Thalassa Holdings Ltd: Annual Report and Audited Accounts to 31 December 2024

Thalassa Holdings Ltd

Thalassa Holdings Ltd

(Reuters: THAL.L, Bloomberg: THAL:LN)

("Thalassa” or the "Company")

AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2024

The Company today announces its audited results for the year ended 31 December 2024.

The information set out below is extracted from the Company's Report and Accounts for the year ended 31 December 2024, which will be published today on the Company's website www.thalassaholdings.com.  A copy has also been submitted to the National Storage Mechanism where it will be available for inspection.  Cross-references in the extracted information below refer to pages and sections in the Company's Report and Accounts for the year ended 31 December 2024.

2024 HIGHLIGHTS

Group Results 2024 versus 2023 GBP GBP

2024 Macro-Highlights

• S&P 500 registered another stunning gain, +24%, following similar performance in 2023…the best two-year performance in 25 years.
• S&P500 corporate EPS were forecast to grow 9.4% in 2024 and 14.8% in 2025, driving market expectations, not to mention valuations ever higher.
• From 20% two years ago, the "Magnificent Seven" Apple, Nvidia, Microsoft, Amazon, Alphabet, Meta Platforms, and Tesla accounted for one-third of the S&P 500 Index. With 63% average gains over 2024 (+59.1% in 2023), these seven tech behemoths accounted for more than half of the gains on the S&P 500.
• NVDA market value rose to $3.38 trillion; Apple to almost $4 trillion.
• The Magnificent Sevens’ increasing dominance begged market concentration issues with their astonishing performance. Double their share in five years, the Magnificent Seven registered a record 33% of the S&P 500 with $18 trillion market capitalization. Concentration sparked questions on the dangers of a highly weighted index.
• US Treasury Yields churned lower, helping drive stock prices higher.
• By the end of 2024, the Buffett Indicator, US Stock Market Value compared to US GDP, reached an all time high of 211%, 67% higher than the long-term trend line, whilst Berkshire Hathaway’s cash-pile increased to a record $323 billion.
• Undeterred by US equity valuations, Donald Trump’s re-election (initially) contributed to increased market optimism, with expectations of corporate tax-cuts and deregulation bolstering investor exuberance…until the President’s April 2 announcement of tariffs on all trading partners.

2024 Micro-Highlights

• ARL
  • Further delays in software development due to rework of some areas of the Flying Node simulator and the vehicle automatic control.
  • Design of the production standard electronics and full power battery pack has progressed with the most complex pcb designs complete.
  • Engagement with potential sources of funding and strategic partners has continued with additional resource available from Q4.
• Tappit restitution agreement
  • Chairman has contributed £2.1m of up to a possible £3m from sale of personal property. Final instalment of £0.9m due by end of June 2026 when final payment due on sale of property.

• Mark to market losses incurred due to declines of 8% and 6% respectively, in share prices of company’s largest holdings Surgical Innovations Group Plc and Newmark Security Plc, as well as losses on hedges (which subsequently resulted in gains in 2025).

• Strategic Business Review completed with targeted cost savings achieved.

• Having waived 2021, 2022, 2023 consultancy, Chairman also waived 2024 consultancy. Chairman received warrants in lieu of fees NOT nil paid shares, as is too often the case in smaller companies.

I have chosen to leave last year’s comments attributable to Jeremy Grantham as a reminder…

The Great Paradox of the US Market!

By Jeremy Grantham

11 March 2024

https://www.gmo.com/europe/research-library/the-great-paradox-of-the-u.s.-market_viewpoints

The following thoughts are extracts from Market Watch and GMO, and hopefully reflect Mr Grantham’s, and my view of the Market

• U.S. stocks appear expensive after investor mania surrounding Artificial-Intelligence interrupted the bursting of an initial market bubble that was deflating in 2022.
• “Prices reflect near perfection, yet today’s world is particularly imperfect and dangerous,” Jeremy Grantham.
• AI, “a new bubble within a bubble like this, even one limited to a handful of stocks, is totally unprecedented, so looking at history books may have its limits.”
• In January 2022, Grantham warned that the U.S. was nearing the end of a “super bubble” across major asset classes. Both stocks and bonds plunged that year as the Federal Reserve aggressively hiked interest rates in a bid to tame surging inflation. But the launch of ChatGPT in late 2022 paused the deflation of the equities bubble that he saw, according to his note.
• “We paused in December 2022 to admire the AI stocks,” he said. “Even though, I admit, there is no clear historical analogy to this strange new beast, the best guess is still that this second investment bubble — in AI — will at least temporarily deflate and probably facilitate a more normal ending to the original bubble.”
• The U.S. stock market has risen to records this year, with the S&P 500 SPX booking an all-time closing peak on March 7 and the technology-heavy Nasdaq Composite COMP scoring a fresh closing high at the start of this month. The Dow Jones Industrial Average DJIA also notched a record close this year, on Feb. 23.

Bubbles and AI

• Looking backwards, what happened to our 2021 bubble? The Covid stimulus bubble appeared to be bursting conventionally enough in 2022 – in the first half of 2022 the S&P declined more than any first half since 1939 when Europe was entering World War II. Previously in 2021, the market displayed all the classic signs of a bubble peaking: extreme investor euphoria; a rush to IPO and SPAC; and highly volatile speculative leaders beginning to fall in early 2021, even as blue chips continued to rise enough to carry the whole market to a handsome gain that year – a feature hitherto unique to the late-stage major bubbles of 1929, 1972, 2000, and now 2021. But this historically familiar pattern was rudely interrupted in December 2022 by the launch of ChatGPT and consequent public awareness of a new transformative technology – AI, which seems likely to be every bit as powerful and world-changing as the internet, and quite possibly much more so.
• But every technological revolution like this – going back from the internet to telephones, railroads, or canals – has been accompanied by early massive hype and a stock market bubble as investors focus on the ultimate possibilities of the technology, pricing most of the very long-term potential immediately into current market prices. And many such revolutions are in the end often as transformative as those early investors could see and sometimes even more so – but only after a substantial period of disappointment during which the initial bubble bursts. Thus, as the most remarkable example of the tech bubble, Amazon led the speculative market, rising 21 times from the beginning of 1998 to its 1999 peak, only to decline by an almost inconceivable 92% from 2000 to 2002, before inheriting half the retail world!
• So, it is likely to be with the current AI bubble. But a new bubble within a bubble like this, even one limited to a handful of stocks, is totally unprecedented, so looking at history books may have its limits. But even though, I admit, there is no clear historical analogy to this strange new beast, the best guess is still that this second investment bubble – in AI – will at least temporarily deflate and probably facilitate a more normal ending to the original bubble, which we paused in December 2022 to admire the AI stocks. It also seems likely that the after-effects of interest rate rises and the ridiculous speculation of 2020-2021 and now (November 2023 through today) will eventually end in a recession.
• The broad U.S. stock market is expensive, with a Shiller price-to-earnings ratio of 34 as of March 1, 2024, which is “the top 1% of history,” while total profits are also near record levels.
• “The paradox that worries me here for the U.S. market is that we start from a Shiller P/E and corporate profit margins that are near record levels and therefore predicting near perfection”.
• “If margins and multiples are both at record levels at the same time, it really is double counting and double jeopardy — for waiting somewhere in the future is another July 1982 or March 2009, with simultaneous record-low multiples and badly depressed margins.”

‘Can’t get blood out of a stone’

• When the price of an asset doubles, its future return is halved, Grantham said in his latest paper.
• “The simple rule is, you can’t get blood out of a stone”.
• To Grantham’s thinking, the long-term prospects for the U.S. stock market look “poor” as it’s generally overpriced and never has seen “a sustained rally starting from a 34 Shiller P/E.”
• “The only bull markets that continued up from levels like this were the last 18 months in Japan until 1989, and the U.S. tech bubble of 1998 and 1999, and we know how those ended,” he said. “Separately, there has also never been a sustained rally starting from full employment.”
• While AI seems likely to be at least “as powerful and world-changing as the internet,” tech revolutions tend to see “early massive hype and a stock-market bubble”.
• He cited Amazon.com Inc. AMZN as an example of speculation in the late 1990s, noting its stock plunged before the company rebounded into the giant online retailer it is today.
• “As the most remarkable example of the tech bubble, Amazon led the speculative market, rising 21 times from the beginning of 1998 to its 1999 peak, only to decline by an almost inconceivable 92% from 2000 to 2002, before inheriting half the retail world!”
• In his paper, the GMO co-founder didn’t stop at warning about looming dangers for U.S. stocks should the “AI bubble” burst and finish the job deflating the “original bubble” that had worried him.
• “It also seems likely that the after-effects of interest-rate rises and the ridiculous speculation of 2020-2021 and now (November 2023 through today) will eventually end in a recession,” Grantham cautioned.
• On a brighter note, Grantham said there’s “a reasonable choice of relatively attractive investments” in the U.S. equities market, such as “quality” stocks. He also cited resource equities, “climate-related investments,” such as solar stocks, and “deep value” as areas of the market to consider.
• “U.S. quality stocks have a long history of slightly underperforming in bull markets and substantially outperforming in bear markets,” he said, “although they did unusually well in the recent run-up.”

Non-U.S. Equities and Real Estate

• If things are so good, why on earth is the rest of the world so down at heel, with very average economic strength and average profitability and with both getting weaker? The UK and Japan are both in technical recessions; the EU, especially Germany, also looks weak; and China, which has done a lot of the heavy lifting in global growth for the last few decades, is pretty much a basket case for a while (although getting very cheap in its stock market). Global residential real estate looks particularly tricky also, although it often takes a very long time for prices to catch up or down with mortgage costs. Can any young couple in the developed world today buy a new home comparable to those bought at the same age by their parents? Peak prices as a multiple of family income multiplied by an old-fashioned looking mortgage rate (now 6.8% in the U.S.) makes for a very tough affordability calculation. And as for office space, forget about it. With the double problem of higher rates and Covid-induced work-from-home, no one is confident of anything, no one will build anything new, and all sit holding their breath as appraisals start to come down and bank loans to commercial property look increasingly dicey. And in China, extreme overbuilding threatens both housing and commercial real estate.
• Throw in a couple of wars that refuse quick endings and rising possibilities of expanded military confrontations with Russia and China, and you can see why the rest of the world is sober and much more reasonably priced than the U.S. (Understanding U.S. optimism is much more difficult.) To be more precise, I would say that in contrast to extreme overpricing of U.S. equities, those overseas are a little overpriced, offering uninspired but positive returns. The positive exceptions to this general, moderate overpricing are at the value or low-growth end of emerging market equities and non-U.S. developed equities (including Japan), which are not only much cheaper than the high-growth varieties but are selling in a range from fair price to actually cheaper than normal.

The only thing that Mr Grantham didn’t mention was Tariffs…otherwise, as night turns to day, Mr Grantham is on the money; since 2 April 2025, the impact of Tariffs has been broadly reflected in the decline of virtually every stock market in the World, the big exception being China. In our opinion, the next shoe to drop will be the negative impact on global economies, as we doubt very much that the US can negotiate meaningful new Trade Treaties in the 90 days that the Trump Administration has indicated.

Duncan Soukup

CHAIRMAN’S STATEMENT

Holdings

2024 results reflect reduced costs but also declines in our publicly quoted holdings, including our hedges.

• Newmark Security plc (NWT LN) - 21.3%

Having risen significantly from 33p/share to close 2023 at 75p/share, NWT’s shares declined 8% during 2024.

THAL currently own’s 21.3% of NWT, making us the largest shareholder in the company. 2024 results fell short of expectations. Whilst we maintain our view on the potential of the Company, we are unhappy with both the operational- and financial performance of the company. 

•  Surgical Innovations Group plc (SUN LN)

SUN’s 2024 results are due in May 2025, shortly after our results are to be released. We anticipate a marked improvement in 2024 results, as indicated in the Company’s 10 April 2025 Trading Update.  However, given the lack of interest in micro-cap companies we do not expect an immediate up-tick in the Company’s share price.

• Autonomous Robotics Ltd. (ARL)

The Flying Node seismic sensor development project focussed on the flight software development, the design of production standard electronics and battery system and refinements in the mechanical design. One production standard Flying Node seismic sensor is scheduled to be manufactured during 2025

The software development required rework to the Flying Node simulator system and the automatic vehicle control which has resulted in further delay to the programme. Software management has been modified to ensure more frequent issue and thorough testing of software modules which has resulted in improved output of working software modules. In water testing of the mission management and control software is scheduled to start during Q2 of 2025. Development of status monitoring and built in test software will continue during 2025.

Production standard design of the most complex electronic pcb’s and electrical distribution for the Flying Node has progressed with manufacture and test of these parts due to start in Q1/Q2 2025. The battery system design is close to completion with manufacture of the first production standard unit scheduled for Q2 2025.

Reduced resource in mechanical design has delayed the work schedule but some improvements in the pressure vessel design and the battery movement mechanism has been implemented for the production standard battery system.

To reduce the timescale to first revenue a version of the Flying Node has been conceived which would allow the Flying Node to carry various additional underwater sensors. This system can be sold to the environmental and survey market and investigation of applications and discussions with potential users has started. This would require the current design of the Flying Node to be increased in length with other aspects remaining very similar to the seismic Flying Node.

Increased engagement with potential investors and strategic partners started in Q4 2024 and will continue in 2025.

Outlook

Last year I wrote…

AI is clearly the latest dot.com game in town. Nvidia (NVDA US) in particular, is growing revenues and profits exponentially. NVDA is the proverbial bucket and spade supplier in this latest gold rush. However, how the buyers of their sophisticated chips will translate their substantial Capex into increased profits remains to be seen.

AI is already impacting the way companies operate, and individuals transfer and use information; whether the outcome will ultimately be positive for companies and consumers remains, in our opinion, to be seen?

Add geo-political risk and the potential for increased economic tension between China, the US, and Europe and suddenly the stock market outlook clouds.

The US President’s Tariff-Policy has upset the proverbial apple cart. The implications of an expanded and/or protracted dispute with its trading partners will, without a doubt, in our opinion, lead to a massive re-rating in stock, bond and all other asset prices. Some like Gold have taken off, while the full impact on real estate and stocks may yet worsen.

Having successfully covered our shorts I during the sharp decline in the Nasdaq 100 between 2 April and 8 April, we have again replaced limited short positions in anticipation of further declines in US Tech stocks as the economic impact of the US President’s economic policy filters into the real economy.

Duncan Soukup
Chairman

29 April 2025
 

FINANCIAL REVIEW

GROUP RESULTS

Continuing Operations

Total Revenue from continuing operations for the year to 31 December 2024 was (£0.22m) (2023: £0.54m) related to rental income in Switzerland.

Cost of Sales on continuing operations were £(0.04)m (2023: £(0.03)m), resulting in a Gross Loss