Small Cap Wrap: Month: November 2014

AIM Breakfast - Archive

6th November 2014

This week: Strat Aero plans AIM landing, Rosslyn hits a Big 4, Nektan playing the AIM game

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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.

AGY appointment,CEPS acquisition,CHRT contract win,ENTU first day of dealings,FDEV end of Beta phase of Elite,HZD appointment,MOS trading update,NAK interims,NKTN first day of dealings,PROX placing,QTX first day of dealings,RDT appointed by ‘Big 4’ Accountancy Practice,SVR contract extension,StratAero intention to float on AIM,VEC approval in Baltics,VRP award

Allergy Therapeutics (LON:AGY 19.25p / £78.94m)

Allergy the specialty pharmaceutical company specialising in allergy vaccines announced the appointment of Dr Daphne Tsitoura as Head of Clinical Science leading the Clinical Development team in Munich and Worthing from the 10th November, reporting to Professor Tim Higgenbottam. Dr Tsitoura joins Allergy Therapeutics from GSK, where she has spent the last eight years as Principal Physician in the Respiratory Therapeutic Area in the GSKs’ Stevenage Research Centre UK and has maintained a clinical link with allergy as an associate Allergist at University College Hospital London UK. Previously she has held roles of Principal Immunologist at the Institute of Biomedical Research Academy of Athens, Consultant Physician / Chief of the Allergy Unit at the Henry Dunant Hospital Athens, senior fellow in immunology and allergy at Stanford University School of Medicine Palo Alto USA, and associate professor in Respiratory Medicine College of Physicians and Surgeons Columbia University New York.

CEPS (LON:CEPS 37p/£2.00m)

CEPS announced that it has acquired 70 per cent. of the issued share capital of a newly incorporated company, Aford Awards (Holdings) Limited (AAHL), which has been formed to acquire 100 per cent. of Aford Awards Limited (Aford) for £1,500,000, the acquisition of which was completed on 3 November. The vendors of Aford are Jon Ford, the Managing Director, and members of his family. Aford is a sports trophy and engraving company which is profitable, cash generative and has enjoyed annual growth in sales and EBITDA over the last five years. At 30 November 2013 net assets were £452,352, including a cash balance of £409,066. Trading performance of Aford in 2014 has been in line with management’s expectations for the year to date. As part of his consideration Jon Ford will receive 30,000 Ordinary Shares, being 30 per cent. of the issued share capital of AAHL. CEPS will subscribe £770,000 into AAHL for 70,000 Ordinary Shares for £70,000, £490,000 Acquisition Loan Notes and £210,000 Shareholder Loan Notes, both with an 8 per cent. interest rate. The Acquisition Loan Notes will be repaid before the Shareholder Loan Notes, but after the Vendor Loan Notes. The Vendor Loan Notes have an annual interest rate of 7 per cent. All categories of loan notes will be repaid subject to the availability of free cash and it is envisaged that the Vendor Loan Notes will be repaid within three years from completion. The Ford family will receive total consideration of £1.5m made up of cash of £1,080,000 at Completion, £300,000 of Vendor Loan Notes, and Jon Ford will receive £90,000 of Shareholder Loan Notes and 30,000 Ordinary Shares issued at a price of £1 per share. The cash element of the consideration will be funded from the £770,000 subscribed by CEPS into AAHL, as explained above, and a £400,000 dividend from Aford.

Cohort (LON:CHRT 239p/£97.89m)

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Cohort, the independent technology group, announced that its subsidiary MASS has been awarded a series of contract renewals to provide Electronic Warfare (EW) Operational Support services to an export customer with a total value of approximately £9m. The contracts will see MASS provide expert manpower and EW countermeasure development and design services. The work will begin immediately and will continue for approximately two years.

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Entu (LON:ENTU 103.5p/£67.90m)

entu, the home improvement group providing energy efficiency products and services to homeowners in the UK, recently announced its first day of dealings on the AIM market. entu is a multi-product and service home improvement group providing energy efficiency products and services to homeowners in the UK. Since its inception in 2008, the Group has grown both organically and through strategic acquisitions. The Group now comprises four business segments that are engaged in the sale of home improvement products, the sale of energy generation and energy saving products, the sale of insulation products, and a repairs and renewals service agreement programme. A national installation service supports all four business segments. Products sold by the Group include energy efficient windows, doors, conservatories and external and cavity wall insulation together with solar power generation products and energy efficient boilers. All products sold by the Group are sourced from third party suppliers and manufacturers. The Group’s key brands are Zenith, Penicuik, Weatherseal, Staybrite Solar, Energy Hypermarket, Job Worth Doing and Europlas.

Frontier Developments (LON:FDEV 270p/£90.47m)

The independent developer of video games with studios in Cambridge, UK and Halifax, Canada, publically announced last week that the Beta phase of its development of Elite: Dangerous will come to an end on Saturday 22 November 2014, with the full public release happening in the current calendar quarter. 22 November is also the date Frontier has announced for the worldwide Premiere event it is holding for Elite: Dangerous at Imperial War Museum, Duxford. Frontier has now raised total funding via Kickstarter, the crowd-funding website, and its own site of over £7.5m from over 140,000 backers in order to develop Elite: Dangerous. David Braben, Chief Executive Officer of Frontier Developments, said: “Development continues to track well for a 2014 launch, and the end of a successful Beta phase on the 22nd November means the company expects to be able to recognise a substantial portion of the deferred revenue received before the end of the calendar year.”

Horizon Discovery Group (LON:HZD 154.5p / £121.0m)

The provider of research tools to support translational genomics and the development of personalised medicines announced the appointment of Dr David Smoller, Chief Business Officer of Horizon, as an Executive Director of the Board, with immediate effect. David recently joined Horizon as Chief Business Officer as part of the Company’s recent acquisition of Sage Labs for $48m. David, a successful serial entrepreneur, was previously Chief Executive Officer of Sage Labs, Chief Scientific Officer of Sigma-Aldrich and President of its Research Biotechnology business unit. Before joining Sigma-Aldrich, David served as President of ProteoPlex, a seed stage spinout focusing on proteomics (acquired by Merck KGaA in 2003), and founded Genome Systems Inc. (acquired by Incyte Genomics in 1996), a company focused on providing the scientific community access to genome project-related technologies.

Mobile Streams (LON:MOS 15.5p/£5.75m)

The mobile media company, alongside its AGM statement, updated on trading. As announced in the audited Financial Results for the Year Ended 30 June, released on 10th October, the Company continues with its strategy of diversifying its revenues into new markets beyond Argentina. Other Latin American markets in particular Mexico, Brazil and Columbia are expected to contribute to this diversification. Any further devaluation of the Argentinian peso would have a negative impact on the Company’s future performance. Additionally, the Company continues to launch its mobile internet services into new emerging markets, such as Africa, Asia and India. The Company has to date executed five agreements covering various African markets. These diversification plans will require investment during the rest of the year, which will be reflected in reduced short-term profitability. As of mid-October, Argentina represented around 92 per cent of the mobile internet subscriber base, whereas the Company’s second largest market Mexico represented around 5 per cent of the subscriber base. New emerging markets such as those in Asia and Africa and India are yet to contribute any significant subscriber numbers and the Company would expect this to happen in Financial Year 15-16 at the earliest. Following the recent launch of new products on new local networks, the Company is currently experiencing strong growth in its subscriber numbers in Brazil, with more daily net subscriber additions currently being added in Brazil than in MOS’s second largest market of Mexico.

Nakama Group (LON:NAK 3.75p / £4.42m)

The AIM quoted recruitment consultancy working across UK, Europe, Asia and Australia providing staff for the Web, Interactive, Digital media, IT and Business Change sectors announced its interim results for the six months ended 30 September 2014. Revenue increased by 29 per cent to £11.1m (2013: £8.63m), profit before tax increased substantially to £222,000 (2013: loss £25,000), net fee income (NFI) rose by 27 per cent to £2.71m (2013: £2.13m), and the NFI percentage is stable at 25 per cent (2013: 25 per cent). Permanent recruitment fees increased by 32 per cent to £1.33m (2013: £1.01m), the revenue across APAC region increased by 20 per cent driven by the continuing shortage of skilled talent within specialised markets and revenue across the UK increased by 32 per cent following increased demand for both contract and permanent business. Ken Ford, Chairman of Nakama, commented: “There is an increasing feeling of confidence in the digital recruitment market at the moment, which is demonstrated by the number of requirements released by both corporate and agency clients being at a 5 year high. The Group has improved its financial position overall and begun to generate some creditable momentum during the period under review, despite a still challenging and competitive marketplace. Looking forward, we are optimistic for the second half and expect to continue to build on these foundations across the Group and further grow net fee income over forthcoming trading periods.’

Nektan (LON:NKTN 234.5p/£49m)

Nektan, an international B2B mobile gaming platform provider, recently announced its first day of dealings on the AIM market. The company is a developer and operator of mobile games in the regulated, interactive RMG and freemium gaming space, delivering white label implementations to large commercial organisations that have established online audiences. Formed in 2011, Nektan operates under a full Remote Gambling Licence issued by the Gibraltar Licensing Authority and maintains sales and customer support operations in its two primary geographical targets, Europe and North America, from offices in Gibraltar, London and Las Vegas. The Group has developed a full end-to-end platform, Evolve, which is purely focussed on supporting mobile gaming. Nektan’s white label platform simplifies the route to mobile gaming revenues for its target commercial entities: managing the full customer experience and back-office operations, allowing the partner solely to focus on marketing the product to its consumers. The Group has raised £4.1m (before expenses) at a placing price of 236 pence per Ordinary Share.

Proxama (LON:PROX 2.65p/£21.45m)

Proxama announced the proposed placing at 2.5 pence per share, raising gross proceeds of between £3.7m and £4.0m and possible acquisition of the entire issued share capital of Aconite. The Placing is conditional on, inter alia, shareholder approval at a General Meeting of the Company but (save for the Elderstreet Placing) is not conditional on the successful completion of the Possible Acquisition. Commenting on the acquisition Neil Garner, CEO of Proxama said:”…The possible acquisition of Aconite would provide a complementary fit into our operations and would integrate well into our CardGateway® platform to provide a complete end-to-end solution for card issuers to migrate from cards to mobile devices. We believe putting our two organisations together would create a potential opportunity to accelerate our development across Europe and the USA as well the chance to cross sell to the combined customer base. We are looking forward to working with them to achieve this.”

Quartix (LON: QTX 136p/£63.4m)

Quartix, a leading supplier of subscription-based vehicle tracking systems, software and services in the UK, recently announced its first day of dealings on the AIM market. The Group provides an integrated tracking and telematics data analysis solution for fleets of commercial vehicles and “pay as you drive” motor insurance providers that is designed to improve productivity and lower costs by capturing, analysing and reporting vehicle and driver data. Quartix’s main country of operation is the UK but also has operations in France and the US. As at 30 September 2014, the Group had over 6,000 commercial fleet customers generating over 56,000 active vehicle subscriptions. In addition to its Fleet customer base, Quartix provides the tracking systems used in the telematics-based policies operated by a number of major UK motor insurance providers representing more than 67,000 installations to date. The company raised approximately £11.4m at a placing price of 116p per share.

Rosslyn Data Technologies (LON:RDT 21p/£15.84m)

Rosslyn announced that, as part of its strategy of developing partnership relationships, the Company has entered into a global arrangement to provide data analytics, using the RAPid platform, with the consultancy arm of one of the ‘Big 4′ accountancy practices for use with their clients. The contract is expected to be revenue generating from the outset. Commenting on this announcement Charles Clark, CEO of Rosslyn said: “Partners are an important channel for our growth, extending the reach and adoption of our RAPid platform, into new markets. Rosslyn Analytics’ global partnership with a ‘Big 4’ shows just how important analytics has become to the business success of organisations – and it is exciting to see our technology playing a central role in helping partners deliver value to their clients.”

ServicePower Technologies (LON:SVR 7.375p/£14.75m)

ServicePower announced it has signed an extended contract with a leading data management company. The contract extension is worth approximately $4.5m over five years, and expands ServicePower’s engagement with the customer from its initial deployment in the US into an additional 20 countries. Marne Martin, CEO of ServicePower, commented: “This contract is with a long term, valued client that is seeking to gain the benefits from ServiceScheduling throughout their global business. I’m delighted with their continued confidence in ServicePower. Recent extended localisation of our product set positions us well to support growth of services around the world. The opportunity to deploy our products within the Force.com ecosystem enables us to provide a single vendor solution, as well as extend our footprint within the global Force.com community. We likewise look forward to supporting the client’s future field service requirements with the continuing innovations we’re making in our product platform.”

Strat Aero (TBC/TBC)

Strat Aero, an international aerospace services company focussed primarily on the provision of training solutions, management systems and consultancy services to the international aviation market, recently announced its intention to float on the AIM market. The Directors, who have experience in multiple aspects of the aviation industry, are looking to capitalise on opportunities resulting from the forecasted strong growth in the airline industry and in particular, the predicted growth in the emerging UAV industry over the coming decade. The Group is organised into three divisions: Unmanned Aerial Systems (UAS) Pilot Training and Services, Aviation Software, Products and Services and Aviation Management and Consultancy Services. The primary focus will be capitalising on UAS pilot training and services, through leveraging its expertise and fully functional training facility at Roswell, Chaves County, New Mexico, United States. Training of US Air Force UAS pilots is expected to commence by early Q1 2015 in partnership with Northrop Grumman. The Group has further leveraged its position to target the provision of UAS training and services to non-military markets including law enforcement, education and corporate.

Vectura Group (LON:VEC 117.75p/£473.90m)

Vectura’s partner Sandoz has been granted marketing authorisation by the pharmaceutical regulatory authorities in Estonia, Latvia and Lithuania for AirFluSal® Forspiro®, an innovative new inhaler for patients with asthma and/or chronic obstructive pulmonary disease (COPD). These latest marketing authorisations by the three Baltic states, which are members of the European Union (EU), mean that AirFluSal® Forspiro® has now been approved in a total of thirteen European countries, as well as South Korea and Mexico. The product has been launched in five countries to date, including South Korea.

Verona Pharma (LON:VRP 1.075p / £10.86m)

Drug development Company focused on first-in-class medicines to treat respiratory diseases announced it has received a Venture and Innovation Award from the Cystic Fibrosis Trust. The Award will be used to fund further exploratory studies to investigate the potential of the Company’s lead pipeline drug, RPL554, as a novel treatment for cystic fibrosis (CF). Verona Pharma is the first drug development company to receive a Venture and Innovation Award from the Trust. The planned studies, in well-recognised and validated translational models of CF disease, entail examining further the effect of RPL554 on airway cells obtained from CF patients. They follow on from encouraging preliminary data of such effects that were recently notified on 29 September 2014 and presented at The 28th Annual North American Cystic Fibrosis Conference (NACFC), Atlanta, Georgia, USA, 9-11 October, 2014. RPL554, a first-in-class dual PDE3/PDE4 inhibitor, is currently in phase 2 clinical development as a nebulised treatment for acute Chronic Obstructive Pulmonary Disease (COPD).

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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.