Smaller companies spotlight

EACH week, former Fleet Street City Editor Patrick Lay keeps Thisismoney readers up-to-date with a neglected, but exciting sector of the stock market - smaller companies.

Strike it unlucky

SOME people are just born unlucky, like the chap who run a horticultural business on the Isle of Wight but failed to make it pay. He decided to sell off his 20 acres inviting offers of around £7,000 an acre for something that, had it been farmland, would have been worth a third of that.

He must have thought all his birthdays had come at once when he received an offer of £9,000 an acre for 4.2 acres early this year, but only if the deal was closed quickly.

He didn't wait to ask why and so wasn't told. If he had, he might have learned what has since become news: the land he sold, a few miles from Cowes and close to Parkhurst Prison, may be sitting on one of the UK's largest onshore oil fields. If it is, then it could be worth a fortune.

It may be some time before anybody knows for sure, but Derek Musgrove, managing director of Northern Petroleum, is fairly confident and has already applied to the Isle of Wight County Council for permission to construct a site and drill an exploratory borehole down to a depth of 1,600 metres.

He says: 'This project has been the result of two years extensive study. We are probably the first company to have access to an almost complete seismic and well database acquired by major and junior oil companies from 1980 to 1992, and our detailed studies have brought new indications of what may be there.'

Mr Musgrove admits that the current high oil price would make this a very good deal for Northern, but says if world oil prices were half their current level, it would still be a commercial proposition.

There is still a long way to go, of course, with environmentalists and others all likely to get involved before permission to drill is won, but with the current state of the oil market Mr Musgrove is likely to have the politicians on his side, at least.

Oh Danny boy

IF people are known by the company they keep, then Watermark Group, the provider of in-flight products and cabin management services to the airline industry, and already one of this column's favourite companies, has just moved up several slots in my estimation.

The appointment of Danny Bernstein as a non-executive director is a major plus for the company.

Danny, non-executive chairman of Monarch Airlines, where he was previously managing director, is also chairman of the British Air Transport Association and a non-executive director of National Air Traffic Services and a former President of the International Air Carriers Association. That is a very impressive cv for anybody joining a company linked to the airline and travel industry.

But the major plus is in the man himself. If he has not changed in character since I knew him socially, when he was a councillor in Enfield, North London, some 30 years ago, then Danny is the epitome of what a non-executive director should be: principled and not afraid to speak his mind when necessary.

The fact that he is a chartered accountant by training and will serve on Watermark's audit and remuneration committees, is a bonus.

ITM Power

I HAD been due to lunch with ITM Power next Tuesday to celebrate this fuel cell technology company's launch on Aim, but the tastebuds have been put on hold.

The company has proved such an attraction and demand so high that brokers Durlacher have included a series of European roadshows to back those in the UK, and having already placed £7m worth of shares, are now going for £10m before the float, rescheduled for mid-June.

Some you may have missed

Galen Holdings
It is difficult to know what Roger Boissoneault, chief executive of Galen Holdings, would describe as excellent, but he claims that second quarter results to end March, showing a 55% rise in revenue over the same quarter last year and a 109% rise in operating profits 'was a very solid set of results'. Sounds like a hard man to please.

The company now plans to change its name to Warner Chilcott, the US women's health company it bought in 2000, and expects to change its primary share listing to the US in the next year.

GWR
GWR, the radio group, will receive around £10.6m in cash – realising an exceptional profit of £4m - from the sale of its 27.8% stake in Radio Investments to the Local Radio Company, a sale conditional on LRC's admission to Aim. The cash will be used to reduce group debt.

Appian Technology
Appian Technology, who provide police forces throughout the country with CCTV traffic monitoring systems is considering an early move from Ofex to Aim. Chairman Pat Ryan says the group is now looking closely at acquisition opportunities in related areas, such as security, traffic management, access control, parking, digital imaging and information distribution.

StatPro Group
Corporate Synergy has been appointed corporate broker and nominated adviser to StatPro Group, the Aim-listed provider of software for asset managers.

Antisome
Antisome, the biotechnology company developing anti-cancer drugs, says revenues increased to £5m in the first quarter of this year – up £800,000 on the equivalent quarter last year – but operating losses were £1.2m compared with only £100,000 a year ago. Chairman Dr Barry Price says the company expects to in-license a new clinical product this year.

Binns
City financial and public relations consultancy Binns & Co has signed up for the Knowledge Technology Solutions Quote Terminal, says Gresham PR, the KTS financial public relations group.

Premier Oil
Sir David John, chairman of Premier Oil told shareholders at the yearly meeting: 'We plan to drill up to 18 wells this year and are confident that this drilling programme has the potential overall to add significant reserves and value to Premier's business.' He added: 'Premier is in good shape and we intend to keep it that way.'

Surface Transforms
Surface Transforms has been awarded its first contract, valued at around £40,000, by the UK Ministry of Defence, a contract to develop its carbon fibre reinforced ceramic materials for use in body and vehicle armour. The brief is for materials that will protect individuals and vehicles against repeat-hit, high-power rifle and cannon fire, and is expected to be completed within nine months.

Henderson Morley
Drug discovery group, Henderson Morley, has raised £620,500 by the issue of 55m new ordinary shares through a placing. Both chairman Andrew Knight and director Dr Ian Pardoe have each subscribed for £25,000 worth to add to their self-invested pension plans.

Baltimore
Bermuda-based Acquisitor Holdings, which failed by a whisker to win control of Baltimore Holdings at the extraordinary meeting a week ago, has raised its stake in Baltimore to 17.59%.

Paladin Resources
Paladin Resources has completed drilling well 22/17.2, its first operated well in the UK sector of the North Sea, using the GSF 140 semi-submersible rig. The well has proved up a significant extension of the Montrose Field to the north-west and has successfully achieved all of its objectives.

Chief executive Roy Franklin told shareholders this week there is 'another excellent year in prospect', being one of the few companies that stands to benefit from higher oil prices.

Centurion Electronics
In-car entertainment group, Centurion Electronics, reports a 60% increase in turnover to £4.43m for the six months to end March, with operating profits before exceptional items up 29% to £566,000.

Private & Commercial
Private & Commercial Finance Group, the Aim-listed car leasing company, has been awarded damages of £4m against National Insurance Guarantee, a subsidiary of Direct Line. The action was brought by College Credit, a subsidiary of Private & Commercial, to recover unpaid claims under a policy of credit insurance relating to instalment credit agreements.

John East
Johnny Townsend, a former partner of de Zoete & Bevan, managing director of Barclays de Zoete Wedd and a director of Kleinwort Benson, has joined the board of John East & Partners, the specialist corporate finance boutique. Simon Clements, an assistant director of John East has also been appointed to the board.

Red Squared
Red Squared, the IBM-managed services partner, has signed INCAT, a global professional services company, as its first strategic partner for the Red2Alert Systems Monitoring Solution.

Terrace Hill
Caledonia Investments has bought 14m shares in Terrace Hill, representing 7.49%, the purchase being made during the recent placing of shares.

Chroma Therapeutics
Ian Nicholson, currently director of business development at Celltech Group, has been appointed chief executive of Chroma Therapeutics, the drug discover group. In addition, Chroma announces that Raj Parekh, former founder of Oxford Glycosciences and later a director of Abingworth Management, the lead venture capital provider to Chroma, has been appointed chairman.

Some to watch out for

Ennstone
As Vaughan McLeod, chairman of Ennstone was telling shareholders at the yearly meeting, 'the board is confident that in 2004 further progress will be made across the business resulting in another successful year', Stephen Rawlinson, analyst at Arbuthnot Securities, was sending out a 'buy' recommendation for the shares at 38p. He says: 'We believe the assets of the company to be worth much more than the book value of 45p a share.'

T Clarke
Mr Rawlinson also likes building materials group T Clarke which he describes as 'a champagne stock at brown-ale prices' and says they are a 'buy' at 486p.

His colleagues were expressing enthusiasm too, with Dilip Shah, saying Hardy Underwriting is beginning to make a mark in the insurance sector and that the shares are a 'buy' at 242p with a fair value of 265p.

Xansa
George O'Connor puts software group Xansa as a 'strong buy' at 80p and Michael Blogg, is equally excited by Aga Foodservice.

Galen
Following the strong quarterly results from Galen (see above) Shawn Manning at Dresdner Kleinwort Wasserstein says the shares are a buy at 786p and Rachel Sledge at UBS says 'Galen should perform well'.

For more news and interactive graphs for these stocks, click on the company names in the left-hand margin. Or for tips from a small caps fund manager, click on the link on the right.