Smaller companies spotlight

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.

Coutts is a monster success for Disney

THE City is an unforgiving place. If you‘re out of favour it takes a long time to win friends again. Look at CA Coutts Holdings, the East End design and packaging company, for instance. Two years ago the shares were changing hands around 260p and now they are trundling along around 60p. The fall followed the closure of one operation that resulted in exceptional costs of £506,000 in 2000 and then a further £400,000 last year when the pension fund of the closed operation needed topping up.

It was not all bad news, because Coutts made an 'exceptional profit' of £270,000 on the sale of the failed company‘s property.

But that is behind it now and Coutts is firing on all cylinders, doing what it does best – designing, building and distributing display units for some of the biggest names in the High Street, not least Disney who account for some 10% of the group‘s £40m-a-year turnover.

Walk into any supermarket, store or large video outlet later this month and spot the Treasure Chest units holding videos and DVDs of Return to Neverland, or be prepared for the characters of Monster Inc to guide childish feet towards the latest videos and DVDs next month.

Disney, who do not issue compliments to suppliers lightly, claim 'Coutts Retail Communications are an integral part of our business. They are key to maintaining our leading-edge in store as number one brand in children‘s entertainment.'

But that is just one client. Fox is another film maker who appreciates the efforts of Coutts, Sky used them to launch its digital operations, L‘Oreal and Estee Lauder are just two of several in the cosmetics industry who get the company to design display units to boost sales, and supermarket chain Safeway has used the company to design, develop and make new permanent units to get customers to spend more time at the higher-margin health and beauty section after picking up their lower margin grocery items.

Coutts will be reporting its interims next month and, although the majority of profits are earned in the second half, the High Street spending boom will have been good for the company. House broker Beeson Gregory has forecast £700,000 pre-tax for this year and £1.1m for next.

At their current level the shares yield just under 7% so, with interest rates staying low, they provide a better income than banks or building societies at present; in fact, I wouldn‘t be surprised if the Queen wasn‘t tempted to transfer some money out of her Coutts bank and have a flutter on Coutts (the designer) shares.

Virtual profits on the rise

MY attention has been drawn to Telecom plus, the company now run by Charles Wigoder, the former head of corporate finance and development at Carlton Communications and Quadrant Group, who left in 1988 to set up The Peoples Phone Company which he sold eight years later to Vodafone for £77m.

Telecom plus is a 'virtual supplier' of telephone, gas and electricity services, which means it buys in bulk at a discount from the previous monopoly suppliers and is able to offer households cheaper phone calls, gas and electricity.

From a pre-tax loss of £360,000 in the year to March 2000, the company made a pre-tax profit of £2.51 in the following year and £4.04m in the year which ended last March. The company‘s broker, KBC Peel Hunt, estimates profits will increase a further 20% to £4.8m in the current year and rise by more than 35% to £6.5m in the following 12 months.

Some you may have missed

MEDAL Entertainment & Media is raising £10.25m through a placing and bank loans to buy Leisureview and Fountain Television for a total of £8m.

Leisureview is a video publishing business specialising in military history, aviation and TV continuity marketing. Fountain, a wholly-owned subsidiary of Avesco, operates one of the UK‘s largest, fully equipped, independent television studio facilities, providing services to major broadcasters and independent producers.

JOHN F. Walsh, a former president of Dicon Holdings, one of the world‘s largest makers of smoke alarms, has been appointed President of US operations for Sprue Aegis, makers of the FireAngel plug-in smoke alarm.

SURFACE Transforms has received an order to supply plant and materials to a leading aerospace brake equipment provider. Although worth around only £90,000, a licensing agreement is being negotiated which will define how Surface Transforms receives royalties from the manufacture of brake discs.

ROYSTON Hoggarth, group marketing director of Logica, has become a non-executive director of Intercede.

BEAUFORT International, the AIM-listed business consultancy, has been appointed exclusive marketing and sponsorship agent for 'The Clover Transatlantic Challenge' in which 15-year old Sebastian Clover will race head-to-head, single-handed, against his father Ian in two identical yachts.

SECTORGUARD, the AIM-listed manned guarding provider, is raising £300,000 by the placing of 10m new ordinary shares.

SPORTS and entertainment management and marketing group CSS Stellar has bought Echo, a specialist entertainment advertising and marketing agency, based in Toronto. Cost is £4.13m in cash and shares with a further £250,000 payable in February 2004.

One to watch out for

LESLIE Kent, analyst at broker Seymour Pierce, believes the interim figures from building materials provider Travis Perkins, due on September 9, will show an 11% increase in turnover to approach £700m. The shares, which peaked at 1200p early this year and now stand at 925p, are recommended as a 'buy'.