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.

Erectile

I HAVE been in many uncomfortable situations in my role as a journalist reporting on matters financial, but none as uncomfortable as I faced last Monday.

Being in Alaska in temperatures of below 60 degrees when BP first found oil in Prudhoe Bay was not pleasant.

I was also fairly twitchy when photographed standing 15 yards from a herd of fighting bulls while working on a story about British Leyland's 'man in Spain', who owned the ranch on which they were bred (the photographer was hiding behind a rock).

I was threatened with a beating by some east London heavies when I wrote a story they didn't like about their attempts to buy a London dog track. (That evening, a colleague Patrick Neville finished up in Charing Cross Hospital after taking a severe beating by four thugs in Trafalgar Square - wrong Patrick?)

And I had a covert meeting with somebody identified only as Tower Bridge when I exposed a money laundering operation - the result of which was that I was banned from entering Switzerland for more than a year after exposing the role a Swiss bank was playing.

All these I took in my stride. But I must admit to a nervous, dry throat when I met James Barder, chief executive of Aim-listed Futura Medical, to discuss his product in development - MED2002 - particularly as he was accompanied by his young lady PR, the delightful, 20-something Alexandra Tweed.

MED2002, I should explain, is a 'rub-on cream for erectile dysfunction,' - Viagra in a tube - not the sort of subject I would choose to discuss with young ladies over lunch, or any other time for that matter.

Nor were Futura's other products CSD500, 'a latex condom with gel to help maintain erection throughout intercourse, so reducing slippage' and FLD500, for 'female partners of male condom users.'

Mr Barder and Ms Tweed, both experienced in these matters, were gentle with me and the only time I felt at all embarrassed was for the poor waiter pouring a glass of wine just as Mr Barder reached the words 'stopping the condom slipping' - he hardly spilt a drop.

Schoolboy sniggering aside, there is a serious investment point in all these products, not least that an exclusive agreement has already been signed with SSL International, makers of Durex, for the CSD500 product, which will be available over the counter next year. And MED2002 is also scheduled to be sold over the counters of High Street stores by 2006.

Former insurance broker James Barder became involved with Futura having made an investment in what was a private company; pre-Viagra, he, some family and friends all thought it a 'bit of a laugh' initially, but are now very serious. Together they speak for around 25% of the company and many of them came in at the equivalent of 1p a share. Today the shares stand at 71.5p

Although Peter Cartwright, analyst at Williams de Broe, expects losses to rise to £2.2m this year on sales of just £100,000 - the first ever sales - he estimates sales could rise to £1,325,000 next year and losses to be reduced to £562,000.

And, remember, MED2002 does not hit the streets until 2006.

Pilat

I AM advised that Pilat Media Global, a company whose software helps television companies pan their schedules of programmes and advertisements, is worth watching even more than EastEnders.

For the fourth consecutive quarter the company has turned in profits and in the first six months of this year sales soared 88% to £5.6m, resulting in £435,000 profits for the half-year compared with a loss of £1,245,000 in the corresponding period a year ago.

But the big news could come early next year. Pilat is already doing some work for a major US television network where it has been selected as 'preferred supplier' and the hope is that the arrangement could become more permanent by the end of this year.

NEW ISSUE ALERT

Medsea

While the UK still seems to be the home of preference for an increasing number of migrants, more and more Brits are making room for them by moving out - mostly to Spain.

According to a recent Alliance & Leicester International report, by the year 2020 one in five Brits will be living outside the UK.

And that is good news for Medsea Estates Group, one of the top six leading estate agents in Spain, who are coming to the Aim market with a £60m valuation.

Medsea was established in 1998 by Tony Gatehouse who has more than 20 years experience of the Spanish property market, and he works substantially with agents in the UK and Ireland.

In the six months to end June turnover was just over e10m (roughly £6.5m) and pre-tax profits were e2m (£1.4m).

The group is developing plans to expand into other Mediterranean countries such as Cyprus and Greece.

Dyno

Dyno-Rod, one of the oldest franchise operations in the UK, is pushing ahead with its Aim-quotation and £47.5m fundraising.

The company says it has ambitions to move from Aim to a full listing 'as soon as practical'.

Some you may have missed

Multi

Multi Group is selling its tool hire business to Speedy Hire for £7,150,000, of which £5,650,000 is payable on completion. Chairman Oliver Cooke says he now has funds available to re-launch the company.

Falkland

David Hudd, chairman of Falkland Islands Holdings told shareholders at the yearly meeting: 'The group's trading results in the first quarter showed an improvement over last year.'

He added: 'In Falkland Minerals, the analysis and modelling of the onshore aero-magnetic survey for minerals is nearing completion and the initial results are encouraging. The survey has identified 20 possible drilling targets which are being evaluated and a drilling programme is being designed and will commence later this year.'

Sunbeach

Sunbeach Communications, the Aim-listed, Barbados-based internet service provider, has encountered slower than anticipated fundraising for purposes of entry into the cellular market, which has resulted in a delay to the provision of cellular services in Barbados. However, the board believes Sunbeach will be in a position to commence cellular services in the last quarter of this year.

Data

It has been a stunning first half for Datacash, the group that supplies the software that checks credit card payments. Pre-tax profits in the six months to end June were 155% higher at £670,000 on turnover up a more modest 26% to £2.14m.

All the revenue came from the Card Holder Not Present activities, which recorded 18.7m transactions, 50% higher than the first half of last year and greater than the total for the whole of 2002. These transactions are expected to continue to grow at a compound monthly rate of about 4%.

Sondex

Hampshire-based Sondex, the British oilfield technology company, has signed an agreement to develop a 'downhole telemetry interface tool' exclusively for Halliburton, the US oil giant.

Surface

Surface Transforms, the makers of carbon fibre reinforced ceramics, has had a year of 'strong progress,' says chairman Kevin D'Silva. Turnover increased 79% to £428,608 in the year to end May, and operating losses were reduced by 77% to £256,972.

Cambrian

Cambrian Mining is raising £4.2m through a placing of new shares at 45p each. The funds will be used to maintain Cambrian's current equity interest in Western Canadian Coal before that company's proposed Aim admission, and to subscribe for, or underwrite, further equity issues in other companies within Cambrian's portfolio of investments.

Real

A growing confidence in the media sector helped Real Affinity, the Aim-listed direct marketing and communication group, to reduce pre-tax losses to £37,770 from £1,298,000 in the year to end March. Chairman Tony Douglas says he is confident the company is now positioned to increase the value of its business and enhance shareholder value.

Deltex

Nigel Keen, chairman of Deltex Medical Group, told shareholders at the yearly meeting: 'Trading in the first half has been according to the board's expectations and it looks forward to the second half with confidence.'

Petra

Kevin Dabinett, chief executive of Petra Diamonds says: 'The work at Alto Cuilo (in North Eastern Angola) continues to yield positive results. Alto Cuilo is a project of great potential and I believe we will be in a position to announce further positive news in the near future from both the drilling and bulk sampling work.'

Some to watch out for

Matrix

Following the announcement of three acquisitions and a contract with Betfair worth more than £1.5m over the next two year, data network group Matrix Communications is a 'long term buy' at 3.8p a share, says David Johnson at Daniel Stewart. He sets a target price of 4.75p.

Computer

Computer Software Group, who provide ticketing systems to Chelsea and Manchester City among several other football and sports clubs, gets a 'buy' recommendation from Anne McMahon at Seymour Pierce. She puts a target price of 67.4p on the shares which rose 4p to 59.5p following the results for the year to end February showing turnover up 74% to £6.3m and a pre-tax loss of £343,000 compared with a loss of £1.4m in the previous year. Mark Watson-Mitchell's SQC Research is even more enthusiastic setting a target price nearer 75p.

There is no dividend this time, but the company is currently in the process of going to the courts for a capital reconstruction which will allow it to 'develop a dividend policy for returning value to shareholders', something which will appeal to chairman Michael Jackson whose Elderstreet Investments vehicle owns more than 30% of CSG.

Kidde

Following a settlement of past tax liabilities with the US internal revenue service, Kidde, the fire detection group, has announced a large tax credit worth £30m in the profit and loss and £13m in cash in 2004. This is a one-off benefit but, coupled with the BP Prudhoe Bay contract last week, it serves to focus attention on the shares, says Michael Blogg at Arbuthnot Securities. He says the shares are a 'buy' at 120p.

Mr Blogg's colleagues have also been in buying mood this week. Alan Millar, for instance, says that the share price of Greene King, the regional brewer, has been affected by some profit-taking following the announcement of the Laurel acquisition last month, and he believes this represents a 'strong buy' opportunity into a quality company. He sets a target price of 1,250p against the current 1,050p.

Robert Sanders, reiterates his 'buy' recommendation for our favourite company, Mears Group, even though the shares have risen from 98p to 178p in the past year, and he says that the price weakness in the shares of engineering group, Hampson Industries, provides an 'excellent buying opportunity' at 18.25p a share.