear announced a smart eyewear partnership with fashion brand Nautica.

The landmark agreement will see Lucyd technology licensed to Nautica for the production of smart eyewear aimed at Nautica’s ocean faring customers.

Nautica’s brand carries a nautical appeal, an activity Lucyd’s technology could potentially provide enormous benefits.

Lucyd’s Bluetooth enabled smart eyewear allows users to perform activities that may otherwise be a distraction, such as answering mobile phone calls.

“The Nautica smart eyewear line will stay true to the brand essence of bringing the inspiration of the sea into smart eyewear that is modern and innovative,” said Harrison Gross, CEO of Innovative Eyewear, Inc.

“Our Nautica® smart eyewear collection, powered by Lucyd®, will align perfectly with today’s lifestyle, as we believe consumers are looking for designer eyewear that allows them to reman connected to their digital lives.”

Tekcapital shares were 4% higher at 19p at the time of writing.

Bid battle for RPS not finished

Andrew Hore
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Bid battle for RPS not finished

There could be scope for further improved bids in the takeover battle for engineering professional services firm RPS (LON: RPS). It has strong positions in niche markets in the UK and some other countries and provides an attractive way of enlarging international exposure for the bidders.  
WSP initially bid 206p a share for RPS and this was recommended by the company in August. Tetra Tech has come in with a higher bid of 222p a share and the recommendation of the WSP bid has been withdrawn. Toronto-based WSP is considering its options.
Tetra Tech is listed on Nasdaq and provides consultin...

Aquis weekly movers: Chapel Down expects strong harvest

Andrew Hore
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Aquis weekly movers: Chapel Down expects strong harvest

RentGuarantor Holdings (LON: RGG) is the best performer of the week even though there was no news except the announcement of an investor Q&A. There were four trades during the week. Three were on Tuesday and the fourth on Wednesday was a trade of 1,000 shares at 165p. The share price surged 26.9% to 165p.

Trading in the shares of Marula Mining (LON: MARU) prior to its interims pushed up the price by 6.67% to 2.4p. In the first half of 2022 there were no revenues and a loss of £169,000.

Thixotropic gels manufacturer Unigel Group (LON: UNX) joined the Access segment of the Aquis Stock Exchange in August. There was £800,000 raised at 64p a share. The gels are used in the fibre optic industry. A maiden trading statement says that interim pre-tax profit was 94% ahead at £940,000. New products and higher selling prices boosted revenues and current trading is described as robust.

Hydrogen Utopia International (LON: HUI) had £3.2m left in the bank at the end of June 2022. There were no revenues in the first half. There was progress with waste plastic to energy project developments.

Wishbone Gold (LON: WSBN) had £2.38m in the bank at the end of June 2022. Drilling has commenced in Western Australia and Queensland in recent months.

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Fallers

Clean Invest Africa (LON: CIA) was the worst performer on the Aquis Stock Exchange last week with a decline of 42.9% to 0.2p. Loan notes have been converted into shares helping the company turn net liabilities into net assets of £1.72m at the end of June 2022. The company’s CoalTech technology is proven in palletising coal fines or coal waste and management believes that other materials could be palletised.

VSA has downgraded its forecasts for battery storage technology developer Invinity Energy Systems (LON: IES) following interim figures. First half revenues were £1.4m and the order book is worth £13m – mainly relating to the second half. However, 2022 revenues were downgraded from £14.1m to £11m. Next year’s revenues have been upgraded from £20.6m to £23.7m. Cash is likely to run out later next year. The shares are 20.3% lower at 25.5p.

Coinsilium (LON: COIN) reported a net fair value gain on financial assets of £163,000 in the first half of 2022. However, the value of cryptocurrency assets has declined. Net assets have fallen from £5.84m to £4.57m. There was a 15.9% fall in the share price to 1.85p.

All Things Considered (LON: ATC) investee company Driift has acquired interactive live streaming events platform Dreamstage, which has been used by Driift for its own events. Deezer will invest a further £4m into the combined business. Music management business All Things Considered increased interim revenues by 19% to £6m and the loss was reduced. Net cash is £1.5m. A full year loss is expected compared with previous expectations of a £600,000 profit. The share price fell 14.4% to 110p.

Wine maker Chapel Down Group (LON: CDGP) increased interim revenues by 4% to £6.88m. Sparkling wine revenues were 35% higher. Pre-tax profit improved by 6% to £489,000. The company started harvesting in August and a strong yield is anticipated. The share price fell 7.55% to 24.5p.

KR1 (LON: KR1) is not immune to the decline in values of digital assets. The value of intangible assets fell by £155.5m in the period, which more than offset realised gains of £2.5m and income of £16.6m. Net assets have declined by nearly three-quarters and NAV is 30.6p a share. The share price fell 6.58% to 35.5p.

ProBiotix Health (LON: PBX) generated sales of £306,000, down £537,000 in the first half of 2022. Orders worth £1.12m have been received since the beginning of the year, so the second half revenues should be stronger, as well as higher than last year. The share price slipped 6.25% to 22.5p.

In the six months to June 2022, the value of the equity stakes held by Cadence Minerals (LON: KDNC) fell from £12m to £5.75m. The main decline was in the value of the stake in AIM-quoted European Metals Holdings. There was £1.99m in the bank at the end of the period. The shares declined 5.76% to 9.4p.

NFT Investments (LON: NFT) has been hit by a reduction in the value of cryptocurrency, particularly Bitcoin. That means that NAV has fallen to £30.1m, including £20.4m in cash. There was a revaluation reduction of £265,000, but that was offset by exchange gains of £362,000, leaving the value of investments at £6.47m. At 0.91p, down 4.21% on the week, the share price is less than one-third of the NAV of 3p a share.

Screwless spinal stabilisation systems developer TruSpine Technologies (LON: TSP) had £3,471 in cash at the end of March 2022. There was a £390,000 cash outflow from operating activities and £1m of development spending capitalised. TruSpine subsequently entered into a funding agreement with Proffitt Brothers and $100,000 has been received. The shares fell 3.33% to 4.35p.

Helium Ventures (LON: HEV) is considering widening its investment strategy because of the lack of suitable helium investments. If a suitable acquisition is identified, then shareholders would be asked for their approval. The shares slipped 2.26% to 6.5p.

Kent brewer Shepherd Neame (LON: SHEP) returned to profit in the year to June 2022. The total dividend is 18.5p a share. Net assets increased from 1140p a share to 1194p a share, while net debt is back to pre-pandemic levels at £75.3m. Pubs and hotel revenues are still lower than in 2018-19. Beer volumes have more than recovered, although own beer volumes are 8% lower than three years ago. In the 13 weeks to 24 September 2022, like-for-like retail sales are 9% ahead, while own beer volumes were 1.2% higher – including a 14% improvement in own beer volumes. There was a 1.5% decline in the share price to 670p.

Property investor Ace Liberty & Stone (LON: ALSP) increased pre-tax profit by 49% to £2.07m in the year to April 2022. Net assets are 6% higher at £34m. Net debt has reduced from £54.8m to £44.6m. A dividend of 3.4p a share has been announced that will cost £2m. The share price fell 1.45% to 68p, valuing the company at £40.7m.

AIM weekly movers: Attraqt agrees offer

Andrew Hore
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AIM weekly movers: Attraqt agrees offer

Crownpeak Holdings is making an agreed 30p a share cash bid for omnichannel retail merchandising software provider Attraqt Group (LON: ATQT).  The plan is to combine Attraqt’s merchandising technology the Digital Experience Platform owned by Crownpeak. The share price has not been as high as the bid price since May, and it reached its all-time low of 17.5p prior to the bid. The share price jumped 63.3% to 29.4p, making it the best performer of the week.

Tertiary Minerals (TYM) announced the commencement of soil sampling at the Jacks copper project in Zambia, where there is a collaborative agreement with First Quantum Minerals. This is in the area surrounding copper mineralisation intersected by drilling earlier this year. Tertiary Minerals shares rose 55.6% to 0.21p. The share price nearly doubled in September.

Sustainable biopesticides developer Eden Research (LON: EDEN) has obtained US EPA approval for its three active ingredients and two formulated products. Mevalone (a biofungicide) and Cedroz (a nematicide) sales should start next year via existing distribution partners. State approvals are required before launching in an individual state. Eden Research reduced its interim loss, but cash is still flowing out of the business. There was a cash outflow of £1.9m in the first half, including capitalised development costs and £1.85m was in the bank at the end of June 2020. R&D tax credits will help to replenish cash, but more will be required in the near future if Eden Research is going to take full advantage of the EPA approval. The share price jumped 29.3p% to 4.85p, which is still not far from the all-time low.  

Pathfinder Minerals (LON: PFP) has agreed an option with claim enforcement group Acumen Advisory Group (AAG) for the acquisition of Mozambique-based IM Minerals Ltd. AAG will complete due diligence before deciding whether to pay £2m to acquire the business and then commence proceedings against the government of Mozambique due to the unlawful transfer of a mining licence. A successful claim would spark a contingent payment to Pathfinder Minerals of either $24m or 20% of net recoveries if that is higher. The claim could be worth between $110m and $1.5bn and AAG has the cash to pursue it. The company was £146,000 in the bank at the end of June 2022 and that would not have lasted much longer. Pathfinder Minerals shares increased by 28.6% to 0.675p.

Music streaming technology provider 7Digital (LON: 7DIG) remains loss making, but the deficit reduced substantially in the first half of 2022. Revenues were one-fifth higher at £3.9m. Since the end of June, a contract has been signed with Utopia Music. Two weeks ago, 27% shareholder Magic Investments SA lent 7Digital £500,000 at an interest rate of 5% a year. This repayable by 1 October 2023. The share price rose 27% to 0.235p.

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Fallers

Xeros Technology (LON: XSG) has signed a joint development agreement with a global domestic washing machine component manufacturer for its XFilter microfibre filtration technology. A full licence dela could be agreed in six months. However, the subsequent interim announcement and fundraising sent the shares to a new closing low of 5.7p, down 71.5% on the week. A placing raised £6m at 5p a share and a six-for-seven open offer could raise up to £1m more. In March 2021, a placing and open offer at 240p a share raised £9m. There was £2.6m of cash at the end of August 2022 and the cash outflow is £500.000 a month.

Ireland-based accounts software company Glantus (LON: GLAN) warns that there will be additional operating costs in the second half plus charges for the relocation of operations to Costa Rica. Revenues will also be lower than expected. This led to the share price plummeting 68% to 12p. Glantus joined AIM in May 2021 at 102p a share. Executive director Diane Gray-Smith bought 150,000 shares at 14.8333p each.

Digital transformation services TPXimpact (LON: TPX) had a management overhaul last week because trading has been below expectations and there were complications with the integration of the businesses acquired. Chief executive Neal Gandhi and finance director Oliver Rigby. Bjorn Conway is the new chief executive. The order book is increasing in value, but revenue expectations have been cut from £97.4m to £90m. Operating costs are rising. and profit expectations have nearly halved. The share price has slumped by 64.8% to 40p, which is a new low.

Shares in Pressure Technologies (LON: PRES) slid 61.7% to 25.5p after disappointing second half trading. This means that there will be a full year loss. The engineering company will also breach covenants on its bank facility and more cash is required. Supply chain and manufacturing problems hampered progress with defence contracts. Oil and gas companies delayed orders. On top of this costs have been rising. Management believes that Pressure Technologies can return to profit in 2022-23 on the back of improving order levels.

MusicMagpie (LON: MMAG) has been hit be weak consumer spending with lower sales of technology. That hit the share price and it fell 54.5% to 12.5p. The April 2021 placing price was 193p. Rental income from pre-owned mobiles is growing, though, and that is good for longer-term revenues. The original pre-owned books and music operations are trading as expected. The second half should still be better than the first half, although a full year pre-tax loss is forecast on flat revenues. A small profit is forecast for 2023. Net debt is expected to be £8m at the end of the year.

AIM movers: Joules share price recovers, while TPXimpact’s halves

Andrew Hore
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AIM movers: Joules share price recovers, while TPXimpact’s halves

Shares in retailer Joules (LON: JOUL) have reacted positively to a statement last night. Management says that the turnaround plan is progressing. Joules is still considering how to raise additional finance. The share price recovered by 25.8% to 6.29p.

Angus Energy (LON: ANGS) says Saltfleetby gas flow rates will be ramped up to 6 million cubic feet per day in October. A further compressor will double flow rate in January 2023. The shares are 14.1% higher at 2.225p.

Pharma company e-Therapeutics (LON: ETX) is raising £13.5m at 20p a share – M&G funds are investing in the shares. The share price rose 9.54% to 19.525p. This adds to the cash of £21.8m at the end of July 2022. This cash will be used to expand the in-house pipeline of RNAi candidates that the ETX platform has identified. It will also fund further development of cell-type specific computational tools and datasets.

Nostra Terra Oil and Gas Company (LON: NTOG) more than doubled its interim revenues to $2m on a one-third rise in oil production. Cash generated from operations was $850,000. The latest well has already reached payback. There are further production increases in the second half as wells that have been offline for work on facilities return to production. The share price rose 10.4% to 0.265p.

Digital transformation services TPXimpact (LON: TPX) says trading has been below expectations and complications with the integration of the businesses acquired to build up the group has not run smoothly. Operating costs are rising. The order book is increasing in value, but revenue expectations have been cut from £97.4m to £90m. Profit expectations have nearly halved. Chief executive Neal Gandhi and finance director Oliver Rigby. Bjorn Conway is the new chief executive. The share price has slumped by 54.8% to 47.5p.

Sports nutrition supplier Science in Sport (LON: SIS) has commenced a strategic because of review and an option is a sale of the company. This has been coupled with a £5m placing at 15p a share. The share price dived 27.7% to 17p. This cash will strengthen the balance sheet and provide finance to cope with raw material price increases. Reduced consumer confidence is having an impact on trading.

Credit provider Morses Club (LON: MCL) has been hit by claims against the home collected credit division. Losses continue and this is reducing cash available to lend. A scheme of arrangement is being developed to avoid insolvency. The share price has slumped 23.5% to 3.78p.

Real Good Food (LON: RGD) says it needs to make further cost reductions and more redundancies will be required. Expectations for the current year have been reduced and £2.5m is being sought to finance the restructuring. The shares are 19.2% lower at 1.05p.  

Sterling returns to pre-budget level, 900 pips off weeks lows

UK Investor Magazine
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Sterling returns to pre-budget level, 900 pips off weeks lows

The pound continued its recovery on Friday with GBP/USD returning to pre-pandemic levels as markets looked forward to dramatic rate hikes from the Bank of England.

There has been a general improvement in UK assets on Friday with the FTSE 100 gaining and bond yields falling.

However, analysts warned the respite from this week’s volatility may only be short lived.

“The pound may have returned to the levels it was at when Chancellor Kwasi Kwarteng stood to address MPs a week ago but that doesn’t mean we’ve miraculously returned to a pre-mini-Budget world,” said AJ Bell investment director, Russ Mould.

“The currency’s recovery is predicated on more rapid and aggressive rate hiking from the Bank of England with all the implications that has for borrowers and, in particular, anyone with a mortgage.”

Despite the backdrop of worsening economic conditions, traders were positioning for a possible U-turn by the government on some of their measures which would be a welcome boost sentiment.

There is growing pressure on the PM from her backbenchers to remove the Chancellor and pedal back on his mini-budget package.

GBP/USD was 1% higher at 1.2223 at the time of writing, around 900 pips above the lows of the week.

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