News blog

AIM 50 Digest 5 August 2022

BY: Andrew Hore |
POSTED: 05/08/2022 |

North Sea-focused oil and gas producer Serica Energy (SQZ) rejected an increased potential offer from fellow AIM-quoted oil and gas producer Kistos (KIST), whose management was previously in charge of North Sea assets consolidator RockRose. The Serica Energy board says that the offer does not reflect the value of the underlying assets or their potential. Serica Energy is highly cash generative and there is potential from exploration drilling at the North Eigg prospect.
The new offer is 0.4 of a Kistos share plus cash of 213p a share – 67p of cash coming from Serica Energy’s own coffers and the rest from Kistos – for each Serica Energy share. That was 425p per Serica Energy share based on a Kistos share price of 530p, although it has risen to 540p. The Serica Energy share price is 378.5p.
The original offer was 0.2932 of one of its shares and 246p in cash – 67p from Serica Energy’s cash and 179p paid by Kistos. The main differences between the offers are less cash and that Serica Energy shareholders would end up with 58% of the enlarged business rather than 50%. The value of the offer is around 11% more than the previous one, depending on the Kistos share price. Serica Energy previously made an alternative offer for Kistos of 90p a share in cash plus 1.29 Serica Energy shares. That was also rejected by Kistos.
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Floorcoverings supplier James Halstead (JHD) says that increased demand is being offset by higher costs. Revenues are nearly 10% higher at £290.4m and management is investing cash in increasing stock levels. There is a trend towards vinyl from other floor coverings. Price increases and delivery surcharges, but they have lagged cost rises. Net cash is estimated to be £45.1m at the end of June 2022. WH Ireland has trimmed its 2021-22 earnings forecast by 4% to 9.2p a share, which is down from 9.6p a share.
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Soft drinks maker Nichols (NICL) had a strong first half in the UK due to a recovery in the Out of Home business, although there was a decline in international revenues. In the six months to June 2022, revenues were 19% ahead at £80.2m and underlying pre-tax profit was 27% higher at £11.3m. That excludes the £1.2m charge for the operational change programme. Share buy backs reduced the cash pile to £49.2m. The interim dividend was increased from 9.8p a share to 12.4p a share. Vimto continues to outperform the soft drinks market in the UK. There are inflationary pressures for ingredients and packaging and management is trying to mitigate these effects. Expectations for the full year are unchanged.
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Peel Hunt has initiated research on ITM Power (ITM) and the broker believes it is in a good position to be a leader in the electrolyser market. Peel Hunt has set a target price of 500p. Sheffield-based ITM Power develops and manufactures electrolyser technology that can produce hydrogen from green sources. Peel Hunt believes that ITM Power could become profitable in the year to April 2025. That is based on forecast revenues of £233.8m. Cash could still be around £135m by the end of April 2025, if the forecasts are proved correct.
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Fuel cell technology developer Ceres Power (CWR) says six months revenues should be £10m, down from £17.4m. There is cash of £221m. The completion of China joint venture contracts with Bosch and Weichai and associated licence fees should be included in the second half of 2022.
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Cosmetics supplier Revolution Beauty (REVB) is the latest of the crop of 2021 AIM new admissions to put out a trading warning that has led to a share price slump. Revolution Beauty has delayed its 2021-22 results and cut its expectations for 2022-23. Poor retail demand in the US and the loss of £9m of Russian and Ukraine revenues have hit the early part of the new financial year. Online demand is switching to store sales and cost increases have hit profitability. Zeus has cut its 2022-23 EBITDA forecast by 38% to £19m, while higher net debt means that earnings are reduced by 64% to 1.5p a share.
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Smart Metering Systems (SMS) says interim EBITDA was slightly higher than forecast, helped by a better than expected performance of the Burwell grid-scale battery project. There is an increasing battery pipeline. Index-linked annual recurring revenues increased 8% to £93.1m. This covers 1.9 million meters. The meter installation pipeline is 2.42 million with a current average install rate of more than 40,000 per month.
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Video games services provider Keywords Studios (KWS) says that interim revenues were one-third higher at Euro320m and pre-tax profit will be 36% ahead at Euro54m. The trading statement led to an 8% earnings upgrade to 100.8 cents a share.
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Mortgage Advice Bureau (MAB1) says interim revenues were 3% higher at £95m even though transactions are taking longer. This is before the completion of the acquisition of The Fluent Money Group. Mortgage Advice Bureau increased its stake in protection and general insurance advice firm Vita Financial from 49% to 75%.
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Gamma Communications (GAMA) continues to grow in line with expectations. Germany had a strong first half, offsetting a weak performance in Spain. Inflationary increases are being managed.
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Ergomed (ERGO) is on course to meet 2022 expectations. Interim revenues are 25% ahead at £69.9m and there was £12m in the bank at the end of June 2022. The clinical research and pharmacovigilance services provider has an order book worth £284.5m. Finance director Richard Barfield sold 25,000 shares at 1170p each.
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CVS Group grew like-for-like sales by 8% in the year to June 2022. Operating profit is ahead of forecasts. Peel Hunt increased its 2021-22 earnings forecast for the veterinary practices owner by 3% to 82.7p a share and the 2022-23 figure by 4% to 87.5p a share. The number of vets has increased and there is a pipeline of potential acquisitions, even though one acquisition in southern England had to be unwound. There are still plenty of consolidation activities. Like-for-like sales growth is expected to be 7% in the current year. There is a capital markets day scheduled for 8 November.
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Volumes continue to improve in the catering and hotel linen division of Johnson Service Group (JSG) and group interim revenues recovered from £99.6m to £176.2m. Workwear revenues grew by 2%. Like-for-like group revenues are not far behind the level in the first half of 2019. Energy prices are predominantly fixed well below current levels. Net debt was £22.3m at the end of June 2022. Full year pre-tax profit is expected to recover from £9.4m to £36m this year as volumes build and then rise to £47.2m in 2023. An interim dividend should be announced in September.
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Building materials sector consolidator SigmaRoc (SRC) reassured investors and said that earnings per share are 35% ahead in the first half. This was boosted by a contribution from Nordkalk, which was acquired last year. The second half has started well, although forecasts are being maintained.
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Pantheon Resources (PANR) says drilling of the Alkaid #2 pilot hole has reached a measured depth of 8,950 feet and there have been multiple oil-bearing reservoirs. There could be a material upgrade of the current resource.
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Learning Technologies Group (LTG) says that first half revenues will be at least £280m, which represents organic growth of 5%. Operating profit should be more than £43m. The interims will be published on 22 September.
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Oil and gas company i3 Energy (I3E) has completed the farmout of a 25% working interest of the Serenity discovery in the North Sea to Europa Oil and Gas, who will fund 46.25% of the cost of an appraisal well costing up to £15m. A dividend of 0.1425p a share will be paid by i3 Energy in September.
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Big Technologies (BIG) finance director Daren Morris has acquired 40,000 shares at 230p each, taking his shareholding to 400,000 shares. CentralNic (CNIC) managing director Donald Baladasan sold 50,000 shares at 130.5p each and 55,431 shares at 125.2848p each. The cash will settle tax liabilities relating to share options.

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