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SMALL CAP IDEA: Thruvision suffers US CPB budgetary challenges


Thruvision Group’s share price was thrown under the bus back in October after the small-cap, AIM-quoted security technology group posted its interim trading update.

Despite displaying decent momentum on the revenue front with 27% in top-line growth year on year, there was some disappointing news emerging from the US.

Anticipated orders from key client the US Customs and Border Protection (CBP) didn’t get awarded in the reporting period due to emerging budgetary challenges at the federal level.

‘Without the CBP order there will be a material impact on the Group’s performance in the second half and for the current financial year as a whole,’ the group conceded.

It was a genuine blow, but one completely out of Thruvision’s control; though that came as little consolation to tetchy shareholders.

Thruvision Group' s share price was thrown under the bus back in October after the small-cap, AIM-quoted security technology group posted its interim trading update

Thruvision Group’ s share price was thrown under the bus back in October after the small-cap, AIM-quoted security technology group posted its interim trading update

Shares have continued to underperform, but has the market unfairly discounted what is an otherwise promising venture?

Backing up a bit, who and what exactly is Thruvision?

Thruvision is a technology group spun out of the Government’s historic Rutherford Appleton Laboratory (where the Diamond Light Source synchrotron is housed), in 2002.

Such was the sophistication of Thruvision’s heat-detecting tech that it was initially designed to be placed on satellites to seek out holes in the ozone layer.

Today that technology is deployed in two main fields: Customs and distribution centres; the former to detect illegal items – including deadly weapons – and the latter to detect employee theft.

According to CEO Colin Evans, the ‘enormous scientific engineering pedigree behind the business means that, while not unique, we make up one of only two or three companies in the world able to do what we do’.

To be specific, Thruvision’s product is a ‘passive terahertz interferometer’. Congratulations if you know what that means, but for normies, it’s essentially a heat camera, yet a far more advanced one operating on a much longer wavelength than the bodycams seen on Police Camera Action.

It’s important to note that Thruvision’s tech cannot be used in public spaces, meaning you won’t be seeing them in department stores or airport lobbies. And rightfully so, given the privacy implications.

Yet the addressable market is still big.

Evans estimates that there are around 20,000 distribution centres across the UK, US, and Europe where Thruvision’s cameras could be used.

On the customs front, Thruvision already has the US government as a customer but there are many more countries with thousands of border touchpoints currently underserved by heat-sensing technology.

Thruvision currently has up to 600 passive terahertz interferometers (let’s just call them cameras) being used out in the field on a daily basis.

You might be wondering what came before Thruvision. The answer is nothing really, apart from metal detectors and pat-downs.

Evans explained to Proactive that metal detectors ‘will never detect drugs, they will never detect cash, they’ll never detect a small bottle of whiskey, they’ll never detect a few packets of cigarettes that people are trying to steal or smuggle’.

It is here that Thruvision found its gap in the market.

While there are small revenue channels in high-security government sites and employee screening at airports, retail distribution and customs ‘are our most important markets and where the bulk of our revenue has been for two or three years now,’ said Evans.

The retail distribution and customs segments also have different market drivers, helping to balance the company when unfortunate incidents like the CBP contract hiccup occur.

Customs currently command the greatest share of revenues, though retail distribution is seen as the primary growth channel.

Currently, only 150 distribution centres have taken up the opportunity. If taking Evans’ 20,000-centre addressable market at face value, that is a lot of growth potential for a company currently valued at around £35million on the London Stock Exchange.

It’s through this paradigm that Pentland Capital, of JD Sports’ largest shareholder fame (not to mention the brand owner of Speedo, Berghaus and Canterbury of New Zealand), recently committed to a £2.5million equity investment in a £3.2million share placing at a 6.8% closing-price premium.

Canaccord Genuity contributed another £500,000.

Pentland Capital intends to build a 10% stake in Thruvision, which is either a mark of confidence or a hint of grander ambitions for the group (you be the judge).

At the very least, it provides a window of opportunity to expand Thruvision’s existing relationship with JD Sports, which is already one of Thruvision’s longest-standing customers with equipment installed in five distribution centres across the UK and Europe.

Costing up to £100,000 apiece for a top-end device, the initial expense of adopting Thruvision tech is high.

But with retail theft generating headlines in the UK and US and retail losing as much as $112 billion per year to the problem, not to mention the national security imperatives on the customs side, Thruvision’s business case is intriguing.

At the time of writing, Thruvision shares were priced at 19p.

To read more small-cap news click here www.proactiveinvestors.co.uk.

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