Spotlight May 2024

and, as such, are written by the companies in question and reproduced in good faith.

Introduction

WWelcome to Spotlight, a bonus report which is distributed eight times a year alongside your digital copy of Shares.

It provides small caps with a platform to tell their stories in their own words.

The company profiles are written by the businesses themselves rather than by Shares journalists. They pay a fee to get their message across to both existing shareholders and prospective investors.

These profiles are paidfor promotions and are not

independent comment. As such, they cannot be considered unbiased. Equally, you are getting the inside track from the people who should best know the company and its strategy.

Some of the firms profiled in Spotlight will appear at our investor webinars and live events where you get to hear from management first hand.

Click here for details of upcoming events and how to register for free tickets.

Previous issues of Spotlight are available on our website.

Members of staff may hold shares in some of the securities written about in this publication. This could create a conflict of interest. Where such a conflict exists, it will be disclosed. This publication contains information and ideas which are of interest to investors. It does not provide advice in relation to investments or any other financial matters. Comments in this publication must not be relied upon by readers when they make their investment decisions. Investors who require advice should consult a properly qualified independent adviser. This publication, its staff and AJ Bell Media do not, under any circumstances, accept liability for losses suffered by readers as a result of their investment decisions.

What opportunities exist in the smallest part of the UK market?

By Ryan Lightfoot-Aminoff, Kepler Trust Intelligence

WHAT’S SMALLER THAN SMALL?

As the name suggests, micro caps are those companies that are at the lowest end of the market-cap spectrum.

The definition of what classifies a micro-cap rather than just a small cap varies, though consensus varies around companies whose market capitalisations are in the bottom 1% to 3% of the whole market.

The MSCI UK Micro Cap Index which focusses on the space, includes approximately 400 companies, of which the largest (as of 29/03/2024) is £430 million, with a mean average size of around £96 million.

However, there are several investment trusts that focus primarily on micro caps

which typically invest below this.

They invest from as low as circa £20 million market cap up to a maximum of £150 million at the time of initial investment, though often holdings are allowed to grow if the investment thesis holds.

As a result of this low capitalisation, the trusts focussing on the space need to be conscious of their own asset base.

The average (Net Asset Value) NAV of the trusts in the AIC UK Smaller Companies sector is £319 million, according to JPMorgan Cazenove as of 04/04/2024.

If a theoretically average trust were to put 3% of its portfolio into the average company in the MSCI UK Micro Cap Index, it would mean the trust would own circa 10% of the share capital of the company.

This would allow them to

exert considerable influence but would also have implications for the ability to sell such a large position without having to take a haircut.

At present, the trusts focussed purely on micro caps have assets of between £43 million and £65 million, meaning this is yet to be an issue of note, though it does present challenges for openended funds to invest in the space, given the potential for inflows to necessitate taking larger and positions, enhancing the attraction of investment trusts, in our opinion.

MICRO MANAGING

Micro caps have advantages from both fundamental and investing standpoints. One of the key fundamental advantages of small businesses is that they are nimble and flexible,

which allows them to adapt quickly to changing market conditions.

This can be a weakness of larger organisations which take a long time to make decisions.

Smaller companies often have quite flat structures meaning the time taken for a solution to be found for a problem may be shorter.

We think this is one of the key reasons why smaller companies can deliver higher growth than their larger peers over time.

This operational efficiency can have its drawbacks though.

With a slimmer organisational structure, the decisions of a small number of individuals can have an outsized impact on the company’s prospects.

Should these calls prove incorrect, it can cause trouble for the business.

This key main risk is still present in larger companies, although there is the potential for this to have a larger impact with smaller firms.

The smaller the company,

the more focussed their product or service offering tends to be, with micro-cap companies often having just one or two business lines.

This means that micro caps are more likely to operate in market niches which further supports their high growth potential.

However, this can create exposure to idiosyncratic factors such as losing a single contract, or from a big player entering the space and making for an uncompetitive environment.

From an investing point of view, several micro caps have unproven, pre-profit business models such as pharma companies working on new drugs which have

binary outcomes.

As such, this can add to the higher volatility often present in the micro-cap space.

Other market-based factors that increase the appeal of micro caps are that they are very underresearched, with little analyst coverage, and therefore weak price discovery.

As such, there are significant alphaopportunities for those who can identify the undiscovered gems in the universe.

CONCLUSION

Over the long term, micro caps have delivered on their ability to provide long-term growth opportunities.

However, acute weakness in the UK market stemming from negative sentiment and a weak economy has caused them to fall back in the past few years.

Despite this, there are reasons to believe they could recover, and investment trusts could provide an excellent vehicle for investors to take advantage of this, due to their fixed pool of capital negating the liquidity issues and allowing managers to take an active approach to the idiosyncratic space.

With several of these trusts available at very wide discounts, this could prove an extremely attractive entry point over the long term.

EnSilica sees exciting potential in the semiconductor space

It has now been two years since EnSilica (ENSI:AIM) listed on the AIM market of the London Stock Exchange, and management are pleased with the operational and financial progress delivered in that time, especially given the macroeconomic headwinds prevalent across the industry. As one of only a handful of tech IPOs in recent years, EnSilica notes it has been enjoying life as a listed company and is pleased to be performing in line with expectations.

Headquartered in Oxford, EnSilica is a designer and supplier of ASIC semiconductor chips which are essential components of electronic devices, from smartphones and TVs to  mineral mining detonation systems. They are a mainstay in electric vehicles and will continue to play a vital role in both the green transition and the development of satellite communications. They are essential to the progress of Industrial 4.0.

CHIP SHORTAGES

Since 2020, the global semiconductor market has experienced a well-publicised chip shortage. The shortage has highlighted the benefits of using custom silicon and led industrial powerhouses across Europe to seek

secure, local and simpler supply chains. The company is reaping the rewards of this shift in strategy and has signed contracts with a number of companies looking for innovation-led partners to provide or design high-quality chips for their products.

Notable recent new business wins include a supply project for a leading European industrial OEM worth more than $30 million, a contract with the European Space Agency to develop a new chip for the next generation of mass market satellite

broadband user terminals, and a $20 million deal across the pond with a major US electronics manufacturer. These contracts, amongst others, span over several years and further support a promising ARR (annual recurring revenue) outlook. EnSilica’s specialism is application-specific integrated circuits (ASICs) popular with high-growth markets including automotive and healthcare, as well as AI programmers. These industries tend to be heavy consumers of ASICs given their ability to support data encryption, signal processing and sensor interfacing, and the custom chips are also valued due to their reliability. The fast growth of the global ASICs chip market, currently valued at around $1.7 billion, is showing no signs of abating, and market commentators expect it to hit $25 billion by the end of 2030.

EnSilica’s core focus has shifted from consultancy to the design and supply of fabless ASICs. This move integrates EnSilica further into the electronics value chain, and results in the design cost being shared with the client, as well as a long-term recurring revenue stream for EnSilica as chips enter production.

The benefits of EnSilica’s IP have been recognised internationally, and its current sales pipeline of opportunities and potential contracts stands at around $423 million. This is a strong endorsement of the quality of EnSilica’s business output and its growing reputation in the chip sector. EnSilica not only licences its IP to other semiconductor companies but also leverages it in the development of custom ASICs which it supplies to clients. Having such IP is a key differentiator for EnSilica’s ASIC business given the markets it addresses, as well as for bringing in high margin IP licensing revenue.

AVOIDING CONTRACTION

Unlike many digital ASICs companies, the company has avoided contraction, a success which it credits to its unique IP, the strength and expertise

of its global team, and its clear growth strategy. As global digitalisation prevails, EnSilica’s IP suite covering cryptography, radar and communication systems has continued to grow. It recently achieved a new milestone by securing a first customer licence with a leading semiconductor supplier through release of its Post-Quantum Cryptography accelerators IP and are fully focused on further expanding its diferentiated IP portfolio.

EnSilica has developed know-how and IP making it a leading expert in a number of high growth fields of chipmaking, the company is now trusted by blue-chip companies to supply their key components. EnSilica’s full potential has not yet been unlocked. As demonstrated by the recent Nvidia boom, edge AI and enhancements in cybersecurity requirements are driving disruption across all EnSilica’s focus sectors driving further growth.

The company recently unveiled a multi-core AI edge processor for applications such as consumer audio, and in the past developed a medical AI chip for wearable sensors, but given its ability to significantly enhance efficiencies, the company anticipates AI will

become an ever-present influence in EnSilica’s future operations.

EXCITING POTENTIAL

Chipmaking, like the sectors EnSilica services, is fastevolving, and management sees this as incredibly exciting from both a company and investor perspective. Despite recent supply chain disruption and raw material shortages, the semiconductor chip industry is projected to be worth a staggering $1 trillion by 2030. EnSilica sees itself as ideally positioned to capitalise on this astronomical growth as it explores opportunities to further broaden a global IP footprint, increase exposure to AI, and, ultimately, consolidate a reputation as a best-in-class chipmaker and supplier. The company is very excited about the future of the industry and, of course, the future of EnSilica.

Biotech firm N4 Pharma is delivering cutting edge solutions to the UK

N4 Pharma (N4P:AIM) is a speciality biotech commercialising two novel delivery systems, primarily for nucleic acids in the fields of oncology, gene therapy and vaccines.

The first is a patented mesoporous silica nanoparticle with a unique spiky structure that traps the payload within its spikes. These spikes also protect the payload once inside the body and carry it to the cell before it is then effectively taken up into the cell where, once inside, the spikes dissolve and the payload is released.

The company has recently acquired a majority stake in a company called Nanogenics giving it a second delivery system this time using a combination of lipids and a peptide.

The lipid element encapsulates the payload and binding it with a peptide allows the targeting of specific cells.

N4 Pharma’s aim is to become a leading supplier of delivery systems which it intends to license to major pharma and biotech players who are developing their own products and to develop its own range of

products itself using its novel delivery systems.

NEW PRODUCT DEVELOPMENT

The first product it is developing, via Nanogenics, uses its lipid/peptide system to deliver a siRNA sequence targeting the MRTF-B gene to reduce scarring for Glaucoma patients who have undergone corrective surgery to reduce ocular pressure.

The product has undertaken both in vitro and in vivo studies demonstrating equivalence to mitomycin C, a chemotherapy agent which is used off label for this purpose despite its toxic side effects.

The company is now investigating orphan drug designation for this product and looking to get preIND approval for its safety, toxicology, and phase 1 clinical studies.

For its silica system the company has undertaken a range of different proof of concept studies for DNA, mRNA and latterly siRNA to showcase the versatility of this system. The current focus of this work is two areas, firstly multiple loading of siRNA and secondly oral delivery.

Multiple loading of siRNA opens the possibility of silencing multiple pathways in a single cell. This is important for oncology treatments as often a single siRNA can be used to target a tumour, but that tumour can escape and

build resistance through a second pathway. By attacking both pathways this can reduce that level of escape and lead to a more effective treatment.

Oral delivery of nucleic acids has proven difficult but N4 pharma has now shown that the protective nature of its silica system can achieve this.

It has shown that DNA loaded onto a pegylated version of its silica system and placed in an enteric coated capsule can be delivered to the intestine and if taken at regular intervals with a 21day booster a sustained level of protein expression and antibody production can be achieved.

Both these elements are in high demand across the biotech industry and N4 Pharma is actively presenting these results to potential collaboration partners.

HIGH GROWTH COMPANY TO WATCH

N4 Pharma has immense potential as a delivery system company yet currently has a low market cap as it is yet to strike a commercial deal. It is now focused on that as its next goal and has recently entered into a significant collaborative agreement with

US based SRI International which brings that possibility much closer.

SRI operates across a wide range of technical and scientific disciplines to discover and develop ground-breaking products and technologies, with a view to bringing new innovations and ideas to the marketplace.

Its SRI Biosciences division integrates basic biomedical research with drug/ diagnostics discovery, along with preclinical and clinical development. The team has advanced more than 200 drugs to clinical trials, of which 25 have commercialised.

The collaboration agreement with N4 Pharma will combine N4’s silica system with SRI’s Molecular Guidance System. The SRI system uses unique peptide delivery agents which are then attached to N4’s silica nanoparticle before loading the nucleic acid.

This allows the system to target a specific cell type to internalise its selected payload. Significantly, when an MGS binds to its identified target, the event triggers rapid cellular uptake of the attached payload.

The ability to selectively target specific (i.e., diseased)

cells with therapeutic payload while remaining broadly inert in plasma is a key ambition for next generation medication and should generate significant interest across the wider pharmaceutical industry.

SRI already collaborates with a broad range of partners, from small and virtual biotechnology companies to top ten pharmaceutical companies. The combined technology from this new agreement presents unparalleled access to a wide range of commercial partners for N4 Pharma.

In summary N4 Pharma is an innovative UK biotech developing innovative solutions in a highly attractive market and if it gets one of its delivery systems partnered with a major player will become a high growth stock to watch.

Blended seaweed additives in animal feed key to Ocean Harvest Technology’s success

Ocean Harvest Technology (OHT:AIM) is pioneering the use of blended seaweed additives for use in animal feed to improve performance and sustainability in livestock production and companion animals (pets and horses). The company has proven its technology, generated commercial traction with a global customer base and has multiple channels where it is targeting growth.

Ocean Harvest Technology has demonstrated that its products, blended from red, green, and brown seaweeds, have a pre-biotic effect in animals which it has shown can lead to higher growth rates, lower mortality, and improved feed efficiency in multiple species of animals.

The company has been granted a patent which protects these performance claims for a wide range of seaweed blends and for use in a wide range of animals. The granting of this patent demonstrates that Ocean Harvest Technology is the innovator in this area and has an important first mover advantage that it can protect.

The company sources its seaweed from several regions globally and processes them at its accredited facility in Vietnam. There it conducts quality controls, processes the raw seaweed, and then

combines the different seaweeds into products specifically formulated for each of the major animal species such as poultry, swine, cattle, and aqua.

The company’s product development has been based on years of research and development. This has demonstrated how its products generate improvements in an animal’s digestive system and has also shown that this leads to health, profitability, and sustainability benefits through the completion of dozens of animal trials. This research

and development function remains highly active and is continuing to demonstrate additional applications for its OceanFeed products.

WHY INVEST IN OCEAN HARVEST TECHNOLOGY?

DEMONSTRATED PRODUCT EFFICACY IN A LARGE GLOBAL

MARKET

Ocean Harvest Technology sells its OceanFeed blended seaweed additive to customers globally who use the product in a range of animal species.  The large-scale use of

antibiotics in livestock is increasing human resistance to antibiotics, costing many lives around the world.

OceanFeed is providing a 100% natural alternative for those farmers that want or need an ingredient to support higher growth and lower mortality in antibioticfree diets.

For example, it sells OceanFeed for inclusion in piglet diets to help support the animal in its early life, when it is most vulnerable, without having to rely on antibiotics. The multiple trials conducted by the company, its customers, and research institutions have demonstrated that OceanFeed can lead to materially lower mortality rates which improves both the returns to the farmer and the sustainability of rearing the pig.

The company estimates that its swine product is included in the diets of approximately 25% of the piglets in Canada and it is also growing its presence in the US, Asia, and the EU.

Ocean Harvest Technology’s OceanFeed additive is also included in cattle diets to promote increased milk production volumes and improved milk quality. Customers are using the product in layer hen diets to increase egg production and eggshell strength. The

product is also included in aqua diets to support higher growth and better disease resilience through improved gut health.

These are just a handful of examples of the product’s use cases that show how the improvement in the animal’s gut health can lead to improvements in profitability for Ocean Harvest Technology‘s customers and an improvement in the sustainability of their animal production.

The global animal feed additive market is worth over $40 billion per annum, providing Ocean Harvest Technology with significant growth opportunities as customers seek out new products which are natural and help to deliver improvements in performance and sustainability in their animal production systems.

GLOBAL LEADER IN SOURCING SEAWEED

Ocean Harvest Technology sources wild blooming seaweed from southeast Asia, Africa and the north Atlantic. These seaweed blooms are often invasive and therefore harvesting the seaweed restores the biodiversity in the waterways from where they are collected. If left unharvested, they tend to decompose at the end of their short lifecycle which then releases harmful carbon,

nitrates, and phosphates into the local environment.

Ocean Harvest Technology has established its supply chain in conjunction with communities and suppliers over many years in various regions where there is poor infrastructure and vast geographic collection areas. As such, the company has a leading position in sourcing these seaweeds that would be costly and time consuming for others to replicate.

LOW CARBON FOOTPRINT

Harvesting seaweed uses no arable land, fresh water, or fertilisers and hence it has a much lower carbon footprint than other ingredients and additives used in animal feed.  Furthermore, due to the carbon capture benefits of the seaweed and the reduced feed consumption benefits in animals using OceanFeed as an additive, Ocean Harvest Technology has calculated that every tonne of OceanFeed used leads to a ten-tonne reduction in CO2 equivalent emissions from the animal feed chain. This is a growing priority for Ocean Harvest Technology’s customers and hence provides real commercial opportunity.

REAL SOCIAL BENEFITS

Ocean Harvest Technology also points to the social benefits generated for those in its supply chain in remote

locations across southeast Asia and eastern Africa. These communities benefit from tens of thousands of euros in additional income per community each year, much of it to women who previously had little economic activity.

WHAT NEXT FOR OCEAN HARVEST TECHNOLOGY?

Ocean Harvest Technology has robust growth opportunities as it onboards new customers in this large global market. Its customers are looking for natural products which can help them deliver improved animal performance, improve the sustainability of their production systems, and address their profitability issues.

The company’s OceanFeed blended seaweed product is a unique solution for these customers as it is 100% natural and has a pre-biotic effect with demonstrated results which have been patented.

The products also have a lower carbon footprint

than most other animal feed ingredients and improves the sustainability of production animals when included in their diets.

The company continues to invest in its research and development to demonstrate

RESULTS

Ocean Harvest Technology listed on (the alternative investment market) AIM in April 2023 and recently reported a 28% increase in sales of its core OceanFeed product and grew its gross margin to 38%.

The research forecasts in the market have Ocean Harvest Technology reaching its (earnings before interest taxation depreciation amortisation) EBITDA breakeven phase next year.

additional benefits of using its OceanFeed products. The company will continue to report the results of these trials and then leverage them to further grow its addressable markets.

Ocean Harvest Technology is continuing investment in its three key focus areas of sales and marketing, supply chain development, and R&D to drive its sales growth and further protect its position as the pioneer who is leading the commercialisation of this exciting seaweed-based product in global animal production.

US-based PPHC now boasts half of Fortune 100 as clients for Public Affairs and Lobbying

Public Policy Holding Company (PPHC:AIM), through its nine wholly owned operating companies, operates a portfolio of independent firms that offer public affairs, crisis management, lobbying and advocacy services on behalf of corporate, trade association and non-profit client organisations.

Since its inception in 2014, the group has acquired, integrated, or organically created nine businesses. With circa 375 employees located throughout the US, Public Policy Holding Company now advises over 1,200 clients, including 44 of the Fortune 100, including Alphabet (GOOG:NASDAQ), Boeing (BA:NYSE), Ford (FORD:NASDAQ), Meta (META:NASDAQ) and Cigna Healthcare (CI:NASDAQ). Servicing clients across all industries, the group’s largest sectors are technology, healthcare, pharmaceuticals, energy, and financial services.

Public Policy Holding Company benefits from this broad client base, with the largest client representing only 1.6% of total revenue and boasts extremely high client retention rates which are typically above 85%.

In 2023, the group

maintained its position – for the fifth year in a row – as the largest provider of federal lobbying services in the US, according to the Bloomberg Government Ninth Annual Top-Performing Lobbying Firms Report

GROWING INDUSTRY

The role of government impacts everyone and, specifically for companies, government policy and spending commitments create both risk and opportunity.

The role of Public Policy Holding Company is quite simple – to ensure that clients communicate effectively with the political and regulatory authorities so that they have and retain all the necessary

information at their disposal to develop policy and legislate in the best interests of their citizens.

The increasing importance of government is present in every geography.

In the US, for example, the federal government’s spending has increased from $1.8 trillion in 2000 to $6.3 trillion in 2023.

Alongside this, total regulated federal lobbying spend in the US increased from $1.6 billion to $4.1 billion over the same period.

The US is the world’s largest market for lobbying, but it is not a service exclusive to the area and is of vital importance in many other regions, including the EU (over $2

billion estimated) and the UK ($750 million estimated).

In today’s world of crossborder business operations, multinational companies seek to ensure their voices are heard in a variety of jurisdictions, making international territories more relevant and important from a lobbying and public affairs perspective.

With a strong standing in the highly regulated US market, Public Policy Holding Company is well positioned to benefit as other geographies, including the UK and across the EU, look increasingly likely to regulate lobbying and related activities in the future.

CLEAR STRATEGY

Public Policy Holding Company’s strategy is focused on organic and M&A (mergers & acquisitions) based growth. Organic growth is delivered through sustained investments in its brands and in the holding company platform. One example of this is the recent launch of Concordant Advisory to support the broader strategic communications needs of the group’s clients.

Public Policy Holding Company has an excellent history of value accretive M&A and has a strong and active pipeline, focused on expanding into new geographies (both into key US states and international capitals, such as London and Brussels) and adding new capabilities that address today’s issues (health, sustainability, AI).

The criteria for M&A opportunities comprises best in class ethical and compliance standards; market share and diversification benefits; premium financial profiles and maintenance of group-

wide margin targets; long-term revenue synergy potential and opportunities; accretive to (earnings per share) EPS; and, for UK/EMEA expansion, sufficient level of scale to serve as a hub for international growth.

SHAREHOLDER RETURNS

Public Policy Holding Company has typically delivered a superior growth profile and excellent profitability throughout political and economic cycles and achieves strong free cash flow to support dividends and continued M&A.

Revenues have grown from $21 million in 2016 to $135 million in 2023, representing a total CAGR of 30%. In its most recent results, the group delivered record revenue and underlying profit of $135 million and $35.1 million, respectively. The company has a history of greater than 60% payout ratio of underlying net profit in dividend, with semi-annual payments.

The group reports revenues in three distinct segments, each with its own attractive characteristics: government relations and policy advocacy are resilient, profitable, and highly retained, diversified services (including research, policy monitoring services) has high growth potential and is

recurring in nature and public affairs provides stable growth and benefits from crossselling.

GROWTH PROSPECTS

Supported by a growing market and a holding company model designed to support organic and inorganic growth, the company’s medium-term guidance is to deliver organic revenue growth of 5 to 10% per year, incremental growth from future M&A and an (earnings before interest taxation depreciation amortisation) EBITDA margin of between 25% and 30%.

The demand for the company‘s services is enduring and not reliant on election cycles. With a high quality of earnings driven by strong client retention and repeatable revenues, the group is confident of delivering further growth in the future.

The provider of SaaS compliance platforms Skillcast is starting to see accelerated growth

Skillcast (SKL:AIM) has built over 400 compliance e-learning courses and compliance management products that sit on its own learning management platform and are currently sold to over 1,200 companies.

Skillcast was founded in 2001 by three co-founders that are still executive directors today and retain significant equity interests.

The company floated on AIM in December 2021 and raised £3.5 million to invest in commercial, technology and infrastructure and increase market awareness.

The company has 120 employees, with 80 in its London-based head office and the balance in its Maltese service office.

The company designs and builds both the content and technology for the hundreds of e-learning courses it offers that cover topics including (anti-money laundering) AML, bribery and corruption, (diversity, equality and inclusion) DEI, (environmental, social and governance) ESG, GDPR, health and safety, modern slavery, risk management and (senior managers & certification regime) SMCR for the financial services industry.

Skillcast delivers the courses

on its own flexible learning management system (LMS) platform for clients to deliver and track compliance e-learning programs that allow full corporate branding, integration to HR staff records, and dashboard reporting.

Many customers that start with digitising their compliance training on Skillcast‘s compliance platform often go on to deploy other features, such as its policy hub for delivering corporate policies and gathering employee attestations, anonymous surveys for collecting employee feedback, staff declarations for employee disclosures, and compliance registers for documenting various compliance-related activities such as gifts & hospitality.

With this, Skillcast helps clients save considerable time and money by consolidating all their compliance management onto one platform and helps to reduce the risk of compliance breaches.

Skillcast has over 1,200

customers that typically contract for a minimum 12-month subscription, invoiced up front on 30-day payment terms. Smaller clients with less than 50 employees subscribe through a recently launched self-serve e-commerce offer.

Skillcast has built a book of these software-as-a-service (SaaS) contracts whose annual recurring revenue (ARR) stood at £10 million in March 2024.

With a client churn rate of 7% and a net retention rate of 105%, the company has high revenue visibility and can build on the existing book with new clients that it acquires through its marketing and sales funnel.

It grew its (annual recurring revenue) ARR book by 37% in 2023 and reported a 36% yearon-year-on-year increase in March 2024.

In 2024, Skillcast received the Feefo Platinum Service Award for the fourth consecutive year based on a 4.9/5.0 rating in client reviews.

One of their financial services clients remarked: ‘Skillcast’s customer service team is one of the best I have worked with during my career. There is always a way to make the system do what we need; even if they‘ve not done something before, they reconfigure things and make it work.’

Clients can alternatively opt for a bespoke compliance learning solution from its professional services team which in 2023 represented 24% of total revenues at £2.8 million.

This proportion has been steadily decreasing over the last few years as Skillcast focuses on growing its SAAS business.

INVESTMENT OPPORTUNITY

The market for corporate compliance is growing fast despite the stagnant economy as firms struggle to comply with a myriad of laws and regulations covering money laundering, sanctions, bribery, data protection, equality and health and safety.

Kemi Badenoch, the Business Secretary, pointed out in a recent speech that compliance functions now account for about 10 per cent of the average workforce in UK financial services.

A study by the Centre for Policy Studies recently found that the cost of regulation on UK businesses has grown by £6 billion per year since 2010 alone.

The competitive landscape is heavily fragmented. Some of the bigger content providers in the space include Learning Pool, LTG, Access Group and Marlowe.

Skillcast differentiates itself by offering only compliance e-learning and management, a customisable platform, outstanding customer service and a transparent and value focussed pricing model.

Skillcast’s in-house technical and content teams continue to innovate to increase staff compliance awareness and reduce the burden on compliance teams. For instance, it plans to launch artificial intelligence powered

Skillcast key financials

£0.7m IPO costs in 2021

services this year to enable users to ask questions and find compliance training.

As a trusted supplier, it can provide ring-fenced AI solutions that rely solely on curated content, eliminating the risk of misinformation common with many AI products.

The company had a net cash of £7.2 million in December 2023 and pays a modest dividend. It does not capitalise any development or intellectual property.

WELL-PLACED TO RETURN TO PROFITABILITY

The

reduction in overhead growth rate in 2023 indicates the company is moving towards a return to profitability after its post-IPO investment phase.

It operates a proven, innovative, scalable, low churn SaaS model in a growing, resilient market.