AIM movers: Zinc Media acquisition and Orcadian Energy farm-out

Andrew Hore
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AIM movers: Zinc Media acquisition and Orcadian Energy farm-out

TV programme producer Zinc Media (LON: ZIN) is acquiring The Edge Picture Company and raising £5m at 100p a share. The share price dipped 5.6% to 101.5p. Zinc Media has also launched a £250,000 retail offer via Peel Hunt’s REX platform. The intermediaries involved are Interactive Investor, AJ Bell and Hargreaves Lansdown and the minimum subscription is £50. The Edge is based in London and Qatar and is a brand and corporate film maker. Clients include Barclays, Amazon and FIFA. In 2021, revenues were £8.2m and EBITDA was £800,000. There is initial consideration of £2.1m in cash and shares with up to £3.875m payable if a total of £5m of operating profit is made over the three years to June 2025.

Sabien Technology (LON: SNT) is raising £500,000 through a placing at 10p a share, with potential to raise up to £100,000 more from existing shareholders via a broker option that closes at 5pm on 3 August. The cash will be used to finance the company’s green technology businesses. The share price dived 21% to 12.25p.

Detection technology developer Kromek Group (LON: KMK) shares bounced back today following yesterday’s annual results. The shares increased 15.2% to 10.25p. finnCap forecasts revenues will grow from £12.1m to £18m in the year to April 2023. There is 53% of contracted revenues and 37% going through contract negotiations. The other 10% should come from repeat revenues. Kromek will remain loss-making.

Phoenix Global Resources (LON: PGR) has posted a circular to shareholders to gain approval for its plan to leave AIM. The oil and gas company is holding a general meeting on 1 September. Main shareholder Mercuria Energy is offering 7.5p a share to minority shareholders. The share price moved up 17.7% to 7.3p.

Orcadian Energy (LON: ORCA) has announced the formal farm-out agreement for the Carra prospect in the North Sea. The deal with Carrick Resources requires it to fulfil certain work milestones, which should take four months, and Orcadian will assign a 50% stake in the sub-licence area. This pushed up the share price by 4.76% to 33p.

Oracle Power (LON: ORCP) has been told by the Sindh authorities that it will receive a letter of intent for establishing a 1,200MW hybrid solar/wind, green hydrogen/power project in Pakistan. Oracle Power has to provide a $600,000 performance guarantee. There was a 14% rise in the share price to 0.325p.

Omega Diagnostics (LON: ODX) has completed the sale of the CD4 business for up to £6.1m. The initial £1.1m has been paid. A further £4m will be paid when a clinical study is completed in Kenya. There was a monthly cash outflow of £300,000 a month from CD4. The ongoing focus will be the health and nutrition business. finnCap believes that Omega Diagnostics could breakeven in 2022-23. The relocation to Ely will provide additional capacity. The share price increased 4.7% to 3.35p. Mixed signal ASICs chipmaker EnSilica (LON: ENSI) says contract momentum accelerated in the fourth quarter of the year to May 2022. Revenues and EBITDA are ahead of expectations. Revenues were approximately £15.1m, up from £8.6m the year before, while the EBITDA was £500,000. The share price rose 2.1% to 49.5p, which is just below the recent flotation price of 50p.

IP Group swings to £309.8m HY1

Natasha Doris
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IP Group swings to £309.8m HY1

IP Group shares increased 1.4% in late morning trading on Wednesday, despite swinging to a loss of £309.8 million in HY1 from a profit of £116.5 million the year before.

IP Group linked its HY1 loss to the reversal of gains on Oxford Nanopore, reflecting a slide in public market interest in life science tools companies.

The company announced a net portfolio loss of £291.1 million against a net gain of £140.4 million, with a climb in net overheads to £11.1 million from £9.6 million.

The IP Group mentioned a net asset value slide to 136.7p per share from 167p per share.

The firm also noted a fall in its balance sheet to £235.7 million against £321.9 million the last year.

“Having acted to ensure that the Group has a strong level of liquidity, IP Group ended the period with gross Cash of £235.7m,” said IP Group CEO Greg Smith.

“This financial strength enabled the Group to continue to invest into our leading companies over the period as well as continuing to return a proportion of all exits to shareholders via dividends and share buybacks.”

“In addition, we have arranged a private market debt issue to provide additional funding flexibility in what may be difficult market conditions.”

The IP Group confirmed a dividend raise to 0.5p per share compared to 0.48p year-on-year.

Osirium Technologies licence extension

Andrew Hore
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Osirium Technologies licence extension

Cloud-based cybersecurity provider Osirium Technologies (LON: OSI) has secured a three-year privileged access management (PAM) licence extension with an existing customer. The deal has a value of £500,000.

That is equivalent to 30% of the total bookings achieved by Osirium Technologies in 2021. The cash will be paid up front and revenues recognised over the three-year period.

The customer, which is a global asset manager, has been using the PAM service for six years and the latest contract will cover 4,500 devices.

The customer has also extended the use of Osirium Technologies’ privileged process management (PPA) service for another 12 months. The PPA service has been used since 2019. The number of licences has increased from 40 to more than 75.

This shows how Osirium Technologies can win an initial contract with a client and sell additional licences and other services on the back of the initial deal.

Osirium Technologies is forecast to achieve revenues of £1.74m in 2022. It remains loss-making, although deals like the late4st one mean that cash flow is better than the reported loss.

The share price initially jumped on the announcement, but it has lost much of the increase and is currently 8.7% higher at 6.25p.

Could Cellular Goods shares continue the rally to 5p?

UK Investor Magazine
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Could Cellular Goods shares continue the rally to 5p?

The Cellular Goods share price was rocketed from lows 1.05p in mid-July to briefly trade above 3p in the last 24 hours. The surge in Cellular Goods shares follows a number of announcements around the marketing of their cannabinoid products and positive YouGoV poll results.

With the Cellular Goods IPO price at 5p, this is will be a natural short-term target for investors in the David Beckham-backed supplements and skin-care company.

Whether shares can continue to the 5p level will depend largely depend on the traction of their marketing activities, and the resultant revenue from campaigns that utilised publishers such as Sheerlux, Evening Standard, Conde Nast and Hearst.

A survey by YouGov found 5.4% of 500 respondents were aware of Cellular Goods cannabis-based products, if this is extrapolated across the wider market, one may deduct the marketing campaigns are paying off.

“YouGov’s survey demonstrates how the marketing initiatives we implemented and budgeted for just a few months ago have taken Cellular Goods from being a virtually unknown brand to coming close to some much longer established names,” said Anna Chokina, Chief Executive of Cellular Goods following the release of the poll in July.

“Strong brand recognition is fundamental to delivering revenue growth and I am hugely encouraged our investment and strategy will enable the Company to achieve its long-term potential.”

However, this doesn’t directly infer any sales so we must take recent developments into account, these only being the dramatic share price increase since mid-July, and a 80% surge yesterday.

It’s common for a company to release an RNS noting any sharp share price movements, especially if they feel there isn’t any material changes in the company to warrant the movement, or there’s been media coverage they feel is slightly off the mark.

Such a release was absent from yesterday’s trading, suggesting management feels recent announcements justify the surging share price.

There has been a pull back today in a round of profit taking, which should be expected after such a notable rise in Cellular Goods shares.

The Cellular Goods website encourages visitors to ‘try the breakthrough Rejuvenating Cannabinoid Face Serum, proven to fight ‘inflammageing’, to keep skin youthful, smooth, and radiant.”

Investors will be closely watching future results for just how many people have done this, and to what extent.

Ferrexpo revenues fall 31% as Ukraine conflict impacts mining operations

Natasha Doris
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Ferrexpo revenues fall 31% as Ukraine conflict impacts mining operations

Ferrexpo shares gained 1.1% to 144.5p in early morning trading on Wednesday, despite a revenue decline of 31% to $936 million in HY1 2022 against $1.3 billion last year, as a result of lower production and tighter market conditions.

The Ukraine-focused company confirmed a 14% drop in pellet production to 4.8 million tonnes, with the decrease attributed to the conflict in Ukraine and associated logistics constraints.

The commodities group announced a post-tax profit fall of 88% to $82 million compared to $661 million, as result of a realised $254 million impairment over the term.

Ferrexpo mentioned an underlying EBITDA slide of 44% to $486 million linked to higher costs, driven by lower production volumes, soaring global inflation and rising energy prices.

The firm noted a net cash position of $172 million compared to $177 million year-on-year, and a minimal debt as of June 2022.

“Twelve months ago, we spoke in our Interim Results announcement of an exciting future ahead for the Ferrexpo business, and whilst this positive growth story remains in the Group’s plans, today we are focused on supporting the people and communities of Ukraine following more than 150 days of Russia’s continued invasion,” said Ferrexpo CEO Lucio Genovese.

“The results announced today reflect an unprecedented period in the history of Ukraine, and Ferrexpo, and should be viewed as a result derived through the strength and determination of Ferrexpo’s workforce in Ukraine and those involved in facilitating the export of the Group’s products.”

“Having previously shown resilience during the global Covid-19 pandemic in 2020 and 2021, the Group’s operational teams managed to produce 4.8 million tonnes of iron ore pellets in 1H 2022, and a financial result that is in many ways comparable to historic periods, despite a deterioration in global iron ore markets.”

Ferrexpo cut its dividend 63% to 19.8p per share from 52.8p the year before.

Taylor Wimpey exceeds expectations, raises FY operating profit guidance

Natasha Doris
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Taylor Wimpey exceeds expectations, raises FY operating profit guidance

Taylor Wimpey shares increased 3.2% to 124p in early morning trading on Wednesday, following a HY1 performance ahead of market expectations.

The housing giant reported completions slightly ahead of expectations at 6,790 homes, excluding joint ventures, with a 16.3% rise in pre-tax profit to £334.5 million compared to £287.5 million the last year.

However, Taylor Wimpey confirmed a revenue dip of 5.4% to £2 billion against £2.1 billion, linked to lower levels of completions compared to the 7,219 achieved in HY1 2021.

The group mentioned the impact of rising cost inflation at 9% to 10%, and noted the climbing expenses were being countered by house price growth.

The property company highlighted an operating margin uptick of 0.1% to £434.6 million compared to £424 million, alongside an operating profit margin growth of 1.1% to 20.4% from 19.3% year-on-year.

“I am pleased to report an excellent financial and operational performance with completions in the first half slightly ahead of expectations,” said Taylor Wimpey CEO Jennie Daly.

“This was a very good performance against a strong comparator and only possible due to the hard work of our outstanding teams across the business, and I would like to thank them for their continued commitment and efforts.”

FY 2022 guidance

Taylor Wimpey confirmed a projected FY 2022 operating profit at the top end of market expectations, as a result of strong average selling prices on completions, which are expected to rise 4% to 5% compared to the last year.

The firm reported a total order book of £2.8 billion going forward, compared to an order book of £2.7 billion the year before.

The company acknowledged the volatile macro-economic environment, and commented it would remain “agile” to tackle hurdles across the financial period.

“Taylor Wimpey capped off a strong first half where completions came in ahead of expectations and operating profit for the full year’s now expected toward the top end of previous guidance – the shares popped a couple of a percent as a result,” said Hargreaves Lansdown equity analyst Matt Britzman.

“The forward order book looks strong and Taylor Wimpey’s doubling down on efforts to take full advantage, opening the check book to push more outlets and being new land plots into the fold.”

“Cost inflation remains a thorn, running around 9-10% but fully offset by higher prices for now. It remains to be seen how long that can continue, but while it does shareholders can continue to expect solid returns.”

Taylor Wimpey announced an interim dividend of 4.6p per share, representing an 8% rise against HY1 2021.

NWF’s bumper year fuelled by volatile oil prices

Andrew Hore
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0
NWF’s bumper year fuelled by volatile oil prices

Bumper fuel profit meant that NWF (LON: NWF) produced record results in the year to May 2022. All three divisions improved their profit during the year and NWF has net cash of £9m.

More than 30% of fuel sales are for heating and 12% used in agriculture. There is also significant demand from lorry fleets. There is still potential to fill in the gaps in the regional fuel depot network.

NWF has historically tried to achieve a profit of just over 1p per litre. The volatility of the oil market and availability constraints have enabled it to make around 2.6p per litre, although it will not be able to maintain that margin. Fuels operating profit jumped by 85% to £17.2m, even though volumes fell by 4.6%.  

In the year to May 2022, group revenues were 30% ahead at £878.6m, while underlying pre-tax profit jumped from £11.9m to £20.9m. That was excluding a £8.3m impairment charge for feeds division assets. There was a continued steady increase in the total dividend to 7.5p a share.

The food distribution division is fully using the additional capacity at Crewe, which is doing better than expected. That pushed up revenues from £54.8m to £62.6m, while operating profit jumped from £1.9m to £2.8m. Additional fulfilment and packing work helped margins. A new managing director has taken charge. Further expansion of capacity will be based on additional contract wins.

There was a small improvement in feeds profit, but it is still not back to previous levels. The milk price has been rising, so that farmers will be able to cope with the rising commodity prices that push up feed prices.

The pension deficit has been reduced from £15m to £9m. The next pension assessment will be at the end of 2022. That helped net assets improve to £6.8m.

Acquisitions

There were no acquisitions last year, but the cash in the balance sheet will help to finance further fuels deals. The unusually high profit levels may make that difficult in the short-term, but management knows the businesses it would like to buy and can be patient.

The plan is to spend £10m a year, paying around six times operating profit. That will enhance earnings.

Assuming a profit of 1.2p per litre for the fuels division, group pre-tax profit is expected to decline to £12m.  At 223p, the shares are trading on 12 times prospective 2022-23 earnings, while the yield is 3.3%.

Filtronic invests in sales and R&D

Andrew Hore
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0
Filtronic invests in sales and R&D

Filtronic (LON: FTC) narrowly beat June’s upgraded full year results for the year to May 2022. The RF components and products developer and supplier has a strong balance sheet, and it is investing in its sales team and the development of space products.

A new facility has been set up in Manchester to house a dedicated mmWave space products development team. Last year, R&D spending was maintained at £1.7m and there are plans to spend 12% or more of revenues in the future.  

In the year to May 2022, revenues improved from £15.6m to £17.1m, while pre-tax profit jumped from £200,000 to £1.5m. The mix of product sales boosted margins. Higher margin defence and critical communications sales grew, while lower margin Xhaul telecoms revenues fell, although they were stronger in the second half.

Net cash was £4m. Inventories increased from £2.19m to £2.6m so that difficult to obtain electronic components were available when needed.  

Expectations

The easing of Covid restrictions will mean more travel costs this year and there will also be more sales and development personnel. That will hold back short-term profitability, making it difficult to maintain the current level of profit.

There is likely to be a greater proportion of Xhaul sales in this year’s forecast revenues of £19m. That means that group margins will decline. Pre-tax profit is expected to be £800,000 and net cash could rise to £4.4m.

Filtronic recently won additional contracts, including a £400,000 aerospace and defence contract for the design and manufacture of microwave filters. This will be delivered this year and there could be follow-on business.

It should be remembered that there were upgrades during last year, so there could be scope for upgrades later in this financial year. The latest investment should start to pay off over the next couple of years. At 15.25p, the shares are trading on 50 times prospective 2022-23 earnings. That multiple could reduce significantly in the coming years and the technology developed could be highly valuable.

Rotork order intake rises on price increases, revenue decreases on supply chain problems

Natasha Doris
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0
Rotork order intake rises on price increases, revenue decreases on supply chain problems

Rotork shares increased 2% to 263.2p in late afternoon trading on Tuesday following an adjusted order intake rise of 14% £340.1 million in HY1 2022 compared to £298.2 year-on-year.

Rotork credited an encouraging performance from its Chemical, Process and Industrial, and Oil and Gas businesses for its raised order intake, along with successful price increases implemented in January and May.

However, the firm reported a statutory revenue dip of 2.9% to £280 million compared to £288.3 million as a result of supply chain challenges.

Rotork confirmed an operating profit fall of 12.9% to £44 million from £50.6 million, alongside an operating margin slide of 1.8%to 15.7% against 17.5%.

The company noted a pre-tax profit decrease of 12% to £44.6 million compared to £50.7 million.

The engineering firm said it forecast profit and revenue growth in HY2, and added it was positioned to deliver positive FY 2022 results despite macro-economic headwinds.

“We enter the second half with encouraging momentum, a record order book, and with our supply chain improvement actions taking effect,” said Rotork CEO Kiet Huynh.

“Whilst forecasting remains challenging due to geopolitical and macroeconomic uncertainties we continue to expect our full year results will have a greater than usual weighting to the second half, which will be even more pronounced than our previous expectations if recent sterling weakness continues.”

“Our progress to date confirms that we are well positioned to deliver profitable growth.”

Rotork announced an EPS drop of 11.4% to 3.9p from 4.4p the year before.

However, Rotork raised its HY1 dividend 2.1% to 2.4p compared to 2.3p in HY1 2021.

Synthomer EBITDA falls 46.2% on decreased Performance Elastomers demand

Natasha Doris
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0
Synthomer EBITDA falls 46.2% on decreased Performance Elastomers demand

Synthomer shares tumbled 10.3% in early afternoon trading on Tuesday following an underlying EBITDA fall of 46.2% to £173.1 million in HY1 2022 against £322.7 million in HY1 2021.

Synthomer said all businesses delivered EBITDA growth except for its Performance Elastomers sector, following a 2021 swell of demand for Nitrile Butadiene Rubber (NBR) linked to the Covid-19 pandemic.

The UK-based polymers supplier noted a double-digit EBITDA rise in its Functional Solutions and Industrial Specialties businesses.

The group confirmed an underlying operating profit drop of 56% to £132 million from £288.6 million, alongside an underlying pre-tax profit decline of 54.6% to £114.7 million compared to £272.4 million.

Synthomer reported an underlying revenue climb of 8.6% to £1.3 billion against £1.2 billion, and a statutory revenue growth of 8.5% to £1.3 billion compared to £1.2 million year-on-year.

“All parts of the business except NBR generated EBITDA growth against a strong H1 2021 comparator, demonstrating the strength and diversity of Synthomer’s portfolio,” said Synthomer CEO Michael Willome.

“Our performance reflects the benefits of recent acquisitions with Functional Solutions continuing to leverage its increased global reach and portfolio depth and Adhesive Technologies having a strong first quarter in our Group, in line with our expectations. We have successfully managed higher costs and have passed them through, helping to enhance our profitability.”

“Whilst NBR market conditions have yet to normalise following a period of exceptional COVID-19 related demand, we are focused on the tremendous opportunities available elsewhere in the Group. I am confident that the Group’s enhanced scale, portfolio depth and geographic diversity will continue to underpin our resilience, supporting further progress in the second half and into 2023.”

The firm mentioned an EPS slide of 61.1% to 19p from 49.3p the last year.

Synthomer recommended a dividend of 4p against 8.7p the year before.

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