Empresaria Group plc (EMR.L, 90p/£44.1m) Initiation of share buy backs (13.12.17) | Parity Group plc (PTY.L, 9.375p/£9.6m) Full year trading update to 31.12.17 (13.12.17) | Robert Walters plc (RWA.L, 592p/£446m) Trading update to 30.11.17 (12.12.17) | Servoca plc (SVCA.L, 23p/£28.3m) Preliminary results to 30.09.17 (12.12.17) | SThree plc (STHR.L, 368p/£479m) Full year trading update to 30.11.17 (15.12.17)
Companies: EMR PTY RWA STEM SVCA
SThree plc (STHR.L,363p/£472m) Proposed relocation of UK Support Functions (01.11.17) | Servoca plc (SVCA.L,23p/£28.3m) Trading update and appointment of new CFO (03.11.17) | World Careers Network plc (WOR.L, 227p/£17.3m) Full year results to 31 July 2017 (02.11.17)
Companies: STEM OLEE SVCA
Clean Invest Africa—Introduction due around 14 Nov. Vehicle established to identify investment opportunities and acquisitions in renewable and clean energy projects/companies or alternative technologies that are used in a socially and environmentally responsible way that will aid the development of the African continent,
Boku - Independent direct carrier billing company. Revenues were up 21% to US$10.2 million in HYJun17 . Q32017, revenues grew to US$6.5m, up by 44% . The Company also saw continued growth across all of its key metrics: user numbers, total payment and a positive adjusted EBITDA for the month of September 2017. Due 20 Nov. Offer TBA.
Ten Lifestyle Hldgs. Technology-enabled lifestyle and travel platform providing trusted concierge services to the world's wealthy. Net revenue increased from £20 million in the year ended 31 August 2015 to £33 million in the year ended 31 August 2017, a compound annual growth rate of 29%. Offer and date TBA.
AfriTin Mining—Demerger from Bushveld Minerals (BMN.L). Offer TBA. Due 6 Nov. The Uis Tin project (Namibia) is considered the flagship tin asset within the portfolio, as this was once the largest open cast tine mine of its kind in the world .
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.
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.
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 mid November.
Companies: NAR OTC MPL HAT AST CSSG TOT SVCA MAGP URU
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Since our first quarterly at the end of 2015, 12 of the 59 companies we included in our valuation tables have been bid for. Given those tables were simply designed to show the range of companies present within the sector, not a hit-list of undervalued opportunities, the fact that 20% of them have been taken over is worth looking at in more detail. At a time when warnings and share price collapses from the likes of Interserve, Carillion, MITIE, DX and Capita and Serco have dominated newsflow, it should be remembered that the sector is broad and highly varied both in terms of business model and performance. If the troubles of a minority of the sector drag down wider valuations then the evidence is that there is an army of potential bidders (reinforced by the weakness of sterling) ready to take advantage.
Companies: FOUR DSCV BOOT CLL CMS CNCT FCRM LOK PPH RNWH STAF UTW WATR VANL WYG SVCA
In light of the UK election, we highlight our favoured overseas earners, operators in defensive markets and those capable of taking market share, but our main topic is the structure of the UK employment market. The UK has the lowest unemployment rate since 1975 at 4.6%, and there are, consequently, fewer and fewer candidates to fill vacancies. This suggests recruitment companies may struggle to grow, but there are structural changes in the UK labour force that offer growth opportunities. Temporary labour continues to expand relative to the point in the economic cycle, its importance accelerating since 2008, and part-time labour has grown at twice the rate of full-time labour throughout both the last cycle and over the long term. There are, of course, specialist temporary recruiters, but the part-time market appears relatively untapped (at least by the quoted companies) despite being c.5x the size of the temporary segment in terms of numbers.
Companies: FOUR DSCV BOOT CLL CMS CNCT FCRM LOK PPH RNWH STAF UTW WATR SVCA
Servoca has reported H1 sales up 19% and EPS up 29%. This has been driven by a strong performance across both outsourcing and recruitment divisions. Different parts of the group have come to the fore in H1. The group continues to achieve substantial growth and is benefitting from the diversification of the business mix. Each one of the markets in which the group operates has seen revenues increased over the same period last year. Servoca enters H2 with positive momentum benefiting from healthy growth opportunities, new contract wins, leaving the group well placed to deliver forecast expectations again. We make no changes to our full-year PBT/EPS forecasts given the significance of the pivotal September period for the group’s Education recruitment businesses.
Servoca* (SVCA): Well placed to deliver the full year (CORP) | Europa Oil & Gas* (EOG): Open Offer result (CORP)
Companies: Europa Oil & Gas Servoca
Shearwater Group—Schedule 1. Acquiring SecureEnvoy for £20m in cash and shares—a provider of multifactor authentication enterprise software solutions. RTO under the AIM rules.
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.
Global Ports Holding—Intention to float on Standard List of the Main Market. International cruise ports operator. Seeking $250m raise including $75m primary offer.
Dorcaster—Schedule One Update. Admission now expected on AIM 3 May. RTO of Escape Hunt raising £14m at 135p.
Verditek— Intention to float on AIM. On Admission, the Company's subsidiaries will be involved in advanced solar photovoltaic, filtration and absorption technologies specialising in providing environmental services. Raising £3.5m. Admission in May.
Tufton Oceanic Assets– Offer extended to 9 May on specialist funds segment of Main Market to enable investors to complete further due diligence.
Companies: PEG MARL SNX NUOG ZOL CSSG GEO CAM TSI SVCA
CareTech (CTH): Half-year trading on track to deliver FY (BUY) | Synairgen* (SNG): AZD9412 (inhaled interferon beta) rights returned to Synairgen (CORP) | Servoca* (SVC): Resilient performance, confident on H2 (CORP) | Vipera* (VIP): Large contract underpins growth expectations (CORP) | Europa Oil & Gas* (EOG): FEL 2/13 – new prospectivity identified (CORP)
Companies: CTH SNG VIP EOG SVCA
We have run our new quantitative Slide Rule over the Support Services sector. Of the c.500 stocks we have ranked on a Quality, Value, Growth and Momentum basis in the small to mid-cap space, 21 Support Services stocks appear in the top 100. Fulcrum leads the pack, ranked no. 6 out of 500 (and not coincidentally our top pick for the year), closely followed by Brainjuicer (no.7), Sanne (no.8), Learning Technologies (no. 12) and Next Fifteen (no.16). These stocks have high ROCE on both an EBIT and cash basis, strong growth prospects, earnings and share price momentum and valuations that, in this context, remain attractive. At the other end of the spectrum, HSS, Management Consulting, Serco, Mitie and Lakehouse appear towards the bottom of the rankings. Strong returns could, of course, be made if any of these turn their fortunes around, and management has been changed at Lakehouse, Serco and Mitie.
Companies: FOUR DSCV CLL CMS CNCT FCRM LOK PPH RNWH STAF UTW WATR SVCA
Creo Medical group—Schedule 1 update.. £20m raise. Expected market cap £61.2m, admission expected 9 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
Companies: ACP PCF DALR SCE SNX BNN VANL PRES SVCA
Full-year results showed double-digit YoY growth and were in line with expectations. The Healthcare operations were the main driving force behind the group’s growth in the mid-teens, with the group’s diversified business mix helping. We introduce new 2017 forecasts that point to a current year P/E of 8.5x, which we consider attractive.
Servoca*: Acquisition (CORP) | CityFibre*: Demonstrating network benefits (CORP) | Quartix*: H1 in line for FY expectations (CORP) | Alumasc: Disposal and trading update (BUY)
Companies: CITY QTX ALU SVCA
Servoca*: Interim results – strong growth seen (CORP) | Trifast^: FY results slightly above expectations (BUY) | ScS: Upgrade to forecasts post strong May (BUY)
Companies: TRI SCS SVCA
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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
The announcement that Avon Rubber is to sell milkrite | InterPuls, its dairy division, to DeLaval Holding for £180m gross proceeds is strategically logical and financially compelling. The fit of dairy and defence has always looked slightly anomalous and the terms of the deal show that the opportunity to augment dairy through value-accretive deals is difficult given the scale of the business and opportunities. Management must now recycle the cash balances that will be created into Avon Protection, where there are a greater number of potential investments.
Companies: Avon Rubber
Brick and concrete products manufacturer Forterra has raised c. £55m gross in an equity placing in order to maintain its strong balance sheet and support the Group's continued investment programme. It was accompanied by, in our view, a reassuring trading statement which we believe is backed by yesterday’s brick industry data and comments from housebuilders, which suggest that demand has been recovering from its lockdown lows, before the PM’s promises to “build, build, build” housing and infrastructure.
Resilient Trading Update
Companies: Macfarlane Group
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.
The Norcros operating companies largely performed relatively well in challenging market conditions (in both the UK and South Africa) in FY20 though year end trading was affected by COVID-19 lockdowns, as flagged previously. The group’s financial position appears robust following management actions (including foregoing an FY20 final dividend) and well-placed to both contend with weaker near-term markets and the pursuit of market share gains from a position of relative competitive strength. Our estimates remain suspended at this time.
As flagged in the April trading update, Solid State’s FY20 results showed a 19.7% growth in revenues and 34.3% jump in adjusted profit before tax. Demand from the medical and food retail sectors is strong but weakness in the oil & gas and commercial aviation sectors related to the coronavirus pandemic is likely to result in lower year-on-year sales during Q2 and early Q321. While management sees potential for a Q4 recovery, the current range of FY21 profit outcomes is wide, so it is not providing guidance.
Companies: Solid State
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.
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.
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.
Smart Metering Systems (SMS) has announced that it has emerged from the recent Covid-19 uncertainty in a strong financial position and taken the decision to return funds received from the Government under the Coronavirus Jobs Retention Scheme. Current net cash of £48m (not including furlough grant) is ahead of previous expectations and underlying profitability for the year to 31 December 2020 is expected to be in line with expectations prior to lockdown, despite the obvious interruptions to meter installation activity that it has caused. During lockdown essential emergency field engineering work continued and SMS completed the sale of a proportion of its meter asset portfolio for a gross cash consideration of £291m (£282m net). In March 2020, SMS announced that it would rebase its dividend to 25p (prospective yield 4.3%), index linked to FY24 and commencing payments in October 2020, quarterly thereafter. A phased resumption to meter installation activity commenced on 1 June 2020.
Companies: Smart Metering Systems
Successful K3 Capital placing to raise £30.45m (gross) at 150p to fund the £9.3m acquisition of Randd UK Ltd, an R&D tax credit specialist with an LTM EBITDA of c.£2.0m, with a margin of c.50% and revenues typically contracted for 5 tax years with many recurring thereafter, followed by future potential deals in SME exposed markets. K3 has established itself as an innovative company that is able to effectively gather, generate and mine large quantities of data in order to scale up M&A services to SMEs. Transferring these lead generation capabilities to adjacent SME markets can allow rapid growth from proven models, at scale.
Companies: K3 Capital Group
Salt Lake Potash has received commitments to raise A$15m through the placement of unsecured zero-coupon Convertible Notes to Equatorial Resources (ASX:EQX) and institutional investors. The Convertible Notes have been structured as deferred equity with zero coupon and mandatory conversion into equity at the lower of 45c/share or a 5% discount to any future equity raising of at least A$10m. These funds will enable Salt Lake Potash to continue to develop Lake Way to the project schedule through July as they finalise debt financing. Plant practical completion and first SOP sales remain on schedule for the March 2021 quarter. The debt financing process in its final stages and with an agreement expected to be executed within weeks.
Companies: Salt Lake Potash
The covid-19 pandemic has had a devastating effect on the share price of property companies, with 31% wiped off the value of their total market capitalisation during the first quarter of 2020.
Companies: AEWU CREI CSH BOOT INL HLCL THRL SUPR RESI RGL DIGS GR1T SOHO PHP BOXE ASLI UTG AGR UAI BLND UANC CAL SHED CWD WHR EPIC WKP GRI YEW HMSO PCA INTU NRR