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.

Class act

A QUESTION I always wanted to ask my teachers, but never had the courage to ask, was: 'If you‘re so clever, why aren‘t you rich.' In those days teachers were still allowed to give pupils a thump round the ear for raising an eyebrow.

Mike Clark, a former head at a London comprehensive, could give me a better answer, however, having turned all those years of drumming the three Rs into hundreds of reluctant learners into a couple of a million pounds in the space of three years.

Just about the time Tony Blair was mouthing his mantra 'education, education, education,' Mr Clark (or Clarky, as he was probably known to his pupils) was retiring from full-time employment, and found himself taking temporary assignments as a boost to his pension.

Such was the demand, he hit on the idea of forming a recruitment agency to bring in teachers from around the English-speaking world.

It was as easy as A,B,C. Two other former teachers, Geoff Perkins a South African and still only 31, and Nick Ward, a New Zealander, now 39, who had already left the profession for the more lucrative world of recruitment, joined forces with Clarky in 2001 to set up the International Teachers Network (ITN) to specialise in the field.

Agents were appointed in Australia, New Zealand, South Africa and Canada to recruit and vet teachers and classroom assistants who desired to expand their experience while, at the same time seeing more of the mother country and Europe.

Last year, ITN placed nearly 10,000 teachers on daily contracts, 323 for a full term, and found permanent positions for a further 63. Turnover soared to £6.4m and generated profits of £645,000 – a ratio of 10%.

Such success attracted on-line AIM-listed recruitment specialist Hot Group, which had already bought two other recruitment companies in the past year, and inspired a £5.6m offer in cash and shares. The three founders stay on to 'grow and develop the business.'

It bodes well for Hot Group who have just reported an operating loss of £438,000 for the year to end August (against a loss of £2.225m for the previous 16 months), but recorded its first quarterly profit in the final three months of the last financial year.

Chairman Tony Reeves is confident the group will be reporting profits for the current financial year, and he has plans for a further acquisition in the near future. Could it be anything to do with supplying the ailing NHS with overseas recruits, by any chance?

Coal haul

IN March I wrote of the attractions of UK Coal, as much a property play as a supplier of the black stuff. The attractions were two-fold, at 68p I suggested there was a good chance for capital gain, and at that price the shares were yielding more than 14%.

The interim dividend was maintained and this week the shares hit 134p on news that the company has landed a three-year contract to supply 8m tonnes of coal to EdF Energy, one of the UK‘s biggest electricity suppliers.

While it is never wrong to take a profit, those who bought for the dividend yield should hold on. The Bank of England has a long way to go to catch up with 14%.

Rehabilitating Cyprotex

CYPROTEX is a company remembered on the Stock Exchange not for the excellence of its software technology that helps in drug discovery, but because of the publicity it attracted when Paul 'The Plumber' Davidson chose to mark the company‘s launch on AIM, early in 2002, with spread-betting activities.

'This publicity has probably made it more difficult to attract serious investors, even though the company was not involved, and as a result, no recognised investment institution has a worthwhile stake,' says Robin Gilbert, analyst at Numis in a research note.

It does appear, though, that the investment institutions‘ loss could be the small investors‘ gain, with Mr Gilbert recommending the shares at 20.75p each, believing they could rise to 40p.

He says: 'We believe the company has developed a leading edge technology, which deserves the backing of institutional investors.'

Can‘t be clearer than that.

Mining-go-round

WHAT an incestuous world it is in mining. Take this: Asian Energy has raised £750,000 from two UK institutions as the first step to listing on the Alternative Investment Market. Deepgreen Minerals now owns 55.3% of Asian and AIM-quoted Cambrian Mining owns 52% of Deepgreen, and, oh yes! John Byrne is chairman of all three companies.

Some you may have missed

IN-FLIGHT advertising and lifestyle publishing group Transad International has bought Personal Screening, the supplier of home testing kits, from Wellbeing Screening. Transad paid in shares worth £625,000.

INDEPENDENT financial adviser consolidator Destini Financial Services Group has bought two further operations – Applewood Associates and Bervale Mead. Destini has bought 11 companies in the past 12 months.

DATA storage group InTechnology reduced losses by £1m to £3.7m in the six months ended September 30 and chief executive Charles Cameron says: 'Group outlook is more encouraging this autumn than it was six months ago.'

AIM-listed active management company Crown Corporation is to install waste management and water treatment infrastructure for three Argentinian projects to a value of $633m. The contracts are due to start by July 2004.

PREMIER OIL has confirmed a 'significant discovery' in its exploration well offshore Mauritania.

MINING and exploration company Minmet is in talks to sell a number of its Swedish gold exploration concessions to Dublin-based Ovoca Resources. Price is 11m new Ovoca shares, representing around 22.5% of Ovoca.

HEALTHCARE products group Maelor has won its first approval outside Europe for ContiSol, its urethral catheter maintenance solutions brand. Ahimsa, a leading supplier in Argentina and the region, has been appointed marketing and distribution partner.

Some to watch out for

AN 'interested party' is said to have bought nearly 3% (9m shares) in Tadpole Technology in the past few days. The company is said to be working on a 'radical new delivery method of software for CD Roms'.

GALLIFORD TRY, which has just seen off a bid from ROK, is still seen as a potential bid target by Stephen Rawlinson at Arbuthnot Securities, and with the company named as a preferred private sector partner for two NHS LIFT projects, he sees the shares as a 'buy' at 44p suggesting the stock is worth 'in excess of 60p in a bid situation.'

IT MUST help to have the Governor of the Bank of England on your side, which is what Debt Free Direct, who advise individuals on how to solve their debt problems, could claim this week following the Governor‘s warning on rising debt problems.

But probably even better to have house-brokers W H Ireland speaking up for you. David Gorman, analyst at W H Ireland, says the shares are a 'buy to outperform the market' at 72p, and he is looking for 86p in the short term and 'well above 100p' in 2004.