SMALL CAP MOVERS: Spring could be here after a three-year deep freeze

After more than three years of deep freeze, liquidity dried up, valuations languished, and investor apathy reigned, there are signs of a tentative spring.

Cavendish, the boutique investment bank with a front-row seat to the UK’s small and mid-cap market, has just signalled a change in the weather.

According to commentary alongside its full-year results this week, there are three drivers: a weakening US dollar, rising political risk stateside, and a growing sense among global investors that being overexposed to America may be more of a bug than a feature.

As portfolios rebalance, undervalued UK equities, particularly smaller ones, are starting to get a second look.

Cavendish’s optimism isn’t just PR gloss. It’s grounded in a strong pipeline of private equity dealmaking and a rising tide of founder exits.

Interesting, then, that against this backdrop Cavendish, born from the merger of small-cap brokers finnCap and Cenkos, has landed in the middle of bid speculation.

An approach from private equity-backed accountancy firm Smith & Williamson to acquire Cavendish’s M&A arm sent shares up 25 per cent to 13.76p. The enquiry was promptly rebuffed.

Now, onto the wider market. Underlining Cavendish’s point, the AIM All Share rose 1.1 per cent to 768.20, its highest level since last August. The FTSE 100 was flat.

Top of the leader board was Autins, the automotive insulation firm, which surged 64 per cent after announcing it was on track to make its first net profit since 2017.

Ariana Resources also impressed, unveiling a major uplift in the economics of its Dokwe gold project in Zimbabwe.

Proactive flagged it earlier as one to watch after it missed the sector’s rerating. Dokwe, conservatively valued at around £250 million, appears to have lit the blue touch-paper, with shares up 38 per cent.

Turning to the debit column, the week’s biggest faller was Dekel Agri-Vision, the West Africa-focused farming group, which dropped 38 per cent following a deeply discounted £2 million fundraising and debt conversion.

Arkle Resource, the gold and zinc explorer chaired by veteran Irish entrepreneur John Teeling, sank 39 per cent after prelims showed the firm is running on fumes.

It ended last year with £23,000 in the bank, then raised £270,000. Investors were told more capital can be raised ‘as required’ – the market is braced for a dilutive, discounted cash call.

Mosman Oil & Gas also had a rocky week, falling 30 per cent after a failed helium drill in Colorado. While the crew moves on to the next well, it was the end of the road for CEO Andy Carroll.

Next 15 endured a turbulent 24 hours. The PR and marketing group behind City spin shop MHP issued a doozy of a profit warning on Thursday, prompting the CEO’s departure and a boardroom reshuffle, plus a sharp drop in the share price.

No sooner had the rollercoaster hit bottom than bid interest emerged, with an unnamed buyer circling the group’s ‘legacy’ advertising and PR business. Shares bounced 8 per cent on Friday but still ended the week down 25 per cent, and 42 per cent lower year to date.

Finally, a breakthrough for Zanaga Iron Ore. The company has made a metallurgical leap that could transform the economics of its flagship Republic of Congo project. Test work confirms Zanaga can now produce direct reduction iron (DRI) grade pellet feed—essential for the fast-growing electric arc furnace (EAF) steel sector.

DRI-grade feedstock must meet tight specs. According to Panmure Liberum, Zanaga’s samples exceeded them, with iron content over 68.5 per cent and low impurities.

Crucially, the upgrade appears cost-neutral. As Panmure put it: ‘There should be no expectation of any significant change to capital and operating costs as a result.’

The shares ended Friday up 8 per cent at 8.34p.

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