Small caps movers: Red letter day for Summit Therapeutics after successful top-line data

By Tom Howard / January 27, 2018 / www.proactiveinvestors.co.uk / Article Link

It may not have been the top mover on AIM, but Summit Therapeutics is more than worthy of kicking off this week's column.

The drug developer took another step towards finding a treatment for Duchenne Muscular Dystrophy - one of the most devastating diseases around.

What makes DMD - a severe muscle wasting disease - quite so disturbing is that it only affects young boys, usually from around four years of age.

There is currently no cure and most sufferers will succumb to the disease before their 25th birthday.

On Thursday though, interim results from the phase II clinical trial of Summit's DMD candidate, ezutromid, revealed a "statistically significant and meaningful" reduction in muscle damage in patients taking the drug.

It's only a mid-stage study, but boss Glyn Edwards told analysts on a packed conference call that he was "hugely excited by the data" and said he wanted to accelerate preparations for pivotal phase III trial.

Investors shared his enthusiasm, sending shares 12.3% higher across the week to 197p.

Elsewhere, a couple of the junior market's biggest players both hit fresh all-time highs after they issued trading updates.

Online fashion retailer Asos - now valued at a whopping ?6bn - jumped over 8% to ?74 as an "exceptional performance" in its core UK market helped sales soar over the key Christmas period.

Worries over an economic slowdown have affected some of its peers, but AIM's biggest company brushed off any concerns that it would meet a similar fate.

UK retail sales rose 23% to ?300.9mln (2016: ?244.0mln) - the kind of growth high street rivals such as Debenhams and Next could only dream of - in the four months to December 31.

In the same period of 2016, Asos' UK sales grew by 'just' 18%, with shoppers taking a particular liking to a new same-day delivery option and a Try Before You Buy feature this time around.

Fevertree Drinks lifted its 2017 forecasts once again on Wednesday, with the posh tonic maker also enjoying a strong festive season.

London-based Fevertree only upgraded its guidance in November but now reckons results for the year just gone, due in March, will be "comfortably above" even those loftier estimates.

The ?2.8bn company - which has moved ahead of Schweppes and Britvic as UK shoppers' number one mixer brand - expects sales for the year to December 31 to be around ?169mln - 66% higher than the ?102.2mln it generated in 2016.

Shares headed past ?26 on Wednesday morning, but fell back towards the end of the week and ended just 3% up at ?24.94. Still, the stock has risen by around 1,500% since it joined AIM just over three years ago; not bad going...

After November's modest profit warning, investors in staffing conglomerate Empresaria Group might have been apprehensive ahead of Wednesday's trading update.

In the end, the statement was full of reassuring stuff like: "record profit, in line with market expectations" and "an improved performance from our businesses in the USA in the second half", not to mention "the business in the Middle East has been resized resulting in an improved performance".

The shares rose 12.1% at 114.7p but they are still some way below their 52-week high of 169.95p; investors are still in a "prove it" mood after November's wobble but management seems to have made a good start in restoring the faith.

It was a solid if unspectacular week for the junior market overall, with the AIM All Share adding 7.1 points, or 0.%, to 1,074.1.

That's much better than the blue chips though which have struggled with the pound's resurgence weighing heavily on the FTSE 100. The index shed almost 1%, or 71.2 points, to 7,662.8.

Offsetting the gains made by the likes of Summit and Asos was model train maker Hornby, which crashed again after another profit warning.

The company - which also owns the Scalextric brand - warned that it will likely record a heavier-than-expected loss this year after it endured a miserable Christmas.

Sales over the key holiday season were worse than management had planned for, with retailers not very keen on a new strategy which has seen Hornby stop bulk-selling toys at heavily-discounted prices.

More volatility is expected as the firm works to convince its partners that the higher prices are worth it and investors took their chance to jump ship. The shares initially fell 17%  but recovered to finish the week at 27p thanks to a rally late on Friday.

The share price of Velocity Composites picked up speed following its full-year results on Tuesday, but unfortunately in a backwards direction.

The supplier of composite materials kits for aerospace firms slumped to 102.5p from 120p overnight after it revealed future growth expenditure of ?446,000, which contributed to a ?627,000 reported loss before tax.

It is worth noting, however, that the company also had to swallow ?667,000 of exceptional administrative costs relating to its listing on Aim last May.

"Before an additional ?0.4mln of business development costs underlying PBT [profit before tax] was ?0.2mln ahead of forecast," noted house broker finnCap.

The market didn't quite see it through those glasses though, with the stock losing more than a quarter of its value to 90p.

Another company to see a sizeable chunk wiped from its market capitalisation this week was Connect Group after the logistics and distribution business revealed a slow start to the year.

It reported a fall in revenues in the opening few months of its financial year, while the ?11.6mln sale of its book division has been thrown into doubt.

Connect - which owns Smith News, the UK's largest magazine and newspaper distributor, as well as logistics group Tuffnells - said back in October that it expected to return to growth in 2018.

But sales fell 3.5% to ?564.5mln in the 19 weeks to 13 January, with the expected declines of newspaper and magazine sales more than offsetting growth in its Mixed Freight and Pass My Parcel businesses. Shares slumped 15% to sit just above 75p come Friday afternoon.

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