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Northland Capital Partners View on the City Hummingbird Resources, Formation Group, Eckoh and Richoux Group

Northland Capital Partners View on the City Hummingbird Resources, Formation Group, Eckoh and Richoux Group

Formation Group (LON:FRM) – CORP: Pre-close trading update
Market Cap: £16.8m; Current Price: 7.625p
FY pre-close: Strong growth in profits, record revenue

  • Strong FY15 performance with PBT expected to exceed £1.75m (FY14: LBT of £0.1m) and management expects a further significant improvement in FY16 (more than double). £2m early interim profit share distribution received on the Norwich House (Streatham High Road) investment in FY15.
  • Further expansion of the order book in H2 and currently includes a number of substantial project management contracts. H1 FY15 revenue of £10.8m was substantially ahead of FY14 (£7.9m) and management has secured additional revenue in H2 and expects to report a record year in revenue.
  • Iverson Road development site has progressed well and is on target for completion by the end of March 2016 – marketing has commenced. In July, Formation announced a profit share agreement in relation to the Norwich House development property entitling Formation to 40% of net profit. £2m received represents part of this.
  • FY16 growth in profits will generate sufficient cash to invest in further projects, some of which are already being appraised.

NORTHLAND CAPITAL PARTNERS VIEW: Strong outturn to FY15 and a very positive outlook for FY16 with further funds from the profit share on the Norwich House (Streatham High Road) development and the sale of Iverson Road development expected. Management also reports a strong project management order book.

Hummingbird Resources (LON:HUM): Interim results
Market Cap: £27.8m; Current Price: 26p
From Yesterday: LBT of US$1.9m

  • The change in year-end means a direct comparison with last year’s interims is not possible.
  • LBT for H115 (30th June) was US$1.9m and LPS of 2.1c.
  • Net debt was US$24.7m.
  • Forecasts, rating and price target remain under review pending the finalisation of the recently completed technical studies that have indicated an improvement to the projects economics.

NORTHLAND CAPITAL PARTNERS VIEW: Hummingbird Resources has continued to advance its 1.8moz Yanfolila Gold Project towards production in H116. The H115 results reflect that focus with a relatively low LBT considering the large volume of technical studies and definition work the Company completed in the first half of the year. We would expect the LBT to widen in H215 as the mine development will be in full swing. While the focus has been on Yanfolila, the positive preliminary report on the Hydro-Electric Power Plant at its Dugbe Gold Project, funded by IFC InfraVentures, has been a positive development that indicates that hydropower could reduce operational costs at the Project.

Eckoh (LON:ECK): Trading update
Market Cap: £90.4m; Current Price: 40p
Good start to FY16

  • Good start to FY16 with a number of wins with CallGuard contracts secured for implementation in Morocco, USA, Canada and South Africa. International interest in the newly launched Haloh Audio Tokenisation secure payment solution with a first contract signed with Sensée.
  • High levels of sales pipeline activity with particular acceleration in enquiries in the US. FY16 is expected to see the usual H2 weighting, reflecting the seasonal volume increases of existing customers and the delivery of projects secured in H1.
  • Separately announced a CallGuard contract with The Co-operative Group, following a competitive tender. The three year deal will see CallGuard deployed across the group’s contact centres in its Electrical, Legal Services, Group Finance and FuneralCare divisions. The service is expected to commence in December. No financial terms disclosed.

NORTHLAND CAPITAL PARTNERS VIEW: Positive trading update with a good start to FY16 with a number of international contracts secured. The FY results in June were overshadowed by the (ultimately unsuccessful) recommended offer for Netcall but the company is trading well with an up to date product set and strong demand drivers as companies battle with the data loss and ensure compliance with PCI DSS. The shares have tracked sideways over the past three months but the current rating of 32.4x FY16 and 26.2x FY17 EPS assumes very strong execution.

Richoux Group plc (LON:RIC): Interims
Market Cap: £21.6m; Current Price: 23.5p
Solid trading in the 1H15

  • Turnover and Adj. EBITDA increased marginally YoY to £6.7m and £0.8m. There are currently nineteen restaurants trading, where two new Dean’s Diners were opened in Hampstead Valley, Kent, and an eighth in Orpington.
  • Outlook statement looks positive where the business is looking to further expand the Dean’s Diner portfolio by adding two new restaurants next year. Furthermore, the new Richoux site in Gloucester Road is clearly trading well as management sees scope for further openings of the Richoux brand.      

NORTHLAND CAPITAL PARTNERS VIEW: The business produced a credible 1H15 performance where both revenue and EBITDA increased YoY. Furthermore, there is sufficient cash headroom of c. £4.4m on the balance sheet with which to add additional sites as alluded to above. There are no forecasts in the market for the business but we estimate the stock trades on c. 10x EV/EBITDA, which does not appear particularly demanding in our view. The additional Dean’s Diner and Richoux site openings will add to the scale of the business.

1. Northland Capital Partners Limited (“Northland”) acts as Nominated Advisor and/or Broker to the company.

2. Northland) and/or its affiliates companies do beneficially own 1% or more of any class of the issuer’s equity securities, as of the end of the month immediately preceding the date of issuance of the research report or the end of the second most recent month if the issue date is less than 10 calendar days after the end of the most recent month. 

3. The authoring analyst or any associate of the authoring analyst does maintain a long or short position in any of the issuer’s securities directly or through derivatives, including options or futures positions.

4. Northland, its affiliated companies, partners, officers, directors or any authoring analyst of Northland has provided services to the issuer for remuneration during the preceding 12 months other than investment advisory or trading services.

5. Northland or any of its affiliated companies has performed investment banking services for the issuer during the 12 months preceding the date of issuance of the report.  

6. A partner, director, officer, employee or agent of Northland or any of its affiliated companies is an officer, director, employee or advisor of the issuer.  Disclosures are applicable for all companies

7. The authoring analyst, or any associate of the authoring analyst, has viewed the material operations of the issuer. 

8. The authoring analyst, or any associate of the authoring analyst, received reimbursement for travel expenses.

9. Northland makes a market in the securities of this company.




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The past is not necessarily a guide to future performance. The value of shares and the income arising from them can fall as well as rise and investors may get back less than they originally invested. The information contained in this document has been obtained from sources which Northland Capital Partners Limited believes to be re¬li¬able. The Com¬pany does not warrant that such information is accurate or complete. All estimates and prospective figures quoted in this report are forecasts and not guaranteed. Opinions included in this report reflect the Company’s judgement at the date of publication and are subject to change without notice. If the investment(s) mentioned in this report are denominated in a currency different from the currency of the country in which the recipient is a resident, the recipient should be aware that fluctuations in exchange rates may have an adverse effect on the value of the investment(s). The listing requirements for securities listed on AIM or PLUS markets are less demanding, also trading in them may be less liquid than main markets.

Northland Capital Partners Limited and/or its officers, as¬sociated entities or clients may have a position, or other material interest, in any securities men¬tioned in this report. Northland Capital Partners Limited does not provide recommendations on securities of firms with which it has a corporate relationship. More information about our management of Conflicts of Interest, Investment Research Methodology & Definition of Recommendations can be found at 

Northland Capital Partners Limited is authorised and regulated by the Financial Conduct Authority and a Member of the London Stock Exchange.

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