Risks tilting to the upside

tinyBuild is the strongest- performing UK video game stock of 2026, up by over 80% since the beginning of the year. We like the diversified portfolio of own-IP which offers a strong risk-reward combination. After three years of neglect, the video game sector is starting to attract investors’ interest again. We forecast solid H1 results ($18.7m revenue and $3m Adj. EBITDA) and a strong second half, based simply on titles for which the release date has already been announced (e.g. Restory, Graveyard Keeper 2, Probably Stolen). If future releases continue to track positively, there is also some potential for upside surprise over coming months.

Risks tilting to the upside

The FY24 results, released today, are in line with the figures provided in the trading update in November 2024. They reflect a strong performance and are Idox’s sixth successive set of annual results with growth in revenue, recurring revenue and adjusted EBITDA. The tone of the management statement and outlook is confident. We have marginally revised our forecasts for FY25 and FY26 and introduced estimates for FY27. With LPPP and geospatial having been key drivers in FY24, we look forward to FY25 in anticipation of further evolving opportunities in geospatial.

Geospatial, the growth driver

Nasdaq Stock Market, the world’s second largest stock exchange, is the unnamed ‘major Exchange Cloud customer’ first announced by Beeks on 6 February 2024. The service is now live. The contract underpins FY25 estimates and has scope to grow further. For us, referenceability at Nasdaq will help to convert the ‘substantial pipeline of opportunities’ that CEO Gordon McArthur identifies, with Beeks in ‘advanced discussions with other major Exchanges across the globe’. Beeks was the top-performing LSE tech company (n=75) in cal2024 with a TSR +182% 2024YTD vs the sector +10.5%. In our view, Beeks is gaining from secular tailwinds (cloud adoption, compliance, data sovereignty, cybersecurity, sustainability, analytics, payment modernisation, AI in risk management etc), which have enabled it to carve out a moat as market leader in cloud infrastructure for financial markets and payments. The FY1 valuation (EV/EBITDA 11.5x) does little to reflect the proven execution on global TAM and the opportunity for more. Investors undoubtedly buy Beeks for long-term secular growth.

Nasdaq contract: Beeks has blown the doors off

Today’s FY trading update features a beat on net cash (£8.2m vs our £7.4m estimate), profitability ‘in line’, but revenue weaker than expected (£62.7m, vs £70.6m last year). The revenue miss is attributed to ongoing challenges in the ceramics market. Balancing this, Xaar has a ‘significant number of immediate opportunities’ in the pipeline. Xaar is navigating three transitions: (i) product, which sees it replace printhead revenue; (ii) deploying a lower-cost model (Hubble), similarly progressing well; and (iii) geographic, with increasing revenue from the US and Asia. The key headwinds remain the ceramics market and choppy geo-politics, both making for an uncertain buying environment. Reflecting this, Xaar will issue FY25 guidance at forthcoming results (25 March), but we amend forecasts today. As the first OEM products incorporating Xaar printheads ship, the market will ‘unclog’ and with it Xaar gains greater referenceability, in turn reinvigorating investor confidence. Shares are trading on a pedestrian 0.8x EV/Sales, a sharp discount to wider tech (2.9x), reminding us of the maxim ‘buy when others are fearful’.

A curate’s egg with immediate opportunities in the pipeline

Idox has announced that it has won a £2.4m contract with North Yorkshire Council to bring together its eight planning and building control systems into a single cloud-based system. This exciting news follows the government’s announcements regarding the restructuring of local authorities and amalgamation of services across England. There is clearly going to be significant change and development in this area, with Idox excellently placed to be at the forefront.

Exciting contract win

Beeks announces that NED William Meldrum is appointed Chair, and the current Chair, Mark Cubitt, becomes a NED. This follows Mr Cubitt’s appointment as Executive Chair of IQE plc, where he is busy with a strategic review. On 29 October, IQE CEO Americo Lemos departed and Mr Cubitt, who joined the IQE Board earlier that month, was appointed Executive Chair, taking over from Phil Smith, who stepped down as Chair but remains as a NED. By contrast, Beeks is a model of stability, unbridled growth and opportunity. Beeks is currently the top-performing LSE tech company (n=74) with a TSR +203.5% 2024YTD vs the sector +8.1%. In our view, Beeks is gaining from secular tailwinds (cloud adoption, compliance, data sovereignty, cybersecurity, sustainability, analytics, payment modernisation, AI in risk management etc), which have enabled it to carve out a moat as market leader in cloud infrastructure for financial markets and payments. The FY1 valuation (EV/EBITDA 13x) does little to reflect the proven execution on global TAM and the opportunity for more. Investors buy Beeks for long-term secular growth.

Board changes: ‘Do You Hear What I Hear?’

Idox has provided a trading update for the year ended 31 October 2024. Management expects to report full-year results in line with market expectations. Idox has delivered strong (c.20%) revenue growth and good adjusted EBITDA growth in the year, alongside healthy cash generation. Order growth of 9% is encouraging as it demonstrates both the underlying quality and strength, and the positive outlook. We look forward to the FY24 results to see how FY25 has started and how the growth story will continue.

Strong and resilient growth

With the departure of long-standing CFO Ian Tichias to pursue other opportunities, Xaar has appointed Paul James as Interim CFO and Executive Director. Mr James has extensive experience: Group CFO of Biffa (Sept 2023-Oct 2024), Group CFO of Genuit Group plc (Mar 2018-Sept 2023), following senior financial roles with Dixons Carphone, Inchcape, British American Tobacco and Ernst and Young. We are reminded of the Boy Scouts principle to ‘try to leave this world a little better than you found it’. Mr Tichias joined Xaar as CFO and Board Director in March 2020, and has seen the company through a period of significant change. Latest results point to improved progress, with revenue from new printhead products +24% Y/Y and a 26% CAGR for new product revenue since 2019. We wish Ian well.

Board changes

ZOO’s H1 25 performance reflects the steady return of orders following the end to the Hollywood strikes by actors and writers. However, monthly budget allocations from ZOO’s customers remain at depressed levels due to ongoing strategic reviews at the major studios. Content strategies are evolving, and business models are being realigned to generate more profit and cash. This has resulted in unpredictable workflow patterns, but visibility is expected to improve throughout calendar year 2025, particularly given ZOO’s diversified client base as it continues to win business from significant new clients. We therefore introduce forecasts for FY26, which factor in a modest recovery to revenue but with ZOO returning to an operating profit, and good cash generation. Although current trading is in line with expectations, management notes visibility remains limited for Q4 orders and we therefore trim our FY25 estimates as a precautionary measure.

H1 25 results highlight steady return of orders

Thruvision’s H1 25 results are in line with the trading update on 14 October. The strategy under the recently restructured board remains unchanged as Thruvision establishes itself as the industry-leading provider of walk-through screening solutions, reaping the benefits of a broad customer base in international markets. There is good momentum in demand from new and existing clients, and strong progress in expanding its reach as it looks to scale the business through a broader set of sales partnerships, such as with Sensormatic. With a healthy order pipeline and potential larger orders that would significantly extend the order backlog, we look forward to further updates as the year progresses.

Strong progress in Retail Distribution in H1

Thruvision has issued an update on current trading for the first half of the year to 30 September and announced a number of changes to the board, including CEO Colin Evans leaving the company (with chairman Tom Black taking the reins until a successor is appointed). There is good momentum in demand from new and existing clients, and strong progress in expanding its reach through a broader set of sales partnerships, such as Sensormatic. Retail Distribution has performed well, accounting for 85% of revenue in H1, double the prior-year period. However, the lumpy nature of customs meant that there were no material orders in H1, compared to a single order for £1.9m in the prior year from an Asian customs agency. Given the timing of some of the larger orders, we have trimmed estimates for the current year. However, our revised estimates still factor in over 15% growth in revenue compared to FY24. Thruvision is reaping the benefits of a broad customer base in international markets, with a healthy order pipeline and potential larger orders that would significantly extend the order backlog. We look forward to further detail at the interims on 24 October.

H1 trading update and board changes

ZOO has published a white paper on AI in media localisation, highlighting its use as an assistive technology, where it is being used successfully and where challenges remain given the complexities of localising premium entertainment content. ZOO has been at the forefront of AI and has actively pursued R&D in technologies that will enhance and support traditional processes rather than replacing or eliminating the need for skilled human talent. We therefore believe that the AI revolution is an opportunity for ZOO to expand its technical capabilities and solidify its position. ZOO’s unique end-to-end, technology-centred approach is finding favour with the major streaming providers, delivering the levels of reliability, quality, security and scalability required to service the high levels of demand. We believe that the company is well placed to deliver long-term profitable growth through increased market share as the industry recovers from the recent disruption.