AIM movers: TP Group write-downs and significant Abingdon Health loss

Andrew Hore
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AIM movers: TP Group write-downs and significant Abingdon Health loss

Engineering and consultancy business TP Group (LON: TPG) has finally brought out its 2021 results and reported a loss of £19m. New management will hopefully have got all the write-downs out of the way in this set of figures. However, there is a warning there are still concerns about the resolution of legacy maritime contracts. This year and next year are described as a period of transition. Net debt is £1.6m and bank facilities will be renegotiated over the next 12 months. The share price slumped 25.3% to 1.4p.

Diagnostics company Abingdon Health (LON: ABDX) reported a slump in revenues and they are still significantly lower when Covid-related revenues are taken out – down from £3.6m to £2.8m. This means that there will be a substantial loss in the year to June 2022. A previously announced £2.7m technology transfer deal may not go ahead. There should be more than enough cash for the current financial year and the company is refocusing on contract services. The share price dived 24.3% to 7p.  

Designer and supplier of automotive interior components CT Automotive (LON: CTA) says that although first half revenues of $55m were ahead of expectations gross margin was lower. This was due to Covid lockdowns in China, delays in shipping and problems with UK manufacturing. UK production is being closed and there will be a small exceptional charge. The recovery in vehicle production is stronger than expected. CT Automotive joined AIM at the end of 2021 at 147p a share. Today, the share price fell 17% to 122.5p.

Trading in platinum and precious metals explorer Future Metals NL (LON: FME) shares has been halted on the ASX but continues on AIM. An announcement regarding a fundraising is anticipated. The share price has fallen 6.45% to 7.25p.

International payments company Cornerstone FS (LON: CSFS) has appointed former Equals Group (LON: EQLS) executive James Hickman as its new chief executive. He will start in September. The share price bounced back 16.7% to 10.5p.

Velocys (LON: VLS) believes that new legislation in the US will enable the financing of its sustainable aviation fuel project. The bill includes sustainable aviation fuel tax credits, which should help the Velocys project in Natchez, Mississippi. Southwest Airlines and BA have agreed to buy the fuel and an offtake agreement is being finalised. The share price jumped 14.9% to 5.975p.

Spectra Systems (LON: SPSY) has amended a contract with a bank customer and that means that there will be an additional $4m of revenues, which is likely to be earned in the two years to the end of 2024. The banknote authentication and brand protection technology provider will use some of the additional cash to boost the marketing of machine-readable secure polymer substrate, Fusion. This pushed the share price up 7.36% to 138.5p.

Secure payments technology provider Eckoh (LON: ECK) says that new orders in the first quarter are significantly higher than in the same period last year. This includes a two-year contract with a global hotel company worth at least $1.3m. The share price rose 7.32% to 44p.

Oil and gas producer Serinus Energy (LON: SENX) increased interim revenues from $15.9m to $29.3m and this enable it to move from loss to a $4.35m pre-tax profit. This was partly thanks to strong sales in April when the oil price was near its high. Cash generated was ploughed back into capital investment. A full year pre-tax profit of $8.9m is forecast. The share price was 6.5% higher at 12.25p.

Phoenix Group shakes off market uncertainty in positive first half

UK Investor Magazine
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Phoenix Group shakes off market uncertainty in positive first half

Phoenix Group,  the UK’s largest long-term savings and retirement business, had a robust start to 2022 as cash regeneration grew and market volatility was managed with efficient hedging activities.

Phoenix Group cash generation rose 9% to £950m while New Business Long Term cash generation jumped 107% £430m.

“Phoenix has performed very strongly in the first half of the year despite the challenging macro environment. We have once again delivered a record set of financial results, which was underpinned by the strong progress we have made across our strategic priorities,” said Phoenix Group CEO, Andy Briggs.

Hargreaves Lansdown’s Steve Clayton shared the CEO’s sentiment and highlighted the positive impact of hedging throughout the business, as well as the possibility of additional acquisitions.

“These are a solid set of numbers from Phoenix that show the company executing well against all of their key targets. Cash generation is up and acquisitions have delivered their synergy expectations. The group have cash surplus and capital, so expect further acquisitions down the line,” said Steve Clayton, fund manager at HL Select.

“The business hedges risks to the maximum extent possible and saw little impact when markets tumbled in the first half. Crucially, Phoenix say this morning that they have almost no exposure to inflation, having hedged out their costs and product exposures. No doubt analysts will quiz them later on how long this hedging will run for. But right now, that protection from rising costs puts Phoenix in an enviable position relative to most UK companies.”

MTI Wireless orders set up stronger second half

Andrew Hore
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MTI Wireless orders set up stronger second half

MTI Wireless Edge (LON: MWE) maintained its pre-tax profit in the first half of 2022, helped by a strong second quarter performance by the antennas division, which returned to profit in the period. Recent contract wins by the group mean that it already has momentum in the second half.

In the six months to June 2022, revenues improved from $21.3m to $22.7m, while pre-tax profit barely changed from $2.05m to $2.04m, due to a higher interest charge and amortisation related to the recent acquisition of communication and monitoring systems developer PSK WIND Technologies.

It should be remembered that Russia accounted for 6% of revenues and 5% of profit in 2021. That business is no longer part of the group. PSK contributed revenues of $2m and made a small profit contribution after amortisation.

Net cash has fallen to $5.2m after paying the final dividend and acquiring 51% of PSK. The disposal of the Russian assets meant that a prepayment had to be returned and that knocked $2.79m off the cash pile. There is contingent consideration of $1.43m and bank debt of $187,000.

Divisions

Antennas lost money in the first quarter but made a profit in the six months, even though military demand was slow. In the 5G backhaul market, the company is working with five of the seven main telecoms equipment manufacturers. There is also new technology that can adapt to different climate conditions. The timing of orders is uncertain, but the potential is large.

Distribution is the largest profit contributor. PSK has renewed a contract with the Israeli Ministry of Defence which will be worth $1.4m a year over seven years. This is more than previously. At the end of June, PSK won two other contracts valued at $850,000 for delivery this year.

Irrigation technology supplier Mottech Water Solutions gained €1m of orders in Italy at the end of June, also to be delivered this year. Mottech reported a flat profit in the first half because of a planting sabbatical in Israel. The second half outlook is positive.  

The share price fell 5.79% to 57p. Shore Capital expects a 10% rise in 2022 pre-tax profit to $4.4m, but flat earnings per share. That means the shares are trading on 17 times prospective earnings and the forecast yield is 4.2%. MTI Wireless is expected to have net cash of more than $10m by the end of the year.

Tekcapital confirms pricing for Lucyd NASDAQ IPO, shares soar

UK Investor Magazine
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Tekcapital confirms pricing for Lucyd NASDAQ IPO, shares soar

Tekcapital shares jumped on Monday after the university technology investment company announced the pricing details for the Innovative Eyewear IPO, a subsidiary of portfolio company Lucyd.

The IPO is set to raise $7.35m at an offer price of $7.50. Should the offer is fully subscribed, Innovative Eyewear will have a market capitalization of approximately $55m. Tekcapital announced shares would begin trading on the NASDAQ today and the IPO offer would close 17th August.

If the total amount is raised at the offer price, Tekcapital will own retain a 70% stake in Innovative Eyewear, which will be worth be worth roughly $38.5m, through their 100% ownership of Lucyd.

The IPO represents a significant increase in the book value of Tekcapital’s holdings in Lucyd, valued at $27.1 million as of 31 May 2022.

At the time of writing, Tekcapital had a market capitalisation £53m meaning the market is effectively attributing a value of just £21.5m to the rest of their portfolio including London-listed Belluscura, Guident and MicroSalt.

The combination book value of these three holdings totalled $44m, or £35m, as of 31 May 2022, highlighting the deep discount Tekcapital shares trade at compared to their holdings NAV.

Tekcapital are set for another portfolio company IPO in MicroSalt in the coming months which promises to unlock further value in the portfolio.

The Tekcapital share price soared on the news to trade as high as 37p, before easing slightly to 35.8p.

Coats makes second sports footwear acquisition

Andrew Hore
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Coats makes second sports footwear acquisition

Industrial thread manufacturer Coats Group (LON: COA) has made a second acquisition in six weeks. Coats is acquiring Germany-based Rhenoflex for an enterprise value of $117m and this should enhance medium-term earnings.
Rhenoflex trading is back above pre-Covid levels, even though supply chain problems have held back progress. In the year to June 2022, revenues were $76m and operating profit was $10.1m. There could be $6m of cost benefits from the acquisition that will help to improve margins.
There are factories in China, Vietnam and Germany and there is capacity of $100m. Adidas and Nike are...

Aquis weekly movers: Close Asset Management buys Macaulay Capital

Andrew Hore
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0
Aquis weekly movers: Close Asset Management buys Macaulay Capital

Close Asset Management has taken a 6.5% stake in Macaulay Capital (LON: MCAP), which joined the Access segment on 29 July when £1.9m was raised at 20p a share. This week the share price rose 19% to 25p. The strategy of the company is to originate potential investments and generate fees from these businesses by advising them and helping to raise money, as well as investing alongside other investors. The focus is smaller companies with track records in well-established markets. An initial investment has been made in a food manufacturer.

Invinity Energy (LON: IES) rose 13% to 39p after the commencement of trading on the US OTCQX and new US climate legislation that should boost energy storage demand. The energy storage technology developer says the bill contains $369bn of clean energy investment, including tax incentives and grants.

Hydrogen Utopia International (LON: HUI) has appointed Duncan Snelling as an engineering consultant and granted him options over up to 600,000 shares at 9.275p each. Each month, 50,000 options will vest, and they are exercisable between the first and fifth anniversaries of the appointment. The share price rose 4.23% to 9.25p.

In the three months to June 2022, National Milk Records (LON: NMRP) increased revenues from £5.72m to £6.09m. All parts of the business grew their revenues with genomics testing more than doubling revenues to £111,000. This is the final quarter of the financial year. Milk prices are increasing. The share price edged up 0.5% to 100.5p.

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Fallers

Chapel Down Group (LON: CDGP) has replaced finnCap with Singer as its corporate adviser and broker. The share price of the wine maker fell 3.39% to 28.5p.

Vulcan Industries (LON: VULC) has appointed Darren Taylor as a non-executive director. He was one of the shareholders in Aftech, which was acquired in March, and he has a 12.6% stake in Vulcan Industries. The share price declined 3.24% to 0.895p.

Gathoni Muchai Investments, where Marula Mining (LON: MARU) chief executive Jason Brewer is a substantial shareholder, acquired 1.5 million shares and 1.1875 million warrants exercisable at 4p each for a total of £16,000. Chairman Richard Lloyd bought one million shares at 1.07p each. The current share price is 2.1p, down 2.33%.

AIM weekly movers: Afentra returns from ten month suspension

Andrew Hore
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AIM weekly movers: Afentra returns from ten month suspension

Africa-focused oil and gas company Afentra (LON: AET) has returned from suspension following the publication of an admission document covering the proposed acquisition of interests in the producing Block 3/05 and the exploration Block 23 in Angola from Sonangol. The share price jumped 85.6% to 27p. Afentra chief executive Paul McDade bought 821,192 shares at 24.3p each.

The initial cost of the acquisition is $80.5m, with up to $50m of contingent consideration for the Block 23 interest. The acquisition cost is equivalent to $3.60/barrel – based on proved and probable reserves. In the first half of 2022, the net production from Block 3/05 was 4,700 barrels per day and it could generate an estimated $36m of cash a year at an oil price of $75/barrel.  

Artemis Resources Ltd (LON: ARV) returned from a much shorter suspension during the week after reporting additional results for drilling at the Greater Carlow Castle copper gold cobalt project in Australia. A review of the results has been completed. Crosscut zone results have identified an offset mineralised load to the west, while mineralisation is open to the north. Carlow West zone drilling has intersected two areas of mineralisation. A mineral resource calculation is planned. The share price rose 75.9% to 2.75p.

Shares in rail infrastructure monitoring technology provider Cordel (LON: CRDL) rose 66.7% to 8.75p following the announcement earlier in the week of a five-year contract with Angel Trains to install fully automated monitoring hardware on in-service passenger trains. Robert Lojszczyk bought 200,000 shares at 6.98p each on Thursday.

Stakebuilding in Igas Energy (LON: IGAS) by Odey Asset Management appears to have pushed the share price higher. It has risen by 45.2% to 74.2p. Odey announced a declarable holding of 3.71% at the beginning of August and this has been increased to 4.26%. This is the highest the share price has been since early 2019 and it is still 98% below the peak in 2014.

Trinidad-focused oil and gas company Touchstone Exploration (LON: TXP) shares are continuing their recent recovery and the price has risen 39.8% to 98p. The authorities have accepted the Environmental Impact Assessment for the 80%-owned Cascadura project. A final determination will be made by 15 September. The Coho gas facility will soon start pre-commissioning. Coho and Cascadura could add total net production of more than 10,000 barrels of oil equivalent per day. Quarterly oil production from was 2% higher at 1,402 barrels of oil per day. Revenues were 66% higher at $12.6m, however, a higher tax charge meant that there was a small net loss.

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Fallers

Kropz (LON: KRPZ) says that its Elandsfontein phosphate project has been delayed due to initial ore variability and that made it the worst performer on AIM during the week with a 29% decline to 5.15p. This delay means Kropz immediately requires $4.2m of additional funding to tide it over. A $7.3m bridge loan facility has been agreed with ARC Fund on top of the existing facility already provided. The bridge loan is payable on demand. Further funding is likely to be required for working capital, particularly if there are any more delays.

A tax issue and a slow start to the current financial year knocked the ECO Animal Health (LON: EAH) share price, which fell 21.6% to 100p. Trading for the year to March 2022 will be in line with expectations. The profit will include a £1m foreign exchange gain that helped to offset a similar provision for sales tax on imported products – this has not been previously expensed. The total provision, covering more than one year, is likely to be £2.5m. There is also an additional R&D charge of £300,000 for work that did not meet the criteria for capitalisation. Low Chinese hog prices have hampered demand for antibiotics in the first quarter and the subsequent rise in prices will take time to boost demand. Group revenues are likely to be flat in 2022-23.

Digital media company Digitalbox (LON: DBOX) reported a strong first half trading with revenues 40% higher at £1.9m and an increase in net cash to £2.4m. This is before the completion of the acquisition of the assets of TVGuide.co.uk. However, management is concerned about advertising levels in the second half. Digitalbox management believes that it can still achieve full year pre-tax profit expectations of £1.2m, though. The interims will be reported on 27 September.

Echo Energy debt restructuring

Andrew Hore
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Echo Energy debt restructuring

Latin America-focused oil and gas company Echo Energy (LON: ECHO) is restructuring its debt and raising at least £450,000 via a placing at 0.25p a share. This was announced after the market closed and the share price had closed 5.06% higher at 0.27p.

Lombard Odier Asset Management has agreed to convert its €5m 8% secured convertible debt facility into shares at 0.45p each, while accrued interest will be converted into 213.9 million shares at 0.25p each.

A further €10m of debt plus interest, will be converted into shares at 0.45p each. Shareholder approval is required to issue the additional shares.

That should leave €10m of Luxembourg-listed 8% secured notes. This remaining debt will be extended until 2032 and the interest charged reduced from 8% to 2%. That is as long as the note holders agree.

Subscribers to shares in the placing will receive 1.07 warrants for each share taken up. The warrants are exercisable at 0.25p each.

The cash from the placing will fund working capital so the cash generated in Argentina can be used to finance an increase in production. It will also fund the costs of the debt restructuring.

In the first half of 2022, Echo Energy’s 70% share of production at the Santa Cruz Sur assets in Argentina was 261,290 barrels of oil equivalent, including oil and gas. Over the next six months a 40% increase in production is planned.   

Echo Energy believes it will be able to publish its 2021 accounts by the end of August.

FTSE 100 closes higher after quiet week

Natasha Doris
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0
FTSE 100 closes higher after quiet week

The FTSE 100 closed 0.4% higher at 7,500.8 on Friday, rounding up a week of quiet progress with a 0.8% gain over the past five days.

The big news rocking the market was the massive fallout from pharmaceutical drug Zantac, which wiped £4.5 billion of GSK’s market cap after claims that the heartburn drug caused cancer.

Shares in the pharmaceutical giant plummeted 12.9% this week, however the company clawed back a 3.6% rise to 1,450.5p today.

“Fears of a multi-billion-dollar lawsuit for the companies involved with recalled heartburn drug Zantac have wiped billions off the value of GSK, Haleon and Sanofi this week,” said AJ Bell financial analyst Danni Hewson.

“Investors fear they will have to shell out big bucks if found guilty of failing to properly warn users about health risks, with allegations that Zantac causes cancer.”

“Now comes the really hard part, with the drug companies having to convince investors, the public and the courts they are not guilty.”

GSK’s spinoff group Haleon was caught in the chaos, falling 11.9% in the past week and recouping a fragment of its losses with a 1.8% uptick to 270.7p.

“It’s given GSK spin-off Haleon a terrible start to life as a standalone business, with its share price having plummeted in recent days,” said Hewson.

“Haleon says it isn’t party to any of the Zantac claims, yet GSK has served it with notice of potential claims in relation to liabilities connected to over-the-counter Zantac products.”

“With the first personal injury case going to court later this month, the healthcare companies involved will have already prepared their defence and GSK implies that the accusations do not tally with scientific consensus to date.”

Investors were warned of the potential risks linked to Zantac before the company was spun out, however it appears they missed the memo, responding in shock as the fine print was pulled into the spotlight.

“It is worth remembering this is not ‘new’ news. Regulators and experts have been looking into any links between Zantac and cancer for years, and indeed the risks were flagged in Haleon’s stock market prospectus,” said Hewson.

“However, it goes to show most investors don’t bother to read the small print, so they’ve been caught off guard after the potential liabilities hit the news.”

Flutter Entertainment

Not every investor had cause to grab the smelling salts today, as Flutter Entertainment shares flew with a 14.3% rise to 10,730p.

Revenue climbed 11% to £3.3 billion against £3 billion in HY1 2022, despite a difficult market environment.

The gambling firm linked its revenue growth to an increase in recreational players, with a 14% rise in average monthly players to 8.7 million from 7.6 million the year before.

However, Flutter Entertainment confirmed a 23% EBITDA slide to £434 million compared to £562 million, in line with management expectations.

“Flutter Entertainment took the top slot among the FTSE risers, with the shares jumping after the company said there were no signs of consumers betting less – something the market had been fearing given the cost-of-living crisis,” said Hewson.

“This reinforces the idea that people will be happy to keep betting in the hope of winning big during more difficult economic times.”

Mondi

Mondi investors had a great Friday, with shares rising 11% to 1,703 on the back of its agreement to sell its Russian Syktyvkar mill for €1.5 billion.

The move comes in line with the company’s announced shift away from Russian operations reported in early May as a result of the Ukraine war.

The proposal is currently pending approval from the Russian agreement and the firm’s shareholders.

Government launches proposal to support energy intensive industries with electricity prices

Natasha Doris
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1
Government launches proposal to support energy intensive industries with electricity prices

Energy and Business Secretary Kwasi Kwarteng announced a proposal to provide additional relief for energy intensive industries in a statement released today.

Companies with a high rate of electricity usage, such as steel and paper mills, were suggested as contenders for new proposals to subsidise electricity costs under a consultation for the Energy Security Strategy.

Kwarteng said the UK government was currently consulting on the option to raise the level of exemption for select environmental and policy expenses from 85% to 100%.

The rationale behind the new proposal reflects the higher UK industrial electricity prices against the rest of Europe, which the Conservatives fear risk hampering investment and competition for business including paper, glass, steel and ceramics across the UK.

“British manufacturers are the lifeblood of our economy and central to our plans to overcome this period of economic uncertainty,” said Kwarteng.

“With global energy prices at record highs, it is essential we explore what more we can do to deliver a competitive future for those strategic industries so we can cut production costs and protect jobs across the UK.”

According to the statement, the suggested plans would help approximately 300 businesses and support 60,000 jobs in the country’s industrial heartlands.

“The publication of this consultation is a significant step forward in delivering competitive electricity prices for the UK steel sector and should provide some much-needed relief in the face of extremely challenging circumstances at the current time,” said UK Steel director general Gareth Stance.

“While there remain difficulties, this announcement demonstrates that UK government understands the challenges of British industry and continues to support steelmakers and steel communities across the country.”

The government has so far provided over £2 billion to support businesses in energy intensive sectors with energy prices since 2013.

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