Small-cap Week, May 17

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Bagir Group was one of the biggest fallers among the small-caps this week, after warning just a month after its flotation that it was in danger of breaching banking covenants.

Shares in the tailor plunged 64.6 per cent after it said it had experienced an unexpected reduction in business from its largest customer. At the time of its IPO, Bagir said its biggest customer was Marks and Spencer. As there was no certainty about future business, Bagir said, it was cutting full-year sales guidance by $15m. The sales shortfall will make the company lossmaking this year, said N+1 Singer, which was broker to Bagir’s float.

A profit warning also sent shares in Bioquell tumbling this week, by 14.9 per cent. The decontamination specialist warned it would be lossmaking in the first half due to poor equipment sales.

Wessex Exploration shares fell 38 per cent amid profit-taking, after shareholders rejected a boardroom coup and chose instead to back the group’s acquisition of Philippines assets. Wessex shares had nearly doubled in the previous week in anticipation of the agreement.

Led International shares plunged 60.6 per cent after the Hong Kong-based light maker warned it was yet to receive a Rmb100m investment from investors. It said it was looking for alternative funding.

Zytronic finds more of the magic touch

From cash machines and information points in Iceland to milking parlours in New Zealand, Tyneside-based Zytronic – a specialist manufacturer of touch sensors – has global reach, writes Chris Tighe. It now exports 95 per cent of its products to 40 countries.

And the Aim-quoted company’s ability to attract new customers, has helped it bounce back from a difficult first half. Its results for the six months to March 31 showed a stronger pipeline of contracts with new and existing customers.

Pre-tax profit was up 87 per cent to £1.4m, and gross margins rose from 26 per cent to 34 per cent, helped by a higher proportion of touch sensor sales, larger screen sales, and efficiency improvements.

Gaming and signage were strong end markets, particularly for the company’s larger touch screens. Improving ticket machine sales, and bank ATM redesigns also boosted take up of its multi-touch products.

Zytronic said its commitment to research and development is not “blue skying” but strongly linked to commercial potential.

Net cash rose to £4.6m year-on-year. Revenues rose to £8.8m, from £8.5m and the interim dividend was increased by 3.6 per cent to 2.85p per share. EPS was up to 7.7p, from 4.1p.

Zytonic’s shares rose nearly 5 per cent in the week, closing at 240p, and are up 60 per cent since last July.

Petroceltic edges up after equity raising for $100m

Shares in Petroceltic International edged up yesterday after a placing of 38m shares at 157p to raise about $100m, writes Michael Kavanagh.

Support for the equity raising by the Aim-quoted exploration company was boosted by Malaysian oil industry figure Dato’ Ahmad Fuad, whose Dovenby investment company has taken up half of the placed shares.

But another leading shareholder, activist investors Worldview Capital, complained that its offer to underwrite the issue on slightly better terms had been rejected.

The funds raised are expected to be spent on Petroceltic’s exploration interests in the Kurdistan region of Iraq, alongside developing early stage licence positions in Egypt and Greece, as well as bridging its finances ahead of funds from a sale of interests in Algeria. The company, which expanded production revenues via its merger with Melrose Resources in 2012, has held its ground since.

LZYE at risk of Aim delisting as broker and chairman quit

Zeus Capital quit abruptly as broker and nominated adviser to LZYE, the lossmaking Hong Kong-based educational services group, this week, writes Kate Burgess.

Within minutes Dominic Yeung, chairman, also resigned. The company noted if it had not found an alternative adviser to represent it on Aim within a month, the exchange was likely to delist its shares.

LZYE, which joined Aim in August 2012 at 8p a share, has had a trying year. Last month the board proposed to quit Aim, its shares having plummeted to 0.35p, saying the directors had unanimously recommended the plan. It said trading had been difficult, it had struggled to develop the business and revenues had plummeted.

The company has been relying on the support of its principal shareholder, ISF. To add to the confusion, this month 58 per cent of shareholders said they would oppose plans to delist LZYE.

Blur group’s shares plummet after revenue estimates cut

Blur Group took a beating this week. Shares in the business services marketplace fell sharply to close the week down 45 per cent, after the company slashed its revenue estimates to reflect a new approach to revenue recognition, writes Sally Davies.

The Devon-based group, run by ebullient former dotcom entrepreneur Philip Letts, has suffered from investors being overly optimistic about how the growth of the projects transacted through its platform would translate on to the balance sheet.

Blur works by letting companies submit requests for projects that include advertising, legal and accountancy services, and then helps find the best person or provider for the job. In the process, Blur takes a cut of 20 per cent.

The cause of the latest revision was a change to a $3.6m project, whose revenues have been pushed back from 2013 to 2014 “and beyond”.

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