Tialis Essential IT reports resilient EBITDA despite revenue dip, secures major contracts

Tialis 2025 results: resilient EBITDA masks a softer revenue year

Tialis Essential IT PLC has delivered a mixed set of audited 2025 results. The headline positive is that adjusted EBITDA – a profit measure before interest, tax, depreciation, amortisation, impairment and other one-off or non-cash items – held up reasonably well at £1.8 million, compared with £2.0 million in 2024.

The problem is revenue went backwards. Group revenue fell to £17.7 million from £20.8 million, mainly because two customers brought contracts in-house and because project work and customer ordering were slower than expected. That is not catastrophic, but it is a proper setback and investors should not ignore it.

Key metric	2025	2024
Revenue	£17.7 million	£20.8 million
Adjusted EBITDA	£1.8 million	£2.0 million
Gross margin	29%	29%
Net cash from operations	£1.4 million	£1.9 million
Loss after tax	£1.5 million	£3.2 million
Bank borrowings	£3.0 million	£4.0 million
Cash balance	£0.7 million	£0.9 million

What saves this from being a disappointing update is margin stability and cash generation. Gross margin stayed at 29%, which tells you the business did not win low-quality work just to flatter revenue. It also generated £1.4 million of operating cash and repaid £1.0 million of bank debt, which is exactly what you want to see from a business going through a revenue dip.

Tialis major contract wins improve forward visibility for 2026

This is where the investment case starts to look more interesting. Tialis says it secured two strategically important multi-year awards in the second half:

• A £50 million, 5-year follow-on framework agreement with a long-standing enterprise customer.
• A £15 million, 5-year contract with a major UK Government Department, which started in September 2025.

That matters because IT services businesses live and die by visibility. Tialis says approximately 77% of expected 2026 revenue is already supported by existing contracts, and it has an £8 million annual value sales pipeline. ACV means annual contract value, or the yearly revenue value of contracts in the pipeline.

In plain English, 2025 looks like a transition year, while 2026 is supposed to be the year those contract wins start doing the heavy lifting. Management says trading is in line with expectations and is talking about a year of strong growth. That is encouraging, but it still needs to be delivered.

Cash generation and debt reduction are the best parts of this Tialis update

The strongest operational signal in this RNS is cash. Net cash generated from operating activities was £1.5 million in the cash flow statement, versus £1.9 million in 2024, and the company finished the year with £0.7 million of cash and £3.0 million of bank borrowings.

That is not a fortress balance sheet, but it is moving in the right direction. Net debt reduced as the company paid down borrowings, and trade and other payables also dropped sharply to £2.6 million from £4.1 million. That suggests tighter financial control rather than balance sheet stretch.

The net loss also improved meaningfully. Reported loss after tax was £1.543 million, compared with £3.194 million in 2024, while basic loss per share improved to 5.55 pence from 13.11 pence.

Tialis risks investors should not brush aside

There are still some obvious weak spots here. First, revenue dependence remains high. The largest customer accounted for £10.5 million of revenue, or 60% of the total, although that is down from 81% in 2024.

That reduction is good news, but 60% is still a chunky concentration risk. If that relationship wobbles, the numbers will wobble with it.

Second, there was a banking covenant issue. Tialis says it failed to meet the adjusted leverage covenant at 30 September 2025 and 31 December 2025. Its lenders issued reservation of rights letters, although after the year end the covenant was amended and the breaches were waived.

That takes the immediate pressure off, but it is still worth noting. When a company breaches covenants, even if it gets a waiver, it tells you the balance sheet is not completely carefree.

Third, headcount fell again. The group ended 2025 with 212 employees against 268 a year earlier, and average monthly headcount dropped to 243 from 288. Management presents this as simplification and cost alignment, which may be fair, but shrinking staff and shrinking revenue are not usually the hallmarks of a business firing on all cylinders.

Tialis acquisitions and investment portfolio: smart capital allocation or extra complexity?

Tialis spent 2025 broadening its portfolio beyond the core managed services business. It launched AI Auxesis, a 50%-owned AI consulting subsidiary, built stakes in QPC 2020 Limited, Digital Petcare UK Limited and CloudCoCo Group plc, and bought 50% of MXLG Acquisitions Limited.

There is some logic here. Management is trying to combine a steady core business with selective higher-growth opportunities. The Digital Petcare investment, for example, gave Tialis a 14.14% equity stake and a £0.7 million facility earning 12% interest.

But there is also more complexity now. The MXLG joint venture contributed revenues of £5.7 million and adjusted EBITDA of £0.5 million since acquisition on 7 October 2025, yet it made a loss after tax of £0.4 million, and Tialis recognised a £0.2 million share of post-tax losses. That does not make it a bad deal, but it does mean investors will need to keep a close eye on whether these side bets actually enhance shareholder value.

Capital reduction proposal could matter later for dividends and buybacks

One of the more interesting AGM items is the proposed capital reduction. Tialis wants to cancel the share premium reserve of about £63.7 million and eliminate 496,702,800 deferred shares of 2.49 pence each, which the board says have no rights or economic value.

This would create distributable reserves. Why does that matter? Because distributable reserves can give a company legal flexibility for future dividends and share buybacks if the board decides conditions are right.

That is not the same as saying payouts are coming soon. In fact, there is no dividend for 2025. But it does tidy up the capital structure and gives management more options down the line.

What Tialis Essential IT results mean for retail investors

My read is fairly straightforward. This was not a growth year on the reported numbers, but it may have been a necessary reset year. Revenue fell, the business remained loss-making, and covenant breaches are never pretty. Those are the negatives.

The positives are that EBITDA was resilient, cash generation stayed solid, debt came down, customer concentration improved, and the company landed two very sizeable contracts that support visibility into 2026 and beyond. If those contracts convert into the growth management is expecting, 2025 may end up looking like the low point before recovery.

So this RNS looks cautiously positive rather than outright exciting. The direction of travel has improved, but Tialis still has to prove that contract momentum can translate into sustained revenue growth and cleaner profits. For now, the story is credible – just not yet fully banked.

Tialis AGM details and shareholder takeaways

The AGM will be held at 10.00 am on 22 June 2026 at the offices of DAC Beachcroft LLP, 25 Walbrook, London EC4N 8AF. Shareholders will be voting on the usual annual business as well as the proposed capital reduction.

If you are watching this stock, the big things to track in 2026 are simple: delivery against that £8 million pipeline, progress in lifecycle services, the contribution from the new major contracts, and whether the company can keep converting profit into cash while staying inside banking covenants. That will tell you very quickly whether this turnaround has real legs.