Alongside another solid trading update (for the year ended 31st May), Hargreaves has announced the cessation of all coal mining operations by July 2020. This decision, which will incur an exceptional cost of £3.7m, is in line with Hargreaves’ long term strategic plan, leaving the Group purely focused on industrial and property services. As reported on 4th May, the Property business has been affected by the suspension of the construction industry in Scotland but, in all other respects, the underlying results for the year to 31st May will be in line with market expectations. Net debt at 31st May was £27.3m, including £13.7m of leasing debt, significantly lower than the £40.3m reported at 30th November and considerably lower than we had expected. We will reintroduce forecasts in due course but with most business areas performing well and construction activity expected to resume over the coming weeks in Scotland, we see a positive outlook for the Group in FY21 with potential for significant value creation.
Companies: Hargreaves Services
Hargreaves has announced the first major commercial property development contract on the 250 hectare Unity scheme. Unity, the mixed use development site at Hatfield, is a joint venture between Hargreaves Land and regional developer Waystone Limited. The JV has exchanged conditional contracts for the sale of a 32 hectare plot to a national retailer for the development of a 75,000 sq. metre national distribution centre and training facility. The sale will generate c.£25m of revenue for the JV on legal completion. The JV will only recognise profit at that point. It is conditional upon the grant of planning permission and construction of a new access road, which will provide direct access to junction 5 of the M18. Legal completion is currently expected around the middle of calendar 2021. Hargreaves has also provided a further update on the impact of COVID-19 on the Group, confirming that trading remains in line with expectations with the exception of the Property business, which has inevitably been impacted by the pausing of infrastructure work at the Blindwells site near Edinburgh.
Hargreaves has continued to trade in line with expectations since the interims on 29th January and no meaningful impact has been seen to date as a result of COVID-19. Nevertheless, in line with many other companies, the Board believes it is not possible to assess the potential impact on the Group’s trading performance. We therefore withdraw forecasts for now. The interim dividend has been deferred in order to conserve cash and further steps are being taken to minimise discretionary expenditure. Net bank debt stands at around £25m against total borrowing facilities of £50m and Hargreaves has very strong asset backing (net assets £130m).
A positive interim results statement confirms Hargreaves is trading well whilst preparing the ground for value creation over coming years. We are upgrading forecasts this morning to reflect ongoing activity at British Steel and see scope for outperformance in a number of areas, having intentionally pitched forecasts conservatively. HRMS, meanwhile, is growing in importance with the potential to deliver substantial shareholder value in the next few years, not least via an additional dividend from FY21.
Hargreaves’ German associate HRMS has acquired 94.9% of DK Recycling und Roheisen GmbH (DK) from DK Holdings GmbH for €1. The acquisition represents another important strategic step for HRMS as it adds complementary manufacturing process capability to its specialist commodity trading skills. As previously communicated in relation to the new Carbon Pulverisation Plant (CPP), the aim is to improve HRMS’ revenue visibility and moderate the volatility of earnings in the trading business, creating a demonstrably sustainable earnings stream. We make no changes to forecasts, given that DK is currently break even, but improvements in DK’s sales and procurement processes, as well as certain cost reduction measures, should increase HRMS’ and Hargreaves’ profits over time.
Adriatic Metals* (ADT AU) – Latest drilling intercects deepest mineralisation so far at Rupice | Altus Strategies* (ALS LN) – La Mancha strategic investment draws closer | Arc Minerals* (ARCM LN) – High-grade copper assays in step-out drilling extends scale of Chezeya East discovery | Cora Gold* (CORA LN) – Maiden Sanankoro resource lays the base for further upgrades | Europa Metals Limited (EUZ LN) – Completion of first drillhole of campaign at Toral zinc, lead, silver project in Spain | Hargreaves Services (HSP LN) – Liquidators sell Hemerdon tungsten mine in Devon to Tungsten West Ltd £2.8m | Wolf Minerals (WLFE LN) – LIQUIDATION | Resolute Mining (RSG LN) – Drilling results from Mako, Senegal
Companies: ALS ARCM CORA EUZ HSP WLFE RSG
Hargreaves has announced positive developments at the Hemerdon tungsten mine, which was operated by Hargreaves’ customer Wolf Minerals until Wolf ceased trading in October 2018. Since then, Hargreaves has been in discussions with the Official Receiver and other interested parties regarding the future of the mine, initially in order to protect Hargreaves’ role in the restoration of the site. Earlier this year, as these discussions continued, Hargreaves acquired various properties and an assignment of the minerals lease via wholly owned subsidiary Drakelands Restoration Ltd (DRL). Today, Hargreaves has announced the sale of DRL to a third party, Tungsten West Limited (TWL) for £2.8m in cash generating an exceptional profit on disposal of £2.4m. TWL intends to recommence tungsten mining in due course and has awarded Hargreaves a 10 year mining services contract. The contract comprises a fixed fee of £1m p.a. in addition to revenue for services provided when mining operations commence. Hargreaves will also continue to carry out maintenance services on site. In our view, this is an excellent outcome, crystallising a £2.4m exceptional profit, whilst reviving the opportunity for future tungsten production at Hemerdon and protecting Hargreaves’ longer term interest in the restoration of the site.
African Export-Import Bank a supranational financial institution whose purpose is to facilitate, promote and expand intra- and extra- African trade, of its potential intention to publish a registration document, the Bank hereby confirms its intention to proceed with an Initial Public Offering. The GDRs are expected to be admitted to the standard listing segment of the Official List of the FCA and to trading on the Main Market of the LSE. DNEG Limited intends to apply for admission of its Shares to the premium listing segment of the Official List of the FCA and to trading on the London Stock Exchange's main market for listed securities. The Offer will be comprised of new Shares to be issued by the Company (to raise expected gross proceeds of £150m). Admission is expected to take place in November 2019.
Companies: SAR REDD HSP KEFI PTR AVG SNX IHC BGO TERN
FY19 was undeniably a challenging year for Hargreaves. Nevertheless, good strategic progress has been made, laying the groundwork for a recovery in profitability. Current year forecasts are unchanged and, looking forward, we expect an increasing contribution from Hargreaves Land and German Associate HRMS, as well as ongoing progress within Industrial Services. Perhaps the most striking news in the statement is the proposed introduction of an additional dividend of approximately 12p per share from FY21, funded by HRMS profits as the Carbon Pulverisation Plant (CPP) comes on stream. This will take the dividend yield to c.9%. Combined with the elimination of net debt and a more stable backdrop, we expect this to underpin a significant share price recovery.
Hargreaves’ full year trading update contains no surprises, confirming that underlying trading for the year to May ’19 has been in line with expectations. It has been a turbulent year for Hargreaves, given the previously reported customer insolvencies (Wolf Minerals and British Steel), but it has also been a year of significant progress in terms of debt reduction (from £31m to £18m) and first conditional plot sales at key residential development site, Blindwells, near Edinburgh. We expect Hargreaves to continue to unlock value from its land portfolio over coming periods, which we believe has the potential to underpin a material recovery in the share price following recent pronounced weakness.
Hargreaves has announced a positive development at its Blindwells site near Edinburgh. It has agreed the conditional sale of 10.75 acres of serviced residential development land to Bellway. The land is valued at £9m and legal completion is conditional upon planning consent. This is the second land sale at Blindwells and provides further positive confirmation of the value to be unlocked from the site. Remediation and sale of land is a key part of the Group’s strategy. With momentum building, we believe Hargreaves is well placed to continue to unlock value from its land portfolio.
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. £28m raised. Half primary, half shareholder sell down expected 29 May 2019. Mkt cap £72.6m. Issue price 151p.
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
Companies: LSAI HSP VOG FEVR IQE TSI CNN CASP GMS GPH
Noting recent media commentary regarding the uncertain future of British Steel, Hargreaves has this morning set out the Group’s potential exposure as a supplier to the business. Hargreaves has provided materials handling and other services to British Steel’s operations for almost 8 years, employing approximately 170 people in those operations. In the event that British Steel is unable to continue trading, Hargreaves has identified a possible total exceptional charge of c.£9m, resulting from a combination of WIP, trade receivables and other asset write downs, as well as related redundancy/employment costs. We estimate the cash impact of this would be c.£7.5m, most of which would be felt in FY20. Additionally, if British Steel ceases trading, Hargreaves’ revenue in FY20 could reduce by up to £11m and PBT by £1.3m. It goes without saying that this will ultimately be determined by British Steel’s position and ongoing viability. A further update will be provided as appropriate. Hargreaves’ year end trading update will follow on 5th June.
Companies: GTC TCM MTFB BST CDM HSP INL DOTD C21 GGP
Hargreaves’ interims highlight good underlying progress and the signing of the first conditional contract with a housebuilder for a plot at Blindwells. This is an important and welcome development at a site that should be a strong contributor for many years. Legal completion is anticipated by the summer, subject to detailed planning. Underlying operating profit increased by 32%, driven by Industrial Services in the UK and the outlook for the balance of the year is positive. The shares are trading at a 30% discount to book value, in our view significantly undervaluing Hargreaves’ prospects.
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A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
Successful businesses ‘never let a crisis go to waste’. Indeed since an otherwise strong Q1’20 was interrupted by COVID-19, Mpac has further streamlined operations, accelerated R&D and launched new remote equipment diagnostic/acceptance testing, virtual reality & other ‘Industry 4.0’ services.
RBG Holdings pre-close trading update to June 30th confirms a strong H1 performance for RBL, the Group’s law firm, with revenues up 36% like-for-like to c.£11.4m YoY. Convex, the CF boutique, understandably has faced COVID headwinds, with most of its H1 pipeline deferred indefinitely, whilst Litigation Finance continues to grow its pipeline and financing commitments on a longer term view. Due to continued uncertainty from COVID we withdraw our forecasts this morning, with a view to reinstating once more clarity on H1 outturn and momentum into H2 is available.
Companies: Rosenblatt Group
Resilient Trading Update
Companies: Macfarlane Group
The year-end trading update was encouraging, with expected results showing good YoY growth, modestly below but close to our earlier expectations. Trading has been resilient, particularly in safety critical areas such as its nuclear exposure, with some weakness being seen in oil & gas, where there is limited exposure. Two new contract wins in the nuclear sector have also been announced today. FY 2021 forecasts remain under review. With strong finances, the company is well positioned to maximise M&A opportunities, through its PIE strategy.
Revenue for FY 2020 is ahead of expectation and we adjust our forecast accordingly. Sales are growing at an impressive rate; >50% pa despite COVID-19 and the virus had no effect on the company’s ability to deliver projects with 23 new customers live in Q4. We note COVID concerns are causing some delay on contract decisions, and sales would have been even stronger but for that. These delays do lead to caution on FY 2021, and we ease back our forecasts on more prudent management guidance. However, with the recent £5m equity placing, PCIP has plenty of cash to continue to invest in rolling out its exciting secure payments proposition. This cloud-based solution can be deployed remotely and assists call centres in moving agents to WFH and still collect payments securely. The outlook remains very bright with continued rapid growth expected.
Companies: PCI Pal
The group has issued a trading update for the year ended 31 May 2020 highlighting an adjusted EBITDA of at least £11.5m which is close to the group’s original expectation, despite widespread disruption to operations in the second half. The statement notes ample liquidity headroom in excess of £10m with net debt (excluding IFRS 16 lease liabilities) reducing in H2 to £7.5m as planned. The Group’s order book and prospect pipeline remains strong overall and the update is accompanied by the announcement of two meaningful contract wins in the nuclear sector. A further significant positive development is the grant of outline planning permission for the conversion of the group’s 7 acre Hayward Tyler site in Luton into residential housing for up to 1000 dwellings. Whilst financial guidance for FY2021E remains withdrawn at this point due to on-going uncertainties around the impact of COVID-19, we see the group continuing to demonstrate good resilience, operating at close to normal levels, supported by exposure to multiple markets and a strong customer base that includes governments and their agents.
Caledonia's Q2 2020 production from its 64% owned Blanket mine in Zimbabwe was 13.5koz gold. This was an increase over the same period last year of 6.2%, leaving Caledonia with a first half production of 27.7koz – well ahead of this time last year (24.7koz) and on track to meet its 2020 full year guidance of 53-56koz (WHI etc. 55.5koz).
Spectra Systems Corporation is a provider of machine-readable high-speed banknote authentication, brand protection technologies and gaming security software. The company has announced that it has executed a new contract with a major world central bank to ‘enhance existing authentication sensors to detect a unique type of counterfeit notes'.
Companies: Spectra Systems Caledonia Mining Corporation Plc Com Shs Npv
Marlowe delivered a strong performance during FY20A, with +7% organic revenue growth, and improved Adj EBITDA margins. Integration of acquisitions is progressing well, and with receipt of c£40m gross proceeds, Marlowe is well placed to accelerate the consolidation of its markets. We leave our forecasts unchanged and reaffirm our Buy rating.
Jubilee today takes us through its H1 2020 numbers, which, importantly, cover the critical COVID-19 initial lockdown period in South Africa. The numbers continue to show growth and progress, with headline H1 2020 operational earnings up 54% to GBP 12.8 million – the sixth consecutive, six-monthly period of double-digit growth. The cash position increased to £10.8m despite settling the final payment of £1.4m for the acquisition of additional PGM and chrome rights as well as settling historical debt of £2.5m, all while commissioning the Zambian Sable Refinery.
Following the appointment two months ago of new CEO Rob Richards, VDTK's newsflow has been encouraging in recent weeks, and we view this morning's announcement as a further affirmation of the company's renewable energy solution. Today's RNS highlighting a contract to supply ultra lightweight, flexible solar panels to Black Tulip Minerals SA, of Peru, is, at over €200,000, the latest in a string of recent positive announcements, while also taking the company into a completely new sector which it had announced as a target area.
Image Scan is a specialist in the field of X-ray imaging for the security and industrial inspection markets. The company has announced, as part of its organic growth strategy, a new partnership agreement with a major security technology company that will lead to the launch of a new range of security X-ray screening systems for the international market. Competitively priced, and leveraging Image Scan's IP and direct and indirect international channel partners, the new system will be a high performance, competitive conveyor X-ray machine, suitable for security checkpoints in government and commercial buildings around the world. Importantly, these systems will also allow the company to increase its recurring service and support revenue.
Companies: IGE JLP VDTK
ECSC Group plc* (ECSC.L, 71.5p/£7.2m) | Trackwise Designs plc (TWD.L, 90.5p/£20.0m) | Transense Technologies plc (TRT.L, 59.5p/£9.7m)
Companies: ECSC Group Trackwise Designs
Scotland’s only quoted housebuilder recorded its highest ever weekly number of reservations following the reopening of its sales offices after the prolonged construction lockdown north of the border. As a result, Q1 2021 sales are expected to be “significantly higher” Y/Y, after the inevitable disruption caused by Covid. In this morning’s FY 2020 trading update, the Group also highlighted the widely reported trend across the housing market to larger homes with gardens, Springfield’s ‘sweet spot’ in our view.
Companies: Springfield Properties
Updating forecasts following 2019 results
Companies: Trackwise Designs
Strong H1 results, prospects good, investing in the future WEY's H1 results this morning reflect both the positive effect of proactive actions taken by the company last year and strong demand from the market at large. Sales up 43% YoY and PBTA of
£0.3m (2019: £0.1m) reflect increases across both sides of WEY's business and are accompanied by margin uplift (62% gross margin as against 56% last year). The company is a well-established leading supplier of online education, having built a 15-year track record of excellence in its sphere. Covering the half year ending on February 29th, the period of the results precedes the lockdown; however this morning's statement lays out the heightened demand for WEY's product which is an inevitable result of the new focus on remote working and online learning. WEY is plainly extremely well-placed to grow in the current environment, and it has made significant investments in educational quality and in marketing – in both cases including senior and wellrespected hires. The Covid-19 crisis has generated a new appreciation of online education from parents, pupils and educational authorities, who increasingly see this as a real, practical and highly effective substitute for traditional education, adding to the already strong demand across
WEY's brands. Our 30p-plus fair value assessment rests on the inherent opportunities and is also supported by the strong balance sheet (£6.6m of net cash, +£1.6m in the period).
Companies: Wey Education
Tipping point: Proven, revenue generating, now scaling