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
Friday Takeaway from UK Small Caps
This will delve a little deeper on individual companies and focus on non-house stocks under £200m market capitalisation to help raise awareness
19th September 2025
Alphabetically arranged
Share prices and market capitalisations taken from Alpha Terminal from the current price on the day of publication.
Top three shareholders are taken from the websites of the companies that we are writing about, unless there is a more up to date TR-1 notification RNS announcement.
Providing services to large clients has risk and rewards; it could be a rewarding time for these two companies
HERC Energy boost
PEN Operationally Ready
Hercules 38.50p £30.65m (HERC.L)
Last Reported in Friday Takeaway 20 June 2025 at 44.2p
Financial Calendar:
Year End September, Reported 13 January, Interims to end March, Reported 17 June
Three Main Shareholders:
Brusk Korkmaz (CEO) 45.02% held through Hercules Real Estate Limited, Martin Tedham 12.69% (NED) held through Wasdell Packaging Limited, Premier Miton Group plc 10.09%
Key Investment Points:
Orders flow, Strategic Acquisition, Accelerated growth
This week’s news of water sector contracts followed the third and perhaps game changing acquisition made on 27 of August. Hercules is a technology-enabled labour supply, recruitment, and training service provider specialising in the UK infrastructure, construction, and now the energy sector.
A series of new contracts have been closed with clients including Galliford Try, Costain, Tilbury Douglas and Thames Water, worth a combined £6.5m. This is a drop in the ocean following the regulatory reviews by Ofwat compelling water utility companies to invest an expected £104bn+ between 2025 and 2030. This record level of capital expenditure is focusing on environmental improvements, reducing pollution incidents, upgrading ageing infrastructure, and increasing resilience to climate change. Hercules recently became a member of British Water, a trade association and already works with Anglian Water, Thames Water, Southern Water, Severn Trent Water, Wessex Water, United Utilities, Welsh Water, and Yorkshire Water. Hercules expects additional contracts over a wide range of projects as investment ramps up.
Advantage NRG Ltd (ANRG) is a strategic acquisition, taking the group into the UK power and energy sector. ANRG is a specialist labour supply company and cost an initial £10.2m paid from internal cash resources after last year’s fundraise at 49.5p. There is also a deferred payment of approximately £1.5m, plus a one year earn out. ANRG provides highly skilled linesmen for the construction and maintenance of overhead electrical transmission lines, supporting major UK utility contractors and employs approximately 155 skilled operatives. This could be a pivotal moment to enter the energy sector as the UK is embarking on a major upgrade of its electrical infrastructure to meet rising energy demand, improve energy security, and deliver on its net-zero targets. National Grid proposals include £58bn of investment to support a projected 64% increase in electricity demand by 2035.
Hercules already supplies to the wider infrastructure industry, and this complementary acquisition is expected to be cash generative, earnings enhancing and offers more cross-selling opportunities across the infrastructure training suite. It will also boost the training capacity at the Academy in the West Midlands, which was opened in January 2024 and has already trained 1,500 entrants and is generating revenues.
The current year to September 2025 market forecast (taken from Alpha Terminal) is for a PBT of £3.34m, an EPS up 4.2% to 3.65p and an unchanged 1.72p dividend. We calculate that this would represent a prospective P/E of 10.7x, with a 4.4% dividend yield. It is Hybridan's view that next year’s earnings will be enhanced by the acquisition.
Hybridan Comment: Hercules business operations have advanced substantially this year, but not the valuation, which ought to improve with further contracts.
Pennant International Group 22.00p £9.51m (PEN.L)
Financial Calendar:
Year End December, Reported 24 April, Interims to June, Reported 16 September
Three Main Shareholders:
Rockwood Strategic plc 15.03%, CC Powell Concert Party 14.52%, Brett Gordon 12.12%
Key Investment Points:
Financing in Place, Orders Anticipated, Critical Sector
Pennant’s recent underwritten fund raise of £930k at 21.5p, as confirmed this morning, signals the cumulation of a
prolonged business restructuring and repositioning strategy. This week’s interims to June reported the pain with a 40% drop in revenues to £4.5m, while Gross margins reduced to 44% from 48%. A loss of £1.7m was made compared to a £0.4m loss, although these results were flagged in a trading update ahead of these interim results. The Group is moving away from the challenging operational and project based procurement of the legacy training services towards broader critical software and related services with strategic partners such as Siemens and resellers.
Pennant’s systems support software and training solutions to defence departments and major OEMs worldwide. This is expected to be a strong growth opportunity as many countries are increasing defence budgets, and technological complexity of military, aviation, and rail systems increases exponentially. The defence industry’s growing focus is on 'operational readiness', 'data standardisation' and 'equipment availability'. Pennant’s solutions address these critical market needs to maximise operational efficiency. The market for these services is estimated to be worth $1004bn per annum and growing.
There are three key business segments. Auxilium software which generates recurring revenues through the provision of a suite of software tools designed for mainly military and marine clients to manage and use complex data and ensure equipment availability at optimal cost. Integrated Product Support (IPS) and Integrated Logistics Support (ILS) software and services equip customers with powerful toolsets to manage, model, and utilise the complex equipment data. Technical Services drives repeat revenues with expert support for users of Pennant and third-party solutions including consultancy, support and maintenance, training, and bespoke development. Training Systems produce project-based revenues which tend to be both large and difficult to predict. The training solutions are for maintainers and operators of aircraft, ships, and land systems and contract news is expected.
The property disposal programme was concluded in July 2025 and realised £3.2m in gross sale proceeds and, along with the net proceeds from the subscription, is for continued capital expenditure on the Auxilium software platform, also to cover the reduction in the Group’s overdraft facility with HSBC to £1m and is expected to provide sufficient working capital.
The revenue for 2025 is anticipated to be significantly second-half-weighted, with the likely award of the delayed £5.8m GenFly contract and project work through Q2 within the Track Access (rail) business. Pennant is in advanced negotiations for £10m of orders (excluding GenFly) providing confidence for the market forecast (taken from Alpha Terminal) for FY2025 revenue £9-11m,with an adjusted pre-tax loss of £0.82m and FY26 PBT of £0.48m on revenue of £13m. We calculate from the current market forecasts that the EBITDA/EV would be 5.4x in 2025, then falling to 3.7x in 2026. Hybridan Comment: We may be at the bottom of the repositioning cycle and there should be sufficient funds to convert the existing pipeline and win further ‘operational ready’ contracts.
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