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.

Hail the Ofex founder

IF THE City of London is about anything it is about entrepreneurs, it is about raising money to help companies grow and providing an opportunity for investors to buy into those companies.

Ofex ticks all these boxes, and more.

In only nine years, more than 500 companies have started their lives as publicly quoted companies on this market. They have raised more than £1bn and provided investment opportunities for tens of thousands, perhaps hundreds of thousands of investors.

Many companies have moved on to bigger markets and raised even more billions of pounds.

What a testament to the vision of John Jenkins who started his working life as a 'Blue Button' (trainee), at just 15 years old on the old Stock Exchange floor - a right of passage that would have benefited many of today's traders.

When his father, Sid, died in 1981 he took over the family jobbing firm of S Jenkins & Son but, five years later, when the Big Bang changed life in the City forever, he sold the business to the Guinness Peat Group.

A further three years down the road and Guinness Peat withdrew from market-making and John decided to set up his own firm, JP Jenkins, trading in unlisted securities under Rule 4.2.

An even bigger move was still to come in October 1995 when the Stock Exchange launched Aim. Some 45 companies previously quoted on the Unlisted Securities Market said they did not want to join that new market and John Jenkins agreed to set up a separate market for them. The Stock Exchange gave its blessing, providing he made it clear that these companies were traded 'Off Exchange'. And so Ofex was born.

It was fashionable for some in the City not to treat Ofex seriously. Many still do not. But John Jenkins, more steeped in City compliance and history than most, has always lived by the City's code 'My word is my bond' - and thus he has always been serious and protective of the exchange he founded.

It has now moved on, become a publicly quoted company in its own right and has four market-making firms operating. Institutions now take it seriously.

Mr Jenkins is now retiring as chairman and has accepted the new position of honorary life president, a mark of the role he has played. But isn't it time the City also honoured one of its own?

This man spent all his working life in the Square Mile and created an exchange that fits alongside the best the traditionalists can offer. Overpaid footballers and bit-part actors have been knighted for less.

But I believe that John Jenkins would relish nothing more than having his achievements recognised by the City establishment which has always been reluctant to embrace him.

Polaron

THE best thing I can do for Joe Stelzer is to write that Polaron, the extremely hi-tech company where he is chief executive, is bound to fail. He thrives on proving people wrong.

He has been motivated in this way by his father, Dr Isadore, who was short on praise and long on criticism, and also at his public school, Haberdashers, where he was determined to turn every negative into a positive.

One talent he did discover at an early age was that he had an eye for the commercial angle. So while one or two others competed at solving the Rubick Cube in the fastest possible time, 14-year-old Joe worked out the answer then sold the solution to his school mates at £1 a time so that they could compete in the time-trials.

At 14 he was also selling Apple computers to classmates – and eventually the school – as a freelance agent for his father's business.

Once he had graduated in electronic engineering and computer science, Joe joined his father at Polaron, a maker of electron microscope grids, to set up a software republishing business.

Joe's determination to show his father how good he was eventually led to him gaining control and bringing Polaron to Aim last March.

Polaron is a pioneer in various scientific instruments, but the jewel in its crown is in nanotechnology: providing a microscope that allows researchers and industry to study the atoms in raw materials. At £500,000 a time, these instruments are not cheap, but they are still cheaper than competitors can provide.

Next month Mr Stelzer will be producing his first set of figures for the market, of which a pre-close trading statement last month said: '... while revenue levels for the year ended June 30 will be broadly in line with market expectations, improved efficiencies in manufacturing operations, control of general overheads and the benefit of recent currency movements, will result in profitability for the group significantly in excess of market expectations.'

That encouraged Robert Sanders at Arbuthnot Securities to raise his profit forecast for 2004 by a third to £1,050,000 and to £1,650,000 for 2005. A further 50% hike in profits is predicted for 2006 by Lawrence Peterman of brokers Eden Group, by which time sales are predicted to be more than £21m.

But more important for me is that Mr Stelzer has set himself a personal target of reaching sales of £100m by the time he hits 40, three years from now. He emphasises this is not a market forecast, but a personal goal.

Of course, he will never do it, will he?

Supporta supporter

I'VE become a supporter of Supporta, the company that supplies outsourcing services to the NHS. The shares returned from a month's suspension this week having seen their price rise 37% in just two hours in July.

Their return saw them down 11p to 43.5p, a much more realistic level, but with a whole series of pluses in the offing.

Supporta is raising £6.25m through a placing of shares at 38p each, and will use the cash to buy Parys Snowdon, a seller of back-office services to the NHS, and to buy Quality Care, a supplier of homecare workers.

The board is being revamped too, with Bob Holt (of Mears fame) taking a watching role of senior non-executive director, and handing over the chairmanship to John Jasper, a man steeped in local government service and latterly in local government supply.

I would bet it won't be long before more acquisitions are being announced.

Some you may have missed?

CRC Group
Things are not as bad at CRC Group as market rumours were suggesting, but the group that mends mobile phones and other IT products is cautious about the second half.

To dispel speculation, chief executive Alan McLaughlin brought forward his half-time results by a fortnight, admitting 'in spite of encouraging trends in most areas, the operational issues in Home Gateway and foreign exchange effects in IT mean that the group's operating profit for 2004 full year is now expected to be a little below the current range of market expectations.'

In the first half, sales were some £2m lower than the first half last year at £33.4m and pre-tax profits were £1.5m compared with £2m at this stage a year ago.

Henderson Morley
Billam AG has raised its stake in Henderson Morley to 9.36m shares, representing 3.6% of the company, following the purchase of 1.25m shares.

Meanwhile, Henderson Morley has reported pre-tax losses of £774,000 for the year to end April, some £90,000 more than in the previous year. Chairman Andrew Knight says: 'We are cautiously optimistic that a licence will be granted as a result of one of the series of negotiations currently taking place.'

Arc Risk Management
Arc Risk Management Group has raised £420,000 through a placing with institutional and other investors. The monies raised will be used to provide working capital for the company and, in particular, to accelerate the marketing and roll-out of the red24 suite of security products in Japan and elsewhere.

Maelor
Maelor the healthcare products company has appointed Zodiac Productos Farmaceuticos as a partner for the distribution of its blood plasma substitute product, Volplex, in Brazil.

Zotefoams
Zotefoams saw turnover increase 7% to £13m in the first half of this year, with pre-tax profits up £50,000 to £870,000 despite the negative impact of the weak US dollar.

NWF Group
NWF Group has delivered record sales, profits and dividends for shareholders in the year to end May. Turnover increased 18% to £199m and pre-tax profits were £120,000 higher at £5.17m.

Morgan Sindall
With pre-tax profits up 31% to a record £11.6m and sales up 8% to £604m, it has been a good first half for Morgan Sindall. The 'excellent results' were driven by strong performances in Affordable Housing and Fit Out, says chairman John Morgan.

South African Resources
Charles Hansard has joined South African Resources as a non-executive director.

Minmet
Minmet has started full in-pit mining at its Bjorkdal Gold Mine in Sweden and raised its estimate of production to more than 100,000 ounces of gold.

Angus & Ross
Angus & Ross is to form a joint venture in China with local authorities, the aim of which will be to conduct gold exploration in TongLing County, just south of the Yangtze River.

Albidon
The Tunisian Ministry of Industry and Energy has approved the application by Albidon for an exploration permit covering 4,160 sq km of highly mineralised terrain.

InTechnology
Charles Cameron, chief executive of InTechnology told shareholders at the yearly meeting: 'I am very encouraged by this healthy start to our fiscal year. We are performing in line with expectations and materially better than the same period a year ago.'

Harrier Group
Harrier Group, the information security and data storage group, where Bob Morton is chairman, reports an operating profit before exceptional costs of £172,219 for the six months of this year (up £34,000) on turnover of £6m (up £2m).

The company announced last month it is in advanced merger talks with Articon Integralis AG which, if successful, will result in an enlarged group that 'will be the market leader in the sector in the UK market and have well established operations in the USA and Europe.'

Cambrian Mining
AGD mining, in which Cambrian Mining has a 17% stake, plans to proceed with the development of the Augusta Gold/Antimony mine in Victoria, Australia.

Dana
Dana has successfully completed two appraisal wells designed to test the western extension of the Ujung Pangkah field offshore East Java, Indonesia.

Bema Gold
Bema Gold is raising its stake in Victoria Resource Corporation from 30% to 33% through a placing of Victoria shares costing Canadian$4m.

Some to watch out for

Spectris
Toby Thorrington at Arbuthnot Securities considers there is 'considerable upside potential' in Spectris, and says the shares are a 'strong buy' at 408p.

Interserve
His colleague Michael Morris believes that Interserve 'continues to trade at a discount to the support services sector as a whole' and says the shares are a 'buy' at 266p, while Gillian Hilditch remains 'long-term buyers' of Carpetright at 1060p.

Xenova
Sam Fazeli, analyst at Nomura, rates Xenova a 'buy' at 8.6p in anticipation of a 'full pipeline' of news to come.

Carclo
Having endured a 'torrid time following the collapse of its key telecom market a few years ago', Carclo, the global supplier of technical plastic components and specialist wire products, is now more optimistic than it has been for some time, says Peter Ashworth at Charles Stanley. He says the shares are a 'buy' at 49p.

Teleunit
Given Teleunit SpA's history of profitability and cash generation and revenue growth prospects, the discount on the share price compared with European competitors is 'wholly unwarranted', says David Johnson at Daniel Stewart. He says the shares are a 'buy' at 14p.

Sportingbet
His colleague James Hollins is equally adamant that Sportingbet is a good 'buy' at 93p and places a target price of 120p on the shares.