Smaller companies spotlight

EACH week, former Fleet Street City Editor

Big things ahead for smaller firms

IT WAS heartening to see, high in the New Year share forecasts, a healthy recommendation for the small companies‘ sector as a whole, as well as recommendations for individual shares.

Perhaps, feelings are best summed up by Frank Manduca, Gartmore‘s UK Smaller Companies Investment Manager, whose team runs a fund of around £1bn and watches over the performances of some 2,000 companies from the Alternative Investment Market upwards.

He says that after the pretty torrid time for Small Caps in the past 18 months there are some attractive share prices out there. Benefits might not come through until the third or fourth quarter, but they should be there in 2003 and, 'although it might be a bit early to buy now, and there is no mad rush, private investors should be doing their homework to make sure they do not get left behind when the big money starts rolling in'.

Manduca believes the future will not be a 'thematic' market, in other words, don‘t go for a sector, but look for individual shares in a sector. His team believe there are some bargains around in the telecoms and technology markets where sound companies soared with the eagles two years ago and fell with the flock last year. The right companies in these sectors now represent much better value for investors.

If interest rates continue low then the housing market still presents some opportunities, and retailers have had a better Christmas than had been anticipated – Manduca suggests Laura Ashley, Mothercare and Homestyle (the Benson Beds people) might all be on the recovery trail.

The trouble for individuals is that they may find themselves spoilt for choice and could finish the year kicking themselves for poor selections. Those of a nervous disposition could consider a bit of insurance and pick themselves a unit or investment trust specialising in smaller companies.

Clive Scott-Hopkins, a director of independent financial advisory group Towry Law, has gone on record as saying 'markets are in a recovery mode' and his top sector is UK Smaller Companies. His top selections include Artemis UK Small Companies, Baring UK Smaller Companies, Old Mutual UK Select Small Companies. Out of respect for the enthusiasm of Manduca, I do not believe Gartmore‘s offering should be overlooked.

Some you may have missed

ALMOST certainly missed in the haze of New Year‘s morning was the upbeat statement by Mike Lunch, managing director of Sound Alert Technology, when presenting results for the six months to end September, despite having to report a loss of £649,584 for the period.

Following the 11 September terrorist attacks on New York and Washington there has been an impact on three areas of the group‘s business based on sound technology to guide people safely through smoke and other hazards to safety.

In the aviation industry successful trials have been conducted with Universities of Cranfield and Greenwich together with an aircraft manufacturer and airline operator. However, as the industry‘s emphasis has shifted from safety to security, this has slowed the group‘s plans in aircraft evacuation, but it has opened fresh opportunities in airport CCTV security.

'There has been a significant increase in interest in our CCTV facial capture technology in combination with facial recognition software as a vital new technology in security screening systems, and we anticipate sales revenue in the coming months,' said Lunch.

In the United States the National Fire Protection Association has convened a working group to consider how its evacuation technology could be quickly adopted as part of the US Fire Code and the group is in advanced stages of negotiation with a major multi-national fire detection systems maker.

Back home, the Maritime & Coastguard Agency has proposed Directional Sound Evacuation to the International Maritime Organisation as 'an innovative technology for passenger safety on cruise ships and ferries.' If adopted this could become a mandatory fitment on all passenger ships throughout the world.

The only question remains is why Lunch put out such an upbeat statement on New Year‘s Eve?

ELECTRICAL services group Thomas Clarke made a positive start to 2002 with an announcement that the directors expected results for the year which ended on 31 December, to 'significantly exceed current market expectations'. This follows a positive first half and pre-tax profits for 2000 of £4.58m on sales of just short of £100m.

SPEEDY Hire is paying £13.5m for 37 Jewson‘s stand alone Hire Point branches in the south west, greater London and the home counties. It means Speedy now has more than 250 outlets in the UK. The deal has raised an immediate 'strong buy' recommendation from David Taylor, analyst at brokers Teather & Greenwood who believes the group‘s re-rating 'will go substantially further'.

MATERIALS technology group Cookson has raised £38m through the sale of its plastic mouldings operations. Most of the proceeds will be used to reduce debt.

Some to watch out for

SOUTHERN Vectis has got to be different, not only does it provide a public service bus operation on the Isle of Wight and in Southern Hampshire, it also provides consultancy to other transport operators – Stephen Byers, please note. The consultancy side, although still quite small, does generate attractive margins and, says Stephen Thomas, analyst at Teather & Greenwood, 'provides an entrée to other opportunities that are essential for growth'.

He suggests the shares are a 'buy' to take advantage of 'the growth in profitability expected as a result of the lower costs of fuel and driver recruitment and the re-working of the network'.