Companies: MMX BMS BSEAF 5K9 FNX
Companies: ALT MMX ZAM
City of London Group (CIN): Corp Completion of capital raise | Minds + Machines (MMX): Corp Revenue recognition issue requires clarification
Companies: Minds + Machines Group Limited (MMX:LON)City of London Group plc (CIN:LON)
The interims are in line with the July update and highlight MMX’s resilience during the pandemic. Steady growth in billings continues alongside strategic improvement in the quality of business; notably, a reduced reliance on one-off brokered domain name sales saw almost all H1 billings (amounts invoiced) come from growth in the automated retail channel, building renewal business for the future. However channel billings are recognised over the life of the registration so much of that revenue is deferred. Thus while total H1 billings grew an impressive 7% YoY, accounting revenue actually booked fell 5% and adj. PBT fell 4% YoY - the near-term cost of greater security and quality. Cashflow remained strong, lifting net cash from $6.6m in January to $7.3m in June despite a $1.2m buyback in H1. Given the current COVID-19 backdrop, management is cautious on FY guidance however with a bright outlook, a cash-generative business and a large cash reserve, a further return of £3.0m is being flagged for H2.
Companies: Minds + Machines Group Limited
Belvoir Group (BLV): Corp | discoverIE (DSCV): Corp | Intercede (IGP): Corp | Minds + Machines (MMX): Corp | Omega Diagnostics (ODX): Corp | Sopheon (SPE): Corp
Companies: DSCV IGP MMX ODX SPE BLV
eve Sleep (EVE): Corp Good strategic and financial progress | Gateley (GTLY): Corp Prudently managing the business in uncertain times | K3 Business Technology (KBT): Corp Deferral of results; FY19 dividend cancellation | Minds + Machines (MMX): Corp FY 2019 beats forecasts and sets course for dividends | Pebble Beach Systems (PEB): Corp FY19 results postponed and extended loan facility | Pelatro (PTRO): Corp Postponement of results reporting | Quartix (QTX): Corp A strong start to 2020 curtailed by COVID-19
Companies: KBT MMX QTX GTLY EVE PEB
This was another very good year for MMX, with a comfortable beat of forecasts as management continues to execute its strategy of improving both the ‘quantum and quality’ of its revenue base. The one-off brokered sales (many from .vip in China) are steadily being replaced by rapid growth in new registrations of a much wider range of gTLDs and growing renewal revenue, all automated through the global registrar network – but more in Europe and the US. Group revenue jumped 25% YoY, assisted by strong new sales across the portfolio, the launch of a new brand protection product, and a FY (an extra five months) of the ICM acquisition while the outsourced platform model is keeping the cost base relatively flat so margins and profits are rising. MMX ended the year with $6.6m net cash and will revisit the intended maiden dividend in September, after the pandemic subsides. Given its automated business model and the switch of business and leisure online, this global issue may well be beneficial to MMX. However, with the current level of uncertainty in the global economy, we place forecasts Under Review.
Minds + Machines (MMX): Corp Strong H2 underpins forecasts and maiden dividend | Quixant (QXT): Corp Market weakness impacts H2 and cautions on FY 2020 | Tremor (TRMR): Corp Reassuring trading update after a transformational year
Companies: MMX QXT TRMR
Kingswood Holdings (KWG): Corp Rapid growth strategy well underway | Minds + Machines (MMX): Corp Legacy onerous contract settled as expected | NAHL (NAH): Corp PI marginally ahead, Property behind
Companies: Minds + Machines Group Limited (MMX:LON)NAHL Group Plc (NAH:LON)
Facebook Inc's ambitious efforts to establish a global digital currency called Libra suffered severe setbacks on Friday, as major payment companies including Mastercard and Visa Inc quit the group behind the project. The latest exodus leaves the Libra Association without any remaining major payments companies as members, meaning it can no longer count on a global player to help consumers turn their currency into Libra and facilitate transactions. Uber is buying a majority ownership stake of Cornershop, an online grocery delivery business serving Latin America in the latest step to diversify its revenue stream. The deal is expected to close in early 2020, according to a press release, with the current leadership at Cornershop continuing to lead the business and reporting to a board with majority Uber representation. Cornershop currently operates in Chile, Mexico, Peru and Toronto, according to the release. SoftBank CEO Masayoshi Son is considering changing his Vision Fund investment strategy to concentrate on companies with clearer pathways to profitability and public offerings, according to people familiar with the matter. Son plans to slow the pace of investment for Vision Fund 2 compared with his first $100 billion Vision Fund, which has deployed about $80 billion in less than three years.
Companies: TRAK ARB CPX MMX QTX SEE TECH TEK TCM TRCS TRCS
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Oxford University and AstraZeneca announced the first interim analysis from the Phase III study of its COVID-19 vaccine candidate, which was found to be 70% effective in preventing COVID-19. This follows similar announcements from Moderna, and Pfizer/BioNTech in the previous two weeks, and the caveats we mentioned at the time remain the same. While all of these results have been highly encouraging, we reiterate that they do not diminish the urgent need for COVID-19 treatments and testing, which will be required for years to come. We consider Synairgen, Avacta, genedrive, Omega Diagnostics and Open Orphan to offer good buying opportunities.
Companies: AVCT ODX SNG GDR ORPH
Appreciate is the UK's leading voucher, gift card, and e-code provider, working with brands from Iceland to Halfords to Boots. It sells its pre-paid products to corporates as well as directly to consumers. It also runs the UK's largest Christmas Savings scheme, having helped some 2.7m families put money aside for Christmas expenses over the years.
In Appreciate, we see a business that's undergone significant change and modernisation since 2018. Under its highly competent and dynamic management team it has transformed from a Christmas savings business that physically produced hampers, to a pure play financial services business with material growth prospects in the longer term.
Companies: Appreciate Group plc
Moderna announced the first interim analysis from the Phase III study of its COVID-19 vaccine candidate, which was found to be c.95% effective in preventing symptomatic COVID-19 disease. This follows a similar announcement from Pfizer/BioNTech last week, and the caveats we mentioned at that time remain the same. AstraZeneca-Oxford University are also due to announce initial results this month. While these results are highly encouraging, we reiterate that they do not diminish the urgent need for COVID-19 treatments and testing, which will still be required for years to come, and we outline why. We consider Synairgen, Avacta, genedrive, Omega Diagnostics and Open Orphan to offer good buying opportunities.
Strong trading has continued through October and we raise FY21 revs forecasts by 6% to £56m. With much of the upside from lower margin SMS, we leave profits forecasts unchanged. H2FY20 revenue growth was impacted by the pandemic and dropped to 9% after 2.5 years of 15% growth. Our new FY21 forecast imply a return to c. 18% growth as dotdigital makes a strong recovery and benefits from the shift to omnichannel online marketing driven by booming e-commerce. FY20 growth was strongly assisted by International revenues up 19% and Functionality up 16% and yet there is still plenty of room for growth here with the former just 31%/revs and the latter just 30%. We see a significant and extended growth runway leading to consistent progress for the company over the foreseeable future.
Companies: dotDigital Group plc
Braemar’s associate AqualisBraemar (AQUA-OSL) announced an acquisition and equity raise yesterday that was very well received by investors. The AQUA share price finished the day up +25%, meaning Braemar’s stake (which is on the balance sheet at £7m) is now worth £13.4m. This provides increased support to Braemar’s valuation and a significant potential source of funds if the stake were to be realised in the future. In the meantime, it provides a useful and increasing source of dividend income (prior to yesterday’s deal, we had forecast £0.6m dividend income p.a.) and we continue to highlight the strategic progress the new management team at Braemar is making and the very significant valuation gap to closest peer Clarkson (December 2021 P/E 22x).
Companies: BMS BSEAF 5K9
President Trump likes to project himself as a highly successful businessman, but surprisingly little is known about his true financial position. Various articles, including a 2016 in-depth analysis by The Wall Street Journal, have speculated about his income and asset base. All sorts of claims and counter-claims have been made about his wealth – by Trump himself, pitching his fortune at some $9bn, and by journalist Timothy O'Brien, suggesting that it is as “low” as $150m-$250m. It is doubtful whether we shall ever know the truth, but we can use Trump’s UK corporate filings to gain an insight into his businesses in Scotland.
Companies: AVO ARBB ARIX CLIG DNL FLTA ICGT PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
Thruvision has reported results for the six months to end-September 2020, showing a steady financial performance, with cost control enabling EBITDA break-even to be achieved in the half year, despite the challenges presented by the COVID-19 pandemic. H1 FY21 revenues were steady year-on-year at £4.7m, with gross margin being held at 48%. Net cash has increased from £5.0m at 30 September 2020 to £7.8m at 20 November, following payment from US Customs and Border Protection (CBP), which made a substantial £2.9m follow-on order in the half year. Near-term uncertainty means management are not in a position to provide full-year guidance for FY21, but they report a strengthening sales pipeline and their growing confidence in medium-term prospects is evidenced by investment in sales and pre-sales resource in both the US and Europe to support increased demand.
Companies: Thruvision Group PLC
Open Orphan PLC, a specialist pharmaceutical services company, and the world leader in the testing of vaccines and antivirals using human challenge studies, continues to make excellent progress towards maximising the capacity utilisation of its unique clinical facilities and services capabilities.
Companies: Open Orphan Plc
DOTD has reported prelims to the period ending June 2020, only a month after the strong October trading update, which had already resulted in a 6% revenue upgrade. On the back of FY20 outperformance we once again push revenue up FY21 expectations (+5%, to a total of +11% upgrade) with unchanged EBITDA as the group continues to invest in product development in anticipation of further revenue growth. Success in investment is evident in each of the three pillars for growth, with advances in territorial reach and product functionality manifesting in greater sales, both direct and pre-integrated into CRM and e-commerce platforms. With a heavyweight balance sheet including £25m cash, revenue upgrades with EBITDA maintained demonstrate an expansion in investment (opex and capex) to drive greater revenue growth into FY22 and beyond, particularly internationally and in functionality: DOTD is both succeeding now and investing in its future. Target 170p reiterated as the group creates a growth platform for future upgrades.
RBG Holdings has updated on significant transactions completed in the Group’s Convex and LionFish divisions since its last market update in mid-September. With the Group’s legal division – RBL – continuing to trade well, management now have considerably improved visibility on financial performance, and so reinstate guidance with an expected FY20E revenue range of £24m-£26m (FY19A: £23.7m). For FY21E we anticipate revenue in the range of £26m-£29m We take this opportunity to reinstate our forecasts for both FY20E and FY21E; revenues of £24.6m / £26.9m, adj EBITDA £6.8m / £8.9m, adj EPS 5.0p / 6.8p respectively. Our forecasts are cautiously positioned towards the bottom end of guidance, with scope for upgrades when discretionary litigation asset sales or Convex transactions complete. On our FY21E forecast of 6.8p adj EPS, a mid-teens multiple of 15x PER implies the shares could be worth 100p.
Companies: RBG Holdings Plc
Following on from the well-received interim results (29th September), Next Fifteen has provided a further Q3 trading update. The key headlines are that positive recent trading trends continue and, allied to strong cost control measures taken throughout the year, have resulted in profit expectations being raised for the current year. We have upgraded our estimates accordingly; marking the second material upgrade we have made since September. Initial concerns that the pandemic would materially disrupt client demand and spending patterns have proven largely overstated. The speed at which revenue has been recovered has been matched by impressive cost actions; not least around the fixed property overhead within the group, which has resulted in higher drop through rates than the group has experienced in the past. The key question looking forward is whether the legacy of the pandemic will be a lower fixed cost base for the group. Revenue mix effects are likely to continue to cloud the answer but our sense is that Next Fifteen has been successful in laying the foundations for structurally higher margins looking forward. Despite a strong recent run (+37% since late August), Next Fifteen still trades a material PE discount to its immediate peer group. Given the positive trading and margin momentum evidenced today, this looks harder to justify.
Companies: Next Fifteen Communications Group plc
WEY has delivered an impressive set of results this morning, significantly ahead YoY, meaningfully outpacing our expectations on the revenue, profit and EPS lines. With strong revenue growth of 38% feeding through to 103% EBITDA growth and adj. EPS up 100%, the inherent efficiency of the model, supported by rising student numbers, is manifest. Educating ‘3,000' students, WEY is larger than any UK secondary school. Moreover, while providing a collegiate, online education, WEY is a clear beneficiary both of long-running and fundamental drivers, and of the current Covid-focused environment. With the benefits of past investment effectively displayed in today's results, the company continues to do more to grow its platform, present and future, and has highlighted an ongoing commitment to investing in the business to provide further support for future profit acceleration. Our Fair Value assessment is 34p per share.
Companies: Wey Education PLC
Anexo has announced that private equity firm DBAY Advisors (DBAY) is to acquire a 29% stake in the Company at 150p per share (in two tranches) from Directors Alan Sellers and Samantha Moss and co-founder Valentina Slater. The purchase, at a 13% premium to last night’s closing share price, is a significant support for Anexo’s growth strategy, in our view. There is no change to the sellers’ roles within Anexo but, upon completion of the purchase, DBAY will have the right to appoint up to three Non-Executive Directors (NEDs). The update on trading focuses on the opportunity presented by competitors’ woes in the current operating environment for Anexo to expand its introducer network more quickly than previously envisaged. While this means cash absorption rather than generation in H2 20E, we note the resulting rapid increase in vehicles on the road. Aside from reflecting the cash position, we make no changes to estimates at present.
Companies: Anexo Group Plc
Today's news & views, plus announcements from Compass Group, CRH, Carnival, AO World, Pets at Home, Appreciate Group*, ImmuPharma and IG Design.
*We have also initiated coverage on Appreciate Group, with the note linked in this edition.
Timing is everything when it comes to innovation. Too early, and even ground-breaking technology can struggle to gain traction. Too late, and the opportunity might be lost. A tricky balance. However for Rosslyn Data Tech, we think this ‘battle-hardened’, cash-rich (Est Apr’21 net funds of £6.1m) & now profitable SaaS firm is ideally placed to benefit from strong secular demand for its cutting-edge & fully integrated Big Data, AI, spend analytics, SMDM (Supplier Master Data Management) & customs/duty handling applications.
Companies: Rosslyn Data Technologies PLC