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.

In for a penny with Cater

IT'S the dream of every investor to buy a share at a penny and sell it for 100p. Books have been written on the subject, tip sheets have prospered from feeding the hopes of subscribers and occasionally some winners have emerged. Mostly, however, punters do not buy at 1p. By the time they get the news the shares have trebled or quadrupled.

But today I have news of shares being offered at 1p each - that is, 10,000 for £100 - in an AIM-listed company that made profits of £1.9m last year. Cater Barnard, the financial services company and adviser with operations in New York and London, is raising between £5.3m and £7.56m from an open offer and a placing of new shares.

The open offer to existing shareholders of 360.7m ordinary shares is on the basis of two new shares for every one they hold. It is placing 395m shares with chairman Stephen Dean in exchange for nearly £4m worth of loan notes that were due for repayment in November.

This is the third offer made by the company, formerly VoyagerIT.com. The first was at 5p, the second at 15p and, at the height of the IT boom some shares changed hands at 38p each. Shareholders may feel they are simply pouring good money after bad - others might ask themselves: 'What else can you buy for 1p these days?'.

Times have changed, and so has the company, re-establishing itself as the financial service group that it now is, investing in smaller companies. It has a near-54% stake in AIM-listed specialist telecoms company, Envesta and a 36% stake in IMX Pharmaceuticals, quoted on the OTC bulletin board. It also holds 69% of Cater Barnard (USA) which will be raised to 86.4% following the latest offer.

Having gained FSA authorisation towards the end of last year, the company plans to widen its services through acquisitions. It is in talks with a target that could help build a national brand of independent financial advisers.

It is also saving around £326,000 a year on the loan notes which have been converted to shares. It says something for Dean's faith that he will own more than 50% of Cater following the deal. He will also give up the executive role for a non-executive position, leaving day-to-day operations to managing director Mark Garratt in the UK and Adrian Stecyk in the US.

Seymour Pierce are brokers to the issue and Seymour Pierce Ellis has underwritten the first £1m of the open offer.

easyHemscott

ROSALYN Wilton is no Stelios. But the chief executive of business and financial data provider Hemscott reckons the reason it succeeds where others fail could be compared to why easyJet thrives while British Airways struggles.

'We are the easyJet of IT,' she said at the firm's results presentation.

EasyJet boss Stelios Haji-Iannou may not be so happy about the comparison. Hemscott is still making losses - £3.9m in 2001 - and is not tipped to be in profit until 2003, and then only by £100,000.

But for Wilton, 2001 was a success. Turnover rose 21% to £5.1m and losses fell 67% to £3.9m. There is still £9.4m cash in the bank and the business information division is thriving, claiming 265 clients. New products are constantly being developed.

Flying high

SURREY-based Avionic Services is moving from Ofex to AIM in April, and raising up to £3m in a placing of shares. The company provides air traffic control equipment, systems integration services, airfield ground lighting, consultancy services and flight inspection services in the UK and internationally.

It is one of the top 20 elite companies featured in the Deloitte & Touche Technology Fast 50 UK league table for London and the South East, its sales having grown at a rate of 244% a year between 1998 and 2000.

Last September it reported a £2m forward order book and since then has won new contracts totalling around £600,000. These include a £400,000 project for a runway at a Middle Eastern airport, a £100,000 contract to supply and install an instrument landing system at Manston Airport, and an extension to a £750,000 contract with German group Siemens on five small airfields in Ethiopia. Noble & Co have been appointed advisers.

Some you may have missed

TAXI drivers will no longer have to boast about who they had in the back of their cabs - they'll be able to download pictures.

Eagle Eye Telematics has received an initial order for 1,000 of its telematic and camera units designed to protect cab drivers.

Marketed by Chubb under the Cabwatch brand name, the system allows the driver to activate a panic alarm that alerts the Chubb monitoring station and takes photos in the taxi for immediate or subsequent download.

A Chubb operative can listen in to the vehicle and guide police to an incident whether the vehicle is moving or stationary.

PROFITS halved at £4.1m at Alphameric, the IT solutions provider to the retail and logistic sectors, in the year ended 30 November. The retail division accounted for all the success, but the retail betting and finance division was hit by roll-out delays on contracts, and lost £400,000 on turnover of £20m.

However, the three delayed Alphabet contracts have now recommenced and are expected to be completed in the current financial year. Chairman Rodney Hornstein looks forward to 'a resumed period of strong, sustained revenue growth this year and beyond'.

GOSHAWK Reinsurance has opened its new office in Bermuda and will be underwriting Marine XL, Non Marine Property Catastrophe, Marine Retrocession, Aviation XL and Finite Reinsurance. Jim Kemp, formerly managing director of Tate & Lyle Reinsurance, will run the Bermuda office.

AKAEI, the AIM-listed games publisher, has acquired the distribution rights to 'Earth 2150 – Lost Souls', which is due for release this autumn. It marks a new relationship with Polish development studio Reality Pump.

ELTON Games, producers of Elton Derby Games - already installed in Circus Circus in Las Vegas, Warner Brothers Movie World in Spain as well as Butlins, Alton Towers and Sun City in South Africa - is planning to list on Ofex, raising around £500,000.

ALAN Cherry, chairman of Countryside Properties told shareholders at the yearly meeting that trading since the beginning of the year has been particularly strong. 'Enquiries for the group's homes over the last three months are 25% higher than the same period last year,' he said. 'The number of reservations taken during the period has increased 18% and, at an average selling price of £260,000, are some 48% ahead by value. The directors are confident that the group is on course to achieve further progress during the current financial year.'

Some to look out for

PHARMACEUTICALS group Vernalis has signed a new collaborative research and development deal with pharma giant Roche, this time related to diabetes.

Given other alliances between the two, Gary Waanders at brokers Peel Hunt expects Roche to fund the R&D and make payments on the achievement of development milestones, with Vernalis receiving royalties on eventual sales. This makes the company a 'buy', says Waanders.

DMATEK has been selected to supply its home detention systems to the Dijon Regional Directorate of Penitentiary Services for its new home trial programme. Dmatek now has its systems included in five out of seven trials currently being conducted in France.

Analyst Robert Brent at brokers Peel Hunt believes these might lead to significant contracts in due course, and he rates the shares a 'buy'. On one trial, in Lille, the authorities claim there is a 50% decrease in cost per person using electronic monitoring as an alternative to custody.