Hybridan Monthly, 1 May 2025
Market Comment:
A contrarian view to companies delisting from the market
The flurry of companies delisting from the market has accelerated since early 2024. The London Stock Exchange (“LSE”) has been an easy target for those eager to point the blame. Unfortunately, criticism towards the LSE is now synonymous with the media coverage of a company leaving the market. “The London Stock Exchange is on course for its worst year for departures since the financial crisis….” became a regular headline back in 2024.
Not wanting to take anything at face value here at Hybridan, we started to look under the bonnet of these companies delisting to see if there was something more to it rather than the usual “blame the LSE” rhetoric.
We tracked the ten-year share price performance of the 164 (and counting) companies delisted (not subject to takeover) across the period between January 2024 and April 2025. The average share price performance of those companies over a 10-year period was a decline of 70%*. Not wanting to point fingers at specific companies, but consistent themes of: profit warnings, lack of revenue growth, lack of commercial delivery, lack of engagement with investors, soon became apparent. In most cases, companies delist because they cannot attract meaningful growth capital to continue operations. Adopting a slightly Darwinian approach, if a company hasn’t delivered over a sustained period of time, why should investors have to keep funding it?
I challenge the reader to find one company that has delisted (as opposed to being taken over) and consequently blamed the market when their own revenue and profits have grown consistently year on year. Growth capital available for growing businesses has never left the market. What has happened is the market has become more clinical and unforgiving in backing businesses that take a long time (too long?) to deliver. Any company that is surviving the current turbulence will be viewed more favourably possibly by institutional investors when we come out the other side because they will have for the most part shown capital preservation and business model resilience when many of their peers were delisting. We will be left with a mainly better quality pool of companies for investors to choose from.
Now the above is not an absolute rule. One anomaly that springs to mind when looking at circumstances behind this delisting trend was e-Therapeutics. Back in April 2024 they announced their plans to delist from AIM, citing a lack of support from UK institutional investors. At the same time, the Company’s own shareholders backed the Company with a further £29m and took it private. The quoted life science space has been challenging for some time when it comes to institutional interest, and it was a damning indictment of the state of affairs for small cap biotech companies when e-Therapeutics raised the money themselves and consequently delisted for pastures new.
Moving from companies delisting to those being acquired, the criticism towards the LSE has been equally bizarre. When Thoma Bravo acquired Darktrace for £4.3bn back in April 2024, the price paid was a 44% premium to Darktrace’s three-month average share price, a 31X EBITDA multiple and investors enjoyed a 150% share price gain since their April 2021 IPO price. You would have thought with those shareholder returns delivered by Darktrace; it would have been all smiles, but the LSE soon became the target again for losing a UK tech champion as Darktrace was undervalued compared to its US peers. I can only imagine what the criticism would have been like if Darktrace was taken out below their IPO price!
Most recently, the negative market commentary around Deliveroo’s bid by DoorDash has already started suggesting the UK markets are not supportive of tech companies. DoorDash has offered to buy Deliveroo for £2.7bn (180p), a disappointing 54% decline since their 390p March 2021 IPO. “First Darktrace and now Deliveroo, the UK is running out of public tech companies” is the position some are taking.
However, as this article is all about providing context, Deliveroo IPO’d during the Covid bull run – the business model was well timed during lockdown when the weekly takeaway was a regular highlight. Inevitably, post-pandemic, growth slowed as we ventured out to restaurants, increasing competition in the market put pressure on margins creating a challenge to get to profitability, and they posted their first annual profit of £3m in 2024. Most traditionalist investors would give themselves a nosebleed paying £2.7bn for a business with £3m in profit. A bull market valuation by any metric and it just goes to show how investor sentiment (especially in tech) can quickly change from toppy revenue multiples to a focus on profitability and cash generation. It would appear Deliveroo is a victim of its own success; IPO’d at the right time (despite a 26% share price decline on their first day of dealings), but was slow to adapt to consumer habits and the competition.
Whilst the LSE has received undue criticism, as it has no control over companies delisting or indeed which companies investors choose to back, they do have 100% ownership is making the markets a more hospitable place for growth companies onto LSE markets (AIM and Main). The number of IPOs in 2024 was the lowest in 15 years. That has to change, and we hope with the current consultation on “Shaping the Future of AIM,” the LSE will take the opportunity to reinvent its offering, especially for exciting UK SMEs. A £1m average cost of IPO’ing onto AIM is not sustainable and the risk factors associated with cumbersome listing documents does not reflect the accepted nature of deploying equity risk capital to high growth businesses.
* We tracked the ten-year share price performance of the 164 (and counting) companies delisted (not subject to takeover) across the period between January 2024 and April 2025. The average share price performance of those companies over a 10-year period was a decline of 70%*.
By Niall Pearson
Company Newsflow:
ITIM Hockey stick curve
OBI Infection Inflection Point
itim Group 50.0p £15.7m (ITIM.L)
|
Price |
Results |
Top 3 Shareholders |
Value |
|
47-53p |
Year End December, results expected in May |
Ali Athar family interests 38.4%, |
Recurring Income |
|
Spread: 10% |
Interims to June expected before end September |
Lewis family interests 18.1%, |
Passed Break-even |
|
52 week High/Low: 59.5p /33p |
|
Robert Frosell 7.6% |
£3.8m cash for Growth |
Source: Alpha Terminal, and Company Website at https://www.itim.com/investors/shareholders.html
Finals from this SaaS retail technology Group to December 2024 are due to be reported in May. The 27th February trading statement upgraded FY expectations to a PBT of £175k, compared to losses of £1.1m in 2023, with a 260% increase in EBITDA to £2.5m, up from £0.7m.
itim’s technology enables store-based retailers to optimise their businesses to improve financial performance. Despite a challenging market, and because of new contract wins and extensions, the February trading statement reported that revenues grew 11% to £17.9m, of which around 75% is recurring. The gross profit margins are 38% and cash balances increased from FY 2023 £1.9m to £3.8m. In July 2o24, a five-year multi-million-pound contract was agreed with Assaí Atacadista, a Brazilian wholesaler, with more than 300 stores and turnover of $13bn. Assai is leveraging itim’s UNIFY Price & Promotions Optimisation solution, powered by Profimetrics AI, to refine its pricing strategies and boost competitiveness.
itim was established in 1993 and has grown organically and by a series of acquisitions of retail software systems which were redeveloped to provide omni-channel retailers with a unified Retail platform. It was listed in June 2021 at 154p, raising £8m and is focused exclusively on digital technology and owns proprietary software that re-engineers retail businesses. The technology enables clients to produce cost efficiencies, increase sales, and profitability.
itim states that recent technological advances have created a once in a decade opportunity for a step change in retail productivity and it can therefore target to improve client sales by 30-50% and client profits by 50-100%
Hybridan Comment: itim should report passing the break-even inflection point in May and has cash to fund scalable growth.
Ondine Biomedical Inc. 9.0p £39.9m (OBI.L)
|
Price |
Results |
Top 3 Shareholders |
Value |
|
8.5-9.5p |
Year End: December Results expected before end June |
Carolyn Cross (CEO) 26.7% and husband 8.5% |
Phase 3 Funded |
|
Spread: 5.6% |
Interims to June, Interims expected before end September |
hInsight-NX LLC 9.5% |
$5.6bn market |
|
52 week High/Low: 13.3p /5.125p |
|
M&G Plc 9.2% |
Directors are significant shareholders |
Source: Alpha Terminal, and Company Website at https://ondinebio.com/investors/aim-rule-26/
The Canadian life sciences Company and leader in light-activated antimicrobial therapies has a fully owned lead product, Steriwave, which is a rapid nasal decolonisation therapy that eradicates a broad spectrum of pathogens in the nose in minutes. It is easy to use, environmentally safe, provides substantial health benefits, and saves cost. Based on its patent protected photodisinfection platform, there are other products with similar characteristics in various stages of development. The pipeline includes treatment of chronic rhinosinusitis, decolonisation of infections in burns and wounds, and disinfection of endotracheal tubes to reduce the incidence of ventilator-associated pneumonia.
In November 2024, Ondine raised net proceeds of £10.2m at 8.5p, with the directors and employees investing around £1.75m. This This was preceded by circa £2.8m of funding at 12.5p from Canada in September 2024 and in January 2025, a further £3.1m was raised in the US at approximately 8.3p. The combined £16m raised is for US-based Phase 3 clinical trials of patients using the nasal photodisinfection system to prevent infection and kill germs. The cash runway is into late Q4 2025, by which time the Phase 3 topline results are anticipated. This should lead to regulatory approval and potentially to world-wide commercial agreements. The global market is worth approximately $5.6bn in 2025 and is expected to be $6.7bn in 2030. The largest market is the US where tariffs do not affect medical devices, although that could change, however in mitigation the Company has a US base.
Following a sequence of progressive news in April, Ondine moved further towards commercialisation. As a health economic analysis by the York Health Economics Consortium (YHEC) was published stating that using the Steriwave nasal decolonisation prior to major surgery delivers substantial net cost savings. The YHEC study demonstrated that for every £1 spent on Steriwave to prevent surgical site infections, the NHS can save an average of £1.49 to £2.38 across major surgical specialties. This makes a £38 to £107 net saving per operation, so potentially saving UK hospitals, including the NHS, up to £200m per annum. In our opinion, this substantial return on investment should help drive its adoption, when approved.
Hybridan Comment: Steriwave should be funded for Phase 3 approval, and as further milestones are passed, we believe the value will increase as it gets nearer to licencing deals.
House Report: News from a house stock
TMT Investments $2.5 $80.8m (TMT.L) *
TMT manages a diversified technology investment portfolio of over 50 companies, primarily in the US on Big Data/Cloud, Ecommerce, Edtech, Mobility, FinTech and SaaS (software-as-a-service). These technologies are main growth drivers of the global economy. Its finals to FY December 2024 reported a stable Net Asset Value (NAV) of $205.9m which is little changed from £208.1m for December 2023. The NAV on a per share basis is $6.55 from $6.62 in the prior period. The shares are currently trading at $2.50, a discount of approximately 62% to NAV.
Its five largest holdings account for 61.85% of the portfolio value. The largest at 32% of the portfolio is Bolt, which is on an IPO runway. Bolt is a ride-hailing and food delivery platform and achieved double-digit annualised revenue growth in 2024. The shareholding value was reduced by $4.4m or 6.2% taking the value to $67.7m. Bolt has a highly diversified geographical revenue base as it is active in over 700 cities globally, which is up from 550 last year. Bolt is adjusted EBITDA positive and was valued at $7.7bn in 2022. According to Bloomberg News on 26 February 2025, citing sources familiar with the matter, Bolt raised a $235m credit facility and is working towards a listing in 2026.
TMT’s administrative expenses are $1.4m which is little changed from 2023’s $1.3m, reflecting the continuing quieter period of activity alongside good cost control. Cash and cash equivalent reserves were $4.8m at 24 March 2025, with no debt. Since its inception in 2010, the IRR is up approximately 14.5% per annum and there have been 19 full and partial exits. TMT can afford to wait for its markets to improve.
Hybridan Comment: The share prices discount to NAV seems attractive and would narrow on a US market rally and probably go to a premium at Bolt’s IPO listing.
Updates/Events:
CyanConnode Holdings 7.5p 26.1m (CYAN.L)
Since our feature comment in April’s Hybridan Monthly report, Cyan’s Indian subsidiary, DigiSmart Networks PVT, has been issued a Letter of Intent for a total contract worth approximately £70m from the Government of Goa’s Electricity Department to deploy approximately 750,000 smart metres. There has however been a profits downgrade for FY March 2025 as a result of timing shifts in India and resultant delay in shipments, the Board now expects FY25 revenue to be approximately £14m and the Company will report an EBITDA loss expected to be in a similar region to last year. Cash at 31 March 2025 was £5.8 m, and cash received from customers during the year totalled £14.2 m. Cyan is a global provider of narrowband Radio Frequency (RF) smart mesh networks. This deal follows 27th June 2024 report of its empanelment as an Advanced Metering Infrastructure Service Provider (AMISP) so it could bid for and lead smart metering projects in India. DigiSmart is the lead consortium member responsible for installing the meters, communications (RF and cellular), cloud services and meter data management systems. The contract is expected to begin in the next few months and for 27 months thereafter. CyanConnode’s outstanding order book has grown to approximately £180m, with revenue expected to be realised over the next ten years, with the majority likely to be recognised within the next three years.
Hybridan Comment: The shipment delay has tried investor patience which may create a longer-term opportunity
Northcoders Group 46p £4.0m (CODE.L)
The technology training Group reported FY December 2024 results: revenue increased by 24% to a record £8.8m, driven by diversification and rolling out new courses in high growth areas. The gross profit margin increased to 67% from 63% for an adjusted EDITDA of £1m, up from £0.1m and a PBT of £0.4m compared to loss of £1.0m last year. The Company reported an EPS of 4.85p, and we calculate this puts it on a P/E of 10x. The FY cash balance was £1.2m. A 39% increase in individuals trained to 3,976 reflects the constantly evolving offering of new formats. A new course focusing on AI and Machine Learning will start in June 2025. In the latter part of FY24 and into Q1 FY25, there has been a positive shift in corporate engagement, with three contracts won. The Department of Education contract provides visibility until June 2025 and there is confidence, although not certainty, of a decision about future structures for the Department of Education contracts. Looking ahead, the CEO reported that FY25 has started promisingly, whilst macro-economic challenges remain.
Hybridan Comment: Our caution in April’s Hybridan Monthly report was very prescient as the price has fallen back sharply. This may be overdone and the cautious may prefer to wait for clarity on the Department of Education decision about future contract awarding structures.
RUA Life Sciences 11.625p £7.21m (RUA.L)
In January’s Hybridan Monthly report, we reported on this Company that has a number of medical device businesses. The Company is focused on the exploitation of long-term implantable biostable polymer (Elast-EonTM) and had made an astute acquisition. The recent trading update is for a second interim period to March 2025, after changing the YE to September. Strong progress is reported in growing the contract manufacturing business and exploiting the IP. Revenue is anticipated to increase 86% to £4.1m, of which £1.3m is from the acquisition made in September 2024. The continued focus on cost control resulted in a 22% reduction in like-for-like costs and its set to produce an EBITDA of £0.3m compared to a loss of £1.6m. The net cash of £3.7m results from lower cash utilisation in the business. Contract manufacturing will produce short-term opportunities as the new business prospects continue to grow. The Company is actively pursuing an opportunity to combine its textiles expertise with Elast-Eon to create a novel device for a global medical company.
Hybridan Comment: The benefit of the acquisition is yet to be reflected in the valuation.
In the news in May
Calnex Solutions 51.3p £45.0m (CLX.L)
The Year End March 2025 results are expected on Tuesday 20th May. After disappointments for the last couple of years, the pre-results trading update was positive that its key performance metrics had steadily improved. A 12% increase in revenues to around £18.3m, is expected along with in improved gross margin from 74%. The EBITDA is forecast, on Alpha Terminal, at £5.0m which is a strong recovery from the EBITDA loss of £1.1m at the interims. Cash at the end of March was £10.9m, which is £2.3m ahead of H1 and the interim dividend of 0.31p was maintained as an improved H2 is anticipated.
Calnex is an expert in digital network synchronisation and emulation and its software and hardware provide measurement solutions for the telecommunications sector. Founded in 2006, Calnex Solutions has a deep and wide customer base and has delivered orders to over 600 customer sites in 68 countries across the world. Clients include telecom equipment vendors CISCO, services providers such as AT&T, and Hyperscale enterprises like Apple, Google and IBM, all using Calnex’s products to improve performance and maintain regulatory standards in a demanding and competitive service sector.
Hybridan Comment: We calculate that the 2025 EBITDA/EV is 5.5x, leaving room for further recovery in the share price.
* A corporate client of Hybridan LLP
** Share prices, market capitalisations, and top 3 Shareholders all reported as at the close on 30 April 2025
By Jon Levinson
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