Safestyle has confirmed that FY20 was in line with forecasts. PBT is a c. £4.7m loss, in line with the ZC forecast of (£4.5m), with revenue of more than £113.0m, post 20% growth in Q4, and net cash of £7.6m, ahead of the £7.0m ZC forecast. Importantly, Safestyle started FY21 with a strong order book, +80% yoy. This has insulated it from the impact of the current lockdown with door canvas and in-home selling suspended in early January. With the latter having re-started this month and door canvas expected to begin again in Q2 the order book will remain strong. The suspension of the two forms of sales activity has seen some impact on the length of the order book, but it remains higher than the historic norm. Fortunately, the current lockdown has not prevented surveyors or installers from working meaning revenue levels in the first few weeks of FY21 have been solid and should have resulted in strong levels of profitability due to good level of margin achieved. FY21 forecasts are unchanged.
Companies: Safestyle UK Plc
Report on Techcrunch that IROKO, a Nigerian-based media company, could file to go public in the next 12 months on the London Stock Exchange (LSE) Alternative Investment Market. Founded by Jason Njoku and Bastian Gotter in 2011, IROKO boasts the largest online catalogue of Nollywood film content globally. According to this report, the media company will raise between $20 million and $30 million valuing the company at $80 million to $100 million. AMTE Power, a developer and manufacturer of lithium-ion battery cells for specialist markets, announced its intention to seek admission to trading on AIM. Admission is expected to take place during March 2021. The Company intends to raise approximately £7 million by way of a placing of new ordinary shares in the capital of the Company. Timing TBC. Samarkand Group Limited, the cross-border eCommerce technology and retail group opening up the world's largest market for brands and retailers, intends to IPO on the Apex Segment Aquis Stock Exchange Growth Market. Admission is targeted for March 2021. Cellular Goods a UK-based provider of premium consumer products based on biosynthetic cannabinoids announced its intention to join the main market (standard) this spring. Target valuation £20m raising c. £8m “to finalise the development and launch of a range of the Company's premium-quality consumer products based on biosynthetic cannabinoids, which is fully compliant under UK law.” Kanabo Group (RTO by Spinnaker Opportunities SOP.L) on the main market (standard). Raising £6m, enlarged mkt cap £23.4m. Kanabo focuses on the distribution of Cannabis-derived products for medical patients, and non-THC products for CBD consumers . Due 16 Feb. NextEnergy Renewables to launch an IPO on the Main Market. NREN is a differentiated renewables investment company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. Targeting a £300m raise. NREN is targeting total returns of 9-11 per cent. per annum (net of all fees and expenses but including the Target Dividend and capital appreciation) . The Company's target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence. Due Early March Auction Technology Group is considering an IPO on the Main Market. The Group operates six world-leading online Marketplaces and proprietary global auction platform technology for curated online auctions . In FY20 the Group delivered pro forma revenue of £52.3 million, supported by notable underlying year-on-year growth from both Standalone ATG Group and Standalone Proxibid Group (12.4 per cent. and 40.4 per cent., respectively). For the same period, the Group delivered a strong profitability performance of £22.3 million pro forma Adjusted EBITDA representing a pro forma Adjusted EBITDA margin of 42.6 per cent. Digital 9 Infrastructure launch an initial public offering on the Specialist Fund Segment of the Main Market of the London Stock Exchange, by way of an initial placing and offer for subscription for a target issue £400m. Digital 9 Infrastructure plc is a newly established, externally managed investment trust. The Company will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The IPO Prospectus is expected to be published in March 2021. Cordiant Digital Infrastructure to admit its shares on the Specialist Fund Segment of the Main Market of the London Stock Exchange . Targeting a £300m raise. Cordiant invests in global infrastructure and real assets, running infrastructure private equity and infrastructure private credit strategies through limited partnership funds and managed accounts. Due 16 Feb 4basebio UK Societas is a specialist life sciences group focused on therapeutic DNA for gene therapies and DNA vaccines and providing solutions for effective and safe delivery of these DNA based products to patients. The Company has been divested from 4basebio AG , a German company listed on the Prime Standard segment of the Frankfurt Stock Exchange . No capital to be raised on Admission. Anticipated market capitalisation on AIM Admission: £14.53m. Due 17 Feb Cornish Metals (TSX-V: CUSN) intends to list on AIM. The Company is proposing to raise £5m by way of private placement of new Common Shares to advance the United Downs copper-tin project. The Company expects that Admission will become effective 16 February 2021. The Company's Common Shares will continue to be listed and trade on the TSX-V in Canada. Raising £8.2m. £18.7m mkt cap.
Companies: CCS UKOG PTD SFE STAR ATYM AVG PHD CGNR SNX
Baths, boulders, bricks, doors, drainpipes, rocks, shower trays, taps, tiles and windows – all are in demand
Recovery in demand picks up pace increasing FY21 estimates
The strength of the post lockdown recovery in demand has accelerated in the final quarter of the year with revenue growth of c.20% yoy, against the c. 9% in Q3. This is stronger than ZC estimates and leads to a 3% upgrade in FY20 revenue to £113.2m. The increase in the order book, expected to be c. 75% ahead yoy at year end, and the current installation run rate indicate the better than forecast performance will continue well into next year. This leads to a 10.6% increase in FY21 revenue to £138.6m with profit before tax more than doubling to £4.0m. Net cash of c. £7.0m is also better than expected and highlights the funds at management’s disposal to continue the investment into achieving peak levels of revenue seen in FY16 and FY17.
It is pleasing to see that lockdown has not materially undermined Safestyle’s recovery after it had seen good demand in the early part of the year. On last night’s close, the shares are arguably no longer on a recovery rating at 15x, despite adj. operating profit in FY21 being less than 30% of peak profitability.
Interim results highlight the impact to the business from the nationwide lockdown that started in late March and began to ease in mid to late May. Within today’s results, the outlook statement is probably of most interest. The strong demand highlighted in the trading update in July has continued through August and into September. With the balance sheet in a strong position, post the fund raise, demand firmer than expected and national competitors struggling, Safestyle is in a good position. The recovery had been well underway until the COVID-19 lockdown interrupted operations but Safestyle has come through it in a position to capitalise on good market demand and weak competitors. Revenue numbers for FY20 increase marginally to c. £110.0m but profit forecasts are unchanged. The level of order intake has outstripped the short-term capacity to install orders leaving the order book 82% higher yoy, indicating that the run rate into FY21 should be positive in terms of forecasts.
Since the recommencement of operations in May (14th) demand has been much stronger than anticipated. For the last eight weeks order intake has grown 23.2% with the order book at the end of June 45% higher than at the same point in 2019. This has forced management to increase capacity further, whilst increasing lead generation spend and a shorter furlough period than we had assumed as workers came back earlier. The resulting additional costs incurred are likely to mean H1 profitability will be lower than we might previously have thought. Whilst hopeful that this will be offset in H2 as installations increase, we take a conservative view leaving revenue forecasts unchanged but increasing cost assumptions. Estimates in FY21 are left unchanged, and whilst visibility remains low as to where underlying demand might settle post the initial pent up demand post lockdown, the potential for government assistance to underpin a strong market over the next 18-24 months is high.
The AGM statement indicates that Safestyle will restart operations during the remainder of May. In the first instance, this will involve manufacturing and surveying with installations and selling following. This announcement is welcome and shows the beginning of a return to normalcy and is in line with the actions of other building product companies. Post the placing at the end of April, the balance sheet has good levels of liquidity with excess of £12.0m. This could fund the business well into the next financial year if it was required and debt covenants continued to be waived. With operations restarting this will not be necessary and the strong balance sheet can be utilised to increase market share at the expense of weaker competitors. Forecasts are unchanged having been updated post the placing, assuming a stringent two month lockdown followed by a gradual recovery in H220.
Safestyle announced the successful placing to raise £8.5m to further strengthen the balance sheet and see the business through the current COVID-19 situation. The placing price of 17p was a slight premium to the previous night’s close and a c.20% premium to the 14p low on the 3rd April. Post the placing, covenants on Safestyle’s debt have been waived for up to six months and a reduced EBITDA covenant target will be in place for the rest of FY20. The improved banking terms, in combination with the additional funds raised, puts the business in a strong position, as and when trading returns to a degree of normality. It is still too early to ascertain when social distancing measures will ease, but Safestyle has the headroom not only cope for an extended period but also, importantly, to invest to take market share, when the time is right.
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Following on from Boris Johnson’s statement yesterday evening, Safestyle has announced a temporary closure of its sites across the UK along with the cessation of all installation activities. This should not come as a surprise; management had indicated last week this was a likely short-term outcome as the pandemic progressed. With the turnaround at Safestyle having picked up pace in the final few weeks of FY19 and into the early part of FY20 the impact from Covid-19 is frustrating. However, the short-term focus is on dealing with the issues and the business is in a far better shape to deal with the situation than it has been for some time with extended financing facilities and a leaner more variable cost base.
FY19 results are in line with the detailed guidance provided at the time of pre close trading update in late January. Revenue of £126.2m was 8.4% ahead yoy highlighting the progress the business has made in recovering from the issues it experienced in FY18. A return to profitability was achieved in the middle of the year on the back of a much-improved performance in revenue and margin, gross margin increasing 240bps yoy. This signalled the end of stage two of the recovery process set out by the management team. Stage three, accelerating growth, had begun in earnest with the year-end order book up 24% yoy. The good order run rate continued into the first two months of FY20 with both revenue and profitability materially ahead on FY18.
The business is steadily getting back to where it was pre 2017. The management team has only been in place for a year but in that time has worked hard to stabilise the business and return it to profitability. Confidence of where the business is in the turnaround strategy is evidenced by the announcement today that it will significantly invest in marketing over the next three years. This will underpin an increase in the order book and drive profitability. Investment started in Q419 driving market share gain and an improved order book but has meant profitability is marginally below expectations, at (1.5m). Importantly revenue of £126.2m was broadly in line with ZC forecast (£128.7m) and the strong growth in the final weeks of Q4 suggest the run rate into Q1 of FY20 was good. The turnaround part of the strategy has been executed. The business is now in the recovery phase with the return to profitability in Q319 and the commitment to increase marketing spend to drive profitability over the next three years.
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.
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AFC Energy has this morning announced (RNS Reach) that it has launched its Anion Exchange Membrane (“AEM”) Fuel Cell test facility at the Company's Surrey headquarters. This facility will test and optimise AFC Energy's high energy-density fuel cell technology, HydroX-Cell(S)™, that is currently in development. The design of the new dedicated AEM fuel cell facility was completed in the second half of 2020 with full fit out now complete in advance of full operation.
Companies: AFC Energy plc
tinyBuild— a leading video games publisher and developer with global operations. tinyBuild's strategic focus is in creating longlasting IP by partnering with video games developers, establishing a stable platform on which to build multi-game and multimedia franchises is to join AIM. Offer details TBC. Due mid-March. AMTE Power, a developer and manufacturer of lithium-ion battery cells for specialist markets, announced its intention to seek admission to trading on AIM. Admission is expected to take place during March 2021. The Company intends to raise approximately £7m by way of a placing of new ordinary shares in the capital of the Company. Timing TBC. Samarkand Group Limited, the cross-border eCommerce technology and retail group opening up the world's largest market for brands and retailers, intends to IPO on the Apex Segment Aquis Stock Exchange Growth Market. Admission is targeted for March 2021. Cellular Goods a UK-based provider of premium consumer products based on biosynthetic cannabinoids announced its intention to join the main market (standard). Has raised £13M in an oversubscribed placing. £25m mkt cap. Due 26 Feb. NextEnergy Renewables to launch an IPO on the Main Market. NREN is a differentiated renewables investment Company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. Targeting a £300m raise. NREN is targeting total returns of 9-11 per cent. per annum (net of all fees and expenses but including the Target Dividend and capital appreciation) . The Company's target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence. Due Early March 2021. Digital 9 Infrastructure launch an initial public offering on the Specialist Fund Segment of the Main Market of the London Stock Exchange, by way of an initial placing and offer for subscription for a target issue £400m. Digital 9 Infrastructure plc is a newly established, externally managed investment trust. The Company will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The IPO Prospectus is expected to be published in March 2021. Team PLC announced their plans for an AIM IPO. Team owns Theta Enhanced Asset Management Ltd, trading as Team Asset Management. This is a Jersey-based active fund manager providing discretionary and advisory portfolio management services to private clients, trusts and charities. Assets under management were GBP291m in November, up from GBP140m in December 2019 . The Company is seeking to raise no less than £5m. The Placing will be priced on a pre-money valuation for the Company of £7m. Targeting March Admission. Virgin Wines UK Plc has out their plans for an AIM IPO. Virgin Wines is a direct-to-consumer online wine retailer that sells products to retail customers in the UK through two subscription schemes and a pay-as-you-go offering. The Group also sells a range of beers and spirits and operates a B2B sales channel for corporates. Anticipated mkt cap £110m. Raising £13m in new money and vendor sale of £34.9m . Due 2nd March. Fix Price announces its intention to float on the Main Market of the London Stock Exchange. Fix Price is one of the leading variety value retailers globally and the largest in Russia, with more than 4,200 stores. Fix Price has revenues of RUB 190.1bn, RUB 142.9bn and RUB 108.7bn for 2020, 2019 and 2018, respectively. Adjusted EBITDA for the same years was RUB 36.8bn, RUB 27.2bn and RUB 14.2bn, respectively. The Offer would consist of an offering of GDRs by certain existing shareholders of the Company. Great Point Entertainment Income Trust PLC announced its prospectus has been approved by the FCA. Great Point Entertainment Income Trust PLC is a newly established, externally managed closed-ended investment company. The Company will provide project finance to content makers and commissioners in the global television and film production industry via senior loans secured against pre-sold intellectual property (IP) rights. GPEIT's investment objective is to provide Shareholders with dividend income and modest capital growth through exposure to media content finance. According to media reports, Deliveroo, are expecting to release their IPO plans on 8th March. The company raised more than $180m in January with a valuation of more than $7bn.
Companies: YEW IKA UPR WYN ENW BWNG TRAK DBOX HZM G4M
BAE released a sound set of figures for FY20, beating the consensus and shining with its strong cash generation. The company remains poised for groth in FY21 thanks to its defensive backlog and high exposure to strategic contracts.
Companies: BAE Systems plc
We update our valuation following our initiation note in September. Since then there has been multiple positive developments in terms of new strategic collaborations with world leading organisations as well as investment to ensure capacity can be built up to satisfy demand. Our revised target valuation of 191p reflects elements of the ABB relationship in a number of major markets, albeit the longer-term opportunity could be much bigger than this. Indeed, we have not included all AFC’s growth opportunities in this valuation. Recent profit taking gives an opportunity to re-visit the long-term investment thesis. The next scheduled news flow is FY results in early March.
Directa Plus has announced that it has signed a supply agreement and a Strategic R&D Agreement with NexTech Batteries Inc, a leading company in the field of Lithium Sulphur batteries based in Nevada, US. These agreements follow on from the Memorandum of Understanding entered into between the two companies and announced on 26 October 2020. The Supply Agreement has an initial duration of three years, with an option to extend for an additional two years and under the Supply Agreement, Directa Plus will supply NexTech with 300kg of nanoplatelets in 2021, with quantities for delivery in each subsequent year to be agreed between the parties. Directa Plus and NexTech have also agreed a worldwide bilateral exclusivity between the parties in the lithium battery field for the duration of the Supply Agreement.
The three year R&D Agreement provides for Joint Lab activities with the intention of developing new specific grades of G+® graphene nanoplatelets for a next generation of Li-S batteries. Both parties will dedicate selected scientists from their R&D teams and part of their respective facilities to the enterprise.
As announced in November 2020, NexTech, using Directa Plus's G+ materials, achieved 410Wh/kg of specific energy in a practical demonstration system at a weight only slightly below 30g. For comparison, standard lithium-ion batteries have a specific energy density of 100-265 Wh/kg.
Companies: Directa Plus Plc
Affected by volumes which were lower than their long-term average and weak commodity prices for the upstream division, the group published a disappointing set of FY20 figures. Although the group’s efforts on its cost structure are notable, we maintain a cautious view on inventory due to the economic uncertainty that could erode cash generation (due to an increase in working capital requirements, among other things).
Companies: Centrica plc
In the past two years, since Hardman & Co first started to target the IC sector, we have heard many managers of ICs and boards talk of the growth of the retail investor on their registers. Many have approached Hardman & Co for help in addressing this market, since we have a unique strength in this field relative to other providers.
Companies: AVO ARBB BBGI CLIG DNL FLTA ICGT OCI PCA PIN PHP RECI STX TRX VTA YEW
Directa Plus has announced that its existing relationship with NexTech Batteries Inc has progressed to a formal supply and strategic R&D agreement. We consider this a very positive development, given the potential for Lithium-Sulphur (Li-S) to disrupt the dominance of Lithium-Ion batteries. Directa will supply NexTech with 300kg of G+® graphene platelets this year, with potentially far higher quantities for delivery in subsequent years linked to NexTech’s anticipated growth.
The Drax prelims show continued progress in generation and pellet production with the impacts of COVID 19 on the customers business within expectations. The company is delivering cost reductions in its pellet supply business and this business will be significantly expanded with the proposed acquisition of Pinnacle Renewable Energy, turning the company into a major vertically integrated biomass business.
Companies: Drax Group plc
NBB is an established and well-recognised 40-year brand in the field of senior executive-level talent acquisition, which has been substantially upgraded since appointing Mike Brennan as Group CEO in 2016, and has become a totally transformed company. Notably NBB has lifted its game dramatically, growing into a broad human capital solutions business delivered via professional embedded processes, where before what we had was the familiar well-respected but single-strand executive search operation. As a result, growing and more relevant new service lines now form the largest part of the company, and aligned with this, NBB's financial prospects have improved significantly. While Covid has been challenging, the company has managed the crisis well by considered and strategic headcount additions, while at the same time taking out over £500,000 in costs. Positive H1 and FY EBITDA reports stand out as important milestones. Net debt cut from c.£1m to near-zero in H1 reflected a return to cash-generation. We are now able to include forecasts for FY-2020E and in addition '21 and '22 scenarios, illustrating the potential upside.
Companies: Norman Broadbent plc
Alba Mineral Resources (ALBA LN) – Welsh exploration programme
Bluejay Mining* (JAY LN) - BUY - Valuation 40p – Bluejay training students and personnel in Greenland for Dundas project
IronRidge Resources* (IRR LN) – Progress at Ewoyaa Lithium Project
Keras Resources* (KRS LN) – Chairman reports no outstanding requirements on grant of exploitation permit at Nayéga manganese mine in Togo
Mkango Resources* (MKA LN) – Pilot plant test-work underway
Power Metal Resources* (POW LN) – Option exercised to acquire Coco East Property
Sibanye-Stillwater (SSW JSE) - Sibanye-Stillwater Partner up with Keliber for lithium in Finland
Tirupati Graphite (TGR LN) – Trials of battery grade spherical graphite accelerate timetable to commercial production
Companies: MKA ALBA JAY KRS POW TGR IRR SSW
Volex has reported interim results that are in-line with expectations following a strong trading update in mid-October. Of far greater significance is today’s announcement of the proposed acquisition of DEKA for a consideration of up to €61.8m on a debt free basis. DEKA is a leading and highly profitable power cord manufacturer, strategically located in Turkey, that serves leading European white goods manufacturers. The acquisition should close in early CY2021, subject to expected Turkish Competition Authority approval. We foresee 15% earnings enhancement in FY2022E with further opportunities for revenue synergies with Volex in the Far East as its operations also vertically integrate, production efficiencies increase and the cost of production falls. The statement highlights that pro forma net debt/EBITDA remains under 0.4x and this provides scope for further bolt-on acquisitions alongside a new $70m RCF and $30m accordion, also announced with the interims.
Companies: Volex plc
The UK legal service sector looks intrinsically attractive to investors, with its inherent high added-value, resilient growth through all but the very worst of economic times and fragmented nature. Five companies representing about 1% of the huge UK legal sector are all we have seen so far on the UK stock market and this is clearly going to grow, as listed law firms drive home their advantages and expand. Their UK domestic focus has brought share prices under pressure which looks wrong given the outlook, offering a good buying opportunity. We take this opportunity to initiate coverage of Gateley (Corporate) which has achieved great success since IPO but paradoxically trades at an anomalous discount to its peers.
Companies: GTLY BUR DRV MUR INCE KEYS RBGP
Macfarlane has reported exceptionally resilient 2020 interim results, reflecting the diversification of the business and strong management of the operations and cost base. The Group's ongoing communication has been highly effective for updating investors with key trends in the business and recent share price strength demonstrates an acknowledgement of this. We reinstate our forecasts and buy recommendation following these strong results
Companies: Macfarlane Group PLC
Rolls-Royce issued a trading update as of November. The Defence business remained resilient while the situation in civil commercial aerospace was more contrasting. The recovery is still fluid, with a few uncertainties still to overcome in 2021 but visibility in 2022 should be better. Still, we see the cash generation capability of the company will remain under pressure.
Companies: Rolls-Royce Holdings plc