Small Cap Feast

Small Cap Feast – 21st April 2022

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What’s Cooking in the IPO Kitchen?

Lift Global Ventures plc to join AQSE Growth Market. The Company’s investment strategy is to operate as an enterprise company seeking acquisition or investment opportunities within the financial media and technology industries. Within these broad industries, areas of focus may include: Financial news websites and other forms of “new media”, Investment research providers, Financial PR, IR, design and marketing agencies, Production studios and visual content providers and Technology platforms which facilitate capital raising and/or lending. Mkt Cap and Capital to be raised TBC, expected 29 April.
Shellraise plc, to join AQSE Growth Market. The Company will focus on identifying investment opportunities in companies operating in the viticulture sector which require funding to increase output. Mkt Cap and Capital to be raised TBC, expected later in April.

Breakfast Buffet

Base Resources 18.5p £217.9m (BSE.L)

Quarterly operational, development and corporate update from the African mineral sands producer. Kwale Operations maintained production consistency through the quarter, in line with FY22 guidance. Ongoing strong demand supported further price increases for all products in the quarter, delivering a record revenue to cost of sales ratio of 3.3:1 for the quarter. Bumamani DFS on track for completion in the June quarter. Fourth Tanzanian prospecting licence granted, and 15m auger rig acquired. Discussions with the Government of Madagascar on Toliara Project fiscal terms continued. FY22 half-year dividend of AUD 3.0 cents per share paid, totalling US$26.1m.

Colefax Group 652.5p £51.8m (CFX.L)

Trading update in two major markets the US and the UK has been ahead of expectations reflecting strong demand for home-related spending. In addition the Decorating Division will deliver a good performance this year due to the timing of completion of a major UK project. Fabric Division profitability is highly operationally geared and as a result of higher than expected sales, the Board now expects the Group’s profits before tax for the year ended 30 April 2022 to be ahead of market expectations. Like many businesses the Company is experiencing significant inflationary pressures so although demand is currently strong this adds a note of caution to prospects for the year ahead.

DP Poland 7.75p £48.1m (DPP.L)

The operator of pizza stores and restaurants across Poland, announces a trading update for the first quarter of 2022. Like-for-like System Sales increased by 21.3% in Q1 2022 compared to Q1 2021. Total System Sales increased by 22.6% in Q1 2022 compared to Q1 2021. Q1 2022 System Sales significantly above pre-COVID-19 levels. Higher sales have been affected by high inflationary cost pressures, which have persisted. Polish CPI inflation was reported as 10.9% in March 2022 vs 8.6% in December 2021. Cash at bank of £1.55m as at 31 March 2022 (as at 31 December 2021: £1.80m). Orders volume up by 22% March 2022 compared to March 2021 and up by 17.1% Q1 2022 compared to Q1 2021. Introduction of reduced menu which is expected to improve operational efficiencies and drive cost reductions to help mitigate inflationary pressures. Store opening program restarted, with two new stores expected to be opened in Q2 2022. Store opening program restarted, with two new stores expected to be opened in Q2 2022.

Europa Oil & Gas 2.45p £23.4m (EOG.L)

The AIM traded UK, Ireland and Morocco focused oil and gas exploration, development, and production company, announces the signature of the Serenity farm-in agreement with i3Energy North Sea Limited (i3E) in respect of UK Seaward Production Licence P.2358, Block 13/23c (Serenity). Europa is acquiring a 25% interest in Serenity by paying 46.25% of the appraisal well cost, equating to a 1.85 to 1 carry. The farm-in is in line with Europa’s previously stated strategy to acquire an appraisal asset, adding to its existing producing and high impact exploration assets, and thereby creating a more balanced asset portfolio for its investors. The Serenity appraisal well is scheduled to be drilled and formation tested in late Q3 2022 at a gross cost of £14m. The Carry is capped at a gross well cost of £15m, of which Europa’s interest will be £6.94m. Thereafter, each party will fund its interests proportionally. Serenity is strategically located near existing infrastructure in the North Sea, however the appraisal well could provide sufficient recoverable volumes for a standalone development. There are no material conditions for Europa to satisfy to complete the farm-in. Europa will fund an escrow account with its paying interest obligation.

Gear4music 265p £55.6m (G4M.L)

Gear4music, the largest UK based online retailer of musical instruments and music equipment, today announces a year-end trading update covering the 12 months to 31 March 2022. Strong financial and operational progress compared with FY20 pre-Covid trading. Gross margins remained strong at 27.8% (FY21: 29.5%; FY20: 25.9%). EBITDA now expected to be £11m (FY21: £19.8m; FY20: £7.8m). Revenues and EBITDA slightly lower than FY22 consensus market expectations due to weaker than expected consumer demand during February and March 2022. Strong levels of inventory across all distribution centres to support conversion in FY23. AV.com now fully operational, with accelerated progress expected during FY23.

Induction Healthcare 64p £58.9m (INHC.L)

Induction, a leading digital health platform driving transformation of healthcare systems worldwide, provides an update on continued strong trading and outlook following the year ended 31 March 2022. Contracted annual recurring revenues, a key metric for the business, has grown significantly to c. £15m (31 March 21: £1.8m). Results for FY22 are in-line with already upgraded market expectations for revenue and adjusted EBITDA (£12m and breakeven, respectively) (31 March 21: £1.5m and £-4.8m). In addition, following the placing to raise £25m in June 2021, net cash as at 31 March 2022 was inline with expectations at c. £8m (31 March 21: £2.4m). Furthermore, following strong renewals of NHS England Induction Attend Anywhere contracts, the Group’s cash position has further increased significantly, post period end.

Solid State 1,150p £98.4m (SOLI.L)

The specialist value added component supplier and design-in manufacturer of computing, power, and communications products, announces a trading update for the 12 months ended 31 March 2022. Following a strong finish to the Period, the Company expects to announce record results with revenues for FY22 of approximately £85m (2021: £66.3m) up 28% over the prior year, and adjusted profit before tax for the Period of approximately £7.2m (2021: £5.4m) up 33%; both ahead of recently upgraded consensus expectations. The like for like open orderbook at 31 March 2022 is up 106% over the prior year at a record £85.5m (31 March 2021: £41.5m). These results reflect a strong performance across the Group, with notable contributions in electro-mechanical and imaging systems resulting from the acquisition of Willow Technologies and Active Silicon respectively. Like for like organic revenue growth is in excess of 8%. The Group has enjoyed particularly strong demand in the energy and aerospace & defence sectors, with the latter now representing approximately 15% of the Group’s revenue. Solid State continues to deliver on its organic growth strategy through the targeting of structural growth markets and remains focused on complementary acquisition opportunities.

Seeing Machines 7.94p £329.3m (SEE.L)

The advanced computer vision technology company that designs AI-powered operator monitoring systems to improve transport safety, has collaborated with Magna on a demonstrator that features a fully integrated Driver Monitoring System (DMS) combining camera, electronics, and interior mirror technology. The demonstrator combines Magna’s industry leading mirror technology, camera design, integration, and packaging know-how, with Seeing Machines approach to optimised and co-designed optical path, embedded processing, and enhanced AI vision algorithms for DMS. This technology addresses the critical OEM challenge associated with managing vehicle electronics integration and cost, with the need for seamless camera packaging across a diverse line of vehicle models. Seeing Machines’ enhanced FOVIO eDME (embedded Driver Monitoring Engine) algorithms and processor optimised and accelerated software, which solves for the optimised processing footprint, low thermal dissipation, and small overall mechanical size and weight needed for a viable all-in-one Mirror based DMS solution. Seeing Machines has further addressed the difficulties associated with a movable mirror/camera combination through innovative vision based dynamic real-time detection and calibration techniques.

Strategic Minerals 0.35p £7.1m (SML.L)

The profitable producing mineral company, announces that its 100% owned subsidiary Cornwall Resources Limited has signed a 10-year extension to its existing Redmoor exploration licence agreement. Redmoor Exploration Licence extended to 2037. 25-year Mining Lease option confirmed. General Permitted Development Order application in progress. Recent commodity price increases likely to result in further upside to project’s internally estimated US$163m NPV (8%) despite general increases in mining costs.

Warehouse REIT 171.4p £727.4m (WHR.L)

The company that invests in e-commerce urban and last-mile industrial warehouse assets in the UK, announces that it has exchanged contracts to acquire Bradwell Abbey Industrial Estate, for £62m excluding acquisition costs. The purchase price reflects a net initial yield of c.4% based on day one passing / guaranteed income and continues Warehouse REIT’s stated aim of acquiring assets in the Oxford-Cambridge Arc. The multi-let industrial estate totals 69 units across c. 335,000 sq ft, ranging from c. 1,000 to 15,000 sq ft in size. It is located just off the A5, providing fast access to the surrounding population of Milton Keynes and the wider motorway network, with the M1 being 6 miles to the East. The estate is currently 96% leased to a range of occupiers including Argos, F&F Stores and Taylor Kerr Engineering Ltd and produces a total annual income (including some rental guarantees) of over £2.6m. The low average rent of c. £7.80 psf offers good reversionary potential, considering that prime rents in the area range from £10 to £14 per psf. Milton Keynes is a highly sought-after industrial location, with vacancy sitting at c.4%. Significant residential growth is putting further pressure on demand and underpinning land values, providing further rental growth potential.

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