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18 Sep 19

LIBERUM: Sirius Minerals* - Running numbers on potential financing solutions

Yesterday Sirius has announced the cancellation of its Stage 2 financing plans and the implementation of a strategic review after it failed to issue the $500m high yield bond required to unlock the full financing package. What matters for shareholder returns from here is the structure of any future financing solution and its likelihood of success.

Companies: Sirius Minerals

12 Sep 19

Hurricane Energy - Lincoln Crestal positive flow test

This morning Hurricane Energy announced the flow test results from its Lincoln Crestal well, the second well of a three-well drilling campaign in the Greater Warwick Area (GWA). The well tested at a maximum stable flow rate of 9,800bopd using electrical submersible pumps (ESPs). The well flowed at an average rate of 4,682bopd under natural conditions and no formation water was produced. The well will now be suspended, with the intention that it will be used for production via tie-back to Lancaster’s Aoka Mizu FPSO in 2020, subject to further work, regulatory consent and final investment decision by the joint venture. Production from the tie-back would generate reservoir data to be used in planning future phases of development of GWA. The drilling rig will now move to the location for the third and last well of the 2019 drilling programme, Warwick West. Our latest risked valuation of Hurricane Energy stands at 102.8p/share, with GWA tie-back being valued at 3.5p/share and GWA FFD at 21.6p/share. Hurricane Energy is currently trading at 49.0p/share.

Companies: Hurricane Energy

13 Sep 19

LIBERUM: AFH Financial* - Acquisitions, a positive trading update and a primary focus now on organic growth and improved profitability

AFH organic net inflows continue at at least 8% p.a. The company states it is “primarily focused on driving the organic growth of our business by providing professional and cost-effective services to our clients and, in-turn, enhancing profitability”.

Companies: AFH Financial Group

18 Sep 19

LIBERUM: Judges Scientific* - Strong H1 and positive start to H2

Judges has delivered strong H1 with adj. PBT +27.4% to £8.4m, 4% ahead of our forecast. Cash generation was strong (£7.2m H1 net cash, 17.5% FCF % to sales) and H1 DPS is up 25%.

Companies: Judges Scientific

12 Sep 19

IQE - Executive interview

IQE’s CFO, Tim Pullen, discusses the company’s recent interim results and explains the operational measures IQE has put in place to support growth. He also explains why it is well placed to adapt to shifts in the global electronics supply chain being brought about by US/Chinese trade sanctions. With the infrastructure phase of the capacity-expansion programme nearing completion, he explains why future investment in capacity will be much more linear and discretionary, based on anticipated demand. As a result, supported by recent cost-control measures, the company expects to generate cash in H2. With an increased debt facility in place, management is confident it will not need to raise further capital. Tim ends by discussing how management sees margins evolving and how investors should view the timing of the company’s growth opportunities across multiple different applications.

Companies: IQE

17 Sep 19

A wheel of fortune

These are exciting times for Bango as it matures and expands. After many years building merchant and carrier connections and volumes, the payment processing platform has reached profitability and will rapidly scale revenue on a fixed cost base. The data business is a natural evolution, driving greater payment volumes in a steadily accelerating virtuous circle; adding more data sources will spin it ever faster. Well-managed by an experienced team and uniquely positioned in a high growth industry, we launch coverage with the Interims in a seminal year: Bango is now fully funded and its revenues continue to grow rapidly, targeting breakeven this year and promising significant cash profits from next. We feel the market has yet to fully appreciate the exciting prospects for Bango and set a 225p target price.

Companies: Bango

17 Sep 19

Strong progress, 24.2% growth in revenue

Kape Technologies has reported first half revenue a touch ahead of the guidance given in July’s trading update with Adjusted EBITDA in line with the suggested $5.8 million. The results show strong progress in growing SaaS revenues with the number of subscription users increasing by 24% to over 1 million and the retention rate improving again to a very healthy level. The first half also saw further investment in customer acquisition paying off with ZenMate and Intego – now both fully integrated into the Group - benefitting. New product launches and high-profile successes by Intego’s macOS security analyst team helped augment Kape’s market positioning. We note that this business model continues to enhance Kape’s ongoing revenue visibility and that Kape is growing market share. We make no change to our numbers as the Board expresses confidence in meeting stretching market growth estimates.

Companies: Kape Technologies

16 Sep 19

Tech IPOs outperform, Uber’s great freight hope, New Huawei technology

Tech IPOs year to date have performed well. 8/13 venture-backed tech IPOs this year, including Slack's direct listing, are in profitable territory. If you'd put $1 million into each of them at the IPO price, your $13 million initial investment would be worth $21.7 million - a 67% gain compared to +20% performance in the S&P 500 YTD. As we’ve discussed earlier this month, investors’ appetite for technologies leveraging secular trends appears undiminished

Companies: TRAK CPX SEE QTX

17 Sep 19

LIBERUM: Staffline* - Weak H1 and EPS reduced but past the worst

Interim results worse than expectations with an 88% reduction in FD EPS yoy. We reduce our FY 2019 FD EPS estimate from 37.9p to 24.8p.

Companies: Staffline Group

18 Sep 19

Interim results: On course to meet estimates, Controls margin strong

Revenue increased 2.5% to £43.9m (HY18: £42.9m), 1.0% on constant currency basis, with gross margin 10bps ahead yoy at 38.0%. Good cost control combined with lower finance charge leads to a 4.6% yoy increase in pre-tax profit to £11.5m (HY18: 11.0m). Today’s interim results indicate that the Controls business has a had a strong start to the year on the back of positive mix and the price increases put through on legacy product at the end of FY18. Aqua Optima is flat yoy due to timing of contracts, ZC expect a stronger H2 as material private label contracts come on stream and the majority of additional revenue from HaloSource lands in H2. Net debt at period end stood at c. £33.4m and is on course to meet ZC FY19 forecast of c. £32.0m, sub 1.0x EBITDA. Interim dividend increased 13% to 2.6p and is in line with the Board’s commitment to pay 7.7p in FY19, a 10% yoy increase. No change to ZC forecasts, albeit today’s results increase confidence in achieving FY19 forecasts. The shares trade on 11.8x FY19 earnings falling to 10.9x in FY20.

Companies: Strix Group

18 Sep 19

LIBERUM: AFH Financial* - Further acquisition 'on a similar attractive multiple'

AFH has bought Broadleaf Financial Services for a total max consideration of £3.2m and “on a similar attractive multiple” to previous acquisitions. This brings the total committed spend to £10.4m since the Convertible placing in July, and shows the company following through on their comments about having deals in due diligence.

Companies: AFH Financial Group

17 Sep 19

Data Privacy driving strong top-line growth

Kape have delivered a strong set of H1’19 results as flagged in the July trading update. Revenues increased by 24% y/y, driving adjusted EBITDA up +21%. Cash flow from operations was broadly flat (+$0.2m) as the Group continues to invest in customer acquisition. Operational KPI’s are particularly strong; 147k net subscriptions were added in the core Data Privacy segment, whilst retention rates were an impressive 82% (H2’18: 74%). The Group’s transition to a complete SaaS model continues, with subscription revenue now accounting for 72% of total sales and recurring revenue up >300% to $21.2m. We are encouraged by strong operational performance which serves to increase our conviction in FY’19E forecasts. The current share price looks compelling, with our SOTP intrinsic valuation at 117p/share.

Companies: Kape Technologies

18 Sep 19

Solid H1 results, promising outlook

‘The Group has delivered a solid H1 performance and is trading in line with full year market expectations’. Accordingly, we leave our FY 19/20 forecasts unchanged. Reassuringly, Strix reconfirms at this stage its intention to pay total dividends of 7.7p per share for FY 19, +10% YoY. This should underline the income attractions of this stock to investors

Companies: Strix Group

17 Sep 19

Cenkos: Smart Metering Systems Plc - 2019 interim results

Interim results featured growth in indexed linked annually recurring revenue (ILARR), the main driver of value, to £85.9m, up of 14.1% to £85.9m. The weak performance of the shares in recent months has presented investors with an opportunity to invest at an underpinned valuation in our view, with the core value of SMS clearly residing in the scale of its growing meter and data portfolio and our FY19E forecast £92m ILARR. The current order book of 2m smart meters supports our forecast 4m installed by 2022, from which our DCF forecast implies a valuation of 911p, c108% ahead of the current level.

Companies: Smart Metering Systems

18 Sep 19

LIBERUM: Science in Sport* - All going to plan & well-placed for H2; very cheap at current valuation

H1’19 is exactly how we expected leaving the group well placed to deliver FY results. The interims adopt IFRS 16 and with H1'18 not including PhD, we detail pro-forma numbers in the body of the note.

Companies: Science In Sport

19 Sep 19

Judges Scientific Plc - Another period of solid growth

Judges Scientific posted further record highs across the board for the first half of 2019 purely driven by organic growth. Revenues were up 9% year-on-year to a record £40.2mln largely thanks to strong growth in North America while other regions remained generally stable with low single-digit ups a

Companies: Judges Scientific

19 Sep 19

Onxeo - First Phase Ib DRIIV results released

On 18 September 2019, Onxeo released initial results from the first cohort of patients (n=3) in its ongoing Phase Ib DRIIV study with AsiDNA. The three patients had a progressive metastatic cancer (non-small cell lung cancer, triple negative breast cancer, gastric cancer) and were treated with AsiDNA plus carboplatin. No dose-limiting toxicity was observed. Two of the three patients have shown stable disease (RECIST) since the start of the treatment (more than four and five months). While it is too early to draw any conclusions on efficacy, stable disease status in 2/3 patients and a good safety profile appear encouraging. In the second part of the study, patients with various solid tumours will receive a combination of AsiDNA plus carboplatin and paclitaxel (standard of care in many solid tumours). Preliminary results are expected by end 2019.

Companies: Onxeo

19 Sep 19

Esker - Setting its sights higher

Esker reported another period of strong revenue and profit growth while continuing to invest in product development, consulting and sales & marketing resource. This policy of ongoing investment has fuelled double-digit revenue growth, 80% of which is recurring, over the last five years and supports the company’s premium rating. Progress towards the company’s stretching 20% revenue growth target should support further upside to the share price.

Companies: Esker

19 Sep 19

Cenkos: Redde Plc - Cash flow improvement creates opportunity

Redde's full-year statement in September has given significant reassurance to the market, and helped the stock regain upward momentum. Earnings-based valuations and the yield remain attractive, while there is clear potential for improved cash flow to fuel further bolt-on acquisitions in what has been a consolidating sector over recent years.

Companies: Redde

19 Sep 19

LIBERUM: Staffline Group* - Weak H1 but strategic options exist

Staffline had a horrible H1, and it shows in the numbers. H1 FD EPS was down 88% and net debt was up from £63m at the year-end to £89m.

Companies: Staffline Group

19 Sep 19

Cenkos: Venture Life Group Plc - Strong revenues and cash generation

Venture Life Group has announced its results for the 6 months to 30 June 2019, reporting double-digit revenue growth and strong cash generation. While the Brands business faced a tough trading environment in the UK, the company has made significant commercial progress which positions the business well for future growth. Revenues from customer brands grew 10% supported by both existing and new customers. Venture Life delivered strong operating cash flow of £1.3m and free cash flow of £0.85m. We maintain our Buy recommendation.

Companies: Venture Life Group

19 Sep 19

LIBERUM: Safestyle* - Profitability restored

New management has succeeded in restoring the group to profitability, and positive cash flows, after the severe disruption of 2018. This has been achieved by rebuilding its network of self-employed agents, improving gross margins and lowering overheads.

Companies: Safestyle UK

19 Sep 19

LIBERUM: City Pub Group* - Planning for the future

City Pub Group is growing rapidly with 36% Revenue growth and 19% adj PBT growth in 1H’19. New sites are performing well, the development pipeline remains robust (albeit with some slippage) and LFL of 2.6% is ahead of the market.

Companies: City Pub Group

19 Sep 19

Nurnberger Beteiligungs - Steady progress in unfavourable environment

Nurnberger Beteiligungs (NBG) was able to moderately grow its gross premiums booked on the back of a solid 10% y-o-y increase in new premiums to €266m in H119. Meanwhile, the low interest rate environment dampens NBG's investment income, with the recent central bank rate decisions suggesting this will continue for now. We note that NBG’s relatively high exposure to unit-linked and disability products somewhat limits the impact of accommodative monetary policy. A cap on fees earned on life insurance contracts is still being discussed in Germany. If introduced, it is likely to constrain new life insurance business.

Companies: Nuernberger Beteiligungs

19 Sep 19

Keywords Studios (KWS) H1 2019 results presentation

19 Sep 19

Beeks Financial Cloud (BKS) FY results 2019 presentation

19 Sep 19

Interims: profit recovery building into FY20

H119 revenue increased 6.4% to £64.4m (HY18: £60.5m) with Gross Profit increasing 14.2% to £16.6m (HY18: £14.6m) as margins increased 177bps to 25.8%. The improvement in the top line combined with cost savings meant the Adj loss before tax of £0.8m was a material improvement yoy (HY18: £3.4m). All operational and financial KPIs reflect the improvement in the underlying business, these include revenue, volumes, market share and profitability. Importantly and as previously expected, the business returned to profitability in Q2 and is expected to further increase profitability in Q3 and Q4 of this year. It should be noted that the improvement has been achieved despite the consumer environment for large ticket items remaining difficult. Looking forward, we leave FY20 profit forecasts unchanged but due to increased investment needed to drive lead generation and marginally weaker revenue than expected, as a result we reduce estimates in FY19 from a small profit to a small underlying loss of £0.5m.

Companies: Safestyle UK

19 Sep 19

Interims – re-based forecasts

Interim results to 30 June 2019 showed a 21% decline in revenues, partly reflecting delays to contracts as well as other short-term market factors, which led to a 50% increase in adjusted pre-tax losses to £1.66m given the higher (+25%) R&D investment. Period-end cash was £2.1m. With a renewed commercial focus on high-value clinical trials market as well as its suite of new products, eCOA (electronic clinical outcome assessment) and NeuroVocalix (voice biomarker), however, the company continues to generate interest from large pharma, which is reflected in a growing order book, up 4% from 31 December 2018. This underpins our expectations for growth in 2020. We reduce our forecasts to reflect the impact of short-term factors in 2019 and introduce a target price of 90p, which implies a 2020 EV/Sales multiple of 3.5x. The business is being managed to ensure that it becomes cashflow breakeven in Q4 2020, with sufficient cash to ensure that it gets to profitability.

Companies: Cambridge Cognition

19 Sep 19

Upgrades following additional planned ATR 72-600’s

Avation is a lessor of commercial aircraft to a diversified airline client base. Yesterday, the group announced that it had signed a 10-year lease with Braathens Regional Airways AM for four new ATR 72-600 aircraft. This takes the total number of ATR 72-600 aircraft due for delivery in FY 2020E to five, which compares to our previous assumption of three. As was the case with the August delivery, we understand these aircraft to be on finance leases as opposed to operating leases. On the back of this announcement, we have raised our two year earnings expectations by 16.8% and 8.5% respectively, which includes a gain on sale being recognised from these aircraft in the current financial year. Even so, we see scope for further upgrades to our estimates as additional aircraft are added to the fleet beyond those already on order. Our estimate of fair value stands at 352p, a c.19% premium to the NAV per share.

Companies: Avation

19 Sep 19

Morning Note – 19 September 2019

Anglo African Oil & Gas (AAOG): Corp SNPC cost reimbursements | Cambridge Cognition (COG): Corp Interims – re-based forecasts | Gateley (GTLY): Corp Strong trading momentum

Companies: COG AAOG GTLY