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.

Smart by name

Like any good lawyer, Jason Smart, will argue his case to a point where the opposition begins to doubt the evidence of its own eyes and ears. Mr Smart, chairman of Litcomp, a company that makes its living by providing medical reports to lawyers fighting compensation cases, insists that Britain is not suffering from a growing compensation culture.

He even produces Department for Work and Pensions statistics that show claims are down 9% to support his arguments. It matters not one jot to him that the Bank of England‘s Rachael Lomax said this week that Government statistics are not always as reliable as they might be nor that a visit to Ask Jeeves on the web throws up 8,621,000 references when you type in the word 'compensation'– of course, not all in the UK.

The fact that some NHS hospitals have fliers in the Accident and Emergency waiting room giving phone numbers of lawyers ready to fight your case if you have had an accident at work or tripped over a pavement slab, carries no weight with Mr Smart.

He is not even convinced by the 50% rise in his own company‘s turnover to £1,554,739 in the six months to end September or the 62.16% leap in pre-tax profits to £101,241 in that period claiming that the business is not only growing but getting a bigger share of a declining market.

He does say, though: 'current trading is progressing well and sales growth over the period has been maintained,' adding 'the company continues to win new clients, which offers good opportunities to continuing growth.'

Success, however, does bring its own problems for Litcomp in that it has to pay the medical consultants who help produce its reports within 30 days of their invoices being presented, but has to wait an average 400 days before its lawyer clients finalise their bills. This has meant that LitComp has raised £1m of finance facilities by discounting its invoices with Cattles Invoice Finance.

Nobody is naive about this and the cost of delayed payments is built into the invoices sent to lawyers, who then pass this cost on to the insurance companies who, in turn charge their policyholders more.

Sounds like a case for compensation to me.

Baltimore blues

How the mighty have fallen. Baltimore Technologies, once the darling of the dotcom boom, even surging into the FTSE 100 when its shares soared to nearly £11 each, is to have its share listing cancelled.

The new management team appointed this summer by Acquistor after one of the nastiest shareholder battles in decades, has decided that there is no point in retaining the quote.

The company still has around 40,000 shareholders on its books of whom some 24,000 have holdings of less than 125 shares (a holding of 125 shares is currently worth less than £22 against around £1,375 at their peak) so plans are being laid to consolidate every existing 125 shares into one new ordinary share and pay off those holders with fewer than the required 125 shares.

The new board says the company is now essentially a cash shell and it is not in the company‘s interests to incur the cost involved in maintaining its listing. It is, however, looking into the possibility of putting in place a matched bargain facility for holders of consolidated shares.

Box of tricks

CRC Group, which makes its money from repairing technical devices from mobile phones to TV set-top boxes, is in talks with NTL to take over the management of NTL's cable TV set-top box test and refurbishment centres.

The deal could be worth £45m over the next five years. Am I the only one who wonders how many things can go wrong with a simple box of tricks, that is going to cost £9m a year in repairs?

Roaring dragon

Could we be seeing in BKN International, the first German company to join Aim, a new Disney giant in the making? BKN is a children‘s animation specialist whose Legend of the Dragon epic cartoon is coming to a BBC screen near you next year and anticipates boosting earnings through spin-off toys, games and videos. The shares were launched on Aim a year ago at 110p each. Having raised further funds last summer at 217p they are now being traded at 427p.

New issue alert

Write stuff
The handwriting of doctors has always been something of a joke, but in these compensatory days – see above – they can be an expensive joke if a pharmacist mis-reads the scrawl that comes across his counter. The Audit Commission report of 2001 identified around 1,200 lives were being lost unnecessarily each year as a result of 'certain medication errors in UK hospitals' adding that this costs the NHS around £500m a year.

Ascribe, is an information technology group that focuses on medicine management and among its systems includes electronic prescribing software that allows doctors to enter prescriptions electronically and transmit them to dispensaries.

Perhaps it is not surprising that the company was founded by a former pharmacist, Stephen Critchlow - now chief executive - and a doctor, Chris Jones, who is now technical director, both of whom must have been at the sharp end of the penned prescription.

Now the company is coming to Aim and raising £5.5m through a placing with institutional investors, most of which will be used in buying Protechnic Exeter, another health IT business. The cost is £5.8m in total, of which £2.7m is in cash and £2.3m in shares, both payable on completion, and a further £800,000 is subject to an earn-out over the following 12 months.

High roller
Gaming VC, an internet casino operator, is to float on Aim in mid-December with an estimated value of up to £140m. The company operates virtual roulette and a gambling magazine in Germany and plans to roll out localised versions of its site throughout the EU.

Some you may have missed

Avanti
Sony Retail has appointed Avanti Screenmedia Group as sole supplier of screenmedia services to its clients.

Computer Software
The successful integration of JBS Computer Services helped more than double sales of Computer Software Group to £5.3m in the six months to end August. There was a pre-tax profit of £86,000 against a loss of £632,000 in the corresponding period a year ago. A month into the second half of the year, CSG bought Pinnacle Computer Systems and Advatech Computer Systems, which will form the nucleus of a new field services division. Chairman Michael Jackson says: 'The board will be looking to strengthen their position in this market.'

Hamworthy
Hamworthy, the designer and manufacturer of marine and offshore fluid handling systems, celebrates its interim figures for the period to end September, with a £10m rise in sales to £56m and pre-tax profits nearly doubled at £3.4m. Chairman Gordon Page says: 'Given the strength of our £81m order book and with ship deliveries expected to rise at least until 2007, the board looks forward with confidence.'

IP Live
IP Live, the company that invests in live (and dead) exhibitions – it has stakes in Diana: A Celebration and in Wonders of the Human Body – has raised £756,000 through a placing of shares at 55p each, to help in expanding its activities.

Oak Holdings
Oak Holdings, the Aim-listed property development group transforming a former South Yorkshire colliery site into a giant theme park, has been awarded an extension by Rotherham Metropolitan Borough Council to its Preferred Developer Agreement for a further 12 months – until May 2006.

Vert-Eco
HydroDec Development Corporation is being bought by Vert-Eco for a total of £3.9m, of which £500,000 is the repayment of debt due to the vendor. Vert-eco is raising £1,035,000 through a placing and will change its name to HydroDec Group following what is deemed to be a reverse takeover.

Dana Petroleum
Dana Petroleum has signed an exchange agreement with Caledonia EU through which Dana will acquire a 27.78% interest in the producing Johnston gas field and associated North Sea blocks in exchange for a 30% interest in three Dana blocks, plus a balancing cash sum.

MediaZest
MediaZest, the provider of in-store media solutions for retailers, which is coming to Aim next month, is to handle the worldwide licensing of the FeONIC‘s 'whispering windows' technology.

Care UK
Health and social care specialist Care UK, reports a £26m rise in turnover to £140m in the year to end September and a £4.4m rise in pre-tax profits to £10,696,000. The company also announces the appointment of Ruth Camall, a former director of the Departmental Change Programme at the Department of Health, as a non-executive director.

Southern African Resources
Goldman Sachs Group Inc in New York has declared an interest on behalf of its London-based office acting as custodian for its customers in 12,450,000 shares (3.74%) of Southern African Resources. The shares are registered in the name of Goldman Sachs Securities (Nominees).

Minmet
Further 'positive results' on its Norra gold project in Sweden have been announced by Minmet following the completion of a 17-holes drill programme by North American Gold.

Soco International
Soco International is selling for £13.5m, its interests in the Zarat Permit offshore Tunisia to PA Resources AB, a publicly listed Swedish Company with other interests in Tunisia.

Scotty Group
A $300,000 order from the US Army has been won by Scotty Group for its waterproof, shock-resistant video communication unit with display screen; the deal includes a number of satellite phones and associated airtime. In addition it has announced a further €250,000 order from the German Army for the new 'stand alone' data transfer software product.

Xansa
IT services company Xansa has signed a 50-50 joint venture with the Department of Health to provide finance and accounting services to NHS organisations. The company says: 'The market for the provision of these existing finance and accounting services within the NHS is estimated to be in excess of £1bn over the next ten years, potentially delivering revenues to the joint venture of around £500m over the same initial period.'

Appointnments

Mark Bristow, currently chief executive of Randgold Resources, has been appointed a non-executive director of Southern African Resources.

Peter Salter , a non-executive director of the Real Good Food Company, has become finance director of Hill Station, the super-premium ice cream company.

Some to watch out for

Sovereign Reversions
Following news that Sovereign Reversions has bought NHL Reversions for just over £2m, Robert Corden, analyst at Charles Stanley says: 'Although there is uncertainty over the short-term direction of house prices, we consider that given the discount to net asset value and the time to pull to vacant possession value, the current share price (255p) is attractive to long-term investors.' His recommendation is 'accumulate'.

Richmond Foods
Following a pre-close trading statement from Richmond Foods, Andrew Saunders at house broker Numis has reacted with a 'buy' recommendation, setting a price target of 550p on the shares against the current 505p.

Spectris
A 'strong buy' recommendation for electronics group Spectris comes from Michael Blogg at Arbuthnot Securities who says that if the shares traded at the same average price/earnings ratio as Spectris‘s peer group they would be valued at more than 700p against the current 422p. No wonder he believes 'there is considerable upside potential in the stock'.

His colleague, Stephen Rawlinson, says the half-time results from BSS Group, the plumbing and heating distributor, will please investors when they are published on Monday, and says the shares are a 'buy' at 781p and claiming 'the stock is worth at least 900p'.