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.

Big money from the beautiful game

NICK Roach, chief executive of InterClubNet, is over the moon. He's done a deal with the Football Association that brings in £12.5m, most of it immediately, and which could include a further £8.5m over the next seven years. He's also able to report a pre-tax profit of £1.4m for the year ended May, from a loss of more than £2m in the previous 12 months, and has nearly £4m in the bank.

Not bad for a company that develops software and databases for the sporting world.

It signed its original contract with the FA in April 2001, and has provided other services including software support and maintenance and call-centre services and training. It is the support services deal that has really changed.

Under an agreement signed last month, the FA becomes the owner of the software in England, the Channel Islands and the Isle of Man. InterClubNet retains the right to sell and develop the software elsewhere.

It plans to concentrate on the 45 national associations under the Asian footballing umbrella, which Roach believes is a growing force in world football, given the rising interest in the game demonstrated by the success of the World Cup this year in Japan and Korea. He is not neglecting other areas, although developments with the African nations are slow.

The group has an excellent relationship with the England and Wales Cricket Board. It is developing, hosting and supporting the ECB Cricket Network technology and administration systems, which are becoming an integral part of the board's grassroots cricket strategy.

Then there are links with the Lawn Tennis Association, and a mysterious promise of 'further information in the near future' on detailed discussions with the Government to 'determine the viability of assisting with a major sports-related initiative'.

With so much good news it's a wonder the share price took a tumble. It seems a couple of major original investors, holding between 4-5% of the shares, have decided to cash in. The shares are not likely to overhang the market for too long. Even now negotiations are going on with a potential buyer. Suggestions of £3m pre-tax this year do not phase Roach one bit.

A happy ship

JON Pardoe, chairman and managing director of Berkeley Morgan Group, returned to his launch pad this week, HMS President on the banks of the Thames.

He had an office on the vessel in his early days and returned to host a lunch, celebrating a 37% rise in pre-tax profits to £1.2m for the Ofex-quoted independent financial adviser in the year ended April.

The industry faces major changes as the Financial Services Authority and others insist on tighter controls. But Pardoe believes this will provide opportunities for Berkeley to develop. The group is cash positive, which opens the door for acquisitions and for organic growth, and he is expecting to report another good year next time around.

It is certainly good news for Athol Still, the man who acts as agent for several sporting celebrities including Sir Steve Redgrave and Sven Goran Eriksson. He bought into the company in 1994 when a previous backer pulled out.

His son worked for Berkeley in those days and he was asked if he wanted a stake. He had just won £15,000 on a bet that John Barnes would score more than 20 goals for Liverpool in a season (the fact that Barnes was a client and knew he would be the club's penalty taker throughout the season, gave him an edge), so he used his winnings to buy a 4% holding. Today that holding is worth around £500,000.

Some you may have missed

ONCE judged one of the lowest animals in the farm yard, the pig is emerging as a vital link for mankind. In recent weeks we have seen PPL Therapeutics, the company that created Dolly the cloned sheep, claiming doctors could be transplanting pig organs into humans within two years, and Tissues Science Laboratories has developed a product from pig collagen that will help stress incontinence (leaky bladders).

Now Sygen International, known until last year as the Pig Improvement Company, is to use its skills in improving meat quality and disease resistance, to develop better prawns. It expects to generate its first revenue from the prawn business a year from now.

In the year ended June, Sygen reported pre-tax profits of £12.7m, up around a third on last year, despite a £9m drop in sales to £175m, the result of lower pig prices.

AIM-quoted motor finance group Private & Commercial Finance goes from strength to strength. Pre-tax profits rose 28% to £755,700 in the six months ended June, on sales ahead 7.4% to just under £16m. Backed by a new £75m funding facility from Barclays, chairman Julius Levinkind says: 'We expect to see benefits coming through shortly in the form of higher business volumes and increasing profit margins.'

MANAGEMENT time spent on bringing financial services supplier Brookvale Group to Ofex in March took its toll on profits in the year ended March. Sales rose fractionally to £263,352 but pre-tax profits fell to £7,647 from more than £60,000 previously. Chairman Malcolm Ravenscroft is not downhearted. 'The quotation will offer many new opportunities not previously available,' he tells shareholders in his maiden report.

INSENSIA Capital, part of the Insensia financial media group, has been authorised by the Financial Services Authority to act as a corporate finance adviser and arranger.

GUITON Group, publisher of the Jersey Evening Post and Guernsey Press daily newspapers, increased profits by 1% to £2.4m in the first half, despite a 7% drop in turnover to £37.3m. Chairman Frank Walker says 'despite a decline in recruitment advertising, our core businesses of newspaper publishing and retailing have held up well. The technology market, however, has suffered a severe downturn which shows no signs of abating'. Showing confidence, the company lifted the interim dividend 10% to 3.22p a share.

PROACTIVE Sports Group, the sports management and marketing company, has bought Fox Sports for up to £1.88m. Fox represents several Premier League soccer clubs and provides services to athletics and rugby. Most of its sales come from perimeter advertising.

IT HAS been a solid start to the year for Swan Hill, the property and housing group, where pre-tax profits rose more than 50% to £3.7m in the first six months. Chairman George Duncan says that 'although increases in house prices are beginning to show some signs of slowing, with interest rates remaining low and continuing high levels of demand for housing relative to supply, the outlook for the housing market remains positive'.

Some to look out for

RICHARD Ratner, analyst at broker Seymour Pierce, says the purchase by toy store Hamleys of The English Teddy Bear Company from the liquidator makes sense. He says the shares are a 'buy' at 173p.

INTERIM results from travel supply and marketing services Watermark Group, due on 24 September, 'should show that trading in the current year is well up on market expectations,' says SQC Research. 'The shares are now gaining increased institutional investor interest and look very attractive.' SQC puts a target price of 150p on the shares, which are currently 103p.

GAVIN Haywood, at Brown Shipley Securities, marks Private & Commercial Finance Group as a 'strong buy' at 42 1/2p following the results this week. He says the company is poised for 'quite explosive' growth in earnings over the next two years and with considerable potential thereafter.