Smaller companies spotlight

EACH week, former Fleet Street City Editor

Full steam ahead

RAILWAY buffs have a chance to indulge themselves through the Ofex launch of Flying Scotsman Ltd, owners of the restored famous Flying Scotsman. The company has issued a prospectus and plans to raise up to £2,199,000 through the offer of shares at 38p each.

The Flying Scotsman steam locomotive is the company‘s major asset. Built in Doncaster in 1923, it has had a variety of owners, including former pop impresario Pete Waterman and Sir William McAlpine since being withdrawn from service by British Rail in 1963.

The future was uncertain in 1995, by when urgent restoration was required. It was bought by Dr Tony Marchington a year later who formed Flying Scotsman Railways to co-ordinate the acquisition and restoration at a total cost of £2m.

Now it is being turned into a business with a five-year contract with Venice Simplon-Orient Express in which Flying Scotsman will exclusively provide steam haulage for VSOE‘s day excursion trains in the UK.

The company is also backing a permanent exhibition of the locomotive and historic memorabilia called Flying Scotsman Village to be based in Edinburgh, subject to planning permission, contract and rail access arrangements. There is also an agreement with Microsoft for its computer game Microsoft Train Simulator.

The company has plans for brand capitalisation including the launch of a membership club, merchandising and licensing opportunities with makers of goods such as luggage and clothing and providers of services to be sold throughout the world from retail and railway orientated outlets and through the company‘s website.

A commemorative founder‘s share certificate is also planned for the first public share offer.

Peter Butler, former MP and ex-parliamentary private secretary to Kenneth Clarke, is chief executive of Flying Scotsman and the company is forecasting operating profits of £2,750,000 by December 2004. The current year which ends on December 31 will show a loss of £360,000.

The company is being brought to market by Daniel Stewart & Co and dealings will start on January 25 provided the minimum amount subscribed has reached £800,000 by January 12.

Opportunity knocks

ONLINE research specialist MoneyGuru has recognised what readers of this column are all about. Having had success with various investment portfolios – the Growth Portfolio, for instance, has had a five-week run of out performance against the market – it is now launching a Small Cap Select Portfolio.

It plans to invest in 20 to 40 companies with market capitalisations of less than £750m and to research each selection in depth, with most emphasis on solid industrial stocks.

The company site says: 'Small caps are a rich source of opportunities. Their growth prospects are often better than those of larger peers and, as analytical coverage provided by the large stockbroking firms is relatively poor, the valuations are attractively low.

Access to the research is available for £35 for the first six months for those looking for full coverage.

Health Clinic looks fitter

ANOTHER healthy start to the year for Health Clinic, whose strategy for growth has been followed with pin-point accuracy. It takes each of its new health clinics eight months to move into profit, with breakeven achieved in the 15th month.

With six clinics being opened each year, and now a total of 17 clinics around the country, the proportion of loss-making clinics has peaked. Of the total outlets, only five are full health clinics, the remainder are eye clinics but with the potential for growth.

Figures for the half year to end October show a 42% growth in sales to £12.6m, with like-for-like sales up 20% in the last two months.

There was a loss before tax of £1.67m, as expected at this stage of development, with capital expenditure rising to £5.7m in the period, but brokers Brewin Dolphin believe the company will produce year-end pre-tax profits of £2.7m (£1m higher than a year ago) and have pencilled in £6.8m for the year ended April 2003 and £10.8m for the following year.

Some you may have missed

THERE is nothing downbeat about David Halpern, chairman of resealable plastic packaging group Supreme Plastics. Results for the year to September show a near 18% rise in sales to £17.2m and a 15% rise in pre-tax profits at £1,164,000.

The dividend rises by more than 11% to 1p a share, despite a £4.7m capital and investment spend since the year end.

'The order book remains strong and I am cautiously optimistic that the group will be able to improve its trading performance in the current year,' says Mr Halpern.

HIGH Street chain Coffee Republic provided an adrenaline rush for shareholders with interim results showing sales up by a third to £12.9m in the six months to end September and a 54% drop in operating loss to £600,000. Coffee Republic also announced the purchase of GoodBean for £800,000 payable in shares, raising to more than100 the number of bars now being run by the company.

KEY employees at Inventive Leisure have been granted options over 683,522 shares at an exercise price of 176.5p. The option represents around 3.36% of the current issued share capital and represents the company‘s strategy to incentivise and reward employees.

AIM-listed digital software development and licensing company Interactive Digital Solutions has signed three new strategic distribution partners to market its Room Interactive Systems Console and Showtime software in the UK. Info-linc and Trescray Network Communications will distribute the RISC software while Positive Communications will sell the Showtime software.

ZYTRONIC, the specialist maker of touch screens and optical filters for electronic displays, saw a 50% lift in pre-tax profits to £763,000 in the year to end September. This came from a 29% rise in sales to £5.78m. Chairman John Kennair says the company has been successful in securing contracts with major international companies in the areas of telecommunications, banking and interactive kiosks. These contracts will benefit the second half of the current financial year.

IT HAS always been known that the first group to come up with a workable slimming pill would be richer than the man who invented a new mouse trap, so no surprise that shares in Phytopharm, the drugs-from-nature group leapt ahead this week on news that trials of its new drug, codenamed P57 (nothing to do with Heinz?) had cut the calorie intake of obese men by 30% in recent trials. It is now in discussions with US giant Pfize about a possible licensing deal.

VACCINE group Acambis, the old favourite of this column that duly won the £300m smallpox vaccine contract from the US Government, has struck a £28m refinancing deal on the plant that will make the doses. That money will be reinvested in research and development as part of a strategy to hold on to trial products for longer without licensing them to third parties.

Some to watch out for

BROKER Teather & Greenwood is staying loyal to International Greetings which has taken a hit after the recent disclosure of management and production problems in the UK gift-wrap division which will have a major impact on profitability in the second half. However, analyst Ben Archer says: 'The underlying business remains sound and the group is taking action to make the necessary management and production changes.' He adds that the shares, which have fallen 22% as a result are a ' long-term buy' and reminds folk that the group recently announced a 25% rise in half time sales and an 11% rise in interim profits to £3m.

ANOTHER good set of results from business equipment group Eurocopy has encouraged Peter Ashworth at Teather & Greenwood to say: 'This continued outperformance warrants a wider audience given the continued delivery of good results and the visibility the group enjoys. The outlook remains positive.' He says the shares are a 'buy' at 31.5p.

BROKER Peel Hunt still likes the look of electronic and radio group Alba which has taken the full hit of Bush Internet losses in the first half, 'drawing a close to this costly venture and tidying up the group picture”. The shares are now a 'buy'says analyst Alex Jarvis.

CHRIS Radmore, a colleague of Jarvis's at Peel Hunt, suggests a higher rating is appropriate for chemicals group Dyson. 'Buy,' he says.