Smaller companies spolight

EACH week, former Fleet Street City Editor Patrick Lay keeps This Is Money readers up to date with a neglected, but exciting sector of the stock market - smaller companies.

No stopping
Mr Holt

BOB Holt is not only an excellent host, he knows how to run a company. Year after year his Mears support services group just goes on getting better and better.

Once again this week he has reported record profits for the half year to end March, with a 31% rise to £1,577,418 on turnover which increased by 8% to £38m. Profit margins moved up from 3.4% to 4.1% and are heading comfortably towards the 5% target.

Mr Holt is comfortable with broker forecasts of £3.5m for the year.

No wonder it was standing room only when he met analysts in London to discuss the figures and talk about the future, and there was a full diary when he took the message to analysts and fund managers in the North and to Scotland the next day.

The message being aired is one of excellent controlled progress and a determination to build a long-term business on solid foundations. Having being awarded its two largest ever contracts within the last 12 months, the group is having talks with a number of other existing customers to increase the size and length of certain contracts.

But it is not only in the winning of contracts, and the building of profits that the group excels. It also understands the importance of managing the cash that comes in. In the six months under review the company had a £1.6m positive cash flow and now boasts more than £4.5m in the bank.

Mr Holt says: 'Demand for our services has never been stronger and we continue to seek out those customers who are looking to forge long-term relationships.'

Mears operates in four main sectors. The biggest is in providing maintenance services in the social housing sector, working with local authorities, registered social landlords and housing associations. Then comes the mechanical and electrical fit-out services to private sector customers, and United Fleet Distribution, market leader for trade plated drivers in the UK.

The fourth division is the newest; facility management was formed in 2001 and in its first year has been successful in winning private sector contracts. 'I am excited at the prospects for this group company,' says Mr Holt.

Just for fine measure, he then responds to some of those who have sought to raise doubts about the group‘s accounting treatment of contracts. He says: 'I am pleased to confirm that we write-off all such costs as incurred and therefore have no such historical costs to be written off against future profits. Our financial management is, and will continue to be, of a prudent nature.'

A year ago Mears shares were changing hands around 75p each; they rose to £1 but are now back around the 75p mark but with more and more institutional investors taking an interest in the company – Standard Chartered has built a 3.5% stake in the past year – the shares will surely soon reflect the continuing growth.

Edmonds finds a rich seam

PHIL Edmonds is carrying a bit more weight than when he was bowling for Middlesex and England, but it suits his new status of chairman of an Ofex company moving up to an AIM listing.

Central African Mining & Exploration, which specialises in the mining and marketing of tantalum and associated minerals, is raising £750,000 through a fully underwritten placing by Seymour Pierce Ellis of 25m shares at 3p each as it moves up the market scale.

The cash will be used to expand the group‘s tantalum production facilities in Namibia and develop further opportunities to boost its prime objective of becoming the leading low-cost African producer of tantalum, which is used in mobile phones, laptop computers, electronic games and cameras.

Demand for tantalum has grown by an average of more than 10% a year since 1992 and with new applications continuing to be found, there is no reason to believe the growth will not continue.

Some you may have missed

A STRONG performance by the US business within the broadcasting division, has given a boost to the first half profits of Vislink where sales rose 8.4% to £41.3m and pre-tax profits rose just under 61% to £890,000. Chairman Bob Morton says: 'The current level of enquiries remains encouraging and given their timely conversions, the prospects for the second half remain in line with expectations.'

HALF-TIME results from Host Europe, the internet hosting provider to the small and medium companies market, show a 55% rise in sales to £6.5m and earnings before interest, tax, depreciation and amortisation, soared to £929,000 in the first half of this year against just £60,000 in the same period of 2001. Cash at bank has risen by £500,000 to £1.45m in the past year.

MAELOR, the AIM-listed healthcare products company, has signed an exclusive distribution agreement with Adcock Ingram Critical Care, relating to Volplex, Maelor‘s blood plasma volume substitute.

TRADING in shares of Doctors Direct, the private primary health care services provider, started on Ofex at a premium.

COUNTRYSIDE Properties has won contracts to carry out three estate regeneration projects within the London region comprising a total of 640 mixed-tenure homes. All three include the development of new homes for sale as well as affordable homes for rent and shared ownership under design and build contracts. The housing for sale has a combined completed development value of £54m with the design and build contracts worth an addition £35m to the group.

THE Phase IV trial of the Frovatriptan migraine treatment produced by Vernalis has worked well in tests on menstrual migraine sufferers. Some 52% of patients in the trial were completely headache-free over the course of three menstrual cycles.

Some to watch out for

RHYS Williams, analyst at Seymour Pierce, has his buying boots on this week. He rates general retailer Brown & Jackson a speculative buy, and furniture retailer Homestyle a definite buy. His colleague, Luke Ahern, repeats his buy recommendation for Parkwood Holdings following interim results in line with forecasts.

MEANWHILE, Richard Ratner at the same stable, believes retailer J.Beattie should be 'accumulated for yield'. At their current price of 140p the shares produce a return on investment of 8.5% – compare that with your local building society.