Six AIM shares with recovery potential
AIM has performed strongly over the past year, but in any market there are companies that have done less well in share price terms. This could be because of trading disappointments or technologies that have taken longer than expected to build up revenues.
Here are six companies whose fortunes may improve this year. There is no certainty that any of them will enjoy a significant recovery, and some may continue to languish. However, there could be one or two successes among these firms if the management get it right.
These are the companies to keep an eye on.
Demand for the online merchandising and search software provided by Attraqt (ATQT) appears to be strong. Attraqt has been losing money, but last year's acquisition of the much larger and profitable business Fredhopper appeared an excellent deal that would move the group into profit.
However, one month after the interim figures were announced a trading statement revealed that the new finance director had found that there were inaccuracies in forecasting the timing of contracts and their implementation.
This appears to be a case of an entrepreneurial management securing a big deal and then not managing to achieve the benefits it thought it would – at least initially. Founder Andre Brown has stepped down as chief executive and chairman Nick Habgood, from major shareholder Azini, has taken on an executive role.
Revenues had been expected to be £14.9 million in 2017, but the original trading statement said that the figure would be circa 10% lower. The recent trading statement says that the outcome was between £13.5 million and £13.6 million, which is in line with the later expectation.
There is still cash of more than £2 million, down from £2.3 million at the end of September 2017 and £2.7 million at the end of June 2017. This suggests that Attraqt has sufficient cash for the time being, although this could depend on the timing of renewals. Brown had 12 months notice in his contract and his annual salary was £200,000.
There are concerns about the loss of inherited clients following the merger. New contracts have been signed and the growth in online retailing means that there is strong backdrop to the business. Kestrel has edged up its stake above 20%. There should be further news in the annual results which will be published on 8 March.
OneView's (ONEV) software platform is focused on customer engagement in store and integration with the online and back office functions. This is essential for omnichannel retailers. The orders have not flowed through as hoped and revenues have been lower than forecast. The new cloud-based inventory platform will help to grow Software-as-a-Service revenues, but they will take more time to show through in group revenues than the one-off sales.
The main markets are North America and the UK. Travis Perkins (TPK) and Wickes are clients, but OneView has not built up the recurring revenues base that Attraqt has. Revenues are expected to grow from $3.13 million to $3.9 million in the year to March 2018, but the loss will be flat at $3.4 million. The loss should start to reduce from then on.
The share price has fallen back since a 10-for-one share consolidation. Cash remains a concern. Major shareholders have provided a $300,000 loan facility, at an interest charge of 1% per month, for the company, which hopes to receive large customer payments in the first quarter of 2018. Further cash is likely to be needed.
OneView is involved in a growing market and if it gets it right it could become highly profitable. It might be wise to wait for a fundraising, though.
K3 Business Technology (KBT)
New management has been restructuring enterprise software provider K3 (KBT) and it lost money in the period to November 2017. The strategy is to increase the focus of the business on its own IP rather than third party IP and professional services.
Management has confirmed that last year's trading was in line with expectations. R&D has been consolidated into one unit, so there is a coordinated development focus. The Microsoft (MSFT)-related activities have also been combined into one division. There will be one-off charges for this. A rebound from loss to a profit of £4 million is forecast for this year.
In the middle of 2017, £8.1 million was raised at 140p a share. Cash generation has also helped to reduce net debt to £4.7 million at the end of November 2017. That was better than expected.
The share price has already recovered since the low last September, but it is still half the level it was two years ago. Johan Claesson, who has been involved with the company for two decades, acquired 700,000 shares late last year, taking his stake to 7.2 million shares, although Kestrel Partners has trimmed its stake from 24% to 22.8%. Figures for the 17 months to November 2017 will be published in late March.
Autins (AUTG) is a prime example of a company that floats and soon after disappoints investors. It can be a long haul for investor confidence to recover. The company supplies noise and heat management insulation for cars, and it has been trading for more than five decades.
That shows the underlying strength of the business, but it did not stop a major customer delaying orders and profit slumped within a year of floating. The chief executive resigned and he was replaced by former Hydro International boss Michael Jennings.
There was a turnaround last year with underlying operating profit improving from £900,000 to £1.5 million. This is before the exceptional charges in each period. A 0.8p a share dividend indicates confidence in the future.
Autins has operations in the UK, Germany and Sweden and has developed a new material called Neptune. There are growth prospects in automotive and other markets.
The share price is still below the August 2016 placing price of 168p. The wife of non-executive director Terry Garthwaite bought 15,000 shares at 125p each earlier this month. To be fair, other directors were buying shares last year at higher share prices. This year's figures will be second-half weighted, so there may not be significant evidence of the extent of the recovery until later this year.
Be Heard (BHRD)
Big things were expected for Be Heard (BHRD) when it reversed into a standard list shell and moved to AIM in October 2015. Digital marketing is a growth business and Be Heard has focused on the technology and analytics aspects of the market. The business has been built up via acquisition and there has been some success with cross-selling.
Things have not gone exactly to plan, though, and the share price is near an all-time low. It is well below last November's £2.2 million placing at 2.8p a share, when a further £4 million was raised though loan notes convertible at 3.5p a share. This helped fund the acquisition of The Corner Communications, which adds to the creative services of the group and its client base.
Organic growth in revenues was 24% in 2017, but profit will be below expectations. There was a reduction in activity as the end of the year approached and some contracts were deferred. There were also cost overruns on a large contract and that could require a write-off. Content marketing agency Kameleon disappointed following its acquisition, but its performance is improving.
Be Heard has restructured its management team and Peter Scott has become chief executive. Scott has decades of experience in the marketing services sector and bringing the various businesses under one roof should yield benefits.
Greatland Gold (GGP)
There was bad news at the beginning of this year for Greatland (GGP) concerning the Ernest Giles gold project. Newmont Mining (NEM) decided not to take up its option to become involved in this project. It appears it is not in the right place or big enough to fit in with Newmont's current priorities. The Greatland share price plummeted on the news.
This has masked the positive drilling results which defined a large gold anomaly to the north of previous drilling, plus other anomalies. This drilling was funded by Newmont. Greatland plans an exploration campaign commencing in the first quarter of 2018 to generate more information and data about the anomalies.
Greatland had cash of £4 million at the end of October 2017 and further warrants and options have been exercised since then. This provides enough cash for the time being. Ernest Giles may not be big enough for Newmont, but it is significant for Greatland. Further positive exploration news could help the share price to rebound by the end of the year, although it is unlikely to get back to its previous level in the short-term.
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|BE HEARD GROUP||2.43p||3.40%|
|K3 BUSINESS TECHNOLOGY GROUP||173.50p||0.00%|
|NEWMONT MINING CORP||$38.39||-1.84%|
|All data 15min delayed as of: 09:21:56 21/02/18|