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.

A bug story

NEUTEC Pharma should have no trouble raising the £25.8m it is seeking through a placing and open offer of shares at 490p each. Since the company joined the Alternative Investment Market in 1999 its shares have outperformed the market by 300% and are now trading at more than £5 each.

But even more convincing is that this biopharmaceutical company could provide the answer to a trio of the health community's most serious threats: the MRSA superbug that is blamed for the death of 20,000 hospital patients a year, a lethal fungal infection that affects some patients in intensive care wards; and a contagious diarrhoea that is also affecting hospitals.

The fungal infection drug, Mycograb, has completed its phase two trials and has orphan drug status which means it can be fast-tracked because of the urgent need. The directors believe the company is now in a position to apply for market authorisation in Europe without the need for a further clinical study.

One of the reasons for the fundraising at this stage is to build up sufficient stocks of Mycograb, using outsourced manufacturers, to support expected future sales in Europe and to recruit a small, dedicated salesforce to launch the product in Europe once market authorisation has been obtained.

But Mycograb is not the only runner in NeuTec's stable. It also has Aurograb that targets the treatment of the MRSA superbug, and the cash being raised will be used to fund further trials in both Europe and the United States.

Both of the above could be on the market in 15 to 18 months, something that prospective investors will note.

Meanwhile, Enterograb is the third drug being assessed by the company as a potential candidate in its fight against infection.

It used to be said that where there's muck there's brass: now we can expect that where there's bugs, there's profit.

Care contracts

ANOTHER company that is likely to benefit from all the additional cash going into healthcare is Morgan Sindall. As part of Community Solutions for Primary Care – a joint venture between Morgan Sindall, Apollo Medical Partners and Barclays European Infrastructure Fund – it has signed a 20-year partnering agreement with Camden Primary Care Trust and Islington Primary Care Trust to provide primary health and social care facilities in Camden and Islington, London.

Morgan Sindall's construction company, Bluestone, will carry out construction works totalling some £50m over the next five years. Contracts valued at £5m, for completion within 12 months, have also been signed for the development of two facilities.

Chief executive Paul Smith says: 'We anticipate further wins as we concentrate on building our leading position in this growing market.'

Turbulence subsides at Watermark

YOU can almost hear the gnashing of lawyers' teeth as they see a potentially lucrative messy corporate divorce slip through their hands with the feuding partners deciding to be grown-up about a settlement.

Last May, AeroBox – 'a maker of lightweight containers for use in aircraft m'lud' – wanted to end a joint venture agreement with Watermark – a provider of in-flight services. But Watermark, as its part in the joint venture had been instrumental in introducing AeroBox to potential customers and felt it should be reimbursed for the cash it had spent.

Initially feet were stamped and voices raised and the row seemed to be heading for the High Court. However, now an 'amicable commercial settlement' has been reached recognising the important role Watermark played in opening doors for AeroBox in the early days and saving the boards of both sides having to waste valuable time briefing lawyers and fighting their corners.

The result is that Watermark will be issued new ordinary shares in AeroBox equal to 7.5% of the current capital and be paid an agreed marketing charge, while receiving a commission on sales to four airlines for six months.

Arc-Risk Management

AIG International Services, part of American International Group Inc, the world's leading insurance and financial services group, has signed a three-year deal to distribute the Red 24 Alert security advice service provided by Aim-listed Arc Risk Management.

Initially it will focus on the Asia-Pacific area, beginning with Japan, where travellers will be able to add the full Red 24 Alert service to their travel insurance packages and learn about security risks in any part of the globe. They can even arrange for bodyguards in certain countries and call on experts to get them out of danger if faced with a life-threatening situation.

So important is this particular programme considered that Arc has recruited a number of Japanese nationals to operate from their call centre in Cape Town and is developing a dedicated Japanese website and telephone service.

I would like to be able to give you my own red alert on what all this will mean for Arc profits, but chief executive Rob Whiting says this will not become apparent until next month when AIG officially launch the package.

Myhome International

SOME much-needed support for Ofex comes from Simon McNeill-Ritchie, chairman of Myhome International who has just appointed Hoodless Brennan as broker and raised £250,000 in the process.

He says: 'The recent addition of new market makers on Ofex –including Hoodless Brennan – has undoubtedly sparked fresh interest in those companies traded on the facility, and this step will make it even easier for new investors to join our growing number of shareholders.'

Stephen Greenwood, chief executive of Hoodless adds: 'Myhome is an excellent example of the exciting investment opportunities our clients are looking to find on Ofex.'

I think I spy two candidates for the Ofex Awards ceremony next spring.

Abchurch

GOOD luck to Julian Bosdet and Henry Harrison-Topham who have taken their public relations and investor relations business teams and clients out of Bankside Consultants to form Abchurch Communications.

I am told the parting was 'amicable'.

The Abchurch team would have been responsible for around half the turnover of Bankside, the company that won the Aim PR Company of the Year in 2003.

Some you may have missed

Paladin Resources
Paladin Resources has signed a $600m (£335m), five-year Senior Secured Revolving Credit Facility with a syndicate of 16 major international oil and gas banks led by JP Morgan. The facility will be used for general corporate purposes, including the funding of the company's active investment programme to enhance production from its existing assets, the financing of future acquisitions and the refinancing of existing indebtedness.

Antisoma
Cancer drug development company, Antisoma, has gained exclusive rights over the drug BC1-IL12, and will now accelerate the agent's development.

British Vita
British Vita has bought the outstanding 50% shareholding of its Canadian group of companies, Vitafoam Products Canada and Engineered Foam Products and subsidiaries for £15.1m financed from existing cash and debt facilities.

Maelor
Alastair Macpherson, chairman of Maelor, told shareholders at the yearly meeting that: 'With an enlarged portfolio of income-producing products and prudent management of our resources, Maelor is now on a sound footing and able to focus its attention on future profitability.' Meanwhile, the company announces that Ann Hardy, technical manager since 2000 has been appointed operations director.

Harrier Group
Harrier Group and Articon-Integralis AG of Germany are to merge their security systems integration business under the title of Harrier-Integralis Group, and create one of Europe's leading security integration groups with revenues, based on last year's figures. The shares will be traded on Aim.

Jubilee Platinum
Jubilee Platinum has raised £3.1m before expenses in a conditional placing with UK institutions, arranged and underwritten by Numis Securities. Just under £2.5m of the proceeds is being used to pay for the proposed purchase of 49.9% of New Platinum Corporation.

Dana Petroleum
Dana Petroleum has bought an additional 53% interest in the Barbara gas-condensate field and surrounding area from Amerada Hess for US$7.5m. This raises Dana's interest in this area of the North Sea to 80%.

Genetix
HALF-time results from Genetix Group show sales up 38% to £6.7m and pre-tax profits 78% higher at £400,000.

Deltex
Professor Sir Duncan Kirkbride Nichol has been appointed a non-executive director of Aim-listed Deltex Medical. Sir Duncan was chief executive of the NHS from 1989 to 1994 and is also currently a non-executive director of Synergy Healthcare.

Bema Gold
Bema Gold Corporation has arranged a US$60m bridging loan for the continued development of its Kupol project located in north-eastern Russia.

Datamonitor
The sales growth at Datamonitor in 2003 has continued into 2004, chairman Bernard Cragg says, revealing a 10% rise in sales to £18.8m in the first six months of this year and pre-tax profits up to £2m from £500,000 in the same period last year. Things are going so well that there is an interim dividend of 1.5p this time against nil last year.

Scapa
Dr Keith Hopkins, chairman of Scapa Group, told shareholders at the yearly meeting that both sales and profits were up in the first quarter, compared with the first three months last year. He added: 'Our new product development programme has a solid pipeline of innovative products and, with a continuation of current levels of demand, we expect to see further progress being made in the remainder of the financial year.'

Atlantic Global
Atlantic Global experienced 'the most active period in our history for potential client interest' in the first half of this year, the company has announced in a trading update prior to entering the close period ahead of the interim results due in September. The announcement says pre-tax profits for the period are expected to be not less than £200,000 (compared with £322,000 in the same period last year) but that is after an investment of around £200,000 in the sales and marketing activities of the business, which is expected to deliver increased benefits in the second half.

Gold Fields
Latin America and Gold Fields Ltd of Johannesburg have completed a C$860,000 private equity placement in MinMet's majority-owned subsidiary GoldQuest Mining. In addition, Gold Fields has transferred its 50% participating interest in the Western Dominican Republic joint venture with GoldQuest, in exchange for equity in GoldQuest.

GWR
Ralph Bernard, chairman of radio group GWR, told shareholders at the yearly meeting that: 'The group has recorded a good start to the new financial year. Like for like analogue revenues, which account for 92% of group revenue, were up 5% in the quarter ended June 30 compared with the first quarter last year.'

Boughey Distribution
Boughey Distribution, the distribution division of NWF Group, has won a two-year contract with HP Foods to warehouse and distribute HP Foods' products into the grocery retail sector.

Some to watch out for

Aggregate Industries
Stephen Rawlinson, analyst at Arbuthnot Securities, says 'buy' Aggregate Industries at 85p. He says the company, which delivered good half-year results this week, is in the middle of its trading range and should be bought with the mid-term in mind.

Enterprise
He also says that it is 'good news' that Enterprise, the Aim-listed support services group, has bought JMPC Ltd, an educational services company, for up to £4.2m. He says this is likely to be 'the first stage of a broadly-based move into education and white collar services in that area', and says the shares are a 'buy' at 308p.

Halfords
His colleague, Gillian Hilditch, has initiated coverage of Halfords with a 'buy' recommendation, setting a target price of 310p against the current 272p.

XN Checkout
David Johnson at Daniel Stewart, is recommending XN Checkout, a supplier of EpoS systems to the hospitality sector, as a 'long-term buy' at 102p-109p and setting a target price of 126p.

Unquoted-Analyst.com
Meanwhile, Monisha Varadan of Unquoted-Analyst.com has come out with a 'buy' recommendation for Daniel Stewart at 4p, saying: 'this niche player seems to be on a winner'.

KTS
Luke Ahern, at Corporate Synergy, has cut his recommendation for KTS, the Market Terminal information provider from 'buy' to 'speculative buy' following the sharp downturn in the share price in recent weeks. The fall followed what he says was 'the untidy selling of a former director's stock and the general market malaise'. However, he applauds the purchase of 100,000 shares by chief executive Marc Pinter-Krainer last week and sets a target price of 7p against the current 5p. He also advises existing investors 'to hold their nerve'.