Latham (James) (LON:LTHM) – BUY*: Interims
Market Cap: £130m; Current Price: 663p; Target Price: 800p
Another solid set of results
Revenue in the 1H17 was +4% YoY to £100m (£96m) on the back of small gains from sales volumes, product mix and higher prices of imported goods, as a result of the fall in the value of sterling. Gross margin improved by c. 90bps YoY to 18.7% (17.8%). Overheads have been well managed where selling, distribution and admin costs increased by a mere 1% YoY, and as a result operating profit was +21% to £7.8m (£6.5m). Earnings per fully diluted share was +22% YoY to 31.1p (25.5p). On the back of the strong results the Board decided to increase the interim dividend by 12.5% to 4.5p (4p) which is covered 6.9x. The dividend is payable on 27 January 2017 and goes ex-div on 5 January 2017.
Current trading reads well where the business showed revenue growth in October and in the first half of November, though at slightly lower margins. Market conditions are mixed, being difficult in some areas whilst improving in others. No changes to forecasts as the business trades comfortably in line with market expectations. We look for revenue of £196m, implying £96m in the 2H17 and we maintain gross margins of 17.5% for the FY17, PBT of £11.6m and EPS of 47.1p for the FY17. The full year dividend at 15.7p implies a final of 11.2p, compared with a final of 10.3p in the prior year.
NORTHLAND CAPITAL PARTNERS VIEW:
Another solid set of results from Latham today where improving revenue and prudent cost control is having a positive impact on operating results for the business and this should be well received by the market. Construction work has started on the new Yate site and terms have been agreed for the new Wigston site. The shares trade on 14x FY17 earnings, not particularly demanding in our view and it offers investors a 2.4% dividend yield. We maintain our BUY rating and 800p price target.
Active Energy Group PLC (LON:AEG) – CORP: Issue of equity to major investor and CoalSwitch JVA partners
Market Cap: £17.6m; Current Price: 2.7p
Equity issue concludes integration of CoalSwitch technology
Active Energy announces that, following the General Meeting on 16th November, 88,722,779 ordinary shares of £0.01 have been issued at 2.65p per share, and a further 29,287,159 shares have been allotted from the 62,500,000 shares held as treasury shares, also at 2.65p.
First, major shareholder Gravendonck Private Foundation has been issued 42,398,809 shares converting US$1.4m of debt into equity, taking its holding to 211,898,809 shares, or 27.27% of the enlarged issued share capital of Active Energy, with voting rights.
Second, Trident Asset Management Resources Ltd., - the operating company which introduced the CoalSwitch opportunity to AEG – has been issued 46,323,970 shares in return for its 15% interest in the joint venture between Biomass Energy Enhancements LLC and AEG. This further consolidates control of CoalSwitch within AEG. Subsequent, Trident Ltd. will hold 46,323,970 shares or, 5.96% of Active Energy, with voting rights.
Thirdly, key participants in the CoalSwitch joint venture will receive 29,287,159 shares (3.77% AEG), with voting rights in the first of three tranches. AEG Treasury Shares will be used to settle the first and second tranches and part of the third tranche. Completion of the first tranche, together with the completion of certain other conditions precedent to secure control of the CoalSwitch business, will close the joint venture.
The key participants in the BEE Share Exchange include Sandy Munro, Founder of Munro & Associates the provider of key technical advice on the development process for CoalSwitch, Philip Scalzo, Inventor & founder of the CoalSwitch technology, and all key members of the engineering and business development team.
The £:US$ exchange rate used was 1.24603 on 23 November 2016.
AEG CEO, Richard Spinks, said: "The transactions which we have executed today align our major shareholder and the key participants in the development of CoalSwitch with AEG investors. I believe that their decision to receive equity in our Company is testament to their recognition of the significant upside available via commercialisation of the CoalSwitch technology, which is proven to be a unique and effective biomass based drop-in coal replacement fuel that negates the need for coal fired power stations to carry out expensive retrofit programmes. We are pleased to welcome the key participants to our company and, with the combined team's sights set firmly on securing customers for this innovative product, I look forward to providing all our shareholders with updates in the coming months."
NORTHLAND CAPITAL PARTNERS VIEW: AEG has now taken the necessary steps to integrate its CoalSwitch technology and joint venture into the group as a whole ensuring that the benefits of its innovative coal fuel substitution solution will be fully beneficial for the group as a whole.
Premier African Minerals Ltd (LON:PREM) – SPECULATIVE BUY*: RHA update
Market Cap: £6.4m; Current Price: 0.33p
From yesterday: Appointment of mining contractor and conversion of loan note
Premier African Minerals has appointed African Mining and Exploration (Afmine) to be the principal mining contractor for the rehabilitation of the underground mine and re-establishment of open pit operations at the RHA Tungsten Mine, located in Zimbabwe.
Afmine will target 16,0000t from the underground operations per month, with 12,000t expected to be delivered to the ROM pad. Negotiations for phase two, where Prem is targeting 28,000t-23,000t from the open pit, are well advanced.
The initial contract will be for 14 weeks to rehabilitate the underground workings and prepare for open pit operations. The second phase would be a longer term contract but it is dependent on meeting deliverables in the initial phase and acceptable pricing. Prem will make a one-off mobilisation payment of US$50,000 and two milestone payments each amounting to US$75,000.
Darwin Strategic has elected to convert 10 loan notes with an aggregate value of £250,000 into equity. The Company has issued 79,396,838 shares to Darwin at an issue price of 0.314874p share.
Following the issue the Company will have 2,059,360,608 shares in issue.
NORTHLAND CAPITAL PARTNERS VIEW: The appointment of Afmine seems a positive development for Premier African Minerals. Afmin is a leading mining and exploration services company that operates in Zimbabwe with experience in underground mining. Afmine has worked on ASA Resources Limited’s Freda Rebecca Gold Mine, Bindura Nickel Corporation’s operations and Metallon Gold Limited’s Shamva Gold Project.
Starcom Plc (LON:STAR) – BUY*: Issue of equity
Market Cap: £4.1m; Current Price: 3.1p; Target Price: 3.7p
Pacing of 5.0m shares raises £150,000
Starcom announces the issue of 5.00m shares with new and existing shareholders at a price of 3.00p per share to raise £150,000 (gross). Proceeds will be used for additional working capital.
Starcom reports that since a placing on 21 October – which raised £300,000 pre-costs - trading has been in line with the Board's expectations.
The new shares will be admitted from 8.00 am on 29 November, subsequent to which Starcom’s enlarged issued share capital will comprise 152,830,680 shares; there are no treasury shares.
NORTHLAND CAPITAL PARTNERS VIEW: The addition to working capital will further augment Starcom’s position regarding the delay in payment on H2 orders which it highlighted at Interims and which we incorporated into our revised outlook.