A big week for fund raises on AIM

It was a big week for fund raises across AIM with one of our AIM portfolio constituents receiving strong support from its shareholders sending the shares significantly higher.

Fundamental AIM portfolio constituent Watkin Jones (LON:WJG), the developer with a focus on the Build to Rent and student accommodation sectors, reported strong results for the 6 months ending 31 March 2020. Revenue rose 16.7% to £185.7m, underpinned by both student accommodation development and, increasingly Build to Rent. Adjusted pre-tax profit rose 6.4% to £26.6m and the group closed the period in a net cash position of £37.5m with an additional £71.1m of undrawn facilities available to it. With £390m of revenue to come from a forward sold pipeline for the current financial year Watkin Jones has decent visibility. It also has 17,721 student accommodation beds and apartments under management providing another stream of high margin income. Despite the short-term challenges, with cash in the bank and a decent forward order book, it looks in good shape.

International home repairs and improvements group Homeserve (LON:HSV) has proved to be remarkably resilient across the crisis. Results for the year ending 31 March 2020 announced this week saw revenue grow 13% to £1.1bn and pre-tax profits rise 12% to £181.0m. The group’s North America business performed strongly and is now the largest part of the group working with over 950 utilities and with access to 64m households. Across the coronavirus crisis no staff have been furloughed or made redundant and free repairs have been offered for NHS and social care workers in the UK, with over 2,000 repairs completed to date – a great effort!

Shares in Dart Group (LON:DTG), the leisure travel and logistics group which operates the Jet2 airline and is a more recent Fundamental AIM portfolio holding, soared following news of a successful fund raise of £172m at 576.5p per share. Having budgeted several scenarios, including one where flying operations only re-start on 1 April 2021, management believes that the proceeds of the equity raise, together with £300m drawn on the Bank of England Corporate Financing Facility and the Group’s fully drawn facility of £100m, will see them through even the most challenging of trading environments.

The latest update from Belvoir Group (LON:BLV), the UK’s largest property franchise, has reassured that the rental market might be holding up better than expected. The update could bode well for our satellite AIM portfolio holding Property Franchise Group (LON:TPFG) where lettings is also a major contributor to gross profit.

Exceptional demand in the final quarter of the year saw Pets at Home (LON:PETS) lift revenue 10.2% to £1,058.8m for the year ending 26 March 2020, the first time they had surpassed £1bn. The lock-down proved highly beneficial to their online operations and subscription customers however, as anticipated, the exceptional demand witnessed in the closing weeks of the last financial year has unwound in the current year which, combined with social distancing has temporarily depressed normal levels of turnover and profits. It remains to be seen whether customers will be less inclined to use their 453 stores as lockdowns ease, in which case PETS might be faced with needing to reduce the number of stores. A business initially doing nicely from the pandemic may ultimately see its business suffer as a new normal prevails.

Time Out (LON:TMO), which operates the popular Time Out Markets as well as the original media assets, raised £45m at 35p per share. £22.5m of the new funds raised will be used to redeem its outstanding loan notes with the balance used to provide working capital and support the development of new markets. With Time Out markets around the world currently closed and advertising revenues meaningfully lower, the group is facing a very uncertain future while also carrying a significant amount of costly debt. We were really impressed with Time Out Market in Lisbon, which appeared to be thriving before the pandemic struck, welcoming 4.1 million visitors in 2019. Time Our Markets are a great concept and we very much hope they go onto succeed, but the group certainly entered the crisis with a very fragile balance sheet. There could be a cracking recovery play here….for the brave.

To keep up to date with the coronavirus impact on these and many other companies please visit our associates Investor’s Champion.

Have an excellent weekend