BullsEye Insights

BullsEye: Daily London AIM RNS Round-Up

Thursday 30 April 2020


Here is our summary of the day's hottest RNS alerts from across London's Alternative Investments Market (AIM).


Inland Homes (INL.L)

Trading update and Primary Bid offer

Trading Update

Inland Homes, a leading brownfield developer, housebuilder and partnership housing company with a focus on the south and south east of England, today provided a further trading update on the evolving COVID-19 pandemic and the further actions taken by the Company in response to this unparalleled event. The Company's interim results for the 6 months ended 31 March 2020 are expected to be released towards the end of June 2020. 

As referred to previously, the Covid-19 pandemic has impacted the Group's interim results, with five significant transactions, three of which were to major listed housebuilders, being aborted in March 2020.  The total sales value of these transactions was £46.2m. Had these transactions completed as expected, the Company would have achieved the significant reduction of debt planned by management for the first 6 months of the year.

Trading update and financial guidance

The Group achieved legal completions of 136 homes (including joint ventures) during the six months to 31 March 2020 at an average selling price of £284,000.  The average sales rate was 0.71 unit per active outlet during this period. Although all our sales centres have now been shut, we are continuing with our sales and marketing activity remotely.

At 31 March 2020 the Group had forward sales of £30.0m including the sale of a hotel in Bournemouth to Aviva for £13.3m as well as a Partnership Housing order book of £72.7m.

There is little evidence that the UK's national quoted house builders are in the market to purchase land at the present time, however we continue to receive approaches from smaller and medium sized housebuilders for the purchase of sites with planning consent.  We are also being approached by housing associations and build to rent funds for bulk purchases of apartments under construction. Solicitors have been instructed on the forward sale of 113 apartments for a gross value of £22.5m.

We have four Partnership Housing sites under construction for Registered Providers and work is progressing albeit with reduced manpower, which currently generate approximately £6.0m of cashflow per month.

Our land bank now stands at a record 9,143 plots of which 2,881 have planning consent.  Our growing strategic land portfolio where most of the plots are controlled by discount to market value options has increased and now comprises 3,658 plots.  We continue to achieve a good success rate in getting sites allocated for development in local plans.

At 31 March 2020, the Group had cash balances of £17.8m and as a result of the abortive land disposals our net debt was £150.3m.  We had undrawn facilities of £7.4m within our facilities as well as an accordion facility of £20.0m with HSBC.  Discussions are ongoing in relation to renewing the revolving credit facility of £17.2m secured on a portfolio of sites with professional valuations of £26.5m, expiring on 22 August 2020, and the lender has indicated that investors in the facility are positive about renewing. In addition, Inland has a land facility of £4.0m expiring on 12 August 2020 where the lender has agreed in principle that they will extend the facility for a further six months.  The Group expects to repay this facility before its expiry from the sale of the related plot of land.

In line with the Group's commitment to health and safety, Inland's priority continues to be the health and safety of all our employees, sub-contractors and customers.  Three of our sites have been closed and work is continuing at seven sites where processes in line with Public Health England guidance on social distancing can be achieved and where early cash generation may be achieved. In addition, the business has carried out a range of additional measures, including protocols over hygiene, social distancing, travel and self-isolation  and our health and safety personnel continue to monitor the position.

As reported on 30 March 2020 the Board acted quickly in response to the COVID-19 pandemic taking a number of immediate measures to reduce the Group's cost base and to conserve cash. These measures include:

  • The Executive Directors and the Operational Board taking a voluntary salary cut of 50% per annum for the foreseeable future. In addition, the Executive Directors have deferred taking their annual bonus for the 15 month period ended 30 September 2019;

  • The Non-Executive directors have taken a temporary voluntary reduction in their fees of 25% per annum;

  • All staff working remotely earning more than £40,000 per annum have taken a voluntary salary reduction ranging from 9% to 40% per annum;

  • Over 70 members of staff have been furloughed under the Coronavirus Job Retention Scheme;

  • Temporary closure of some sites;

  • Discretionary overhead expenditure reduced to minimum levels;

  • No capital expenditure unless absolutely necessary; and

  • Cancelling the second interim dividend of 2.25p per share which was due to be paid on 12 June 2020, providing a cash saving of £4.6million.

The impact and extent of COVID-19 is clearly uncertain at this stage as are its ramifications on our financial results for the year ending 30 September 2020.  We are assuming that all planned sales of our homes are delayed by at least two months and that the majority of our land sales will be delayed by between two and six months. This includes the major land sales that were expected to be achieved for the half year ended 31 March 2020.  These delays will result in revenues, gross and operating profit in the period being impacted significantly. The Partnership Housing revenues are expected to continue in line with our expectations as work on these sites are continuing at present.


The Primary Bid Offer


Inland Homes plc also announced, following today's earlier announcement, a conditional offer for subscription via PrimaryBid of new ordinary shares of 10 pence each in the capital of the Company at an issue price of 47.5pence per share.


As set out in the Placing Announcement, the Company is also today conducting a Placing of new Ordinary Shares at the Issue Price by way of an accelerated bookbuild process managed by Panmure Gordon, as agent for and on behalf of the Company. The Capital Raising will raise up to £9.9 million (before expenses).


The Issue Price represents a discount of 11.2 per cent. to the closing middle market price of an Ordinary Share on 29 April 2020 (being the latest practicable date prior to the publication of this announcement).


The PrimaryBid Offer and the Placing are conditional upon the New Ordinary Shares being admitted to trading on AIM. Admission is expected to be take place at or around 8.00 a.m. on 6 May 2020.  Completion of the PrimaryBid Offer is conditional upon the Placing becoming unconditional in all respects.


For the full RNS, see: https://www.investegate.co.uk/inland-homes-plc/rns/trading-update/202004300700074044L/


Ascent Resources (AST.L)

Signature of MOU on further three Cuban licences

Ascent Resources Plc, the onshore Caribbean / Hispanic American and European oil and gas company, announced the execution of a binding Memorandum of Understanding directly with the Cuban national oil and gas company ('CUPET'), securing exclusive rights to three additional onshore licences.


Highlights


  • Signature of binding MOU with CUPET granting exclusive rights to negotiate Production Sharing Contract ('PSC') terms on three additional onshore licences

  • Issue of equity raising gross proceeds of £212,500 at nil discount to fund the initial technical work


Background


On 14 April 2020 the Company announced its first acquisition in its wider international strategy with the acquisition of an exclusive MOU on Block 9b, a producing onshore Cuban oil licence.  This licence, located on the North coast of Cuba, contains the onshore Majaguillar and San Anton fields and is currently producing 190bbls/day from three wells. 

The Company also announced that it viewed Cuba as one of the last remaining untapped hydrocarbon provinces of scale and that it was in negotiations with CUPET regarding a variety of other onshore blocks.


Memorandum of Understanding


The Company has now signed a binding MOU with CUPET granting exclusive rights for six months to negotiate multiple Production Sharing Contracts ('PSC') over the onshore Blocks 9a, 12 and 15.  This is in addition to the MOU on Block 9b recently secured via the recent purchase of Energetical Limited.


The combination of Blocks 9a, 9b, 12 and 15 positions the Company with exclusive negotiating rights to potentially one of the largest non state owned, onshore Cuban portfolios.  The portfolio provides a blend of existing production for low risk redevelopment with significant upside potential for both appraisal and exploration.  The portfolio is consistent with the Company's strategy of counter cyclical acquisitive growth with a focus on low cost production, manageable initial capital commitments and near term high inflection growth potential. 


Blocks 9a, 12 and 15 are all onshore licences that sit on the North coast of Cuba and therefore benefit from a proven hydrocarbon system with multiple historic wells with oil shows and on trend with adjacent blocks that are either producing or have successful discoveries.


It is anticipated that the PSC negotiations will take place over the coming 6 months.  As part of these negotiations, the Company will apply for operator status in Cuba, while building an integrated subsurface model, incorporating structural, Geochem and well data.  It is expected the PSCs will be granted with no up front cost / sign on bonuses and manageable capital commitments, focused initially on identifying a prospect inventory and redevelopment plan for Block 9b.

Further details of the blocks are set out below.


Block 9a (1,000 km2)


Block 9a is an onshore block situated adjacent to acreage with a proven hydrocarbon system and on trend with the Varadero producing oil field. The Northern portion of the block is most prospective with limited but modern seismic data already available and approximately 30 historic wells which have penetrated primarily the shallow subsurface.  Many of these wells encountered oil shows.  Having conducted an initial review of the available data and in consultation with CUPET further prospectivity has been identified in the traditional Placetus carbonate reservoirs and in overlying fractured volcanic/ophiolite plays of the Zaza tectonic structural unit ('TSU'). 


Block 12 (2,750 km2)


Block 12 is a high potential onshore block with opportunities in multiple plays; Zaza (Ophiolite), Placetas, Camajuani and Remedios tectonic stratigraphic units. The block has been drilled 9 times, all of which were pre 1960s and all of which exhibited oil shows. Encouragingly, adjacent blocks have been drilled in more recent years with oil shows and discoveries having been made. The Company has identified the potential to generate a portfolio of exploration prospects after evaluation of the existing seismic and well data, including seismic reprocessing and structural modelling.


Block 15 (3,200 km2)


Block 15 is an onshore exploration block with good quality seismic across the central part and 3 historic wells. The Company has identified the northern half of the block as the most attractive section with initial analysis highlighting potential in multiple play types of the Remedios, Placetus and Camajuani tectonic structural units. Again this potential could be unlocked following reprocessing of the seismic data, integrating existing well data, and structurally modelling the subsurface.


Issue of Equity


In support of the Company's international growth strategy and the execution of the technical work streams associated in advancing the MOUs, the Company is pleased to announce it has raised gross proceeds of £212,500 through the issue of 7,727,272 shares in the Company ('Placing Shares') at 2.75 pence per new share, being a nil discount to the closing bid price of the Company's shares prior to this announcement. Each Placing Share will have one warrant attached to it exercisable at any time over the next 2 years by paying 5.5 pence per warrant share exercised, representing a 100% premium to the placing price. The Company has also issued 1 million warrants on the same terms and will pay £8,750 cash in connection with fees associated with the issue of equity. The Placing Shares are expected to be admitted to trading on AIM on or around 15 May 2020.


For full RNS details, see: https://www.investegate.co.uk/ascent-resources-plc--ast-/rns/signature-of-mou-on-further-3-cuban-licences/202004300700074041L/


Ethernity Networks (ENET.L)

Design Contract with North American Tier-1 OEM

Ethernity Networks (AIM: ENET.L), a leading supplier of data processing offload solutions on programmable hardware for functional accelerating of telco/cloud networks is pleased to announce the signing of a new design contract with a North American tier-1 telecommunications OEM.


Summary of Key Terms


  • Design win contract for Ethernity flow processor technology, including ENET Switch and Traffic Manager firmware, to support 200Gbps performance on customer's xPON optical light termination ("OLT") device;

  • $495,000 upfront payment to Ethernity of in respect of design fee and prepayment of initial royalties;

  • Annual revenue of up to $240,000 p.a. for continued product development and ongoing Ethernity engineering support of the previously licenced technology with the customer; and,

  • Anticipated ongoing royalty payments to Ethernity based on expected scale of the deployment OLT platform by the OEM partner from H2 2021.


This contract represents a further development of the relationship with an existing North American tier-1 telecommunications OEM customer following an initial licensing deal in 2018. Following a successful field deployment of the previously licenced Ethernity platform, the customer has now advanced to deployment of a next-generation product based on Ethernity's advanced technology.


The Ethernity solution will be customised to fit the customer's new OLT platform, which, in addition to Ethernity's ENET Flow Processor core functionality includes hierarchical traffic management, switching, and access control list (ACL). It will also include Ethernity's new 400Gbps Fabric technology to allow cascading multiple chassis to form a virtual chassis cluster.

Deployment of the new OLT platform is expected in H2 2021. At such time, and based on current expectation of the scale of deployment of the platform and the size of the OEM, Ethernity anticipates the contract to result in significant ongoing royalty streams for the Company. These would be in addition to ongoing royalties from the previous platform with the customer.


For full RNS details, see: https://www.investegate.co.uk/ethernity-networks--enet-/rns/design-contract-with-north-american-tier-1-oem/202004300700074013L/

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