Small Cap Wrap: Month: July 2014

AIM Breakfast - Archive

16th July 2014

This week: Epwin manufacturing AIM float,Conroy makes a golden addition to the team,Sprue Aegis enjoys record first half

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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.

AVCT major Japanese distributor,CHRT acquisition,CGNR Project Manager appointed, COMS trading update,DEMG trading update,Epwin intention to float on AIM,IGE contract wins, NCT work programme update,ORM Barruecopardo permitting update,PHSC preliminary results,PGY acquisition of Starkstrom Group, SHFT financing discussions,SPRP trading update, TCM trading update,THAL trading update, TMMG trading update

Avacta Group (LON:AVCT 1.135p / £56.38m)

Avacta Group, the global provider of proprietary diagnostic tools, consumables and reagents for human and animal healthcare, announced that it has appointed Cosmo Bio Co Ltd (Cosmo), one of the leading Japanese life sciences R&D suppliers, as distributor in Japan for Affimers. Cosmo has been selling reagents such as antibodies and enzymes, cell and tissue culture materials, separation and purification systems and protein engineering products in Japan for over 30 years to academic laboratories, research institutes and testing organisations. With a network of around 200 agents throughout Japan and servicing over 400 international manufacturers, Cosmo is one of the largest and most established life sciences reagents and equipment suppliers in Japan. Cosmo will market and support both the custom Affimer services and the catalogue reagents sales in Japan which is the world’s second largest life sciences market according to UK Trade Investment.

Cohort (LON:CHRT 210p/£86.01m)

Cohort reported its agreement to acquire a majority stake in Marlborough Communications Limited (MCL), a supplier of advanced electronic communications and surveillance technology, from its management for a cash consideration of up to £8m. The initial consideration of £6m is for 50 per cent plus one share of MCL, payable in cash. There is a further earn out consideration of up to £2m in cash, payable on or before 31 December 2014, dependent on performance in the year to 30 September 2014. The acquisition of the remaining shares of MCL is dependent on earnings before interest and tax (EBIT) and order book performance at the end of 2016. MCL provides the Group with the capability to offer fully integrated electronic warfare, communications and intelligence solutions to the UK Ministry of Defence and other customers and is expected to be immediately earnings enhancing.

Coms (LON:COMS 4.53p/£43.5m)

Coms remains confident that the Company is on track to meet market expectations for the current financial year (Jan 15). Following recent acquisitions, the process of restructuring the Group in order to ensure that duplicated costs and services are, wherever possible, removed is ongoing and there is continued focus on further savings being made through operational efficiencies. This will impact H1, such that whilst there has been further significant increases in revenue the Board expects a loss before tax, when including one-off reorganisation costs. The Board is confident that the majority of these one off re-organisation costs will be limited to H1, and that the second half of the year will see a significant improvement in profitability. Simultaneously it was announced that the FD and Chairman have stepped down. Two new directors have joined including Frank Beechinor (non-exec Chairman).

Conroy Gold & Natural Resources (LON:CGNR 1.40p / £4.93m)*

Conroy Gold has provided an update on its 2014 programme being the appointment of Michael Brennan as Project Manager to develop the gold mine at Clontibret in County Monaghan Ireland. Michael Brennan has over 25 years’ experience in the mining industry with particular experience at a Senior Management Level in Project and Operations. Previous experience includes the Skorpion Zinc study in Namibia for Reunion Mining LTD and modifications and re-commissioning of the open pit diamond project in Botswana for Mantle Diamonds LTD. Conroy Gold and Natural Resources is a gold exploration and development Company focused on Ireland which is planning to develop its first operational gold mine at its Clontibret Gold Project in County Monaghan.

Deltex Medical Group (LON:DEMG 10.375p / £22.1m)

Leader in oesophageal Doppler monitoring (ODM) has announced an update on trading in the six months ended 30 June 2014. Highlights include US surgical probe sales up over 20 per cent, while international sales were up 11 per cent. UK surgical probe sales were 13 per cent down due to NHS de-stocking, though the Company has seen stronger sales since May. Group sales for statutory reporting purposes are expected to be circa £3.0m (2013: £2.9m).

Epwin (LON:EPWN 100p/c£135m)

Epwin, a vertically integrated manufacturer of extrusions, mouldings and fabricated low maintenance building products, supplying the RMI, new build property and social housing sectors, recently announced its intention to float on AIM. The Group has a strong market presence with revenues in the year to 31 December 2013 of £264m and adjusted EBITDA of £21m. The Group employs in excess of 2,300 people, and operates from approximately 1.2 million sq.ft. of leased production and warehousing space across the UK, with major facilities in Telford, Tamworth, Macclesfield, Scunthorpe, Paignton, Newton Abbot and Northampton. The Group is structured in three primary operating divisions, designed to provide the most appropriate and relevant product offerings for its customers. These are the Building Components Division, Building Products Division and Window Systems Division. The Placing and the Vendor Placing together will raise a total of £94m. The expected net proceeds for the Group under the Placing will be £10m and will be used to repay a proportion of the debt within the business, in combination with new debt facilities raised of £25m. The Placing Price has been set at 100 pence per Ordinary Share, giving a market capitalisation of approximately £135m.

Image Scan (LON:IGE 2.75p/£2.15m)

Image Scan, the specialist supplier of x-ray screening systems to the security and industrial inspection markets, announced that it has signed new contracts totalling £92,400 to provide its security products to organisations in the emerging Asian markets. The contracts demonstrate the successful extension of the Company’s global reach and marketing across the region. The AXIS-64 conveyor x-ray systems will be installed as part of a suite of screening equipment at a new national strategic facility that will be subject to the highest security protection within Myanmar. The AXIS-64 system has been chosen after a validation and testing programme where its UK build quality was a significant factor in the selection criteria. The Company’s FlatScan hand portable x-ray system will be supplied into Vietnam and Bangladesh for the first time. The multi-unit contracts for military customers will see the end users in these territories utilise hand portable digital x-ray systems that are back-packable and quick to deploy. The FlatScan’s inherent wireless characteristic was key to securing contracts with these customers; alternative systems often involve carrying separate wireless network or repeater devices. These FlatScan units will also take advantage of the latest software developments where the systems use colour to differentiate between differing material compositions. The colour demarcations will enable users to quickly and more accurately determine the makeup and hence potential threat of the item that has been x-ray inspected.

Northcote Energy (LON:NCT 0.715p / £8.85m)

Northcote provided an update on its 2014 work programme and the issue of £300,000 zero coupon secured loan notes to further accelerate drilling work at Zink Ranch. Currently production is constrained and work to alleviate this is ongoing and is targeted to be completed in the coming weeks. Zink Ranch will continue to be the focus of activities in July and August and the initial work will include the commencement of a new drill programme: permitting has been submitted on 4 new wells; the first well will spud in July; and activity in neighbouring property highlights the prospectivity of the programme. The new drills will take priority over the recompletions given their expected impact to the 250 BOEPD target. The second phase of the 2014 programme will commence in Q3 and will include the remaining Zink recompletions. Phase two, which will be completed in September/October 2014, is designed to increase production beyond the 250 BOEPD target. The acceleration of the drilling programme at Zink Ranch will be funded by the issue of £300,000 convertible loan notes. Northcote has committed to use the anticipated cash flows from the new production to accelerate their repayment.

Ormonde Mining (LON:ORM 3.75p/£17.66m)

The Board of Ormonde provided an update on progress in connection with permitting of its flagship Barruecopardo Tungsten Project in Salamanca, Spain. In its press release of 29 April, 2014, Ormonde advised that the Authorities in Castilla y Leon had indicated that while the processing of the documentation for the mining concession was in its final stages, a legal review of the historic mining concessions (Barruecopardo was last operated in the 1980’s) was required to be completed, with the conclusion of the permitting process anticipated in late June-July. Ormonde has now been advised that in the legal review to-date, the authorities have not identified any concerns in relation to the cancellation of the historic mining concessions and it understands that the review has now been largely completed. However, a final formal request has been made by the Authorities to obtain comment from the owners of the historic cancelled concessions in relation to the cancellation process, no response having been received in relation to its initial request. A short additional time is required for this step before the review can be completed and the new mining concession issued to Ormonde.

PHSC (LON:PHSC 31p/£3.93m)

The provider of a comprehensive range of health, safety and environmental management service to the public and private sectors has announced FY results to March 2014. Group revenues increased by 31 per cent to £7.6m and EBITDA improved by 22 per cent to £0.73m. Basic earnings per share were up 16 per cent to 4.24p from 3.64p. The proposed final dividend was held at 1.5p per share. As at 31 March 2014, the Company had net assets of £6.44m. Following previous acquisition activity (not in the last reported full year), the board sees 2014-15 as a year of consolidation, with no material changes to overall performance anticipated. With the last of the acquisition payments due to be made by the end of 2014, there is scope to begin to accumulate a more comfortable level of cash reserves.

Progility (LON:PGY 7.37p/£14.72m)

Progility, the project management services group, recently announced that it has acquired the entire share capital of Starkstrom Group Limited for an aggregate consideration, payable in cash and loan notes, of £9.68m from its owner managers. Starkstrom is the holding company of, Starkstrom Limited, a UK based project management services’ company specialising in manufacturing and supplying medical infrastructure equipment for operating theatres and intensive care units. In its last audited accounts for the year ended 31 May 2013, Starkstrom generated revenues of £13.7m, made a profit before tax of £1.8m and had net assets of £4.9m. This acquisition formally establishes Progility’s healthcare division as a provider of project management services and solutions to hospitals. Currently, Progility Technologies Pty Ltd. is providing communications and systems integration products and services to hospitals in Australia and the Directors believe that there is significant cross over with the technology being employed by Starkstrom’s complete solutions for operating theatres and intensive care units. The transaction creates scope for collaboration on product development and the opportunity to use Progility’s international reach to extend Starkstrom’s business beyond the UK into the Middle East and Australasia.

Shaft Sinkers Holdings (LON:SHFT 6.375p/£3.03m)

The Company has endured a challenging first half of the year as a result of previously announced issues related to South Africa and the continuing cost of litigation arising from the outstanding dispute with EuroChem. As announced on 19 May 2014, the Company has been pursuing a number of initiatives to address cash flow issues including the deferral of non-essential expenditure, the disposal of assets and surplus property and improvements to the recovery cycle of receivables. Since May the Company’s cash position has further deteriorated to the extent that it is has engaged with various parties regarding the urgent provision of new financing to satisfy near-term liquidity requirements. Negotiations with these parties relate to various financing methods, as well as the disposal of certain assets, and are continuing with the objective of preserving value for shareholders whilst also enabling the Company to continue trading.

Sprue Aegis (LON:SPRP 253p/£115.11m)

Sprue issued a trading update for the six months ended 30 June 2014. The Company’s quote moved to AIM on 30 April 2014. At the same time, the Company raised £8.0m by way of a placing of new shares with institutional investors at 200p each. H1 2014 has seen another record period of trading for Sprue, reflected in sales of £23.8m up 11 per cent on the same period last year. The Company has continued to benefit from strong operational leverage and operating profit – pre-exceptional costs – are expected to be significantly higher than H1 2013. The Group’s balance sheet remains strong with approximately £11.7m of cash and no debt as at 30 June 2014. The Company is pleased to confirm that Nano-905, the miniaturised version of the Group’s existing carbon monoxide sensor, has passed all final certification testing and can now be installed in Sprue’s carbon monoxide detectors due to be sold during H2 2014.

Thalassa Holdings (LON:THAL 180.5p/£45.25m)
THAL trading update

Thalassa announced that it expects to release interim results for the first six months to 30 June 2014 during early September 2014. The Company has experienced good trading in the year to date and continues to experience healthy levels of order enquiry. Accordingly the Board remains confident that Thalassa will deliver another satisfactory performance for the year ending 31 December 2014. The Board also announced that it intends to lease new Group headquarters near Warminster, Wiltshire. Duncan Soukup, Chairman of Thalassa said: “We continue to be encouraged by the level of order enquiries that we are experiencing for our disruptive PMSS(TM) technology.

The Mission Marketing Group (LON:TMMG 49p/£37.7m)

The Mission Marketing Group, the national marketing communications and advertising group, issued a trading update ahead of its interim results for the six months ended 30 June 2014, to be announced in September. Trading for the first half of 2014 has been in line with management’s expectations, with revenue and profit both expected to be ahead of the equivalent period last year. The group’s net debt fell from £10.7m at 31 December 2013 to less than £8m as a result of strong cash flow which is typically experienced in the first half of the year, and the group’s leverage ratio continued its downward trend, falling below x1.25 at 30 June 2014, thereby triggering a further reduction in interest rates. The group’s recent ventures (April-Six’s new San Francisco office, the acquisition of specialist medical Agency Solaris and, most recently, the establishment of a Singapore office) are all developing nicely, and ‘The Mission’ continues to explore opportunities to further extend its range and reach in response to Client demand. Results for the year to 31 December 2014 are again expected to have a bias towards the second half and the Board remains confident of further progress for the full year.

Telit Communications (LON:TCM 225p/£255.2m)

Telit, a specialist in machine-to-machine (m2m) communications has provided an H1 to June 2014 trading update and full year outlook. Telit expects H1 revenues will be approximately $138m up 27.2 per cent. Net debt at 30 June 2014 is expected to be approximately $15.9m (31 December 2013: $11.7m) reflecting the acquisition of the Automotive Telematics Onboard unit Platform (ATOP) and the growth in working capital supporting the increase in revenues. The revenues for the first six months are expected to include $9.2m (6 months 2013: $2.4m) generated from the Company’s Platform as a Service (PaaS) through its m2mAir division, which represents a year on year growth of 283 per cent. Telit expects that trading for the full year 2014 will be in line with market expectations.

*A corporate client of Hybridan LLP

A full archive of previous weeks’ Small Cap Wraps can now be viewed on

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.

8th July 2014

This week: Cello adds another string to its bow, Akers Biosciences on the march into India, DDD enters the next dimension in smartphone galleries

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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.

AKR agreement to market Rapid Tests to Indian military,CLL AGM hails strong trading and acquisition,COS new clinical trial and scientific adviser,DDD launch of TriDef 3D Gallery app,EDEN Mexican patent,EKF AGM statement and new line of women’s products,LID study results,MIRA trading update and major contract win

Abzena (LON:ABZA 80p/c£77.9m)

Abzena, a revenue-generating life sciences company providing services and technologies that enable the development of better biopharmaceutical products, has conditionally raised £20m by way of a placing of 25,000,000 new ordinary shares at 80 pence per share in conjunction with the forthcoming admission of its ordinary shares to trading on the AIM. At the placing price, the market capitalisation of Abzena on admission will be approximately £77.9m. Abzena’s mission is to enable R&D companies to develop better biopharmaceutical products – e.g. therapeutic antibodies and proteins – with one or more of the following attributes: better efficacy, fewer side effects, more predictable quality and/or improved patient compliance. Over 70 per cent. of the revenue of the world’s top ten selling medicines is derived from biopharmaceuticals including the world’s largest selling drug, HUMIRA®. Worldwide revenue from biopharmaceutical products was $169bn in 2012 and this figure is forecast to exceed $220bn in 2017.

Cambridge Cognition Holdings (LON:COG 60p / £10.13m)

Cambridge Cognition Holdings, which specialises in computerised neuropsychological tests including those enabling the acceleration of safe and effective medicines in drug development, provided a trading update for the six months ended 30 June 2014. Cambridge Cognition has traded well in the first half of 2014 and the Directors remain confident of achieving full year expectations. Revenues for the six months ended 30 June 2014 are expected to be circa 25 per cent ahead of the same period last year at approximately £2.5m (H1 2013: £2.0m) and a strong pipeline has been built for the second half. The recent announcements by the Company’s Clinical Trials division, Cantab Solutions, of certain significant contract wins provides the Directors not only with the confidence that they can return the Company to growth in this year but confirms that the strategy of focusing on drug characterization and Human Abuse Liability can deliver higher quality and predictable revenues. Furthermore, the announcement of the Company’s appointment to participate in a global multi-year study focused on drug characterisation, is an indication of the demand for Cambridge Cognition’s technology. The Cantab Research product has also had a strong first half reflecting the benefits of the targeted approach to academic institutions now being adopted following the introduction of a structured commercial team. The Company’s understanding of the potential of Cantab Mobile continues to grow. The Cantab Mobile products in deployment will have soon completed 10,000 patient assessments, the results of which will be used as part of a major review prior to instigating the second phase of the UK commercial journey.

Jaywing (LON:JWNG 29p/£21.61m)

Jaywing, the digital marketing specialists, reported a statutory loss of (£4.8m) in the year ended 31 March 2014 (2013: £0.6m profit). The adjusted operating performance line, before interest, tax, depreciation, amortisation, share based payment charges, loss before tax on disposal, exceptional items and acquisition related costs, shows consistent EBITDA of £2.9m (2013: £3.0m). During the year, the Group continued its restructure with the disposal of its eCommerce integration business Tryzens in October 2013 and the acquisition of Leeds based search specialists Epiphany Solutions in March 2014. The underlying business excluding these two entities delivered operating profits of £2.3m (2013: £2.5m) which was in line with internal budgets. The business will operate in two divisions going forward: Agency Services and Media & Analysis, the latter comprising the ongoing former Consulting division (following the removal of Tryzens) and Epiphany. The segmental performance of our business in these two practice areas is shown in Note 1, together with the comparative performance from the previous year.

JQW (LON:JQW 79p/£152.9m)

JQW, a domestic Chinese B2B e-commerce operator, announced that it has launched, its English Language B2B e-commerce platform which has been developed to attract international members as well as to promote the Group’s fee-paying members in China to a global market. The Group has established as a B2B e-commerce platform in English to allow certain of the JQW’s premier members and other new quality local suppliers to consider expanding their sales internationally. Chen Daocai, Chief Executive Officer of JQW, said: “The launch of our international B2B e-commerce platform is a significant step in the Group’s corporate development and we are pleased that it has been delivered on time and on budget.” We believe that the commission generated through will deliver a new source of income for the Group and will provide increased revenues for both our members and JQW as a whole.”

MediaZest (LON:MDZ 0.22p / £2.01m)*

MediaZest, the creative audio visual company, provided shareholders with a general update on trading. MediaZest successfully executed on its multi-national contract with Coca-Cola for FIFA World Cup; significantly improved revenue for year ended 31 March 2014 to its highest level since 2008; increased investment in sales and marketing creating a strong pipeline of projects; and has grown strategic relationships with blue chip customers such as Samsung, O2 and Pfizer which has made a difference. In the period, MediaZest also has a new strategic relationship with SFD; and has addressed the repayment of shareholder debt following a successful fundraising in December 2013. The Company said that its pipeline is building well, and an enormous amount of work has gone into targeting larger scale opportunities with the potential to roll out over the coming years and to deliver long term shareholder value.

MoPowered Group (LON:MPOW 26.25p/ £4.18m)

MoPowered, the mobile commerce company, announced that Ben Carswell, Finance Director, is stepping down from the Board and leaving the Company with immediate effect. The search for a new Finance Director has already been initiated and an announcement concerning his successor will be made in due course. In the meantime, appropriate interim arrangements are in hand.

Nordic Energy (LON: Nordic Energy TBC/TBC)

Nordic Energy, an oil and gas E&P Company focused on Denmark, Norway and the North Sea sectors of the Netherlands and the UK (the Nordic Area), recently announced its plans to move to AIM from the ISDX Growth Market. As the Company reaches an important point in its development following the announcement of its CPR on 13 June 2014 and the commencement of farm out discussions, it believes a move to AIM is the next logical step, providing a broader investor audience and platform for further growth. The Board believes that admission to AIM will assist the Company in attracting investors, improve liquidity in its shares and allow it to raise additional capital when required. Preparation for the move to AIM, together with an associated placing in which the Company will seek to raise additional funds, is underway albeit this remains at a relatively early stage. An admission document in relation to the AIM admission will be published in due course.

One Media iP Group (LON:OMIP 16p/£11.3m)

The digital media content provider announced the US$1.6m purchase (from existing cash resources) of the Masters and all assets for the classic music catalogue known as ‘Point Classics’. The deal comprises over 4,000 classical recordings and all corporate logos, registrations and distribution rights. The rights to the Point Classics catalogue have been owned by Telos/Point Classics since its acquisition in 2000 and a solid profitable income stream for the content has been built. Michael Infante CEO & Chairman of One Media, said: “This is a significant rights acquisition accompanied with an earnings enhancing income from the outset. It further boosts our presence in this sector alongside the Red Note Classics collection that we acquired in 2011. Our library of classical music will now be one of the leading digital libraries worldwide.”

Premaitha Health (LON:NIPT 14.25p/£26.8m)

Premaitha Health (formerly ViaLogy), a molecular diagnostics company employing next generation DNA analysis technology to develop, manufacture and sell molecular diagnostic products intended to have a major beneficial impact on human health, recently announced its first day of dealings on AIM. Premaitha is responsible for the development, manufacture and commercialisation of their diagnostic products and works with partners to provide the instrument platforms needed by its laboratory customers. Premaitha Health was established in 2013 and is located on Manchester Science Park, Manchester, UK. Premaitha’s first product is the IONA® test which is the first CE marked non-invasive in vitro diagnostic product for prenatal screening. The IONA® test is a complete diagnostic system that is simple and standardised, enabling Premaitha’s clinical laboratory customers to perform the test in their laboratory, using existing clinical workflow. A fundamental element of the IONA® test is exceptional technical support and customer service. The IONA® test is non-invasive, simple and accurate, and is designed to encourage the broad uptake of the technology allowing all pregnant women accurate and safe information about their pregnancy. The Company raised £7.2m by way of a placing and open offer at a price of 11 pence per share. The proceeds of the placing and open offer will be used to commercialise the IONA® test and provide capital for the enlarged group’s sales and marketing initiatives.

Proteome Sciences (LON:PRM 38.5p/£82.43m)

Proteome Sciences recently announced publication of a study it has co-authored with King’s College London in which a set of ten proteins in the blood have been identified which can predict the onset of Alzheimer’s disease. The study which analysed over 1,000 individuals is the largest of its kind to date and marks a significant step towards developing a blood test for the disease. There are currently no effective long-lasting drug treatments for Alzheimer’s, and it is believed that many new clinical trials fail because drugs are given too late in the disease process. A blood test could be used to identify patients in the early stages of memory loss for clinical trials to find drugs to halt the progression of the disease.

Sareum Holdings (LON:SAR0.55p/£10.51m)*

The specialist cancer drug discovery and development business announced a patent grant by the Japan Patent Office for one of Sareum’s key drug discovery inventions. This patent, relating to compounds that inhibit or modulate the activity of kinase enzymes, forms the basis of Sareum’s SKIL® drug discovery platform. The granting of this patent means that Sareum has approved patent protection in the Japan for SKIL and many of its drug discovery programmes. The Company expects to receive similar protection in Europe and other major markets in due course. SKIL (Sareum Kinase Inhibitor Library) has so far produced the Company’s Aurora+FLT3, Aurora+ALK VEGFR-3, FLT3 & TYK2 kinase cancer and auto-immune disease research programmes. SKIL can also generate drug research programmes against other kinase targets. Sareum’s CSO, Dr John Reader, commented: “The granting of this patent in Japan strengthens our patent portfolio, and enhances our negotiating position with potential licensing partners”.

Stadium Group (LON:SDM 67p/£19.08m)

Stadium Group, a leading electronic technologies group, provided a pre-close trading update for the six months ended 30 June 2014. The Board announced that trading in the first half of the year is in line with management expectations, and is significantly ahead of the equivalent period last year. Consequently, the Board remains confident about prospects for the year. Stadium will announce its financial results for the six months ended 30 June 2014 on Tuesday, 9 September 2014.

Trakm8 Holdings (LON:TRAK 78p/£22.46m)

Trakm8, the designer, developer and manufacturer of GPRS based hardware and software for the vehicle placement and security market, noted the announcement made on 7 July 2014 by Belgravium Technologies and confirmed that it has made a preliminary approach for Belgravium. There can be no certainty that an offer will be made, nor as to the terms on which any offer might be made. A further announcement will be made as and when appropriate.

XL Media (LON:XLM 56p/£106.2m)

The provider of digital performance marketing services which IPO’d in March, announced that it has acquired a leading Scandinavian website network within the online gaming sector for a cash consideration of US$2.3m. The acquisition is expected to be earnings accretive during the year ending 31 December 2014. The network reviews a large number of online casino and poker websites, mainly in Denmark, generating high value added content. This enables it to refer significant amounts of customers to its partner brands. The acquisition follows two acquisitions of domains in the North American market during H1 2014, also aimed at extending into new territories and further establishing a presence in fully regulated markets.

*A corporate client of Hybridan LLP

A full archive of previous weeks’ Small Cap Wraps can now be viewed on

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.

2nd July 2014

This week: DJI eyes the jackpot on AIM, Petards wins big with Siemen, Sareum TYKs the box, Hurricane strikes in Shetland and Turkish Delight for Ariana

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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.

AAU Turkish incentives, DAIS final results, DJI Holdings intention to float on AIM, HUR successful test, Jiasen intention to float on AIM, LPA half yearly report, LWRF distribution agreement, MPOW trading update, ODX mHealth partnership in Sub-Saharan Africa, OPAY acquisitions, PEG contract win from Siemens, SAR preclinical proof of concept, SEE sets out industry sector roadmap, SHG operational update, TILS licensing agreement, 7DIG re Blackberry

Ariana Resources (LON:AAU 0.8p/£5.2m)

The Anglo-Turkish gold exploration and development company confirmed receipt of several key investment incentives from the Turkish Government for its planned Kiziltepe Gold-Silver Mine. The incentives secured include: 100 per cent exemption from customs duty domestic and foreign machinery and equipment, 80 per cent reduction in corporation tax up to a tax limit of 40 per cent of the capital investment, social insurance contributions for all mine employees will be paid by the Turkish Government for seven years, interest repayment support on any Turkish Lira or foreign currency loan secured by the company, VAT exemption, and domestic and foreign machinery and equipment.

Daily Internet (LON:DAIP 2p/£8.55m)

Daily Internet, the hosting and cloud infrastructure as a service (IaaS) provider, announced its final results for the financial year ended 31 March 2014. Revenue increased by 49 per cent to £2.33m (FY 2013: £1.56m) including £0.68m revenue from Netplan for the 4 and a half months to 31 March 2014 and Adjusted EBITDA loss reduced to £0.05m (FY 2013: loss £0.17m). Cash and cash equivalents were £1.00m (FY 2013: £0.37m) Abby Hardoon, CEO, commented: “I am delighted with the progress made by the Group during the year to 31 March 2014, a period in which we experienced solid growth and successfully executed a number of acquisitions. These have increased our customer base, improved our product set and resulted in higher ARPU. Looking forward we expect to benefit through extracting further synergies from these acquisitions, particularly as we are now able to fully integrate Netplan following the early payment of the earn-out. We will continue to target small internet hosting businesses for consolidation as well as larger acquisitions with higher revenues per customer to enhance our high-end product range and extend our reach into new markets with new brands. We hope to be able to provide further updates in this regard in due course and we are confident of delivering further growth in the year ahead.”

DJI Holdings (TBC/TBC)

DJI Holdings, a licensed distributor and promoter of regulated lottery products in the Chinese lottery market, recently announced its intention to float on AIM. The Group is a licensed and authorised distributor and promoter of regulated lottery products in the Chinese lottery market. The Company’s strategy is to capitalise on the opportunity to deliver lottery ticket fulfilment sales to its substantial client base of large Chinese corporations (B2B) and individual consumers via the Group’s owned and operated websites (B2C) within the online and mobile environment. Through the Group’s long-standing relationships with the Chinese regulators, portfolio of lottery contracts and reliable technology platform, the directors believe the Group is well-positioned to capture the market opportunity. The principal activities of the Group are the development, promotion and distribution of authorised lottery products in China. DJI’s subsidiaries are licensed and/or contractually authorised to distribute and promote Sports and Welfare lottery products online, via mobile and through physical retail outlets across China. The Group has a differentiated approach to the Chinese lottery market in that DJI operates throughout the promotion and distribution value chain. The Group offers front-end lottery ticket sales via websites owned and operated by the Group, third party websites, mobile applications and physical retail outlets; and back-office lottery ticket fulfilment services to large online and offline retailers. The Offer will seek to raise gross proceeds of up to £30m via a placing of new ordinary shares.

Hurricane Energy (LON:HUR 51.25p/£324m)

The UK-based oil and gas company focused on hydrocarbon resources in naturally fractured basement reservoirs announced that it has successfully completed the testing phase of its key horizontal appraisal well in the Lancaster fractured basement oil discovery West of Shetland. The well will be suspended as a future producer. Both natural (5,300 STB/D) and artificial lift (9,800 STB/D) flow rates were at the upper end of company estimates. Dr Robert Trice, CEO of Hurricane, commented: “I consider this year’s operational result to be major step in further de-risking the Company’s 2C Contingent (444-470MMboe) and P50 Prospective (432-442MMboe) resources and very important as we seek to enhance shareholder value. This successful outcome reinforces the potential importance of basement resources as a strategic resource for the UK.”

Jiasen International (TBC/c£100m)

Jiasen International, a designer, manufacturer and wholesaler of wooden home furnishing, high-end solid wooden doors and other wooden design solutions to both the domestic Chinese and overseas market, recently announced its intention to float on AIM. Quanzhou Jiasen Wood Co. is the Group’s operating subsidiary in the People’s Republic of China (PRC). Jiasen (PRC) was established in 2001 and is based in Quanzhou City, Fujian province, located in south-eastern PRC. Its products are sold and marketed under the ‘Fuyou’ brand and produced in its 83,000 sqm factory in Nan’an City, Fujian province by its workforce of more than 1,400 employees. The Group’s products include doors, wall panels and assorted fixtures, such as fitted wardrobes, cupboards and skirting boards, and furniture which are sold principally to property development projects, through branded ‘Fuyou’ retail stores and to export markets to retailers such as B&Q in the UK. In the year ended December 31, 2013, the Group generated revenue of RMB782.8m (circa £77.2m) and net profit after tax of RMB177.8m (circa £17.5m). Admission is expected to take place in the first half of July 2014 and the total expected market capitalisation of the Company at Admission will be approximately £100m.

LightwaveRF (LON:LWRF 41p/£4.5m)

LightwaveRF announced signing Heads of Terms with Neonlite Electronic & Lighting (HK) to distribute the LightwaveRF range of wireless lighting controls to Neonlite’s distribution network across 84 countries under their Ingenium brand. Under the terms of the agreement Neonlite, who showed the products at the recent Frankfurt and Hong Kong Global Lighting shows, will manage the full sales, marketing and branding of a wireless lighting control product range including the LightwaveRF Wi-Fi hub. This allows real-time remote control and monitoring via the Company’s ‘Internet of things’ Cloud services. The agreement follows the new business model with product being supplied for cash ex works therefore requiring no working capital.

LPA Group (LON:LPA 110p/£13.02m)

The LED lighting and electro-mechanical system manufacturer and distributor announced its results for the six months to 31 March 2014. Revenues were £7.97m vs. £8.65m and profit before tax was £186,000 (2013 restated: £176,000). The interim dividend was raised to 0.7p from 0.6p. The statement referred to a number of significant orders including £1.6m for a contract for French Railways (previously estimated at £1.4m). LPA has yet to book approximately £7.0m of the Intercity Express Programme and around £2.5m in respect of two Aerospace programmes for which it has been selected. It describes the UK rail sector as buoyant and expects to close the year with an order book at record high levels.

MoPowered Group (LON:MPOW 36p/£5.73m)

MoPowered, the mobile commerce specialist, grew revenues in the six months to 30 June 2014 to in excess of three quarters of a million pounds. This growth of over 60 per cent from the second half of 2013 represents less of an increase than had been anticipated. After a strong first quarter, some of the larger deals which the Group had expected to complete in the second quarter of 2014 have now slipped into the second half of the year which will impact the expected results for 2014 as a whole. As previously announced, the rate of launching live mobile sites for smaller SME customers has been lower than expected due to operational constraints and challenges in acquiring these customers cost-efficiently. Consequently, growth in the Group’s recurring revenues, and therefore revenues as a whole, will be more modest than had been expected for 2014 and beyond. The Company reported that overall market conditions for sales of mobile commerce solutions remain strong and MoPowered continues to build up distinct competitive advantages that are attractive to new customers and give confidence for the long-term.

Omega Diagnostics Group (LON:ODX 19.75p/21.48m)

Omega, the medical diagnostics company focused on allergy, food intolerance and infectious disease, announced it is one of the collaborating partners with the Groupe Speciale Mobile Association (GSMA). This collaboration, which was announced in Johannesburg on 30 June 2014, will connect the mobile and health industries to develop commercially sustainable mHealth services that meet public health needs. Omega has developed a mobile App in connection with its Visitect® CD4 test which is currently undergoing Beta evaluations in Kenya and India. The App has been designed to enable the transmission of results from remote village locations to databases controlled by Ministries of Health.

Optimal Payments (LON:OPAY 424.5p/£684m)

Optimal Payments has entered into a definitive agreement to acquire all of the partnership interests of California based payment processing entity TK Global Partners LP (Trading as Meritus) for consideration of $210m consisting of $150m in cash and $60m of Optimal Payments shares (issued in equal tranches over four years commencing on the first anniversary of the closing date), subject to customary closing adjustments. Optimal Payments has also entered into a definitive agreement to acquire the trade and assets of Global Merchant Advisors, Inc. (GMA), a US based online payments company, for up to $15m in cash, $10m of which is payable on closing and the balance based on future performance of the business. Completion of both acquisitions are conditional on one another and subject to customary closing conditions. Closing of the acquisitions is expected to occur early in the third quarter of 2014.

Petards Group (LON:PEG 10.75p/£3.70m)*

Petards, the developer of advanced security and surveillance systems, announced that it has signed a framework agreement to supply Siemens Sector Infrastructure and Cities, Rail Systems Division, with Petards’ train related products and services. The agreement is for an initial five year term renewable annually thereafter and covers the world-wide Siemens business whose portfolio comprises the entire Siemens rail vehicle business ranging from locomotives, commuter, regional, intercity and high-speed trains, metros, light rail vehicles and automated people movers to passenger coaches for inter-city rail service and electric bus systems for cities as well as related services and maintenance. Petards has also secured its first order under the agreement to supply Siemens with Petards eyeTrain on-board digital CCTV systems for the new super high-speed Velaro type trains Siemens are building for the Turkish State Railway who have announced plans to procure up to a further 90 high speed trains in the future. The equipment to be supplied will provide CCTV coverage of the internal saloon areas, the drivers cab as well as “day/night” track monitoring. Petards systems will also provide the trains with Driver Only Operation (DOO) capability. The order, worth in excess of £1.5m, will be fulfilled and supported from Petards facility in Gateshead. Engineering activities have already commenced and equipment deliveries are expected to commence in the second half of 2014 and to be completed by the end of 2015.

Sareum Holdings (LON:SAR 0.535p/£10.22m)*

Sareum, the specialist cancer drug discovery business, announced that Melissa Works, Ph.D. of SRI International will present the latest data from the Sareum/SRI collaboration that is developing TYK2 kinase inhibitors as treatments for inflammatory diseases at the Federation of Clinical Immunology Societies (FOCiS) conference. The oral presentation, “Inhibition of TYK2 and JAK1 Ameliorates Imiquimod-induced Psoriasis-like Dermatitis by Inhibiting IL-22 and IL-23” describes recent proof of concept studies undertaken by SRI scientists on Sareum’s lead compound SAR-T29. In a mouse model of psoriasis, inhibition of TYK2 and JAK1 kinase by treatment with SAR-T29 significantly reduces inflammation and disease severity. The FOCiS conference, held this week in Chicago, attracts leading immunology and inflammatory disease researchers and clinicians from across the globe. Sareum and SRI International entered into a co-development agreement to develop TYK2 inhibitors for autoimmune and inflammatory diseases in April 2013

Seeing Machines Ltd (LON:SEE 5.75p/£47.3m)

Seeing Machines, which has a focus on operator monitoring and intervention sensing technology and services, announced that it expects to deliver full year revenue through to 30 June 2014 approximately 40 per cent ahead of the prior year, driven by sales to both mining and transport customers. Following on from the £16m fundraising in November, the Company plans to expand into new sectors where its protection systems against fatigue and distraction are geared towards untapped opportunities. The target sectors are Mining, Automotive, Commercial road transport, Rail and Simulators. The significant investment in activities identified to accelerate growth in future years is expected to result in reported losses before tax for both the 2013/14 and 2014/15 financial years as expected. The Company expects to have sufficient capital to achieve the targeted levels of revenue growth and subsequently group profitability.

Shanta Gold (LON:SHG 13.5p/£62.6m)

Shanta Gold, the East African focused gold production and exploration Company, recently announced that the Elution and Electro-Winning circuit at its New Luika mine has been fully commissioned and has been operating successfully over the past month. The Company also confirmed that a drilling campaign designed to extend the life of mine at New Luika has commenced with 2,920 metres of drilling expected to be completed in July 2014 with an updated resource statement to be released in Q3 2014. An immediate observation has been an improvement in gold recoveries of 2 per cent to 87.2 per cent and as management better understand the process, in particular the handling of the much higher quantities of silver, further benefits in terms of recoveries and costs are anticipated. Silver recovery has improved by 40 per cent and carbon usage has decreased as anticipated. Management are anticipating additional revenue of approximately $1.5m and cost savings versus the incineration process of approximately $8 per ounce attributable to the new circuit in the second half of 2014. The construction of the new crushing circuit is progressing well and the Company anticipates that commissioning of this plant will commence in late August. Cost savings through the removal of rented equipment are expected to be approximately $20 per ounce. As part of Shanta’s programme to extend the life of mine at New Luika, the Company has embarked on a drilling program with 1,500m of RC and 1,420m of diamond drilling (RC Pre-collar) which is expected to be completed in July 2014. The drilling is focused on upgrading additional resource from Inferred to Indicated at Bauhinia Creek and Luika. Some exploratory drilling will also be completed at the attractive Ilunga target to establish if this high grade ore body is open at depth. Seven holes have been completed to date at Luika with positive mineralisation noted in all holes. It is anticipated assay results will be available from mid-July and the Company will notify the market as information is made available with a planned updated resource statement to be announced in Q3 2014.

Tiziana Life Sciences (LON:TILS 46.12p/£39m)

Tiziana Life Sciences, the UK biotechnology company, recently announced that it has entered into an exclusive license agreement with TTFactor S.r.l., acting on behalf of the FIRC (the Italian Foundation for Cancer Research), Institute for Molecular Oncology (IFOM), and the European Institute of Oncology (IEO), covering the use of twenty defined stem cell markers (the TOP 20) for patient stratification in breast cancer. The TOP 20 model is a gene expression signature capable of predicting disease aggressiveness and prognosis in breast cancer patients. It is different from all other signatures available today because it is derived from cancer stem cells and therefore it predicts cancer behaviour based on its stem cell content. The TOP 20 genes have been defined based on published expression profiles of breast stem cells, and further selected based on their levels of expression and likelihood of reduction into practice for patient stratification in breast cancer. The inventor of the TOP 20 model, Professor Pier Paolo Di Fiore, a physician and specialist in molecular oncology and cell biology, is a consultant to Tiziana and a member of Tiziana’s Scientific Advisory Board. Under the terms of the licensing agreement, Tiziana will pay the Licensor €600,000 over 4 years to fund research to create or enhance technologies to assist in the development and commercialisation of products and services derived from the TOP 20 genes. In return for an exclusive license to patents on the TOP20 genes, Tiziana will pay the Licensor inter alia a royalty rate of 1.5 per cent based on commercial sales of any products developed under the license agreement.

7digital Group (LON:7DIG 14.5p/£15.58m)

7digital provided an update to the market following the decision by BlackBerry to close the music and video sections of BlackBerry World and replace it with the Amazon Apps Store. Management does not anticipate that BlackBerry’s decision will impact current market expectations for the financial performance of 7digital. The Company continues to work with BlackBerry under its existing contract which provides for the continuation of a music service in the event that Blackberry were to close its own music store. 7digital understands that it is BlackBerry’s intention, after the closure of its own storefront, to continue to provide its users with access to the music they have stored in their ‘lockers’ using the Company’s services. 7digital is also working with BlackBerry on an alternative solution for the purchase of new music and will update the market further when the specifics have been agreed.

*A corporate client of Hybridan LLP

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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.