Welcome to our new product “Friday Takeaway”
This will delve a little deeper on individual companies and focus on non-house stocks under £200m market capitalisation to help raise awareness
We wish our readers a Happy New 2025!
Alphabetically arranged
Share prices and market capitalisations taken from the current price on the
day of publication
It’s the season for Trading Updates, with careful reading, growth can be detected
NXQ Cash4teq
SOS Dressing up
NEXTEQ 64.5p £38.98m (NXQ.L)
Financial Calendar:
Year End December, Report March / Interims to June, Report September
Three Largest Shareholders:
Nicholas Jarmany (Chair) and his wife 18.22%, Liontrust AM 13.36%, Chelverton AM 6.88%
Key Value Points:
Trading back inline, Share buy backs, £23m cash for M&A
There was a Trading update for the Y/E December 2024 from this technology solutions provider to customers in selected regulated industrial markets, mainly gaming, medical and broadcasting. Trading is in line with the reduced expectations set at the Interims with Revenue 24% lower at $86.7m (£70.1m). The fall reflects a backdrop of economic challenges, industry de-stocking, and the delay of several customer projects. Its gross margins were maintained at c. 37% and operating costs are reducing. The first half of Y/E 2024 caused the downgrade, but a healthy order backlog is building providing encouraging visibility.
There are two distinct divisions: Quixant, generated 60% of 2023 turnover and was founded in 2005. It is a specialised platform for providing outsourcing technology services for the Gaming industry. These computer platforms are supplied to electronic gaming machine manufacturers and are installed in casinos and gaming venues globally to optimise hardware and software elements to address the specialist needs of this highly regulated market. Densitron, the second division, represents 40% of revenue and supplies industrial display components and bespoke human machine interface (HMI) solutions to industrial markets outside gaming, which is mainly medical and broadcasting. Densitron is benefiting from the growth in broadcasting which was 13% higher at the Interims and is a key sector where broadcasters seek to modernise the control of technology which is typically in Production Control Rooms.
The consensus forecast for December 2024 is for adjusted profit before tax of at least £4.9m, down from £8.9m which would give an EPS of 5.9p for a prospective P/E of 11x and with a prospective 4.6% yield. The Y/E cash was 4.3% higher at $29.1m (£23.1m), as operational cashflow generation remains healthy. The Company’s share buyback programme returned $6.7m of cash to shareholders and is continuing with recent purchases at 63.48p.
The focus is on delivering significant growth, with a three-year plan driven by organic growth accelerated by M&A, which can be funded by the robust financial position.
Hybridan Comment: Tough trading in 2024 is a recurring theme in updates, but few other companies have 61% of their Market Capitalisation in cash which can be used to accelerate from recovery to growth.
Sosandar 6.85p £16.76m (SOS.L)
Financial Calendar:
Year End March, Reports July / Interims to September, Reports November
Three Largest Shareholders:
Schroder Investment Management 13.19%, Octopus Investments 10.74%, Lombard Odier AM 7.79%
Key Value Points:
New stores, New Ranges, Old Challenges
The ‘sales pitch’ for this women's fashion brand is its affordable forward-looking high-quality fashion clothing for women who have graduated from fast fashion brands. A decision was made in 2023, in response to falling margins, to pursue a full omnichannel distribution model by opening Bricks and Mortar stores. An ‘old-fashioned’ store estate should add value to the brand, and the new team and strategy was supported back in 2023 by a £5.4m funding at 22p which attracted institutional support.
The January 2025 Trading update reported its four new stores performed well and in line with expectations with strong footfall from the well-chosen locations. The are two further stores about to open, one in Harrogate and one in Bath and both locations meet Sosandar's strict criteria of top tier, thriving locations. The trading update covered the three-months to December 2024 and a 14.7% reduction in Revenue at £12.2m was reported because of the strategy to move away from promotional pricing. The lead up to Christmas saw strong sales of partywear, as well as particularly strong sales in its core categories of knitwear and denim. Its gross margins improved to 64.7% from 58.3% and is evidence of some success in growing into a true multi-channel retailer.
The core buying route remains online from Sosandar.com, which was strengthened with a mobile app. There are also brand partnerships with Marks & Spencer, Next and with 3rd parties to expand into Australia and Canada. The product range is being developed with homeware, which is to be launched later this year. Overall trading remains in line with market expectations for Y/E March 2025, with revenues of £40.5m and PBT of £1.0m. The net cash of £8.2m is sufficient for the planned growth and role out of new stores.
Hybridan Comment: Presently it is an uphill battle with pressure on consumers, costs, and fierce competition, but for now, it appears there is sufficient cash for the Company to self-fund the planned store roll out.
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