Markets

Small cap movers: Accrol Group shares go down the pan after warning of bigger losses, possible banking covenant breach

A look back at some of the more interesting stories from the junior market this week
Toilet sign
Over the week, Accrol shares plunged nearly 75% in value to 7p, making it the biggest AIM casualty of a pretty bruising week

There was the sound of a loud flush this week as Accrol Group Holdings PLC (LON:ACRL) shares went down the pan after the toilet paper maker said it is likely to breach banking covenants as it warned of a greater than expected full-year adjusted underlying loss (LBITDA).

In a trading update on Monday, the AIM-listed group said it expects to report an LBITDA of around £5mln for the financial year ending April 30, a turnaround from underlying earnings (EBITDA) of £16.1mln the year before, weighed by increased costs.

Over the week, Accrol shares plunged nearly 75% in value to 7p, making it the biggest AIM casualty of a pretty bruising week.

Value butchers Crawshaw Group PLC (LON:CRAW) also saw its share price dramatically chopped back, with the firm’s stock shedding 31% to 3.75p on Friday as it reported two key management resignations and warned of challenging trading conditions.

The high street firm said its chief executive, Noel Collett was stepping down to “pursue other opportunities” while its chief financial officer, Alan Richardson intends to leave the business in early May 2018.

In an update, Crawshaw said trading for the first six weeks of the financial year had been challenging, exacerbated by the recent poor weather, though added that its factory shop format continues to perform well.

Alarms go off at Sprue Aegis

Another big Friday faller was Sprue Aegis PLC (LON:SPRP) which saw its shares slump 31% to 130.7p as the termination of its distribution agreement with Newell Brands turned messy.

Sprue received 12-months' notice the agreement was being ended on 31 March a year ago, but Newell’s BRK Brands - one of fire alarms and smoke detectors firm’s main outlets - has seemingly moved the date forward by nine days to March 22.

BRK Brands also alleges Sprue has breached the long-standing agreement between the two companies and, as a consequence, will not buy any stocks of unsold products.

Sprue said it will carry out an assessment of the value of these stocks but due to BRK Brands’ decision, its audited final results for the year ended 31 December 2017 will not now be announced this month.

Meanwhile, Weatherly International plc (LON:WTI) shares tumbled nearly 34% lower this week to 1.15p after the mining company warned that it was unable to meet loan repayments despite narrowing interim losses driven by exceptional copper production levels in Namibia.

The news came as Weatherly reported results for the six months ended 31 December 2017, showing losses of US$5.9mln, compared to a loss of US$11.3mln the previous year.

And a former AIM favourite Gulfsands Petroleum plc (LON:GPX) saw its shares collapse 52% to 2.25p this week after the energy firm said it would delist from the market, a move being backed by major shareholders who control 83% of the voting rights of the group – which has interests in war-torn Syria.

Dismal week for AIM and FTSE 100

Overall, the FTSE AIM All-Shares index had a dismal week, losing around 4% to 1,015, which was more than the near 3% decline shouldered by the blue-chip FTSE 100 index at 6,910 as Trump trade war jitters did their worst again.

But there were still some bright spots for the small caps, with Airea PLC (LON:AIEA) the week’s biggest gainer, jumping 47% higher to 187p after the flooring company accompanied full-year results with a 5p a share special dividend.

The AIM-listed firm saw its 2017 revenue increase to £36.7mln, up from £24.6mln, helped by export sales growth of 58% over the last six months.

However, Airea’s operating profit before exceptional items was reduced to £1.156mln, down from £2.013mln in 2016 reflecting accelerating losses in its residential carpets business, with the exceptional cost of £2.2mln relating to the rationalisation of that business.

Meanwhile, Columbus Energy PLC (LON:CERP) rose 30% over the week to 6p after announcing on Monday that it has successfully restructured the Beach Oilfield Limited (BOLT) transaction in the South West Peninsula of Trinidad on materially improved terms.

The AIM-listed oil and gas producer and explorer, focused on onshore Trinidad and with the ambition to grow in South America, also said it has entered into an agreement for lease with Singh's (Cedros) Estates Limited to gain long-term access to the South West Peninsula for oil and gas operations, including the Bonasse oilfield.

Leo Koot, Columbus Energy’s executive chairman aid the “news is a major milestone for Columbus and further delivery of our strategy to build a core exploration, appraisal, development and potentially significant production hub in the South West Peninsula of Trinidad.”

Pennant keeps flying

Elsewhere, Pennant International Group PLC (LON:PEN) shares spiked 12.5% higher this week to 91p after good news from the Middle East.

The training and support solutions provider announced that it has received a potential £10mln order from a customer in the region and expects to know by the end of June whether this will turn into a firm order.

In the UK, there was also upbeat news on a major contract that had been delayed, with the scope of the project revised up due to additional work now required by the customer, boosting the value of the contract by £3.5mln to around £12mln.

Last week’s strongest gainer, fertiliser producer Harvest Minerals Limited (LON:HMI) pushed higher again this week, adding 12.5% to 22p after the group said its Arapua project is on the cusp of reaping the benefits of significant investment as commercial production nears.

In its interim results statement released on Friday, Harvest’s chairman, Brian McMaster, said all four of its main targets in 2017 were achieved: to complete all the required agronomic test work at Arapua; to apply to register its product KPfértil with the Brazilian Ministry of Agriculture (MAPA); to achieve first sales; and to commission a modular processing plant to ensure that it is easy to expand production in line with sales.

“Looking forward, 2018 is going to be another real step change for us as we focus on increasing our sales volumes and head towards commercial production,” McMaster said.

Serabi sees gold-star performance

Another Brazil-focused firm, Serabi Gold PLC (LON:SRB) was also in demand on Friday, jumping nearly 30% higher to 4.5p on news of a US$15mln investment from a private equity group.

The gold miner said mining-focused Greenstone Resources will put in US$15mln to acquire a 29.82% interest in the company via a subscription for over 297mln shares.

Serabi added that Mark Sawyer, a partner of Greenstone Capital, would join the board with immediate effect.

And shares in Kibo Mining PLC gained 8.5% this week to 6.4p after the firm welcomed comments from Tanzania’s president pledging to support the private sector and indicating an agreement with a new energy contractor is close to being signed.

Noting recent comment in the press regarding comments made at the 11th Tanzania National Business Council (TNBC) meeting, the AIM-listed energy and resources firm’s CEO, Louis Cotzee said: "It is heartening to see the winds of change blowing from Tanzania. This is a very clear and powerful signal that the country is open to business and keen to create an environment where companies can thrive.”

He added: “We are looking forward to making further strides with our nationally important flagship Mbeya Coal to Power Project, that aims to alleviate the acute power deficiency in the country and hope to sign the Power Purchase Agreement shortly."


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