As previously guided in its trading update on 14 June, H1 results have been adversely impacted by operational and supply chain issues in the core Home Improvement’s business, resulting in reduced installations during the peak seasonal trading months of March and April. An unaudited EBITDA loss of £2.3m announced today is in line with revised guidance. Management have taken positive action to address current challenges; operational improvements introduced in recent months are yielding results and a further restructuring exercise implemented in July has identified £0.8m in annualised savings. Alongside this, the senior leadership team has been strengthened with the addition of several experienced interim managers. A strategic review of the business is underway, with KMPG engaged to consider various debt and equity finance options as well as potential interest in certain parts of the business. At current levels Entu trades on an FY18 PER of 4.1x and EV/EBITDA of 3.7x.
The firm has struggled with supply chain problems, fit capacity constraints, and competition
Entu has announced a trading update this morning, with H1 performance held back by supply chain problems and fit capacity constraints, while intense competition in its non-core boilers and energy-switching businesses has resulted in the decision to discontinue these operations. Tighter market conditions have also meant the postponement of planned reductions to customer discounting and the Group now expects to report an underlying LBITDA of c£2.0m for H1. The Group remains committed to executing the action plan outlined alongside preliminary results in March and has appointed an external consultant to accelerate its implementation. We have cut our forecasts to reflect revised expectations, Entu now trades on 9.7x FY18 PER.
Phoenix Global Mining— US Brown field copper play. Expected late June. Offer TBA
Touchstone Exploration— Oil exploration and production company active in the Republic of Trinidad and Tobago. Interests of approximately 90,000 gross acres. Production c. 1,300 boepd. Raising £1.45m. Expected mkt cap £7.5m. Due 26 June.
I3 Energy –Schedule 1. Independent oil and gas company with assets and operations in the UK. Offer TBC, 7 June admission.
Verditek— Schedule 1 update. On Admission, the Company's subsidiaries will be involved in advanced solar photovoltaic, filtration and absorption technologies specialising in providing environmental services. Issue price 10p. Admission in late June
Tiso Blackstar Group—Schedule 1 update. Media, entertainment and marketing solutions group/ £160m mkt cap. Admission only. Expected late June.
Vordere—RTO targeting German Property. Raising £9m at 17p. Readmission c. 15 June. Residential Secure Income - social housing REIT raising up to £300m Admission due c.12 July.
ScotGems—Admission due 26 June. Seeking £50-£100m. To investing in a diversified portfolio of Small Cap Companies listed on global stock markets
DP Eurasia—Intention to float from the exclusive master franchisee of the Domino's Pizza brand in Turkey, Russia, Azerbaijan and Georgia . £20m primary raise plus a partial vendor sale.
Film Finances—Sky News reports that ‘movie financing company with credits including the Hollywood hits La La Land and Nocturnal Animals is plotting a blockbuster premiere on the London stock market that will value it at several hundred million pounds.’ Expected ‘during the summer’.
AIB—Intention to float from AIB, Ireland's leading retail and commercial bank . The Minister for Finance intends to sell approximately 25% of the Ordinary Shares of AIB. Valuation range €10.6-€13.3bn. Admission end June.
Curzon Energy—Report on Proactive Investors of intended LSE float this year with acquisition of coal bed methane assets in Oregon. Looking to raise £3m plus.
NLB Group—financial and banking institution based in Slovenia, with a network of 356 branches. Seeking Ljubliana Stock Exchange listing with GDRs on the LSE. Expected mid June.
Flying Brands (FBDU.L)—Prospectus approved by FCA. RTO of Stone Checker Software, supplier of technology solutions in the field of kidney stone analysis and prevention. Has raised £550k at 3p. Subject to GM on 15 Jun.
Kuwait Energy— $150m raise plus vendor offer. Admission due June. 2p reserves 810.0 mmboe
Companies: IRR MNC K3C FUM EHG ENTU PTCM WAND RHL IGAS
Final results in line with expectations following a challenging year that has included significant divisional restructuring, and a detailed balance sheet and accounting policy review. EBITDA for FY16 of £2.7m is in line with management’s revised guidance of £2.6m to £2.7m and ZC forecast of £2.7m. As previously announced no final dividend has been declared, resulting in a total dividend for the year of 0.5p. Management have affirmed intentions to reinstate a dividend as soon as possible; our forecasts of 1.0p in FY17 and 1.5p in FY18 are unchanged and reflect the improved profitability of the business going forward as cost savings are realised. Encouragingly, revenues for the first quarter of FY17 are ahead of plan with £4.0m of annual savings targeted for the year. Entu is on track to meet FY17 expectations whilst implementing the necessary changes to establish a foundation for future growth. Trading on just 5.6x FY17 earnings the valuation is undemanding if restructuring plans continue to be well executed.
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Entu has announced that EBITDA from continuing operations will be within the range of its previous guidance of £2.5m to £2.9m at £2.6m to £2.7m. This is in line with ZC forecast of £2.7m in FY16. The FY16 outcome, combined with the fact that revenue for the first three months of FY17 are also in line, is reassuring considering the issues the business has faced during the year. FY17 forecasts assume a c. 60% increase in EBITDA as profitability bounces back. However, as a result of a balance sheet review and the introduction of more prudent accounting policies, the company will not pay a final dividend for FY16. This means total dividend for the year will be 0.5p, not the 1.5p forecast. We leave income forecasts unchanged in FY17 and FY18 but reduce dividend expectations. Although the company does state that it intends to reinstate the dividend as soon as possible the cut to the dividend is disappointing. The valuation on FY17 earnings of 5.4x reflects the difficulties the business has faced over the last twelve to eighteen months.
Arix Bioscience — Intention to float on the main market from the global healthcare and life science Company supporting medical innovation. Raised £52m in Feb 16 with investors including Woodford Investment Management
Eco (Atlantic) Oil & Gas—Schedule One Update. Now expects admission ‘early February’.
Ramsdens Holdings –Schedule One from the financial services provider and retailer, operating in the core business segments of foreign currency exchange, pawnbroking loans, precious metals buying and selling and retailing of second hand and new jewellery. Expected admission to AIM 15 Feb raising circa £15.6m. Expected mkt cap £26.5m.
Companies: XLM MDXG BHRD ENTU AMO RGM WGB ASA HRN
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Entu has announced it has agreed the disposal of Astley Facades and its wholly owned subsidiaries to Duality Group for a nominal sum. The disposal is in line with Entu’s strategic focus on improving the performance of, and driving growth in its core Home Improvements business. In addition, it de-risks the business from a potentially significant increase in working capital commitment. Astley’s contribution to FY16 adj EBITDA is £1.1m, this will now be classified as discontinued. Adj EBITDA from continuing operations is expected to be between £2.5m and £2.9m, in line with guidance provided in the pre close statement (11 th October), excluding Astley’s contribution. The impact in FY17 and FY18 EBITDA is less muted at just c. £400k in each year respectively. Dividend assumptions remain unchanged offering a prospective FY17 yield of 11.9% and on new FY17 earnings the shares trade on a PER of just 4.3x.
Physiomics* (PYC.L) | Milestone Group (MSG.L) | Inspired Energy (INSE . L) | Entu (ENTU.L) | BMR Group (BMR.L) | Independent Oil & Gas (IOG.L) | Northamber (NAR.L) | Mirada (MIRA.L) | Distil (DIS.L) | BNN Technology (BNN.L)
Companies: PYC ENTU BMR IOG NAR BNN DIS INSE MIRA CTEA
Ahead of the year end (31 Oct) Entu has released a pre close trading statement. EBITDA for FY16 will be in the range of £3.6m to £4.0m, this is below the estimated £4.2m. As a result, forecasts in FY16 are cut to the mid- point of the range £3.8m, a 9.5% decline. This leads to a decline of c.11% in profit after tax on revenue falling from £108m to c.£103m. The impact in FY17 is greater at c.34% with adj operating profit cut to £4.6m (prev. £7.0m) on revenue now expected to be broadly flat at c.£103.0m (prev. £113.6m). The impact of the downgrade in H216 into FY17 is exacerbated by planned cost savings now expected to be reinvested into the business to strengthen management, controls and the balance sheet. The net debt estimate for the year end increases to c. £5.0m on larger exceptional costs than had previously been forecast. Despite this, management expect to honour the commitment to a 1.0p final dividend making 1.5p for the FY and, despite the cut to numbers, maintains its intention to pay 2.4p in FY17 equating to a c. 10% yield at the current 24.5p share price.
Interim results show a solid performance in terms of core revenue but the ongoing cost base of the discontinued solar business leads to significant downgrades to earnings in FY16 and FY17 of 50% and 17% respectively. As a consequence, the interim dividend is cut to just 0.5p and estimates now assume a total dividend for FY16 of 1.5p, previously 5.3p. That the anticipated new revenue streams did not come through in H1 is disappointing and has left the business with a cost base substantially above where it needs to be. The Board has taken action making changes to senior management and instigating a cost saving initiative to rebase profitability of the business moving forward. Post the cut in earnings expectations the shares trade on a current year PER of 11.4x based on last night’s closing price. However, the bounce back in profitability in FY17 puts it on multiple of 6.4x yielding 4.6%.
So what is the profile of a typical AIM quoted company? The market’s detractors may argue that London’s junior market is peppered with cash consuming companies that are not sufficiently advanced in their route to profitability nor corporate governance regimes to justify their listing. Supporters of the London Stock Exchange’s growth market would say that the Alternative Investment Market is the world’s most successful market for growing companies rewarding investors prepared to brave the risks of earlier stage funding, and driving innovation and job creation. Neither view suggests that AIM would be a fertile hunting ground for income generating stocks. However a glance at the FTSE AIM All Share constituents (Source: Fidessa) suggests that over 250 of its members or circa a quarter of the market’s members pay dividends.
Companies: BVXP BOTB ITQ SHOE CGS DX/ HSP JIL IBEX PRP CAML GTC JIM CCAP ENTU FXI NAH ASY HGM PEN PEG AVG NXR
Lower profitability in Entu's H115 results has been well explained, as have the reasons for expecting an improvement in H2 and beyond. We believe that momentum in commercial contracts should ultimately outweigh limited drag from changes to industry incentives. However, in the current year, we have elected to lower EPS by 4.3%. Ahead of demonstrating regained momentum in H2, the 7% prospective yield should appeal to investors.
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Whilst Arena delivered FY20E results in line with our expectations, this has inevitably been overshadowed by the challenges posed by COVID-19 to the industry. Arena acted swiftly to cut costs and preserve cash, such that it currently has a c£23.5m cash balance. This is enough to see the company through into 2021, even if the global event market remains heavily disrupted for the rest of the year.
Companies: Arena Events
Air Partner has issued a further shareholder update, confirming PBT of at least £10m in the first five months of the year to June, an increase of £2.5m since the last update to May. The Group continues to deliver impressive results despite a challenging market backdrop. As has been the case throughout the COVID-19 crisis, performance has been driven by strong activity in the Freight and Group Charter divisions. Crisis driven activity is expected to reduce in H2, with an anticipated recovery in the Group’s core activities, where the update reports positive early indications across the Group’s divisions. The balance sheet is very well supported, with net cash at 30th June standing at £13m post the recent £7.5m fund raise. The Group continues to have access to total debt facilities of £14.5m. Whilst visibility for H2 remains limited, we believe the Group is well placed to deliver a strongly profitable FY21 result.
Companies: Air Partner
Gaming Realms is a creator and licensor of innovative games for mobile, with operations in the UK, U.S. and Canada. Through its unique IP and brands, Gaming Realms brings together media, entertainment and gaming assets in new game formats.
Companies: Gaming Realms
The group has today announced the conclusion of a structured development and succession plan implemented by the Board over the past 2 years. CEO Phil Maudsley will be succeeded by Paul Kendrick at the end of the current financial year (March 2021). Phil leaves the group in excellent shape, having completed a major transformation of the group over the last 10 years, from a heavily indebted mini conglomerate to a digital-first value business with bright growth prospects. Studio Retail’s transformation from a small Christmas catalogue retailer to an agile online value retailer back by a strong integrated credit operation was clearly evidenced by the June update, highlighting the best growth rate in the listed retail space (+55% YTD). Phil will be involved over the remainder of the current year to ensure a smooth transition and handover to Paul who has made a significant contribution to recent strategic and operational enhancements, and who leads the business forward with a clear and exciting 5 year growth plan.
Companies: Studio Retail Group
Directorate change: DWF has announced that Andrew Leaitherland will step down as Group CEO and a managing partner of DWF Law LLP and DWF LLP with immediate effect and will be replaced by the Group’s Chairman Sir Nigel Knowles. Sir Nigel has over 40 years of experience in the legal sector and was previously. Global Co-Chairman and Senior Partner of DLA Piper. We believe he has the experience and leadership qualities required to lead the Group through the near-term challenges it faces. Chris Sullivan, Senior Independent Non-Executive Director, has been appointed as interim Chairman.
Companies: DWF Group
Today’s statement reveals incredibly robust Q1 trading across the Group’s brands and regions, with a positive outlook and guidance reinstated for the remainder of the financial year and beyond. In addition, the Group has announced the acquisitions of Oasis & Warehouse, bringing two well-recognised and complementary brands onto its platform. We believe the unprecedented disruption resulting from the COVID-19 pandemic has accelerated the channel shift to online where we see BOO as the clear winner, with an established and leading model positioned to consolidate the market.
Companies: Boohoo Group Plc
We are introducing our Best Ideas for 2019 and also review the performance of last year’s picks. We suggest ten solidly financed stocks with good business dynamics that ought to be considered for core portfolio holdings and six UK domestically focused stocks that our analysts believe should perform strongly in the event that uncertainties unwind. We also introduce a new style of research from N+1 Singer which presents a Company’s dynamics and metrics in a clear and concise manner and concentrates on the pivotal issues affecting that Company and an investment decision.
Companies: BCA CLIN CLG CBP DNLM EAH STU FCRM FUTR GTLY INS GLE NICL SDL SPR TRI
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
Companies: OPM ALU ANCR BLV CONN CRC STU GATC HAT LEK MMH MCB MWE NXR NTBR NOG PAF PEG RFX SRC TEF TEG TPT VTU WYN XLM
Boohoo Group has announced an upgrade to FY20 guidance on the back of continued strong trading momentum over its second quarter ended 31 August 2019. Strong revenue growth across the Group’s key brands (boohoo, boohooMAN, PrettyLittleThing and Nasty Gal) confirms the Group’s multibrand strategy is bearing fruit, with fears around potential cannibalisation firmly allayed. Top-line outperformance is driving operating leverage at Group level, enabling it to maintain full year EBITDA margin guidance at 10% despite the ongoing investment being made in the three brands acquired in the first half. Today’s announcement represents an impressive tenth consecutive upgrade in management guidance over the last three years, as the Group continues to outperform the market and consolidate its position as a leading multi-brand fashion ecommerce platform.
Halfords 3Q IMS is in our view positive with PBT forecasts for FY 2020 held at £50-55m and good LFL in Retail cycles +5.9% and Autocentres +4.6% where most of new management development work has been focused. Retail Motoring products LFL -2.7% continues to show impacts of discretionary spend softness in our view. Management retains its caution about near term demand prospects overall and its development programme in Autocentres and key aspects of the business overall (notably new integrated website) moves up a notch in calendar 2020. This said PBT guidance for 2019/20 has been maintained and this trading shows promise in our view.
Companies: Halfords Group
Arena's planned £9.5m share placing will substantially strengthen its balance sheet and, together with various cost saving measures being undertaken, should help to see the company through the coronavirus crisis for the foreseeable future. Given the uncertainty around how long it will take before normal event scheduling resumes, we withdraw our forecasts and place our rating Under Review, which we will revisit once visibility improves.
What’s new. This morning Purplebricks UK has provided an “update regarding current trading and the potential impact of COVID-19 and Govt guidance on the UK housing market.” Key points are:
1. Purplebricks first priority is health of people and customers: its online business model includes “video valuations, virtual viewings, connecting customers with potential purchasers via Purplebricks online platform.”
2. Govt restrictions on movement are weakening vendor and purchaser activity; deferral of completions would have a further negative impact.
3. Immediate cost-saving measures will materially reduce cash burn including suspending TV and radio advertising, reducing online marketing, taking advantage of the Government Job Retention Scheme.
4. Purplebricks currently has net cash of £35m and no debt.
Companies: Purplebricks Group
AFC Energy is a global leader in the fuel cell sector. It has a proven fuel cell technology which it is commercialising through its H-Power™ product, an off-grid electric vehicle charging system which is run on hydrogen and produces no emissions. The company's core fuel cell technology is a liquid alkaline fuel cell called HydroX-Cell(L)™. The company is also developing a solid alkaline fuel cell called HydroX-Cell(S)™ , the critical component of which is a is a solid electrolyte which upon validation will be marketed under the AlkaMem™ trademark. We expect the AlkaMem™ product to have multiple electro-chemical applications outside of fuel cells. The purpose of this note is to compare AFC Energy's products, markets and business strategy against its listed peers Ceres Power and ITM Power. The note also assesses the state and outlook of the hydrogen market in addition to the proton exchange membrane market, which is relevant for AFC Energy's AlkaMem™ product. As a reminder, we believe AFC Energy has a fair value of 27p/sh.
Companies: AFC AFC AFC
Sale of Fowler Welch
Companies: Dart Group
New management has put in place a strategy which the February interim results revealed was returning the group to growth with very encouraging LFL statistics and attractive returns on refurbished outlets. In March, however, in response to COVID-19 and following UK Government guidelines, all venues had to be closed.
Management initiatives have materially reduced the cash burn while the group is unable to trade, and the group’s lender has been very supportive in significantly increasing the borrowing facility.
Management is now proposing an equity issue, the rationale for which is to strengthen the leverage ratio to create a more appropriate capital structure moving forward, to allow an immediate return to the estate refurbishment programme and to be able to potentially take advantage of strategic opportunities as they arise as the sector emerges from the COVID-19 crisis.
Companies: Revolution Bars Group