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.

Virtue of an each-way bet

THERE is nothing like a good each-way bet for the investor. Such an opportunity could be available at Virtue Broadcasting, the online webcast operator which has a blue-chip client list in the UK and Europe, including such giants as the Bank of England, BAT, Microsoft, the London Stock Exchange, CommerzBank and Novartis – to name but a few.

This is a company whose shares were standing at 328p in 2000 when all it had to offer was a dream for the future. The shares collapsed to 1.25p in July 2003, at which stage a new management team stepped in, began shaking up the company and bringing the cash burn under control.

The shares have recovered to 5.25p in the wake of these efforts and some useful acquisitions that added weight to the strong customer base. When the figures for 2003 are published at the end of March, there should be signs that the improvement recorded at the halfway stage have continued. Michael Vassallo, analyst at Brewin Dolphin, is predicting the company could move into profits this year.

So, a more promising future is one half of the each-way bet, but the second half could provide a quicker return. Good news is just what makes Virtue vulnerable: there is no better time for a predator to pounce than when others have done all the hard work and are just poised to reap the rewards.

I understand that at least one interested party has already had talks with new chairman Mike Neville, and the feeling is that if such talks do not end amicably, there could be potential support from many of the 2,500 retail investors who have been nursing losses for some time.

And there may be some more anxious to sell than others. For instance, as part of the management restructuring last summer the two founding directors, Nick and Giles English, had to step aside, although Giles continues as a non-executive director. Between them they held some 18m shares, then representing 17% of the company. A further 13.4% was held by Interoute Finance, a supplier to the group, and the company where the English brothers are now involved.

Nick has already reduced his holding from 9m to 2.5m shares, which could be a forerunner of things to come.

ARC de Triomphe

THE WORLD may be a safer place since the Iraqi war, according to Prime Minister Tony Blair (who has just taken delivery of his £200,000 armoured Jaguar – so he, at least feels safer), but nobody in the security industry is easing up yet.

ARC Risk Management Group sells a database of knowledge on personal risk issues in more than 130 countries through its red24 information system. In recent weeks it has signed up HSBC Bank and insurers Hiscox as clients, and today announces a deal with US-based World Access Inc, a member of the Mondial Assistance Group, the world‘s largest travel insurance and assistance company.

Chief executive Rob Whiting says: 'This agreement is expected to form the platform for significant expansion of the red 24 service in the United States.'

A week before this announcement, John Beddoe, analyst at Seymour Pierce, was recommending ARC shares as a 'buy' at the price of 1.13p, which makes him look very good, as the shares rose 25% to 1.88p following news of the US deal.

Some you may have missed

'MIND-boggling' was one description of the licensing deal done by BioProgress with US-based FMC Corporation. BioProgress has signed an exclusive, worldwide 20-year licence for its NROBE dosage form, equipment and technology. A statement said the contracts 'are likely to generate a minimum of $160m (£87m)' over the first six years'.

FORBIDDEN Technologies has agreed with Mediaconcept Srl, to promote and develop Forbidden‘s new generation of online and mobile streaming products in the Italian market.

JOHN Nash, chairman of Care UK, told shareholders at the yearly meeting that trading in the current financial year to date is in line with group expectations.

DANA Petroleum confirmed it is in early stages of discussions that may lead to a merger with Venture Production.

MORGAN Sindall has signed a 20-year partnering agreement with Barnsley Primary Care Trust and Barnsley Metropolitan Borough Council, to provide primary health and social care facilities. Morgan‘s construction company, Bluestone, is the design and construct framework partner and will carry out construction works totaling some £50m over the next five years.

AIM-listed exploration group, Southern African Resources, has raised £2m following the exercising of 45m warrants by CGT Management, representing the interests of the family of Thomas Kaplan. The proceeds will partially pay for the recent acquisition of a 52% stake in Tau Mining.

JUBILEE Platinum has appointed Numis Securities as its nominated adviser and broker.

OILFIELD services group, MOS International, has bought NIM Engineering, a subsidiary of LGH Group of Newcastle for £675,000.

ENTERPRISE has been awarded a £60m contract stretching over three years to undertake the maintenance of social housing in Liverpool.

DIVERSIFIED sales and distribution business NWF Group improved profits by only £70,000 to £1,521,000, in the six months to end November, despite a 17% rise in turnover to £89m. Chairman J Roy Willis says 'the increasing costs of insurance and pensions' impacted on profits. Paul Grundy is joining the group in May and will become group finance director in September, following the retirement of Alan Fulkner.

HOT Group has bought Vectis Innovations, the internet-based recruitment company, for £450,000 in cash and shares.

CORPORATE Synergy has raised £650,000 for iTrain, a provider of training software, and has been appointed its new broker.

JASON Smart, chief executive of LitComp, the provider of expert witness reports, says in a trading update: 'We have had a very encouraging start to the second half.'

One to watch out for

ARBUTHNOT Securities‘ George O‘Connor believes there is more to go for in SurfControls, following the company‘s results that were at the top end of the guidance he set out on 13 January. He says the shares a 'buy' at 521p and sets a target price of 819p.