23rd April 2013
This week: IDEA generates strong growth, FML on the front foot and SORB preserves inner Mongolian plan
Jim Mellon will be providing the headline speech at a Biotech Conference, Understanding the Biotech Revolution, to be held in London on Monday 13th May 2013. To register, conference website is at: www.biotechrevolution.co.uk
The inaugural Small Cap Awards, supported by the London Stock Exchange and ISDX, is taking place on 24 April 2013 at BAFTA, Piccadilly. For details please visit http://www.smallcapawards.com
The bull run that saw the FTSE 100 cross 6,500 in the middle of March failed to reignite last week as mixed corporate results continued to remind investors of the economic cycle. The FTSE 100 lost 95 points to reach 6,285, and the AIM All Share closed at 705, down 23 points. The deflation in commodities is starting to impact even the large diversified industrials such as Caterpillar, with earnings disappointment in the technology space (IBM, Spirent, etc) further underlining the precarious state of the world economy. This week’s busy earnings calendar is bound to throw up more surprises but the rotation into defensive stocks should underpin the main indices. The main talking point in the economic calendar is likely to be release of GDP figures on both sides of the Atlantic (UK figures on Thursday and US on Friday).
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Disclaimer- This document, which does not constitute research, has been issued by Hybridan LLP for information purposes only- please refer to the disclaimer in full below.
RGO Contract wins, AGTA Issue of equity, BZT GM Inquorate, COG AIM listing, CON Fundraise, ECK Trading update, FRX Project Update, FTC Interim management statement, FML Operational and Financial update, IDEA Contract Wins and Trading Update, IKA New European customer, LRL Quarterly Report, LID Preliminary results, NETD Final results, ODX US Patent, OMIP AIM listing and first acquisition post listing, RLD New CFO, SAR Co development agreement, ZZZ Financial update, STI Afar JV update, SORB AGM Statement, SUMM new data at conference and preliminary results, UBC Trading update, UBI General Electric contract
2ergo Group (LON:RGO 9.75p/£6.29m)
2ergo Group, the owner and international provider of patented contactless mobile technology, has announced contract wins for its podifi contactless mobile loyalty and couponing system. New client wins include a Premier League football club which is trialling the podifi platform for the remainder of this season ahead of a full roll out for the start of the 2013/14 season. The club-branded digital wallet will allow supporters to download mobile coupons for use within the stadium, collect loyalty points, place off-line bets and view club related content. The podifi technology will enable the club to collect data within its stadium, corporate suites and in-house gaming facilities whilst offering fans state-of-the-art mobile services. Compass Group (LON:CPG 816.5p/£14.9bn), the leading food service solutions provider, is also installing podifi technology in several of its catering sites such as Bournemouth University, Deeside College, Compass Group Training Centre Heathrow and Watford General Hospital. Podifi will enable these sites to generate footfall and build customer loyalty by rapidly creating, launching and managing mobile coupon based offers and loyalty promotions.
Agriterra (LON:AGTA 2.46p/£26.12m)
Agriterra, the pan-African agricultural company, announces that pursuant to the agreement announced on 17 January 2013 regarding the acquisition of a further 2,500 hectares of farmland to expand the Company’s cattle ranching operations in Mozambique, the Company is issuing 2.1m new ordinary shares as partial consideration. The acquisition is in line with the Company’s strategy to expand its beef herd, which currently stands at 6,213 across the 2,350 hectare Mavonde Stud Ranch and the 15,000 hectare Dombe Ranch. The newly acquired farm, known as the Irmaos Ranch, will further diversify the Company’s agricultural product range as it comprises a producing banana plantation and macadamia orchard, in addition to the land capacity for cattle. The Irmaos Ranch is located approximately 25km north of the Company’s Mavonde Stud Ranch and is irrigated by the bordering Nyadzonya River. Following admission, the consideration shares will represent 0.2 per cent of the enlarged issued ordinary share capital, which will then comprise 1,062m shares.
Bezant Resources (LON:BZT 27.25p / £22.60m)
Bezant, the gold and copper exploration and development company operating in the Philippines and Argentina, announced that the General Meeting convened on 9 April 2013 has subsequently been discovered to be inquorate, due to there being too few shareholders eligible to vote in attendance, and therefore the meeting was void. Accordingly, the Company has posted a further circular, incorporating the formal notice of a new general meeting, to seek the approval of Shareholders for the proposed cancellation of the Company’s two classes of deferred shares and part of its share premium account and the proposed return of capital of, in aggregate, approximately £5.2m (8p per ordinary share) to shareholders, other than Gold Fields.
Cambridge Cognition Holdings (LON:COG 86p/£14.52m)
Cambridge Cognition Holdings, which specialises in computerised neuropsychological tests including those enabling the early detection of dementia, announced its listing last week on AIM. On Admission, Cambridge Cognition raised approximately £5.0m (before expenses) and certain existing shareholders have realised a further £1.4m through the sale of existing ordinary shares. The placing price was 70 pence per ordinary share, and has risen to 86 pence per share since then. Since the AIM listing, Cambridge Cognition Holdings separately announced the NHS Commissioning Board specifications for the four new directed enhanced services (DES) that will be offered to GP practices in 2013/14, which prioritises, amongst other conditions, the timely diagnosis and support for people with dementia. The DES have been designed by the NHS Commission Board to reward GP practices for undertaking a proactive approach to the timely assessment of patients who may be at risk of dementia. GP practices are being invited to sign up to the DES before the end of June 2013, enabling them to qualify for funds under the Quality and Outcomes Framework, and according to the DES, an average-sized GP practice could receive an upfront payment of £2,587 to set up the service and will then be eligible to share in a national pool of £21m, depending on the number of assessments they complete.
Connemara Mining (LON:CON 6.12p/£1.64m)
Connemara, the exploration company with principal assets in Ireland in base metal zinc/lead exploration licences as well as shear hosted gold exploration licences, has raised £315,000 and settled liabilities of £136,500 through the issue of 9m ordinary shares at a price of 5p. The net proceeds will fund further work on the Company’s portfolio of exploration projects in Ireland and pay on-going corporate costs. As part of this fundraise, the Company’s directors Dr John Teeling and Mr James Finn, have each agreed that a proportion of accrued unpaid fees owed to them by Connemara will be settled via the issue of new shares at the issue price.
Eckoh (LON:ECK 14.75p/£30.83m)
Eckoh, a UK provider of customer service solutions using speech recognition, provided a trading update for the 12 months ended 31 March 2013, where it stated that it has seen a strong financial performance over the second half of the financial year and continues to experience significant demand for its products, with results therefore in line with market expectations. The Company’s client base increased from 39 to 50, whilst the balance sheet benefitted from a cash balance of £8.5m as at 31 March 2013 (£6.4m at 31 March 2012). The board expects to recommend a final dividend of 0.25p, an increase of 25 per cent on the previous year.
Ferrex (LON:FRX 1.38p/£10.58m)
Ferrex, the iron ore and manganese development company focused in Africa, provided a positive update on activities at its 309 sq km Mebaga DSO Iron Ore Project in northern Gabon. A drill contract has been signed with Geoserve whereby two in-country rigs are to be mobilised on site immediately to test the main 1.8km zone of iron ore mineralisation at the Mebaga deposit to depths of 250m (exploration target of 20Mt @ 60 per cent iron(Fe)). The Company is targeting a maiden JORC resource in H2 2013, with the initial drilling campaign expected to take two to three months. Ferrex’s Managing Director Mr. Dave Reeves said: “We have been highly active since acquiring the Mebaga DSO iron project in January 2013 having already announced the presence of DSO mineralisation with values up to 68 per cent Fe as confirmed by Niton XRF results. The signing of the 3,000m drill contract is another significant step which will allow us to move this project forward and test the near term DSO resource potential. The camp construction is now complete and, having also employed an experienced local geologist to manage the project, we are well on the way to establishing an in-country framework to support this project as we develop it towards the Scoping Study stage later this year, with a view to future production.”
Filtronic (LON:FTC 68p/£65.96m)
Filtronic, the designer and manufacturer of microwave electronics products for the wireless telecoms infrastructure market, provided an interim management statement for the period from 1 December 2012, with good progress being achieved with the LTE/4G mitigation filters, which has helped drive fourth quarter performance. With sales of these filters having commenced in March, the Company anticipates that current market forecasts for Wireless turnover and profit will be exceeded. In terms of the broadband business FY13 revenues and profits are expected to be in line with market expectations despite its delayed transition to production volumes on long term customer programmes from Q4 2013 to Q1 2014 of the next financial year. Overall, revenues are expected to be £38.5m, which together with profits are expected to exceed market expectations.
Frontier Mining (LON:FML 3p/£55.83m)
Frontier Mining, the copper producer operating in Kazakhstan, has reported that further to Sberbank Kazakhstan approving a loan to finance production expansion at the Benkala SX-EW plant, the Company has now received credit committee approval from Sberbank head office in Moscow. The signed agreement provides KazCopper LLP (Frontier’s wholly owned subsidiary) with a loan and credit facility to the value of US$17.9m. The new facility is for five years and comprises two components: a US$6m increase in the Capital Investment Loan at an interest rate of 9 per cent and a US$11.9m increase in the Working Capital Credit Facility at an interest rate of 8.5 per cent. The additional loan brings the total amount of existing Sberbank facilities to US$52.9m.The Company has also announced the recommencement of operations at its flagship Benkala Copper Project and anticipates shipping of cathodes to begin in the first week of June.
Ideagen (LON:IDEA 20.88p/£25.41m)
Ideagen, a leading supplier of Compliance based Information Management solutions, announced that it has signed in excess of £500k of new contracts within the Aerospace and Defence Sector. The contracts are for the supply and support of Ideagen’s Workbench compliance software to the Ministry of Defence and two global tier-1 suppliers to control critical information across multiple operational sites and across multiple programmes including Typhoon and E-3D sentry. Additionally, the Company also announced that Raytheon UK has recently gone live with Workbench to provide a single repository and portal for its quality and regulatory information. The market for their products within highly regulated industries has remained strong throughout the year and the Company reported that it continues to trade in line with market expectations and looks forward to providing a further update in May. The Company expects to report for the twelve months to April 2013 revenue and adjusted EBITDA growth of approximately 50 per cent over the prior year.
Ilika (LON:IKA 30.5p/£13.97m)
Ilika, the advanced cleantech materials discovery company, has signed a contract with a major European manufacturer of speciality materials, for the optimisation of its proprietary lithium ion battery materials. This contract is one of the three contracts referenced in Ilika’s trading update released on the 16 April as being unexpectedly delayed. However, due to the timing of the award of this contract, the majority of the revenue associated with the work will be recognised during the Company’s next financial year, commencing 1 May 2013.
Leyshon Resources (LON:LRL 15.5p/£38.67m)
Leyshon Resources provided an update on the progress made during the first quarter of 2013. The Company, through its wholly owned subsidiary Pacific Asia Petroleum Limited (PAPL), has commenced an accelerated exploration and appraisal programme for its Zijinshan Gas Project on the eastern fringe of the prolific Ordos Gas Basin in Central China. PAPL has a 100 per cent interest in the exploration phase of the Production Sharing Contract (PSC) with China National Petroleum Corporation (CNPC), which has the right to back in to a 40 per cent interest at the development stage. The main objective of the 2013 work programme, with a total estimated cost of up to US$20m, is to define a resource sufficient to delineate a third party independent resource by the end of 2013 and to submit a Chinese Reserve Report (CRR) by mid 2014. The main components of the programme comprise drilling up to six wells, conducting eight flow tests and acquiring 300 kilometres of 2D seismic data. Three of the wells are committed and the additional three are subject to results and PSC partner agreement. It should be noted that drilling of these additional wells will be dependent on favourable results from both the testing and seismic programmes.
LiDCO Group (LON:LID 11.75p/£22.77m)
LiDCO Group, the cardiovascular monitoring company, this morning announced preliminary results for the 12 months to 31 January 2012. Revenues increased slightly to £7.21m from £7.12m in 2011/2012, and pretax losses during the period widened to £0.26m (2011/2012: loss of £0.045m). Operational highlights during the period included the re-establishment of a direct sales operation in the US and the purchase of a US monitor installed base, and the registration, reimbursement and market expansion into Japan with the appointment of Nihon Kohden. The Company also saw the development, CE marking and commercial launch in the EU of new LiDCOrapid (v2) with Unity Software, and completed a fund raise in November to raise £2.21m (net) to pursue growth opportunities. Post year-end, further progress was made with US FDA clearance being granted for sales of LiDCOrapid (v2) with level of consciousness display – with non-invasive module registration expected mid-year, and also a patent was granted in Japan for the LiDCOrapid monitor graphical user interface.
NetDimensions (LON:NETD 41p/£11.06m)
NetDimensions, the provider of performance, knowledge and learning management systems, has announced final results for the year to 31 December 2012. Overall revenues were up by 12 per cent to US$13.8m (2011: US$12.3m), whilst investment into R&D and global sales expansion contributed to the reducing of profits to US$0.4m (2011: US$1.3m). Cash on the balance sheet was broadly similar to the prior period end at US$6.8m (2011: US$6.9m). With the overall headcount increased by 25 to 130, and 71 new clients signed including Fresenius Medical Care, Eisai Pharmaceutical, Thames Water, Finnair, Mitsubishi and Geely Automotive, the Company spent considerable efforts in developing its sales channels, with new offices in Germany and Australia. The product launch for NetDimensions Talent Suite, an integrated Talent Management System (TMS), and NetDimensions Talent Slate, an innovative tablet application for mobile workforces, also took place and the Company intends to substantially increase investment in 2013 as part of its long-term growth strategy to increase market share in the global Talent Management System market. Post period end, the Company also completed the acquisition of eHealthcareIT for a total consideration of approximately US$3.5m as part of the Company’s strategy to become a top global provider of talent management solutions for healthcare and other highly regulated industries.
Omega Diagnostics Group (LON:ODX 16.25p/£13.85m)
Omega, the medical diagnostics company focused on allergy, food intolerance and infectious disease, announced that it has been informed by the Burnet Institute that its exclusively licensed CD4 test for monitoring HIV-positive patients has been awarded a US Patent. The patent was granted on 2 April 2013 and widens the protection from territories where patents have already been granted in South Africa and the member states of the African Intellectual Property Organisation, and with patents pending in many other territories.
One Media iP Group (LON:OMIP 8.25p/£5.28m)*
The digital media content provider which exploits intellectual property rights around music and video announced the admission of its shares to trading on AIM last week. Simultaneously with Admission, the Company raised £750,000 before expenses at a price of 8 pence per share. The funds raised in the Placing will be used to finance new content acquisition and it is the Company’s intention to increase the size of the deals that are made. One Media specialises in acquiring nostalgic content and then digitising it, before recompiling and delivering the digital music and video content, via its aggregator, directly to over 600 online digital stores. The Group has acquired approximately 80 music catalogues and the directors estimate that the Group owns and/or controls the rights to over 170,000 tracks. Although the Company focuses on mainstream artists with a proven audience from the last 90 years, the genre of music in the catalogues acquired varies widely, ranging from Rock to Pop and Classical to Spoken Word. This variety provides the Company with a diversified revenue stream. One Media iP Group separately announced yesterday that it has acquired for a consideration of £25,000 plus an on-going royalty, the exclusive digital rights to the Peppermint Music Ltd catalogue of content. The Catalogue contains over 150 recordings performed by artists such as Connie Francis, singing the hits of Buddy Holly, Billie Jo Spears, Racey, Alvin Stardust and other great performances from Grace Kennedy, Pete Haycock and Paul Da Vinci (of the Rubettes).
Richland Resources (LON:RLD 4.88p/£5.76m)
Richland Resources, the gemstones producer and developer, announced that Mr Louis Swart is joining the Company in a non-board capacity as new Group Chief Financial Officer, starting immediately. He is a chartered accountant and a member of the South African Institute of Chartered Accountants and Institute of Chartered Accountants Australia. Louis qualified as a chartered accountant in South Africa, completing his articles in 2001 at Kotze and Abbott. He has over 14 years of accounting, finance and senior management experience including over nine years of working in diverse financial roles in the mining industry. Louis previously joined the TanzaniteOne group as Financial Manager in 2003, working at their operations in Tanzania until 2008. Since then he has served as Financial Manager at Simmer & Jack Mines Limited and from 2011 as Senior Staff Accountant at Tronox Western Australia Pty Ltd. Louis will divide his time between Tanzania and Perth, Australia.
Sareum Holdings (LON:SAR 1.05p/£15.98m)*
The specialist cancer drug discovery business yesterday entered a co-development agreement with independent non profit research and development institute SRI International to advance Sareum’s Tyrosine Kinase 2 (TYK2) small molecule drug discovery program for readiness in human clinical trials. Under the agreement, research will focus on the discovery and development of small molecule therapeutics targeting TYK2, one of the four Janus kinase (JAK) family members implicated in a number of inflammatory diseases. As part of the agreement, SRI Biosciences’ Center for Immunology and Infectious Diseases will co-lead discovery and development activities. Sareum will retain the option to further develop and commercialise the program.
Snoozebox (LON:ZZZ 57p /£37.94m)
The Directors of Snoozebox, the provider of portable hotel accommodation, has announced that revenue in respect of the year ended 31 December 2012 will be not less than £3.8m, a material shortfall against the trading update of 30 January 2013. EBITDA will reflect the shortfall. This shortfall is related to the requirements for recognition of income under IFRS. The management expects that some or the entire shortfall may reverse and therefore be recognised in the current year. The Company has reiterated that it has a strong pipeline of event related and other deployments for the current year.
Stratex International (LON:STI 5.38p/ £25.12m)
Stratex International, the exploration and development company focused on gold and base metals in Turkey, East Africa and West Africa has provided an update on its Afar joint venture in Ethiopia and the Republic of Djibouti, where 51 per cent JV partner Thani Ashanti is currently funding all exploration. In the Republic of Djibouti, channel-chip results, the scale of the veining and the surface grades has confirmed the potential for Oklila to be a significant discovery. In the Tendaho Exclusive Exploration Licence in Ethiopia, deeper drilling at Megenta is expected to commence in Q3 2013. Thani has now assumed management of the two projects having met the JV criteria for earning 51 per cent.
Sorbic International (LON:SORB 9p/£4.36m)
Sorbic International, the third largest sorbates producer in China, issued an update ahead of its AGM today. The Company announced that it has signed a compensation agreement in relation to the Company’s manufacturing facility in Ulanqab City, Inner Mongolia totaling approximately £5m. As previously announced, the Company has been in discussions with local authorities in Ulanqab City regarding the effects on the Company of the proposed zone reclassification and to finalise a compensation plan offered by the Ulanqab authorities. The Company will receive compensation for relocation of infrastructure already built (including disassembly and reassembly of equipment and inflation), as assessed by an independent valuer. This is expected to be in the region of RMB25m (£2.65m) and includes inflation on the rebuilding costs. Sorbic will also receive compensation for one year’s interest for equipment capital commitment based on the capital expenditure incurred (including inflation). This is expected to be approximately RMB3m (£0.32m). Sorbic will be reimbursed in full for the land (400mu or 64 acres) that was first purchased for RMB 16.3m (£1.73m). There will be no land cost to the Company for the new 200mu (32 acres) of land which will benefit the Company by RMB5m to RMB8m (£0.53m to £0.85m), depending on the final valuation of the land. The Ulanqab authorities have committed to assist the Company in securing a loan facility of RMB50m (£5.3m). These additional funds will be used to complete the rebuild of the new factory. The Ulanqab authorities have agreed to the continuation of the industrial park’s original agreement in respect of tax reductions, power costs and other direct costs. Following signing of the agreement, the Company expects to receive the first tranche of funds (RMB 16.3m gross) by the end of May 2013.
Summit Corporation (LON:SUMM 4.38p/£15.49m)*
Drug discovery and development Company advancing therapies for Duchenne Muscular Dystrophy and C. difficile infections (CDI) announced last week that abstracts have now been released by the organising committee of the 23rd European Congress of Clinical Microbiology and Infectious Diseases (ECCMID) which will be held in Berlin, Germany from 27 to 30 April 2013. Summit will present new positive preclinical data on the novel, selective antibiotic SMT 19969 for the treatment of CDI. Three presentations are being given by Summit and key collaborators with data being reported from preclinical efficacy and safety studies. SMT 19969 is currently being evaluated in a Phase 1 clinical trial in healthy volunteers with top-line results expected to be reported during Q2 2013. The programme is supported by a prestigious translational research award from the Wellcome Trust. A few weeks earlier, Summit reported its preliminary results for the year ended 31 January 2013. It highlighted that it had in the period strategically re-focused the Group on the development of the clinical-stage Duchenne Muscular Dystrophy and C. difficile infections programmes. The cash position at 31 January 2013 was £3.4m (31 January 2012: £2.1m), operational expenditure was in-line with expectations and the net loss for 12 months ended 31 January 2013 was £4.2m (31 January 2012: £2.7m).
UBC Media (LON:UBC 2.75p/£5.37m)
UBC Media Group, the multimedia content and services Company, provided a trading update in which it announced that it expects turnover for continuing operations for the year to 31 March 2013 to be approximately 17 per cent up on 2012’s revenues at £3.8m, though operational losses are expected to be in line with market expectations. Cash on the balance sheet at 31 March 2013 was £2.6m (£3.5m at 31 March 2012). The Company also noted a further investment by Imagination Technologies Group (LON:IMG 424.6p/£1,127.34m) for 8,333,333 at 2.4p per New Ordinary Share taking its share holding up to 13.68 per cent, and also issued options to purchase 3,169,010 of shares for a total amount of £1 on the satisfactory completion of certain commercial conditions, which would take its holding up to 15 per cent of the enlarged voting rights if exercised. Interestingly, the audio social network Audioboo (in which the Company has a significant 37 per cent) is also seeing rapid growth, with the number of active users having quadrupled in the last six months to 4.4m and the number of audio “listens” per month has risen from 3.3m in September 2012 to 8.2m in February 2013. Audioboo has opened an office in San Francisco and has appointed Pagemill Partners of Palo Alto to lead a fundraising round, which will involve a new lead investor.
Ubisense Group (LON:UBI 205.5p/£45.06m)
Ubisense Group announced that it has been selected by General Electric (NYSE:GE $21.65/£225bn) to provide location services as part of a major new engagement for an enterprise solution. This will consolidate several legacy systems and provide critical data and integration for operations including asset management, capacity planning and customer service. The three year, US$6.8m, agreement represents a significant milestone for the Company and is one of the largest contracts of its kind encompassing data migration, validation, development, and roll-out and support services.
*A corporate client of Hybridan LLP
The Hybridan Small Cap Wrap is a weekly review of some of the most interesting small cap stories of the past week. Our review will usually be of those companies whose market capitalisations are less than £50m although we may occasionally cover larger companies.