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The responsibility for marketing Zenakine falls specifically to Sederma within the Croda Group. Sederma is a relatively small part of a very large business. I doubt the Board directors have much involvement in how it is run day to day or even year to year. I say "small", it cost $66m in 1997, $123m in today's money which is less than 5% of Croda's current market cap. Since it was acquired by Croda in 1997 Sederma has not disappointed, most especially since it was behind the development of the successful Matrixyl product in the early part of this century. I have no special insight into the quality of the Sederma management but note that it has a good track record and for what it is worth I am happier that Sederma is responsible for the marketing of Zenakine than SBTX. Now that Sederma are spending significant sums and management effort promoting Zenakine, the interests of SBTX and Sederma are better aligned than when it was still just an "option" in development phase (I don't fault Sederma for this, it was in their interest to cross every "i" and dot every "t", after all they were successfully selling their existing product in the meantime and the new product would need to be demonstrably "better" to justify the management and marketing expense of launching it).

It is unlikely activity at the Croda corporate level will have any impact on the progress of Zenakine over the next couple of years. And while I say Sederma is small relative to Croda, it is more or less unthinkable that a tiny business like SBTX could ever take over a business like Sederma or even more so the whole of the Croda Beauty business. In fact it would be very scary as the management capability within SBTX is not even close to being ready to manage a much larger business (no offence intended).

Hi tichtich

Worth looking at 2023 Full Year Results top of Part 2 released 6th March 2024 where L&G explain the impact of new Accounting Rules. It's a debate about when should a profit be recognised - at the start of a long term contract or over the course of the contract. The consequence of the new rules was that "Shareholders' Equity" halved (but that "lost" profit is in fact held "in reserve" and released over the term of the contract if assumptions pan out as expected).

I do not claim to be an expert but would say that in simple terms prior to this, the argument was that as soon as a deal was done (e.g. a PRT deal), the profit was calculated and reported - if anything changed later (e.g. longevity proved to be different from assumption) it was reported later as a favourable or unfavourable adjustment. So profits may now appear lower to begin with but build over the years if the assumptions prove correct. Does this matter? Probably not but it could be an issue if "Shareholders' Equity" reduces to a point where L&G can't make the level of buybacks and dividends shareholders are expecting (even though they have the cash to do it, accounting rules do not allow distributions that are greater than the calculated "Shareholders' Equity").

Pensions and Life Assurance is a long-term business - figuring out how much "profit" has been made in any one year has always been somewhat subjective. RBC analysts seem to be stressing about the level of Shareholders' Equity - I'm not saying they should, it is just their point of view and other Analysts take a different view with more confidence that these "profits" will be reported over the coming years based on deals already signed and sealed.. Only time will tell.

Couerdelion,

I think we are really on the same page here (especially as "Own Funds" and "CSM" in this case work out quite similar even though the basis of calculating them is entirely different and for different purposes). And appreciate your point that "Own Funds" suggests the market valuation of L&G is attractive.

My comment on IFRS17 was based on the original "Sorry" thread because the first answer to "dubs" question by "sparhawk" quotes the RBC analysis for the reason for the share price drop:

"The analysts also highlighted negative implications for balance sheets, with equity positions falling as rates climb. "This is a key area of focus," particularly for Phoenix Group Holdings PLC (LSE:PHNX) and Legal & General Group PLC (LSE:LGEN), "given the recent declines in IFRS shareholders’ equity."

If I am not mistaken, dividends and share buybacks require there to be an accounting measure of positive shareholders' equity and one of RBC's points is that there is at least a small risk there may not be enough to allow these payments, depending on overall "profit" each year and perhaps specifically how much of the CSM L&G can release to profit each year. They have the cash, more than sufficient regulatory capital, and the theoretical "profit", but will they always be able to distribute it?? even if the PRA don't object to it.... Whether this matters depends I guess on how much investors are buying the shares for the yield.

Courdelion, great summary. Effectively the adoption of Accounting Rule IFRS17 in 2023 meant that profits on contracts in Life & Pensions are spread out over the life of the contract, reducing the upfront value and instead spreading those profits out over future years (but subject to annual reassessment so the "Own Funds" could fluctuate).

As the profits are released in line with the current Accounting Rules each year, then each year the dividends can be paid and the share buybacks made.

This is what makes the shares look attractive on the basis that the profits are probably already there to make the annual distributions. Unless of course you agree with RBC analysts. Their view more or less assumes the UK will implode under the weight of debt, in which case I think most posters on this board will have more to worry about than the L&G share price....

Duckberry, yes. Chief Exec of Rheinmetall said yesterday that "Europe needed to develop counter-drone systems in a very cheap way. To fire a $200,000 or $500,000 weapon against a $20,000 drone makes absolutely no sense".

MSI have a product that would seem to fit the bill. It is a question of how much (if any) of this market MSI can capture, and not just in Europe of course....

But their liabilities are also measured based on the yield on these same assets, so as the yield rises, their liabilities fall. So in broad terms the fall in gilt values makes little difference to L&G as their liabilities also fall in value by a similar amount. At the margin it makes a difference on Asset Management fees but that is really quite a small difference.

Perhaps the real issue here for investors is a broader one about confidence in the economy (especially UK) and what impact it could have on Financial Services businesses like L&G (and maybe even more corporate tax levied in UK such as that being muted for the banks).

Hi Pharmhall

170p was the peak so good timing!

At current 149p price PE on last year's results about 23x. True that next year's results will likely make the stock look expensive. However Space and Defence are long-term businesses and they have just recently announced the largest order in their history which will ship in 2027 and 2028 years so these years are likely to show profits back up again. That is just one customer and there is a lot more for them to go at. So I guess it depends on whether you are prepared to look beyond the likely 2026 outcome. Although the AIM market is often frustratingly short-term I guess in this case the share price will be supported by the fact this order is already placed (as long as the manufacturing of this new product goes ok - their recent track record is good on this though).

So nothing sinister in the broker's forecast. Like many AIM stocks I guess the share price will be quite volatile but this look like a good business in a growth market with further potential.

Just anecdotal but I checked with 2 users of Axisbiotix-Ps. The use-by date is on each sachet and recent ones bought had a use by date in 2027. This dry powder product (I think it is freeze-dried?) seems to have a long shelf life so probably not a significant issue (unless they go totally mad on overordering!).

Short term (say next 2 years) it is all about Zenakine. Longer term is a different matter and the quality of the management would be important. So those willing to take a 5 year view need to decide whether the current management can realise the longer term potential of the business. But those who are already long term holders may not want to wait for another 5 years from now.... 🤣

In defence, MSi is a provider of no-nonsense and relatively inexpensive equipment which can reach the skies but not the Moon.

In contrast space is now the defence industry "final frontier". For exposure to this via a UK business I went for FTC (since Feb 2021 - but I wish I had bought more then!). Like MSi, it's not a pure defence play. Lots more potential for this business (and hopefully also for MSi).

p.s. MSi share chat here is one of the best in my opinion - knowledgeable contributors who just play the ball, not the man (or woman). Thank you to all contributors.

AxisBiotix is a good product for a specific category of consumer with a skin complaint. It's not really the same target market as Dermatonics (whose products can appeal to a broader target audience) and, of course, it is not branded Dermatonics so you are paying to support 2 different brands (which is relatively expensive if you are targeting physical store sales). It would have been better in my view to wait, develop Zenakine based creams under the Dermatonics brand, and just expanded the existing Dermatonics Superdrug and Boots distribution deals for these creams (and not AxisBiotix). Much cheaper just to do a product extension to an existing brand.

The AxisBiotix potential is relatively limited and best promoted via digital channels (which are cheaper). Opti seem to have taken on some credible young Marketing recruits to boost online sales - SBTX could be using the same playbook for Axis-Biotix. Even then, it would remain a small contributor to profits. Nothing to stop SBTX doing this, even now.

So having said all this, the Axis-Biotix deal is not a make or break issue for SBTX and it is likely the sales will be sufficient to earn a small return. However this is not going to move the needle on the share price. Only Zenakine has the potential to do that (not guaranteed, just potential).

The management and marketing of Zenakine is of course now almost entirely down to Croda (and more specifically Sederma). Perhaps this is for the best. Sederma can point to a good track record in the business and have all the worldwide sales contacts and distribution to sell this intermediate product. Over the next few years, barring catastrophic errors by SBTX management, the performance of the business (and the share price) will ironically have little to do with actions taken now by SBTX management - the die is cast. It will all depend on whether the Zenakine deal will prove to be the success it is forecast to be, or not.

In many ways investors who believe the Zenakine deal will succeed, and SBTX management, may be better off taking the counter-intuitive advice sometimes given to investors:

"Don't do something, just sit there!"

At the moment, like most defence stocks (and MSI is viewed as one regardless of the other divisions), MSI shares go down on news of possible Ukraine peace and up when it seems that won't happen after all. Simplistic and short-term when defence business is long term. That's the market for you - in the short run a voting machine..... only in the long run a weighing machine (to paraphrase Mr Buffett).

Recent wars suggest that, for all the sophisticated and very expensive equipment the West has spent money on, there is still a need for cost-effective kit that can shoot down cheap nasty drones....and a lot of this kit will be needed as drones are cheap to launch in large numbers....hopefully MSI can satisfy some of this requirement on sea and land.

Aquae it's a good question/comment. Normally if revenue is lower than expected then profits are lower (or, in this case, losses are higher!). So how can the EBITDA figure come out so close to the Singer estimate when the revenue line is so much lower? "Careful cost control" is what we are told but this is hard to believe as a full explanation given the quantum of the revenue miss. Delaying spend on Superdrug inventory build etc. could make some of the difference but that is not "cost control" it is just "cost deferral" and could SBTX risk not meeting the Superdrug deadline? Otherwise of course there is 100% margin Croda royalties....(which has nothing to do with cost control!).

And maybe a mix of all of the above....

As for Dermatonics and BTS , on their own they are likely solid but with relatively low growth potential taken in isolation and the revenue targets were likely overoptimistic. The only way they could deliver significant growth is through developing SBTX products which BTS can manufacture and Dermatonics can market. I think this is possible (e.g. what about Dermatonics day and night creams containing Zenakine?) but it will take time. Not sure long term shareholders have much patience left....

AxisBiotix is tiny so even significant growth will deliver small profits (especially at the lower margins via Superdrug). The only part of SBTX that could "scale quickly" to deliver significant value to shareholders is the Croda Zenakine deal.

Aquae, your first line comment is spot on that we don't have sufficient information to assess what exactly happened in 2025. Appreciate your attempt to "square the circle". Just a couple of observations:

I think Singer just use the word "Adjusted" to distinguish from figures that would be "Reported" according to current Accounting Rules (based on IFRS) - EBITDA is not an accepted Accounting Standard so Singer call it "Adjusted".

Looking at Singer's estimated 2025 figures in "Income Statement" (page 22), they are allowing for £0.5m of Depreciation and Amortisation (that is the difference between the "Adjusted EBITDA" line of -0.3 and the "Adjusted EBIT" line of -0.8, the difference being "Depreciation and Amortisation"). This would be their estimate of first year D and A based on the initial acquisition costs for Dermatonics and BTS. SBTX accounts will likely be very similar. Neither will show any "deferred acquisition costs" (or deferred consideration) in the Income Statement (this would appear in the Balance Sheet under "liabilities" assuming they conclude it is still likely to be payable).

I gave up trying to work out what exactly happened in 2025 - we just don't have enough information. The RNS (like all the previous ones!) is as clear as mud. For what it is worth I take the statement of cash and July trading as positive. And if sales were lower than expected and yet profits were as expected margins were higher (or there were more than nominal royalties received from Croda!). As others have said, the future for now for SBTX all depends on the performance of the Zenakine deal - everything else is likely to be a "footnote".

Reasonable quantities so a positive sign.

Follow the money - forecast cash was £4.1m but they have £4.8m. And no profit warning here - expectation was for £0.3m EBITDA loss.

Revenue is vanity, cash is sanity.

Whilst these businesses are small relative to Zenakine potential, there could be synergies for SBTX to exploit which could deliver high margins. As an example, SBTX could develop their own skincare day cream and night cream using Zenakine, perhaps using a brand extension to Dermatonics, e.g. "Dermatonics Natural" range. Dermatonics has a good, if limited, brand image currently. Products already sold online and, in UK, via Boots and Superdrug (plus Umesh Modi in India/Asia). If BTS made the product, and given Zenakine ingredient attracts a royalty payment, the margins should be high even if volumes lower than a Tier 1 cosmetics company. There should be no reason to stop SBTX selling their own end product under a brand they own in addition to Croda selling Zenakine ingredient to other cosmetics companies.

Looking further ahead, the medical pillar fits very well with the existing Dermatonics products, e.g. a cream for wound healing of diabetic foot ulcers fits well alongside the existing "Once" Heel Balm. And, again, it sounds like the sort of product BTS could make.

So lots of future potential for this business.