Good morning!

Small-cap news today from our universe of stocks is limited:

  • 600 (LON:SIXH) (trading update)
  • IQE (LON:IQE) (grants share options to CEO/CFO)
  • Checkit (LON:CKT) (concert party increases stake)
  • AdEPT Technology (LON:ADT) (placing and subscription)

After I've covered these, I might say a few words on the recent deal by Volvere (LON:VLE).

Timings: finished at 2.30pm.

China Supply Chains & Coronavirus - Paul asked me to provide a link to the interview he published yesterday on his website, on a timely topic. Here's the link to the interview with the MD of UP Global Sourcing Holdings (LON:UPGS).

600 (LON:SIXH)

  • Share price: 11.25p (-20%)
  • No. of shares: 117.5 million
  • Market cap: £13 million

Trading update

This industrial group already issued a profit warning in December, triggered by "certain macro economic and political uncertainties" and "the global automotive slowdown".

Things have only got worse since then. The company cites the following factors:

  • the strike by a union at General Motors (but this has been over since October)
  • suspension of Boeing 737 MAX
  • two specific projects being pushed back
  • Coronavirus - revenue from sales into China is being delayed into the next financial year (after March).

It all means that the result for FY March 2020 will be significantly below the revised expectations, i.e. we have a follow-on profit warning.

Debt - the company has been trying to derisk, both operationally and financially. The failure to get a good result this year is clearly going to have an impact on those objectives.

Net debt as of September 2019 was $16.9 million (£13 million).

If the share price gets above 20p, the £8.5 million in outstanding loan notes would convert to equity. But as things stand, these loan notes are set to mature in February 2022 and will need to be paid for with cash

My view.

The P/E multiple has been cheap here for a while. Frustratingly for shareholders, it's starting to look like the market's scepticism was correct.

Despite getting rid of its pension scheme, the company still seems to be in a bit of a mess in terms of its balance sheet. And with trading so…

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