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I caught up with Marie-Claire this evening on my email sent yesterday.

As always she needed to be cognisant of disclosures. We chatted through the interim results and performance over 1H 23 and 1H 24. Based on our discussions I see no reason to doubt the forecasts I have calculated although MC couldn't obviously comment. Interestingly she was keen to point out the higher margins on the new business verses UKG, which was one of the first deals they did on HCM. I took away from that discussion that there is more margin and profits to come through from a similar revenue position.

We discussed forecasts and how we position our growth. Again MC confirmed that profit forecasts are still something she is keen to avoid in the near term but with reoccurring revenues growing quickly there are areas where forecasts could potentially be made. She would consider what and when although didn't see this happening in the near term.

I explained my dividend comment and asked her to consider what we can say around when we might see the return of a dividend. I flagged that any comments in terms of the reinstatement of a dividend would be seen as positive as it would be stressing to the market that profits are growing. Again she was keen to stress we were profitable in Q2 and the momentum is strong as disclosed more profit in Q3 and Q4. I stressed the trading update to be issued in May/Jun should ram home this point. To state we are 'ahead' or 'significantly ahead' in profit terms for FY24 over 23 would be hugely positive. She took this onboard.

We discussed the announcements of dates. A FY results date is already pencilled in for September. This will be announced around a month in advance of the publication of the results.

I advised that I had continued to increase my stake. MC reminded me that she and other family members cannot buy more shares due to the limits in place as she is part of "Dwek Concert Party" (see RNS 01062020. I took this as she'd like to buy more shares but cannot. I had forgotten about this and thought WOW, none of our biggest shareholders can actually buy more without a takeover. No They are not sellers but cannot buy more, this is a potential reason we are undervalued. I flagged that it would be great to see Paul as CFO buying some as again this would flag positive vibes. Again she got the point I made.

Overall whilst MC could give me no new news this was a highly informative and useful call to share what as a shareholder I'd like to see the company doing better and for MC to remind me that what they have put into the market is very much in line with what we should expect.

I see no reason to doubt that we will make profits in Q2, Q3 and Q4 and that 2025 will be much better again. BUY BUY BUY.......

You’ll also note the power of the market expecting the results. Previously RNS’s would be a surprise, the fact that we are now organised, with dates in the diary leads to speculation and potential buying. Please continue to ensure these dates are published.

So what for 2H, full year 24 and 2025? I have to say there is some clamour from investors to get some forecasts into the market. The Allenby Capital note was good but needed forecasts. I know you have previous stressed that these have been difficult for the company to provide but with re-occurring revenues and increasing certainty around contracts I personally think we are missing a trick. The 3 contract wins for example, simple statements of belief that these might add £3m+ to revenues adds significant weight to the message. I have done my own forecasts (below) that provide significant room for manoeuvrer around trading that will help guide investors on the trend and provide more confidence in the strategy. Again a simple message that we see 2024 FY ahead of 2023 would have gone down really well.

I know we need to tread a fine line in over promising but I genuinely believe we can publish a minimum or a range, or opt for simple statements like ahead. Views like these would have led to the price perhaps stabilising higher than where we are or even accelerating further. In the interests of all shareholders I think you need to be reconsidering the position on forecasts even if it is within ranges that you feel comfortable. That said, by my forecast we remain in bargain territory so I have upped my stake to 3.4% and I will continue to support the price on any further dips. We have an exciting 18 months ahead that will hopefully stretch into years and I am very much enjoying the ride.

Dear Marie-Claire,

I hope you and Paul are keeping well.

Thanks, and despite the small loss, congratulations on the most recent interim update! There were no real surprises for me other than perhaps the cash position, where I expected with inventories to fall over the period (which they did) creating a more neutral position in 1H 24 over 2H 23. This has also led to the debt position growing again which I’d like to see stabilise/reverse although this might need to be balanced with the payment of a small dividend at some point in the next 18 months. The company has generated £125m of revenues since 2016/17 (last dividend in 2015/16) of which shareholders have received nothing.

I thought you delivered an excellent update via the Proactive interview, you were very confident, both in the way you presented and the overall results and future outlook. The detail in both the interim release and Allenby Capital note has really helped in terms of understanding the impact of UKG and allowed some forecasting on where we might end FY 24 and 2025.

You’ll be aware that I and others had reached out via social media and through investment boards to broaden our message. This led to some excitement into these results and the share price accelerating to 90p the night before results. The pullback to 70p should not be seen as a negative, the results themselves suggest we were a little ahead of ourselves but the fact we moved from 30p in Q1 23, to 55p by Q3 23 and 70p into Q4 23 is a significant improvement in confidence in the strategy!

Indeed fft100. There are a number of ways we could have put it better, another way (if we were making £150k profit per month out of UKG) would be to have a view that with UKG we'd have expected a a profit in the region of £800k for 1H24, not a loss £100k. And thus if we'd had UKG profit for 1H 24 over 1H 23 would have shown a 60% YoY increase in profitability! That said there are rules and I am no expert on what we can and cannot disclose.

On Safetell, personally I'd run with doors and keep Safetell for a bit a least, the early turnaround signs look good and there was at least some capacity (in protection) that allowed growth without adding too much cost. Move forward and with economies of scale and re-occurring incomes, profits could come on the back of a successful strategy. The spinning out of GT into the US however might be a more sensible move (hedgehog and I shared views on this in the past and I also raised with Marie-Claire). We need to see the full value of the new contracts but if the US grows in 2H and the RoW strategy continues its growth then that business alone is worth $50m.

On your point around forecasts - I have sent the a note to Marie-Claire that I'll copy above.

Starting with the positives the EBITDA number hit the mark.

Finally, costs are a focus and being managed!

New contracts in the period provide good momentum.

Relatively disappointed with the revenue increase.

Cash burn still impacting the outlook and further dilution is on the cards if we need cash under the Polymer N2 agreement.

Not the car crash of previous results and Mr Market seems relatively happy.

Fft100 you wanted a forecast so here's my thoughts on profits.

In 1H23 all was wonderful, we had UKG baked into the numbers and we made a £500k operating profit.

UKG continued into the 2H 23 but only partially, let's assume 2 months and we made a £200k loss in the 2H 23. (Full year £300k profit plus tax rebate so £400k)

So the differential in 1H over 2H was -£700k.

When UKG ended, we effectively started to lose £150k of profit in the 2H 23 per month (from month 9) of the year, steadily reducing.

So what about 1H 24, well we made a £100k loss. 1H 24 is a £600k improvement in 2H 23. However, if loses of £150k per month had continued (no UKG revenues) then actually the loss would have been £900k and thus we we’re £800k improved (with continued growth).

So - in the 2H 24 the growth trajectory is therefore a minimum of £800k of profit, and thus £700k of FY 2024 is the absolute minimum. However, if the upside of growth is consistent (new contracts etc) we could be nearer FY number of £1.5m.

So to summarise, I believe there will be a profit between £0.7m and £1.5m for FY 2024! And for FY 2025 based on similar a similar approach a minimum of £1.5m to £3m.

Strong BUY

Hi Hedgehog,

This was a worse case scenario and delays the significant multi-bagging out a bit but not far. I am confident that there is nothing to really get concerned about. I'm out in the Alps this week so won't really get stuck into the detailed numbers until next week. When I do, I will pick up with Marie Claire on key areas like the revenues, debt and cashflow. To fft100's point we really are a bit lame on forecasts or just giving a bit more detail around what 3 new clients mean in terms of revenues etc. Why not state we expect each to be worth a million or so (potentially more), why not call out we expect to be in profit (we have stated it will be materially higher so why not call out 'profit'. Still, we are where we are, and that is 40% higher in price terms than FY results. A buying opportunity for those who don't want to miss out.

Cheers

I agree on the lack of outlook fft100. I'll feed that back.

They have acted on the feedback to give us greater clarity on the UKG impact so we can do the numbers.

The fact is we'd have made around £1.1m in the 1H without the loss of UKG. That is a key piece of info we needed to have the direction of travel.

All businesses have their ups and downs. To me the direction of travel on the growth remains strong. We will be profitable in 2H and then will not make a loss again.

Agreed Brightstine

Results are behind the curve but the growth continues. Might see the pullback today but it'll be temporary. 2H looks profitable and year on year will look excellent.

Back to the 70's but hopefully no lower. Then build from there towards the full year. US HCM will show stronger growth YoY with 3 new active customers and the rest of world is flying. Safetel turning nicely too.

I think there is definate Jam tomorrow and it ain't far away...

Buying opportunity for me if we fall to far...

Very amusing Hedgehog. 1 trading day left before 1H RNS and the publication of the analyst's note. Exciting times.

Cracking trading volumes on the build up. Someone I'd using a broker to add given the unknown trades. These look to me to be orders being filled. The price rises to draw out some sales then the big buys go through.

Let's hope they continue.....

I was first in during the pandemic, it was a great rise following but overdone, I then added more recently when we slipped back between £2-3. The biggest news - the clearing of the pension deficit liabilities would have added significantly to the bottom line and I don't believe it was truly reflected in the price as yet. On that basis we may have gotten a higher price if we'd allowed the re-rate on result but as you say the future is logistics is not without risk and significant investment (both automation and environment) so happy to move on given there are so many more 'opportunities' to move on to. Happy overall.

I didn't notice Wincanton at the top of my portfolio view this morning. Had to do a double take. Then boom. Love days like this! Good offer. 3% to be gained by holding out or take the profits. Money in the bank... Newmark Security next, then I can retire....

Love it. £2m would be fantastic but I am less optimistic. Given the 2H 23 loss, and UKG, I am expecting a small profit for 1H24 but no more than £250k-£400k, I am expecting £800k to £1.2m in the 2H. I'd love to be proven wrong on the upside, more than £500k for 1H and we'll be on track for £2m. 1H revenue YoY will be cloudy because of UKG but that won't matter if the profit number comes in.

In 2 weeks we'll know for sure.

I think we need a little news/update to push higher from here. So bring on the 25th Jan.

It has been a lovely run into the new year and there is a great deal of comfort to be gained due to the lack of selling through the 60's and 70's. Clearly the majority of investors believe that there is significant upside from here to hold onto what they have - me included (in fact I might have added a little more :))

It should be remembered that the 1H 23/24 results reflect a period including UKG, but also a period where price rises were pushed through to other customers. And the likely bottom of the Safetell business before the rebound in revenue.

Whatever 1H 23/24 shows, we also know that this will be the bottom, with the 2H already positioned by the management as the stronger period. We also know that with our contracts and reoccurring revenue, in markets set to grow significantly, that 1H 24/25 will be stronger again (YoY and HoH) so there is literally only good news to come. Revenues, profits should all climb, debts repaid, forward invoicing costs reduced, so regardless of any short term volatility, buyers will come in and the floor price will continue to rise.

My end of year range prediction whilst wide is somewhere between 150p -250p by December. We achieved share price growth of 150% last year against what on the surface wasn't specular top level numbers (although if you know the background with UKG you know the underlying performance was strong).

So good luck all in 2024 with your investments. This one we know should be fun!

No matter how badly some think the business is being run (and yes things could be done better). EPS will still be around 30p+ this year and probably next with no big shocks hopefully on the horizon.

The question for management is what to do with all that cash, the dividend is 8p. Provisions are made then released, there is only so much investment to do. So what to do with the extra?

My view is that at some point the profits have to fall significantly (unlikely), or specials or dividend increases will be paid or the price will rise due to the market re-evaluation/or through buybacks.

My view is nothing is without risks (but PRA oversight helps UK investors more than we give credit) and the price looks wrong. A P/E ratio under 6/7 is temporary in the short/medium term. Time will tell.

This is what he said back in July.

"Kromek is on track to report an underlying profit (adjusted EBITDA) this year to April 2024" Basu added.

So we will see. I'd really like so see this share fly.

THAL holdings in Newmark SecurityToday 14:09

Will THAL's holding in NWT be a catalyst to drive the price higher in 2024?

I've just taken my stake in NWT to over 3%. The rally towards the end of the year and an overall return on NWT of nearly 150% in the year makes THAL potentially another stock to watch in 2024. The 10% holding in NWT reflects nearly 40% of THALs market cap. At the start of the year it represented just 20%. So not all the value of this rise has come through into THALs share price or other assets have performed less well.

I'm with the recent finals commentary in the NWT could well become an acquisition target in the next couple of years. I'd expect a sale price in the region of £40m as being realistic and this is 5/6x the current price. I am certainly of the belief that we're only just at the beginning of a strong rise in NWT as the US continues to out perform, that Safetell in now growing again and the rest of the world strategy accelerates. Another doubling/ trebling of the NWT share price is on the cards in 2024 and this should reflect well on THAL.

By 2025 we'll be in the offer territory for a take out at £40m or so.

I shall potentially be buying here in the new year once I have done some further research on the other investments.

Will THAL's holding in NWT be a catalyst to drive the price higher in 2024?

I've just taken my stake in NWT to over 3%. The rally towards the end of the year and an overall return on NWT of nearly 150% in the year makes THAL potentially another stock to watch in 2024. The 10% holding in NWT reflects nearly 40% of THALs market cap. At the start of the year it represented just 20%. So not all the value of this rise has come through into THALs share price or other assets have performed less well.

I'm with the recent finals commentary in the NWT could well become an acquisition target in the next couple of years. I'd expect a sale price in the region of £40m as being realistic and this is 5/6x the current price. I am certainly of the belief that we're only just at the beginning of a strong rise in NWT as the US continues to out perform, that Safetell in now growing again and the rest of the world strategy accelerates. Another doubling/ trebling of the NWT share price is on the cards in 2024 and this should reflect well on THAL.

By 2025 we'll be in the offer territory for a take out at £40m or so.

I shall potentially be buying here in the new year once I have done some further research on the other investments.

Https://finance.yahoo.com/news/newmark-security-plcs-lon-nwt-054612507.html

Wallstreet article now showing on Yahoo! that allows comments, so I have added mine, just in case there are investors reading up.

Merry Christmas all.

I've sent your feedback Provest :)

Hi Marie-Claire,

Great to see the RNS out today and the price is up again. The notification on results should set a floor under the current gains and generate further interest from investors keen to get the update that will come with the 1H results.

I'd like to bring to your attention a recent post from what I think is a new investor that has just bought in:

Title: Growth drivers

Will one of the biggest near term growth driver will come from the rollout of Primark stores in the US? 8 new stores this year and 60 by 2026, GT clocks etc should be added at each of these shops. There are 1,309 TJ Maxx stores in the United States as of December 05, 2023 so Primark needs to get a move on if it wants to be competitive. Its only a bit disappointing that NWT dont talk about this more, but I guess the lack of transparency gives insiders the chance to buy stock without telling the market where the real growth is coming from!

Just like when you explained the US model at the AGM -where we are super scalable and efficient. If the above is correct, it would be great if you could provide case studies (Primark or equivalent) at future investor updates. This will help that improve the understanding and make real for investors the opportunities, companies we support and how we will achieve the growth story. 

Again potentially something to think about and plan to cover when you are holding the next updates.

Have a great Christmas.

Regards

David

Sent from my Galaxy