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.

Land grab

A JOLLY little shareholder row is building at Grosvenor Holdings, the AIM-listed property investment group. Shareholder Andrew Perloff, who has built a reputation for spotting potential targets in the property field, is trying to oust four existing directors and replace them with himself and HM Perloff, believed to be his son.

Perloff senior currently speaks for about 30% of the Grosvenor shares and could raise his stake to more than 50% cent if his family investment firm, Panther Securities, succeeds in winning control of another company, Oakburn Properties, for which Panther made a bid on October 17.

Oakburn holds some 28% of Grosvenor.

The Grosvenor board is not amused, claiming the ?approach‘ is unwelcome and an ?opportunistic attempt to secure control without paying an appropriate premium at a time when our prospects are highly encouraging.‘

It adds that Perloff has put forward a number of resolutions for the forthcoming annual meeting that are ?extraordinary‘. The directors told shareholders that Perloff ?has been a shareholder of the company for some years, has supported the strategy of your board and has never voted against any resolutions proposed at any of your company meetings.

?Furthermore, your board has communicated with Mr Perloff on numerous occasions and he has always supported your board.

?Your board strongly believes Mr Perloff is attempting to gain control of Grosvenor Land for the benefit of either himself or of Panther Securities.‘

The board also rejected various claims made by Perloff about the performance of Grosvenor Land and the remuneration of its directors. The directors plan ?a detailed rebuttal ahead of the yearly meeting now brought forward to noon on November 19‘.

Should be quite exciting!

Where is the sparkle?

?Bubbles are our business,‘ says the blurb in the annual report of Disperse Technologies, the AIM-listed company which supplies the cosmetic industry with bubble filled perfumes, skin moisturisers, natural oils and sunscreens.

But are the bubbles about to burst?

Chairman and chief executive Colston Herbert believes not, but accepts the year ahead could be make or break year for the company, which has just raised £1m from a third round of funding.

The year that ended on August 31 was not as good as had been hoped. The company relies, at present, on royalties earned by selling its patented products to others, mostly in the US.

The big client is Estee Lauder, which uses Disperse Technology‘s secret formulae in at least four products and pays around $1m a year for the privilege. Sadly, the strength of sterling against the dollar reduced the value of the contract.

Another blow was delivered by the tardiness of Bodyworks, described as a US combination of Marks & Spencer and Bodyshop, the biggest retailer of cosmetics in the US. This giant organisation had been expected to start providing royalty income in the past year, but has delayed product launches until next month.

Meanwhile, Disperse is still spending more than £1m on research and development. The aim now is to reach break-even in the current trading year, which means turnover rising to £1.8m and cutting costs, by introducing a redundancy programme, directors‘ salaries being halved and senior managers accepting a 10% cut. Plans are also in place for either selling or sub-letting the group‘s Guildford head office.

Emphasis has been switched from boffins to marketing, and the expanded sales team is charged with finding new industry sources to sign up.

?We are talking to 15 to 20 major players at the moment, and we are looking at other uses for the bubbles, not least in pharmaceuticals,‘ says Herbert.

As a former executive of US medical giant Sterling Winthrop, he says: ?Working for a US company means you can miss a target once, but the second time you were looking for a new job. I do not expect to survive here if we do not achieve our objectives over the next year.‘

Breath of fresh air

SPRUE AEGIS, developers of the FireAngel plug-in smoke alarm, is on a roll; and has already snared some 15% of the home market, selling through more than 5,000 outlets. It expects to start selling in the vast US market in December having received regulatory approval there.

David Pannell, analyst at house brokers Durlacher, believes sales could increase by 269% in the coming year, generating a profit of £800,000, albeit one year later than had originally been anticipated.

But what is a year with the whole future in front of it?

A major area for growth at home is in the higher margin social housing sector, where installing a plug-in alarm comes at a fraction of the cost of installing traditional smoke alarms.

It is with this market in mind that the company has just launched a new initiative involving the nation‘s fire brigades, local authorities and housing associations. It is offering to pay £1 to local community fire safety programmes for every FireAngel smoke alarm sold into social housing where the lead has come from those sources.

The money doesn‘t go direct to the introducers but into fire safety programmes. Still, paying 5% for an introduction seems a modest enough incentive plan.

Some you may have missed

PIXOLOGY, the digital photographic software group, is raising £10m through a placing and working towards a quotation on the Alternative Investment market. A prospectus is promised by the end of November. Meanwhile, chief executive Yuval Yashiv says the market for digital photo software will continue to grow rapidly. ?The additional capital will enable us to exploit our leading technology in a market with huge potential,‘ he says.

AIM-listed AFA Systems, suppliers of software for the banking and asset management industries, is to supply ?a leading Scottish investment management group‘ with Common Knowledge, from the group‘s investment management suite of products.

CMS WEBVIEW, the AIM-listed group which has the exclusive licence to distribute ProphetX - a market display and trading system for energy and commodity traders - has signed up 12 clients since July.

SOUTH AFRICAN RESOURCES has signed an agreement with Snowden Group to start a ?confirmatory exploration and drilling programme‘ to take the Leeuwkop platinum group metals project to bankable feasibility status.

MALCOLM WILSON, former chief executive of Lonrho Properties & Construction Africa, has joined Central African Mining & Exploration as an executive director. He has also made a £210,000 investment in the company.

LOSSES at medical group Maelor were reduced by 45% to £726,560 in the half year to end September.

ONLINE commercial property trader First Property Group recorded a turnover of £1.6m in the six months to end September, five times more than in the corresponding period a year earlier. Pre-tax profits were £175,000, against a loss of £116,000 in the corresponding period. Chief executive Ben Habib says: ?We would expect this growth to continue during the year to March 31, 2004 and beyond.‘

Watch out for

BEMA Gold, whose share price has risen from 156p to 193p since listing on AIM on September 30, is the subject of two brokers‘ ?buy‘ circulars. Both Michael Curren, at CIBC World Markets, and Brian Christie, of Canaccord, have raised their target prices.

CAMPING specialists Blacks Leisure gets favourable treatment from Gillian Hilditch at Arbuthnot Securities and from Richard Ratner at Seymour Pierce, both of whom recommend ?buy‘ at 345p. Hilditch has set a target of 425p.

STEPHEN Rawlinson at Arbuthnot Securities, having already raised his forecast for T Clarke at the interim stage has issued a further ?buy‘ recommendation. ?The quality of earnings is high and the yield (4.5%) is backed by a very strong cashflow and cash balances,‘ he says.

“WE believe Fibernet offers a low risk, potential high-reward exposure to the alternative telephone services sector,” says Richard Wood at Arbuthnot Securities. He rates the shares a ?buy‘ at 99p.

KBC Advanced Technologies, a specialist consultancy to the global oil industry, gets the thumbs up from corporate activist Paul Scott writing on the UK-Analyst website. He says the shares, trading currently at around 40p have a target price of between 80p and 100p.