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.

Back in pink

NEWS this week that Queercompany, the internet portal aimed at the British gay and lesbian market, has ceased trading has brought an extra bounce to the step of the board of Ofex-quoted e-maleorder. It means one less competitor.

E-maleorder has been going through some traumatic times itself, not least having its shares suspended while it went through some legal wrangles over the dismissal of two directors, Michael Maxwell and James Elliott. That situation has now been resolved and their holding of 9m shares bought by various directors and others at 30p a share. The stock, suspended at 42.5p last August, is being requoted.

Clearly the remaining board members are not phased by the collapse of Queercompany, whose survival was handicapped by the failure to attract anything like the advertising revenues that had been expected.

E-maleorder has never relied on web-advertising on its site, preferring to fund its operations through marketing deals. Its allman.co.uk web site has been rebranded to befrank.co.uk and has been rehosted with a UK-based hosting partner to speed up response times.

Although still concentrating on the pink pound, this is no longer the exclusive market. It has launched Halo Insurance, which offers insurance services from home to pet and travel. Wholly-owned subsidiary Frank Talk offers mobile phone deals at extremely competitive prices provided by Phone4U Direct.

Chief executive Shehzad Farrukh says he believes the company will emerge stronger and more successful from its recent problems. He must hope so. Farrukh owns more than 8m shares and options on a further 1m that can be exercised at 225p a share within five years.

Another director is former singer Patti Boulaye, who holds 500,000 shares in her own name and speaks for a further 250,000 shares held by a charity, Support for Africa, where she is president.

Flagging Scotsman

IT'S not only Transport Secretary Stephen Byers who is having trouble paying for his railway set. Peter Butler, former MP and Parliamentary Private Secretary to former Tory Chancellor Kenneth Clarke, appears to have run into the buffers in his attempt to raise £2.2m to launch the Flying Scotsman brand.

His plan is for a permanent exhibition of the locomotive and memorabilia - called Flying Scotsman Village - near Edinburgh, along with various merchandising deals.

Although there has been 'a lot of interest' in the concept, obviously not many have so far backed their interest with hard cash. A true politician, Butler puts on a brave face, claiming the offer for subscription, which should have closed on 25 January, will now remain open until 28 February 'to ensure nobody is left on the platform when Flying Scotsman steams into the future'.

It is a statement that carries as much conviction as the RMT saying it 'regrets the inconvenience to passengers' of its strikes.

Some you may have missed

MANCHESTER-based IBM-hosting and managed service partner Red Squared has made a good start to its second full year of trading since joining Ofex in November 2000.

Having announced a loss of £820,000 for the year ended September and cash at the bank of £1.2m at the year end, the board then produced first-quarter results for the current financial year.

Turnover in the three months was £1.76m against £416,000 for the whole of the previous 12 months, and there was a pre-tax profit of £51,519 for the quarter. Interestingly, cash at the bank had grown to £1.3m. John McGuire, joint managing director, says the company is negotiating several contracts and 'hope to be able to report on these in our interim statement'.

DIMENSION Resources is buying a Rustenburg Black granite quarry near Brits in South Africa's North West Province. It is paying £125,000 initially and up to £125,000 more when production targets are met.

ROBERT Adair, chairman of Melrose Resources, is looking forward to applying for a production lease and associated gas sales contract on its El Mansoura concession, in the Nile Delta area of Northern Egypt. Its Number 3 exploration well has been successfully tested and Adair now awaits results of further tests on the currently proposed wells.

THERE could still be some distance to go for Express Dairies if the approach from Scandinavian farmers' co-operative Arla Foods goes ahead. The firm, responsible for Lurpak butter, is said to be preparing an offer of 35p a share, compared with the current price of 24 1/2p.

In the past 12 months Express shares have traded up to 70p, but turned sour in recent months and were down to 14p before Arla appeared.

FITNESS clubs and amusement machine operator Kunick has received an offer worth 17 1/2p a share from management.

COMMUNICATIONS services group Affinity sold nearly 200,000 mobile phones in the run-up to Christmas and now expects to beat brokers‘ forecasts of £45m sales for 2001 by about 15%. A company statement said it was confident of meeting market expectations of £100m sales for the current year.

VIRTUAL Internet is virtually certain to be a bid target soon. It has been having on-off talks with an unnamed bidder since December and this week announced the talks were back on.

Some to look out for

THOSE who like to hold on to the coat-tails of successful operators could do worse than keep an eye on Galileo Innovation, an incubator that plans to help inventors bring their concepts to market. Dealings start on AIM on 5 February.

The duo behind the company are Angus Munro, former chief executive of discount retailer Matalan, and Paul Davidson, founder of pipe-making success story Oystertec and the man behind the bid for golf club operator Clubhaus. The pair will own around 29% of Galileo, worth a total of £3.8m.

PAUL Hickman, analyst at broker Peel Hunt, reviews Wolverhampton & Dudley Breweries after the share consolidation. With earnings growth forecast at 12% over the next two years and the dividend yield 4.6%, he concludes the shares are cheap.

GARDEN centre specialist Blooms of Bressingham is recommended as a 'hold' by Stephen Thomas, analyst at brokers Teather & Greenwood. He believes the new managementwill take the group forward. Although underlying trading is still loss making, he forecasts a profit in 2002/03 with further progress in 2003/04.

WEB research group MoneyGuru has started Alfred McAlpine with a 'buy' recommendation and a target price of 481p a share (currently 425p). McAlpine sold its housebuilding division to Wimpey last year and is concentrating on support services, picking up Private Finance Initiatives projects from the Government. The group has orders of around £1.3bn and is one of two bidders for the £500m Derby Royal Infirmary PFI project.

Analyst Wojciech Mikolajczak says: 'McAlpine should grow strongly over the next few years.' One key factor is that although McAlpine has moved away from its traditional construction business, it is still valued as such in the market.

A re-rating into the support services sector would raise the average forward multiple from around 12.5 times to 22.4 times.