Here's Why We're Watching Tan Delta Systems' (LON:TAND) Cash Burn Situation

Just because a business does not make any money, does not mean that the stock will go down. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

Given this risk, we thought we'd take a look at whether Tan Delta Systems (LON:TAND) shareholders should be worried about its cash burn. In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. Let's start with an examination of the business' cash, relative to its cash burn.

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How Long Is Tan Delta Systems' Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. In June 2025, Tan Delta Systems had UK£2.0m in cash, and was debt-free. In the last year, its cash burn was UK£1.7m. That means it had a cash runway of around 15 months as of June 2025. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. Depicted below, you can see how its cash holdings have changed over time.

Check out our latest analysis for Tan Delta Systems

How Well Is Tan Delta Systems Growing?

We reckon the fact that Tan Delta Systems managed to shrink its cash burn by 24% over the last year is rather encouraging. But the revenue dip of 6.3% in the same period was a bit concerning. Considering the factors above, the company doesn’t fare badly when it comes to assessing how it is changing over time. Of course, we've only taken a quick look at the stock's growth metrics, here. This graph of historic earnings and revenue shows how Tan Delta Systems is building its business over time.

How Easily Can Tan Delta Systems Raise Cash?

While Tan Delta Systems seems to be in a fairly good position, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Commonly, a business will sell new shares in itself to raise cash and drive growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.

Tan Delta Systems has a market capitalisation of UK£18m and burnt through UK£1.7m last year, which is 9.3% of the company's market value. Given that is a rather small percentage, it would probably be really easy for the company to fund another year's growth by issuing some new shares to investors, or even by taking out a loan.

So, Should We Worry About Tan Delta Systems' Cash Burn?

Even though its falling revenue makes us a little nervous, we are compelled to mention that we thought Tan Delta Systems' cash burn relative to its market cap was relatively promising. Cash burning companies are always on the riskier side of things, but after considering all of the factors discussed in this short piece, we're not too worried about its rate of cash burn. On another note, we conducted an in-depth investigation of the company, and identified 4 warning signs for Tan Delta Systems (2 make us uncomfortable!) that you should be aware of before investing here.

Of course Tan Delta Systems may not be the best stock to buy. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.