Aquis weekly movers: Black Sea Property NAV rise and Chapel Down flat
Black Sea Property (LON: BSP) reported its 2021 figures at the end of the previous week, but the share price did not react until Thursday. There was an increase in NAV from 1.23 cents a share to 1.37 cents a share, helped by revaluation gains and the profit from disposal of a subsidiary. Black Sea Property shares increased from 0.3 cents a share to 0.55 cents a share, making it the best performer on Aquis.
Valereum (LON: VLRM) reported an increased loss of £1.84m for 2021. There is still £1.43m in cash and net assets were £2.51m at the end of 2021. There was no news about the regulatory approval for the acquisition of the Gibraltar Stock Exchange. The share price rose 8.33% to 26p.
Clean Invest Africa (LON: CIA) says that clan coal business CoalTech has commenced commercial coal production in South Africa. Initial production will be 3,500 tonnes/month and it is expected to double in 2023. That could be enough to eventually generate annual net profit of $1.2m. The first coal pellets should be sold in September. There are tests running in other countries. The shares rose 4.1% to 0.255p.
Invinity Energy Systems (LON: IES) says that the world’s largest hybrid energy storage system, incorporating a 5 MWh Invinity Vanadium Flow battery, was launched at the Energy Superhub Oxford. Jonathan Marren has been appointed as chief development officer, having previously been a non-exec director. The share price edged up 1.11% to 45.5p.
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Fallers
Wine maker Chapel Down Group (LON: CDGP) says interim revenues are in line with the same time last year due to the disappointing 2021 harvest. This year’s harvest should be better and full year revenues should be higher. Price increases should help to improve margins. Net cash was £3.76m at the end of June 2022. Net assets are 19.5p a share. Five directors bought shares at between 19.6p and 19.9p a share. The share price fell 9.8% to 19.4p.
Samarkand (LON: SMK) says trading is in line with expectations in the year to March 2022. Revenues are forecast to be £16.5m and the loss estimated to be £8.3m. There was £4m in the bank. Samarkand provides e-commerce technology and services to clients that wish to access the Chinese market. Trading has been hampered by Covid lockdowns. Management says that trading conditions are improving, although 2022-23 revenues are likely to be flat. Margins should improve. The share price fell 9.68% to 70p, compared with the placing price of 115p.
Waste plastic to energy technology company Hydrogen Utopia International (LON: HUI) is extending the term of the 40 million warrants issued at the time of the flotation. The new deadline for conversion at 15p a share is the fourth anniversary of the flotation on 6 January 2026. The share price fell 7.14% to 4.875p, compared with the placing price of 7.5p.
Ecotricity has increased its stake in Good Energy (LON: GOOD) from 26.1% to 27.2%. The share price fell back 5.88% to 245p.
AQRU (LON: AQRU) has appointed First Sentinel as corporate adviser and Tennyson Securities as broker. They are replacing Novum Securities. The decentralised finance-focused incubator has launched AQRU Trend, a high-return strategy optimised for cryptocurrencies designed for small investors to access competitive returns in the crypto market. It is available through the AQRU.io platform. The share price fell 1.79% to 1.375p.
All Star Minerals has not only changed its name to Marula Mining (LON: MARU) on 4 July it has also consolidated 100 shares into one new share. That means that the consolidated price for 1 July was 2.45p. The share price has dipped to 2.41p, although some websites have the share price rising by more than 9,700% because they have not adjusted for the consolidation.
AIM weekly movers: Tekmar recovers some of previous week’s loss
Shares in Tekmar Group (LON: TGP) recovered by 169.7% to 16.45p after the subsea cable protection services provider winning a wind farm project contract in Japan. The contract should be delivered in 2023. This was the first bit of good news since Tekmar announced a strategic review and possible sale of the business. Even though Tekmar is the best performer in the past week, the share price is still less than 50% of the level it was one month ago.
Simec Atlantis Energy Ltd (LON: SAE) shares have been in decline since the beginning of the year. News that it has secured a contract for difference for the MeyGen tidal energy site in Scotland that guarantees £178.54/MWh for 15 years, has sparked a 55.1% increase in the share price to 1.9p. This contract covers 28MW of power in Scotland. The full project can generate much more than this.
Stakebuilding in lightweight solar panels provider Verditek (LON: VDTK) has pushed the share price 38.2% higher to 2.35p. John Celaschi has gone from less than 3% to 8.34%. His stake had fallen below 3% in November 2020, when the share price was even lower. Gavin Mayhew has increased his stake from 7.94% to 10.6%. The share price rose 38.2% to 2.35p.
The Beowulf Mining (LON: BEM) share price has nearly recovered all the loss that happened after a nearby Sami village challenged the Swedish government’s decision to award the exploitation concession for the Gallok / Kallak iron ore project in Northern Sweden. Beowulf has agreed a SEK22m (£1.76m) loan facility from a Nordic institutional investor, which will predominantly be spent on Kallak. This latest news pushed up the share price by 26.7% to 5.45p.
Oil and gas producer Parkmead Group (LON: PMG) has been a consistent riser during the week and it ended up 23.8% to 52p. The Netherlands project is generating record revenues thanks to higher gas prices, enabling a move into profit for the group in the year to June 2022. Revenues of more than €14.5m were generated, compared with a forecast figure of €12.8m. Two additional wells will be drilled earlier than previously expected.
Cordel (LON: CRDL) has been on a downward trajectory during 2022 even though it has announced significant contracts. The share price has more than halved so far this year, even after a 22.2% rise to 5.5p on the week. The latest win is a 12-month contract to provide automated LiDAR-based services to One Rail Australia. This is for ballast profile analysis for 2,000kms of freight rail and estimates how much ballast needs to be replenished.
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Fallers
BlueRock Diamonds (LON: BRD) is the largest faller with a 38% decline to 7.75p. The South Africa-based diamond miner has signed a loan note subscription agreement with Teichmann Company, T-Three-Drilling and three Teichmann employees for a total of £1.6m. That will help to repay a loan note maturing in October. Initially, a £1m simple loan note will be issued alongside the provision of a debt funding facility for the Kareevlei diamond mine. Subject to shareholder support, the £1m loan note will be converted into shares at 7p each and a £600,000 convertible loan note will subsequently be issued that will also be convertible at 7p a share.
Savannah Resources (LON: SAV) chief executive David Archer unexpectedly resigned, and Dale Ferguson will be interim chief executive. That appears to be the reason why the shares fell 37.1% to 2.2p. The environmental impact assessment of the Barrosso lithium project in Portugal is continuing. Savannah Resources has six months to optimise the design of the project.
The share price of Ironveld (LON: IRON) continues to decline and fell by one-third to 0.36p during the week. The price has nearly halved since Ironveld received a requisition notice from shareholder Richard Jennings of Align Research who wants to remove chairman Giles Clarke and chief executive Martin Eales from the board. Ironveld says that Richard Jennings is aware of a potential placing, and he has previously said he would “hold his corner” in a fundraising of up to £5m at a price of up to 1.25p a share. That is more than three times the current share price and Ironveld is capitalised at £4.8m.
Consumer products supplier Supreme (LON: SUP) reported a 6% improvement in full year pre-tax profit to £17.4m. However, the lighting business is well down in the current year, partly due to destocking, and that is the main reason behind an expected fall in pre-tax profit to around £14m in 2022-23. The vaping business continues to grow and is the largest profit contributor to profit. The newer sports nutrition business is building momentum. Evan after a recovery at the end of the week, the share price fell 30.2% to 88p.
Diagnostics company Novacyt (LON: NCYT) fell after an announcement that full year revenue expectations have been reduced to £25m – from £35m-£45m – and it will move back into loss. Interim revenues slumped from £52.2m to £16.5m – non-Covid revenues fell from £4.8m to £3.5m. Costs are being reduced and they should reach an annualised level of £17m by the end of the year. Novacyt still has cash of £99.6m. The share price dived by 28.2% to 115p. This is back to the level it was back in early February 2020.
Just before the close on Friday Applied Graphene Materials (LON: AGM) admitted that it has appointed Weild & Co to help it raise additional cash. The plan is to gain introductions to US investors and raise up to $10m. Applied Graphene Materials says that it has enough money to get it into early 2023. The share price fell 18.4% on the day and the week to 15.5p. That values the graphene products developer at £10m, so a fundraising could be highly dilutive.
Next – the evolution of a high street retailer
David Smith, Portfolio Manager of Henderson High Income Trust, provides an insight into one of the Trust’s long term holdings – Next.
“You own the retailer Next? I don’t know anyone who shops at Next” is a common phrase I hear when I start talking about one of my long-term holdings. But I feel there is this common misconception that the company is just another high street retailer that faces extinction. To be clear, Next is a high street retailer but this now only represents a quarter of profits and while names such as C&A, BHS and Woolworths have disappeared, under the management of Lord Simon Wolfson, Next has evolved and thrived in the last 20 years.
One of the key inputs into the investment process we look for is potential strong management teams running the businesses we invest in. Not only to steer companies through difficult short-term environments but to also have the foresight to evolve business models so companies remain relevant in the face of longer term structural pressures.
Next has invested and innovated to create a strong platform that draws on all its assets – stores, warehouses, delivery networks, systems, marketing and credit facilities – to create a powerful online aggregation business selling hundreds of third-party clothing and home brands alongside its own Next merchandise both in the UK and increasingly Europe. This has meant profits have increased almost 4 fold over Lord Wolfson’s reign as CEO, despite well-known headwinds for high street retailers during that period.
That investment and innovation continues today with the company now employing as many people in its Technology teams as it does in its Buying and Merchandise departments. This is indicative of how important technology has become in the development of Next.
Two recent technology developments have been Platform Plus and Total Platform. Platform Plus is an operating system that allows Next to draw on stock only available in its third-party brand partner’s warehouses for distribution through Next’s own fulfilment network. The advantage of this is to give the company access to much broader assortment of stock whilst ensuring they retain ownership of customer service from the moment the goods leave a partner’s warehouse. In the last few year Next has expanded the number of brands using the Platform Plus operating model which has helped increase the range available to their customers without utilising their own warehouse capacity. This has been a contributing factor to Next’s significant online growth over the last few years which should hopefully continue going forward as it adds new brands to the system.
Total Platform meanwhile, offers client brands a complete suite of online services, providing website, warehousing, distribution, call centre and returns processing. This frees up a third-party brand from capital constraining, complex and time consuming activities in which they have little competitive advantage and utilises Next’s infrastructure and technological capabilities. For these services Next takes a commission on sales. While only small in the context of the group today, the potential Total Platform could be significant and highlights how a good company innovates to generate additional profit streams from its existing assets and capabilities.
While the short term is uncertain for a retailer in a cost of living crisis, one needs to differentiate those companies that continually evolve and invest to produce strong returns for shareholders over the longer term. With the sell off in consumer discretionary stocks indiscriminate this year it provides a good opportunity to own a high quality company that has invested appropriately to remain relevant in an ever changing retail environment at an attractive valuation.
To quote Simon Wolfson from the recent annual report:
“The evolution of the Group might, in hindsight, appear to have been part of a grand strategic plan. In reality, the way in which we have changed has been tactical – lots of individual initiatives taken in response to the opportunities and threats of a rapidly changing market. Our business ‘model’ was not conceived in the Boardroom, but is the result of countless ideas conceived at every level of the organisation.“
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FTSE 100 closes higher after turbulent week for UK government
The FTSE 100 closed up 0.1% at 7,196.2 on Friday, ending the week with a 0.3% gain over the past five days after the UK government saw a wave of resignations from the cabinet culminating in Prime Minister Boris Johnson’s departure.
The market saw the price of oil climb higher, with benchmark Brent Crude trading at $107 per barrel. Shell shares rose 0.4% to 2,043.5p, with BP increasing 0.3% to 386.5p and Harbour Energy leaping 2.1% to 325.7p.
“It’s been a chaotic week for politics and a rollercoaster ride for investors as markets experienced yet more wild swings,” said AJ Bell investment director Russ Mould.
“Investors continue to lock on to oil stocks, with BP, Shell and Harbour Energy among the top risers.”
JD Sport Fashion appoints former Morrisons executive
JD Sports Fashion shares climbed 2.2% to 124.9p as the company announced Morrisons veteran Andy Higginson as chair to replace Peter Cowgill, who resigned after heavily-publicised disagreements created a rift between himself and the JD Sports Fashion board of executives.
“Having closely followed JD’s success over the years, I see it as an exceptional business, with a strong strategic position,” said Higginson.
“The Board has clearly been addressing its governance and risk management structure and I very much look forward to working with the Board and the senior management team, including our new CEO once appointed, to bring my experience to bear and capitalise on the strength of the brands, market positions and channels to market including the global retail store network.”
The market is set to keep a close eye on Higginson, given the recent storm of controversy JD Sports has weathered in the last several months, ranging from price-fixing investigations to corporate governance worries.
“Given how JD’s share price has slumped in recent months amid market worries about consumer spending and the surprise departure of Cowgill, Higginson will be under pressure from day one to try and improve the company’s reputation from a boardroom perspective, and to find the right person to lead the business,” said Mould.
“Despite all the drama, JD has been a resounding success and its core business model certainly doesn’t need a rethink.”
Housebuilders dip as cost of living crisis bites
Meanwhile, soaring house prices continued to suffer the pressure of recession alarms, as housebuilder shares fell on concerns that the market would be unable to sustain its high prices as the cost of living crisis continued to hack bars off the property ladder for consumers.
Taylor Wimpey shares fell 1.6% to 112.9p and Barratt Developments dipped 0.1% to 456.5p.
“Housebuilders didn’t fare as well, with Taylor Wimpey … taking a knock amid mixed messages about the sector which is battling materials, energy and labour cost inflation.”
“There is also a growing sense that the property market can’t sustain its positive momentum if we get a recession.”
US jobs report signals hawkish Fed
Across the Atlantic, a stronger than expected US nonfarm payrolls report saw American markets slide, with the S&P 500 falling 0.4% to 3,885.6 and the Dow Jones dropping 0.2% to 31,292.4.
Investors expect the US Federal Reserve to act more hawkish than previously anticipated in light of an unchanged unemployment rate of 3.6% and high jobs growth in a move to tackle inflation, which is currently at a 40-year high of 8.6%.
Science in Sport shares tumble as revenues fail to hit market expectations
Science in Sport shares tumbled 24.3% to 34.4p in late afternoon trading on Friday after the company announced a revenue climb of 12% in HY1 2022, coming in beneath market expectations.
The group reported an estimated improvement in HY2 through brand investment, digital channels and improved pricing.
Science in Sport added that its current assessment of external factors indicated an adverse £3.2 million of costs or margin loss for the year against its budget, including raw material price increases, fuel and logistics costs, people retention expenses and the closure of its Russian business.
The firm said its new Blackburn site was close to completion, with the logistics operation delivering the scheduled efficiencies and cost savings in line with the new business case.
Science in Sport confirmed its gel machine was being installed, with the site set to become fully operational by the end of July 2022.
Litigation Capital Management anticipates 25% climb in revenues in FY 2022
Litigation Capital Management shares were down 7% to 86.1p in late afternoon trading on Friday after the group announced an anticipated FY 2022 revenue approximately 25% higher year-on-year and a 15% rise in adjusted operating profit.
The asset manager reported cash of $29 million at the period end, with total assets under management growing to $414 million.
Litigation Capital Management added that a decline in overall applications over the term reflected disrupted trading conditions, however commitments were broadly in line with the year before, which the firm claimed indicated progress on improving the quality of applications.
The group further mentioned two material investments which moved into future financial periods, highlighting that while similar delays were diminishing, they remained present in the portfolio.
The firm emphasised that the delay was a timing issue as opposed to a reflection of the company’s current or future financial performance.
Litigation Capital Management commented that it would not provide market guidance, due to the volatile and unpredictable nature, and complexity of its investments.
“I’m pleased with our resilient performance for the second half of the financial year, despite continued challenging external conditions, in which we have maintained our level of commitments alongside growing our assets under management,” said Litigation Capital Management CEO Patrick Moloney.
“Noting that the average life of these investments is historically 27 months, as our investments become larger and more complex, we expect the investment period to increase to between 36 and 42 months.”
“With the current market instability and uncertainty, we remain very confident in LCM’s growth prospects.”
Chamberlin swings to profit for first time in 5 years
Chamberlin shares were up 2.5% to 4.8p in late afternoon trading on Friday after the group announced a 112% rise in adjusted EBITDA and a FY 2022 post-tax profit for the first time in five years.
Chamberlin highlighted an expected revenue of £16.5 million, in line with market expectations, alongside an adjusted EBITDA of £200,000 and a post-tax profit of £100,000.
The company reported an expected record level of revenue and operating profit growth at Petrel and Russell Ductile Castings on the back of strong recovery and high demand across post-pandemic markets.
However, Chamberlin confirmed slower than anticipated recovery at Chamberlin & Hill Casings in Walsall, which still operates at a loss.
The group said it would mostly eliminate the deficit to shareholders’ funds for FY 2022 as a result of restructuring actions, a reduction in the pension deficit and improved performance across the firm.
Chamberlin added that it refinanced the terms of its assets finance facility with HSBC in May 2022, extending the repayment period to October 2025 at an interest rate of 6.5%.
The company further mentioned the proceeds from its sale and leaseback of its freehold property at RDC on 6 May 2022 were used to reduce its pension fund deficit by £600,000 in satisfaction of the Chamberlin & Hill Life Assurance Scheme’s charge over the property, with the balance of the proceeds being applied to the firm’s growth strategies and working capital.
It also noted a net debt of £2.7 million on 32 May 2022, alongside current cash headroom in line with management expectations at £800,000.
Chamberlin confirmed strong order books across all three sectors despite the volatile market environment, with higher than expected order levels and the reduction in its cost base priming it for future growth.
US adds 372k non-farm payrolls in June 2022
The US reported 372,000 non-farm payrolls in June 2022, with the figure slightly offset by a 74,000 downward revision to the results over the past two months.
Private payrolls grew by 381, while manufacturing payrolls grew 29,000. The unemployment rate remained unchanged at 3.6%.
S&P 500 futures were down 0.4% to 3,889 at the time of reporting.
Bloomberg reporter Michael Mckee answered a viewer question about what the figures would mean for US Labour Secretary Marty Walsh: “It’s a victory lap for the Biden administration, [he] can say look, we’re still producing jobs, the unemployment rate hasn’t changed.”
AIM movers: Science in Sport disappoints and Tekmar wins contract in Japan
Sports nutrition supplier Science in Sport (LON: SIS), whose customers include the Ineos Grenadiers cycling team that currently has four riders in the top ten of the Tour de France, says interim revenues did not grow as fast as expected. The share price slumped 22% to 35.5p. Interim revenues were 12% ahead, but costs are higher than budgeted. Higher raw materials, fuel and transport costs will increase costs by £3.2m. The Russian business has been closed. There should be efficiency improvements when the new Blackburn facility is completed. Management believes that marketing investment and higher prices will help to improve the rate of growth in the second half. Science in Sport was previously expected to lose more than £6m this year.
Shares in Tekmar Group (LON: TGP) have jumped 88.5% to 11.5p after the subsea cable protection services provider winning a wind farm project contract in Japan. That is still less than one-third of the share price one month ago when Tekmar announced a strategic review and possible sale of the business. The Japanese contract should be delivered in 2023. This adds to the £20.1m order book revealed with the interim figures. Management believes that the level of market activity is improving.
Events organiser Live Company Group (LON: LVCG) is raising £600,000 at 4p a share and using £120,000 to acquire the 80.06% stake it does not already own in the digital art platform developer Start Art Global. These shares are currently owned by two Live Company Group directors, including chief executive David Clicilitira. There could be deferred consideration of up to £3.88m. There are also 7.5 million warrants, exercisable at 8p, being issued with the shares. The rest of the cash raised will be used to develop events under the Kpop.Flex brand. The share price fell 20.7% to 3.65p.
Litigation funder Litigation Capital Management (LON: LIT) says gross revenues in the year to June 2022 will by one-quarter higher with underlying operating profit 15% ahead. This was despite disrupted trading, which led to cases not completing in the financial year. Total assets under management are A$414m. There are likely to be more delays due to the complexity of some cases. The average life of investments is expected to increase from 27 months to up to 42 months. There was an 8.1% decline in the share price to 85.2p.
Diagnostics developer Oncimmune (LON: ONC) says that decision-making is slowing and delaying pharma services business. There was a 3.8% share price decline to 78.9p. There is positive news from Biodesix, the US distributor, about the EarlyCDT Lung nodule test. Medicare administrators have provided a coverage determination for NodifyCDT, which is the US name for EarlyCDT Lung, at an in-market selling price that is ten times the current price. Oncimmune receives royalties on every sale, as well as supplying the test. Oncimmune has changed its year end from May to August. New chair Alistair Macdonald has experience that can help with acquisitions and partnerships.