7:59 cut – THRU, LTHM

Thruvision (THRU) – H1 Results

Thruvision, my pick in advance of Mello, reports revenue up 53%, gross margin up from 39% to 48%, admin costs up 32% at £2.7m and operating loss halved to £0.4m.

The revenue had already been disclosed in the period-end trading update with the gross margin guided higher. An operating loss was also expected.

A positive surprise is that cash has increased from £8.7m to £10m post period-end. They already appeared fully funded on their current trajectory. [Edit: It seems likely the majority of the cash has come from receivables of £3.3m, but other sources would be sales out of inventories of £3.2m or development funding].

The company provides an excellent breakdown of admin costs and from this and the cash reconciliation it can be seen that Engineering expenses increased 55% mainly due to increased depreciation on expanded production capacity. These increased costs will clearly recur, but should not continue to grow at the same percentage rates on average. Sales and marketing costs were up 37% while other areas were more subdued.

The company suffers from very lumpy revenues at this stage of its development and therefore it is disappointing that they were not able to announce further orders post period-end, saying only they had “a growing number of strategic opportunities now in process” and cautioning that “precise timings remain hard to forecast”.

The company is doing all the right things – appearing at Mello, paying for research from Progressive and agreeing to meet with full-time investors. The provision of financial projections from Progressive should provide a boost, despite the risk of a weaker H2. I will attempt to produce my own independent projections later this week.

[Edit 10:40: I was avoiding the Progressive report in order to not bias my independent research, but what I saw it cited on Twitter was not positive. Accordingly I have sold half my position this morning]

James Latham (LTHM) – Acquisition

This family-controlled timber-focused builders’ merchant has been a steady performer over a number of years. In February they announced a potentially strategic bolt-on purchased of a Irish operation having previously only served the country from their Leeds depot.

Today they announce a purchase of a specialist supplier in what appears to be a vertical integration move into wood processing (if not exactly manufacture). While they claim this provides an opportunity to develop further products in that area, the valuation suggests an opportunistic aspect.

With two acquisitions within a year it will be interesting to see what the company plans next.

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