It has been a while since I last penned anything here on THRU, which came about following a catch up call with CEO Colin Evans.
Despite the small cap space remaining decidedly unfriendly for investors at present, THRU - where I hold and have recently increased my holding - continues to look extremely interesting for the medium to longer term.
Of course, at the outset I’ll acknowledge that THRU has never turned a profit and has chomped its way through cash in its endeavour to make a serious impact across its chosen market.
This sees the company developing and delivering its own, and what is considered world leading people screening solution.
Having seemingly made positive progress prior to the pandemic striking, it was not surprisingly de-railed throughout 2020 which saw revenues reducing.
Having previously offloaded its video related business in 2017, THRU subsequently became purely focused on its people screening system and revenues increased impressively in subsequent years.
This saw positive momentum building from a relatively low base of the 2017 recorded £2m, rising to £3m, £5.9m and £8m in subsequent years.
That trend was halted however as a direct result of Covid induced measures which saw last year’s 2021 number fall back to £6.7m.
That however looks to be more of a blip, as ironically the climbing out of covid and the pandemic has really highlighted the case of THRU’s product.
Indeed, the news thus far this year from the company has been extremely positive which bodes well for the future and has led Progressive in its last note to forecast a break even result at the EBITDA level for the year now in progress, which would be a first in the company’s history.
Admittedly, the market cap does look up with events at £37m given its financial achievement and performance to date and for that reason it continues to be more of a speculative proposition.
As a result it clearly won’t appeal to many investors which is understandable, although for those that like the appeal of something novel with serious growth prospects, then THRU may just be worth taking a closer look at.
Importantly, it has an increasing customer base across differing markets with loss prevention now showing serious traction to complement the more established border and customs market.
In the case of loss prevention the THRU system screens employees in large distribution centres at distance without the need for patting etc.
According to research such companies lose millions each year, where anything from tobacco to razor blades are smuggled out of the centres and where historically, it has been difficult to detect.
With Morrison’s supermarket chain having previously signed up for the THRU system, it was announced earlier this year that it had been joined by Tesco which represents a key win for THRU.
Tesco which is the UK’s leading retailer opted to deploy the system at scale having been highly impressed by the offering, which surely suggests that there is potentially a huge market for THRU to target.
Although this is a relatively new space for the company, it has also secured its first European customer in the form of Zalando which based in Germany serves the shoe and beauty market where it employs some 17k people across its operations.
THRU has also secured its first US win in this area where it has been adopted by RNDC which is one of that country’s largest distributors of alcohol products.
Additionally, some of THRU’s earlies customers such as Next and Boots have upgraded existing systems, whilst further orders have been achieved from CEVA logistics and ASOS who only placed their first orders last year.
Despite the current economic climate the retail migration away from the High St is clearly here to stay, which means continued investment in large distribution centres, that in turn should play to the strengths of the THRU product.
Whilst the UK is the home market, THRU is already serving other territories and that trend looks destined to gather pace, particularly as the USP is so positive, including a relatively quick pay- back time.
It isn’t all about the profit protection though, as THRU is already very well established in the US serving borders and customs/homeland security.
And according to the Progressive note, CBP publicly announced procurement plans to acquire significant numbers of additional ‘passive body scanners’ during 2022 where they believe Thruvision is well placed to pitch in the upcoming tender process, with potentially very significant volumes attached.
The other potentially massive opportunity concerns commercial aviation, where with flights thankfully now resuming on scale could provide for a significant opening for adoption of its system, providing it achieves approval from what is proving a lengthy and protracted process.
There is no reason why that shouldn’t happen though, given that it is already active in Los Angeles, Seattle and La Guardia airports where its systems screen employees.
It is also going through the same clearance process in Israel which is a relatively new target market and that appears to be progressing well according to the pre-close update to the market in April.
In that update the company closed with the following comment,
“Our markets have now substantially recovered from the negative effects of COVID, and we believe we are now firmly back on a growth trajectory.
The pandemic has strengthened the need for contactless people security screening and this is most evident in Profit Protection where increasing traction in the US and Europe means we are very positive about the Group's prospects.
With operational successes and front-line demand, we are also increasingly confident about significant growth with CBP. As a result of this positive momentum in our two main markets, we are confident of good growth in FY23 and beyond”.
The full year results are actually late and in the Progressive note it was mentioned that they were likely to be released in July.
There has been a departure of the CFO which was announced some months back, although an Interim appointment was made prior to the new CFO taking up the position in October, so one would have thought the numbers should be ready for delivery.
October is the latest THRU has for delivering the 2022 numbers, so it seems reasonable to assume that they could come any day now.
I can’t see them waiting until the new CFO is fully installed as there clearly would be little time for her to oversee the numbers concerning the last financial year.
So, I do wonder what the hold up here is, as everything appears to be on track as per the April update which even saw a decent Director buy on the back of it. The purchase was made by a non- exec with 67,000 shares purchased at 32p against the current mid -price of 25.5p.
Current forecasts for the forthcoming (2022)numbers are for revenue of £8.4m with an EBITDA loss of £1.3m moving to £10.1m for the year now in progress along with that all important breakeven EBITDA expectance.
More should be revealed when the results do finally emerge, but the opportunity does look exciting given recent progress and the clear opportunity for its systems offering.
As an aside, It is also conceivable that THRU could well make for an attractive acquisition for a larger operator in the security space, which would no doubt come at a decent premium to the current price.
The balance sheet here remains comfortable with net cash, where as of March of this year the cash position stood at £5.5m.
There should therefore be no need to raise new money, particularly if the 2023 numbers are achieved which would also provide a springboard onto a sustainable and profitable path.