Smaller companies spotlight

EACH week, former Fleet Street City Editor

Growing optimism
BUSINESS confidence among small and medium-size companies is improving for the first time in more than a year, according to a CBI survey.

A third of the companies surveyed were more optimistic about the general business situation while less than a fifth were less so. That makes a difference of plus 14% compared with a minus of 24% recorded in January.

But don‘t throw hats in the air just yet. Manufacturers still expect profits to remain under pressure and believe they will still be forced to cut jobs – but they think they will cope better than larger firms.

Budgens offer
A COUPLE of weeks ago we advised readers to 'watch out for Budgens', anticipating a full bid for the supermarket group from Musgrave, the Irish food and grocery distributor which already had 28% stake.

This week it was revealed that an approach had been made.

As Musgrave had agreed 'not to make an offer for the entire issued share capital of Budgens, nor make any announcement of an intention to do so, without the prior written consent of the board of Budgens,' it must be presumed that a detailed offer will be forthcoming in the very near future.

Some you may have missed
LITCOMP, the provider of medical reports on claims to the legal profession, which recently had a successful launch on Ofex, has opened a rehabilitation services division to provide reports, assessments and referrals for the medical treatment of personal injury claimants.

The division assesses and overseas the medical treatment of an injured claimant and, after providing insurance companies and solicitors with an expert report and recommendation on the required treatment, handles the referral of the claimant to a suitable medical centre or specialist. This, it suggests, will speed up the time span of a claimant‘s recovery and the overall costs of a claim.

MANCHESTER-based IBM hosting and managed services partner, Red Squared, has won an order worth £3m, part of a multi-million pound contract delivered in conjunction with IBM. The unnamed customer is a world force with 2,700 employees serving 26,000 blue-chip clients in 18 countries across three continents.

SOUTH Staffordshire Group, the services business, has bought the privately-owned Regency Financial Holdings, a retail warranty business, for up to £44.7m.

ELDRIDGE POPE, brewer and pub operator, increased profits by 22% to £1.4m in the six months to end March. Sales rose from £27.5m to £32.8m and the group has revealed it is looking for further acquisitions.

NEW management at Beaufort International Group, the AIM-listed business consultancy, is doing its best to lift the company up by its boot straps following a disastrous first half in which losses totalled £3.4m. It has signed a contract with Inpharmatica, a drug discovery company, that is expected to earn on-going revenues of up to £500,000 a year. The market is waiting for results for the year to end March to be published next month to see if a genuine recovery is under way.

MANO River Resources has agreed a joint venture with Golden Prospect, a mining and exploration investment fund, to explore both companies‘ licences in the Sonfon region of central Sierra Leone. Golden Prospect will also buy 6.1m shares in Mano for £244,000.

Some to look out for
DESPITE, or perhaps because of, the weakness of the stock market, analysts are spotting more buying opportunities than ever. Here is a selection from the current week‘s offerings

JAMES Follows, analyst at web research group MoneyGuru, is particularly fond of Holidaybreak, which he describes as having 'a superior business model to many of its peers within the leisure industry.'

He describes the company as being 'lean, flexible and a very profitable operator' and says the 'high quality management team is worthy of further support.' The shares are a 'buy' at 530p with a target price of 623p.

Follows also likes the look of support services group, Connaught, where he believes the prospects are 'exceptionally bright'. 'Buy' at 310p with the one-year forward price targeted at 360p.

Analyst Paul Bethell, from the same stable, is equally enthusiastic about Blacks Leisure following the disposal of the sports and fashion division and integration of the Famous Army Stores units, which will make the business debt free. He has moved his recommendation from a 'hold' to a 'buy' with a price target of 280p against the current 230p.

PETER Jones, analyst at brokers Peel Hunt, feels comfortable with ScS Upholstery whose interim results were ahead of expectations with pre-tax profits up 35% to £5.2m and the interim dividend 25% higher at 3p a share. Mr Jones believes there is scope for continuing with above average growth and sets a price target of £3 a share against the current 240p.

Undeterred by the naming and shaming of JJB Sports in the OFT inquiry into price fixing of soccer kits, Richard Ratner at brokers Seymour Pierce, sticks by his price target of 450p against the current 366p share price.

'I‘m sure it will overhang the price for a while, but I have no doubt that this is a political manouevre and that JJB will answer all five of the charges against it.

'People seem to forget that a year ago when others wanted to raise prices to £45.99 for a shirt, JJB said that £39.99 was the top it would go to. There does not seem a case for retailers to answer; if there is a problem it could be with the clubs and suppliers.'

Meanwhile, Ratner believes JJB‘s share price has been 'punished enough' for its acquisition of TJ Hughes and he sticks by his decision to raise the recommendation from 'buy' to 'strong buy'.

His colleague, Luke Ahern, is also in tipping mood, advising investors to 'fill their wellington boots' with the shares of cattle breeding group who report on May 23. The shares are currently 142p.

Adam Lawson, analyst at brokers Teather & Greenwood, sends out a buying signal for Morse. He suggests 250p is a reasonable target for the shares which are currently around 205p.

David Taylor from the same house likes Heywood Williams, the window, door and conservatory making group, where a new management achieved a 'remarkable' turnaround in its first year and looks to be continuing its success this year. The shares at 234p yield 6.4%, which looks safe, bearing in mind the company paid a total of 9.75p a share last year because of its recovery, and it has a strong cash flow.