Share Talk Weekly Small Cap Movers & Shakers – 24th October 2021

We take a look at some of the major movements in the small caps world over the last week.

Arena Events Group PLC, a turnkey event solution provider, was purchased this week in an agreement 21p per share cash offer.

The shares jumped 44% to 20.25p after the bid. It was made by IHC Industrial Holding (an Abu Dhabi-based publicly listed holding company) and Tasheel which already holds a 23.9% stake in Arena.

Arena’s entire ordinary share capital is valued at approximately PS71.0 million. These terms also imply an enterprise valuation – i.e. Arena’s debt is included £95.1 million.

Ironveld PLC, (AIM:IRON) rose 40% to 0.825p this week, thanks to a large investment by Grosvenor Resources. The company is purchasing PS5.6mln shares at a penny per poke.

Ironveld stated that Grosvenor, a South African private company, was founded by young black entrepreneurs to expand their mining and investment operations beyond bulk commodities and create high-value vertically integrated projects.

After the investment, Grosvenor will be able to nominate two directors non-executive to the Ironveld board.

System1 Group‘s trading update (AIM:SYS1) was a marketing and branding consultancy that sparked a stampede for shares. Shares rose 39% to 340p.

“We are delighted that both new and old customers continue to adopt System1’s repeatable and fast-turnaround data products. They have displaced the large, bespoke consultancy projects which dominated the group’s activity up until H2 last years,” Management stated in an update covering the six month period ending September.

The group’s revenue rose 22% year on year to PS12.3mln. Adjusted profit before tax, after all pennies are counted, is forecast to be around £900,000. This is compared to last year, which was at PS1.3mln.

Reabold Resources (AIM:RBD) PLC, the AIM-listed investment company focused on upstream, is to become a major shareholder in Daybreak Oil and gas, a US over-the-counter-traded oil and gas operator with assets in California.

Daybreak’s share capital will be held by Reabold up to 46.5%

Reabold shares rose 30% to 0.2215p after investors gave their approval.

Sachin Oza, co-chief executive officer at Reabold, stated, “This transaction creates liquidity and forms a new cash flow producing business with skills and capability to capitalize on growth opportunities from the existing portfolio and attractive acquisitions made by California market dynamics in California.”

Smartspace Software PLC (LSE-SMRT) was the biggest loser of the week. It plunged 30% to just 77p after lowering its full-year guidance.

The revenue for the year ending 31 January 2022 will not be less than £5.2mln. (FY2021: PSD4.6m). There will be an adjusted EBITDA (FY21) loss of £2.7mln. (FY21 adjusted EBITDA Loss: £2.1mln).

The company’s Evoko Naso room-booking software has been less popular than expected. This is because a full-blooded employee returns to the office takes longer than expected.

The board expected that sales of Naso would accelerate in autumn. However, September sales and initial indications for October have not reflected this.

Gusbourne, an award-winning English sparkling wine and still wine producer, was another stock that had a poor week. Its shares fell 24% to 93.5p due to fundraising news.

The company raised £2.6mln through the issuing of shares at 75p. This was a significant discount to market prices.

Funds raised will be used to support business growth in all channels (Direct to Consumer, UK Trade and International), and further development of the company.

It seems like a long time ago that toilet roll was the “must have” item during lockdown. Accrol Group Holdings PLC, the toilet roll company (AIM:ACRL), must be longing for those days after this week’s share price collapse.

In a trading update, the company highlighted the pressures facing its raw material supply chain. The company noted that the global rise in energy costs, shortages of inputs and general inflationary pressures has had an impact on the production costs of pulp and parent reels. However, the supply chain had shown “significant resilience” and had been managed well, but significant cost increases were needed to be sustained in the short term. Distribution pressures, including the availability of HGV drivers, have further impacted revenue growth for the current fiscal year, which runs until April 2022.

Although these cost increases are being passed on successfully, there will be some time delay in passing on their full impact. This will result in earnings for fiscal 2022 being lower than previously anticipated. This smells of a classic profit warning.

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