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.

Eyebright future

FORMER Hoare Govett vice chairman Johnny Townsend is masterminding another AIM fund-raising after the success of Ringprop, the marine propellor company that he brought to the market in late 2002.

Now with John East & Partners, Townsend‘s latest venture is Eyebright, a day surgery company that is planning to raise £5m to set up 20-day surgery centres across the UK. The business is set to list on AIM in mid-to-late April.

Townsend, one-time head of corporate business development at Kleinwort Benson, says the day-surgery market is set to take off following renewed efforts by the NHS to cut the cost of in-patient admissions.

'The government has made day surgery a priority to reduce the crippling overheads of in-patient surgery. To raise the proportion of procedures done in this way will require a massive increase in capacity. We‘re well positioned to capitalise on this growth.'

Eyebright has already raised £2.2m by public subscription to open a surgical centre in Yorkshire in December.

That Morton magic

COAT tails are to investors what towing lines are to a water skier, hold tight and ride the waves for a successful run. Bob Morton is one of those whose coat tails are worth holding on to, so I draw your attention to not one, but three companies reporting this past week in which he holds a substantial stake.

First is Multi Group, currently a tool hire business, that has just reported a loss of £3m for 2003, adding to a £2.9m loss in 2002.

But, and it is a big but, last November, the company raised around £2m in a placing of shares which brought in Southwind Ltd, Bob Morton‘s investment vehicle with a 52.3% stake.

Mr Morton is many things but he does not waste any of his many millions chasing lame ducks. Within days of the financial restructuring, Oliver Cooke was appointed chairman while Russell Bracegirdle, the company‘s chief executive and Keith Ferguson, its operations director, ?stepped down‘ from the company‘s board and joined a newly-created management board. Since then Mr Bracegirdle has left ?to pursue other interests‘.

In recent weeks two loss-making companies have been disposed of, taking more than £1m out of group operating costs.

The statement from Mr Cooke this week said: ?The board has ambitions to develop Multi into a wider and much larger services group and is actively exploring other sectors in which the group might profitably operate.‘

I understand that some of these ambitions will shortly be realised, with at least one significant deal in the pipeline.

Multi shares fell from 7p to 5p on the results, but have recovered to 6p and are tipped to go higher as news emerges.

Next we move to Vislink, a company that provides satellite technology for broadcasters around the world.

This is a company that has, say brokers Investec Securities, ?laboured for years through difficult end-markets, competitive pressures and internal reorganization. By contrast, 2004 and 2005 will see a number of positive trends coinciding in the digital broadcast and video sectors.‘

The company has just won a $59m deal in Venezuela that will provide a minimum 10% profit margin, and is anticipating a major boost in sales from changes in the mobile phone requirements in the United States.

Another area that chief executive Ian Scott-Gall is looking to for future earnings is on the high seas where piracy last year, he says, cost the shipping industry some $25bn.

The big fear is that terrorists will get aboard a supertanker and steer it into port and blow it, and half the town, apart. New marine regulations being introduced by the International Maritime Organisation from July 1, insist that any vessel above 5,000 tonnes trading internationally will need a certificate proving it has a tight security plan.

This will need to show that all vulnerable parts of the vessel, engine room, decks and bridges are watched 24-hours a day either by dedicated crew members or through a surveillance system.

Vislink provides Sea Touch, a touch screen CCTV-system covering all vulnerable areas, through its Norwegian subsidiary, Hernis, already involved in new-build vessels.

?It needs only 50 ships to sign up for our equipment to bring in £1m worth of additional revenue,‘ says Mr Scott-Gall, and there are several thousand more than that sailing the seas.

Finally to Maclellan, the outsourcing service group, that handles everything from opening envelopes in Inland Revenue offices around the country to cleaning the floors at Sainsbury supermarkets and handling VIP passengers at Heathrow and Gatwick airports.

This is a company that keeps growing year-on-year and in 2003 saw turnover up 19% to £153m, and pre-tax profits £1.3m better at £5.5m.

Already this year the group has added such names as Boots, Superdrug, Holmes Place Fitness and Somerfields to its contract list and chairman, Mr Morton, says ?the board is confident the group will make further progress in 2004.‘ Its current order book stands at £485m.

It is a sentiment likely to be echoed in a trio of broker circulars in the coming weeks, with all of them said to be penciling in £6.5m for the current year.

No wonder Mr Morton can afford to pop over to his home in Barbados again this week.

Baltimore showdown

WHAT excitement is promised when the board of Baltimore Technologies finally faces its tormentors from Bermuda-based Acquisitor Holdings. No date has yet been set, but it looks as if the extraordinary general meeting demanded by Acquisitor probably will follow the AGM in late April/early May.

Baltimore, to remind those who have forgotten, was the darling of the dot.com boom and whose shares, in 1999 soared to a massive £137.50 each earning the company a slot in the FTSE 100 index with a market capitalisation of £5bn.

It would have formed no part of this column in those days. Today, it fits in well with the shares at 38p and a market cap of just £20m.

It is with this history that Acquisitor has announced plans to oust the current board and replace it with its own team, led by David Buchler – better known as deputy chairman of Tottenham Hotspur.

Acquisitor has set itself up as champion of the 45,000 small shareholders still tied into the company – virtually all institutional investors bowed out some time ago.

Its deputy chairman, Duncan Soukup, argues that the existing board of Baltimore ?has presided over a disastrous collapse in shareholder value‘ and there are risks it could squander what shareholder value remains.

Baltimore‘s board, in reply, says that Acquistor is being ?opportunistic‘. It is an argument that has some merit. After all, Acquisitor did not buy into Baltimore until last November and, in fact, is showing a 1p gain on its average buying price.

On the other hand, somebody needed to ask the existing board some important questions and Acquistor, with more than 10% of the company (against the board‘s 0.2%) will be a loud voice.

High-flier

NORMALLY, nobody would accuse Bob Holt, head of Mears, the support services group, of having his head in the clouds, but he certainly did earlier this week when balloonist David Hempleman-Adams broke the world‘s altitude record in Colorado, climbing to 37,000 feet.

Mears not only sponsored the attempt but provided eight volunteers from its UK staff to assist in the launch of the open-basket hot-air balloon.

Sovereign's aim

SOVEREIGN Reversions, an investment company formed in 1992 to invest in home reversions, is coming to AIM through a £15.6m placing and an up to £2.7m open offer at 260p a share. Charles Stanley is the nominated adviser and broker. Dealings are expected to start on April 16.

Out of Africa

ALBIDON, an Australian company that mines for nickel in Africa, starts trading on AIM and the Australian Stock Exchange, today having raised A$15m (£6.2m). RFC Corporate Finance is nominated adviser and Numis Securities the broker.

Some you may have missed

HEALTHCARE products company, Maelor, has received approval from the UK Medicines and Healthcare products regulatory agency to launch a one litre version of its blood plasma substitute, Volpex.

SIR David John, chairman of Premier Oil, says: ?2003 was a year of transformation for Premier. Record levels of production and profit, and a strong balance sheet, were complemented by exploration success and the completion of the corporate restructuring.‘ Pre-tax profits last year were up 80% at £40.8m, and net cash inflow, including restructuring and joint ventures, was £255m compared with £93m in 2002.

LAPP Plats, the Ofex-listed resource company, has appointed Dr Tim Fletcher as exploration manager.

PARALLEL Media Group, the AIM-listed executive sports promotion group, has announced the creation of a major new golfing series in Asia to be sanctioned by the PGA European Tour.

PRINT and online publisher, Vitesse Media, has appointed Leigh Nissim, formerly chief executive of BusinessForSale.com, as its new chief operating officer.

SHIRE Pharmaceuticals has acquired the rights to the global patents for Fosrenol, excluding Japan, from AnorMED for up to S31m.

AIM-listed Alltracel Pharmaceuticals , the biopharmaceutical research and development company, has announced a 61% growth in revenue to e1.01m and a loss for the year of e2.6m compared with e3m in 2002.

RED Squared, the Ofex-listed IBM hosting and managed services partner, is planning to move to AIM within the next three months. The company has just announced a pre-tax profit of £7,556 for the first quarter of this financial year (to end December, 2003) compared to a loss of £82,000 for the comparative quarter in the previous year.

SALES at TripleArc tripled to £21m in 2003 and pre-tax profits nearly quadrupled to £3.4m. Chief executive Jason Cromack said: ?The highlight for the group was undoubtedly the acquisition of Access Plus in November. This has led to our becoming one of the largest print management companies in the UK and puts us in a position to win some substantial contracts which, prior to the acquisition, would not have been possible. We expect to see further growth in 2004 and to make progress accordingly.‘

AMINEX, the oil and gas company listed in London and Ireland, is selling its stake in OAO Ideloil, an oil company operating in the Russian internal republic of Tatarsan, to Dolkono Holdings and Nereids Holdings for $2.2m

PURSUIT Dynamics has raised £2.4m through a placing to institutional shareholders at £1.24 a share, the proceeds of which will be used for further expansion and to provide additional working capital.

JAY LeCoque, chief executive of Celsis International is ?very encouraged‘ by the progress the company is making. In a trading statement he says: ?The product group continues its robust customer expansion and is performing well across all market segments. Our dairy business is poised to capture significant market share in all dairy-producing regions.‘

WYNDEHAM Press has bought Graphic Facilities, a pre-press and print process specialist for £4.62m in cash and shares, with a deferred consideration of an additional £1.3m.

INDITHERM, the specialist heating technology company, is to install an undersoil pitch heating system at the new Falkirk community stadium. The £100,000 plus contract has been awarded under the first phase of the new stadium development.

PILAT Media, who supply software to broadcasters, produced profits of £600,000 in 2003, following a loss of £240,000 in 2002. Sales increased 28% to £9.42m.

ATLANTIC Global, a provider of business and resource management software, saw sales rise 26% to £1.96m in 2003, while pre-tax profits soared 111% to £496,000. Chairman David Cox says: ?I am confident that 2004 will be another successful year.‘

THOMSON Intermedia reports a 38% rise in sales to £4.05m and a significant reduction in losses to £647,000 from £1.34m.

DELTEX Medical Group saw sales rise 74% to £3m and a £800,000 decrease in operating losses to £2.4m in 2003.

JOHN Morgan, chairman of Morgan Sindall, told shareholders at the yearly meeting that all divisions had made a good start to the year and the group is well positioned to take advantage of the exciting market opportunities in both the public and private sectors.

CORPORATE Synergy has completed two share placings, raising more than £4m for 1st Dental Laboratories and The 4Less Group. It means Corporate Synergy has raised nearly £9m for clients since it opened its broking business at the end of 2003.

PETRA Diamonds has been issued with prospecting permits for two kimberlites in the North West province of South Africa.

LIGHTHOUSE Group, the independent financial advisory group, reports a 53% rise in turnover to £22.8m last year and an 83% jump in gross profits to £4.8m.

Some to watch out for

TANIA Wild at Williams de Broe issues an upbeat report on CA Coutts, following another good set of results showing pre-tax profits of £1.54m and an 11% increase in the year‘s dividend to 5p.

DILIP Shah, at Arbuthnot Securities, says Brit Insurance is a ?strong buy‘ at 79p even though they have been very weak over the past fortnight. He says a fair value for the shares is 95p.

COMPUTACENTREis a key beneficiary of a recovery in IT demand, says George O‘Connor at Arbuthnot Securities. The shares are a ?buy‘ at 430p with a target of 494p.

ASSUMING Geest is able to match the market‘s growth this year, Nicola Mallard at Investec Securities says the shares are a “buy” at 474p

FINAL results from Costain were well ahead of expectations and group performance will improve further as the mix of work develops, says Stephen Rawlinson at Arbuthnot Securites. The shares are a ?buy‘ at 46p.

SHARES of insurance group SVP look heavily oversold, says Dilip Shah, at Arbuthnot Securites, and he says they are a ?buy‘ at 50p with a fair value of 65p.

GO FORTH and buy Forth Ports, says Alastair Gunn. It is his transport nap stock for the year and the shares at 1132p are a ?strong buy‘ with a target price of 1645p to 1799p.

RICHARD Workman at Oriel Securities has upgraded the shares of food producer Uniq to a ?buy‘ at 168p claiming they are currently oversold.

STRONG results showing pre-tax profits rising 19% to £21m at AIM-listed support services group Enterprise, has earned a ?buy‘ recommendation at 320p for the shares from Stephen Rawlinson at Arbuthnot Securities.

A 41% rise in pre-tax profits to £28.4m at Paladin Resources prompts a ?buy‘ note from Merrill Lynch at 103p although it does say there is a risk of high volatility.