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.
7digital Group (LON:7DIG 10.10p/£11.04m)
7digital Group, the digital music and radio services company, announced its results for the half year ended 30 June 2015. High margin monthly recurring licensing revenues from access to the Company’s streaming technology and music catalogue are replacing low margin revenues from downloaded content. As the online music industry moves into a “Third Age”, an increasing number of companies are ready to enter the digital music and radio marketplace, creating a strong demand for the Company’s services. Operational highlights included 15 new customer contracts signed producing set-up revenues of £0.9m, including Sainsbury’s, Mariposa, Jazz FM, NEC, Panasonic, and OpenLIVE. There were 13 new customers using the platform, generating annualised MRR (monthly recurring revenues) of £1.6m during the lifetime of their contracts, including ROK Mobile, Onkyo, Spanish Broadcasting Systems, and new Guvera territories. There was continued transition from low margin download business to high margin B2B streaming services which raises the gross margin to 64 percent (2014: 49 percent). Finally, new partnership agreements with Imagination for FlowRadio, and product innovation with Google CastTM were also announced. Financial highlights included a turnover of £5.2m (2014: £5.1m), with high-margin licensing revenues up by 26 percent to £3.1m and total annualised MRR at half year end up 55 percent at £5.2m (December 2014: £3.3m). Gross profit was up by 34 percent to £3.3m (2014: £2.5m) and adjusted LBITDA reduced by 27 percent to £1.3m (2014: £1.8m), which including the mark-to-market loss on the sale of the Audioboom stake of £4.8m, a statutory loss of £6.6m (2014: £2.8m) and cash at 30 June 2015 of £2.5m (December 2014: £5.3m).
Avingtrans (LON:AVG 112.00p/£31.45m)
Avingtrans, which designs, manufactures and supplies critical components, modules and associated services to the aerospace, energy and medical sectors, announced its preliminary results for the twelve months ended 31 May 2015. Financial Highlights showed revenue decreased by 4 percent to £57.8m (2014: £60.3m), allowing adjusted EBITDA to decrease by 6 percent to £5.3m (2014: £5.6m), which meant adjusted Profit Before Tax decreased by 16 percent, to £2.9m (2014: £3.5m). Cash generated from operating activities remained at £1.6m (2014: £1.6m), with net debt increasing to £5.9m (31 May 2014: £3.6m). Gearing was 17 percent (2016: 11 percent) and there was an increase in final dividend of 2.0 pence per share, and a full year total 3.0 pence (2014: Final 1.8 pence per share, Total 2.7 pence), an increase of 11 percent. Operational highlights showed Aerospace revenues restricted, with a decrease of 7 percent versus 2014, largely due to first half customer destocking, and the second half stabilised. There were also new contract wins with Airbus/PFW (£25m/10yr) and Sonaca (£5m/5yr), with the acquisition of RMDG assets for £1.2m from Tricorn plc which boosted market share. Energy and Medical division revenues flat, constrained by low oil price, and the EBIT recovered in H2. The company announced a£47m, 10-year contract win with Sellafield Ltd and EBIT losses significantly reduced, with a second half profit demonstrating progress.
BMR Mining Plc (LON:BMR 5.30p/£6.81m)
BMR Mining, the Zambian-focused mineral processing business, provided an update on the WKS from which BMR now hopes to generate revenues. BMR’s assets at Kabwe, Zambia, include approximately 1.1 million tonnes of WKS, as surveyed on a JORC compliant basis by Mineral Consultant Corporation The WKS was written down by 90 percent to £0.2m in the accounts for the year ended 30 June 2014 due to it being brittle and hard, and of too low a grade and too difficult to process on a commercial basis. However, BMR has now identified, from studies undertaken by the Building Research Establishment UK, that the WKS, being a ferro-silicate zinc slag (smelter slag), could be applied in the construction of building blocks. As part of its analysis and in conjunction with a local block making company, BMR has manufactured a test batch of concrete blocks, using an 80:20 ratio of WKS to building sand, which were then subjected to testing. Importantly, there was no evidence of leaching of lead or zinc. BMR has therefore instructed its Environmental Consultants to prepare a submission, including BMR’s test results, to seek approval from the Zambian Environmental Management Agency (ZEMA) to sell the WKS for incorporation in block and concrete making. Approval will be sought in the form of an Environmental Project Brief which involves a separate and less onerous application process than an Environmental Impact Study. The Directors expect that this submission will be made by early November with approval being granted by the end of the calendar year. In the event that ZEMA approval is given, BMR intends to commence local sales of WKS, which would involve limited costs and could realise modest but meaningful revenues over several years. Disposing of the WKS in this manner would also provide an elegant solution to environmental issues associated therewith.
Collagen Solutions Plc (LON:COS 12.15p/ £20.55m)
Collagen Solutions, the developer and manufacturer of medical grade collagen components for use in regenerative medicine, medical devices and in-vitro diagnostics, announced that its subsidiary Collagen Solutions Inc. has signed a supply agreement with Turkish medical device company Yücel Medikal Ltd. This supply agreement covers the provision of collagen materials and support services for use in Yucel’s product Lyocoll which is currently on sale in Turkey. Lyocoll is a local haemostatic used in all types of surgery to control capillary and venous bleeding as well as oozing where the conventional methods are impractical and ineffective.
Ilika Plc (LON:IKA 69.50p/£45.52m)
Ilika, the accelerated materials innovation company, announced it has received a Notice of Grant in China for its patent application supporting solid-state batteries jointly filed with Toyota Motor Company on 21 July 2011. This Notice of Grant in China follows the successful British grant in May 2014 and the notice of Intention to Grant in Europe in March 2015 as a member of the patent families that cover Ilika’s proprietary vapour deposition processes used in producing solid-state batteries directly from the basic elements. The application went to formal grant in Europe in July 2015 and Ilika has now received a Notice of Grant in China. This particular joint filing resulted from collaborative work undertaken by Ilika and Toyota, which commenced in 2008. This patent family is one of the two earliest filings of a growing portfolio of intellectual property exemplifying Ilika’s unique approach to solid-state battery production using evaporation sources. The more recent applications in the portfolio contain both jointly-owned and solely owned IP. In January 2014, three international patent applications from the portfolio were filed under the Patent Co-operation Treaty based upon earlier British priority applications. These were published in July 2015 and are progressing through the international patent examination process. The scalable stacked cell architecture which Ilika can produce, enables the simple fabrication of cells over a wide range of sizes. Ilika intends initially to produce micro-battery prototypes designed for powering wireless sensors, commonly referred to as the “Internet of Things”, which is a rapidly growing segment expected to create an addressable market for micro-batteries in excess of £1bn by 2017.
Miton Group (LON:MGR 26.90p/£45.72m)
Miton Group, the fund management group, announced its half year results for the six months ended 30 June 2015. Financial highlights showed renewed momentum with net inflows in Q2 following outflows in Q1. Over six months to 30 June, AUM increased from £2,050m to £2,225m, with average AUM over the six month period at £2,140m (H1 2014 – £2,953m). This reduction included the impact of the disposal of the Liverpool business. Net revenue margin increased to 66.6bp (H1 2014 – 65.0bp) and H1 costs maintained at £5.7m (H1 2014 – £5.8m). Adjusted profit before tax reduced to £0.8m (H1 2014 £3.4m) and total cash balances as at 30 June 2015 were £13.6m (31 December 2014: £15.2m) after payment of year-end bonuses and the dividend. Trading is currently in line with the Board’s expectations for the year as a whole. The positive net flows experienced in Q2 have continued and AUM rose to £2,364m as at 31 August 2015. CF Miton UK Value Opportunities fund increased AUM to £498m as at 31 August 2015 (30 June 2015: £378m; 30 June 2014: £86m). Miton UK MicroCap Trust plc was launched in April raising £50m. Since launch a further £5m has been raised and following appointment of Carlos Moreno in August, the company intend to launch a new European equities fund in Q4.
MX Oil Plc (LON:MXO 2.38p/£9.22m)*
MX Oil, the oil and gas investing company focused on the re-opening Mexican energy sector, announced its unaudited half-yearly results for the six month period ended 30 June 2015. Highlights for H1 2015 showed that significant progress had been made regarding the onshore conventional field bidding round in Mexico, with access granted to the data room in June 2015 – where analysis and due diligence are on-going, ahead of the anticipated award of concessions in December 2015. The terms of the joint venture with local partner in Mexico, Geo Estratos have been amended, increasing MX Oil’s interest in any concessions awarded to 55 percent and removing the obligation to fund Geo’s share of costs post contract award in return for limiting Geo’s exclusivity to a minimum of two concessions. Post-Period Highlights showed the company investing in a 5 percent indirect, non-operating interest in Aje – a substantial late stage development project offshore Nigeria with proven, flow tested discoveries and exploration potential. Commencement of multi-phase development project is underway at Aje, part of the OML 113 licence – initial two well programme underway targeting first oil by December 2015 and peak production of 11,000 bopd. Multiple exploration prospects have also been identified on Nigerian licence which lies adjacent to the 774mmboe (P50 gross recoverable resources) Ogo structure on block OPL 310. The company also provided an update on the progress it is making in Mexico together with its partner Geo Estratos with regards to the on-going Bid Round 1 Licensing round and its efforts to secure onshore conventional concessions in the re-opening Mexican energy sector. The Company has submitted its pre-qualification filing with the National Hydrocarbons Commission regarding its participation in the third phase of Bid Round 1. In this third phase, a total of 25 Land Contract Areas in the states of Chiapas, Nuevo Leon, Tabasco, Tamaulipas and Veracruz will be awarded to companies that satisfy the pre-qualification requirements and win the subsequent tender process. In tandem with this, MX Oil has completed its due diligence on five Land Contract areas and following this confirms its intention to bid for all five of the concessions. It is expected concessions will be awarded in December 2015.
Obtala Resources Plc (LON:OBT 6.00p/£15.80m)
Obtala Resources, the African-focused, vertically integrated agribusiness, timber and retail company, announced interim results for the six months ended 30 June 2015. Financial highlights showed sales revenue increasing to £2.3m (2014: £1.0m), with net profit of £3.02m (2014: loss £0.2m) including independent valuation of new land assets and net assets standing at £95.8m (2014: £93.5m) and cash and equivalents broadly the same at £1.4m. Operational highlights showed the Agribusiness developing fresh produce lines, with Global GAP certification awarded and work continuing on gaining BRC Global Standards. The Timber business showed a further 35,000 hectares under application, now supplying cut timber and the development of higher margin product lines. The retail side revealed that six branches are now open, with continued focus on operational performance improvement, cost control and sourcing.
OptiBiotix Health Plc (LON:OPTI 44.22p/ £32.98m)*
OptiBiotix Health, a life sciences business developing compounds to tackle obesity, high cholesterol and diabetes, announced it has completed testing and primary data analysis on its capsular food supplement to reduce cholesterol, and commenced pilot manufacturing studies. The aim of the human study was to establish safety and compliance, and to assess the extent of the lowering potential of its product in this group of volunteers. Sample testing and primary data analysis has now been completed and in accordance with the option agreement announced in June 2015, the results are being shared with a multinational consumer goods company. The terms of the option agreement are bound by confidentiality and no further details on the agreement or human studies can be disclosed at this time. The company also announces it has commenced pilot manufacturing studies to define the scale up requirements to take the strain from laboratory to pilot scale manufacture.
Ormonde Mining (LON:ORM 1.60p/ £10.40m)
Ormonde Mining, the development and exploration company operating in Spain, announced its unaudited interim results for the six months ended 30 June 2015.Highlights showed that the Mining Concession was received and the critical permitting steps for Barruecopardo Project development were completed late in 2014. A $99.7m funding package was successfully completed for the development of Barruecopardo, with Oaktree Capital Management, comprising a well balanced mix of equity and debt. Moreover, commencement of the development stage of the Barruecopardo Project, with tender documents for the supply of the major items of the processing plant were issued and final engineering design work for the rest of the plant is underway. Ormonde reports a profit of €2.56m for the 6 months to 30 June 2015 (Loss of €1.12m for the 6 months to 30 June 2014) which includes a profit of €3.40m from the part disposal of its interest in Saloro as part of the Financing.
ProMetic Life Sciences (TSX:PLI CAD1.88/ CAD1,092.29m)*
ProMetic Life Sciences announced it had a successful Pre-Investigational New Drug meeting with the US Food and Drug Administration (FDA) for its orally active anti-fibrotic lead drug candidate, PBI-4050. The meeting with the FDA focused on ProMetic’s proposed clinical development program for PBI-4050 in patients with IPF, and particularly on an optimal design for the first pivotal clinical trial that will incorporate the current standards of care for IPF in the US. The two drugs commercially available to treat IPF have been shown in clinical trials to slow the progression of the disease, but not to reverse it. Treatment of this devastating condition therefore remains an urgent medical need, and IPF patients could potentially benefit from PBI-4050, either alone or in combination with current therapies. It is notable that in the gold standard preclinical model used to emulate pulmonary fibrosis in humans, PBI-4050 performed favourably compared to these recently approved drugs, and demonstrated synergistic effects when combined with pirfenidone (Esbriet®). The multi-centre pivotal study will be a double-blind, placebo-controlled design with IPF patients on pirfenidone or nintedanib randomised to receive either PBI-4050 or a placebo. The study will be powered to demonstrate a statistically significant difference in forced vital capacity changes between the PBI-4050 combination therapies and the current standards of care. The design of the definitive protocol is currently being completed by consultant experts in this field, and ProMetic expects to file its IND with the FDA during the first quarter of 2016.
ServicePower Technologies (LON:SVR 4.88p/£11.09m)
ServicePower, a market leader for mobile workforce management software solutions, announced its unaudited interim results for the six months ended 30 June 2015. Financial highlights showed that trading for the half-year was in line with management expectations and ahead of the same period last year. Total revenues were up 13 percent to £6.94m (H1 2014: £6.16m), with recurring revenues accounting for 81.5 percent and SaaS now deployed to 71 percent of their customers. Gross profit was up 26 percent to £3.4m (H1 2014: £2.7m) and LBITDA reduced by 71 percent to £0.2m, including £0.1m in extraordinary expenses and £0.2m in IT cloud transition costs (H1 2014 LBITDA: £0.7m). Loss before tax reduced by 33 percent to £0.6m (H1 2014: £0.9m), including the accrued interest that was converted on 30 June 2015 and net cash at 30 June 2015 was £0.7m, prior to the receipt of the £0.75m short term loan (as announced on 30 June 2015) (30 June 2014 Net Cash: £0.6m). Operational highlights showed that the momentum gained in 2014, 11 deals were signed during the period with new and existing customers, with a strong pipeline in place for H2 2015 and 2016. The Company entered into a number of strategic partnerships in order to broaden its functional capabilities and cloud-based offerings
Venture Life Group (LON:VLG 81.60p/ £28.07m)
Venture Life Group, the international consumer products group addressing the self-care needs of the ageing population, presented its unaudited interim results for the six months ended 30 June 2015.Financial highlights showed revenues increased to £4.4m (H1 2014: £3.1m), allowing for gross profit to increase to £1.5m (H1 2014: £1.2m), but a loss before tax, amortisation and exceptional costs increasing to £0.42m (H1 2014: loss of £0.23m). Cash at the period end was £3.3m (31 December 2014: £4.9m).Commercial highlights revealed a 30 year exclusive distribution agreement signed with the Chinese retailer Gialen Group Co. Ltd to sell a range of skin-care products in China under Venture Life’s Lubatti brand with first order and payment equivalent to €0.5m (50 percent of the first order) received. Moreover, exclusive distribution agreements signed for Lissio HA in Slovakia and Original Bioscalin in Taiwan, and a ten year agreement signed with a Swiss healthcare company to formulate and manufacture an onychomycosis product. Post-period end highlights showed four long term exclusive distribution agreements signed across four brands, including in India for Original Bioscalin and the first consignment of Lubatti products ready to ship to China, with second order received and retail launch planned by Gialen for Q4 2015.
Universe Group (LON:UNG 10.6p/£24.44m)
Universe, a leading developer and supplier of point of sale, payment and on-line loyalty systems announced that its subsidiary HTEC, has signed a major contract with Conviviality Retail Plc, the UK’s largest franchised off-licence and convenience store chain with the Bargain Booze fascia. Under this contract, revenues over the next three years are expected to amount to approximately £4.3m. The contract, secured after an international competitive tender process, is for the supply and maintenance of a comprehensive, integrated suite of HTEC’s proprietary next generation point of sale, back office, head office and payment systems together with related on-going customer support. The systems will be installed across Conviviality’s entire estate of over 650 off-licence and convenience stores, with implementation expected to begin no later than November 2015. As well as facilitating and managing sales processing and secure in-store payments, HTEC’s products will also manage online ordering and deliver an extensive reporting suite.
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