House in order
Checkit plc today announced FY20 Preliminary Results following restructuring, the highlights of which were: the sale of Bulgin and return of £81.0m to shareholders; acquisition of Next Control Systems for £8.8m, subsequently renamed Checkit UK Ltd.; renaming of Elektron Technology plc as Checkit plc; and a renewed focus on cloud-based Software-as-a-Service operational management solutions.
16 Jun 20
Readying the ship
Prelims to January are in line with an earlier update and reflect a period of strategic change. Bulgin’s disposal meant CKT became a technology-led company – a proposition then strengthened through the acquisition of Next Control Systems (now “Checkit UK”). Despite the inevitable disruption of M&A, progress is already forthcoming, as shown by 8% LFL sales growth in FY20. We are optimistic this trend can continue thanks to the strategic fit of these businesses – specifically; their complementary product sets and so, cross-selling opportunities. Further optimism is provided through the BP deal – both in terms of product validation and ‘credentials’ and also given the potential to expand this relationship beyond the UK. Optimism should be tempered however, as FY21 trading has been significantly impacted by Covid, specifically CKT’s ‘installation business’, as lockdown and store closure has impacted contract deliverability. Encouragingly however, costs are being carefully managed, meanwhile sales opportunities (particularly in Healthcare) continue to be pursued. With a strong balance sheet, a renewed focus and proven product, we think the longer-term opportunity remains an exciting one.
16 Jun 20
Tracking ahead of ‘bear case’
Last month’s update reported +15% LFL sales growth YTD (Feb & March) and also material margin improvement in areas that have received attention. Near-term uncertainty was however flagged, as Covid has impacted project fulfilment. In this context, today’s update is therefore encouraging, as LFL growth has continued through April – meaning +13% LFL sales growth YTD. April benefitted from service and install revenue (as well as recurring, ~£5m pa.). On this basis, CKT is therefore tracking considerably ahead of the company’s ‘bear case’ scenario. Looking ahead we are cautiously optimistic - as while revenue is set to decline in May - CKT mention “customer plans to resume installation projects”, particularly in Healthcare, where opportunities are described as strong. Timing and volume remain hard to predict however. Costs continue to be closely monitored and managed and as evidence, cash remains strong, at £12.8m – only marginally down from 31st March (£13.1m) and £14.3m as at January’s year-end. Prelims now expected 16th June.
26 May 20
CV-19 and post year-end update
Reporting on the first two months of FY21 (to Mar-20), Checkit has seen good progress, with LFL growth accelerating to c.15%. – up from +3% achieved in FYJan20 (or +8%, ex. EET; non-core). Profitability has progressed also – with the margin improvement project delivering price rises of 10-50% in the areas that have received attention. Meanwhile, cash remains strong at £13.1m – only marginally down from £14.3m at y/e and notwithstanding a higher debtors balance at present. Despite this very positive start, the outlook is cautious – with CKT citing the UK’s lockdown has meant project fulfilment has become very challenging, as customers have either temporarily ceased operations or CKT field engineers have been prevented from entering sites. FY21E sales are likely be negatively impacted therefore, but to an unknown degree. We note that the company’s ‘worst case scenario’ assumes reliance on just existing committed recurring revenue – estimates at £5m pa. CKT has initiated cost saving measures, totalling £4m pa. (equiv. to 40%/payroll costs), effective 1st April. These measures will remain under constant review. Taking both the ‘worst case scenario’ and also cost saving measures into account, we estimated current cash burn is £0.4m pm. In the context of £13m current net cash, cash resources therefore continue to look comfortably sufficient. Given the aforementioned uncertainty regarding sales, we prudently withdraw FY21&22 estimates until further notice. Separately we note that FYJan20 prelims are now expected 28th May.
14 Apr 20
Y/e trading update – sales ahead, cash in line
Checkit has provided an encouraging year-end trading update to January, disclosing sales of £11.8m, 5% ahead of forecasts, equivalent to +3% LFL growth (group basis), or +8% (ex. EET; non-core). Cash is also reported at £14.3m – ahead of forecasts, but distorted by non-trading activities. After adjusting for both, we believe the underlying cash position is £12.4m – in line with forecasts, in turn implying that CKT’s investment program (and resulting cash burn) is proceeding as anticipated. The update also splits out Checkit Europe’s and Checkit UK’s sales. While such segmental reporting will not be continued, it is reassuring to note that Checkit Plc has acquired a company (now branded ‘Checkit UK’) in good financial health, as it grew pro-forma sales 7% y/y to £11.6m. Checkit Europe meanwhile grew more strongly, at +30% (but off a low base) to £1.3m. Looking forward, y/e pro-forma sales of £14.8m compares against £17.2m expected in FY21E, implying 16% growth. Driving this, we expect Checkit’s landmark contract win with BP (announced Oct-19) to be a material driver. To remind, Checkit won a three year deal to provide its Real Time Operations Management capability to BP at 320 sites. Naturally, we viewed this announcement very positively – as it provided validation of Checkit’s proposition (at an enterprise scale). We look forward to future news flow, confirming the roll-out is going to plan and - potentially - ‘sub contract wins’ also, as the contract may be extended beyond BP’s (320) owned sites, to dealer-owned sites and internationally also. N/c to forecasts.
13 Feb 20
Side show to centre stage
The disposal of Bulgin and renaming as Checkit Plc completes the group’s transition from a manufacturer to pure-play technology company, with the Checkit software solution becoming the core value driver within the remaining group. Checkit offers a unique digital ERP (‘real-time operations management’) solution. This is targeted at large, geographically distributed Enterprises with a mobile (non desk-based) workforce and that have compliance, facilities management, building energy management (‘BEMS’) and temperature monitoring needs. Immediately addressable markets are estimated to be worth £5.4bn p.a. As a first mover, Checkit is well placed to capture share, and the acquisition of Next Control Systems Ltd (renamed Checkit UK: ‘CUK’) has added scale (FY’20E pro forma sales: £15.1m). Core sales are forecast to deliver a 32% (underlying: 17%) 2-year CAGR to FY’22E once CUK is embedded. £6.0m FY’20E cash burn is expected to contract, with a path to cash flow breakeven subject to successful execution. Current valuation implies up to 92% upside.
01 Nov 19
Bumper £81m payday coming soon
Like it or not, but we’re on the verge of a golden era of technological innovation, thanks to rapid advances in artificial intelligence, big data, robotics, 5G and cloud services. Presenting huge opportunities for sharp-eyed investors across almost every walk-of-life. One such (albeit lesser known) example is the digital transformation of mission critical, Health & Safety and other regulated tasks eg cleaning kitchens/toilets, preparing meals, performing healthcare tests and maintaining schools, shops & leisure facilities.
22 Oct 19
Contract win announced
Checkit Plc has announced a new contract win to provide its Real Time Operations Management solution to BP sites over an initial three year period. The deal covers 320 sites at inception although has the potential to lead to roll-out across dealer-owned sites domestically, as well as to international roll-out. The addition of a new major blue-chip customer further validates the Group’s software proposition, whilst also enabling Checkit to expand beyond core Retail and Healthcare verticals. We make no changes to forecasts at this time, with the deal serving to help underpin growth expectations for FY’20E. Group EV of £9m (net of £81m to be returned to investors and an expected £14m of cash retained) equates to an EV/FY’20E pro forma sales of just 0.6x. Our SOTP generates an intrinsic multiple of 1.5x FY’20E pro forma sales. A separate announcement has set a timetable for the tender offer with the tender made available to shareholders on the register on 22 Nov’19. Tender offer is subject to a general meeting (25th Nov), with purchases on 28 Nov.
22 Oct 19
Making rain from cloud software & services
Successful investing boils down to 2 key things - ‘buying low & selling high’. People often get the first right, but fail on the second due to a tendency to cling on to winning positions for far too long. Only later to twig that they would have been better served banking the profits, and recycling the proceeds into other more attractive areas.
04 Oct 19
Small Cap Feast
AMRYT PHARMA PLC— a biopharmaceutical company focused on developing and delivering innovative new treatments to help improve the lives of patients with rare or orphan diseases have raised $60m before expenses and will relist on the AIM Market on the 25/09/2019. VAALCO Energy, Inc. (NYSE: EGY), an independent energy company focused on development and production assets in West Africa, today announces its formal intention to seek a Standard Listing on the Main Market of London Stock Exchange ("LSE"), to complement its existing Listing on the New York Stock Exchange. Kaspi.kz, the largest Payments, Marketplace and Fintech Ecosystem in Kazakhstan with a leading market share in each of its key products and services, announces today the expected publication of a registration document that has been submitted for approval to the FCA and its potential intention, subject to market conditions, to undertake an initial public offering . Registration document approved for Helios Towers. The Group provides essential network services, flexible infrastructure solutions and reliable power supply to mobile network operators in five African growth economies. Revenue increased 7 per cent. year-on-year to US$191m (H1 2018: US$178m), with Adjusted EBITDA up 15 per cent. year-on-year at US$99m (H1 2018: US$86m) for the six months ended 30 June 2019.
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25 Sep 19
General meeting approves Bulgin sale
Elektron yesterday held a general meeting approving the sale of its Bulgin operations for £105m gross, in-line with the group’s update on the 31st July. The key highlight from the announcement is management’s intention to return up to £81m to shareholders through a repurchase offer for two shares for every three held. Assuming the tender is entirely taken-up, c43p/share of value would be returned to shareholders leaving an estimated £14m of net cash (after restructuring costs) to drive continued growth in the software focused side of the business. Removing 43p/share from the current share price, and a further 1p/share for Elektron Eye Technology (EET), leaves a ‘rump’ value of c12p/share at current levels. This equates to c0.7x EV/proforma FY’20E sales which looks attractive given strong reported growth in Checkit (H1’20: 50% y/y) and the recently acquired Next business (CY’18: 9% y/y). We are temporarily withdrawing forecasts in light of this transformational deal, and will be re-introducing new numbers in due course.
04 Sep 19
Proposed sale of Bulgin
Elektron has announced the conditional agreement to sell the Bulgin business for a gross consideration of £105m (net: c.£94m post debt and other expenses). Completion requires the approval of shareholders at an AGM set for the 3rd September which, if successful, would pave the way for the majority of proceeds to be returned to investors by way of a tender offer. A successful deal would prove transformational for the group, transferring focus to the high growth technology-led real-time operations management software business of Checkit. Our initial analysis suggests c.£10m- £13m of cash would be needed in order to take the Checkit business to breakeven. The disposal value of 56p/share is broadly in-line with our SOTP intrinsic valuation, but strongly ahead of market valuation for the group as a whole. We expect shares to respond positively to the proposed disposal. We make no adjustments to forecasts at this stage, although the impact to financials is significant with Bulgin expected to make up 69% of FY’20E revenues and c. 140% of FY’20E adjusted operating profit.
31 Jul 19
Turbo-charged growth at a modest price
“If it ain't broke, don't fix it” is synonymous with corporate life. However ‘laurel resting’ is not in Elektron’s lexicon, even after producing a 10-fold rise in the stock price over the past 5 years. No instead, the firm’s DNA is based on ‘continuous improvement’ and maximising shareholder returns, as characterised by this morning’s bumper results and encouraging outlook.
12 Jun 19
Confirmation of strong FY’19
FY’19 results confirmed positive performance from all three businesses. Group sales grew 13%, whilst Bulgin delivered strong operating margin momentum (Bulgin +350bps) leading to FY’19 PBT up 77% (5% ahead of expectations). We have upgraded FY’20E forecast Adj FD EPS by 4%, and introduce FY’21E forecasts targeting growth of 50% (underlying: 14%) in sales, and 87% (underlying: 62%) in adjusted operating profit versus FY19. We have increased our SOTP implied valuation range to 68p – 76p including Next (from 62p – 65p), offering strong upside potential.
12 Jun 19
Strategic acquisition expands software strategy
Elektron Technology has announced the acquisition of Next Control Systems Ltd (“Next”), a leader in high-end service based temperature monitoring in healthcare and life-sciences with customers including the NHS. The net £8.8m (gross: £10.5m) cash acquisition adds significant scale to the technology segment, and is strategically important for Checkit, diversifying the customer base, offering access to new verticals, and extending Checkit’s service range with complementary IP. The transaction was undertaken at a net multiple of 6.6x EV/EBITDA, and adds over £10m of revenues, 57% of which are annual repeating (Next FY’18 sales: £10.7m; Checkit: £0.5m). The deal is earnings accretive from the acquisition date, with Next having generated £1.2m of operating profit during FY’18 (December YE). The acquisition announcement has been issued alongside a Q1 trading update highlighting strong 17% y/y revenue growth for the group. Whilst management expect sales growth to moderate in Q2, H1 sales are still expected to be “significantly ahead of last year’s comparable”. As a function of the acquisition, we raise our FY’20 group revenue forecast by 18% to incorporate 8.5 months of Next, with adjusted operating profit rising 13% (ex. restructuring costs).
15 May 19
Taking Checkit to the ‘Next’ level
Disruption may be the most over-hyped word in the Tech lexicon, yet it is reshaping almost every walk of life. Even routine tasks - from cleaning restaurants, hospitals, food factories and public toilets, to maintaining schools, shops and leisure facilities - have been transformed by the ‘digital revolution’.
15 May 19
Small Cap Feast
Essensys plc—a provider of mission-critical SaaS platforms and on-demand cloud services to the high growth flexible workspace industry, plans to join AIM. Offer TBC, expected 29 May 2019. Induction Healthcare Group plc—a healthcare technology company focused on streamlining the delivery of care by Healthcare Professionals looking to join AIM. Expected raise of £14.58m at 115p, market cap of £34.07m. Expected 22 May 2019. SDX Energy plc—a North Africa focused oil and gas company, announces its intention to complete a Canadian plan of arrangement under section 192 of the Canada Business Corporations Act and will have shares de-listed from the TSX-V and admitted to trading on AIM. Expected 28 May 2019, anticipated market cap of £76m Renold plc—a leading international supplier of industrial chains and related power transmission products, announced that it will cancel the listing of the Company from the premium segment and apply for admission on AIM. Expected 06 June 2019. Alumasc Group plc, the premium building products, systems and solutions group, has announced its intention to move from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019
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15 May 19
Bulgin approach infers “substantial” upside
Price and value are often confused. Indeed it sometimes takes an impromptu bid before investors twig the difference. Take Elektron Tech, who today said it had received “an unsolicited offer for Bulgin at a substantial premium to the Group’s market capitalisation (ie £84m)”. On this occasion nothing came of it, with the interested party ultimately withdrawing “due to strategic reasons”. However, we believe the approach from an unspecified “overseas buyer” nonetheless highlights the considerable upside available, and puts a solid floor under EKT’s shares.
05 Feb 19
FY19 trading in line; good start to FY20
Elektron Technology has given a reassuring update for FY19, guiding to trading in line with recently upgraded expectations and a strong start to FY20. Adjusted profit for FY19 is expected to be in line after £0.2m of one-off costs, implying underlying performance slightly ahead of our estimates. The one-off costs relate to an unsolicited approach for Bulgin at a substantial premium, although the offeror’s own strategic reasons meant this did not come to fruition. Net cash almost doubled to £10.1m. We have made no changes to our forecasts, although note that the decision to put EET up for sale could drive revisions in due course. This sale would allow management to focus on Checkit and Bulgin, where it sees strong opportunities for growth.
05 Feb 19
Forecasts upgraded following very strong Q3
Elektron Technology delivered an exceptional performance in Q3, with strong sales growth from all three businesses and a significant increase in margin. Consequently management now anticipates FY19 results significantly ahead of previous market expectations. We have increased our forecasts for adjusted PBT by 58% to £4.4m for FY19 and by 34% to £5.9m for FY20, along with an increase in year end net cash from £8.4m to £9.5m. We continue to value Elektron Technology on a sum-of-parts basis, as we believe headline numbers hide the value in a group with both profitable and lossmaking operations. Our upgrade has increased this valuation to 62-65p offering significant upside vs. the current share price.
01 Nov 18
Elektron knocks it out the park
Deciding how to react during a FTSE rout is never easy, especially for smallcaps where price swings can often be extreme. Nonetheless smart investors prepare for such eventualities, hold their nerve and importantly have a shopping list of high quality names to buy amid any indiscriminate selling.
01 Nov 18
Curtis Banks Group (CBP LN) Discerning approach to non-standard, strong controls in place | Earthport (EPO LN) Restatement of fair value adjustments | Elektron Technology (EKT LN) Forecasts upgraded following very strong Q3 | Midatech Pharma (MTPH LN) Forecast update post sale of US operations | Wilmington (WIL LN) Tracking the right way, but more to do
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01 Nov 18
Doing all the right things consistently well
Professional investors tend to be a sceptical bunch. Nonetheless, even the most die-hard cynics occasionally have to ‘tip their hats’ when a company constantly out-performs. Sure there’s always something to quibble about. Yet for Elektron - particularly in light of the difficult hand it was originally dealt – this morning’s ‘strong’ results are the culmination of years of hard work, and a reflection of the business’ resilience and quality.
19 Sep 18
H1 19 in line with recently upgraded forecasts
Elektron Technology had already provided headline numbers for H1 19 in its recent trading update, which drove upgrades to our PBT forecasts of 22% for FY19 and 6% for FY20. The interims were in line with these updated forecasts, with adjusted PBT more than doubling to £1.4m and an increase in net cash to £6.8m. While Bulgin was the biggest driver of group performance, all three businesses delivered good growth in sales and profitability. H2 has also started well and management remains positive about prospects for FY19 and beyond. We have made no further changes to our PBT estimates or valuation at this stage. We continue to value Elektron Technology on a sum-of-parts basis, as we believe headline numbers hide the value in a group composed of both profitable and loss-making operations. This valuation increased to 54-57p in August, suggesting attractive upside despite recent outperformance.
19 Sep 18
accesso Technology (ACSO LN) Positive first half, full year expected to be in line | Cello Health (CLL LN) Health driving performance | Eckoh (ECK LN) A good start to the year | EKF Diagnostics (EKF LN) Interims slightly ahead, outlook positive | Elektron Technology (EKT LN) H1 19 in line with recently upgraded forecasts | Ergomed (ERGO LN) H1 results: in line with June trading update | Futura Medical (FUM LN) Business update highlights increased focus on MED2002 | ReNeuron Group (RENE LN) Exclusive hPRC discussions stopped: talks renewed with other parties | Yu Group (YU LN) Continuing strong, sustainable growth and cash generation
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19 Sep 18
Upgrading forecasts again
Disruptive technology is turning the world upside down. Look anywhere from online retailing, autonomous vehicles and social media, to big data, augmented reality and artificial intelligence. Life is changing, and fast. Similarly we think Elektron’s Checkit service is set to transform the workplace, simplifying everyday tasks such as cleaning schools, monitoring food safety and testing patient blood samples, whilst simultaneously delivering substantial time/cost savings, along with improving customer service and regulatory compliance.
09 Aug 18
Bioquell (BQE LN) Strong interims drive full year upgrades | Elektron Technology (EKT LN) Checkit roll-out by Center Parcs | Gresham Technologies (GHT LN) Positive start to H2 underpins confidence in FY | IQE (IQE LN) Solid first half trading, outlook maintained
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24 Jul 18
Momentum screen refresh + 7 highlighted stocks
We report on the performance of our momentum style screen since the last refresh three months ago and present the 25 new constituents. The screen underperformed small-cap and microcap indices modestly, though our previous focus stocks did significantly better. While momentum (as we express it) has outperformed smallcap significantly since inception of the screen in July 2016, this has arisen in shorter periods and appears to only coincide with a steadily rising small-cap index. We therefore consider this style screen to have limited predictive capability. We highlight seven stocks, which we think are interesting.
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28 Jun 18
AGM upgrade driven by Bulgin
Elektron Technology’s AGM update has revealed a strong start to the year, with performance ahead of expectations. This has been driven by Bulgin, which is trading strongly across all territories. Management now expects Bulgin to report H1 19 sales of at least £13.5m (up c.8%) and anticipates modest sales growth for the business for FY19, despite a tough H2 comparative. Meanwhile Checkit continues to make good progress in driving adoption of its real-time operations management and monitoring solution, and Elektron Eye Technology is trading in line with expectations. We have increased our forecasts for Bulgin in line with updated guidance, driving an upgrade to adjusted group PBT and EPS of 20% for FY19, followed by 5% for FY20.
20 Jun 18
“Strong” start to the year
‘Running winners’ is simple in theory, but difficult in practice. Sure, there is nothing wrong with banking a few profits after a parabolic move, especially when a stock becomes disproportionately large within one’s portfolio. Yet for Elektron, based purely on the fundamentals, we believe this would be a mistake despite the stock’s >5-fold rise since the 2017 lows.
20 Jun 18
Small Cap Breakfast
RA International is a leading provider of services to remote locations in Africa and the Middle East looking to join AIM raising £18.8m and 56p, market cap of £97.2m. Expected 29 June Cake Box Holdings—franchise retailer of cakes with a growing store base across the UK looking to join AIM, Offer tbc, expected late June Mind Gym. Behavioural science business that uses scalable proprietary products to deliver human capital and business improvement solutions to large corporations. Offer TBA. Due 28 June i-nexus—develops and provides strategy execution software to assist global enterprises in effective execution of their strategic plans and initiatives looking to jon AIM. Offer raising £10m at 79p, market cap of £23.36m, expected 21 June Yellow Cake will use its expertise to generate value through the ownership of physical U3O8 (Uranium) together with a range of activities and opportunities connected with owning physical U3O8. Acquiring supply contract for up to $170m. Offer TBA. Knights Group— UK regional legal and professional services businesses. FYApr18 rev £34.9m and adjusted operating profit was £6.8m excluding Turner Parkinson (acquiring on IPO). Offer TBA, expected 29 June. TransGlobe Energy Corporation—an independent international upstream oil and gas company with headquarters in Calgary, Canada is looking to join AIM. No Capital to be raised, market cap of £131m. Expected 29 June Strongbow Exploration (TSX:SBW) intends to dual list on AIM. Holds rights to the South Crofty underground tin mine, a former producing tin mine located in the towns of Pool and Camborne, Cornwall . The project is estimated to require the Company to raise £25 million over the next 18 months to progress to a production decision. Offer TBS. Due June.
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20 Jun 18
Buy one, and get two for free
Have you ever had the pleasure of cleaning a canteen kitchen, fast-food outlet or public toilet? If so, then you’ll know it’s not for the squeamish. The restaurant, facilities management and medical industries are faced with this challenge millions of times each day. Balancing on the one hand, stringent health & safety, hygiene and clinical requirements with cost, employee & customer pressures on the other.
17 May 18
Elektron Technology consists of three businesses. Bulgin is a highly profitable and cash generative industrial connectors business which currently accounts for all of group profit. Cash generated from Bulgin is being reinvested to drive profit growth, and to develop two small loss-making, potentially high growth businesses: an ophthalmic equipment business, Elektron Eye Technology (EET); and a nascent realtime operations management and monitoring SaaS business, Checkit. In our view the value of the individual businesses is not reflected in the current share price, as their progress and prospects are less apparent in group numbers that comprise both profitable and loss-making operations. Our sum-of-parts valuation suggests upside of more than 70% to 49-52p, with potential for more significant long-term value creation as the operations deliver their planned progress.
03 May 18
Centaur Media (CAU LN) AGM statement – trading in-line | Elektron Technology (EKT LN) Hidden value | GlobalData (DATA LN) Exploiting the GlobalData model |Horizon Discovery Group (HZD LN) Possible offer by Abcam illustrates attractive growth prospects | James Fisher & Sons (FSJ LN) Trading in line; good contract momentum | Springfield Properties (SPR LN) Acquisition of Dawn Homes to accelerate growth
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03 May 18
Small Cap Breakfast
Avast, global cybersecurity provider with 435m users worldwide. In 2017, the Group's Adjusted Billings was $811 million, Adjusted Revenue was $780 million, Adjusted Cash EBITDA was $451 million. Seeking to raise $200m. Due in May | Vivo Energy—retailer and marketer of Shell-branded fuels and lubricants in Africa, Due in May. 100% secondary sell-down of existing Shares by Selling Shareholders, No new Money. Pricing TBA | Gore Street Energy Storage Fund—Seeking to raise £100m for the purposes of investment in a diversified portfolio of utility scale energy storage projects. Due 03 May.
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03 May 18
Growth milestone for Checkit
Elektron Technology’s nascent real-time operations management business, Checkit, has made rapid progress over the first two months of FY19, ahead of management’s expectations. Contracted annual recurring revenue has increased to over £1.0m, up from c.£0.75m at the end of FY18 (January year end) and c.£270k at the end of FY17. The business is focused on scaling-up: building its UK customer base and extending its service offer, with plans for international expansion later in FY19. This progress complements the positive momentum at the group’s other businesses, with the year end trading update confirming good growth for connector and component business, Bulgin and H2 progress for Elektron Eye Technology. Encouragingly this was accompanied by strong growth in the order book (which does not include Checkit), underpinning prospects for FY19.
10 Apr 18
Abzena (ABZA LN) Halozyme terminates agreement, no impact on outlook or valuation | Applied Graphene Materials (AGM LN) Signs of increasing commercial momentum | EKF Diagnostics (EKF LN) FDA 501k/CLIA Waiver for DiaSpect Tm | Elektron Technology (EKT LN) Growth milestone for Checkit | LiDCO Group (LID LN) Disruptive model gaining traction | The PRS REIT (PRSR LN) Q3: Maintained trajectory, new construction partner
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10 Apr 18
New global distribution agreement for Bulgin
Elektron Technology has announced a new global distribution agreement for Bulgin with Arrow Electronics Inc, the leading global distributor of electronic components and enterprise computing solutions. The agreement will provide Bulgin with access to new customers and is expected to generate incremental revenues and profits for the business. Products will be available for customer orders from July 2018, implying a c.half year contribution from the agreement in Elektron’s year to January 2019. The announcement further underlines the group’s positive momentum: following February’s strong FY18 year end trading update and encouraging start to FY19; disposal of the loss-making Queensgate business for an attractive multiple; and successful Checkit trial with the Food Standards Agency.
29 Mar 18
Small Cap Breakfast
Perfomatrix PLC, a global end to end Performance Marketing technology and services company headquartered in the UK, is looking to join AIM in early April 2018, offer TBC Crusader Resources, an ASX-listed public company incorporated in Australia, which is primarily focused on the exploration and development of gold assets in Brazil. POSTPONED SimplyBiz, a Financial Services Firm, looking to join AIM raising £30m via placing and £34.6m via a sale of existing ordinary shares at 170p giving a market cap of £130m. Expected 4 April
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29 Mar 18
Disposal of Queensgate Nano
Elektron Technology has announced the sale of the trade and assets of Queensgate Nano to Prior Scientific Instruments Ltd, completing its strategy of slimming down its portfolio to focus on the businesses offering the best potential to deliver growth and value for shareholders. Elektron Technology will receive an initial cash consideration of c.£0.8m, with a further cash payment of up to £0.8m contingent on sales in the year following the transaction date. This represents c.1.1x historic EV/sales based on the initial £0.8m consideration only, which appears to be an attractive multiple for a business which has been materially loss-making. The disposal will be earnings enhancing with the proceeds used for working capital purposes. The announcement follows last week’s positive trading update, which confirmed strong trading for FY18, an increase in year end net cash to £5.1m and encouraging prospects for FY19 underpinned by order book growth.
16 Feb 18
accesso Technology (ACSO LN) Steve Brown to step down as CEO | CVS Group (CVSG LN) Proposed placing and interim results | Dunelm (DNLM LN) Interim results preview | Elektron Technology (EKT LN) Disposal of Queensgate Nano | Sigma Capital Group (SGM LN) The PRS REIT placing programme to close early
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16 Feb 18
Positive year end trading update
Elektron Technology’s trading update has confirmed a positive end to FY18 and encouraging start to the year ahead. Sales grew by c.10.9% in FY18 driven by the group’s connector and component business, Bulgin. Profits benefited from higher Bulgin margins, operational gearing and efficiency gains, despite continued investment to support long-term growth. Strong trading, along with proceeds from disposals, also drove a significant increase in net cash to c.£5.1m. The group is well positioned for further progress in FY19, with prospects underpinned by an opening order book up more than 50%.
08 Feb 18
Small Cap Lunch
TruFin—holding company of an operating group comprising three growth-focused FinTech and banking businesses operating in three niche lending markets: supply chain finance, invoice finance and dynamic discounting. Offer TBC, expected late Feb | Polarean - The medical drug-device combination companies operating in the high resolution medical imaging market. Offer TBC. Due 22 Feb | Block Energy—a NEX Listed UK based oil exploration and production company whose main country of operation is the Republic of Georgia, looks to join AIM end of February 2018. Offer TBC | OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Offer raising £30m at 165p with mkt cap of £100m . Due 9 Feb.
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08 Feb 18
Small Cap Breaskfast
Novacyt S.A.—Sch1 from the international diagnostics group, generating revenues from the sale of clinical products used in oncology, microbiology, haematology and serology testing. Offer to raise £8.8m at 59.38p with a value of £22.4m. Expected 01 Nov. Footasylum Ltd—UK-based fashion retailer focusing on the branded footwear and apparel markets announced its intention to seek admission to AIM. Expected value between £130m and £150m. Due Nov 2017. Totally (TLY) - Sch 1 for £11m RTO of Vocare, a provider of integrated urgent care services to the NHS throughout the UK. £76.8 million rev in the year ended 31 March 2017. Totally to address Care Quality Commission concerns. Due 24 Oct. Central Asia Metals (CAML) -RTO of Lynx Resources. Anticipated market capitalisation at Admission: £404.8m. Raising £113m at 230p. Acquiring the SASA zinc-lead mine in Macedonia from Solway Industries. Due 15 Dec. OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m. Orogen plc, to be renamed Sosandar plc on Admission. Sosander is an online womenswear brand specifically targeted at a generation of women who have graduated from younger online and high street brands, and are looking for affordable clothing with a premium, trend-led aesthetic. Offer to raise £5.3m with market cap of £16.1m, expected 2 November 2017 OG Graphite, brownfield development-stage graphite company focused on the reactivation of its wholly-owned Kearney natural flake graphite mine and mill located 280 km north of Toronto, Canada. Offer TBA, expected late October . ContourGlobal LP— contracted wholesale power generation businesses, with 69 thermal and renewable power generation assets in Europe, Latin America and Africa. In the year ended 31 December 2016 it generated $905.2 million of combined revenue and $440.4 million of Adjusted EBITDA. Raising c.$400m. Expected November. TI Fluid Systems—Maybe second time lucky? Pulled last October. global manufacturer of automotive fluid storage, carrying and delivery systems seeking to raise €425m to reduce financial leverage (to approximately 2.0x net debt to Adjusted EBITDA by the end of FY 2017). Possible partial sale by Bain. Revenue for FY 2016 was €3.3 billion and Adjusted EBIT was €362.1 million M7 Multi-Let REIT—Intends to raise up to £300m at 100p. Aims to acquire and hold a portfolio of UK regional light industrial and regional office assets diversified by geography, asset type and tenants that is expected to generate stable income returns and, where appropriate, offer the potential to leverage and enhance returns through active asset management initiatives. Due 13 Nov. Bakkavor Group - Provider of fresh prepared food intends to float in November. FY 16 Revenue: £1,763.6 million FY 16 Adjusted EBITDA: £146.4 million (13.7% CAGR FY 14-FY 16). Part vendor sale and primary raise of c. £100m. Price TBA. Russia’s En+, owned by Russian aluminium tycoon Oleg Deripaska, has assets in metals and energy, including hydropower. reported to be seeking dual London and Moscow listing raising $1.5bn TMF Group , which provides tax, admin and legal support services, reported to be seeking London IPO to raise c. £200m. People’s Investment Trust—Objective of sustainable wealth creation. Also to list on the Social Stock Exchange. Targeting £125m raise on 17 Oct. No performance fees or executive bonuses in order to focus on long term rather than short term performance.
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20 Oct 17
Independent Oil & Gas* (IOG): Pieces falling into place (CORP) | Elektron Technology* (EKT): Further strategic progress (CORP) | Elecosoft* (ELCO): A good H1 is driven by ICON and FX (CORP) | Hurricane Energy (HUR): Lancaster EPS approved (BUY) | Hurricane Energy (HUR): Lancaster EPS approved (BUY) | Hurricane Energy (HUR): Lancaster EPS approved (BUY) | Nasstar* (NASA): Growth and efficiency (CORP) | SRT Marine Systems* (SRT): Loan notes will fund satellite data project (CORP) | Trifast^ (TRI): Trading update, progress in line with expectations (BUY)
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25 Sep 17
Small Cap Breakfast
City of London Group (COLG) - Sch 1—RTO of Milton Homes Limited, an equity release provider which has a UK residential property portfolio of 586 properties with a market value of approximately £77 million as at 30 June 2017. Offer TBA. Due 5 Oct | Springfield Properties—Scottish housebuilder. Intention to float. Offer TBA “Our turnover exceeded £100 million for the first time this year and now we employ around 500 people. This IPO is the next step in our growth.” | Warehouse REIT - The Company will invest in a diversified portfolio of UK warehouse assets located in urban areas. The Company is targeting a dividend yield of 5.5p equivalent to a yield of 5.5 percent. for the year ending 31 March 2019. Issue price 100p. Offer raising £150m at £1 with market cap of £166m. Due 20 Sep | OnTheMarket—Intention to float on AIM to raise c. £50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m. |People’s Investment Trust—Objective of sustainable wealth creation. Also to list on the Social Stock Exchange. Targeting £125m raise on 17 Oct. No performance fees or executive bonuses in order to focus on long term rather than short term performance. | Charter Court Financial Services Group—Intention to float. Specialist lender serving the UK residential mortgage market. The net mortgage loan book stood at £4.4 billion as at 30 June 2017 growing at a compound annual growth rate of 92 percent since 31 December 2014. Part vendor sale and £20m primary raise. | ContourGlobal LP—Report on Bloomberg that the thermal energy power generator is considering a London listing. | Hipgnosis Songs Fund investment Company offering pure-play exposure to Songs and associated musical intellectual property rights. Offer raising £200m at 100p. The Company has decided to extend the closing date for the Placing, Offer for Subscription and Intermediaries Offer to 1 August 2017. The Company may bring forward this closing date at any time. Admission 15 Sep.
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19 Sep 17
Small Cap Breakfast
OnTheMarket—Intention to float on AIM to raise c. £50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m. Wilmcote Holdings plc—Sch1 from the Company established with the objective of creating value for its investors through the acquisition and subsequent development of target businesses in the downstream and specialty chemicals sector. Offer raising £15m at 120p with market cap of £25m. Expected 17 August 2017 Xpediator Plc—Sch 1 from the holding Company for an integrated freight management business operating in the supply chain logistics and fulfilment sector across the UK and Europe with a strong presence in Central and Eastern Europe. Offer details TBC, expected Admission early August 2017. Hipgnosis Songs Fund investment Company offering pure-play exposure to Songs and associated musical intellectual property rights. Offer raising £200m at 100p. The Company has decided to extend the closing date for the Placing, Offer for Subscription and Intermediaries Offer to 1 August 2017. The Company may bring forward this closing date at any time. Admission 15 September 2017
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10 Aug 17
Advanced Materials – the building blocks of Tomorrow’s World
Whether we know it or not, advanced materials are a core component in the everyday life of the everyday person. They are the key material in items we often disregard, such as printer inks and lotions, to objects which defy the laws of gravity like the Airbus A380 and London’s Shard. Furthermore, these materials are not only essential to many objects and structures, but, due to their superior qualities, are the key to the advancement of many industries. One such example is the use of carbon fibre which offers five to ten times more rigidness, stiffness, and strength than its aluminium counterpart. As a result of these impressive qualities, motorsport and athletics have improved ten-fold since their mainstream use and new records are broken every year.
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26 Jul 17
Small Cap Breakfast
I3 Energy –Schedule 1. Independent oil and gas company with assets and operations in the UK. Offer TBC, 26 May admission. | Opera Investments –Reverse Takeover of Kibo Mining’s subsidiary Kibo Gold. Raising £1.5m. Expected mkt Cap £6.5m. 23 May. | 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 May. | AEW UK Long Lease REIT—Intention to Float. Up to £150m raise. Admission early June. UK specialist and alternative property | Alfa Financial Software –Intention to float. Mission-critical software platform purpose-built for asset finance enterprises. Vendor sale of 25% plus. FYDec16 rev £73.3m (CAGR of 24% from 2012). Adjusted EBIT £32.8m. | Kuwait Energy— $150m raise plus vendor offer. Admission due June. 2p reserves 810.0 mmboe | ADES International— Provider of offshore and onshore oil and gas drilling and production services in the Middle East and Africa, seeking raise up to $170m plus vendor sale under a Standard Listing of the Main Market. Admission due May 2017. | Tufton Oceanic Assets– Extended to 9 May on specialist funds segment of Main Market to enable further due diligence. |PRS REIT—Private rental sector REIT raising up to £250m. Admission due 31 May
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18 May 17
Small Cap Breakfast
Path Investments—Publication of prospectus from the Energy Investment Comnpany. Raising £1.4m. Admission due on or around 30 March. Franchise Brands—Schedule 1 detailing £28m reverse takeover of Metro Rod. Admission expected 11 April. Alpha FX Group— Schedule 1 from the foreign exchange provider focused on managing exchange rate risk for UK corporates that trade internationally. Fundraise TBC. Admission expected 7 April. K3 Capital Group—Schedule 1 from the Group of business and company sales specialists across business transfer, business brokerage and corporate finance. Admission date and fundraise details TBC. Integumen— Schedule 1 from the personal health company developing and commercialising technology and products for the human integumentary system. Raising £2.16m at 5p. Expected market cap £8.16m. Admission expected 5 April. Tufton Oceanic Assets– Offer extended to 9 May to enable investors to complete further due diligence.
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27 Mar 17
Small Cap Breakfast
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 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.
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08 Feb 17
Small Cap Breakfast
Big Sofa Technologies— Schedule 1 from the b2b technology company providing video analytics at an enterprise level. Seeking to complete RTO of unlisted HubCo investments. Raising £6.1m. Target date 19 December. ECSC—Schedule 1 from provider of cyber security services. Raising £5m. Vendor sale £0.8m. Target date 14 Dec. Expected market cap £15m. RM Secured Direct Lending - The secured direct lending fund intends to float on the Main Market on 15 December raising up to £100m Creo Medical Group - UK based medical device company focused on surgical endoscopy, a recent development in minimally invasive surgery. Admission due 7 December. Fundraising details TBA.
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02 Dec 16
Cambridge Cognition Hldgs* (COG.L) | Venn life Sciences* (VENN.L) | Conroy Gold & Natural Resources (CGNR.L) | First Property Group (FPO.L) | Secure Property Development & Investment (SPDI.L) | LXB Retail Properties (LXB.L) | Union Jack Oil (UJO.L) | Elektron Technology (EKT.L) | Proteome Sciences (PRM.L) | DJI Holdings (DJI.L)
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22 Sep 16
Could Brexit be a positive for the UK Industrials sector? While the EU and UK are important to each other in terms of trade, the level of that importance is asymmetric: 44% of UK exports go to the EU and a further 10% go to countries with free trade agreements with the EU; only 15% of EU exports go to the UK. As a result, we feel that UK bargaining power is relatively weak and we need to accept the possibility that the UK drops out of the single market and trades under WTO terms with Europe. The extent to which this is a positive or negative for UK Industrials depends entirely on the value of Sterling versus the Euro or US Dollar. We analyse this and conclude that with a 7% (or greater) depreciation of Sterling (versus pre-Brexit levels), all the costs associated with WTO trade are more than compensated for. Big exporters become strategic winners and big foreign FX earners become financial winners. Largely domestic players are at risk. Export or die!
Economic DataIndices and Markets
18 Jul 16
In Issue 2, we concluded that the VW emissions scandal was likely to result in faster development and adoption of hybrid and electric vehicles. In this issue, we discuss what we think will be a key megatrend of the 21st century: the strong push to decarbonise vehicles AND power generation. The implications for the Industrials sector are substantial and we attempt to identify some of the key winners and losers of what we think is now an unstoppable force. The full list starts on page 8 but key winners we identify are: Lithium, Copper, Hydrogen, Composites, batteries and fuel cells, electric motors, wind turbine components, solar cells, ac/dc convertors and all forms of power storage.
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04 Apr 16
Whilst revenue was flat, the recent trend in improving profitability continued, reflecting the group’s restructuring and strategic refocusing initiatives. Net debt has fallen further and investment in the M2M Checkit product continues, the full launch of which is expected in H2 and which we believe may have significant potential.
10 Sep 15