Friday Takeaway—delving a little deeper into 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
Alphabetically arranged
Share prices and market capitalisations taken from the current price on the
day of publication
Results are a company’s calendar highlight and the two below seem worth a second look
LPA Renewed and Reinvigorated
RDT Cloud Funded
LPA Group 53p £7.2m (LPA.L)
Financial Calander:
Year End September, Report January, Interim June
Three Largest Shareholders:
Peter Gyllenhammer AB 29.11%, Peter Pollock 7.40%, Michael Rusch 7.10%
Key Investment Points:
Restructured, New Contracts, Returning to Profits
The new CEO Philo Daniel-Tran joined LPA in January 2025 after its year of business restructuring and resizing. The recently reported finals to September 2024, showed Revenues to be 8% higher at £23.5m and the underlaying pre-tax loss increasing to £200,000, compared to £100,000. The loss before tax is however decreased to £0.6m from £0.8m last year. A pre-tax profit of £400,000 is forecast for the year-end September 2025 which gives an EPS of 3.6p for a P/E of 15x.
The innovation-led engineering specialist in electronic and electro-mechanical components and systems has completed the successful implementation of a new ERP system (Enterprise Resource Planning) into both manufacturing sites. It supplies aviation, defence and rail markets with components, connection and lighting
systems. Three complementary product lines have been acquired over the last two years which will help to balance the factory workload, adding value and ultimately improve margins.
The global electromechanical systems market was valued at $4.5billion in 2023 and set to grow at a CAGR of 4.2% from 2024-2032. This is driven by demand in consumer electronics, vehicles and a widening application scope. Since September, it has won three contracts worth £4m; including, the French rail operator SNCF Voyageurs for interior LED lighting, Siemens Mobility, also for LED lighting, and seating manufacturer Grammer for heat electronics and lighting for trains in France. The French contract is for five years while the others are deliverable in 2025 and 2026.
LPA is continuously assessing new business and acquisition opportunities. Last year Red Box International was acquired for £1.1m and has a range of ground power equipment, giving access to new markets including general aviation and B2C sales which is set to contribute to profits this year. This month a power business was acquired as an asset purchase which could have been at a discount to its revalued assets. It brings several complimentary products for the rail industry and included world right rights to brands and product designs. Net debt at the year-end increased to £2.1m from £1.2m, although there was a net cash inflow of £1.3m and an unused £3m bank facility, further operating cash maybe needed for the expected turnover growth.
Hybridan Comment:
After the finals, the recovery gradient is less steep and a few more contracts could turn it into a downhill run.
Rosslyn Data Technologies 5.1p £3.8m (RDT.L)
Financial Calander
Year End April, Report October, Interims January
Three Largest Shareholders
Canaccord Genuity 23.25% ,Octopus Investments 22.01%, First Equity Ltd 10.36%
Key Investment Points
Case Refences, Relevant New Product, Two-year cash runway
The Interim’s to October 2024 from this cloud-based enterprise spend intelligence platform reported some notable achievements. Its Revenues marginally increased to £1.5m with gross margins up from 35.5% to 40%, while Administration expenses are 27% lower at £1.6m. The EBITDA loss reduced to £1m from £1.5m with a 55% decrease in the monthly cash-burn to £125k which is £1.5m pa. Its platform provides insights into diversity and sustainability to drive change across an entire organisation.
A key milestone was the major new client win back in August 2024 which is a significant product validation. It’s a three-year contract worth £2m with the procurement division of one of the world’s largest technology companies with the chance to expand into its other divisions and operations. It’s taken RDT years of investment to develop its intelligent and predictive analytics platform. It helps organisations to mitigate risk and make informed strategic decisions so enabling savings and delivering rapid ROI. It’s been selected by a top 5 global consulting firm as a partner and the combination has won its first contract.
There should be a growing market opportunity for its new AI-powered classification solution, AiCE. The first commercial contract was won after live testing with four customers. The sales pipeline is £3.3m, although timeframes to closing contracts can be protracted and the momentum seems to be building and discussions are underway with sizeable new partners. The fund raise in October was for £3m to further develop its AI solution sales and working capital to drive the business to profitability. The funding was supported by Institutions, EIS/VCT Funds and the Non-Ex Chairman invested £264k. The raise included a £1.2m 10% Five-year Convertible Loan Notes with Canaccord Genuity, already a substantial shareholder taking, £0.4m and Amati Global for the remaining £0.8m.
Hybridan Comment:
The interims signalled key milestones have been passed and there is an estimated 24-month cash runway to close sizeable new orders.
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