10.21am: Power company faces working capital pressure
Shares in Rurelec PLC (LON:RUR) have blown a fuse.
They are down 11.11% to 0.6p after the power company updated the market on its problems in Argentina.
It has a 50% interest in Energia del Sur, a power plant in the country owned by Patagonia Energy.
After the expiry in September of an agreement on tariffs for power generated by the plant’s steam turbine, the companies have been trying to negotiate a new deal with the regulator CAMMESA, so far to no avail.
Until a contract is signed, revenues have been set at spot prices.
Ruralec said: “If this pricing is not corrected it will have significant adverse implications for EdS’s revenue and cash generation, which in turn would affect the timing and amounts of any of the cash payments due from EdS to Patagonia Energy and ultimately to Rurelec. Since the expiry of the resolution in September 2020 the only cash the Company has received from EdS via PEL was US $224k on 23 October 2020.”
EdS has contingency plans to reduce costs, including shutting down the steam turbine. This means it is unclear whether EdS will be able to generate enough cash to pay anything to the company.
The Argentinian economy remains weak, and the government is struggling with COVID-19, which is helping to delay any resolution to the tariff talks.
Rurelec said the the future viability of EdS – the main source of funds for the company in the absence of asset sales – remains uncertain.
So Rurelec will continue to experience significant working capital pressure.
It is seeking other sources of funding, including loans from third parties, and is also looking at selling its other assets, particularly turbines in Chile and Italy.
8.29am: Pharma group signs key deals
The company, which is developing a delivery system for cancer treatments and vaccines called Nuvec, has signed material transfer agreements – the first stage towards a formal collaboration – with two pharma businesses.
The first is with an international company working in the gene therapy space.
The second is a pharmaceutical company developing its own proprietary vaccine for Covid-19 using a DNA plasmid.
N4 also gave a positive update on the latest studies on Nuvec, although some expected results may be delayed into the third quarter as the company assesses how best to make sure various pieces of research complement each other.
Chief executive Nigel Theobald said: “”We are delighted to have entered into two MTAs with these respected companies, each one addressing different markets.
“Whilst there can be no guarantee of either agreement resulting in a commercial collaboration, it marks a major step forward as we apply third party materials to Nuvec.
“Furthermore, it validates all the hard work that has been done in optimising Nuvec that major players in their fields are prepared to invest their time and resource to see how Nuvec may be applied to their technologies and IP.
The update has lifted its shares 17.72% or 1.4p to 9.3p.
A strong fourth quarter means it now expects revenues of around £83.7mln and profits of £11.5mln compared to analyst forecasts of £77.1mln-£78.5mln and £10.5mln-£11.1mln respectively.
Part of the growth came from four acquisitions during the period.
It made a point of saying the insolvency market remained suppressed due to “government financial support measures and temporary legislation changes.” Which of course has an effect on its revenues in that sector.
But it was appointed as administrators to a number of companies including Football Index, Brooks Brothers and Ralph & Russo.
Analyst Rachel May at house broker Shore Capital said: “With over 70% of Begbies’ revenue coming from counter-cyclical activities, and insolvency volumes well below historic levels, we see further upside to our forecasts as government support measures are scaled back which should result in an increase in insolvency volumes.”
Begbies is up 7.12% at 1129.4p.