Smaller companies spotlight

EACH week, former Fleet Street editor Patrick Lay keeps This is Money readers up-to-date with a neglected, but exciting sector of the stock market – smaller companies.

Newcomer shows M&S how it's done

FAR be it for an old dinosaur like me to have to admit times are changing, but changing they seem to be.

On the very morning that Marks & Spencer stunned the City with a fourth-quarter trading statement showing falling clothing sales yet again, ASOS, an online fashion retailer, was issuing a trading statement that said pre-tax profits in the year just ended would be 44% higher than its own broker had been forecasting.

Marks shares slumped while those of ASOS shot ahead.

I admit we are not exactly comparing like with like, but here are two companies both dealing in fashion: one with years of experience got it wrong, the other – still feeling its way – got it right.

ASOS chief executive Nick Robertson knows his market, the internet-savvy, 16 to 24-year-old, mainly female buyers who want to look like the celebrities they see in their papers, magazines and on television.

If Victoria Beckham is spotted wearing pearl-chain jeans, then Mr Robertson sources a supply in a similar style and has them on offer on the ASOS website. If Mrs Beckham or Britney Spears appears in a cut-out shoulder top, a similar style-offering is on the site.

This is a company that raised £225,000 last summer through a placing of shares at 4p each because the banks would not lend it the cash needed to buy stocks ahead of Christmas - so much for bankers‘ claims that they support small business.

But those investors who put their trust in the company have been well rewarded. ASOS shares touched 22p each on Thursday.

The company is now rated the fifth most visited fashion retail site in the UK, ahead of such High street giants as Top Shop and River Island – I‘m not even certain that M&S features in any rankings.

There are 283,000 registered users of whom 30,000 visit the site every day and spend, on average, £36 each visit.

In the year that ended March 31 profits will be not less than £575,000 says Mr Robertson, that goes against the £400,000 figure that had been forecast by house broker Seymour Pierce. It has raised its forecast for the current year from £1m to £1.3m at the same time Cazenove was slashing its profit forecast for Marks & Spencer for the past year by 6%.

Everybody agrees that Marks & Spencer needs to take some bold steps to get its act together – putting together the Marks & Spencer name with the ASOS flair would be bold, but the way the two share prices are moving they‘ll have to move quick.

Showtime

Some 40 small cap companies are exhibiting at the Business Design Centre in London‘s Islington this Saturday from 9am until 6pm. If you can get along, I understand there may still be some room, even though 1,500 tickets have been sold already.

As well as the companies on show there are 12 speakers, including Jonathan Jenkins, chief executive of Ofex extolling the virtues of investing in smaller companies.

New issue alert

Dealogic, a data and software group, is coming to Aim next month with a value of up to £180m. Two of the company‘s co-founders, Philip Hulme and Peter Ogden, have already made one fortune each as a result of the flotation of Computercenter they built and bought to market in 1998, a deal that netted them around £300m each.

Although they do not plan to sell any shares in the latest offering, their holdings are likely to be worth around £45m each on the first day of dealings.

Some you may have missed

TripleArc
TRIPLEARC has signed a print management contract with BAA, worth more than £10m over five years. The contract covers all of BAA‘s print requirements across its seven UK airports and corporate headquarters. The latest signing brings to £20m the value of contracts won by the company in the first three months of this year.

Terrace
AIM-listed property development and investment group, Terrace Hill, has reported a 15% increase in the value of its underlying assets since last October.

Knowledge
AN international financial news and data service will be launched by Knowledge Technology Solutions at Dealing in Technology 2004 on 20 May. The new product, known as MarketTerminalT, claims to be more comprehensive than many other international services already on the market, and offers in-depth financial information, news, analysis and real-time prices from a number of international exchanges.

Dana
EXOPLORATION group Dana Petroleum has started the appraisal drilling campaign in the Pangkah Production sharing contract area, offshore Indonesia. Two wells will be drilled to test for the presence of a western extension of the Ujung Pangkah gas field and are expected to add substantial new gas reserves to the current core area reserves of 478bn cubic feet.

Pixicology
DIGITAL photography software group Pixicology has signed an agreement with Costco Wholesale Corporation, the international chain of membership warehouses. The deal means Pixicology will supply Costco with own-brand, customised software to be installed in their digital photo consumer terminals. The initial roll-out will start in the US this summer.

Stewart
DANIEL Stewart has been appointed joint broker to Retail Decisions, the fully-listed software and computer services company, and to Essentially Sport, the Ofex-listed sports promotion and management company.

Indi
NICK Bettles has been appointed commercial director for the medical products group of Inditherm, the heating technology company, and Professor David Leaper has been appointed a consultant to the same group.

Some to watch out for

Urbium
THE Annual Meeting statement from John Conlan, chairman of bar and nightclub group Urbium, is ?at least as good as expected‘ after earlier comments, says Paul Hickman at KBC Peel Hunt. Mr Conlan says ?sales in comparable units are better than last year, but London (20 our of 30 sites) is strong and continues to strengthen.

?First quarter refurbishments have been completed with less business disruption than expected and the new City opening, Abacus, is trading well ahead of expectations.‘

Mr Hickman says the next two City openings should capitalise on this success, although the opening dates have both slipped from April to May. He says: ?buy‘ the shares at 564p and sets a target price of 700p although, in a sign of the times he adds, it is beyond his ability to forecast the effect of any terrorist incident.

NMT
RESEARCH guru, Mark Watson-Mitchell, analyst at SQC Research, is turning his mind to NMT Group, the safety syringe makers whose business has undergone some remarkable changes in the past 12 months. The business has a market cap of around £6m but has £6.5m in the bank and on-going costs of around £500,000 a year.

It is no longer bogged down with its expensive production plant in Livingston, Scotland, and has reduced staffing from 156 to just 10. All orders are being filled by third party manufacturers and the future is looking bright.

Mr Watson-Mitchell says the shares at 0.72p each 'look ready to fly'.

Burren
SQC Research also likes the look of Burren Energy, the company that came to market last December after eight years of increasingly profitable growth. It is one of the UK‘s most exciting intermediate oil companies, says SQC, and sets a target price on the shares of 300p by the end of the year against the current 230p.

Systems Union
FROM the same source comes a recommendation for Systems Union where the target price is 175p by the end of the year against 117.5p now.