2 AIM-Listed Companies To Look At – Avacta Group PLC And Live Company Group PLC  

Avacta Group PLC

Avacta Group PLC (AVCT) is a Wetherby, the United Kingdom-headquartered biotechnology and medical research company which seeks to address the lack of a durable response to current immunotherapies of patients by developing novel cancer immunotherapies. The group aims to create effective treatments for all cancer patients by combining its two proprietary platforms – tumour targeted chemotherapy and Affimer® biotherapeutics, which is an alternative to antibodies derived from a small human protein. The company actively seeks to license its proprietary platforms in a range of therapeutic areas and has established drug development partnerships with various pharma and biotech groups and organisations. The operations of the group are differentiated in two operating segments, namely Animal Health and Life Sciences.

Recent Development

The company on 18 October 2019 announced a proposed Placing and Subscription to raise gross proceeds of up to £9 million, which would be used to continue to grow revenues and secure licensing partnerships for Affimer® diagnostics reagents, secure further significant drug development partnerships that help progress the Company’s technology platforms and enter the clinic with its first programme. The placing would entail issuance of up to 59,777,013 new ordinary shares at a price of 15 pence per share, which was at a discount of approximately 11.8 per cent to the closing price of the Ordinary Shares on AIM to 17 October 2019, and would enable the company to have a sufficient working capital in place for at least the next 12 months.

Financial Highlights (H1 2019, in £m)

The interim results were presented for the 12-month period ended 31 July 2019, as the accounting reference date of the group was changed from 31 July to 31 December on 18 January 2019. As opposed to being spread over the three-year term of the development programme, the initial up-front payment of $2.5 million (gross) for Affimer® was recognised on December 2018, which resulted in revenue from Avacta Life Sciences increasing to £2.60 million (2018: £1.19 million). Even as revenues from Avacta Animal Health decreased marginally to £1.53 million (2018: £1.57 million), revenue for the 12 months ended 31 July 2019 was £4.12 million (2018: £2.76 million). While administration costs, decreased marginally to £8.47 million (2018: £8.52 million), as the company continues to invest in the Affimer® therapeutics programme, research and development costs increased to £4.20 million (2018: £2.64 million). The reported loss after taxation increased to £9.68 million (2018: £8.83 million) and operating loss increased to £11.18 million (2018: £10.43 million). Following the completion of the fundraising in August 2018, the number of shares in issue increased, resulting in a decrease in the loss per share to 8.76p (2018: 13.49p). The company ended the period with £6.51 million net cash (31 July 2018: £5.22 million), with an outflow from investing activities of £2.01 million (2018: inflow £1.48 million) and a cash outflow from operations of £7.62 million (2018: £5.47 million).

Share Price Commentary

On 21 October 2019, at the time of writing (before the market closed, GMT 9:04 am), AVCT shares were trading at GBX 16.25, remaining the same against the previous day’s closing price. Stock’s 52 weeks High and Low is GBX 50.00/GBX 16.00. The company’s stock beta was 0.32, reflecting less volatility as compared to the benchmark index. Total outstanding market capitalisation was around GBP 18.88 million.

Outlook

Recently the company entered into a collaboration and option agreement with ADC Therapeutics SA under which ADC Therapeutics will cover all costs incurred by the group during the collaboration, and the company would provide ADC Therapeutics options to obtain exclusive licenses to the Affimer® proteins for clinical development and commercialisation. Moreover, driven by the growing reputation of the Affimer® technology particularly in the diagnostics and pharmaceutical sectors, the company reported strong growth in Affimer® reagents revenue and order intake over the reporting period, and building a profitable Affimer® reagents business remains a very high priority for the company. Avacta remains on track to dose first patients in late 2020, with pre-IND enabling studies due to start for AVA004 (PD-L1 Affimer®). Proof of concept animal data for the TMAC programme is expected in Q4 2019, which could stimulate a preclinical licence deal, given the interest already shown from established pharmaceutical companies.

Live Company Group PLC

Live Company Group PLC (LVCG) is a Surrey, the United Kingdom-headquartered, AIM-listed live events and entertainment company, which operates leading global education and entertainment brands for kids. The operations of the group are differentiated in two operating segments, namely product & content sales, and tours, events, shows, licences and content rental fees.

Recent Developments

The company on 03 September 2019 announced that it had entered into an agreement with Snowman Enterprises Limited to produce a themed tour of The Snowman and The Snowdog, under which the company would pay Snowman Enterprises Limited a royalty fee based on the revenues generated from the themed tour. The company has been granted rights to produce and exhibit The Snowman, and The Snowdog themed BRICKLIVE tour in the Republic of Ireland, the Isle of Man, the Channel Islands and the UK, inspired by the animated film The Snowman and The Snowdog, first broadcasted in 2012, the sequel to The Snowman film.

Financial Highlights (H1 2019, in £m)

As revenue and profits will be heavily weighted to the second half of the year, revenue in the first half of the financial year 2019 was £2.0 million (1H 2018 £2.8 million), in line with expectations and reflecting unusually high sale in the first half of 2018 due to Animal Paradise in China. Even as the cost of sales declined over the year, gross profit fell to £1.14 million from £1.95 million in 1H 2018. Even as the company continued to identify efficiencies and tried to streamline processes to reduce overheads actively, total administrative expenses rose to £1.9 million (1H 2018: £1.4 million), mainly due to the absorption of Bright Bricks Limited into the group. Operating loss before exceptional items was £0.77 million against a profit of £0.52 million while operating loss after exceptional items was £1.02 millionAdjusted EBITDA for 1H 2019 amounted to a loss of £482,000, though the company had been trading EBITDA profitably since the second quarter. A loss for the period was £1.07 million against a profit of £0.12 million reported in the prior year, which corresponded to a loss per share of 1.5 pence versus a profit of 0.2 pence in the previous year.

Share Price Commentary

On 21 October 2019, at the time of writing (before the market closed, GMT 9:06 am), LVCG shares were trading at GBX 45, remaining the same against the previous day closing price. Stock’s 52 weeks High and Low are GBX 74.78/GBX 35.00. The company’s stock beta was -0.18, reflecting a weak inverse relationship with the benchmark index. Total outstanding market capitalisation was around £31.50 million.

Outlook

While the company has invested heavily in expanding its asset base in the year to date and has secured multi-year contracts with big companies, administrative expenses increased significantly but that did not translate into higher revenues and earnings. Moreover, the company faces several operational, strategic and financial risks as it is still in its early stage of development, with the growth of the revenues challenging to predict, despite substantial investment in the development of its content and the pipeline. It will be imperative for the group to maintain & develop its business and stay competitive with its pricing as future growth and prospects will depend on it. The group is seeking to move more towards a partnership-based approach to its events and will continue to produce touring models which appeal to families and customers. The company is also creating customised corporate commissions to launch new products and engage customers and new audiences and will help to continually seek new opportunities to increase and diversify its revenue streams.

 

Comparative share price chart of Avacta Group PLC and Live Company Group PLC

 (Source: Thomson Reuters)