Smaller companies spotlight

EACH week, former Fleet Street City Editor

All Systems go

WHAT a difference in the fortunes of financial and business management software solutions provider, Systems Union Group, in just one year.

Whichever way you look at the figures the turnaround has been impressive. But nowhere so much as in the pre-tax profit line, where a £105.9m loss in 2000 has been turned into a profit of £2.2m. True, the £71m loss on the sale of discontinued operations in 2000 was a major factor in that year, but what a good decision that sale turned out to be.

Technical types like to look at earnings before interest, tax, depreciation and amortisation of intangibles - also known as Ebitda. In 2001 this was £5.15m against a loss of £11.4m the previous year.

Chairman Bob Morton said the improved results 'had been achieved by following a clear strategy of tight financial control and the continued investment in the group's products, services and support offerings to its global customer base. We ended the year with more than £15m in the bank, no borrowings and 9m shares held beneficially for the group.' Those shares are in the accounts valued at 70p each against a current market price of 90p.

Morton is looking forward to 2002 'being a year of further improvement to sales and productivity levels' and expects to take business from competitors.

Feelgood factor

DAYS before its £1.2m cash raising and Ofex-listing is complete, Wellbeing Screening, the supplier of self-test health screening kits, has launched a product to allow users to check for genital chlamydia without having to go to their doctor.

The disease is one of the most common and fastest spreading, curable, sexually transmitted diseases in the UK and a major cause of pelvic inflammatory disease, infertility and ectopic pregnancy. The kit allows users to test regularly and painlessly in the privacy of their own home.

Wellbeing also sells self-test kits for diabetes, bowel disorders, prostate cancer, cystitis, feminine discomfort and the menopause. A new product to coincide with a cash-raising exercise can only emphasise the company's growing expertise.

Some you may have missed

TWO major moves from AIM-listed Cater Barnard this week underline its intention to build itself into a pan-European independent financial adviser (IFA) and corporate finance company.

It has listed on the regulated unofficial market of the Frankfurt Stock Exchange, and plans to raise £2m through a convertible loan note that will be used to develop its proposed businesses in Europe. It's also talking to Confida Mortgages, a mortgage broking company and internet financial products portal, about a takeover that could cost up to £6m.

Cater Barnard is in 'advanced negotiations' to appoint a head for the IFA operations and says it will look to buy other IFAs. The company aims to be a consolidator of the IFA sector where, traditionally, founders can generate income but are unlikely to achieve capital growth. Cater Barnard wants to provide the means by which such people can share in the capital value of their own business.

SQUARESUM, the Ofex-traded supplier of corporate accounting system for medium and large organisations, has linked with Britannia Software to offer Britannia's Fixed Assets Management Systems alongside its Dream software.

VOCALIS, which provides speech recognition technology, has unveiled contracts worth £2m with Abbey National, Chelsea Building Society and Powergen.

DEVELOPER Countryside Properties has been included in the FTSE4Good UK Index, the 'ethical' share index. Chief executive Graham Cherry said this endorsed the company's 'commitment to environmental, social and ethical development'.

SECURITY is an increasing priority in this troubled world. Photo-Scan, which provides security systems for companies across the UK, raised sales 27% to £18.3m and profits 10% to £3.65m in its first full year on AIM.

The company has increased its rental and maintenance contracts to a degree where future profitability is ensured for up to seven years. Prices and margins are expected to be under growing pressure this year, but the board says it is focused on increasing shareholder value.

DESPITE the damage inflicted on tourism by 11 September, Watermark Group, which provides marketing support services for the travel industry, has notched up another set of record results. Sales were up 15% at £32.2m and pre-tax profit 30% higher at £2.3m, allowing the year's dividend to rise 10% to 1.24p a share. Operating profit has now risen by a compound growth rate of 32% over the past nine years.

Chief executive John Caulcutt says: 'This has been a terrible year for the airline industry as a whole, and yet Watermark has continued to exceed expectations and deliver another year of significant growth.' More important, 'market conditions and overall sentiment in the airline and travel industry continue to recover and passenger numbers are returning.' Another good year could be in prospect.

INTERNET hosting provider Host Europe made important progress last year, with sales up 129% to £9.5m and a profit of £500,000 from a previous £1.27m loss. The company, which started life as Magic Moments, is on its way to becoming one of the top three European providers of internet hosting solutions to small and medium-sized enterprises.

It was not all good news, however. The retained loss for the year rose a chunky £20m to £34m after writing off additional goodwill of nearly £15m. That stems from the £40m purchase of Web Fusion, a business now worth around £8m. Fortunately 95% of the purchase was paid in shares, so the loss is more paper than real.

Some to look out for

A STRONG defence of IT services provider Anite has been presented by Adam Lawson, analyst at brokers Teather & Greenwood, who claims 'a bear attack has left this company's shares trading at a level we believe presents a considerable opportunity to potential investors'.

He adds: 'Management should be rewarded, not punished, for successfully executing on a strategy of withdrawing from low value, low growth activities and entering higher growth markets - a strategy which should see margins advancing from a forecast 13.7% in 2002 to close to 15% by 2004.' Lawson says the shares are a 'strong buy' and suggests they could rise up to 50% above their current 117p price.

DESPITE several strategic wrong turns in the past, Flying Brands has now recovered to its previous levels of profitability, highlighting the resilience of the core business, says Paul Bethell, analyst at web research group MoneyGuru. He puts a price target on the shares of 210p (currently 182p) and says they are a 'buy'.

His colleague James Follows feels equally as strongly about Intercare, claiming 'better than expected results lead us to believe the market's current forecasts are far too conservative'. His target price is 340p (277p).

'THERE is not the slightest doubt that JJB, in bidding for TJ Hughes, gave the market an awful shock,' says Seymour Pierce analyst Richard Ratner. 'But not half as much a shock as (chairman) Dave Whelan must have got when he subsequently saw the market's reaction to it, in smacking his share price.'

Ratner says the deal may have damaged the perception that JJB Sports is a narrowly focused company, but that it is unlikely to damage earnings. He has reduced the target price for the shares from 500p to 450p - still a long way from the current 358p - and rates the shares a 'buy'.

WITH new management and a changed culture, building group Rok is a 'buy' for David Taylor at Teather & Greenwood. The group's finances are robust and re-rating of the group is likely to go further.

A STRONG case for buying AIM-quoted pawnbrokers Albemarle & Bond is made by tipsheet Share Watch. It says that in the past three years the group has grown from 25 to 51 stores. With analysts forecasting earnings reaching 5.4p a share in the year ending in July and 6.5p next year the stock looks 'terrific value'. But the firm will soon announce plans to enter a new loans market, which could have a dramatic impact on these profit projections.