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.

Debt busters

MR Micawber may not have been the most charismatic of Charles Dickens's characters, but he sure knew what he was talking about when it came to money.

His 'annual income £20, annual expenditure £19 19s 6d, result happiness; annual income £20, annual expenditure £20.0s 6d, result misery,' is as good advice today as it ever was.

Failing to follow that simple piece of advice is making life miserable for an increasing number of people, and probably many more who will be lured into cheap borrowing by the latest interest rate cut, but it is opening the door to a profitable future for Debt Free Direct, the company which earns its living by helping people sort out their financial problems.

DFD is not one of those debt consolidators, who put all the debts in one basket and lend a bigger sum spread over a longer term so the borrower finishes up paying even more, it is a debt management company which, through computer analysis finds the best method for individuals to solve their problems.

Set up originally within Latham‘s Chartered Accountancy practice, the business sets out to help anybody who is in trouble because of 'unfortunate' circumstances - they have fallen on hard times through sickness or loss of their job.

The company are not interested in what it calls the 'irresponsibles', who take on debt with little idea of how they are going to repay. Out of every 100 people who call on DFD, 40 come under the 'irresponsible' banner; the rest are offered a solution, which may range from cutting up credit cards to re-mortgaging.

In two% of the cases the recommendation may be to go into bankruptcy, but by far the majority, some 30%, are taken into Individual Voluntary Arrangements (IVAs), an alternative to bankruptcy, by setting up a scheme whereby creditors agree to debts being repaid over three to five years, and maybe even accepting 40p to 50p in the pound.

This is where DFD‘s expertise comes into play. Its staff set up the trust into which an individual pays a set amount each month, and handle all the legal details with the creditors throughout the period.

'Since we started offering the services four years ago, more than 2,000 people have used the service,' says chief executive Andrew Redmond. 'And the average debt has been around £30,000.

'We charge £2,500 for setting up the IVA, which we add to the total bill and take out in the first 10 months, and we earn £75 a month for supervising the scheme. All the rest of the money paid in by the debtor, is paid to the creditors, normally in a lump sum at the end of the period.

'Everybody benefits - the suppliers because they are guaranteed to get back at least part of their debt; the individual who probably pays less than he or she would have and has peace of mind; and DFD because we earn from it.'

DFD came to AIM last December and is already breaking even. House broker W H Ireland is forecasting pre-tax profits of £1m for the year to end April 2004 and double that for the following year. The figures could soar when interest rates start rising again and employment levels fall.

W H Ireland suggest the shares are a 'buy' at 47p, against their launch price of 40p, but with only 10% of the shares currently available on the market, they may not be easy to acquire.

From miner to major

CAMBRIAN Mining, the London-based junior mining finance house, that is moving from Ofex to AIM later this month, may not be the size of Yell, but its successful fund raising confirms the growing trend of investors backing new issues.

Chief executive John Byrne is bubbling with enthusiasm about the way the company is performing, particularly in Ghana where the Subranum project, in which it has a 37.25% interest, is producing outstanding results.

It also has a 40.79% stake in Deepgreen Minerals, a major coal producer, and is rubbing his hands in the knowledge that China has began importing metallurgical coal for the first time and expects to buy 25m tonnes a year.

Some you may have missed

HOUSEBUILDER and business park developer Artisan, which was founded by Stephen Dean four years ago, has turned the corner in the year to end March, returning to operating profits of £268,000 from the loss of £16.6m in the previous 12 months.

Mr Dean stepped down as chairman at the end of last July after Michael Stevens came in as chairman and John Hemingway was appointed a director. Various provisions have been made as a result of major changes to the business, and after these there is a pre-tax loss of £5.3m, down from a loss of £12.8m in the previous year, but debts have been reduced by £11.9m in the year.

SAVOY Asset Management has bought B&H, a firm of independent financial advisers of Bournemouth, Dorset, a company that provides financial services to some 750 'high net worth' individuals in the South West. The price is £50,000 immediately and £235,000 to be paid over the next 18 months, plus 116,279 Savoy shares.

AIM-listed mineral exploration company Southern African Resources has been given a prospecting permit for its 4,600 hectare Leeuwkop property.

PETER Stefanini, chairman of Millbrook, told shareholders at the annual meeting: 'Trading in the first quarter has fulfilled our expectations. Prospects for the two quarters are better than they have been at any time in Millbrook‘s history.'

SHAREHOLDERS at the Telecom Plus annual meeting were told by chairman Peter Nutting: 'The first three months of the current financial year have seen a continuation of the rapid growth we were experiencing during the second half of last year. We now have more than 150,000 customers, an increase of 11% since the year end.'

CITY Equities is the latest firm to sign up for QuoteTerminal, the financial news and data service provided by Knowledge Technology Solutions.

One to watch out for

COST cutting and a major restructuring of operations at Planit Holdings, the computer-aided design group, caused a major slump in pre-tax profits during the year to end April, the company reporting just £1.9m this time against £5m previously. But with clear decks, SQC Research predicts the company is now ready to bounce back onto its previous profits growth track.

SQC indicates profits of £3.8m in the current year and £4.6m next and suggests a target price for the shares of 35p against the current 23.5p.