Profit statements

SMALL CAP MOVERS: Watkin Jones slumps after earnings warnings; Joules rebounds 50%

I was watching the second series of Industry, the BBC’s drama about young people working in the city’s pressure cooker environment – mainly to see if this fictionalized account of events in the Square Mile gelled with reality (this it’s not the case).

Still, it’s an entertaining adventure, which made me laugh when Harper, one of the main characters, is reprimanded by Eric, his boss, for using the term “canary in the coal mine”.

Expletives removed, here’s Eric’s retort (and I’m paraphrasing): ‘Please. It’s a pony term used only by financial journalists. No one in our industry would be so left.

Well, I get a waiver because I’m (nominally) a financial journalist.

Watkin Jones, which builds property for the student and rental sectors, warned against profiteering

And when I saw Tuesday’s trading update from Watkin Jones, which builds property for the student and buy-to-let sectors, I wondered if it was a predictor of what was going to happen – not just for builders, but for the wider, over-indebted UK. real estate sector.

If so, then Watkin Jones is the classic “canary in the coal mine.”

WJ was one of AIM’s biggest losers this week as its shares plunged more than a third after sounding the earnings alarm, blaming lower profit margins and a volatile market backdrop. Analysts immediately cut their forecasts.

With a net cash of £75million, or around 30p per share (while its current market price is close to 94p), it has the financial wherewithal to weather the impending storm.

There was also bad news for PCF Group, which fell 44% this week after saying it was looking to raise growth capital, while exploring ‘transactional options’ after a putative bidder left. . He also said his banking operation would stop granting new loans.

Although it’s been a turbulent week in the markets, the direction of travel has been broadly positive, particularly for the tech-focused Nasdaq U.S. index, which has recovered 2.85% of its value over the past few months. last five trading days.

This positivity crossed the Atlantic to trickle down to UK small caps with AIM All-Share up 1.2%.

It’s been a great week if you’re a recent investor in Trellus Health, whose shares soared more than 80% following what was clearly seen as a reassuring update on progress contained in the interim results statement. .

The company, which has developed a solution to help manage chronic health problems, spoke at length about its commercial acceleration.

A likely more innocuous explanation for the market’s reaction has been the company’s reduced cash burn, which is expected to see the £21.5m it has in the bank through 2025.

Look away now if you bought the shares on the May 2021 IPO for 40p – even after this week’s progress they are currently trading around 13p.

Joules, the bombed-out high-end clothing group which last week pushed back against rumors that it was planning to embark on insolvency proceedings called a CVA, has seen a Lazarus-like revival in its share price, which has surged by about 50%.

A sniff around regulatory filings unearthed this truffle-like nugget – that a guy named Richard Teatum became the owner of an 8.9% stake in the company.

Whether this is the same Richard Teatum – the entrepreneur and former mechanic who invested in listed car salesman Vertu – has not been confirmed, although it seems likely.

Nonetheless, it will be interesting to see how Joules’ turnaround strategy unfolds and whether Mr. Teatum recoups his investment.

Stakes: Richard Teatum became the owner of an 8.9% stake in Joules

Stakes: Richard Teatum became the owner of an 8.9% stake in Joules

True to winners, Europa Metals, up 21%, had a good week after announcing a £5.4million deal that would see a Canadian mining developer win its lead-zinc discovery in northern Spain.

Poolbeg Pharma, which is developing a new severe flu vaccine, rose nearly 30% after updating its patent holdings and announcing to the market that its chief executive, Jeremy Skillington, had dipped into his own pocket to buy shares.

It was probably this last action that drove the stock higher. Investors look favorably on such stock purchases, as they are seen to align the interests of management and shareholders with the former, seen as having “skin in the game”.

Finally, investors in Seeing Machines, which is at the forefront of eye-tracking technology, got a boost.

It announced on Thursday that it has teamed up with Magna International, the Canadian auto parts maker, to develop a rear-view mirror that can monitor what’s going on in the car, specifically the driver’s seat.

The deal brought in £58m of additional investment, which a City broker said eliminated any lingering funding issues. Shares jumped 22%.

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