Small Cap Feast

Small Cap Feast – 29th April 2022

Dish of the Day:

Lift Global Ventures plc (AQSE:LFT) has joined 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. The Company has been admitted to the Access Segment of AQSE following the successful completion of an oversubscribed fundraise of £1.73m. Including funds raised prior to the IPO, Lift has raised £2.07m to pursue its investment strategy.

Off the Menu:

Arden have left AIM following a takeover by Ince Group (INCE.L)

What’s Cooking in the IPO Kitchen?

Altona Rare Earths, the AQSE listed mining exploration company focused on the evaluation, acquisition and development of Rare Earth Elements mining projects in Africa, intends to join the Main Market. Admission to trading of the Company’s Ordinary Shares on the AQSE Growth Market will be cancelled simultaneously with Admission. It is also proposed that on Admission, the Company will change its EPIC from AQSE:ANR to REE. The Company also seeks to raise funds to finance its current and future rare earths mining projects in Southern and Eastern Africa. Timing TBC
According to Proactive Investors, Bridgepoint is said to preparing to list Burger King UK on the London Stock Exchange as early as this spring. A valuation of £600m is expected.

Breakfast Buffet

Aukett Swanke 1.5p £2.5m (AUK.L)

Aukett Swanke, the architectural and interior design practice, announced the disposal of its interest in John R Harris & Partners Limited, incorporated in Cyprus and operating out of the Middle East, to the local management team for a maximum consideration of AED 5m (approximately £1.074m). The consideration is to be settled by AED 4.25m (approximately £913k) in cash and a deferred payment of AED 750k (approximately £161k) payable over a fixed 5-year period, subject to an early repayment discount. The Group has also entered into a Marketing Agreement, covering the use of the Group’s project portfolio and associated materials, over the deferred consideration period for an additional sum in order to maintain the Group’s interest in this important market. John R Harris made a loss of £162k (before amortisation of intangible assets) in the year ending 30 September 2021 and the value of its net assets (excluding goodwill and intangible assets recognised in the Group consolidated balance sheet) was £312k as at 30 September 2021. The Disposal is part of a series of intended actions to restructure the Group’s operations in an orderly manner and to allow the John R Harris business to fulfil its potential without the burden of a central overhead. The proceeds of the Disposal will be used to reduce the amount drawn under the Group’s borrowing facility and for general working capital purposes.

Begbies Traynor 114.7p £176m (BEG.L)

The latest Begbies Traynor “Red Flag Alert” research, which has examined the financial health of British companies for the past 15 years, highlights the strain two years of extraordinary financial pressures have had on thousands of UK companies. Concerns as the number of companies in critical financial distress increased to 1,891 in the first quarter of 2022, almost a fifth higher than the same period last year. The 19% year-on-year increase has been driven by a 51% jump in the construction sector and a 42% rise among bars and restaurants. Businesses in significant financial distress down 20% on the level a year ago at 581,596, though this is flat on the previous quarter. County Court Judgements – a warning sign of future insolvencies – up 157% to 22,552 in the quarter compared with a year ago; with March having seen the highest number in a single month for 5 years. Data from Begbies Traynor’s “Red Flag Alert” points to a coming wave of business failures as the economy adjusts to the post-pandemic reality with Covid reliefs cut off and a rapid growth in inflation.

Carclo 24.75p £18.2m (CAR.L)

The global manufacturer, principally of fine tolerance injection moulded plastic parts and aerospace components, today provides an update on trading for the financial year ended 31 March 2022. The Board reports that the business expects to report a strong performance for the year, with revenue growth ahead of, and underlying profits in line with, its expectations despite the challenging macroeconomic backdrop. In addition, the Group balance sheet has strengthened considerably throughout the course of the year, in part driven by a reduction in the IAS 19 pension deficit. It has continued to invest in capital equipment to support long-term growth, largely financed by an increase in net debt. The impact of the pandemic continued to be felt throughout the year albeit less through the direct impacts of lockdowns and plant closures, and more through the secondary effects of labour shortages and significant cost inflation. During the second half, whilst demand has remained robust, the business faced more challenging conditions in terms of recruiting labour in the US as well as cost escalations across raw materials, energy, packaging, freight and other overheads. Whilst the impact of raw material cost increases can largely be passed on to customers (albeit with some time lag) the overall impact of these increases reduced margins in the second half particularly in the US operations. Price increases are being negotiated with customers and this will continue into FY 2023 to offset the impact of the non-material cost increases. Latterly the war in Ukraine has added to these inflationary pressures.

M&C Saatchi 194.6p £238m (SAA.L)

Further to the Company’s trading update announcement on 21 January 2022 and the announcement of the Company’s final results for the year ended 31 December 2021 announced separately today, the Company announced M&C Saatchi’s projections for the years ending 31 December 2022 and 2023. The Company has delivered continued record performance in FY21 as demonstrated by 7 consecutive positive trading updates since January 2021, and as detailed in the Results Announcement where the Company has reported headline profit before tax of £27.3m, ahead of its expectations and over a 200% increase on the prior year. Taking into account the robust financial performance delivered in 2021 and the strong momentum in 2022 so far, M&C Saatchi is now forecasting headline profit before tax in the region of: £31m in FY22; and £41m in FY23. These forecasts evidence the future potential of the business, comprising expected revenue growth from existing clients and new client wins, coupled with further simplification under the accelerated Company strategy. Further details are set out in the appendix to this announcement. The Company remains highly confident in its ability to create material value for its shareholders. M&C Saatchi is an international communications network headquartered in London.

MP Evans 952p £519m (MPE.L)

The producer of sustainable Indonesian palm oil, notes the updated announcement made on 27 April by the Indonesian government of plans temporarily to ban exports of palm oil, including both crude palm oil and refined products, effective from 28 April, to protect domestic supply. Local demand for palm oil is expected to increase significantly for a short time over the Lebaran festival period, celebrated over the next 7-10 days. The Indonesian government last month introduced a revised export levy to subsidise local supplies as global supplies of vegetable oil have been limited. Indonesia is the world’s largest producer of palm oil and a significant consumer, accounting for 59% of global supply and 22% of global consumption in 2021. Management continues to monitor the situation closely and awaits clarity from the Indonesian government regarding the length of the export ban and extent of its impact on the domestic market. The Company will provide further updates as appropriate.

Prospex Energy 4.25p £10.6m (PXEN.L)

The investment company focused on European gas and power projects, updated on the production strategy of, and income from, the El Romeral power plant in southern Spain. El Romeral continues to provide a very healthy income from selling electricity into the spot market in Spain at near record price levels. The Company holds a 49.9% working interest in El Romeral through its interest in Tarba Energía S.L. Loan plus interest repayment made by Tarba to its two shareholders on 28 April 2022. Loan repaid of EUR289,577, plus accrued interest of EUR19,092.97, equalling a total of EUR308,669.97. Prospex’s share of this is EUR153,698.64. Tarba has now repaid in full its two shareholders, Prospex and Warrego Energy Ltd, the outstanding loans held in the El Romeral asset of EUR589,577, plus accrued interest of EUR19,092.97. The El Romeral power plant is now operating 24 hours a day seven days a week as its default operating mode, thereby boosting revenue.

Physiomics* 4.20p £4.1m (PYC.L)

The consultancy using mathematical models to support the development of drug treatment regimens and personalised medicine solutions considers that the award of options linked to the Company’s performance is critical to the incentivisation of its employees and to ensure that there is alignment between management and shareholders. To this end, the Company today confirms that it has agreed to issue 850,000 share options over ordinary shares of 0.4p each in the Company to its non-director employees, under the Company’s existing Enterprise Management Initiative Employee Share Option Scheme. Each Option issued will be exercisable at a price of 4.38p, being the greater of (i) the average closing price for the three dealing days immediately preceding the date of grant; and (ii) the closing price on the dealing day immediately prior to the date of grant, as prescribed in the terms of the Schemes. The Options vest equally over a three-year period and can be exercised within 10 years of the date of grant.

Rotala 32p £15.8m (ROL.L)

Rotala announced the acquisition from Johnsons (Henley) Limited of its entire bus business and 20-strong fleet, for a cash consideration of £936k payable on completion. The business being acquired is a well-established operator of commercial and contracted bus services in Warwickshire and the southern West Midlands. The Acquisition is expected to be earnings enhancing from completion. Rotala estimates that the assets being acquired have annual revenues of approximately £3.5m and that the vehicle fleet has a fair value which approximates to the cash consideration being paid. Rotala will not assume any other assets or liabilities of any materiality on acquisition. On this basis, the Acquisition is not expected to generate any goodwill. The Directors believe that, following completion, the Acquisition will generate EBITDA of approximately £200k per annum for the Group. No additional overheads are expected to be required as a result of the Acquisition.

Smartspace Software 72.5p £21m (SMRT.L)

The provider of ‘Integrated Space Management Software’ for smart buildings and commercial spaces – ‘visitor reception, desks and meeting rooms’ announced the successful launch of SwipedOn’s SaaS visitor management platform, in South Korea. Key highlights to launch in South Korea: Key step in broadening addressable market in Far East with launch of SwipedOn in South Korea. Enhanced multi-language variant of the SwipedOn platform released after 18 months of development. This launch includes full Korean version of SwipedOn supported by a Korean website, an in-country marketing campaign and with local language pre-sales and support. The enhanced SwipedOn platform will allow rapid deployment into other new markets in local languages, with deployment possible in weeks.

Sylvania Platinum 93.5p £255m (SLP.L)

Results for the quarter ended 31 March 2022. Sylvania Dump Operations (SDO) achieved 15,840 4E PGM ounces in Q3 (Q2: 16,605 ounces); SDO recorded $47.9m net revenue for the quarter (Q2: $38.8m), enhanced by strong PGM basket prices; Group EBITDA of $30m (Q2:$22.3m); Net profit of $21.2m ( Q2: $15.5m); Group cash balance of $138m (Q2: $110.1m); and Lesedi plant fully operational since March 2022 following earlier tailings and water related disruptions. Challenges: PGM feed grades in ROM material remain at a lower level at the Mooinooi operation during the quarter: Investigation of potential solutions undertaken in conjunction with the host mine have proven positive. Preferred ore sources have been identified which have led to improved ROM feed grades post quarter end. This is expected to improve PGM grades and therefore production and output in the coming months; and Higher production costs per ounce at the operations impacted by an increase in the cost of reagents, increased fuel and transport cost and the lower ounce production quarter on quarter. Opportunities: The new Lesedi tailings storage facility (TSF) has been completed and commissioning of the tailings deposition facility commenced in February; Cold commissioning of the new Lesedi MF2 project commenced during March 2022 and circuit optimisation is in progress. First slurry was treated post-period end; Tweefontein MF2 remains on track for commissioning H1 FY2023; Production is expected to increase significantly during the next quarter due to progress at Lesedi and the improvements identified post quarter end at Mooinoi; and The Group maintains strong cash reserves.

Head Chef:

Derren Nathan
0203 764 2344
derren.nathan@hybridan.com

*A corporate client of Hybridan LLP

Disclaimer

This document, which does not constitute research, has been issued by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to any such action. This document has no regard for the specific investment objectives, financial situation or needs of any specific person or entity and is not a personal recommendation to any such person or entity. Recipients should reach an individual investment decision, based upon their respective financial objectives and financial resources and, if any doubt, should seek advice from an investment advisor.

The information contained in this document is based on materials and sources that are believed to be reliable; however, such information has not been independently verified and therefore it is not possible to confirm such information as being accurate. This document is not intended to be a complete statement or summary of any securities, markets, reports or developments referred to herein. No representation or warranty, either express or implied, is made or accepted by Hybridan LLP, its members, officers, employees, agents or associated undertakings in relation to the accuracy, completeness or reliability of the information contained in this document, nor should it be relied upon as such.

The content of this document includes market commentary and other information which we have prepared in relation to the company referred to in this document, which is our broking client. The provision of this document to you constitutes a minor non-monetary benefit which is capable of enhancing the quality of service provided by Hybridan LLP and which is of a scale and nature which could not be judged to impair the duty of Hybridan LLP to act in the best interest of its client falling within article 24(7)(b) of Regulation 600/2014/EU (MIFID II Regulation).

Any and all opinions expressed are current as of the date appearing on this face of this document only. Any and all opinions expressed are subject to change without notice and Hybridan LLP is under no obligation to update the information contained herein. To the fullest extent permitted by law, none of Hybridan LLP, its members, officers, employees, agents or associated undertakings shall have any liability whatsoever for any direct or indirect or consequential loss or damage (including lost profits) arising in any way from use of all or any part of the information in this document.

This document should not be relied upon as being an independent or impartial view of the subject matter and, for the avoidance of doubt, constitutes non-independent research (as such term is defined in the Financial Conduct Authority’s Conduct of Business Sourcebook to reflect the requirements of the MIFID II Regulation and Directive 2014/65/EU (known as MIFID II)). The individuals who prepared this document may be interested in shares in the company concerned and/or other companies within its sector, may be involved in providing other financial services to the company or companies referenced in this document or to other companies who might be said to be competitors of the company or companies referenced in this document. As a result both Hybridan LLP and the individual members, officers and/or employees who prepared this document may have responsibilities that conflict with the interests of the persons who receive this document. Hybridan LLP and/or connected persons may, from time to time, have positions in, make a market in and/or effect transactions in any investment or related investment mentioned herein and may provide financial services to the issuers of such investments.

In the United Kingdom, this document is directed at and is for distribution only to persons who (i) fall within article 19(5) (persons who have professional experience in matters relating to investments) or article 49(2) (a) to (d) (high net worth companies, unincorporated associations, etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (SI 2005/1529) (as amended) or (ii) persons who are each a professional client or eligible counterparty (as those terms are defined in the Financial Conduct Authority’s Conduct of Business Sourcebook) of Hybridan LLP (all such persons referred to in (i) and (ii) together being referred to as relevant persons). This document must not be acted on or relied up on by persons who are not relevant persons. For the purposes of clarity, this document is not intended for and should not be relied upon by any person who would be classified as a retail client under the Financial Conduct Authority’s Conduct of Business Sourcebook.

Neither this document, nor any copy of part thereof may be distributed in any other jurisdictions where its distribution may be restricted by law and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Distribution of this report in any such other jurisdictions may constitute a violation of territorial and/or extra-territorial securities laws, whether in the United Kingdom, the United States or any other jurisdiction in any part of the world.

Where possible this document is made available to all relevant recipients at the same time. Dissemination of research by Hybridan LLP is monitored to ensure that it is only provided to relevant persons. Research prepared by Hybridan LLP is not intended to be received and/or used by any person who is a retail client.

Hybridan LLP and/or its associated undertakings may from time-to-time provide investment advice or other services to, or solicit such business from, any of the companies referred to in this document. Accordingly, information may be available to Hybridan LLP that is not reflected in this material and Hybridan LLP may have acted upon or used the information prior to or immediately following its publication. In addition, Hybridan LLP, the members, officers and/or employees thereof and/or any connected persons may have an interest in the securities, warrants, futures, options, derivatives or other financial instrument of any of the companies referred to in this document and may from time-to-time add or dispose of such interests.

This document may not be copied, redistributed, resent, forwarded, disclosed or duplicated in any form or by any means, whether in whole or in part other than with the prior written consent of Hybridan LLP.

MIFID II status of Hybridan LLP research
The cost of production of our corporate research is met by retainers from our corporate broking clients. In addition, from time to time we issue further communications as market commentary (such as our daily newsletter, Small Cap Breakfast), which we consider to constitute a minor non-monetary benefit which is capable of enhancing the quality of service provided by Hybridan LLP and which is of a scale and nature which could not be judged to impair the duty of Hybridan LLP to act in the best interest of its client falling within article 24(7)(b) of the MIFID II Regulation.

Hybridan LLP is a limited liability partnership registered in England and Wales, registered number OC325178, and is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange. Any reference to a partner in relation to Hybridan LLP is to a member of Hybridan LLP or an employee with equivalent standing and qualifications. A list of the members of Hybridan LLP is available for inspection at the registered office, 2 Jardine House, The Harrovian Business Village, Bessborough Road, Harrow, Middlesex HA1 3EX.

If you would like to unsubscribe, please email enquiries@hybridan.com with “unsubscribe me”.