Friday Takeaway—delving a little deeper into UK small caps
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
7th March 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.
A deeper look into two possibly undervalued companies with results soon
GATC Hiring Help
GELN Smell of Success
Gattaca 84p £25.98m (GATC.L)
Financial Calendar:
Year End July, Report October, Interims January, Report April
Three Main Shareholders:
George Materna 25.62%, MMGG Acquisition Ltd 22.81%, Paul Raine 5.65%
Key Investment Points:
Cyclical opportunity, Cash available for development, Low Rating
There was an Interim Trading statement to the period end January 2025 in mid-February from this specialist staffing solutions business that was established 35 years ago. Its total Net Fee Income (NFI) is expected to decline 3% to £18.8m, with the contribution from Permanent staffing down 10%. Due to improved operations, the guidance for FY July 2025 adjusted profit before tax remains at £3m which gives an EPS of 6p and forecast, according to market expectations, to grow to 10p for Y/E July 2026. Its net cash for the period is lower than the prior period at £16.7m, from £22.3m at the end of January 2024, as a result of a reduction in trade creditors. The net cash still represents, according to Hybridan’s calculation, 64% of the market capitalisation. A share buyback program was launched in 2023 and in November paid up to 125.5p per share and the Employee Benefit Trust launched last year meant buying has continued. An interim dividend is expected to be announced, along with results on 2 April.
The Sales Teams headcount was reduced by 10% as it focuses on operational efficiency and resource allocation targeted at sectors showing growth opportunities. A new Business Development team has been built and deployed as part of the investment in front-line sales capability; the Energy sales team was doubled and will focus on Renewables and there is increasing efforts in the core markets of Infrastructure, Defence, Mobility and TMT. The cost base has been rebalanced with proactive measures taken to control initiatives and operational efficiency. The growth opportunities being pursued are in sectors, services, and geographies where it believes it can be a dominant provider, and the strategic investments will aim to enhance its capability in those markets. The Company it seems is undertaking a hiring and building strategy, rather than making acquisitions, and as it is listed, profitable, and with cash, it is relatively well placed to attract the talent required.
Hybridan Comment: Recruitment is a cyclical sector where companies often consolidate. GATC’s downturn has been relatively mild, and there was a slight price recovery after the trading update to, we calculate, a prospective P/E of 14x. This seems a moderate rating for a well-funded business.
Gelion 13.25p £19.67m (GELN.L)
Financial Calendar:
Year End June, Report December, Interims December, Report March
Three Main Shareholders:
Perinato Pty Ltd (Trustee for the Maschmeyer Family Trust) 11.9%, Janus Henderson Investors 8.9%, Adrien Amigues 5.8%
Key Investment Points:
Licensing Model, Technical & Commercial Traction, JV Ready
This Anglo-Australian battery innovator with a licensing model where IP Rights are essential in attracting paying
partners for commercialisation was recently awarded further patents for its core Lithium-Sulfur (Li-S) technology. This technology is creating the next generation of batteries that should perform better through improved energy density, increased efficiency, less expensive materials, and more sustainable energy storage solutions,at a reduced cost.
Gelion's comprehensive Li-S IP portfolio includes over 200 patents and patent applications across 44 families, covering anode, cathode, electrolyte, battery design and manufacturing, and battery management ensuring end-to-end protection across the entire Li-S battery value chain. Energy storage is a critical component in the clean energy transition, and the LiS technology could be game changing.
This battery chemistry has achieved 402 Wh/kg (gravimetric energy density) in a 12 Ah Li-S pouch cell, which is over 60% higher than traditional lithium-ion. Gelion's light-weight sulfur batteries are suitable for high growth applications such as electric aviation, electric vehicles, and specific stationary energy storage, such as remote power supply. Gelion has demonstrated that its proprietary Gen 3 Sulfur Cathode material is viable with solid-state electrolyte material and full solid-state applications, so lowering its barriers to commercialisation.
A £2.5m grant was awarded by the Australian Government in December to be used towards the build of an Advanced Commercial Prototyping Centre. This will provide test and validation of Li-S battery technologies for prospective global partners and customers. The Project will commence upon Gelion securing its appropriate co-funding. Its partners include Glencore for exploring the use of LiS battery technologies for stationary, off-grid, and mobile applications. The Company estimates further capital will be required by June 2025, which it aims to secure with a strategic investor to co-fund the Australian government grant. We think that it is not an impossibility that Chinese or American enterprises could start bidding for this potentially game changing battery technology.
Two businesses are in incubation within Gelion; one is zinc-based battery technology, which is on the back seat, but has value. The more exciting is the Lithium-Ion recycling battery technology which was acquired from Johnson Matthey in 2023. The growing volume of battery waste is an environmental concern and provides an opportunity
to have self-sufficient minerals supply from the waste. This market is projected to be worth $30-40bn globally by 2030. The Department for Business and Trade has granted a further £175k to Gelion for Phase 2 of
the recycling programme to accelerate its commercialisation. Phase 1 was to engage prospective customers. Phase 2 focuses on the Technology Validation which could potentially lead to a feasibility study for a larger scale pilot plant with a JV partner.
Gelion’s Interims to December are expected in March and along with passing technical milestones, significant progress in operational and cost management is anticipated. The final results to June 2024 were reported in December, showing an 18% reduced EBITDA loss of £4.8m, with a loss before tax of £6.3m, down from £7.1m in the prior full year to June 2023. There was £5.4m of cash at the end of June 2024 and in December, ignoring the grant income, a further £1.86m was raised at 15p with Directors investing £155k suggesting more than a six months runaway into June 2025.
In January 2025, Dr Graham Cooley joined as a Non Executive Director. He was previously Business Development Manager at National Power plc, and CEO of ITM Power plc. He is also a NED at Cadent Gas, Non-Executive Chairman of Light Science Technologies Holdings plc and NED of Cap-XX Limited.Hybridan Comment: The technology licensing model mitigates the commercial development risk, while the potential of the recycling business may not be reflected in the market capitalisation, so at just below December’s placing price, could be a tempting entry point.
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