Interactive Investor

Insider: bosses back results boom at these small-caps

20th September 2021 10:41

Graeme Evans from interactive investor

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They’ve already done well, but management at this pair of dynamic companies clearly think there’s more to go for.

An asthma diagnosis firm 17% owned by AstraZeneca (LSE:AZN) and once a key holding for Neil Woodford has seen boardroom buying of its shares worth £112,000 at the end of a milestone week.

AIM-listed Circassia Group (LSE:CIR) hailed a much-improved performance by Niox, which is now its sole focus as one of the market leaders in point-of-care asthma testing. Niox revenues grew by 28% to £14.6 million for its first-ever underlying profit in last week's half-year results.

Trading in July and August has also been above breakeven level, prompting management to forecast a full-year performance materially ahead of current market forecasts.

Executive chairman Ian Johnson, chief financial officer Michael Roller and chief operating officer Jonathan Emms followed the results on Thursday by acquiring shares at a price of 37.1p.

Their purchases came after a long period of overhaul for the Oxford-based group, including the transfer of rights to chronic obstructive pulmonary disease (COPD) treatments Tudorza and Duaklir to AstraZeneca at the end of March. It also agreed a settlement in May unwinding a previous licence agreement for rights to sell Beyond Air's LungFit product.

The company started out in 2006 and soon attracted the interest of Woodford when he was still at Invesco Perpetual. Then known as Circassia Pharmaceuticals, it listed on AIM in 2014, but shares slumped from above 250p in June 2016 after disappointing results from a late-stage trial on a potential treatment for cat allergies.

The shareholder register is now led by UK investor and former Evolution chairman Richard Griffiths with a stake of almost 30%, while Astra has 17% from shares issued as part of the collaboration on COPD products in 2017.

A spell on the London market's main list ended in February 2019, when it returned to AIM due to the percentage of shares in public hands being below 25%.

The stock fell to as low as 13.8p during the pandemic sell-off in March 2020 but have rallied by a third in the past six months. It closed last week at 37.65p after the company said it was now “capable of delivering profitable growth and achieving greater shareholder value”.

Johnson, who became executive chairman in 2019, added in last week's results that considerable progress had been made right sizing the business and ensuring scope for expanding international distribution, including in the competitive China market.

The company acquired the Niox range of products in 2015 and has sold more than 17,000 of the devices worldwide since then. Sales to physicians and hospitals of £12.2 million in the first half were up by 11% over the same period of 2020 and 10% higher than the second half of last year. It generated £2.4 million from sales to pharmaceutical companies and research bodies.

Johnson bought shares worth £55,650 on Thursday, while Roller picked up £46,375 and Emms almost £10,000. The trio also bought in early April when the stock was trading at below 30p.

Share price rockets to decade high

Plans to double the size of North of England-focused regeneration firm Harworth Group (LSE:HWG) have been backed by management after shares worth almost £95,000 were bought last week.

Harworth's strategy under Lynda Shillaw for the next five to seven years includes a “step change” in direct development in the industrial and logistics pipeline and a broader range of products in its residential schemes.

This renewed “beds and sheds” focus has already delivered a strong operational performance after Tuesday's interim results showed a net disposal value (NDV) at the end of June of £590.5 million, representing a per share increase of 14.5% to 183.2p.

Shillaw's plan to grow NDV to over £1 billion from January's £515.9 million starting point will be through “evolution not revolution”, including plans to double the number of residential plot sales to about 2,000 a year.

The strategy has gone down well in the City, with the FTSE All-Share stock surging 7% on Friday to close the week at a decade high of 174p. Peel Hunt sees no reason for the discount to the NDV and has increased its target price to 190p while Liberum has upgraded to 184p.

Harworth returned to paying dividends in 2020 and last week declared an interim of 0.367p a share for payment on 22 October, in line with a policy to grow the pay-out by 10% each year.

The results were followed later in the week by share purchases worth about £49,000 by chairman Alastair Lyons, £30,000 by Shillaw and £15,000 by finance director Katerina Patmore.

They did so at prices of around 161p, which compares with between 90p and 95p when this column reported on Lyons and Shillaw buying shares shortly after the former Town Centre Securities property director joined the business as CEO in November.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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