Vianet set to return to profit

Andrew Hore
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Vianet set to return to profit

Although Vianet (LON: VNET) did not quite return to profit in the year to March 2022, it was highly cash generative and nearly covered the capital investment in the business. Vianet is on course for a substantial profit in the current year.

During the second half, the Smart Zones division, which provides data and stock management information for pubs and bars, went back to full billing of clients. They had been paying a percentage of normal fees during the Covid restrictions.

That helped Smart Zones improve its revenues in the second half. The US business is still making a small loss, although there are new opportunities being investigated that could move it into profit. If they do not, then the business will be reassessed.

The Smart Machines division continues to win new business and secure 3-5 year renewals from existing customers. It provides remote data and contactless payments services for vending machines operators and other clients.

The reduced usage of vending machines because of Covid restrictions and the continued reduction in working in offices has not hampered the business. The data provided to clients means that they can assess when a vending machine requires to be refilled or maintained, thereby reducing the number of visits and saving money.

Additional services are being launched are margins are expected to be higher than previously.

Results

In the year to March 2022, group revenues improved from £8.37m to £13.2m, although that is still lower than in 2019-20. Recurring revenues were 88% of the total. The loss was reduced to £170,000. Net operational cash inflow was £2.4m.

There is no dividend this year. An improved balance sheet with reduced net debt of £3m and a return to previous trading levels should enable a dividend to be paid.

That may not happen this year when revenues are expected to grow to £15.7m and a pre-tax profit of £1.1m is estimated. Next year, forecast revenues of £17.8m and pre-tax profit of £2.5m are both higher than the levels in 2019-20.

Open Orphan secures £7.2m RSV human challenge contract

Natasha Doris
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Open Orphan secures £7.2m RSV human challenge contract

Open Orphan shares rose 4.4% to 12.8p in late afternoon trading on Tuesday after its subsidiary thathVIVO secured a £7.2 million contract with an unnamed top five global pharmaceutical company to test its orally administered antiviral product.

The testing process will use hVIVIO’s respiratory syncytial virus Human Challenge Study Model as it carries out a Phase 2a double-blinded placebo-controlled human challenge study, which will take place at the group’s specialist quarantine facilities in Whitechapel and is set to evaluate the safety and efficacy profile of the antiviral against RSV.

The study is scheduled to kick off this month, with revenue recognised in FY 2022 and FY 2023.

Open Orphan confirmed that hVIVO would be recruiting healthy volunteers through the firm’s FluCamp volunteer recruitment arm.

The company said its client’s antiviral is currently in Phase three clinical trials for another infectious disease indication, and will be using the human challenge to assess the efficacy of its antiviral drug candidate against RSV at great speed, with the intent of highlighting the value of human challenge studies within the process of drug development.

“We’re delighted to be working with this top 5 global pharmaceutical client again to test their antiviral candidate using the hVIVO RSV Human Challenge Study Model,” said Open Orphan CEO Yamin ‘Mo’ Khan.

“I am especially proud that our world-class offering and customer service has secured repeat business from another Big Pharma client, and that we are seen as the ‘go-to’ partner for an increasing number of global drug developers. The client’s drug has already been shown to be an effective antiviral in certain disease indications, and we’re pleased to now test its efficacy against RSV infection.”

“RSV continues to be a serious global health threat causing an estimated 100,000 annual deaths in children under the age of five.”

Frontier Developments shares surge on record £114m annual revenue

Natasha Doris
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Frontier Developments shares surge on record £114m annual revenue

Frontier Developments shares surged 19.2% to 1,286p in early afternoon trading on Tuesday after the group reported a record annual revenue climb of 26% to £114 million in FY 2022.

The company’s adjusted EBITDA is estimated to hit management expectations at approximately £7 million to £8 million against £12 million in FY 2021.

Frontier Developments attributed the drop in EBITDA to higher levels of investment in significant game developments for release in the coming years, including F1 Manager 2022 for the summer this year and Warhammer Age of Sigmar scheduled for FY 2024.

The group highlighted that it had chosen to cancel the console development of its Elite Dangerous: Odyssey PC game due to a lack of engagement, and the board confirmed the capitalised intangible asset would be fully amortised from 31 May 2022, with a resulting additional charge of £7 million.

The company reported that its operating profit was projected to hit £1 million to £2 million following the deduction of the one-off £7 million amortisation cost for Elite Dangerous: Odyssey.

Meanwhile, Frontier Developments added that its balance sheet had £39 million against £42 million in the previous year, with the decrease linked to greater investment in future game offerings and a £5 million purchase of shares by the Employee Benefit Trust executed in April 2022 to satisfy future exercises of share options by employees.

The company said it expected its revenue to climb around 20% on average per year, with FY 2023 trading off to a strong start.

Frontier Developments mentioned its portfolio remained in a positive position, with Elite Dangerous, Jurassic World Evolution 2 and Planet Zoo set to benefit from new DLC over FY 2023 and its major release in F1 Manager 2022 receiving a positive response in advance of its launch later in the year.

The firm’s Frontier Foundry business has also benefited from the reception to its Warhammer 40,000: Chaos Gate – Daemonhunter release in May 2022.

“We’ve had another year of solid growth. Following its launch in November 2021, our player base for Jurassic World Evolution 2 has continued to expand, as expected,” said Frontier Developments CEO David Braben.

“We are now very well set up for the future, with the Dominion expansion and bundles launching today for Jurassic World Evolution 2, and F1 Manager 2022 due later this summer. The team has done a great job this year, overcoming many challenges and working tirelessly to support our games and our players.”

“Our games label, Frontier Foundry, has performed well too, with Warhammer 40,000: Chaos Gate – Daemonhunters launching right at the end of the financial year and looking good for FY23 too, with further exciting Foundry releases to come.”

AIM movers: Revolution Bars, Verici Dx, Condor Gold, Tekmar, Devlover Digital

Andrew Hore
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AIM movers: Revolution Bars, Verici Dx, Condor Gold, Tekmar, Devlover Digital

Revolution Bars Group (LON: RBG) trading remains strong and today’s trading statement has sparked a forecast upgrade by finnCap for the vodka bars operator. Refurbished bars have done particularly well, and two new bars should open by the end of June. They are the first new openings for four years. Cost control is helping to maintain margins despite inflation. Forecast pre-tax profit for 2021-22 has been raised from £500,000 to £2.7m. The share price has risen 1.1p to 16.25p.

The Verici Dx (LON: VRCI) share price fell 17% to 22p after the presentation of data for the post-transplant test Tuteva. Even so, house broker Singer Capital Markets is positive about the results and believes that the performance of the test should improve over time as more data becomes available for the AI technology. The positive predictive value of 60% in high-risk patients is already better than the current tests. Tuteva could be launched later this year. In the next few weeks, there will be news concerning the data from the trial of the Claranva test that generates a risk score for early acute rejection for potential kidney transplant patients.  

Condor Gold (LON: CNR) has raised £3.25m at 28p per unit so that it can complete the feasibility study on the La India god project in Nicaragua. Once that is done Condor can try to secure project finance to construct a mine. Each unit is one share and 0.5 of a warrant exercisable at 35p a share over a three-year period. The share price declined by 3.75p to 26.75p.

The two worst AIM performers yesterday continue to fall. Subsea cable protection services provider Tekmar Group (LON: TGP) has taken over from video games publisher Devolver Digital (LON: DEVO) as the worst performer of the day. Tekmar shares fell from 39p to 24.2p on Monday as it sought a strategic partner or buyer. They have fallen further to 13.25p, which is less than 10% of the flotation price five years ago. Yesterday, Devolver Digital slumped from 136.5p to 67.5p and have continued to decline to 58.5p. A relatively small decline in forecast revenues had a much bigger impact on profit.

Clontarf Energy plugs Sasanof-1 well, eyes alternative WA-519-P prospect leads

Natasha Doris
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Clontarf Energy plugs Sasanof-1 well, eyes alternative WA-519-P prospect leads

Clontarf Energy shares declined 1.4% to 0.08p in early afternoon trading on Tuesday, after the oil and gas firm announced the completion of its Sasanof-1 exploration well located 207 kilometres north-west of Onslow, Western Australia.

The well had been operated by Western Gas, who reported that the well was drilled by the Balaris MS-1 semi-submersible without incident and the rig had de-mobilised from the well and departed the exploration permit, listed as WA-519-P, on 12 June 2022.

Clontarf Energy confirmed that the well had been plugged and permanently abandoned, with wellhead infrastructure removed from the site.

The well had been drilled to a total depth of 2,390 metres on 5 June 2022, and intersected the Lower Barrow Group target sands at a depth of 2252.9 metres, 3.9 metres below the pre-drill prediction.

The oil and gas exploration firm said a preliminary evaluation indicated that 40 metres of net sand was encountered, however logs confirmed that the sands contained water, with no commercial hydrocarbons detected in the area.

Clontarf Energy highlighted that initial technical analysis indicated that the expected western seal of the targeted stratigraphic trap was breached, and allowed migration of gas out of the prospect.

The company confirmed that the total operation cost less than $25 million with a timeline of 25 days overall.

Contarf Energy commented that the WA-519-P block remained highly prospective, with reported material leads identified in the proven Lower Barrow Group and Triassic Mungaroo plays, along with play opening leads in the Jurassic ‘Perseus’ Syn-rift.

The group said it intended to review and assess the leads alongside its joint-venture partners with the aim of progressing them to prospects, using data taken from the Sasanof-1 well to support exploration and targeted farm-out discussions in the company’s future.

“Clontarf will retain its 10% interest in the WA-519-P Block and will work with its JV partners in further evaluating the remaining exploration targets within the field, with a view to commence targeted farm-out discussions,” said Clontarf Energy chairman David Horgan.

“While Sasanof-1 did not intersect commercial hydrocarbons, we did show that a consortium of juniors can identify, work-up, fund and drill a high potential gas well in over a kilometre of water depth.”

“The partners will review deeper targets on this Block, utilising the Sasanof-1 well data, to progress new prospects through targeted farm-out discussions.”

Synectics major end-user markets boost revenues in HY2 2022

Natasha Doris
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Synectics major end-user markets boost revenues in HY2 2022

Synectics shares were up 0.9% to 106p in early afternoon trading on Tuesday, following the company’s trading report for HY1 2022, in which the group confirmed continued momentum in its major end-user markets including oil and gas, and US gaming.

The security and surveillance systems firm commented that recovery was less evident in sectors such as casinos and gaming resorts in the Asia-Pacific region, as a result of subdued leisure-related travel.

Synectics mentioned trading was in line with management expectations, with a positive turnaround from the same term last year.

The company highlighted a revenue climb of 20% in its core system division, which reportedly drove its strong results as markets hit by the Covid-19 pandemic began to recover.

However, its UK-centred integration division Synectics Security saw a fall in revenue on the back of customer-led delays on several important projects that had been scheduled for completion over the period.

Operating profits were projected to hit a similar level to the company’s seasonally strong HY2 2021, with a profit of £400,000 compared to an operating loss of £800,000.

The firm noted revenues of approximately £23 million against £22 million in HY1 2021, with net cash of £3.9 million at 31 May 2022.

Synectics confirmed progress on its large advanced infrastructure surveillance projects, including Deutsche Bahn in Berlin, and the Cloud-based deployment of Synergy for the City of London Corporation and the City of London Police, which act as important reference sites for the group’s core advanced technology.

The firm commented that it expected further acceleration in its progress over HY2 2022.

“A strong team performance has meant we have been able to deliver our goals for this period despite increasing challenges in the supply chain and with markets still subdued,” said Synectics CEO Paul Webb.

“We have all been working through our ‘return to work’ challenges, and are in good shape now to push on together and deliver further improved results in the second half of this financial year and beyond.”

FirstGroup operating profit rises to £806.1m as pandemic travel restrictions ease

Natasha Doris
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FirstGroup operating profit rises to £806.1m as pandemic travel restrictions ease

FirstGroup shares were up 1.6% to 135p in late morning trading on Tuesday, after the travel company reported an operating profit rise to £806.1 million in FY 2022 against £285.8 million in FY 2021.

FirstGroup said its operating profit climbed on the back of easing pandemic travel restrictions, with a consequential growth in passenger volumes.

The company also mentioned a stronger First Rail performance than expected at the start of the year and central cost reductions ahead of plans following the sale of its three North American businesses for a combined enterprise value of $4.6 billion.

The firm announced a revenue fall to £5.5 million compared to £6.8 million last year, however, FirstGroup confirmed a pre-tax profit spike to £654.1 million from £115.8 million, linked to the sale of its American businesses

The group also noted a decline in net debt to £619 million against £2.6 billion.

FirstGroup said its trading outlook remained uncertain as a result of broader macroeconomic volatility, however the company mentioned it expected to make significant progress in FY 2023.

First Bus has reportedly hit 76% of 2019 passenger volume recently, with the level expected to grow in the coming year, weighted in HY2 2023.

First Rail is projected to perform strongly in FY 2023, with current trading ahead of management expectations.

FirstGroup commented that it was also on track to realise a further £5 million in previously announced central cost savings.

“The transformed Group has momentum and we expect to make significant further progress in the year to March 2023,” said FirstGroup CEO Graham Sutherland.

“With leading positions in bus and rail, a strong balance sheet and a clear purpose, FirstGroup has many opportunities ahead to deliver sustainable shareholder value creation while delivering the vital services that are key to achieving society’s sustainability and economic goals.”

The company noted an EPS surge to 60.2p compared to 6.5p, and announced a dividend per share of 1.1p, resulting in a total dividend of £8.1 million.

FTSE 100 continues decline as S&P 500 enters bear market

Natasha Doris
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0
FTSE 100 continues decline as S&P 500 enters bear market

The FTSE 100 fell again on Tuesday as early strength in housebuilders and banks shares wasn’t enough to offset concerns over volatility in US stocks and upcoming central banks decisions.

The S&P 500 officially entered a bear market, with the index down 3.8% to 3,749.6 yesterday and tumbling 21.8% year-to-date.

“The US market entered bear territory last night, with its main markets dropping to long-forgotten lows. The crux of the concern plaguing investors is how harshly the Fed plans to tackle rising inflation in the face of stark new CPI data,” said Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown.

“Getting the balance wrong and hiking interest rates too aggressively could see recession fears become a reality.”

The markets are currently bracing for the US Federal Reserve’s interest rate decision on Wednesday, with investors anticipating a significant hike.

The NASDAQ plummeted 4.6% to 10,809.2 and the NYSE dropped 3.7% to 14,527.9 in advance of the Fed’s expected hawkish move.

“The Fed is focused on inflation and the economy, not the markets, yet its actions have significant influence on the direction of stocks and bonds,” said Russ Mould of AJ Bell.

“A decision to raise rates by more than half a percentage point could cause chaos on the markets and put a bigger dent into investors’ portfolios than they’ve already seen this year.”

However, the European markets managed to avoid the massive slide, with the French CAC falling 0.6% to 5,981.8, the German DAX down 0.3% to 13,383.4 and the Italian FTSE MIB dipping 0.4% to 21,819.8.

Housebuilders defy gravity

The housing market continued to defy gravity, with Persimmon share up 1.8% to 2,158p, Barratt Developments rising 1.8% to 484.2p, Taylor Wimpey gaining 1.2% to 123.7p and Berkeley Group Holdings climbing 1.2% to 4,017p.

“The housebuilding sector continues to shine despite all the gloom about cost of living pressures and rising interest rates,” said Mould.

“A shift towards hybrid working means those who can afford it are often looking for extra space to accommodate a home office.”

“Supply of new homes remains a long-term issue in the UK and this is helping to support the market.”

Banks gain

Meanwhile, the banking sector was spurred higher by the prospect of higher interest rates from the Bank of England on Thursday, with the institution anticipated to hike rates 0.25% to 1.25% at its meeting this week.

Standard Chartered shares rose 2.4% to 593.8p, HSBC shares gaining 2.2% to 514.1p, Lloyds shares up 1.2% to 4,334p and NatWest shares increasing 1.1% to 221.5p.

ITV

ITV shares rose 1.1% to 68.1p following the company’s 79.5% acquisition of natural history film producer Plimsoll Productions for £103.5 million.

The acquisition is set to deepen ITV’s relationships with companies in the streaming industry and expand its entertainment offerings across its customer base.

“Growing ITV Studios with an exciting pipeline of premium programmes is core to our strategy as we further diversify the business by genre, by geography, by customer and grow ahead of the market,” said ITV CEO Carolyn McCall.

Mould added: “The move will strengthen ITV’s position in natural history content which has widespread appeal around the world.”

“ITV has been trying to beef up its content arm with a view to having programmes that appeal beyond its UK domestic audience and this acquisition looks like a winner.”

Ashtead sinks

Meanwhile, Ashtead shares sank 4.9% to 3,617p despite reporting a 19% rise in FY 2022 revenue to $7.9 billion compared to $7.6 billion in the previous year.

The company also increased its final dividend by 40% to 67.5c against 48.2c.

“Construction equipment rental group Ashtead continues to achieve strong sales and earnings growth and its latest results are a reminder of how the business is top of its class when it comes to generating strong returns,” said Mould.

Xeros Technology share price doubles on licence deal

Andrew Hore
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Xeros Technology share price doubles on licence deal

Germany-based washing machine pumps and drives manufacturer Hanning has signed a ten-year global licence to manufacture and sell the XFilter washing machine filter technology developed by Xeros Technology Group (LON: XSG). This is in anticipation of legislation related to microfibres. The Xeros share price has doubled on the news.

XFilter enables microfibres and microplastics released during washing to be captured and safely disposed of. The built-in filters should last the life of the washing machine. This type of technology will be required in France from 2025 and other countries are likely to follow suit.

In today’s announcements the spelling XFilter is used, when previously it was called XFiltra. It is unclear whether the name has been changed.

Textiles testing institute Hohenstein has tested XFilter and verified that it can capture more than 99% of microplastics. Xeros already has a development agreement with a large Asian washing machine manufacturer and these tests were undertaken with this client.

Xeros will receive an undisclosed royalty on every filter that is manufactured by Hanning. The licence deal will not generate any revenues until late 2023, though.

Hanning is estimated to supply components for 8.5 million washing machines each year – around one-third of those made in Europe. This could Xeros has a current cost base of around £7m, so even a small royalty on a proportion of the Hanning-supplied washing machines could generate significant revenues.

Funding

There was £6.2m in the bank at the end of February 2022 and Xeros continues to lose money. Although management said that there was enough money to get Xeros into the first quarter of next year, there may be additional cash required earlier than that. A sustained share price rise may make it difficult to resist a fundraising in the next few months.  

In March 2021, a placing and open offer at 240p a share raised £9m. The current share price is 63.5p, up 31p, and it has been even higher during the day.

Xeros joined AIM in March 2014 at 123p a share, but there was a subsequent one-for-100 share consolidation, so the comparative price is 1230p. The current share price has fallen more than 99% from that level.

ITV acquires Plimsoll Productions for £103.5m

Natasha Doris
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0
ITV acquires Plimsoll Productions for £103.5m

ITV shares were up 1.2% to 68.1p in early morning trading on Tuesday, following the company’s acquisition of a 79.5% interest in Plimsoll Productions for approximately £103.5 million from private equity firm LDC, Plimsoll Productions CEO Grant Mansfield and other existing company shareholders.

The agreement values the company, which is currently the largest independent producer of natural history programmes, at £131 million.

The remaining 20.5% of share capital will reportedly be held by Mansfield and other members of the management team and strategic investors of Plimsoll Productions.

ITV confirmed that there are Call and Put arrangements in place which will provide the company with the option of acquiring the remaining 20.5%, with the consideration payable dependent on Plimsoll’s profit growth performance in the term until December 2027.

The cash amount is capped at £79.5 million and is payable from 2028 onwards.

Plimsoll Productions generated an EBITDA of £10 million for FY 2021. ITV added that under its ownership, Plimsoll will report to a calendar year and under ITV’s episodic revenue recognition policy.

Plimsoll Productions is estimated to deliver a forecasted EBITDA of approximately £5.5 million in HY2 2022 on this basis.

ITV highlighted that the transaction will be earnings accretive from day one, and is expected to accelerate ITV Studios’ international expansion and its business with global streaming platforms.

The transaction is reportedly set to be financed through existing cash resources.

The move comes as part of ITV’s strategy to broaden its reach in the world of streaming entertainment, with Plimsoll Production’s strong ties to global streamers set to deepen ITV’s relationships in the sector.

ITV confirmed that Grant Mansfield and his senior management and creatives are set to stay with the company and manage the business, and would be working alongside ITV Studios managing director Julian Bellamy, Unscripted UK director Angela Jain, and the rest of their team.

“Growing ITV Studios with an exciting pipeline of premium programmes is core to our strategy as we further diversify the business by genre, by geography, by customer and grow ahead of the market,” said ITV CEO Carolyn McCall.

“Through Plimsoll Productions, as a Studio, we can continue to capitalise on the growing demand for natural history and factual programming and I am really pleased to welcome Grant and the team.”

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