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.

Timing is everything, and the folk at ITM Power would embarrass the most precise of Swiss horologists with their excellent launch calendar on the way to the Alternative Investment Market..

ITM is a major player in the world of 'fuel cell and electrolyser technologies for the hydrogen economy,' which meant nothing to me either until it was explained this was the future alternative to fossil fuels and, most importantly, could replace petrol for powering cars.

So, with the world economy rocking to the threat of soaring oil prices, there could not have been a better time for chairman Stephen Massey and chief executive Jim Heathcote, to do the rounds of institutional investors and fund managers, guided by nominated advisors and brokers Durlacher, to raise £10m.

The placing was due to close on June 10, but such has been the demand from UK and European investors that it has closed more than a week early. The rest of the world will have to wait until dealings start on June 11 to jump on the clean-fuel driven bandwagon.

NCI Vehicle Rescue

THINK of the AA, the RAC and Green Flag, and you will have an idea of what NCI Vehicle Rescue is about, except that so far it is a bit smaller, and doesn‘t directly employ most of the people who represent the operation.

In a typical 21st century operation, virtually every aspect of the business is outsourced, from the call centre that acts as the first line of contact, to the local garage that comes to fix, or tow away damaged vehicles. This leaves NCI free to focus on selling breakdown cover, but keep overheads low, the benefits of which (or at least some of them) can be passed on to customers.

The breakdown cover sold by NCI is a fully-insured product backed by Groupama, and a network of 'independent recovery agents' – local garages - throughout the UK and Europe means that NCI only has to pay them when they are called out for assistance, and it does not have to build its own fleet of vehicles, or employ an army of technicians on call 24/7.

As each NCI policy sold carries full insurance against call-out charges, the company has no exposure to claims.

NCI, which already has some 10,000 vehicles on its books, is now raising up to £400,000 at 15p a share to expand its advertising and public relations activities. Some £275,000 is already in the bag, and plans to launch on Ofex are already in hand through financial advisers Ruegg, from whom copies of the prospectus are available by calling 020 7584 3663.

Private & Commercial Finance

A WARNING to all those who feel the need to use the courts to defend their rights is that even winners can be losers. Private & Commercial Finance Group was 'forced' to take legal action against National Insurance and Guarantee, who had refused to pay claims under a policy of credit insurance.

PCFG won the case and the £4m they were awarded on May 7 is now in their bank account – but at what cost? Chairman Michael Cumming has reported a net loss of £989,477 for 2003 against a profit of £929,636 in 2002. It is the first loss the company has reported in 10 years and Mr Cumming puts the blame almost wholly on the distraction and costs involved in fighting the legal battle.

He says: 'The saga prevented us from pressing ahead with acquisition plans while we were forced to wind down the consumer finance portfolio as a precaution in case judgment went against us. Although we won the case, we incurred more than £1.2m of costs and expenses and there is still a lengthy process before our costs, which NIG has been ordered to pay, are finally settled, and even then we will not recover every item of cost incurred.'

The problems do not end there; Mr Cumming warns he will be reporting a further loss in the current half-year as the fall-out from the case has impinged on the current year, but hopes to finish the year close to break even.

As a sign of confidence 'and appreciation to shareholders for their support' the board is recommending a dividend of 0.5p a share.

Myhome

SINCE joining Ofex two and a half years ago, Myhome has struggled, but it could be on the move now following its admission to the British Franchise Association list of associate members.

Carrying the BFA banner should be a major plus for the group that started life in the giant Unilever organisation as part of a plan to provide home services across the UK, including residential cleaning, dry-cleaning and carpet care.

When Unilver had a change of mind, the business was bought by the current chief executive, Russell O‘Connell, who turned it into the franchise operation that it is today.

New York Holdings

THERE is not a great deal for shareholders in Ofex-quoted New York Holdings to get excited about, but the yearly meeting could be worth attending. It‘s in the glamorous Columbus Hotel in Monaco on 17 June, for those who wish to make an appearance and re-elect various directors and approve the payment of a bonus of $150,000 to the same.

Special business includes supporting a resolution to reduce the company‘s share premium account by $965,517 the 'amount having been lost or being unrepresented by available assets'.

Some you may have missed

Maelor
IN the two years since Stephen Appelbee became chief executive of Maelor, the healthcare products group, turnover has more than doubled and losses almost halved, chairman Alastair Macpherson tells shareholders. He reveals turnover rose 15% to £1.34m in the year to end March while losses were reduced 46% to £1.12m. He adds: 'The board believes that, with costs under tight control, the current portfolio of products is capable of delivering profitability.'

Pursuit Dynamics
BRIAN Sweeney has been appointed a non-executive director of Pursuit Dynamics. Mr Sweeney is currently a director of Fastnet Energy Consultants, Braintree Healthcare and Hayward Tyler.

Crown Corporation
CROWN Corporation has sold rights to fulfil security and waste management contracts in South America for $350m (approx £200m) and is using the funds to develop prospects in the oil and gas sector in the former Soviet Union through a newly formed subsidiary Crown Oil Corporation.

Acquisitor Holdings
ERMUDA-based Acquisitor Holdings has raised its stake in Baltimore Technologies to 21.05% and in Nettec to 24.28% through the purchase of 188,000 shares and one million shares respectively.

Premier Oil
Premier Oil‘s Woodside-operated Chinguetti oil development in Mauritania, is to proceed following joint venture approval of the project. The capital investment expected to execute phase I is approximately $600m (approx£350m). Based on the award of contracts and anticipated timing of vessel availability, the first oil is expected to be produced by the end of the first quarter 2006.

Grandcorp
Grandcorp, the 50-50 joint venture company with City Lofts Group, has sold Town Centre House, Harrogate, for £2.4m to a private family trust fund. The property was bought originally for £660,000 and the cost of conversion and refurbishment was £600,000. The book value was £2.1m following a revaluation at March 31, 2003.

Corporate Synergy
SIMON Lapthorne has been appointed equities analyst at Corporate Synergy, the stockbroker and corporate finance adviser to growing companies. He joins from Arbuthnot Securities where he headed a team responsible for all UK equities media research in the secondary market.

Hermes
HERMES Pensions Management, trustees of the BT Pension Scheme and of the Royal Mail Pension Fund, has taken a total of 14.9% stake in Community Broking Group.

John East
JOHN East and Partners, financial advisers to Surface Transforms, has accepted 20,000 Surface Transforms shares in payment of its £14,000 fee for raising £2.9m by a placing to institutional and other shareholders.

Some to watch out for

Mears
HARDLY had Bob Holt, chairman of Mears group, sat down, after telling shareholders of one of this column‘s favourite companies 'the board is confident that the group will exceed current market expectations for the year,' than Robert Sanders at Arbuthnot Securities admitted '2004 revenue will be significantly above our original forecast of £150m.'

He adjusted his profit before tax estimate to £7m from the previous £6.4m and even though the shares have soared from 66p to 185p in the past year he retains a 'buy' recommendation. Interim results and an up-date are due on 31 August.

Castings
ENGINEERING group, Castings, is a 'modestly valued stock' says Michael Blogg at Arbuthnot Securities, who says the prospect of good shareholder returns means the shares are a 'buy'.

ASOS
THE appointment of Jonathan Jones as marketing director and Kate Davies as jewellery buyer at fashion group ASOS could drive the company on to the next level, says Rhys Williams at Seymour Pierce Ellis. He says the shares are a 'buy' at 27.75p.

iTrain
CORPORATE training group, iTrain, has announced a deal with Mindjet producers of visual planning software, which causes Luke Ahern at Corporate Synergy to predict a 'further demand for iTrain shares'. He says it is 'not inconceivable that iTrain could generate sales of £300,000' annually from the deal starting in August, with a margin 'in excess of 90%'.

RWS
FOLLOWING publication of half-time results, showing a 25% increase in profits to £5.5m at intellectual property support services group RWS in the period to end March, Graeme Kemp of Collins Stewart says a 'fair value' for the shares is 190p against the current 151p.

First Calgary
INITIAL results from First Calgary Petroleum‘s Yacoub block in Algeria are 'excellent news' for the company, says Canaccord. It is recommending the shares as a 'speculative buy' at £4.65.