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
20th June 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.
The prospects of these profitable companies can be further transformed by State and Government project expenditure
HERC Building the Future
KOO California State of Mind
Hercules 44.20p £35.19m (HERC.L)
Last Reported in Friday Takeway, 9 May at 49.5p
Financial Calander:
Year End September, Reported 13 January, Interims to end March reported 17 June
Top Three 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:
Finding Skilled Workers, Balance Sheet Strengthened, Organic & Acquisitive Growth
Hercules is a technology-enabled labour supply, recruitment, and training service provider specialising in the UK infrastructure and construction sectors. Hercules’ services are powered by a bespoke Personnel Management System, and a Mobile Recruitment app allowing agility and flexibility; reminding the builder to be at the right job in the right location.
The Interims to March 2025 were reported this week and showed revenues had increased by 18% to a record £54.6m with a 24% increase in EBITDA to £2.6m. PBT increased 55% to £1.7m . The disposal of the Suction Excavator subsidiary for £2.4m in February 2025 reduced debt and lease liabilities by approximately £9m. In September 2024, £8m was raised at 49.5p a share which has strengthened the balance sheet releasing resources for organic and targeted M&A in the fragmented labour supply market.
A Training Academy in the West Midlands was opened in January 2024 and has already trained 1,500 entrants and is generating revenues. A training business, Quality Transport Training Ltd, was acquired in June 2025 for a nominal amount. The QTT team will be integrated to help scale the Training Academy’s operations as it supports the infrastructure project pipeline with a skilled, job-ready workforce. The Construction Industry Training Board projects that the UK will need nearly 225,000 additional construction workers by 2027. The first acquisition since listing was in December 2023 when £1.25m was paid for Future Build Recruitment, which will expand into white-collar and permanent recruitment complementing the blue-collar infrastructure offering.
Strong momentum is reported to in all divisions. There are a series of substantial construction and infrastructure Government initiates in the nuclear, power and energy distribution, aviation, water, and rail sectors. In Nuclear, £14.2bn has been approved for Sizewell C and the Group is already supplying operatives. The project pipeline is benefiting from the OFWAT approved £104bn investment in the water sector. Hercules successfully tendered for a framework agreement with Wessex Water in April 2025, which will include both Labour Supply and its Civil Projects divisions. Wessex Water has identified a need for investment of £3.65bn between 2025 - 2030 presenting significant opportunities. The current year September 2025 forecast is for a PBT of £3.34m, an EPS up 4.2% to 3.65p and an unchanged 1.72p dividend. This would represent a prospective P/E of 12.2x, with a 3.8% dividend yield.
Hybridan Comment: Revenue growth is underpinned by the prospect of increasing UK infrastructure boosted by Government commitments. Opportunistic acquisitions are also to be sought.
Kooth 169.50p £60.66m (KOO.L)
Financial Calander:
Year End December, Results reported 15 April, Interims to end June due to be reported before end September
Top Three Shareholders:
Scale Up Capital 25.8%. River Global Investor 9.8%. J O Hambro Capital Management 9.0%
Key Investment Points:
Market Opportunity Extensive, £20m Cash, Profitable
A provider of mental health services with a focus on young people allowing them access to professional on-line (free and anonymous) counselling, specialises in a digitally delivered ‘hybrid’ service which employs consultants utilising AI to provide a personalised service with appropriate content. The UK’s potential addressable market is estimated to be £500m, and so far, 100 NHS Trusts are adopting the service.
In July 2023, Kooth won a ground changing $188m four-year contract, against stiff competition, that started in January 2024. It is part of a $4bn Californian state mental health programme and Kooth’s operations have been increased to provide the service. The Company has also won a pilot in New Jersey, but one in Pennsylvania was stopped in the run up in the highly politicised election. Kooth has signed an agreement with a large insurance company to access Medicaid funding which is trialling in Illinois. As mental health awareness increases, the opportunity for growth in the US and the rest of the World is significant, with material value being created through operational scale.
The profits to December 2024, reported in April, were exceptional with a 100% increase in revenue to £66m, of which 100% is recurring. The EBITDA increased by 6x to £15.8m, while the gross profit margin was little changed at 77.8%. The administrative expenses increased 52% to £42.8m reflecting its new east-coast clientele. The cash balance is over £20m and the Group is cashflow positive.
The forecast for December 2025 is lower than last year’s record, but is still for a PBT of £4.48m on Turnover of £66m and an EPS of 8.9p. This would imply a prospective P/E of 19x, which would drop to 14x by FY December 2026 on a PBT of £7.5m. On an EBITDA/ EV basis, the FY December 2025 would be 3.9x and FY December 2026 would be 3.4x.
The low EBITDA/EV valuation reflects concerns about the size of the California contract, its service performance and renewal prospects. In October 24, Scale Up Capital reduced its holding by selling around 10.2% at 280p a share and now owns 25.8%. Recently River Global Investors reduced their holding to 9.8% from 10.12%.
Hybridan Comment: The recent selling is bearing down on the price, which we believe, is at a level where positive news could see it rebound.
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