News & Tips: Conviviality, Burford Capital, SDL & more

IC TIP UPDATES:

Shares in Conviviality (CVR) are up more than 2 per cent this morning after the group announced its subsidiary business Bargain Booze has agreed a £30m acquisition of 109 convenience stores and 18 new franchises from WS Retail currently under the fascia ‘Central Convenience’. The deal will be funded by a corresponding 375p a share completed placing. Given Conviviality’s track record in building its business via acquisitions and how successful these have proved to be, we remain buyers.

Burford Capital (BUR) has updated on the performance of last year’s acquisition of litigation fund manager GKC, rebranded Burford Capital Investment Management. This year Burford expects the funds business to contribute $13m (£9.7m) in performance fees and $3m in management fees. In June it raised $500m to invest in complex strategies and has committed $311m of this capital so far. Buy.

Shares in SDL (SDL) fell by a quarter this morning, after the language translation technology group gave a trading update for the year to 31 December. The sales pipeline for the period is in line with expectations. But, it is reliant on closing certain software deals, which might not go through by the end of the reporting period. If not, the group says adjusted earnings before interest, tax and amortisation on a like-for-like basis will be below market expectations. The group has also seen a faster shift than expected from perpetual license sales to software-as-a-service sales, driving higher costs during the year while revenues are deferred into future years. There has been continued revenue growth in the language services division and licence wins in language technologies. Management still plans to increase investment in fast-growing vertical markets including life sciences and market solutions. Recommendation under review.

Two days after publishing its defined feasibility study for its Sonora lithium project, Bacanora Minerals (BCN) has taken its first step to funding the project. NextView Capital, a Chinese technology fund, has agreed to pay £31.2m for a 19.9 per cent stake in the group, by way of a non-dilutive placement of 33m shares at 94.5p a pop. The strategic investment (and further de-risking of the project) has been warmly received by the market, which has pushed the stock 9 per cent higher today to 105p. In return, NextView gets a seat on Bacanora’s board and a guaranteed initial offtake of 5,000 tonnes of lithium carbonate per year. Buy.

There are several metrics to measure President Energy’s (PPC) workover programme at Puesto Flores, onshore Argentina. First, is production, which now totals 1,500 barrels of oil per day (bpd), gross. Given the Aim-listed firm acquired the fields with a run-rate of 1,200bpd, a considerable amount of the incremental production has offset declines elswhere. Second, is cost. President informs us that the PFO-50 and PFO-9 wells were re-started for $0.92m, 20 per cent under budget. Third, this was done ahead of schedule, which bodes well for the speed of the two remaining wells in the programme. The strong levels of cash generation gives us optimism for the new year. Buy.

Keywords Studios (KWS) has acquired Localizadora Latam (LOLA) for $1.03m from its founders. Based in Mexico City, LOLA provides Latin American Spanish dubbing, localisation and sound design services for the video game, film and TV markets. Clients include Warner Bros and Ubisoft. Buy.

KEY STORIES:

Standard Life Aberdeen (SLA) missed some analysts expectations for assets under administration during the third quarter. That was because of higher than expected net outflows of £23bn, although management said this was in line with its expectations. Almost £15bn of these outflows were due to institutional redemptions. However, Standard Life’s pensions and savings products gained £6.3bn in new new business.

Shares in Ceres Power Holdings (CWR) were up more than 5 per cent this morning as the group hinted at “significant commercial progress” in its latest trading statement. Income is expected to have growth by around 80 per cent to £3m in the six months to December this year, while the group remains on track to begin trials of its first “go-to market product” from January. Hold.

A trading statement from SThree (STHR) this morning indicated the now-familiar story of challenging UK employment markets has continued through November. The group saw a 14 per cent decline in gross profit in the UK and Ireland during the period, as well as a 4 per cent drop in Asia Pacific and the Middle East. However, growth was strong in the US and Continental Europe, with growth of 18 per cent and 9 per cent, respectively. The US has now overtaken the UK and Ireland in gross profit terms. 

SQS Software Quality Systems (SQS) has agreed the terms of a cash offer for its entire share capital, from a newly-incorporated German company called Weilchensee 884. VV GmbH. This company was acquired by Assystem Technologies for the purpose of making the respective offer. If they chose to accept, SQS investors would be entitled to 825p in cash for each share, valuing the entire company at £283.1m. This represents a premium of 54 per cent to the closing price of 527.5p on 14 December. SQS's management team unanimously recommend the offer. As SQS is a German-registered company whose shares trade on Aim, it is not subject to the UK City Code on Takeovers and Mergers.

OTHER COMPANY NEWS:

Failure to impose a cap of the 2012 long term incentive plan has prompted Persimmon (PSN) chairman Nicholas Wrigley to resign. This follows the resignation of Jonathan Davie, senior independent direct of the housebuilder and chairman of the remuneration committee. A search has begun for a new chairman, while Nigel Mills has been appointed senior independent director, and Marion Sears becomes chairman of the remuneration committee. Hold

Jackpotjoy (JPJ) has come to a 10-year framework services agreement with Gaming Realms (GMR). The deal will see some services, such as the “Slingo Originals” content, shared across the two companies. They’ve also agreed to together provide JackpotHappy.com on the Gaming Realms platform, and entered into a £3.5m convertible loan agreement. Shares in Jackpotjoy were flat in early trading while shares in Gaming Reals were up 7 per cent.

In a trading update, Telit Communications (TCM) said it expects to report continuing revenue growth and adjusted cash profits in line with previous guidance; revenue for the nine months to September was $255m, up from $238m a year earlier. The number of research and development centres will be reduced. Telit expects to reduce cash operating expenses in the next financial year by over $10m (7 per cent less than the current year). The group also expects to see around $25m in exceptional costs during the current financial year, stemming from non-cash write downs of capitalised development costs relating to discontinued activities, restructuring actions and “addressing the challenges” the group has faced. Telit is in advanced discussions with its leading financing bank “to agree an advance waiver of potential breaches of its covenants as at 31 December 2017”. Shares in the group were up 2 per cent at the time of writing.

AVEVA (AVV) gave an update on the progress of the merger with Schneider Electric’s software business. All outstanding regulatory clearances have been received ahead of completing this merger, except for the approval of the Committee on Foreign Investments in the United States (CFIUS) where a review procedure continues. While Aveva and Schneider Electric “are not aware of and do not expect any substantive CFIUS concerns”, they don’t expect approval until very late December at earliest. This could extend to mid-February next year. So, the merger isn’t expected to complete until the end of January of February. While the listing rules require that the audited financials of Schneider Electric’s software business comprise a date not more than nine months earlier than the date of admission, Aveva will issue another prospectus during January 2018, containing financial statements for Schneider’s software business ending 30 September. Aveva is still deciding on a chief executive for the combined group.

Hummingbird Resources’ (HUM) story (and share price) has progressed nicely since the Mali-focused gold miner published a defined feasibility study for its Yanfolila project in January 2016. Less than two years on, shareholders can now expect first gold production before the end of December, followed by commercial ramp up in the first quarter of 2018. The target is sizeable: Hummingbird expects output to hit 130,000 ounces during its first full year of production.

Earlier this week, on 13 December, Plant Impact (PIM) announced that BCS - the marketer of its flagship ‘Veritas’ soybean product in Brazil - would defer further purchases of Veritas. And, Plant Impact had decided to put itself up for sale. On the day, shares plummeted nearly three-quarters. An AGM statement from the group today gives an operational update, noting that the company’s research and development have seen good progress. And, a new partnership with Albaugh Brazil has been launched - separate from, and with no impact on, the group’s relationship with BCS to distribute Veritas. Albaugh will distribute other Plant Impact technologies as Albaugh branded products. The company has also appointed Ib Jensen as interim chief financial officer, after the announcement on 6 October than Richard Amos would resign as chief financial officer.