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.

INVESTORS still waiting for multiple market makers to start dealing in Ofex shares have not much longer to wait.

That market‘s joint managing director, Jonathan Jenkins, although still not ready to announce the actual timing, insists everything is on target for the 'summer date' he always had in mind. In which case, it will certainly be operating by the time the City returns from its holidays when market activity builds to its most active.

While proud of the role Ofex has played in helping young companies mature into corporate life, and several more are in the pipeline, he is, nonetheless, disappointed by the number who have used this market as a stepping-stone to AIM in recent months, and believes many may be jumping too early in their corporate life.

With nearly 900 companies now quoted on AIM, he suggests that many of the smaller caps could be struggling for recognition. They could also be turning their backs on a soon-to-be thrusting market.

The new top team announced at the beginning of this year is now getting into its stride, multiple market makers are nearly ready to boost activity and build liquidity, and with the launch of the International Market Service, I stick by my New Year assessment that this is a company to watch.

Taste of real life

ASHCOURT Holdings is the sort of company that Jonathan Jenkins could have been talking about. This investment and financial planning group came to Ofex in October 2002 with £181m of funds under management and it has grown both organically and by various acquisitions to a situation where its funds under management are more than £500m.

Now it is planning to move to AIM in a fortnight having raised £500,000 through a private placing and lined up an institution for further funding when it makes it move.

But, the last figures (for the six months to end October 2003) show the group was still making losses of £36,862 and, when chief executive John Morton, reveals the full year‘s figures in early July, it probably won‘t be doing much better than break even.

Mr Morton says that the company was brought to Ofex in the first place to give shareholders the ability to trade their shares, but now needed to find a wider audience.

'The AIM market is real life,' he says, 'even if that means being a small fish in a growing pond.'

Investors will hope that Ashcroft shares, having started life at 75p each and risen to £1, do not find 'real life' too difficult, or expensive, to enjoy.

Acquistor, or is it?

YOU can‘t really blame the Financial Times for being confused; after all if two companies share the same name (almost) and the same chairman, then they can‘t really complain if some think they are one and the same.

However, a headline suggesting, 'Acquistor losses surge passed (sic) £100m' must have sent some hearts fluttering, not least at Baltimore Technologies where the board has come under fire from Acquisitor Holdings (Bermuda) for its failure to deliver to shareholders.

The FT story starts: 'Acquisitor, the Bermudan-based activist investor that has been attempting to expose the weak points of former dotcom stars, has revealed shortcomings closer to home.'

It then goes on to report a jump in pre-tax losses from £32.5m to £106m in the six months to end March.

However, point one – the company reporting was Acquisitor plc, a UK company that has no direct involvement with Acquisitor Holdings (Bermuda), the company trying to unseat the Baltimore Technology board, except they both have John Radziwill (of the Jackie Kennedy Radziwill family) as chairman.

Point two – Acquisitor plc is a private company looking for a reverse takeover to get itself a share quote.

Point three – The losses being reported by Acquisitor plc for the six months were not £106m but £106,180.

Just to add to the confusion, Acquisitor Holdings (Bermuda) reported half-time results three days later, also for the six months to end March, and they showed a loss of $623,813 against a loss of $158,606 in the corresponding period a year ago.

I hope that is a little clearer now.

Following the purchase of a further 618,429 shares Acquisitor Holdings (Bermuda) now owns 23.23% of Baltimore Technologies.

Private & Commercial

FOLLOWING last week‘s report concerning the £4m payout to Private & Commercial Finance Group awarded after a court fight with National Insurance and Guarantee, chief executive Tony Nelson says 'it is excellent news' that NIG has decided not to appeal against the decision.

New issue alert: IPT

DIRECT marketing may not be every recipient‘s idea of what life is about, but for investors it could prove a profitable field. IPT, once known as Interactive Prospect Targeting, is the UK‘s leading supplier of direct marketing operations with more than 400 clients on its books and it is thinking about coming to AIM next month.

Canaccord Capital (Europe) is the broker, who has just started marketing to institutions looking to raise £5m, giving IPT a market cap of between £20m-£30m.

The business was established in 1999 and has been profitable since 2001, which is something to cheer about. Estimates are that pre-tax profits this year will be around £1m.

The group collects data from more than three million questionnaires every month and reckons to be responsible for 100 campaigns every month. Its client list includes such giants as Lloyds TSB, Dixons, Sainsbury‘s, Scottish Power, Dell, lastminute.com and The Open University, and is expected to top 500 by the end of this year. The cash being raised will be used to grow existing databases, for working capital, investment in assets to develop a division and invest in IT security.

Monkleigh

'NOW here‘s a good idea; let‘s see if we can get somebody to back it,' is maybe all you need to come to market these days.

Take Monkleigh, a new company set up specifically to become an integrated event marketing service group. Chief executive Ric Yerbury, non-executive chairman Ray Pierce and finance director Julian Hill, have experience in the hospitality market that they believe is 'highly fragmented and ripe for consolidation.'

So, they have the dream, now all they need to do is to raise £2.5m and get a quote on the Alternative Investment Market to help them fulfil it. Prospective investors should know that the money will be used 'to fund acquisitions and conduct due diligence on target companies.'

Corporate Synergy is acting as nominated adviser and broker.

XL TechGroup

ANOTHER newly created company, XL TechGroup, it is seeking to raise between £20m and £25m, but at least the money is being raised for an existing business, XLTechGroup LP, a limited partnership based in the US, that creates and builds companies in the life sciences and technology sectors.

The new company is seeking a quote on AIM with Code Securities acting as financial adviser and joint broker and Altium Capital as nominated adviser and broker.

Some you may have missed

Eden Research
David Collins, who has been acting as part-time finance director at Gieves & Hawkes, has been appointed finance director of Eden Research who have also appointed John East & Partners as nominated adviser for the company‘s proposed move to AIM.

First Derivatives
It was a good year for First Derivatives, providers of support services to the investment bank market, with turnover up 62.5% to £2.6m and pre-tax profits up 86.5% at £757,000. Chairman David Anderson says: 'The increase in activity experienced in the second half of last year has continued into the early part of the current year.'

Angus & Ross
Angus & Ross‘s Brazilian subsidiary has agreed the purchase of 12 licence blocks totalling 600 hectares where recent field examination suggests a tantalum and gold resource that is likely to represent only a small part of a much larger system.

Arbuthnot
Arbuthnot Securities has appointed Barry Saint, formerly with the emerging companies corporate finance team at Dresdner Kleinwort Wasserstein, as a director of its corporate finance team.

Thomson Intermedia
John Napier, chairman of Thomson Intermedia, told shareholders at the yearly meeting that the value of new sales contracts signed in the first quarter of this year showed a 39% increase. He added: 'Negotiations have advanced with a number of third parties to enhance the existing product portfolio and to create new revenue streams.'

Telecom Plus
Telecom Plus, the group that supplies gas, electricity, telephony and internet services to 178,000 customers reports a 41% increase in turnover to £812.8m in the year to end March and a 90% leap in pre-tax profits to £10.6m. No wonder he says he, and his board, look forward 'with considerable optimism.'

Mitie
Support services group, Mitie, the people who clean the Houses of Parliament and the London Eye among other jobs, is to buy back up to 10% of its shares. Net cash at the end of March was £47m. Pre-tax profits rose 20% to £38.2m in the year to end March.

Intellexis
FINANCIAL training company Intellexis expects to return to profit in the current year following its £2.4m acquisition of Cheshire-based Key Skills, which provides project management training. The company, which plans to change its name to ILX Group, cut its pre-tax loss from £2.04m to £257,000 in the year to March.

Bioprogress
Pill coating company Bioprogress has an exclusive option agreement with Wyeth to enter into negotiations to licence its XGEL Swallow liquid-fill capsule technology for certain specified products. The agreement provides for an upfront payment of a six-figure sum on execution.

Asia Energy
Asia Energy has appointed Michael Frayne and David Lenigas joint managing directors; both were already executive directors of the company and were actively involved in the April AIM flotation.

Paladin Resources
Paladin Resources announces that exploration well 22/23a-7 drilled on the Brechin prospect, 3.5 km to the east of the Arkwright Field in the North Sea, is an oil discovery. The well is being suspended for potential use as a future producer. The results have also upgraded the potential of a comparable prospect 2.5km to the south, which is now a candidate for early drilling.

InTechnology
Despite a tough IT environment, InTechnology, the data storage group, has reported a strong sales performance, both organic and assisted by the Allasso acquisition. Total turnover increased 42% to £223.5m and gross profit increased 75% to £40.8m.

Pursuit Dynamics
A loss after tax of £755,952 for the six months to end March has been reported by Pursuit Dynamics. This compares with a loss of £844,389 in the corresponding period a year ago. Chief executive, John Heathcote says: 'We have taken the decision to focus our efforts on a few initial key areas, including prepared food and related applications in order to fully utilise our resources to create value for the group and its shareholders.'

One to watch out for

Wellington Underwriting
Dilip Shah, analyst at Arbuthnot Securities is in no doubt that the shares of Wellington Underwriting are significantly undervalued. He says they are a 'strong buy' at 84.5p with a fair value of 107p.