Hybridan Small Cap Wrap: Clarity looks ahead, flying results for Avation and lights off for Luminar

The financial markets performed well last week rising some 180 points to close at 5,700, whilst the AIM All Share rose 20 points to close at 734 points. Good progress was made with regards to the European debt crisis, and the BoE were unanimous in voting £75bn of quantitative easing. This week, UK economic growth was 0.5% during the third quarter (higher than the 0.4% in the second) and UK retail figures grew by a stronger than expected 0.6% in September, though the announcement of a Greek referendum caused the US and European markets some difficulties. Looking at the week ahead, PMI data from manufacturing, construction and services sectors will be announced.

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. 

AMC Resource report, ABH Comment on EU ruling, ANCR Trading update, AVAP Final results, BMY H1 results, CCS New contracts,EDE.PL Acquisition of technology, GGG Corporate and exploration announcements, IVO Funding round, KMR Interim statement,LID Interim results, LRM Interim results, LMR Enters Administration, MDY Asset Sale, MONI Company investment,NGP Valuation Uplift, HAWK Placing, NGL Fund raise, SUN Grant from RGF,  TAN Receives Payment, TRP New contract, XEN update on transformational deals.

 Amur Minerals Corporation (AMC 10.5p / £29.18m)*

The nickel-copper sulphide mineral exploration and resource development company focused on far east Russia announced that the Research Centre of the Institute for Geological Exploration of Base and Precious Metals (TSNIGRI ) has compiled a comprehensive report establishing the value of the projected recovered metals within the complex concentrate of the Company’s Kun-Manie project. The valuation report has been forwarded to the Ministry of Economic Development (MED’s) for its consideration and review as related to Amur’s application for its mining licence.  The MED’s responsibilities include its calculation of the concentrate value or alternatively it can utilise a valuation generated by another federal agency certified by the governmental authorities of the Russian Federation. The market awaits news on the licence nevertheless; however it continues to get good results in its exploration programme in the meantime. 

Angel Biotechnology Holdings (ABH 0.24p / £6.59m)* 

The AIM listed biopharmaceutical contract manufacturer commented on the ruling issued on Tuesday 18^th October by the European Court of Justice prohibiting the patentability of human embryonic stem cells. The company said that the court ruling that patents would not be granted on stem cells removed from human embryos if the embryos are destroyed in the process, does not prevent the filing of patent applications relating to process and use claims, providing an alternative strategy for gaining product protection in EU countries. It also emphasised that the majority of cell-based work currently ongoing at Angel and sought by the Company for the future is based on the use of adult stem cells or autologous cell programmes where the patients’ own cells are used for the clinical procedure, both of which are unaffected by the EU ruling. Having made significant progress in re-commissioning the Cramlington facility, which the Board expect to be operational in early 2012, Angel is in a good place generally with its business and within its industry.

Animalcare (LON:ANCR) Group (ANCR 172.5p / £35.38m)

The AIM listed supplier of veterinary medicines provided an update to its shareholders. Trading in the first quarter was satisfactory and continues to be in line with the Board’s expectations. The Company has launched Torphasol, an analgesic for horses, and Detonervin, an equine sedative. Emdocam Equinem, an anti-inflammatory for horses, will be launched very soon. An antibiotic for cattle called Tilmodil was also launched in September by the Company. Also, a very important addition has been completed to the Company’s range finishing its regulatory passage and with marketing authorisation received they expect to launch this in the near future. The board is very pleased with the underlying cash flow of the business and subject to shareholder approval they propose to pay a final dividend of 3p per share brining to total dividend to 4p for the year, on 7 November. 

Avation (AVAP 107.5p/£41.5m)

Aircraft rental and leasing company announced results for the year to 30^th June 2011. Whilst revenues were down slightly to £16.3m (2010: £17.6m), pre-tax profit was up 59 per cent to £5.63m (2010: £3.55m), with dividends per share up by 66 per cent to 1p per share. Net assets on the balance sheet were up by 37 per cent to £49.5m. Having entered into a 10 year loan facility agreement for up to $152.2m (under a mandate to Credit Agricole Corporate and Investment Bank), the Company is in a position to draw down funds progressively on an aircraft-by-aircraft basis for the purpose of purchasing eight new ATR72 Aircraft, though none of these had been delivered to the ultimate operator (Virgin Australia) by the end of year, and therefore revenue performance for this has not been reflected in the financials. Since then, Avation has delivered three aircraft, with another expected during November and four more during the middle of 2012- all hopefully helping the Company to continue with the impressive performance.

Axis-shield (LON:ASD) (ASD 469p/£234.49m)

The international and innovative in vitro diagnostics company today announced that it has signed a new agreement with MinuteClinic, the largest retail medical clinic provider in the United States. Under the terms of the agreement, Axis-Shield will provide an Afinion^(TM) analyser for each of the approximately 600 MinuteClinic locations in the U.S. so patients can access haemoglobin A1c testing, with results provided in three minutes. MinuteClinic is a division of CVS Caremark, the largest pharmacy health care provider in the United States. MinuteClinic's walk-in medical clinics are staffed by nurse practitioners and physician assistants, who provide treatment for common family illnesses and injuries, administer vaccinations, conduct physicals and wellness screenings, and offer monitoring for chronic conditions such as diabetes, high cholesterol, high blood pressure and asthma.

Bloomsbury Publishing (LON:BMY) (BMY 98.25p / £72.88m)

The highlights for the six months ended 31 August 2011 included turnover which was up 16 per cent to £44.9m (2010: £38.6m), a pre-tax profit, adjusted for certain items, which was up 52 per cent to £2.2m (2010: £1.4m), an interim dividend which was increased by 10 per cent to 0.89 pence per share (2010: 0.81 pence) and a basic earnings per share, adjusted for certain  items, up 31 per cent to 2.07 pence (2010: 1.58 pence). ebook sales in the six months to 31 August 2011 increased by 564 per cent to £2.5m (2010: £0.4m) and the management team was strengthened with the appointment of a new Group Finance Director and a new Managing Director of the new Children’s & Educational division.  BMY acquired the leading Academic publisher Continuum for a cash consideration of £20.1m, purchased the National Archives Publishing programme backlist and did a drama online project with Faber & Faber. BMY also signed a contract to publish PricewaterhouseCoopers Manual of Accounting series and did a licensing deal with the Practical Law Company. Bestsellers across the Group included The Finkler Question – Howard Jacobson; Eat Pray Love – Elizabeth Gilbert and still, the Harry Potter series – JK Rowling. Ebook sales are seeing excellent quarter on quarter growth, and we expect this trend to continue. Little cannibalisation is being seen with ebook sales as the overall market is being grown, except perhaps in certain sectors such as crime fiction. Another ongoing trend discussed at the analyst meeting was the globalisation of children’s books with the Aardman adventure The Pirates! just taking off. Potter will go on and on and the latest is the box sets that are selling. Germany turned a loss for BMY in the first half, although the ebook market has yet to take off and BMY reminded us of their track record in turning things around. Germany is the third largest book market globally, and their preference for English language best sellers should help growth. We think that after the recent large Continuum acquisition, BMY is now in a consolidation phase, but will likely remain opportunistic. 

Clarity Commerce Solutions (CCS 27p /£11.19m)

Clarity, the supplier of software solutions for the retail, entertainment, hospitality and leisure sectors provided a trading update in which it announced a number of new contract wins during the last month. A £250,000 contract win with HMV was seen as the highlight marking the introduction of Clarity’s cloud-based real-time promotions engine to the UK market enabling HMV to offer exactly the same promotional mechanics across its sales channels at the point of purchase. Other contracts won during the period include that of Dune, Debenhams, C1000 (a Dutch grocery chain), Bakker Bart (a bakery chain) and Coop Denmark, reflecting a very healthy period of activity for the Company. Interestingly, there was also comment this week on press speculation surrounding a potential bid from Enigmatic Investments Limited for Clarity. In October we commented on how Clarity was recommending the rejection of the offer, and this week Enigmatic have commented on some of the factual inaccuracies and reiterated that the offer of 23p per share remains and has been extended to being open until 2^nd November 2011. 

Eden Research (EDE.PL 17.5p / £14.52m)

The agrochemical and encapsulation company announced that it has acquired the exclusive, global rights to a next-generation encapsulation delivery system based on scientific research at the University of Massachusetts Medical School in Worcester, USA (UMMS). This technology will augment Eden’s own proprietary technology and allows for greater control over the timing of release of the Active substance. The patent covering the new technology has been granted in seven countries to date including USA, Spain, France and Italy and is valid until June 2025, which extends the life of Eden’s overall patent position.  The Company’s proprietary encapsulation delivery system is being used commercially in environmentally friendly agrochemical applications where it enables the slow release of compounds to control pests and infection. The system is also being evaluated by some of the world’s largest companies for use in other sectors such as animal health, biocides and cosmetics, which will benefit from the next generation UMMS technology.

GGG Resources (GGG 17.25p / £28.59m)

The Company made a few corporate and exploration announcements last week. On 2 August 2011 it received the final payment of $3,273,200 from the sale of the Nimu Project in China. This has brought the total payments from the disposal of Nimu to $7.4m, approximately £0.7m more than was budgeted for at the time of the Company’s 2009 statutory accounts. The Company no longer has any assets or obligations in China. As the Company and Auzex had agreed to merge, on 5 September 2011, GGG’s bid for Auzex lapsed and GGG did not accept any Auzex shares pursuant to the offer. By the end of September, the total of drilling undertaken by GGG and its joint venture partner, Auzex, since project acquisition in May 2010 was 82,667m in 507 holes.  The new JORC complaint resource is 78.84m tonnes at 1.03 g/t gold for 2,603,000 ounces, using a 0.5 g/t gold cut-off. Preliminary project optimisation studies were carried out and all scenarios returned positive economics envisaging the development of a main pit 3.1 km long, 180 metres deep and a secondary pit of 1km long and 120 metres deep.

Imperial Innovations (LON:IVO) Group (IVO 285p / £284.01m)

The technology commercialisation and investment company and Seroba Kernel Life Sciences have led a £5m funding round for the portfolio company, Veryan Medical, which is developing innovative solutions for vascular disease using the principles of biomimicry. Both the companies have each invested approximately half of the funds raised. The latest funding will be employed to progress the Company towards a clinical study in the USA to achieve FDA approval. Veryan’s BioMimics 3D™ stent technology aims to mimic the natural shape and geometry of the human vascular system. The BioMimics3D stent is initially targeted at the market for peripheral stents which exceeds £1bn per year.  This market is growing at around 20 per cent per annum, due to new technology and expanding indications for vascular stents. Veryan has completed enrolment of patients in its European study and this prospective randomized study has been conducted in Germany with Professor Thomas Zeller as the Principal Investigator. Initial results from this study confirm that the excellent preclinical results can be transferred to human clinical experience. Veryan will apply for CE mark in the near future.  

Kenmare Resources (LON:KMR) (KMR 40.57p / £977.53m)

The company which is engaged in the operation of the Moma Titanium Minerals Mine located in Mozambique provided an interim management statement in which it announced that third quarter mineral production was some 27 per cent higher than the previous quarter and but that it still remained below full capacity. This covers the production of Heavy Metal Concentrate (HMC), Ilmenite and Zircon. HMC production was inhibited by theby the last part of a clay-rich zone and by some teething problems associated with new equipment fitted to upgrade a wet concentrator plant, whilst power fluctuations hampered production in October due to faulty voltage stabilisation equipment on the main grid. The Company also stated that its lenders are in the process of approving the Company's plans to expand its Moma mine by 50 per cent, with Phase II expansion costs expected to be in the region of £300m. 

Lidco (LON:LID) (LID 15p / £26.12m)

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LiDCO, the hemodynamic monitoring company, last week announced its interim results for the six months ended 31 July 2011. Total revenue increased by 21 per cent to £3.21m (2010: £2.66m) with the operating loss reduced by 58 per cent to £0.24m (2010: £0.58m) leaving a year end cash balance of £1.2m. Commenting on the results, the Chief Executive noted the progress that has been made during the period, including securing high quality partners in key territories such as Japan and reducing operating losses by 58 per cent, making considerable progress towards profitability.

Lombard Risk Management (LON:LRM) (LRM 10.38P / £21.47m)

The AIM listed global software company presented its results for the six months ended 30 September 2011. John Wisbey (CEO) and Paul Tuson (CFO) presented the results.  The directors believe that the company is the number one in UK bank regulatory reporting. Their new technology in the Bank Regulator reporting solution has had a very good client reaction and is believed to be ahead of its competitors. The Group’s IP is a major corporate asset and the Company has been generating strong revenue (£6.4m now and was £5.8 in 2010), profits (profit before tax £1.8 in 2011 and was £0.2 in 2010) and cash (Net Cash at period end was £1.3 in both years). There is a high level of recurring revenues. There is 200 staff in 5 countries – Major centres in London and Shanghai. Mr Wisbey said that most of the staff members were in China which meant lower costs for the company as the salaries in China are around 30 per cent of those paid to UK staff members. Many contracts have been won by the Company this year - COLLINE with two Tier 1 banks and several others. There has been a global increase in demand for risk management software, so Lombard should continue to benefit

Luminar (LON:LMR) Group Holdings (LMR 0.38p / £0.38m)       

The lights have finally been turned off at Luminar: The Company’s banks declined to extend loan facilities any further, resulting in the Company’s Directors being forced to call in the administrators.  Shares were suspended at 0.7p.    The Sunday Times reported that there may be interest from two Private Equity groups, R Capital and Sun European Partners, but nothing is confirmed yet. 

MDY Healthcare (MDY 42p / £7.17m)       

Mdy Healthcare (LON:MDY) a strategic investor in healthcare companies, announced that the Company will receive between US$20m (£12.5m) and US$21m (£13.125m) for the sale of its 10.4 per cent. holding in Medivance, depending on certain completion adjustments.  MDY Healthcare had invested approximately $6m in Medivance across a series of investments.  On receipt of proceeds, the Company will repay all outstanding debt, approximately $1.65m, and will make a further announcement in due course about the use of the balance.

Monitise (LON:MONI) (MONI 38p / £268.61m)

Monitise, which provides end-to-end solutions that enable banks and their customers to undertake banking transactions via mobile phones, announced that Visa Europe would be investing £24.7m in Monitise at 35p per share. The investment would give Visa an 8.8 per cent stake in the Company, with the president and CEO of Visa Europe joining the Monitise Board of Directors. Also, the Company announced the acquisition of a 51 per cent stake in Monitise Americas, held by Metavante Corporation, for consideration of a 3.3 per cent stake in Monitise. This is very much a reflection of the operational expansion strategy the Company is pursuing, and news that was well received by the markets- shares were up 10 per cent on the day. 

Niche Group (LON:NGP) (NGP 2.82p / £19.54m)

Turkish delight at Niche Group: A new Competent Person’s Report by Senergy (GB) has lifted the valuation of Niche’s stake in Turkey’s Hatay gas blocks to £60m; roughly three times the current market cap.   Niche’s stake is held via a loan note that converts into a 37.5 per cent holding in Oman Resources. Oman Resources in turn owns 50 per cent of the re-valued Hatay Blocks.

Nighthawk (HAWK 2.94p / £11.10m)

Nighthawk, the US focused oil development and production company, last week announced that it has raised approximately £2m through the placing of new shares at 2.5 pence per share. The funds raised will be used to meet ongoing costs and to push ahead with the first steps in a new work programme, which will initially comprise undertaking further improvements to existing wells.  Nighthawk may have sole responsibility for the costs of the work on the existing wells, which are anticipated to be approximately US$400,000, and will have a 50 per cent working interest in the oil produced. The Company expects to make further announcements on the work programme in due course together with details of the previously indicated open offer to all shareholders.

Norseman Gold (LON:NGL) (NGL 7.25p / £15.95m)               

Shares in Norseman resumed trading, after having raised a total of £11.9m: £6.9m from equity and £5m from convertible bonds.   On the production side, they expect improvements next quarter as new personnel are employed for the underground activities and the Open Pit continues to be mined towards hard rock ore.

Surgical Innovations (LON:SUN) (SUN 9.62p / £38.01m)

Surgical Innovations Group, the designer and manufacturer of innovative medical devices, is pleased to announce that it has received confirmation from the Department of Business, Innovation and Skills, that it is one of 119 successful bids in the UK in the second round of the Government's £1.4bn Regional Growth Fund.  The Company has received a conditional offer, subject to due diligence, which has been earmarked for job creation, apprenticeships, training, development of innovative medical devices and manufacturing infrastructure.  The quantum of the funding to the Company remains confidential at this stage of the process. The Regional Growth Fund (RGF) is a £1.4bn fund operating across England from 2011 to 2014. It supports projects and programs that lever private sector investment creating economic growth and sustainable employment.  It aims particularly to help those areas and communities currently dependent on the public sector to make the transition to sustainable private sector-led growth and prosperity. 

Tanfield (LON:TAN) (TAN 39p / £36.69m)

Tanfield got a lift when it received a £3.5m cash payment as part of January’s deal by which they sold their US electric van division to Smith Electric Vehicles US (SEVUS).   Tanfield have also retained 27 per cent in SEVUS, which has a total value of around £75m.  The funds received will be used to release bottlenecks in, and finance the development of, Tanfield’s UK business; which is the design manufacture and sale of aerial work platforms.

Tower Resources (LON:TRP) (TRP 2.95p / £36.16m) 

Tower Resources announced that together with its 50:50 joint venture partner Wessex Exploration, they have signed an Assurance Agreement for a Production Sharing Contract for the Imlili Block, which is located offshore the west coast of Africa, next to existing interests of the both JV partners.   The agreement is with the Saharawi Arab Democratic Republic (SADR), the government of the territory known as Western Sahara. This is a disputed territory and the UK regards its status as undetermined.  Tower and Wessex each have 50 per cent equity and working interest in the new project and Wessex will be the operator.

Xenetic Biosciences (XEN 7.12p / £12.64m)  

The bio-pharmaceutical company specialising in the development of high-value differentiated biologic drugs and vaccines announced the initiation of the process for First Closing of the Proposals set out in the Shareholder Circular of 4 August 2011 and as approved by shareholders at the Company's General Meeting held on 2 September 2011. While regulatory processes in both Germany and Russia - including as they relate to asset transfers, valuation and registration - have proved to take longer than first envisaged, the parties have commenced the process of First Closing (namely completion of the Subscription Agreement with SynBio LLC in Russia and the Acquisition Agreement under which the Company is to acquire the entire equity capital of SymbioTec GmbH). The first stage in effecting First Closing has been initiated by the transfer to SynBio of 34, 000,000 Xenetic Ordinary Shares formerly held by FDS Pharma. Commenting on this process, M. Scott Maguire, CEO of the Company, said: "The Xenetic Board is delighted to see this series of transformational deals reach its final stages. The transactions involved in what is a complex set of deals spell a new beginning for the Company as they enable us to implement our strategy of de-risking biotech. With the new Co-Development Agreement with SynBio, we will have 12 drug candidates in various stages of development in Russia and India via licenses. The data generated by our partners will give human proof of concept on the drug candidates' merits as a therapy, thus taking a large element of the risk out of drug development and allowing us to decide which drug candidates have a good chance of success before we allocate our newly acquired cash resources to US and European clinical trials. A further step in our de-risking process involves reformulating successful marketed drugs with our naturally-occurring, patent-protected platform technologies and creating next generation versions of these successful drugs. With these de-risking approaches to drug development, we look forward with confidence to a new commercialisation phase as a specialty drug developer able to accelerate the creation of shareholder value."

*A corporate client of Hybridan LLP