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

Bob's your uncle

MACLELLAN Group is the thoroughbred in Bob Morton‘s stable of companies. The AIM-listed facilities management group – that means its operatives do every chore from cleaning the floors in Sainsbury's stores to opening envelopes and answering telephones in Inland Revenue offices – goes from strength to strength.

In the half-year to end June, during which the Department of Health was added to the list of customers, turnover was 24% higher at just under £75m, while pre-tax profits rose 54% to £2.34m.

Chief executive John Foley is confident the improvement will continue in the second half and onwards.

Formed only three years ago, MacLellan is already a big league player. But acquisitions are also part of the plan, and the likelihood is of something being added in the near future, probably in the security services field.

The company seeks a minimum growth of 15% a year as its initial target and the shares that have had a lift to 75p this week, are said by more than one analyst to be at least a third undervalued.

Ring the changes

CUT-PRICE telephone call provider Envesta is in a 'significantly stronger financial position now than it was at the start of the year,' says new chairman Lyndon Chapman.

Something of an understatement from a company where revenue rose 131% to £10.8m and operating profit was 76% higher at £501,000. The group generated £1.9m cash from its activities, which has helped in the reduction of debt during the year.

But it is in the backroom that the group‘s strength is showing through. Former chairman Stephen Dean resigned in mid-June and his holding of £2.5m preference shares, due for repayment in March 2006, has been converted to ordinary shares and placed in the market without upsetting the market, thus removing an ongoing liability.

Mr Chapman has strengthened the board by bringing in as non-executive directors, David Hunter, formerly with Thus and Alpha Telecom, and this week, heavy weight Mark Heraghty, former chief executive of Cable & Wireless, UK and Europe.

He is also looking at a number of possible acquisitions and although one potential deal appears to have slipped through the net in the last stages of negotiation, he expects to be announcing something positive in a few months.

No wonder this company is beginning to attract the interest of analysts, including Mark Watson-Mitchell on his WatsHot website who says the shares 'now 3p will soon reflect the potential' and John Beddoe at brokers Seymour Pierce who rates the shares 'hold/buy'.

Cabin fever

A YEAR ago, John Caulcutt, chief executive of Watermark Group, the provider of market support services to the international travel industry, was outlining plans for 'a total cabin management programme for products and services above the wing.'

Twelve months on, nine deals have been completed and the building blocks for future growth are in place.

Meanwhile, half-time profits to the end of June show turnover, operating profit and headline earnings all ahead of this time last year, despite the continuing negative influence on travel of 9/11, Sars and the war in Iraq.

Mr Caulcutt says 'recent market conditions have seen some improvement so that we anticipate the group will show further growth for the current year'.

Some you may have missed

AS I hinted a couple of weeks ago, results from Quadnetics Group, which designs, integrates and controls advanced CCTV and networked video systems, were even better than the bullish figures that the market had been alerted to.

Sales were up more than 50% to £20.3m in the year to end May and pre-tax profits of £1.4m compared with a loss of £800,000 in the previous 12 months.

Chairman Peter Rae says: 'We are confident of significant further advances in the group‘s financial performance, and we anticipate making further announcements in relation to ongoing business within the next few months.'

CARE UK, the specialist health and social care provider, has bought 75% of Corvedale Holdings, a provider of residential and educational children‘s care services, for a maximum of £6m in cash and shares.

Shropshire-based Corvedale, previously owned by three private shareholders, has preferred-supplier agreements with more than 80 local authorities to provide residential car, educational and therapeutic activities, primarily to children aged between 11 and 17 who have a background of emotional and behavioural difficulties.

In a trading update, Care UK says it has continued to make good progress and expects results for the full year to be in line with market expectations.

DEBT Free Direct has raised £3.8m by the placing of 6.4m shares at 60p each with institutional investors, a sum that will take the debt advisory and reconstruction group 'to the next stage in its development' says chairman Grenville Folwell.

The group advises people with debt problems on the best method of restructuring their finance, using a computer model to provide the most suitable method. Mr Folwell says the market for such services is “rapidly expanding.”

IT'S BEEN a long time coming, but Bema Gold Corporation has at last made it on to the AIM market, where it is the biggest player in its field. Bema, already quoted on the Toronto and American Stock Exchange, was keen to list on AIM, seeing it as 'an integral part of our European Development strategy' says chief executive Clive Johnson.

Sunbeach Communications Inc, the largest dial-up internet service provider in Barbados, is looking to the future with confidence, says managing director Michael Wakley. In its first full set of accounts since joining AIM, the company reports revenue of Bbds$6m and a loss before tax of Bbds$2.3m, but there was still Bbds$2.57m in the bank at the end of April

THE board of Vp, the equipment rental group, says: 'Group trading has been satisfactory in the six months to end September and in line with expectations.' Interim results will be announced on December 1.

DESPITE a near five-fold increase in revenues to £11.1m in the first half of this year, GX Networks, the telecoms network operator, still made losses of £1,874,000 in the period. However, this was a £1.4m improvement on the corresponding period of last year, despite the inclusion of substantial one-off restructuring costs.

FINANCIAL media group, Insensia, is withdrawing from the Ofex market on October 20 claiming the costs of maintaining a quote are 'unnecessary'.

LOSSES at Forbidden Technologies increased to £234,000 in the first six months of this year from £147,906 in the first half of 2002. Turnover was £15,333 (£5,350), but the company still has a cash balance of £2.4m. Chairman Vic Steel says: 'We believe the increasing acceptance of our innovative products augurs well for significant growth over the years ahead.'

THE new management team and strategy at Aim-listed education group, Europasia Education, seems to be paying off. Results for the six months to end June show losses have been reduced from £1,998,062 in the period a year ago to just £142,599.

AIM-LISTED recruitment company Hotgroup has bought the Buzz Recruitment Consultancy and Buzz Tempz Ltd for an initial consideration of £388,350 in cash and shares. A further £100,000 payment is subject to achievements in the next six months.

Independent exploration and production company, Ramco, has raised £9.2m through an institutional placing of shares at 350p a share. The additional capital will strengthen the group‘s balance sheet and provide it with an alternative to the mezzanine finance available for the Seven Heads project.

Some to look out for

ADAM Lawson at broker Teather & Greenwood says he is convinced Anite Group 'is on the road to recovery' and believes the IT group is a 'buy' at 44p.

HAVELOCK Europa has made good first half progress says David Taylor at Teather & Greenwood. He adds: 'The financial position is sound and higher workloads are being funded with undue strain.The group is developing well,' he says, and the shares are a 'buy' at 83p.

NEW tipster website UK-Analyst.com got off to a fine start with a word for asset-rich Leeds Group. Having delivered a profits warning earlier, Tom Winnifrith says the shares are a 'buy' at 19p.

STEPHEN Rawlinson of Arbuthnot Securities recommends Morgan Sindell as a 'buy' at 352p following an analyst visit to Scotland and the announcement of a £53m road building contract.