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.

Finely tuned

ONLY three weeks ago I suggested here that in-car entertainment group Armour, was likely to be announcing an earnings-enhancing acquisition before Christmas. Well Christmas has come early and Armour's stocking is overflowing with not one acquisition, but four.

And each one is already making profits.

Such purchases do not come cheap but, like a dog, they are not just for Christmas but for life.

Armour is paying a total of £12.5m, mostly in cash but with some share element, for Veda, QED, Goldring and IMI, companies involved in the design, manufacture and supply of high-end products and services for the specialist hi-fi, home theatre and entertainment market.

Each is a market leaders in its niche sector and either own or represent some of the premier brands in those markets, says chief executive George Dexter.

The deals extends Armour's range beyond in-car entertainment and, as the new Home Electronics Division, these four new operations will account for 45% of the enlarged group's sales.

To help the deal through, Armour has raised £5m through a placing of just over 11m new shares. But an indication of how the market views the benefits is that analysts were soon claiming sales would rise in the year to August to £29m, with pre-tax profits up nearly £800,000 to £2.1m. Brokers KBC Peel Hunt issued a 'conservative estimate' of £34m sales and £2.6m profits for the following year to August 2005.

Great Scott

IT IS difficult to believe that two years ago financial training group Intellexis had less than a month to survive.

That was before Ken Scott was brought in as a saviour - and what a saviour he has been.

A sign of the success is that having endured a period of hefty cutbacks - then some months of stability and organic growth - the company is now on the expansion trail in Europe.

It has a powerful partner after tying up a marketing and distribution deal with Les Echos, one of France's top newspapers.

Olivier Amoudruz-Hattu, director of Les Echos conferences, studies and other programmes, says: 'We have selected the Intellexis Finance Series because they are in line with the high standard of quality that we want to maintain.'

I suspect Intellexis would not have got past the front door two years ago.

Some you may have missed

TECTEON, the software developer for the voice quality and telecommunications markets, has won an initial contract worth some $40,000 for preliminary field testing of its echo cancellation software by KT-NGN, a division of Korean group KT Corporation.

PREMIER OIL has successfully completed drilling and testing of the Chinguetti-4-5 appraisal well. 'It is an excellent start to Premier's active exploration and appraisal programme over the next year,' says chief executive Charles Jamieson.

THERE are now clear signs that the new strategy is beginning to work at AorTech International, according to experts. The biomaterials company cut losses in the six months to September 30 to £1.02m from £7.62m in the same period a year ago. With cash burn now reduced significantly, the group still has £6.2m cash in hand.

AIM-listed healthcare products group Maelor, has been granted a UK pharmaceutical marketing authorisation for its urethral lubricant gel TendaGel.

IRISH oil and gas explorer Petrel Resources is raising £959,500 through a private placing to fund Iraqi oil activities. The AIM-quoted company is in talks with the Oil Ministry in Baghdad to explore a 10,000 sq km block in the western desert.

OILFIELD technology group Sondex, which has recently opened a regional office in the United Arab Emirates to support sales, has reported a 26% rise in turnover to £7.4m in the six months to the end of August and operating profits 13% higher at £2.7m.

NWF Group, the sales and distribution business, has bought Fuel Oil Supply for £870,000 in cash.

MAJOR news from Minorplanet Systems, the global vehicle management information group, which earned a profit of £300,000 in the year to end August, having made a loss of £6.2m in the previous year.

BUSINESS information group Hemscott, expects to report a 'substantially improved performance' for 2003, chief executive Ros Wilton says in a trading update. She adds: 'The out-turn will be significantly ahead of current market expectations.'

Some to watch out for

STEPHEN Rawlinson, analyst at Arbuthnot Securities, believes Costain is poised to return to the dividend list and that the shares are a 'buy' at 36p.

PUB group Jennings Brothers, is on target 'to deliver double-digit profit growth', says Alan Millar at Arbuthnot Securities. He recommends the shares as a 'buy' at 213p.

SUPPORT services group MICE - an old favourite of this column - is a 'very strong buy', says analyst Mark Watson-Mitchell in his WatsHot website. The shares have risen from 46p to 82p this year and he sets a target of more than 100p by early next year.

NORTHERN PETROLEUM shares are a 'buy' at around 5p, says Tom Winnifrith, writing on the UK-Analyst.com website. The company is asset rich, and some of those assets are about to start working. Winnifrith says in a worst-case scenario the shares have a 25% upside in a year, but in a best case the stock could double or more.

TONY Lancelott at Arbuthnot Securities says 'strong finances and the twice-covered dividend suggest a secure and rising 4% yield' at aerospace group Umeco. He recommends the shares as a 'buy' at 327p. He also likes the look of Meggitt, the electronics/systems group, and says its shares are also a 'buy' at 237p.