Small Caps Live Weekly Summary
G4M HERC ING JSE RFX VTU
It’s hot out there! Hope everyone in the UK and Europe is coping ok with the heatwave. Understandably, many will not have wanted to sit at a computer in this heat, so discussions were somewhat truncated. Here’s a selection of what we looked at this week.
(Remember this is a summary of many opinions, and isn’t the view of any one commentator; check out the actual discussion on Discord if you want the nuance of the different opinions.) To avoid spam, the only way for new members to join the Discord server is via the Small Caps Live website. This will be instead of direct invites via Discord. All genuine investors are still very welcome to join in the discussions.
Gear4Music (G4M.L) - Final Results
We tend to hate promotional headlines to RNS:
Significant revenue growth, and EBITDA and PBT ahead of recently upgraded market expectations with a confident outlook
They always come across as a company trying too hard for Partridge reasons! (To the untrained eye, this could look rubbish and like I’ve not bounced back!) However, in this case, they certainly seem to be delivering:
Of course, aided by being the last man standing, to some extent. As we’ve said in the past, in a world where everyone appears to be abandoning listings, this is actually the benefit of being a quoted company. If this had been private, the banks could well have pulled the plug and liquidated the inventory when they ended up over-leveraged after the post-COVID boom abated. Knowing that shareholders would back it meant it could continue to trade and is now doing well, as the private competitors are folding.
FY27 trading is above estimates so far, and overall expectations are in line with risk to the upside, according to Progressive:
Double digit percentage revenue growth FY27 year-to-date against tough prior year comparatives
FY27 trading to date in line with board expectations and on track to deliver FY27 consensus market expectations
It would seem the market hasn’t really believed the broker’s FY27 forecasts (given the boom-and-bust track record), but that could well change following this week’s update.
Hercules (HERC.L) - AGM Statement
After giving us a set of interims at 10 am on a Friday, where they didn’t break out the adjustments they applied to get to their numbers (from a statutory loss), they now give us an AGM statement without reference to current trading. The only comparison is to 2022:
Hercules has undergone significant growth since listing almost four and a half years ago. We have been agile, executing on exciting new opportunities for our Labour Supply division within the infrastructure industry, while expanding existing relationships with our blue-chip client base to increase contract values. We are a much bigger business then we were in 2022.
If they had spent the £17.7m on acquisitions since 2022 that they have and not been bigger, there would have been something very wrong. As it happens, their current market cap is almost exactly that level, suggesting they have added no value in that time. Perhaps something is very wrong after all?
Ingenta (ING.L) - AGM Trading Update
This is the key line:
As a result of this new business momentum, the Company is expecting to deliver increased revenues in 2026 compared with 2025. The management team is continuing with previously announced plans to invest in building our sales and marketing resources, and the additional costs being incurred by the Company will result in EBITDA for the current year being a little lower than in 2025, despite the increased revenues.
The Adj. EPS impact calculated by their broker, Cavendish, is a little disappointing:
On reading the note, this table was a bit confusing at first. The changes appear to be a downgrade. However, the comparison here is to the previous year, as no forecasts were in the market until this week. In fact, some higher costs had always been flagged. In contrast, for many of us, the introduction of forecasts makes the company more valuable than before.
There is also a natural conservatism here from management. Last year, the market also feared a decline in EPS, and in the end, it beat that figure, meaning the decline was relatively minor. Some of this was due to a delay in hiring staff, but this wasn’t the only factor.
We think the company are also very happy with the sales progress:
The Board is pleased to report that since the start of the financial year, the Company has secured a number of new customer contracts across the full range of Ingenta’s major products and services, with total contract values exceeding £2m over a three-year period.
There are many £100m market cap companies that would have chosen to RNS £2m of new contracts on the day they were signed. Here we have a £10m market cap company waiting for the AGM so as not to appear too excitable!
The bad news, and what appears to have spooked the market, is that some of the legacy is running off faster than expected:
Some of the larger customers in this group have requested to move to shorter term contracts, which reduces our visibility over future revenue streams, and introduces a greater risk level to 2027 revenues and beyond. As a result, we are prepared for the new business wins described above to be subject to an offsetting impact from reduction in revenues from these customers in 2027, although some degree of mitigation will be achieved in future years by reducing costs related to the servicing of these customers.
This appears to be the cause:
Looking beyond the current year, as previously noted, there is ongoing attrition of some longer-term customers currently on our legacy platforms who have been seeking to move to global whole-enterprise software platform providers.
This sounds like customers are undergoing ERP projects. In this case, the notorious tendency of such projects to go over budget and over time is to the advantage of Ingenta shareholders. Indeed, Ingenta have spoken in the past about customers giving notice that they want to leave, and then actually not leaving as they find the true cost of replacing their services. Complicating matters further is that Ingenta often provide multiple services to customers, and customer attrition can often only be one of many services, making it hard to quantify the actual “at-risk” revenues.
Oddly, the term AI appears 8 times in this RNS. Compared with just once in the first 30 pages of the recent annual report. For example:
Key initiatives include AI-driven metadata extraction, automated content summarisation, multilingual search, and advanced content discovery tools, all of which are designed to address the evolving needs of global publishers and content providers. The Company's best-of-breed approach leverages AI innovations from leading technology vendors, ensuring continuous improvement while maintaining the governance and reliability demanded by enterprise clients. Additionally, Ingenta is exploring premium AI services, such as enhanced search and trend-based content collections, as part of its subscription models, creating new monetisation opportunities. This disciplined and pragmatic approach positions Ingenta to capitalise on the transformative potential of AI while preserving the stability and trust that underpin its long-term success.
They wouldn’t be the first company to jump on a bandwagon. However, management has spoken about its initiatives in this space in public before this week, and while it is probably a stretch to say they can be an AI winner, they are providing real services to customers based on AI and applying real tools to streamline their internal processes. It’s too soon to say if these will have a noticeable impact on their sales efforts or bottom line, or whether these are simply necessary to keep them level with competitors in the AI race.
The market reaction to this week’s announcement has taken the share price back to the level of last year when two institutions were effectively forced sellers (Premier Miton’s Closed End Microcap Fund was wound up, and Kestrel Partners merged with another fund and changed strategy to focus on unlisted investments). Since then, we have confirmation that sales efforts are delivering material contract wins, and the cash balance has increased further despite a higher dividend payout. EV/EBIT is now around 3x even on the probably conservative forecasts, and the FCF conversion is typically around 80%. It doesn’t need much to go right (or even just not terribly) for the current share price reaction to look like a significant opportunity for those buying the dip.
Jadestone Energy (JSE.L) - First Well in Malaysia Campaign Flows at 3,000 bopd
Some good news at last for this beleaguered oiler.
PM323 PSC has been successfully drilled and brought online at ~3,000 bopd.
3kbopd at $14/bbl premium to Brent, drilled 20% below budget. Next, well spudding will be immediately. It looks like they will manage the third well within the original $50-60m capex budget, too:
The Group's 2026 capital expenditure guidance of US$50-80 million remains unchanged.
Assuming that 3k is oil and initial decline is minimal, that well alone adds around $60m additional revenue on an annualised basis to their 60% Working Interest. We’re not sure of the exact opex figures, but it suggests the payback on these wells is very rapid. We ca see why they are keen to extend the campaign.
Ramsdens (RFX.L) - Recommended Takeover
Congratulations to holders, and to management, who seem to have timed this perfectly with a bid from the same company that bought H&T.
They are willing to pay a decent multiple of what’s likely to be peak earnings, which is certainly punchy. No way management couldn’t recommend a deal of this multiple in our opinion.
The Ramsdens Board recognises that the future performance of Ramsdens remains subject to a range of external factors and risks. In particular, Ramsdens’ recent earnings profile is closely correlated with movements in the gold price. The recent strength in the gold market, culminating in an intraday peak in excess of $5,500 per ounce on 28 January 2026, has been a supportive factor and an important part of the positive trading momentum delivered by Ramsdens over the last 12 months. However, any reversal in this trend could adversely affect trading outcomes.
We wonder whether they have been discussing it for a while, and whether a falling gold price and a rising share price were needed to get it over the line. However, it may be that things came to a head recently and may explain the management being less conservative in the last update.
Another clue is possibly them being more positive about expansion into H&T’s heartland of London / South East in the last call - this is exactly what you’d say if you were negotiating a price with H&T.
Of the offer conditions, the CMA is most likely to cause problems. However, competition concerns are less likely than you might think, given the industry’s highly fragmented nature. Although the industry is diverse and H&T/RFX have different regional focuses, the local market will need to be analysed wherever they have stores close to each other (which will take time), and a few stores may need to be sold.
We hear that some shareholders are unhappy about the price. However, this seems unrealistic to expect more, especially since any further large drops in the gold price may well make the next update a profits warning rather than the ahead statements shareholders have got used to.
Vertu Motors (VTU.L) - AGM Trading Update
A rare upgrade for Vertu:
As a result of the above trading and portfolio changes, the Board anticipates that full year results for FY27 will be ahead of current market expectations.
Especially so early in the year. Although this smacks of setting expectations too low with a view to being able to get the market excited in the future:
The actual upgrades from brokers are very small. Shore 5.7p to 5.9p, Progressive 5.7p to 6.0p. So again, this makes us question why they are bothering with an ahead statement that turns out to be so minor?
They may well be signalling something to the market, or trying to up the price a bidder will have to pay. However, even on the updated numbers, this is looking expensive on a P/ Eof 12 compared to its usual multiples. It is a brave investors who hold purely for the possible takeover offer. In our opinion, the recent Constellation buy is more likely to be a bid blocker than a first (second?) move.
That’s it for this week. Have a great weekend!