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.

Shining Armour

IT would be easy to believe that George Dexter, chief executive of Armour Group, broke his leg having jumped too high at the joy of the excellent results he delivered for the year to August 31. The truth, however, is that he hit the root of a tree while running in the woods last weekend, which was why he is hobbling around the City on crutches.

He did, however, attempt a jig when I met him for lunch to celebrate a massive 94% leap in sales to £31.1m and a 105% jump in pre-tax profits to £2.9m.

And there is even better to come this year with the group's home electronics division, formed only a year ago, already providing massive support to the in-car entertainment division.

It seems that two major housebuilders are showing interest in the new modular multi-line hi-fi systems that have the potential for pre-wiring 5,000 to 10,000 new build properties over the next 12 to 18 months at a cost of £3,000 a time.

This is backed by the recent acquisition of The Hi-End Group, which goes into existing homes and designs, integrates and installs services for home theatre and home automation systems.

Chairman Bob Morton has several interesting runners in his corporate stable; Armour is the thoroughbred.

At your leisure

WHEN somebody has set up a company from scratch and made a success of it, then it makes sense to hold on to his/her coattails when they try again, particularly in a field they know.

It makes even more sense when you are backing not one, but two people who meet the above criteria, which is why investors should keep an eye on ADDleisure which started on Aim this week.

ADDleisure is the brainchild of Allan Fisher, former chief executive of Holmes Place (Princess Di's favourite gym) and David Turner, the man who founded LA Fitness.

Together with technical director David Cummin they have invested £500,000 of their own cash in the new company and raised a further £1.5m through a placing of shares 'to capitalise on new opportunities in the leisure, health and fitness sectors.'

The company already has investments in two such opportunities designed to help us get into shape. First is a 75% stake in Fitbug that links technology with activity, enabling users to enter regularly their daily exercise and diet on to an internet programme that then guides them on how to progress.

The other investment is a 28% stake in Liberation Fitness Systems, offering vibration technology to stimulate muscles and blood flow. The claim is that each exercise programme can be reduced to seconds instead of several minutes.

Designed originally to train elite athletes, the equipment is being sold into gyms and sports areas, but can also be adapted for home use.

Research has shown that a third of all adults will be obese by 2010 – fat chance I say if Messrs Fisher and Turner have anything to say about it.

Daniel Stewart

FOR the second week in a row I am extolling the virtues of Daniel Stewart, the smaller company adviser. Last week it was to celebrate the move from Ofex to Aim and a more than 50% rise in the share price since I first wrote of them three months ago.

This week it is to mark the publication of their results for the six months to end September which show a 137% rise in turnover in the period to more than £4m and an operating profit of more than £1m in the period against a loss of £402,000 in the corresponding period a year ago.

With the Aim market continuing to attract new clients on a week-by-week basis, there is every reason to understand why chief executive Peter Shea says he looks forward to the rest of the year with confidence.

Meanwhile, the brokers have been appointed nominated adviser and broker to Aim-listed ESV A/S, a Danish registered company specifically formed as an investment company to take advantage of opportunities arising from the regeneration of port facilities and related infrastructure in the Ukraine and surrounding region.

Hansard

THIS was not one of those columns that leapt on the bandwagon in July when shares in financial public relations group Hansard doubled in price on the back of a fundraising and news that Terry Ramsden was taking a stake.

Much has happened in the ensuing three months, not least the business changing its name to Financial Development Corporation. This week a very complicated announcement was made to the Stock Exchange by FDC, the gist of which is that Adam Reynolds, founder of the Hansard Group, and his finance director Paul Foulger, have led a management buyout of the Hansard PR companies from FDC at a total cost of £450,000.

Mr Foulger tells me that although there have been talks about taking Hansard public again, it certainly will not happen for some time. Meanwhile, FDC has become a very cash-rich shell.

Associated Network Solutions

ONE can understand the pride that Scott Fletcher, chairman and managing director of Associated Network Solutions, has in the company he brought to Ofex four years ago and which announced profitable growth in the year that ended last August.

But when he announces, as he did this week, that a 52% rise in the share price to 22.75p from September 23 to October 25 is 'a direct result of the purchasing of shares by employees in the company' one has to ask what the employees know that the rest of the investment world doesn't.

Let us hope that it is, as Mr Fletcher says, a clear 'demonstration of the internal confidence in our business strategy and positive outlook going forward' - factors that may become apparent to the rest of us when the interim results are published on December 16.

If it is indeed employee support for their company, then this must be applauded, but if the company should have a surprise up its sleeve, some cynics might wonder if gossip on the shopfloor might have raised employee hopes.

One more warning for Mr Fletcher: investors may be prepared to follow employee confidence and do some buying of their own; but they will also be rushing to unload at the first sign of employees cashing in, seeing this as a sign of no-confidence.

Some you may have missed

Hill Station
British super-premium ice cream maker, Hill Station, started life on Aim this week at a super-premium of 50% above its placing price of 8p a share. Such has been the demand for shares that brokers JM Finn have placed an additional 6,500,000 shares at 8p a share, to raise an additional £495,000, net of expenses.

Real Affinity
Real Affinity, the Aim-listed direct marketing and communication group, has raised £1,433,850 by a placing of new ordinary shares and the issue of £300,000 of convertible 6.5% unsecured loan stock.

The funds have been raised with the intention of undertaking a substantial acquisition in the near future says chief executive Mark Richardson who, with three other directors, has bought a total of 1,635,000 shares in the placing.

Bright Future
Corporate Synergy has raised, with institutional and other investors, £870,000 for Bright Future, the Aim-listed retailer of mobility products such as battery scooters and lifting chairs for the elderly.

Sovereign Reversions
Sovereign Reversions has bought NHL Reversions from the Paragon Group for £2.04m in cash. The sole asset of NHL Reversions is a portfolio of 27 home reversions independently valued at £2.35m.

Western Canadian Coal
John Hogg has been appointed vice president and chief operating officer of Western Canadian Coal.

Alliance Pharma
Sales at Alliance Pharma increased 13% to £5.6m in the six months to August 31 and gross profits were up 26% at £2.9m.

Greystar Resources
Greystar Resources is raising £18.6m through a private placing to advance the company's Angostura project in Columbia where it has just reported that underground exploration has met a high-grade shoot returning 242 grams of gold per tonne over 0.4 metres.

The year that ended on June 30 was one of 'dynamic growth' for Cambrian Mining says chairman Charles de Chezelles. He says that since the financial year-end the trend has continued.

The market value of the company's listed assets, which grew from £2.4m at the end of June 2003 to £13.1m a year later, has soared to £80.7m following the merger with Deepgreen Minerals in September. The value excludes the $1 per tonne royalty from Asia Energy as well as unlisted investments.

RWS Holdings
A trading update from Andrew Brode, chairman of RWS Holdings, the intellectual property support services group, says: 'Current activity levels and the order book are strong, supported by important contract wins and reflecting industry's requirement for RWS's specialist services and for the protection of intellectual property.'

TripleArc
TripleArc, the UK-based provider of technology-led print procurement solutions, has signed a three-year multi-million pound print management contract with Virgin Retail covering point-of-sale print as well as warehousing, distribution and collation requirements.

Henderson Morley
Dr Ian Pardoe, chief executive of drug discovery company Henderson Morley, has bought 6,458,240 shares in the company at 1.75p a share. His beneficial interest is now 44,778, 101 shares representing 15.62%.

Some to watch out for

Celsis International
Jay LeCoque, chief executive of Celsis International, the microbial detection and analytical services company, reports a 27% jump in profits on a 13% rise in turnover in the six months to end September.

He says he looks forward to reporting further strong progress at the year-end, a sentiment that brokers Baird clearly agree with as they retain their 'outperform' recommendation for the shares at 35p.

Sportingbet
Forget the outcry over high streets packed with casinos, James Hollins at Daniel Stewart feels that Sportingbet's acquisition of Paradise Poker 'radically enhances its position as the leading online sportsbook gaming operator' and, with the shares at 116p raises his target price from 130p to 150p. He is supported in his assessment by Melanie Sharp at Arbuthnot Securities who also says the shares are a 'buy'.

Retail Decisions
David Johnson at Daniel Stewart is so encouraged by the trading statement from Retail Decisions, that he not only maintains a 'buy' recommendation but also sets a price target of 31p – exactly double the current price.

Kidde
What a difference a weekend makes. Last Friday, Michael Blogg, analyst at Arbuthnot Securities was recommending shares of Kidde as a 'strong buy', but by Monday he had reduced his recommendation to just 'buy'. The difference is that Mr Blogg was obviously too successful in his earlier advice and the shares jumped 25p to 170p almost immediately; he still remains confident about the company, however, and says 185p should be an absolute minimum.

Balfour Beatty
A day spent visiting an airport, a motorway and a hospital, does not strike us as being much fun, but it convinced Stephen Rawlinson, analyst at Arbuthnot Securities, of the size of the opportunities that exist for Balfour Beatty. The shares are a 'long-term buy' at 280p he says.

Sirius Financial Solutions
Sirius Financial Solutions, the supplier of software and service solutions to the insurance and financial services industries, is a company in transition, with a brighter outlook than the market appears to appreciate, says Stephen Ford at Collins Stewart.

He adds: 'Given the strong earnings growth there seems no reason why Sirius should not trade on at least a sector price earnings ratio instead of the 27% discount at present. This implies a price target of 110p against the current 80p,' he says.

Shire Pharmaceuticals
Analysts at Merrill Lynch and UBS are both highlighting Shire Pharmaceuticals following US approval for Fosrenal, its phosphate binder for lowering phosphate levels in patients undergoing renal dialysis. While UBS takes a 'neutral' stance on the shares, James Culverwell at Merrill Lynch marks them as a 'buy' at 522p.

Tadpole
I hear on the grape vinethat software group Tadpole is about to launch a 'news blitz' in the next few weeks. We shall see.