MJ Gleeson enjoys surging revenue as completions jump
UK affordable homebuilder MJ Gleeson has announced a solid set of results for the year to 30th June with profit before tax surging 33% as the company enjoyed record revenue for the period.
Revene rose 29.4% to £373.4m while completions hit 2000, up from 1,812 in the year prior.
MJ Gleeson were the beneficiary of higher average selling prices which rose 14.7% to £167,300, a trend observed across all housebuilders, including Redrow in their half year results yesterday.
The strong performance during the period has given the broad confidence to increase their dividend by 20% to 18p for the year.
“This is another excellent performance which reflects not only the strong operational capability of our business but also the continuing structural under-supply of affordable homes for first time buyers on low incomes,” said Dermot Gleeson, MJ Gleeson Chairman.
“As well as being affordable, our high-quality homes are also very energy efficient, costing significantly less to run than most houses in the UK, particularly in the rented sector. As a result, our homes are much sought after, and demand remains resilient.”
“Gleeson Land’s market remained robust throughout the year and the business delivered a strong result. Demand in the South of England for quality sites with sustainable and implementable residential planning permission remains strong and the division is well-placed to drive further sustainable growth.”
Blackbird revenues grow
It has taken a long time, but it appears that Blackbird (LON: BIRD) is starting to reap the benefits of both its technology and its marketing initiatives. Blackbird remains loss making, although there is plenty of cash in the bank to finance investment.
The developer of real-time video editing technology can offer faster and easier cloud-based editing. Blackbird has AWS technology partner status. News and sports organisations use the technology. The first technology licencing deal will soon be delivered.
In the six months to June 2022, revenues increased from £867,000 to £1.55m, including £426,000 of non-recurring development revenues from deployment of the licence deal. Even excluding those licence revenues there was growth of one-third. However, rising investment in development and additional staff in sales and engineering pushed up costs. The underlying interim loss edged up from £879,000 to £898,000.
There was a cash outflow from operations and capital investment of £2.1m. There is still £11.6m in cash.
There are contracted and unrecognised revenues of £4.05m, which includes £768,000 related to 2022. Last year, revenues were £2.07m, so assuming these contracted revenues come through there will be strong growth in full year revenues. There are £1.47m of contracted revenues for 2023.
Existing clients are renewing, with IMG signing up for a further three years at a higher revenue level.
The share price fell 0.5p to 19.5p, which values Blackbird at £71.7m. That is still a heady rating given the level of revenues. The share price has recovered since April, but it is still below the 28p where cash was raised at the end of 2021.
Allenby is still not confident enough to set a 2022 forecast. Additional licence deals could provide a significant boost to revenues. Blackbird is still an attractive long-term investment.
CleanTech Lithium upgrades resources ahead of planned 2024 production
CleanTech is targeting near-term Lithium production in hypersaline brine found beneath slats flats in Chile and South America’s ‘Lithium Triangle’.
The company is developing three projects that have the potential to provide future revenues that dwarf CleanTech’s current market cap.
This was demonstrated this week when the company announced a 22% resource upgrade to 1.51mt LCE at the Laguna Verde asset, just one of their three projects. To put this into perspective, the entire country of China has 1.5 MT lithium resources according to the United States Geological Survey.
Anticipation has been building around CleanTech Lithium’s next steps which is clearly evident in a share price that has rallied steadily over the past month. Having built a base around 20p, the CleanTech Lithium share price recently hit 60p as investors await further evaluation of their Chilean lithium projects.
CleanTech Lithium have a clear intent: to begin production of lithium by 2024. Such a defined goal has attracted investors who are clearly impressed with CleanTech strategy, as well as their assets.
Indeed, CEO Aldo Boitano suggested that CleanTech’s portfolio has the potential to make CleanTech Lithium a world-class producer in a recent Podcast interview with UK Investor Magazine.
Direct Lithium Extraction
Located in Chile and the ‘Lithium Triangle’ of Argentina, Bolivia, and Chile, CleanTech’s Laguna Verde and Francisco Basin assets permit Direct Lithium Extraction (DLE) from underground brine.
DLE production methods produce high grade lithium offtake and provide the producer with higher margins than those associated with hard rock extraction. This stems from the ability to harness renewable energy and lower labour costs.
CleanTech Lithium Assets
CleanTech have set about evaluating their assets and are in the enviable position of not yet knowing which of their assets has the potential to be their flagship project.
Laguna Verde
The Laguna Verde project is the most advanced asset with JORC compliant resource of 1.51MT LCE. The resource now also has Indicated and Inferred resources with the Indicated resource sitting at 0.803MT. Evaluating data from three drill holes revealed LCE at a grade of 206mg/L, with grades up to 409mg/L.
An upcoming Prefeasibility Study of the Laguna Verde project is set to use a base assumption of 22,000 tonnes of battery grade lithium production per annum over 30 years of operation.
Francisco Basin
The Francisco Basin project assays revealed lithium grades of 324 mg/L with an average grade of 305mg/L. We await their maiden JORC resource in the near future and broker Fox-Davies said they believe inferred resources could exceed 2m/t LCE in a recent broker note.
Llamara
To add to Franciso Basin and Laguna Verde, the Llamara project is undergoing a drilling programme which we will learn more from later this year. The CleanTech CEO has been quietly optimistic about the Llamara project, highlighting the sheer size of the license.
Fox-Davies believe within three years there could be in excess of 5MT resource, providing CleanTech Lithium’s investors with exposure to a world-class lithium company. Comparisons could be made with ASX-listed Lake Resources and their 4.4MT Kachi project.
Kachi is also located in the ‘lithium’ triangle in Argentina and will use DLE methods powered in part by solar energy. The Kachi Defined Feasibility Study (DFS) gave the project a $1.6 billion NPV.
Unique opportunity
Having secured licenses in the Chilean Salar de Atacama, or Salar Basin, the company has established an unrivalled presence in salt flats that have favourable characteristics that allow for higher margin lithium extraction that is difficult to achieve in hard-rock spodumene.
DLE yields high grade lithium that recovers more lithium content than hard-rock alternatives by using brine reinjection techniques that captures the lithium compound before pumping the result brine back into a reservoir.
The scarcity of available assets utilising this technique means CleanTech has secured some of the last licenses with the associated geological opportunities.
Indeed, DLE is somewhat experimental, and this is reflected in the company’s £44m valuation. However, there is still a significant disconnect from Lake Resources’ valuation that currently has a market cap of A$1.47 or £850m.
Underlining the future potential for the company and the CleanTech Lithium share price, broker Fox-Davies has a 114p 1-year target and 277p 3-year target. Shares in the lithium explorer are currently trading at 55p.
AIM movers: Naked Wines late night warning and ITM Power boss to depart
Naked Wines (LON: WINE) issued a business update after the close yesterday. It says that it is reviewing operational and financial plans in order to move towards sustainable profitability. Online buying of wine during lockdowns meant that there was a 2021-22 profit but Naked Wines is set to fall back into loss this year. Management reassures that the existing credit facility is not going to breach its covenants, but there is an indication that more funding may be required. Pratham Ravi, who is employed by a major shareholder, has resigned from the board having been appointed three weeks ago. The shares have dived 41.1% to 85.5p, which is 86.9% lower than at the beginning of the year.
More bad news from printed circuit technology supplier Trackwise Designs (LON: TWD) as it tries to renegotiate the large contract with a UK electric vehicle client. Production volumes will be even lower than previously expected and that is hampering the financing of capital equipment and leaving Trackwise Designs short of cash. The company hopes to secure an advanced payment from the customer, but further funding will be required. Trackwise Designs is seeking partners in certain sectors, including EV, medical and aerospace. The share price slumped 42.1% to 11p.
Immupharma (LON: IMM) has lost all its recent gains after its partner in the US received a written response from the FDA that includes guidance for the next steps of the clinical programme for Lupuzor as a treatment for Lupus patients, such as dosing and amending the study protocol. The shares fell 30.4% to 4.61p. There was a recent fundraising at 5p a share.
ITM Power (LON: ITM) chief executive Dr Graham Cooley will step down once a replacement is found. The electrolysers developer has a strong balance sheet thanks to a fundraising last year and a pipeline of potential contracts to add to those already signed. Revenues, though remain modest. ITM Power shares declined by 28.5%.
Reabold Resources (LON: RBD) says terms have been agreed for the sale of investee company Corallian Energy for £32m (320p a share). Reabold Resources will receive £12.7m from the sale, compared with a total investment of £7.5m. The cash can be reinvested in other oil and gas assets. Investors do not appear to be happy with the disposal price and there was a 21.7% fall in the Reabold Resources share price to 0.36p.
Inspirit Energy Holdings (LON: INSP) has issued a further update on its waste heat recovery system and its use in the marine market with Volvo. The initial trial produced a power output of more than 34kW. That can be doubled by using the Inspirit Helix Accelerator. Further trials are planned before entering a trial phase with Volvo Marine. There could be applications in the retrofit market for commercial engines. The share price has jumped 70.5% to 0.052p, but the share price tends to be volatile when announcements are made.
Tintra (LON: TNT) has signed a contract allowing it to integrate its customer identification technology with Temenos banking software. Tintra has also gained a fintech services licence in Qatar as it progresses towards being granted a banking licence. The shares are 10% ahead at 220p.
Safety and compliance services provider Marlowe (LON: MRL) has started the year well and revenues are 66% higher in the first four months. Organic growth is in high single digits. Cost savings from some recent acquisitions are going to be better than expected. There was a 8.1% recovery in the share price to 735p. The share price has fallen by more than one-quarter this year.
FTSE 100 falls on dual US and UK inflation shocks
The latest inflation figures did little to cheer markets on Wednesday, after UK CPI fell to 9.9% in August, dropping below July’s 40-year record of 10.1%.
The FTSE 100 dropped 1.2% to 7,293.5 during lunchtime trading, dragged down by rising fears of higher interest rates and the aftershocks of Tuesday’s hotter than expected inflation figures of 8.3% for August, failing to meet analyst expectations of 8.1%.
US futures clawed back a slight amount of ground, with the NASDAQ rising 0.4% to 12,165.7, the S&P 500 increasing 0.3% to 3,965.2 and the Dow Jones climbing 0.2% to 31,300 in pre-open trading.
“Despite some of the key factors behind surging inflation easing slightly, many prices continue to go up and markets are not happy,” said AJ Bell investment director Russ Mould.
“With the 8.3% number for August higher than the 8.1% expected by economists, investors took fright and we saw an almighty sell-off on the markets, including a 5% decline in the tech-heavy Nasdaq index.”
Evelyn Partners chief investment strategist Daniel Casali added: “On the one hand, headline CPI inflation came in lower-than-expected, but the underlying core CPI measure remains stubbornly high, increasing the pressure on the Bank of England to raise interest rates by more than the 50bps expected by the Bloomberg consensus of economists when it meets on 22 September.”
EU calls for energy revenues price cap
Meanwhile, utilities stocks circled the bottom of the FTSE 100, after European Commission President Ursula von der Leyen called for a price cap on non-gas energy suppliers across the bloc to assist vulnerable families as the cost of living crisis and surging energy prices threaten to plunge households across the continent into a harsh, cold winter.
The revenues cap is expected to raise £121 billion, with the cap set to impact producers of low-cost power including renewables and nuclear.
“In these times it is wrong to receive extraordinary record revenues and profits benefiting from war and on the back of our consumers. In these times, profits must be shared and channelled to those who need it most,” said von der Leyen in a statement.
United Utilities shares fell 3.6% to 143.8p, Severn Trent declined 3.6% to 2,684.5p, Centrica dropped 2.4% to 82.8p and National Grid decreased 2.2% to 1,055.7p.
Retail companies rise
However, retail companies gained on the relief of a less extreme cost of living crisis, sparking hopes of increased consumer spending.
Next shares rose 1% to 5,886p, JD Sports Fashion climbed 0.1% to 127.4p and Kingfisher increased 0.1% to 247.5p.
Oil receives boost
Oil companies enjoyed a boost to $93 per barrel in Brent crude after reports of bullish demand from the International Energy Agency (IEA), with the Agency expecting a large-scale switch from gas to oil projected to average 700,000 bpd from October 2022 to March 2023, doubling the rate compared to last year.
The positive news for energy groups follows estimations for growth in international oil demand to rise in 2022 and 2023 by the Organisation of the Petroleum Exporting Companies, which noted major economies were doing better than expected despite problems including spiking inflation.
Shell shares rose 0.1% to 2,331.2p and BP shares gained 0.3% to 463.1p.
C&C Group trading slows down as inflation bites, €900m net revenue expected
C&C Group shares fell 3.6% to 167.5p in late morning trading on Wednesday following a reported a slowdown in on-trade momentum over Q2 2023 due to the impact of inflation on discretionary consumer spending in its pre-close trading statement.
The premium drinks company mentioned an expected HY1 2023 net revenue climb of 35% compared to last year, with expected net revenues of €900 million in the six months to 31 August 2022, broadly in line with comparable pre-Covid figures.
C&C Group also noted a projected operating profit range of €52-55 million against €16 million the year before and €64 million in HY1 2020.
The firm said trading through HY1 saw demand return “robustly” at the start of the term, however the impact of cost of living concerns resulted in a slowdown in trading momentum over Q2 2023.
Meanwhile, C&C Group confirmed an expected net debt to adjusted EBITDA of approximately 1.5 times at 31 August 2022, hitting its previously declared aim.
The company highlighted the further reduction in leverage multiple reflected the benefit of €43 million in proceeds from the first two tranches of three equal tranches from the sale of its interest in Admiral Taverns, along with good cash generation from the group over HY1 2023.
C&C Group added it intended to review the potential return of capital to shareholders including dividends in HY2 2023.
Dunelm increases market share as cost of living crisis eliminates competition
Dunelm shares rose 2.7% to 743p in late morning trading on Wednesday, after the firm announced a total sales rise to £1.5 billion in FY 2022 against £1.3 billion in the previous year.
Meanwhile, the group noted digital total sales of 35% from 46% year-on-year.
Dunelm reported a record pre-tax profit of £209 million compared to £157.8 million, along with a gross margin of 51.2% from 51.6%.
“Looking in the rear-view mirror Dunelm can only see sunny skies as it reports another record profit. But a glance through the windshield reveals a massive consumer cloud about to break over the business,” said AJ Bell investment director Russ Mould.
“Dunelm hasn’t faced a heavy shower yet. Sales have remained ‘robust’, albeit modestly lower year-on-year in the first 10 weeks since the year end on 2 July, and that is testament to the company’s skills as a retailer.”
“Over recent years Dunelm has been one of those names in the retail sector which has got the basics right. It has products people want to buy, at a price they want to pay, and it puts them in front of shoppers at the right times.”
The firm pointed out a homewares market share gain of 1.4% and continued share gains in furniture.
“Like other survivors in the retail space, Dunelm should benefit from market share gains as smaller and weaker rivals fall by the wayside,” said Mould.
The home furnishing retailer also confirmed an operating costs:sales ratio of 37.5% against 39.1%.
The company highlighted a net debt of £23.8 million against net cash of £128.6 million the year before.
Dunelm commented it was on track to deliver FY 2023 results in line with analyst expectations, and estimated a 50% gross margin for the FY term.
The company also said it was set to manage costs through efficiency improvements and operational grip.
“We feel confident and well prepared to weather the current economic pressures – we emerged from an unprecedented global pandemic as a bigger, better business and we believe we have the tools in place to do that again. That said, the operating and economic environment is extremely challenging,” said Dunelm CEO Nick Wilkinson.
“In this environment, we have to make every pound count, both for ourselves through our tight operational grip and cost discipline, and for our customers, through our offer of outstanding value at all price points.”
Dunelm hiked its ordinary dividend per share to 40p from 35p, and declared a special dividend per share of 37p from 65p.
“For now, the company is sticking with full-year forecasts. But even Dunelm can’t change the economic weather and it seems likely sales will eventually suffer as people wait a bit longer to replace that duvet set or pair of curtains,” said Mould.
“As the retailer desperately tries to make ‘every pound count’, to use the language of chief executive Nick Wilkinson, doing what it can to keep a lid on costs and offer customers value, there may be some confidence that it can emerge from the storm a stronger business.”
Redrow, CleanTech Lithium, and Bidstack with Alan Green
In this Podcast we discuss:
- Redrow (LON:RDW)
- Bidstack (LON:BIDS)
- CleanTech Lithium (LON:CTL)
- Evrima (LON:EVA)
Register for the UK Investor Magazine Virtual Investor Conference 27th September here.
Alan Green joins the Podcast for a deep dive into UK equities and global markets. We start by looking and the most recent instalments of inflation data from the US and UK.
In both circumstances CPI inflation fell from the prior month’s reading with the US falling to 8.3% and the UK dipping to 9.9%. However, the US reading of 8.3% was above estimates of 8.1% and at odds with the market’s pricing of equities in the run up to the announcement. US stocks posted the biggest declines since 2020 yesterday and we explore the potential playbook for investors going forward.
Redrow is a company particularly exposed higher interest rates and the cost of living crisis but has still managed to produce to 10% revenue increase in 2021. We look at how their shares could perform in the coming weeks and months.
Bidstack recently posted £2m profit for the first half, a dramatic increase from the same period a year prior. Given the huge potential for the company, we explore how Bidstack provide shareholder value in the future.
CleanTech Lithium released a resource upgrade yesterday and we drill down into the numbers and what investors can expect in the near future.
We finish by dissecting Evrima’s portfolio and the discount of their mining investments compared to the current share price.