Beaufort Securities Breakfast Alert: Amryt Pharmaceuticals, International Greetings plc, Kier Group, URU Metals Ltd, Venture Life Group


Today's edition features:

• Amryt Pharma (LON:AMYT)

• URU Metals (LON:URU)

• IG Design (LON:IGR)

Kier Group (LON:KIE)

Venture Life Group (LON:VLG)




The FTSE-100 finished yesterday's session 0.11% lower at 7,263.90 whilst the FTSE AIM All-Share index was down 0.16% at 991.73. In continental Europe, the CAC-40 finished 0.49% higher at 5,267.29 whilst the DAX was up 0.25% at 12,600.03.

Wall Street

In New York last night, the Dow Jones closed 0.24% lower at 22,359.23, the S&P-500 shed 0.3% to stand at 2,500.6 and the Nasdaq was off 0.52% at 6,422.69.


In Asian markets this morning, the Hang Seng was recently down 0.84% at 27,874.64 and the Nikkei 225 was 0.35% lower at 20,276.04.


In early trade today, WTI crude oil was 0.12% higher at $50.61 per barrel, while Brent was down 0.07% at $56.39 per barrel.



Facebook to share Russia-linked political adverts with investigators

Facebook founder Mark Zuckerberg says his company will share 3,000 Russia-linked political adverts with US investigators. He also pledged to make political advertising more transparent on his network in future. "We will work with others to create a new standard for transparency for online political ads," he said in a live address on his Facebook profile. He said political advertising will now carry disclaimers about which campaign or organisation paid for it. He added that the company was continuing to investigate instances of foreign actors abusing its advertising platform, including Russia and other "former Soviet states". The move to share details with investigators comes after considerable public pressure for Facebook to be more transparent - and is being interpreted by some as an attempt to fend off any potential regulation from the US government.

Source: BBC News


Latest Video

On Wednesday, 20th September 2017 Mick Billing, Chairman & CEO of Thor Mining answered questions posed by private investors at the Beaufort offices. Click here to see the interview.


Beaufort Securities acts as corporate broker to Thor Mining PLC


Company news

Amryt Pharma (LON:AMYT, 21.75p)– Speculative Buy

Amryt Pharma, the commercial stage pharmaceutical company focused on acquiring, developing and delivering innovative new treatments to help improve the lives of patients with rare and orphan diseases, yesterday announced that it has proposed placing to raise €15m (£13.3m) gross through the issuance of 66,477,651 new Ordinary Shares at a price of 20p per share. The use of proceeds are; i) AP101 – to progress its pivotal Phase III clinical trial for Epidermolysis Bullosa ('EB') as well as, in anticipation of a successful Phase III trial, the pre-launch costs and expansion of existing manufacturing capacity for AP101, ii) Lojuxta - further development of commercial, medical and regulatory infrastructure required to support the commercialisation, iii) AP102 – to fun cost of a Phase IIa study, and iv) Other – working capital and future R&D activities. Amryt's CEO, Joe Wiley, commented "We are delighted with the support we have received, both from new and existing investors, for this oversubscribed placing, which has raised €15.0 million, equivalent to £13.3 million, and significantly widened our shareholder base. Amryt has achieved a tremendous amount in a relatively short space of time and we firmly believe that the Company is well-positioned for future growth. As we develop the business further, we will consider additional in-licensing opportunities, as well as acquisitions or investments in other promising assets". The placing is subject to shareholder approval at a General Meeting to be held on 9 October 2017.

Our View: Upon shareholder approval of the Placing, the Group would have €15m (gross) plus €10.9m existing cash (as at end June 2017) with undrawn EIB debt facility of €10m. This would significantly strengthen its balance sheet not only to fully-fund its AP101 Phase III clinical trial all the way through, but also to fund pre-launch costs and capex for manufacturing capacity expansion upon approval. Stating such for their 'use of funds' strongly reinforces the management's continued confidence in achieving FDA and EMA approval for AP101 for the treatment of EB, which Beaufort expect to see during mid-2019. Furthermore, the fund would also be used to support the commercialisation of Lojuxta (treatment for Homozygous Familial Hypercholesterolemia, 'HoFH'), which currently generates annualised revenue of €11.5m with recently upward revised estimated potential market size of approximately €100m (from €50m). The commercial infrastructure that has been built for Lojuxta can also be used to support AP101, other pipeline of drugs and for future in-licensed product should the opportunities arises. The Group's interim results announced early this month was truly impressive, delivering on every promise and more. Operationally, AP101 is progressing well and the management confirmed interim analysis readout expected in H1 2018; which will, if necessary, enable the Group to increase the number of patients in the study to maintain an exceptional 80% chance of success. For AP102 (treatment for resistant acromegaly and Cushing's Disease), pre-clinical studies are expected to be completed in Q4 2017 and the Board intend to seek approval from the regulatory authorities to commence human clinical trials in 2018. Having clearly 'set out their table', there is high confidence that Amryt's management is capable delivering on its promises and vision for its future. All of which, begs a further question - why exactly are European investors still failing to grasp the very significant financial and commercial benefits available for Orphan and Rare Disease drug developers? Although Amryt finds no quoted peers in London, a good basket of NASDAQ-listed comparables are seen to command a significant premium despite mostly being pre-revenue and somewhat earlier in their development. Such anomalies can and, of course, do rapidly correct. Given that Amryt's lead indication has a demonstrable market opportunity in excess of US$1.3bn, while high-margin licensing revenues are now profitably building out alongside a robust pipeline, such an event is clearly overdue. Beaufort's valuation on Amryt shows that the Group is presently valued less than Lojuxta's prudently discounted future cashflow (no value apportioned to AP101 nor AP102!). Beaufort reiterate its Speculative Buy rating on the Share with target price of 65p.

Beaufort Securities provides corporate sponsored research to Amryt Pharma Plc


URU Metals (LON:URU, 1.28p) – Speculative Buy

URU Metals announced a further update to its previously released drill results (14 September) from its Zebediela nickel project located in the Limpopo, South Africa. In addition to 1.97g/t (3 PGE + Au) over 9m and the 1.6g/t (3 PGE + Au) over 1.8m, drill hole Z019 returned 0.42% Ni plus 0.15% Cu and 0.44% Ni plus 0.1% Cu over the same mineralised intervals. Further drilling is expected to commence shortly to test the extension and continuity of the nickel-copper PGE mineralisation. Three drill holes have recently been completed at Zebediela, a world class nickel sulphide project, with nickel and copper assays pending from holes Z017 and Z018 as well as metallurgical test work from Z017, results are expected shortly.

Our View: The Ni and Cu assay results are encouraging given that they occur over two distinct mineralised intervals both at shallow depths and with significant widths. We note that Zebediela is located near major PGE mines, Platreef (Ivanhoe Mines) and Mogalakwena (Amplats). We look forward to the pending nickel and copper assays as well as results from the metallurgical test work from drill hole Z017. In the meantime, we maintain a Speculative Buy recommendation on the stock.

Beaufort Securities acts as corporate broker to URU Metals Limited


IG Design (LON:IGR, 362.50p) – Speculative Buy

IG Design Group, a leading designers, manufacturers and distributors of gift packaging, greetings, stationary and play products, yesterday announced the acquisition of the trade and certain assets of Biscay Greetings Pty Limited ('Biscay'), a leading Australian greetings card and paper products business for a cash consideration of £5.5m, using local debt facilities. The acquisition will be made through Group's Australian Joint Venture Artwrap (50% owned) and is expected to complete on 8 January 2018. Biscay provides greetings cards and related products to customer base of almost 2,000 through various channels including regional, wholesale, and independent retail across Australia and New Zealand. In the year to 30 June 2017, Biscay generated sales of AUD13.4m with an operating pre-tax profit of AUD2.9m. The total transaction and restructuring costs are estimated to be AUD0.6m (£0.4m) which will be treated as exceptional costs, whilst the Group will also inject working capital of up to AUD3m (£1.8m) post the completion. IG Design's CEO, Paul Fineman commented "This acquisition complements Design Group's existing operations in Australia and will approximately double the Group's already strong share in the value channel of the greetings card market there, providing cross selling opportunities and thus an even more compelling proposition to existing and new customers. It will add to our capabilities in this growing and higher margin category for Design Group as well as further diversifying the Group geographically".

Our View: This is a positive move for IG Design. The growth in its 50%-owned Australian JV (accounts for c.11% of Group revenue) has already seen some benefits of significant investment and turnaround as strategies to sell higher margin products to independent store sector turn out to be fruitful. Further to this, the Group has recently won a major new 3-year contract for the sole supply of single greetings cards range with Australia's largest discount chain, which the Group has now initiated national all store 'roll out'. Biscay is a profitable company who has strong established reputation in its product and customer service. This is highly complementary to the Group existing operation as it provides opportunities for cross selling as well as synergies arising from sourcing, design and logistics. The acquisition would strengthen the Group's presence in the New Zealand, while doubling its market share in the value channel of the greetings card market in Australia. The Group has confirmed that while the acquisition would have minimal impact to underlying earnings for FY2018, it will be earnings enhancing from FY2019 as synergies are began to materialise. A recent Q1 trading update provided on 29 August 2017 showed the Group continues to perform well, delivering trading in line with its management's optimistic expectation. In the Americas, the Group saw operating margins continuing to improve across its broadening customer base, supported by sales volume growth and product mix (including increased in own products sale). The region is also seeing "further significant synergies" from the acquisition of Lang, bringing with it improved purchasing power. In the UK, following the reorganisation of its domestic businesses under one leadership team, regional trading has met with management's best expectations. Management also noted Continental Europe remains on course to achieve record sales and production levels across its core gift packaging product categories. Having raised dividend by +80% in FY2017, Beaufort is confident that the Group has ability for future dividend growth at the same time as continuing its investment, while managing average leverage within target (long-term target: 2.0x-2.75x average net debt to EBITDA). The shares are valued at FY2018E and FY2019E P/E multiples of 18.0x and 16.0x with dividend yields of 1.5% and 1.8%, respectively. Considering continued expansion of its operation with Directors' confidence in the current year outcome, Beaufort reiterates its Speculative Buy rating on the Shares.


Kier Group (LON:KIE, 1,164.00p) – Buy

Kier Group, a leading property, residential, construction and services group, yesterday announced its preliminary results for the year ended 30 June 2017 ('FY2017'). During the period, on an underlying basis, revenue advanced by +5% to £4.27bn, against the comparative period (FY2016). Due to -0.1% decline in operating margin to 3.4%, operating profit rose by +3% to £146m, while pre-tax profit jumped +8% to £126m, leading basic earnings per share to grow +7% to 106.8p. On a statutory basis, revenue increased +3% to £4.1bn, operating profit rose to £48m (FY2016: loss £7m), pre-tax profit of £26m (FY2016: loss 35m), leading basic earnings per share of 15.3p (FY2016: loss 25.7p), as this year benefited from non-underlying charge of £75m, including £67m net cash generated on disposal of Mouchel Consulting in October 2016, in line with its portfolio simplification strategy. Net debt widened to £110m (FY2016: £99m). Operating cash inflows before working capital including income from joint ventures stood at £164m (FY2016: £181m), representing underlying operating cash conversion of 113%. On the operational front, the Group continue with its portfolio simplification where it invested in new systems and ways of working which make the Group more operationally efficient. The Group said it is well progressing with the roll-out of its £70m investment in a new Oracle ERP system with 70% of the Group now operating on the new platform. Kier's CEO, Haydn Mursell, commented "Our underlying performance for the year was good. Our Construction and Services order books of £9.5bn, together with our c.£2bn property development and residential pipelines, provide good long-term visibility of our future work. This visibility, coupled with our healthy balance sheet, provides us with confidence of achieving our Vision 2020 strategic targets". The Group declared a final dividend of 41.2p per share, bringing total full year dividend to 63p, up +5%, to be paid on 1 December 2017.

Our View: Kier delivered a good performance for FY2017, with results in line with expectation given profits are weighted towards H2. Property division generated ROCE of 23% on increasing average capital of £113m. An improved development pipeline of over £1.4bn means the Group has 10-year visibility, providing significant opportunities for continued strong performance. Residential division continue to benefit from favourable UK housing market. The Group completed c2,200 units during the year and secured place on HCA four-year £8bn DPP3 framework. Construction division saw a record £3bn contract awards during the year, plus £1.5bn HS2 joint venture awards, post the year-end. A 90% of target revenue is already secured for FY2018. Services division has significantly increased activity with Highways England. Order book amounts to £4.7bn with additional potential extensions of more than £2.5bn providing long-term visibility. An over 90% of target revenue is secured for FY2018. Looking ahead, the Group said it is confident to achieve "double-digit profit growth" in FY2018 and its Vision 2020 strategic targets (double-digit profit growth on average each year to 2020). Kier has strong order book of £9.5bn, up +9%, in Construction and Services businesses, supported by c.£2bn property development and residential pipelines. The Group has secured 90% of forecast revenue in both Construction and Services for FY2018. Kier is focused on portfolio simplification, yet has a balanced portfolio of businesses and market leading positions in regional building, infrastructure and housing. The shares are valued at FY2018E and FY2019E P/E multiple of 9.9x and 8.8x along with dividend yields of 5.9% and 6.3% respectively. Based on this low valuation, high quality management and strong long-term order book visibility, Beaufort continues to award Kier Group a Buy recommendation.


Venture Life Group (LON:VLG, 51.50p) – Speculative Buy

Venture Life Group ('Venture Life'), the international consumer self-care group focused on developing, manufacturing and commercialising products for the aging population, yesterday announced its interim results for the 6 months ended 30 June 2017 ('H1 FY2017'). During the period, revenue advanced by +28% to £7.8m, while on a like-for-like ('LFL') basis, sales grew by +18%, against the comparative period (H1 FY2016). Gross margin slightly declined by -0.2% to 36.6%, making +27% rise in gross profit to £2.9m, while EBITDA increased by 128% to £0.3m, largely due to the increase in revenues. Altogether, loss before tax, amortisation and exceptional costs decreased to £0.1m (H1 FY2016: loss £0.3m), leading to loss per share of 1.9p (H1 FY2016: loss 2.8p). Adjusted loss per share was 0.3p (H1 FY2016: loss 0.8p). Net cash outflows totalled £0.7m (H1 FY2016: outflow £1.3m), comprised of; cash used in operations £0.4m plus investment in tangible and intangible assets £0.3m, leading to cash at the period-end at £1.3m (31 December 2016: £2.0m). Total debt stood at £7.4m (H1 FY2016: £6.3m, FY2016: £7.1m) principally due to strengthening Euro on the Group's Euro denominated debt. On the operational front, the Group signed 4 new long-term distribution agreements across UltraDEX and Procto-eze in two countries. European patent was granted over the UltraDEX sensitive product and Myco Clear commenced human clinical studies. Venture Life's CEO, Jerry Randall, commented "I am delighted with the revenue growth across the Group for the period. Our robust business model is delivering excellent organic growth, and the success of the UltraDEX acquisition is demonstrating our ability to acquire and assimilate interesting products. In this regard, I expect us to continue to explore M&A opportunities to complement our core organic growth, and drive sustainable profitability for the Group over the long term".

Our View: Venture Life's performance for the first half of FY2017 saw strong growth, driven by both organic and through acquisitions. The Group recorded continued growth across its three main areas of businesses; UK Brands (UltraDEX only at present), International Brands and Development and Manufacturing. The highest ever monthly revenue was achieved for the UltraDEX and Biokosmes in June 2017, continue to demonstrate strong demand for its products. Post the period, the Group signed new long term distribution agreements for UltraDEX in five new EU markets (Italy and the Nordics) and secured first two long-term distribution agreements for Myco Clear despite being before the completion of clinical trials. Looking ahead, however, given significant rum up in investments (includes marketing for UltraDEX) and delays in orders from some international distributors, the Group warned that this will impact its margins and sales mix for the full year. Although the Group reiterated its full year revenues guidance in line with current market expectations, however, EBITDA is now anticipated to fall short. The management has guided that full year EBITDA is expected to improve "at least 50%" against prior year, which indicated c.£1.2m, against consensus forecast of £2.2m. Having warned so, the organics growth momentum seen in H1 is expected to continue through the H2. Given management's continued confidence in the Group's future prospects, Beaufort maintains its Speculative Buy rating on the Shares, whilst keeping our eyes on the Group's order book and margin.

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