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.

Opportunity knocks

THERE can be no greater sign that the small cap market is enjoying one of its cyclical booms than people are trying to raise money to invest in it.

St Helen's Capital, no stranger to backing companies in the small cap arena, has formed St Helen's Private Equity, specifically to raise up to £3m to 'invest in pre-IPO opportunities' and then float itself on Ofex.

'A company's greatest growth is often after its early development but before its initial public offering,' says SHPE managing director Mark Warde-Norbury, a former senior manager at Robert Fleming & Co. He adds; 'this is the opportunity that we are targeting' and we are providing retail investor with the chance of also investing in this 'very exciting' asset class that historically has not been available to them.

So keen is Mr Warde-Norbury to encourage retail investors in this exercise that he announces that any who sign on the dotted line for the minimum investment of £2,000 before December 6 will get an additional three% of their subscription in free shares provided by St Helen's Capital out of its holding.

While I applaud this launch, which should be good news for smaller companies clawing their way to market, hopes should not be raised too high. Although an average of three applications are landing on St Helen's doormat every day, 14 out of every 15 are turned down almost immediately.

Like every other provider of funds from the High Street banks to altruistic venture capitalists and merchant bankers, SHPE does not intend taking any risk when it comes to making investment decisions. All hopefuls need to produce a decent business plan, and should remember that Mr Warde-Norbury is the author of 'Producing a Successful Business Plan,' so it might be worthwhile getting a copy of this best-seller to see what he is looking for.

The investigating team will also need to be impressed by the management of the company seeking funds and need to see they have a good track record and the experience to make a profit. But that is not all - the investigating team will also 'need a gut instinct that we can work with them and trust them'.

Tick all these boxes and SHPE could get out the cheque book, but not for the full amount, rather just enough to encourage other investors on board.

Mr Warde-Norbury says there are five opportunities ready for the off, if the fund raising is successful: two software companies - one in medical devices, one in telecoms - and one energy consultancy, none of which is making profits yet. He hopes to have investments in 20 such companies in the first year.

For copies of the prospectus contact SHPE at 15 St Helen's Place, London, EC3A 6DE (Tel: 020 7628 5582) or visit the web site www.sthelenscapital.co.uk.

Sanderson to float

Sanderson Group, a provider of business software, is to float on the Alternative Investment Market next month.

Ofex looking up

Reports reach me that another market maker is about to join Ofex, making five in all, and that the new management team is having some success in convincing fund managers that Ofex shares are worth backing. Watch this space.

Some you may have missed

Clinton Cards
One of the country's most successful retailers of greetings cards, Clinton Cards, is to increase its high street presence with the purchase of Birthdays Group. The deal, worth £46.4m payable in cash, will add 500 stores to the group, making 1,250 stores in total with a yearly turnover of around £500m. Chairman Don Lewin says it is the intention to run both the Clinton Cards and Birthdays brands as separate businesses, each with their own identity on the high street.

TripleArc
Hardly has the ink dried on TripleArc's recent deal with Virgin Retail, than the provider of the printing by technology group has signed a three-year contract to cover the print management of all point-of-sale material for Virgin Mobile.

Huntleigh
Huntleigh Technology has sold Huntleigh National Care, a non-core division of its main UK operating subsidiary, to Nottingham Rehab, a subsidiary of Findel. The price paid was 'in excess of the £3.9m net asset value of Huntleigh National Care' the release says.

Scapa
Turnover of Scapa Group rose £500,000 to £95m in the six months to end September, despite a significant negative impact of foreign exchange. In constant currency, turnover increased 6%. Pre-tax profits improved to £1m from a loss of £700,000 in the corresponding period a year ago. Chairman Dr Keith Hopkins says: 'Second half results will again be affected on translation if the US dollar continues to weaken. Global raw material pricing pressures have also increased in recent weeks, exacerbated by the rapid rise in oil prices.'

Expomedia
Expomedia Group has hosted a visit for analysts and investors to view its Moscow operations to give them a 'broader understanding of the company's operations and provide an opportunity to meet members of the operation management team.' Expomedia says: 'During the visit no new material information relating to the group and current trading will be disclosed.'

Acquisitor
Acquisitor Holdings (Bermuda) has raised its stake in Nettec by 2.1m shares to 33,152,529 shares, representing 27.4% of the company. The company also announces that Scottish Value Trust is now interested in 9,148,750 shares in Acquisitor (18.6%) and Premier Enterprise Fund has an interest in 1,562,500 shares (3.2%)

Espro
Espro Information Technologies has completed the major part of the installation of its personal audio guiding system into the French Railway Museum in Mulhouse, on France's Swiss border. It is the biggest audio visual installation undertaken by Espro and the company expects revenues of around £160,000 when the order is complete.

Northern Energy
Northern Energy and Mining and Western Canadian Coal Corporation are to form a joint venture for the exploration and development of the Saxon and Belcourt coal properties located in British Columbia. It is expected it will cost up to C$20m to update the feasibility reports on both groups of coal properties, as well as the extensive work programmes on the Saxon North and other properties in the Belcourt group that have had work done in the past.

Monstermob
Monstermob, the company that specialises in the sale of those annoying mobile telephone ring tones, reports 'significantly improved' trading in the second half of 2004, which should enable the group to exceed market expectations of £2.3m pre-tax profits for the full year.

Sirius
Sirius Financial Solutions has completed the sale of its freehold office property in Sutton Coldfield in a deal that means, after repaying the mortgage loan the group is 'virtually debt free and in a strong position to pursue future growth,' says chairman Stephen Verrall.

Griffin
Stephen Dean's transatlantic venture, Griffin Group, has enjoyed a good year. In the year to end September sales were up 404% to £3.31m, pre-tax profits were 987% higher at £453,642 and net current assets up 273% to £1,115,638, including £711,500 cash at the bank.

UK operations launched in the last six months achieved five Aim admissions, completed three corporate transactions and raised around £5m of new equity for these projects. US operations raised, directly and with co-agents, around £78m of new equity for emerging growth companies.

Business Post
Business Post, the independent express delivery company, reports a 23% rise in sales to £109.9m in the first half of this year and pre-tax profits of £8.8m. The company says: 'The traditional second-half bias is expected to be slightly more pronounced this year as a result of the group's newly-launched mail activities.'

Netb2b2
Aim-quoted business group Netb2b2 reports a £100,000 drop in sales to £5.3m in the year to end June, but there was a £1,000 pre-tax profit this time against a restated loss of £1,086,000 for the previous 12 months. Chairman Keith Young says trading for the current year is ahead of the previous corresponding period.

Vane
Vane Holdings, which is changing its name to Vane Minerals, has acquired the exclusive mineral rights to three large blocks of land in south-eastern Paraguay. Each land holding is considered to be prospective for the discovery of gold and possibly copper mineralisation.

Wyndeham Press
In the six months to end September, Wyndeham Press Group saw turnover rise £10m to £69.1m and pre-tax profits up 63% to £3.1m. Chairman Bryan Bedson says: 'Wyndeham has made a strong start to the financial year and the board remains confident in its ability to maintain this momentum during the second half and deliver on full-year expectations.'

Corporate Synergy
Corporate Synergy has been appointed broker by Alibi Communications taking its retained clients to 31 since creating its corporate broking function last October. KBC Peel Hunt has been appointed nominated adviser and broker to Planit Holdings.

Plant Health
The upturn in revenues expected by Plant Health Care in September (at the time of the interim results) has not occurred to the extent the directors anticipated, a company statement says. They add that sales for the second half of the year are now expected to be approximately equal to first half sales, with a substantial decrease in the operating loss. Trading conditions in the US were badly hit by the hurricanes in Florida, and poor weather has also had a negative impact on the annual programme of golf course maintenance which the company believed would boost fourth quarter profits.

Appointments

Martin Becker, chief executive and president of XTL Biopharmaceuticals has announced his intention to step down on January 1. A search for a successor is under way and Elkan Gamzu, currently a non-executive director, will act as interim chief executive if necessary until an appointment is made, expected early next year.

Charles Hansard, currently a non-executive director of Southern African Resources, is to become chairman at the yearly meeting on December 17. Current chairman Phil Edmonds and director Andrew Groves will assume non-executive roles while continuing actively in the company's development.

In a board re-organisation at Home Entertainment Corporation, commercial director Anthony Skitt becomes managing director, Gerard Barclay, retail director is appointed deputy managing director and chief executive of Choices Retail Division, development director Steve Barker is appointed group operations director and chief executive of Choices Direct and Chris White moves from finance director to group finance director.

Some to watch out for

Private & Commercial
John Beddoe, analyst at Seymour Pierce, believes Private & Commercial Finance Group, is well positioned to recover from the business it lost while fighting its court case against National Insurance and Guarantee. 'By 2005 it should be well on its way to building its finance portfolio back to levels seen in former years,' he says, adding that the shares at 34p will 'outperform'.

Luminar
Melanie Sharp at Arbuthnot Securites says Luminar is on the road to recovery and there is even the possibility of a return of capital to shareholders towards the end of next year. She sets a price target of 560p (against the current 499p) and is upgrading the stock to a 'buy'.

Her colleague, Alan Millar, says that while Scotland's move to implement a ban on smoking in public places is almost certainly going to make life more difficult for Belhaven Group, the shares are already arguably discounting a substantial proportion of the downside. He says: 'Although investors undoubtedly need to take a long-term view here, we believe that buying the stock below 400p (currently 402p) could conceivably produce a return of around 25% over two years.'

Vectura
Sam Fazeli, analyst at Nomura, expects Vectura, the biotechnology company, to have a very busy 12 months ahead. He says: 'The company is likely to sign one or more inhalation device licensing deals and possibly a lucrative deal on AD237. With this kind of news flow we have no problem with suggesting that the market cap could easily top £100m by this time next year.' Mr Fazeli feels the mid-point valuation is 117.4p a share against the current 63.5p and says the shares are a 'buy.'

Formjet
David Johnson at Daniel Stewart sets a target price of 9p on the shares of Formjet (currently 4.25p) following a trading statement. Despite setbacks he expects the company to achieve revenue growth of more than 90% during 2004 and move into profitability from small loss in 2003,

Mr Johnson has also been looking at Matrix Communications, which has just announced 'its most significant acquisition to date that should enhance earnings for the current financial year and beyond'. He has upgraded his forecast for 2005 and 2006 and increased the price target to 215p from the current 162p