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Good morning and welcome to this edition of “AIM’s Essential Top Ten”, a brief and early roundup of the main news announcements. This morning’s edition includes GKP and MTC from the Main Market.
Animalcare (LSE:ANCR)
Share price: 261p. Market cap: £54 million.
Trading Update: Positive performance, revenues up 8.6% to £14.7 million. Underlying profits to be broadly in line with last year, matching market expectations.
GN view: High earnings multiple attached to this one because of the favourable dynamics of a growing underlying market and the company’s solid performance track record.
Bilby (LSE:BILB)
Share price: 127.5p. Market cap: £49 million.
Final Results: Revenue £31.5 million, underlying profit before tax £2.9 million. Post period end, two acquisitions and a successful placing.
GN view: Recently listed holding company for strategic acquisitions in the gas heating/building services industries. Looks like it is off to a good start. Shareholders should study the transactions carefully and make sure they are comfortable with the pace of change and with management execution.
Dart Group (LSE:DTG)
Share price: 540p. Market cap: £800 million.
Preliminary Results: Revenue +12% to £1,405 million. Group operating profit +82% to £105 million. Final dividend increased to 3.10p.
GN view: The group’s leisure travel business is performing very well. Package holidays are benefiting from lower oil prices and continued strong demand to Europe/the Mediterranean. All-inclusive packages, representing 40% of bookings, can and should be fairly high-margin sales despite the cost-conscious nature of their customers.
Digital Globe Services (LSE:DGS)
Share price: 73.5p. Market cap: £20 million.
Trading Update: Robust trading the second half. Revenues of c. $48 million (up from $40.3 million). EBITDA expected to be below market expectations at $3.1 million, due to lower margin on core business.
GN view: An interesting concept, to outsource online customer acquisition. DGS customers are unlikely to have much brand loyalty however, and it will need to constantly hire the best staff to remain competitive.
EMIS Group (LSE:EMIS)
Share price: 901.5p. Market cap: £570 million.
Trading Update: Six months have been “broadly in line with the Board’s expectations”. Growing market share and good momentum in order books and pipelines.
GN view: Broadly in line most likely means a slight miss on results. Healthcare IT is an interesting sector at the moment, if you can find companies with a sustainable business model. EMIS have achieved excellent market share with their products and looks highly investable.
Fulham Shore (LSE:FUL)
Share price: 17.375p. Market cap: £99 million.
Final Results: Revenues of £29.3 million for the year ended March 2016, following the acquisition of a restaurant group in April 2015. “Headline Operating Profit” of £3.3 million, reported Operating Profit £507,000.
GN view: Restaurants can be a very difficult business for external shareholders. Brand-name restaurants offer the best prospect of meaningful returns, and it appears that Fulham are attempting to create this. As an investment company which was only listed in 2014, I am a little perplexed by the stock’s premium to NAV. This year’s cash outflow and increased bank overdraft are also somewhat concerning.
Gulf Keystone Petroleum (LSE:GKP) (I hold a short position in GKP)
Share price: 4.7p. Market cap: £46 million.
Balance Sheet Restructuring Transaction: 66% of the Noteholders and 50% of the Convertible Bond holders have agreed to a potential restructuring transaction which would leave existing shareholders with 5% of the company, excluding their right to take part in an Open Offer at 1.09 USD cents (.082 pence).
GN view: This deal remains contingent on approval from the three key constituencies (Notes, Bonds and Shares), so it is far from certain that it will go ahead. Were it to go ahead, the company would see its debt liabilities reduce to just $100 million, due in 2021. I think that shareholders have little alternative but to approve.
Learning Technologies Group (LSE:LTG)
Share price: 31p. Market cap: £128 million.
Trading Update: Strengthened margins, “excellent progress”. Revenues in excess of £50 million during the first-half, profits in line with expectations.
GN view: This is a fairly new creation (2013), and previous attempts to build educational conglomerates have ended badly. It achieved profitability last year, worth investigating further.
Minoan Group (LSE:MIN)
Share price: 6.75p. Market cap: £13 million
Interim Results: “Total transaction value” up 15% to £33.1 million in the six month period. Travel business expanding organically. Waiting for a legal decision from Greece in September.
GN view: Little mention is made in the statement with regard to the operating loss of £0.3 million. Losses are understandable and optimism is fine, but I prefer when companies are more direct in their statements.
Mothercare (LSE:MTC)
Share price: 135.25p. Market cap: £230 million.
Q1 Trading Update: Like-for-like sales up 1.2%. Sale brought forward one week to clear stock following adverse weather. Total UK sales down 2.1%, reflecting 4.8% reduction in pace.
GN view: A reasonable result here and will give supporters of the stock no reason to abandon it. Big question remains whether it can find an attractive pitch to consumers which will generate a sustainable turnaround.
