Recent Updates of 2 LSE AIM-Index Stocks – Vast Resources PLC and Mporium Group PLC

Vast Resources PLC

Vast Resources PLC (VAST) is a Maidstone, United Kingdom-headquartered mining and resource development company which has a presence on the ground in both Romania and Zimbabwe. Its projects include the Baita Plai Polymetallic Mine in Romania and the Chiadzwa Community Diamond Concession in Zimbabwe, and it focuses on the rapid advancement of brownfield projects to deliver multiple revenue streams and transform from exploration company to mining company by moving its pipeline of brownfield and appraisal opportunities up the development curve. The group is listed on the AIM market of the London Stock Exchange, and its operations are differentiated in two geographical segments, namely Europe and Southern Africa.

Recent Development

Following an update on progress on the Chiadzwa Community Diamond Concession in Zimbabwe on 17 June 2019 in which the company informed a road map to closing the agreements that will enable it to mine was established, the company on 26 September 2019 announced that it had signed a Joint Venture Agreement with Chiadzwa Mineral Resources. It resulted in the formation of Katanga Mining (Pvt) Ltd and a further Joint Venture Agreement between the newly formed company, and the Zimbabwe Consolidated Diamond Company will be signed in the first week of October, paving the way for the company to commence production at the mine. Further, the company informed that it had settled the historic claims by mutual consent and said that it would shortly provide an update regarding the financing mechanism for both the Community concession and for Baita Plai in Romania.

Financial Highlights (FY 2019, in $m)

For the 13-month period ended 30 April 2019, revenue from continuing operations increased to $3.4 million (2018: $3.1 million), while total revenue, including operations that were discontinued in April 2019, rose to $34.7 million (2018: $30.7 million). Gross loss declined to $0.91 million during the period against $1.2 million reported at the end of FY 2018. It reported an $8.6 million gain on disposal of Zimbabwean gold operations and the exchange loss during the period was reported at $2.8 million versus an exchange gain of $2.3 million recorded in FY 2018. This led to loss from operations of $9.1 million, which ballooned from a loss of $4.53 million in FY 2018. As the company recorded a loss on disposal of an interest in subsidiary loans of $12.53 million in FY 2018, it recorded a loss before taxation from continuing operations of $17.78 million in FY 2018. The absence of loss on disposal of an interest in subsidiary loans helped the group to post an improvement in loss before taxation from continuing operations of $9.95 million during the current period. Profit after taxation from discontinued operations rose from $2.3 million in FY 2018 to $17.04 million, which enabled the group to post a total profit for the period of $7.1 million against a loss of $15.47 million in FY 2018. Total comprehensive profit for the period was $9.03 million against a loss of $16.9 million in FY 2018. Loss per share from continuing operations declined from $0.16 to $0.37 reported in the prior year. Carrying amounts of loans and borrowings were cut by $21.4 million during the period to $5.5 million (2018: $27 million), and the company had a cash balance at the period end of $0.569 million (2018: $1.3 million).

Share Price Commentary

On 30 September 2019, at the time of writing (before the market closed, GMT 3:10 pm), VAST shares were trading at GBX 0.30, up by 39.53 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 0.69/GBX 0.10. The company’s stock beta was 1.05, reflecting almost the same volatility as compared to the benchmark index. Total outstanding market capitalisation was around £20.03 million.

Outlook

Though the group is in an advanced stage of acquiring on substantial funding, failure to do so would call into question the ability of the firm to survive, the threat of which could be further exacerbated by unseasonal severe climatic conditions, unforeseen delays in permits and cost overruns. While the company seeks to reduce risk by using modern technology and electronic tools, mining of natural resources involves significant inherent risk. The prices of various commodities the company markets can be subject to significant fluctuations, and as the prices are affected by global supply and demand, the company does not have any influence on the market prices, which can lead to a significant impact on the financials and affect the business assumptions.

Mporium Group PLC

Mporium Group PLC (MPM) is a London-headquartered technology company that provides Software-as-a-Service (SaaS) and supporting services to a wide range of clients to help identify and monetise the transformation that smartphones have had on consumer behaviour, helping to make better marketing decisions. It is the holding group for Fast Web Media Limited and Mporium Limited, offering four core products, namely Sync, Sports, Insights and Lead Generation. The company works directly with leading independent agencies, major network agencies and brands to drive highly performant digital advertising campaigns. The group is listed on the AIM market of the London Stock Exchange, and its operations are differentiated in two operating segments: Product and Agency Project.

Recent Development

The company on 30 September, along with the interim results, announced that it had entered into a non-binding agreement to acquire the Click Labs Group, a performance marketing agency which specialises in the design, build and deployment of multi-channel lead generation campaigns. The agreement is for a maximum consideration of £5.5 million, and the news sent the share price of the company lower by 50% during the early morning session. It came after the company on 4 September 2019 announced a commercial partnership with Click Labs Group. To provide working capital for the operations of the group and funding for the initial cash consideration of Click Labs, the company further proposed a Placing of £1.25 million shares in October 2019 to support the company in meeting its short-term working capital requirements.

Financial Highlights (H1 2019, in £m)

Driven by Payment Protection Insurance (PPI) lead generation arising from the relationship of the group with Allay, group revenue increased to £18.5 million during the period (restated H1 2018: £0.55 million). Together with sports, and technology licensing, the group expects new consumer claims verticals to be a key revenue and profit driver in the future, as there is no longer an expectation for this revenue to continue in future, due to the PPI deadline on 29 August 2019. Gross profit during the period declined to £0.46 million from £0.5 million in the first half of 2018. Due to the depreciation and amortisation of ongoing capitalised development costs prior to the restructuring, adjusted operating loss increased to £13.7 million (restated H1 2018: £3.1 million), while the reported operating loss for the period was £2.9 million (restated H1 2018: £3.1 million). In addition to £0.2 million of restructuring costs in relation to redundancies, share awards for the Allay exclusivity strategic partnership led to an exceptional non-cash charge of £10.5 million. Basic loss per share attributable to the owners of parent rose to £0.02 from £0.01 recorded in the first half of 2018. Cash and cash equivalents at the end of the period were £0.4 million (restated H1 2018: £0.8 million) and net cash used in operating activities reduced to £0.74 million during the period from £0.8 million in the prior year.

Share Price Commentary

On 30 September 2019, at the time of writing (before the market close, GMT 3:12 pm), MPM shares were trading at GBX 0.475, down by 43.45 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 6.50/GBX 0.80. The company’s stock beta was 0.65, reflecting less volatility as compared to the benchmark index. Total outstanding market capitalisation was around £8.79 million.

Outlook

While the company expanded its operations across multiple global markets with some of the largest clients of the group, its Chief Executive Officer and Executive Chairman exited their respective role, and significant market challenges with the Agency division offering through late 2018 and early 2019 led to the commencement of restructuring in June 2019. The restructuring programme undertaken involves licensing of self-serve solutions, refocus on performance-led division and the divestment of the digital marketing agency Fast Web Media, and is focused on reducing operating expenditure. The applicability of its proprietary IMPACT technology across sectors is demonstrated by agreements signed during the period. The development of the lead generation division is anticipated to further accelerate with the help of Click Labs agreement and subsequent potential acquisition. The company also believes the proposed acquisition would help it to break-even in the medium term, and its business remains in a growth phase. 

Comparative share price performance of VAST and MPM

(Source: Thomson Reuters)