18 May 2010
This week: SeaEnergy waits for the wind, Surgical Innovations goes Industrial and Scancell gets approved.
Allocate Software (ALL.L 71.5p / £42.83m)
Allocate Software (ALL) is a major supplier of workforce optimization solutions to global organisations with large, multi-skilled workforces. The Company’s products should not be considered as HR function facilitators, but as asset management tools that sit above a fully functioning HR system. ALL’s major selling point is that it provides customers with a proven ROI from the implementation of its software solutions.
Allocate is operational in UK, Sweden, US, Malaysia and Australia, and focused currently on 3 vertical markets – Healthcare, Defence and Maritime – and is likely in the not too distant future to enter a fourth, Offshore. The Company is Europe’s leading provider of workforce optimization software, and with over 6,000 registered users, it supplies the largest business system used by the British Army.
Allocate is fast growing with a unique customer base increasing from 30 three years ago to c. 500 today. Trading profits are growing in excess of 35% per annum as the company augments organic growth with targeted acquisitions. Trading margins are running at 12%.
The Company has a very experienced and impressive management team which is demonstrating that it can penetrate quickly large international markets and build a significant profitable customer base.
The future progress of the business, apart from the material growth opportunities from the National Health Service and armed forces, includes the maritime and offshore services sectors where the Company already counts Cunard and Maersk Oil as customers. Expansion into additional vertical markets is likely – both through organic growth and by management continuing its successful integration of earnings enhancing acquisitions.
We would suggest investors allocate some time to review the company’s prospects in detail.
Boomerang Plus (BOOM 80p / £7.13m)
Boomerang, the independent television production group, has reported delays in projects which will prevent the group from achieving market expectations of PBT of £1.4m and EPS of 10.9p for the year ending 31 May 2010. Whilst this announcement is disappointing the delayed revenues will benefit FY 2011. The group has a strong revenue pipeline, in excess of £57m, providing revenue visibility. Increasing network commissions, a growing AFP department supplemented by Freeze and Method and the Indus acquisition are providing a good platform for increased growth and diversification. The group is debt free with net cash of £2.5m at the end of November 2009. Assuming earnings of 14.2p in 2011, the stock trades on a P/E of 6.6x. The stock fell from 96p to 80p on this news which, given the strong pipeline, offers investors a buying opportunity in the hope this boomerang bounds back.
Freshwater UK (FWUK 20p / £3.90m)
Freshwater, the PR and marketing services group, reported interims to 28 February 2010. An 18 per cent decline in revenues to £2.81m (H109: £3.43m) led to PBT to decline to £0.03m (H109: £0.25m) and the loss of the interim dividend (H109: DPS 0.75p). The Board state a dividend will be paid for the FY assuming current market expectations are achieved. Q2 2010 has been stronger than Q1 due to a combination of a small increase in revenue and the impact of ongoing costs savings. The cost savings implemented in Q2 2010 should help deliver stronger profitability in H2 2010. Clients continue to be constrained by budget tightening and there is still uncertainty surrounding the level of public spending cuts. However, the group is reporting greater stability in the market with growth potential this year. The market forecasts 2010 PBT of £0.3m, EPS of 1.17p and DPS of 1.0p and in 2011 PBT of £0.9m, EPS 3.26p and DPS of 1.25p. Even though these forecasts look punchy (with the risk of possible profit warnings down the line) the stock trades on 18x earnings for the current year but a more reasonable rating of 6.4x in 2011 EPS. One to watch for fresh news as and when.
Fusion (FIP 32.5p / £17.63m)
Fusion IP, the university IP commercialisation company announced that Sheffield-based microscopy company Phase Focus raised £370k (Fusion contributed £175k) to help take the company through to its first commercial deals. Post funding Fusion owns a 54.2 per cent stake in Phase Focus. White Rose Technology Seedcorn Fund (£175,000) and The Viking Fund (£20,000) also supported the raising. The Phase Focus Virtual Lens transfers image-producing to a computer programme, removing the need for high quality lenses in a move that could potentially ‘revolutionise’ microscopy, overcoming existing limitations and allowing ‘post-acquisition’ focussing and high-contrast imaging. This funding will help accelerate the company to commerciality and ‘solidify’ relationships with key OEM’s to help address the substantial market opportunity – one of Fusions most exciting prospects. Still, this stock has remained flat on its back for almost a year longer than and we would question the intellect of anyone buying now.
ImmuPharma (IMM.L 81.5p / £66.09m)
ImmuPharma is in a class of its own within the biotech sector. Through its exclusive contracted collaboration with France’s national research institute, the Centre National de la Reserche Scientifique (CNRS), the Company is in a position to cherry pick from the most promising pharmaceutical compounds to surface from French university research departments.
The CNRS has an annual budget of over €3bn for expenditure on drug research – which is predominantly carried out in universities – but it is not permitted to carry out any subsequent drug development work. IMM selects and secures what it considers to be the most promising of these research compounds at nil up-front cost and just a small royalty on achieved sales.
The near-term pipeline of six main compounds includes the Lupus treatment drug Lupuzor – for which the Company has so far received $45m out of a total of $500m in milestone payments from Cephalon – and the anti-cancer drug IPP-204106, which is planned to go into phase II trials within the next year.
The Company’s estimate of the potential market for Lupizor is at least 1.5m patients. The only comparative drug in this area is Interferon, which sells for $28,000 per patient per year. Thus only 10 percent of this estimated market, priced only at one third of the cost of Interferon, would result in a Blockbuster drug with sales of $1.35bn per annum.
The percentage royalty receivable by IMM from Cephalon from sales has not been disclosed, though it would not be out of the ordinary if it was in the mid teens. To put this into context, a 5 percent royalty on sales of $1.35bn would exceed the current market cap of the company. It should be of no surprise therefore that some consider it would make financial sense for Cephalon to purchase the whole company rather than have to pay the annual royalty.
Although the shares are somewhat tightly held, there is a strong argument that any biotech portfolio should have a full position in this stock.
ITM Power (ITM 25p / £26.74m)
ITM, the energy storage and clean fuel company, has announced its first electrolyser product, launched at the Hannover Messe. Some market commentators have been critical of the company saying that another electrolyser product is not sufficient to justify the current market capitalisation. However, this is a long term play and with a last reported cash balance of £20m and an impressive portfolio of technology we expect sentiment, as with an electrical current, to flow from the negative to the positive.
Medicsight (MDST 5p / £7.78M)
Medicsight announced it’s First Quarter 2010 results on Monday. These were in line with management’s expectations. The Company has a strong cash position with £9.1m in the bank and is now expecting to generate sales in the Second Quarter through the first Medicsight hardware product. This has been licensed to MEDRAD (subsidiary of Bayer) and is used to distend the colon ahead of scanning, complementary to the existing software offering by Medicsight. MEDRAD has strong commercial and distribution expertise and this could potentially be used to develop the market for the software whilst providing near term revenues.
The Company is expecting to make a submission to the FDA ahead of the 20th June 2010 deadline following a request for Additional Information that the FDA made earlier in the year and we look forward to an update after that as to the FDA’s response.
Additional news flow should be coming through from the Japanese regulatory authorities and we think that considering the share price lull now would be a great time to invest ahead of all of the potential good news the Company could have coming through.
Metals Exploration (MTL 11.81p/ £31.31)
Metals Ex reached an important milestone with an announcement of maiden Proven and Probable Mining Reserves on 4 May – 780,000 ozs gold. The statement however, which included the results of the independently assessed bankable feasibility study for the proposed mine, had no impact upon the share price. The Company has already received all the necessary permits and certificates necessary to commence mining operations.
The mining feasibility study confirmed the viability of the project to produce an average of 96,700 ozs per annum over the mine life of 10.4 years and the Company is confident that further resources can be confirmed to extend the mine life past this initial benchmark. The capital cost is forecast to be just shy of $150m, with a payback within 3.5 years assuming a $1,000/oz gold price, resulting in an ungeared after tax IRR of 20 per cent.
Giving additional comfort to the mine evaluation is that the financial impact resulting from extracting the 16m lbs of Molybdenum mining reserve has not been included. To put this into context, the c. $46m ($477/oz gold) annual operating costs of the mine could be reduced to $38m ($393m/oz gold) through the addition of a Moly recovery circuit, completely independent of the gold recovery process.
The next major stage for the Company is to secure the bank and equity finance to commence mine construction – which it hopes to commence towards the end of 2010, after the rainy season. In the meantime, expect an announcement after completion of the full Moly recovery feasibility study.
OMG (OMG 26.1p / £17.83m)
OMG, technology group providing image understanding products for the entertainment, defence, life science and engineering industries, announced its interims to 31 March 2010. The group reported a 6 per cent increase in revenues to £14.4m (H1 09: £13.6m) and at constant currency revenues up 9 per cent. Lower sales, support, marketing and research and development costs has driven a 17 per cent increase in pre-tax profits to £1.4m (H109: £1.2m) and a 35 per cent increase in EPS to 1.19p (H109: 0.88p). The debt free business ended the period with net cash of £4.1m (FY2009: £2.8m) as a result of stronger cash generation. Debtor days are higher than the previous period so we would imagine this will be a focus of attention by management. Management acknowledged the market remains uncertain, but believes it will benefit from their diversified geographical spread. The market forecasts 2010 PBT of £1.6m and EPS of 2.0p and 2011 PBT of £1.9m and EPS of 2.4p, which suggests a rating of 12x in 2010 and 10x in 2011. These ratings place the group in line with the software and computer services sector, which trades on a prospective median of 9.8x, with EPS growth of 17 per cent. However, trading on a revenue multiple of c.0.4x, makes it look undervalued. The share price has risen 25 per cent since the beginning of April but we can still see some upside based on the modest revenue multiple.
Parallel Media Group (PAA 0.625p / £2.22m)
AIM listed sports promotion, event management, sponsorship sales, and related advisory services Company last week gave a trading update. It announced a new three year relationship with the PGA European Tour to promote and manage golf in the rapidly growing Asia market place. PMG also announced that it has agreed new commercial terms with the PGA European Tour for the Hong Kong Golf Open. PMG will continue to receive both commission and a share of the event’s profits. As part of this update to the markets, PMG highlighted the continued growth of the Ballantines championship, which was held in Korea last weekend, with profits from the event ahead of last year.
Scancell Holdings (SCL.PL 49.5p / £7.88m)
PLUS quoted developer of therapeutic cancer vaccines last week announced it had signed a worldwide non-exclusive licensing agreement with the National Institutes of Health, a division of the U.S. Department of Health and Human Services, for use of the melanoma antigens TRP-2 and gp100, key components of Scancell’s lead ImmunoBody vaccine for melanoma, SCIB1. Scancell has agreed to pay the NIH an undisclosed upfront fee in addition to certain milestone fees and a royalty on future sales of SCIB1. Scancell will have the right to develop and commercialise its ImmunoBody vaccines for the treatment of melanoma in humans. Scancell is expected to commence its Phase I clinical trials for SCIB1 in Q2 2010. David Evans, chairman of Scancell, commented: “This agreement strengthens Scancell’s IP position around SCIB1.”
Last week Scancell announced that had received approval by the Gene Therapy Advisory Committee (GTAC) and by the Medicines and Healthcare products Regulatory Agency (MHRA) Medicines Division to start a phase I trial and clearly this agreement enables it to move forward towards clinical trials of the melanoma vaccine. Scancell is in a strong cash position and we like the approach in the cancer vaccines space and technology platform model.
SeaEnergy (SEA 36.34p / £23.96m)
AIM listed off shore wind play has come back a long way since it ran up to the mid-80 pence, with the announcement that it had been awarded acreage by The Crown Estate (Zone 1) to develop offshore wind farms in the Moray Firth, Scotland as part of the UK Round 3 awards last year.
Last week it announced that it had secured a grant of £30,000 under the Scottish Enterprise Innovation Support Scheme to help fund the completion of a feasibility study into the service opportunities available in the expanding offshore renewables industry. The grant is funded by the European Regional Development Fund. Adrian Gillespie, director of energy and low carbon technologies at Scottish Enterprise said: “SeaEnergy PLC is an excellent example of an innovative company with real ambition and leadership, enabling them to successfully apply their world class expertise in the offshore renewable energy market and take advantage of the enormous growth opportunities it presents.”
In our opinion, there is nothing to stop this company going global given the caliber of its team and management, which is very much international in its experience. We do not therefore understand SEA’s share price reaction given the good news it has released; it can only be described as frustrating for investors and management alike. Investors should see these lows as a perfect buying opportunity.
Surgical Innovations Group plc (SUN 3.86p/£14.39m)
Although Surgical Innovations is known for its medical tools and instruments used in keyhole surgery, an announcement this week regarding the delivery of a delayed industrial order reminds us that this innovative company has more than one line of business. Last year the company’s industrial division received the largest single order to date of £616,000 but was unable to deliver before year end due to technical issues at a third party. While not an economic issue this was a timing issue resulting in the retained profit for the Group being lower in 2009 than in 2008. This is just something to keep in mind when comparing year-over-year figures but the reality is that the customer is happy because they can now more easily service their jet engines and Surgical has more money in the till. If you have a really clever product, there are all kinds of things you can use it for. That’s a good thing, delayed deliveries or not.
Synchronica (SYNC 2p / £17.8m )
Synchronica has announced yet another contract win for their mobile email, instant messaging and data synchronization technology, this time in Panama, with a leading mobile phone operator with over 1.6m subscribing users. The operator will pay a license fee of up to $4.56 per registered user to the Company. Additional revenues will be generated from hosting and supporting services as well as providing the operator with training.
Synchronica’s technology is offered by operators looking to differentiate themselves with the high level smart phone technology on low cost handsets. This offering reduces the churn and increases ARPU.
Considering the continued contract wins, we don’t understand why the share price hasn’t moved upwards and would still look to get involved, even more so at these depressed levels.
Torotrak (TRK 22.9p / £34.88m)
The infinitely variable gear group, Tototrack has acquired 15 per cent of Rotrex, the Danish supercharger company, and formed a UK JV to be called Rotrak. The group has paid £0.5m for 15 per cent in Rotrex, with £0.147m in the form of a loan to Rotrex. This is very interesting with the trend of small engine sizes continuing to be accompanied by turbocharging. Superchargers are not generally favoured as they are typically fixed geared to the engine speed so they give little boost at initial acceleration and have to be geared so they do not aerodynamically stall at higher engine speed. The combination with a variable ratio Torotrak gearbox would enable the boost curve to be tailored to throttle demands. We view this positively, though of course noting the extended adoption cycles for mainstream auto manufacturing and the company continues to get into gear.
Zeta Compliance Group (ZCGP.PL 37.5p / £3.29m)
Last week PLUS listed Zeta Compliance announced its results for the year ended 31 January 2010. We last wrote on this Company a few weeks ago and said to expect its full year results shortly and – given its announcement when it joined PLUS as to the rationale for being listed – potentially an acquisition this year, which it also announced last week.
First, the results: revenue for the year was £2,324,247 (2009: £1,645,842) an increase of some 41 per cent and PBT came in at £302,506 (2009: £41,411). The results show increasing financial strength and liquidity. Net assets have risen from £146,872 to £824,225. This includes a rise in cash balances of some £303,895 notwithstanding a significant programme of investment. The most significant contribution to this change in cash was raising £450,000 in new equity in November 2009 offset by giving notice to terminate an invoice discounting facility.
Zeta is active in the development and marketing of information and communications technology based products and services to enable organisations to comply with their legal and regulatory obligations. It also announced that it had completed the acquisition of the entire issued share capital of The Fire Strategy Company Limited last week. Fire Strategy delivers bespoke fire engineering solutions to the private and public sector. This acquisition will extend Zeta’s expertise beyond the areas of air, water and carbon hygiene building energy management in which it currently operates. The overall consideration for the acquisition of Fire Strategy is capped at £945,000. In the financial year ended 31 October 2009, Fire Strategy reported unaudited revenue of £454,000 and a small profit of approximately £100,000 on continuing operations. Less than x2 sales and x9 profit doesn’t seem too demanding to us, although with a discontinued part of the Company taken into account, the unaudited interim results following that period, were not quite as good.
We are impressed by Zeta’s list of blue chip clients, namely high street chains, banks, Universities, hospitals, facilities management companies and property managing agents. All businesses have to comply with Health and Safety regulations, and Zeta’s technology (its real time database) and consultancy mean it is leading edge, particularly in water and air, and now with this acquisition, fire. We expect to see solid organic growth as Zeta’s client list grows and contracted revenues increase, as acquisitions such as The Fire Strategy Company enable cross selling opportunities.
*A corporate client of Hybridan LLP
The Hybridan Small Cap Wrap is a weekly review of some of the most interesting small cap stories of the past week. Our review will usually be of those companies whose market capitalisations are less than £50m although we may occasionally cover larger companies.
11 May 2010
This week: Ipoint’s downwards, Space & People acquires and LiDCO top lines
AdEPT Telecom (ADT 22.5p / £4.74m)
Adept has secured a new contract to supply a national electronic games operator, valued in excess of £0.8m over 36 months. The contact is good news and highlights the group’s long term order book visibility and quality of earnings. However, the high debt levels of £10.2m is reflected in the low 2011 P/E of 2.7x leaving the group looking an anachronism from a bygone age.
Anglesey Mining (AYM 36.3p / £53.99m)
Anglesey’s 41 per cent associate Labrador Iron Mines has started construction of a 4.5km spur line. It is expected that rail work will be completed within the next 30 days and used to move the main components of the processing plant and the accommodation camp for which the majority of kit has already been delivered. The group has received a number of permits comprising; mining leases for the first stage of James and Redmond deposits, surface use leases for the beneficiation area, camp, and residue disposal but awaits a number of additional permits including the mine operating permit expected to be issued in the near future.
ANT (ANTP 29.5p / £7.16m)
Ant has signed another license for the Hybrid Broadcast Broadband TV (HBBTV) operating software, this time with German based Kathrein Group for use in various European markets. This combination of simple broadcast with content delivered by broadband is the most logical use of limited capacity which makes this stock attractive and an interesting peer to Motive TV*.
Ashley House (ASH 43.5p / £24.23m) & AH Medical Properties (AHMP 35.5p / £22.98m)
Following our March 30 comment, we see that the bid talks at PLUS quoted AH Medical Properties have now inflicted collateral (but probably temporary) damage on its sister company (historically its parent) Ashley House. Due to the very close trading connection between the two (whereby AHMP has first refusal on primary care properties developed by ASH – we described the link last time) it seems that the possibility of another company taking over AHMP means that Ashley House cannot – for the moment – recognise the design and project management fees, and the development profit, on four properties that would, by now, have been transferred to AHMP. Neither does it feel that it is desirable- again for the moment – to continue with the close contractual relationship that it has had with AHMP.
For obvious reasons all businesses that supply the NHS are now experiencing something of a hiatus – waiting to see what the effect will be of the cuts which all insiders seem to expect even if the political parties deny they will happen. Ashley House has accordingly experienced delays agreeing some of its schemes (although only one small one, so far, might be cancelled). So that, together with the AHMP situation, has caused it to issue a c £1m profits warning (out of the £8m forecast by analysts) for the year just ended.
We explained last time why AHMP should not be affected nearly as much by any NHS cuts, and in any case has a large pipeline – which we believe that the possible bidding party – Primary Health Properties – badly needs in order to bolster its own flagging growth rate. Although we continue to believe that PHP will not want to stump up the true value of AHMP and its pipeline, it does seem odd that the situation has been allowed to drag on. Ashley House – at 47p – now looks very cheap, having promised to meet the expected 6p dividend (compared with the diminished 4p paid last year) that analysts are forecasting.
Berkeley Mineral (BMR 2.28p / £8.01m)
Since our March 30 comment, BMR has raised just over £1m via placings at 2p to progress planning and due diligence on its Kabwe zinc tailings project. With other shares issued to pay creditors, it now has £0.4m of positive net assets to meet a cash burn through the next six months or so, before the major fund raising which will be needed to fund the start-up. Hopefully some of this will be project financed, and observers seem to think will be limited to some £5m of equity. With metal in the dumps valued, apparently, at over £200m, there should be plenty of margin for a profit after recovery costs on the 352m shares now in issue. But Credit Suisse – whose bullish report on the zinc price BMR has highlighted – seems to have made a quick turn on the 17m shares (about 1/3rd of the placings on our estimates) that it apparently took.
Bioventix (BVX 195p / £9.85m)
Bioventix which listed on PLUS in April is a small biotech company – with a difference. Unlike many of its peers still struggling to fund their unproven drug developments pipelines, it is already earning a healthy amount of cash, and is promising to pay a generous dividend. Its £9.85m market cap ought therefore to have been fairly easy to set – or not – because other companies in the same field are on ratings sky-high compared with BVX’s 15 times (at 195p). Abcam (AIM: ABC) like Bioventix, operates in the field of antibodies – one of the more glamorous sectors of medical drugs – and its shares, having risen four-fold in 21 months, are now on a 70 times historic PER. BVX is a manufacturer and developer, so does not have scope to grow as fast as Abcam, which is a web based distributor of the products of many manufacturers and is rapidly expanding its catalogue. But Abcam’s rating goes to show how much investors like the sector – which in turn reflects the hectic merger and acquisitions activity among life sciences companies in recent years.
Bioventix though, more than doubled its pre-tax profits in 2009, reflecting transition from development into full scale production of its specialised sheep monoclonal antibodies, which have advantages over the more widely used mouse antibodies for some types of disease testing. Now that supply of these for use in the hospital mass blood testing machines of companies like Roche and Siemens is in full swing, Bioventix does not expect another such profits surge until a new pipeline is delivered in perhaps three years time, and this year profits might be a tad down after listing costs.
BVX declared a 4p dividend in respect of the half-year prior to listing, so may not be a guide to what will be paid. However, cash generation around 13p per share in 2009, and 29p of net cash per share in the latest balance sheet, might give a clue.
Clean Air Power (CAP 20p / £11.2m)
Clean Air Power has secured a purchase order from a leading global manufacturer of construction equipment to deliver a Due-Fuel Snow-Blower demonstrator, to be delivered to Stockholm airport. This is a good contract win which should help power up the share price.
Crimson Tide (TIDE 1.12p / £3.75m)
Crimson Tide, the service provider of mobile data and software solutions for business, has launched its first Own Branded advanced software product designed for use in facilities management. The product, mpro3fx, is to be rolled out for facilities management at one of the country’s leading supermarket chains. Field trials are also being negotiated for the management and maintenance of over 5,000 ATM machines throughout the UK. This is an exciting development which we hope will turn the tide for this micro-cap.
Herencia Resources plc (HER 0.78p /£7.45m)
Herencia has announced another assay result from its new drilling programme at the Paguanta zinc-lead-silver project in northern Chile. Results from a further four holes confirm that there is an extension to the high grade Cathedral vein at depth and strike. As we mentioned last time, gold assay results are also being returned in addition to high grade zinc, lead and silver. The current resource estimate does not take into account any gold mineralisation.
The good results shown so far have encouraged the company and its JV partner Nyrstar to undertake another 2,000m of diamond drilling at Paguanta in addition to the 3,500m in the original plan. The additional drilling is to further evaluate the new vein along strike and down dip and would hopefully add to the mineral resource estimate which is now expected by early September. With the additional work undertaken, the drill programme should finish by late June and the final assay results are expected to be returned by the end of July. This schedule should allow Herencia to move to a Feasibility Study phase in the fourth quarter of 2010.
Ipoint Media (IPNT 2.75p / £4.14m)
Ipoint, gave a profits warning last week. Revenues to June 2010 will be below expectations and the company will record a loss. This is the result of slippage relating to several tenders submitted in conjunction with Ericsson. The company expects these tenders to be delayed to H2 and cites a slowdown in the telecoms market. Financing is a concern and the company is talking to its largest shareholder Nisko Projects Electronics & Communications on extending its guarantee of the $1.79m loan from United Mizrahi Bank and is examining its financing options. This stock has offered investors nothing but disappointment and I’d point my money elsewhere.
LiDCO (LID 23.25p / £40.44m)
LiDCO is a medical devices company supplying minimally invasive haemodynamic monitoring equipment and related disposables to hospitals. The products are used in intensive and critical care units and also in the much larger market of high-risk surgical theatres.
Scientific evidence is increasingly linking the management of patients’ haemodynamic status with improved outcomes and reduced hospital stays. As hospitals seek to improve efficiency through reducing costly surgery complications, the demand for minimally invasive monitoring products is expected to grow. In this regard, LiDCO has been selected as the sole technology for two multi-centre government-funded studies in the UK and US – respectively for optimizing cardiovascular management in high-risk abdominal surgery patients and for transplantation donor organ optimization.
Hospitals are increasingly focusing on efficiencies and improving the quality of care rather than increasing the number of surgeries undertaken. This is evidenced in the UK by the new national program, QIPP (Quality, Innovation, Productivity and Prevention) and in the US where Medicare is no longer prepared to pay hospitals for treatment of catheter and surgery related complications and infections.
LiDCO recently released its preliminary results for the year to 31 January 2010 highlighting an 18 per cent growth in top-line revenue to £5.37m, incorporating a 22 per cent rise in recurring (disposables) revenue to £3.13m and a reduced operating loss of £1.54m (2008/9: £1.80m). The balance sheet was strengthened through a £3m share issue during the period, eliminating borrowings and leaving the yearend cash balance at £1.85m (2008/9: £0.49m).
2009/10 was the first full year of sales from LiDCOrapid – which was responsible for the acceleration in number of monitors sold and placed in the period to 565 units (2008/9: 326 units). This new cardiac monitor is designed specifically for use in operating theatres for fluid and drug management during high-risk surgical procedures – a market that is worth in the region of US$800m per annum LiDCOrapid enables acute-care physicians to obtain accurate and immediate feedback on a patient’s fluid and haemodynamic status and is considerably less invasive than the older Pulmonary Artery Catheters, thereby leading to a significant reduction in associated complications, infections, length of stay and therefore overall costs of care.
The number of new monitors placed each year is on an accelerating trend – from 112 in the year to 31 January 2007 followed by 149, 326, and 565 in each of the subsequent years – resulting in an installed base of 2,075. The ratio of disposable units sold to the previous year’s installed monitor base has remained relatively static at just over 25 units per monitor and would indicate a unit sales volume for the current year of c. 52,000. Assuming a sales price of £82/unit (the average over the last 4 years is £82.9 with £82.6 for the last financial year) would indicate disposable revenues increasing to £4.26m this year from £3.13m.
In 2009 LiDCO partnered with two major global medical technology groups to penetrate the large markets of the US and Japan – with Covidien and Becton Dickinson respectively – through distribution licenses, that generated up-front agreement fees of £940,000. Sales in the USA doubled across the period and are expected to grow substantially during 2010, and Becton Dickinson is anticipated to achieve sales in Japan from 2011. Further, the new arrangement with Covidien (which is believed to have the largest monitoring equipment sales force in the US) enabled distribution costs to be reduced by c. £650,000 per annum.
The share price had a very strong performance during 2009, but only recovered to the approximate levels of 2005 and 2006. Taking account of the above information, we are not surprised that the Company is talking about achieving maiden profits in the current financial year. This is certainly a stock that could get the heart racing…
Minco (MIO 4.625p / £13.81m)
Minco’s 39.7 per cent associate Xtierra (TSX, XAG) will begin a drilling program at Bilbao next week. This will comprise around 5,000 metres of drilling from about 40 holes. The programme is aimed at shoring up data, upgrading categorisation and potentially extending resources as part of the feasibility process and mine plan and will seek to delineate areas of higher silver grades. The programme will comprise step-out, in-fill, exploration drilling and condemnation drilling (in area outlined for process plant). While Xtierra is no longer directly controlled by Minco the property still looks attractive and potentially much undervalued leaving the stock at a MINimum COst.
Sareum Holdings (SAR 0.285p / £3.35m) *
AIM listed specialist cancer drug discovery business; last week announced that Dr Tim Mitchell, CEO, was presenting Sareum’s Chk1 kinase cancer research programme and SKIL technology platform (SKIL) at the Bio Industry Organisation International Convention. SKIL (Sareum Kinase Inhibitor Library) is Sareum’s drug discovery technology platform that has so far produced the Company’s Aurora, VEGFR-3 and FLT3 cancer and auto-immune disease research programmes. SKIL has the potential to generate drug research programmes that target many other kinase types. Sareum’s Chk1 kinase cancer research programme is a joint research collaboration with The Institute of Cancer Research and Cancer Research Technology Limited. Novel chemical compounds developed by the collaboration have been shown to increase the effectiveness of current cancer therapeutics in in-vivo cancer models. Major pharmaceuticals groups have a well-known need to build their cancer drug pipelines and to bring drugs to market quickly. We believe Sareum can be expected to react positively to any good news, particularly were the company to sign a deal.
Scancell Holdings (SCLP 49.5p / £7.86m)
PLUS quoted developer of therapeutic cancer vaccines last week announced that its proposal to conduct a Phase I clinical trial on SCIB1, its DNA ImmunoBody vaccine being developed for the treatment of melanoma, has been approved by the Gene Therapy Advisory Committee (GTAC) and by the Medicines and Healthcare products Regulatory Agency (MHRA) Medicines Division. In addition, Scancell’s partner Ichor Medical Systems has obtained the required parallel approval from the MHRA Devices Division for the use of Ichor’s TriGrid electroporation delivery device to administer SCIB1 to patients participating in the trial of SCIB1.
SCIB1 is a novel DNA ImmunoBody vaccine being developed using Scancell’s patented ImmunoBody technology for the treatment of melanoma. ImmunoBody vaccines generate the high-avidity T-cells that kill cancer cells, which may overcome the current limitations of most cancer vaccines. In vivo electroporation is widely regarded as an effective method of enhancing the potency of DNA vaccines by up to 100-fold compared to conventional methods of delivery. Scancell is confident that TriGrid will provide the most effective delivery system for its SCIB1 melanoma vaccine as it enters clinical trials.
Scancell is in a strong cash position and we like the approach in the cancer vaccines space and technology platform companies in general. One to keep scanning the news on.
Space & People (SAL 70p / £8.14m)
There can’t be many businesses operating in retail and advertising that have sailed through the consumer recession if not unscathed, at least in good shape. Glasgow based Space and People) – listed since December 2004 – in 2000 had the bright idea of bringing together more efficiently the owners of all that free space in shopping malls, rail stations, and exhibition venues, and the advertisers and retailers whose promotional display stands seek to attract the attention passers-by. Prior to SAL’s arrival, those property owners tried to sell such space, if at all, on their own. But SAL has persuaded the owners of over 310 such ‘venues’ (up from 122 in 2004, and 23 per cent of them since 2006 in Germany and France) to delegate to them the marketing of all their free space to advertisers and retailers. In a recession, these tend to concentrate their advertising spend on the ‘bottom line ‘- i.e. closer to ‘point of sale’ than through the press and TV – and with recession-hit property owners looking to supplement their income, SAL is sitting neatly in between.
With no premises or stock to service, the business is a pure cash generator – which has enabled SAL both to quadruple its dividend in four years and to expand its idea into Germany and France and, more recently into Hong Kong and India. Balance Sheet cash at the latest October 2009 year end amounted to £1.34m (18 per cent of the market cap) so it is intriguing that SAL is not using that cash to help fund its just announced acquisition of Retail Profile Ltd, who operates ‘retail merchandising units’ (RMU’s) also in the same shopping malls but who is also expanding rapidly throughout Russia.
RPL is costing £6.3m in shares and loan notes, with a £1.1m cash element which SAL is raising through a placing at 62p. That will increase shares in issue by 61 per cent and improve their liquidity, a drawback which – with management and backers holding about 2/3rds – until now has caused the company to adopt something of a low profile. With SAL expecting RPL to be earnings enhancing (even though – more directly exposed as it is to retailing itself – it generates less than half SAL’s 24 per cent margin) and with the management believing that the synergies RPL will bring will ‘accelerate further growth’, we think SAL is one to keep an eye on, even though the PER – at a historic 22 times – might be just a little high for current markets. A 5.7 per cent dividend yield is not to be sneezed at however.
Summit (SUMM 4.75p / £7.9m)*
Summit announced their preliminary results for the year ended 31st January 2010.
The exciting news is that Summit’s DMD drug (that is partnered by Biomarin Pharmaceuticals who are conducting the Phase I clinical trials) is now expected to have initial results from this trial in Q2 2010. This means there could be significant news flow within the next few weeks. The DMD drug could potentially be a first as a disease modifying medicine where there is huge demand from the patient population for this debilitating disease that affects children. If the trial results are positive, Summit expect that Biomarin would commence a Phase II patient trial in Q1 2011.
The Summit business model of partner funding for their drug candidates is demonstrated again working well for the compound against C. difficile which is funded by the Wellcome Trust meaning no further cost to Summit.
Additionally Summit’s immunosugar platform, SeglinTM Technology, continues to deliver, with active Seglins identified against a number of major disease areas, including diabetes and Hepatitis C.
From a business administration point of view Summit have reduced their cash spend by 70 per cent by getting rid of non-core businesses and cutting headcount and the Board and executive management took pay cuts of between 20-55 per cent, a clear demonstration of their belief in the business. Alongside the £5.4m raised in December 2009, this means the business is well funded out to end of December 2011. By which time we would expect them to have announced milestone payments from existing deals or possibly new ones.
It is a wonder that the share price has moved so little consider the position of strength Summit now occupies. A strong buy!
Synairgen (SNG 23.5p / £14.04m)
Respiratory drug discovery and development company with a particular focus on viral defence in asthma and chronic obstructive pulmonary disease, last week had two announcements. First that it had started its first Phase II study of inhaled interferon beta for the treatment of exacerbations of asthma caused by respiratory viruses including influenza. The Phase II study, known as SG005, uses the Company’s exclusively in-licensed formulation of inhaled IFN-beta (SNG001) and aims to assess the efficacy and safety of inhaled SNG001 compared to placebo administered to asthmatic subjects after the onset of respiratory viral infection for the prevention or attenuation of asthma symptoms caused by respiratory viruses. Following on from the announcement in November 2009 that SNG001 significantly reduced the ability of influenza to infect lung cells, the SG005 study has now been broadened to include patients who contract influenza as well as common cold viruses. The SG005 study is being conducted at a number of clinical trial sites in the United Kingdom. The first volunteers were entered into the study on 31 March and the trial is expected to be completed during the summer of 2011.
Second, Synairgen announced that the patent for inhaled interferon beta to treat rhinovirus infections in asthma and COPD has been granted in Europe. Richard Marsden, CEO of Synairgen, commented, “The European patent grant and the US patent granted last year are key ingredients in the out-licensing package.”
We last wrote on Synairgen in September and since then its share has gone up nearly 30 per cent. Synairgen compounds are potentially going into truly enormous markets. There are around 23m asthmatics in the US and the cost of emergency department visits and inpatient care in relation to asthma in the US is $4.7bn. COPD includes chronic bronchitis and emphysema and the economic cost to the US of COPD is a whopping $42.6bn a year. Synairgen is aiming to tackle the cold and flu viruses that make asthmatics and COPD sufferers’ lives particularly miserable and which cost health systems a huge amount. Adults get an average of two to four colds per year, young children suffer from an average of six to eight colds per year, and these often rhinovirus infections are the major cause of asthma exacerbations, accounting for 50-80 per cent of all such attacks in both children and adults. We don’t think that this one will catch a cold anytime soon.
*A corporate client of Hybridan LLP
The Hybridan Small Cap Wrap is a weekly review of some of the most interesting small cap stories of the past week. Our review will usually be of those companies whose market capitalisations are less than £50m although we may occasionally cover larger companies.
4 May 2010
This week: Transense gains traction, Imaginatik slips and Stanelco passes round the hat
Corac Group (CRA 23.5p, £25.36m)
Corac, the specialist engineer supplying the oil and gas sectors, announced its finals to December 2009 which saw revenues of £1.34m (£0.66m) with a loss before tax of £3.69m (£3.48m). The group ended the period with £5.34m net cash, which allowing for a net cash raise of £5.79m, gives underlying cash usage for the year of £2.56m. The group is making good progress on the down-hole gas compressor technology with on-going trials and development with Eni SpA, though Corac has already warned the trials have been delayed to later this year. Talks are under way with two additional opportunities, one for a system using coiled tubing that will be less expensive than that being trialled with Eni and another with a group that is looking to use the system above ground to move gas between wells of unequal pressure. In the industrial space the group now has two machines with over 7,000 hours of operation and has installed the system as a booster for an existing compressor system in Austria. The shares have drifted of their recent high of 55p in August last year and are now looking attractively priced.
Hydrodec (HYR, 8.75p, £31.66m)
Hydrodec, the green tech company that produces new speciality oils using spent oil as the primary feedstock, gave a trading update and final results to December 2009 which saw revenues of $10.39m ($7.01m) with a loss before tax of $13.56m ($15.47m). The group ended the period with net debt of $7.71m (net debt $6.44m) post asset/investment disposals that brought in $1.30m and a net cash raise of $10.82m, implying an underlying cash burn of some $13.39m during the year. Since the year end the group has raised some £2m with the issue of 20.26m shares at 10p. The group issued a trading update in March in which it noted an uptick in demand and recovery in the US base market. Importantly not only has the price recovered but the supply of waste oil to be refined, the feedstock, has increased. As a result of lower feedback costs and higher selling prices the margin has recovered by some 7 cents per litre in both the Young and Canton sites. The improvement in cash-flow means that the group will now be able to fully meet the next convertible loan note payment due in June 2010. However the group reports that additional capital is being sought to enable a greater expansion – so there is still a high risk of further dilution. The return to the original US margin of some US 70 cents per litre is described as being a “long-haul”. The group has signed the previously announced alliance with Kobelco Eco Solutions to establish a plant to address the Far-Eastern opportunity. Whilst the additional dilution from a fundraise is uncertain the long term prospects are looking increasingly attractive.
Imaginatik (IMTK, 3.5p, £5.57m)
Imaginatik, the provider of collaborative innovation software and processes, has provided a trading update in which it announced that it anticipates revenues of £4.55m and operating loss before share option charges of £1.26m, for the year ended 31 March 2010, below revised downgraded market expectations. The cash position remains comfortable at £1.51m. Analysts have withdrawn 2011 estimates despite the fact that we believe the contract slippages from 2010 should benefit 2011. The share has fallen steeply from a high of 10p last October and, despite the lumpiness of the revenues, is now looking attractively priced.
Lifeline Scientific (LSI 191p/£33.3m)
We last mentioned Lifeline back in January when the medical technology company whose Organ Recovery Systems business is to enhance human donor organ preservation during transport had a trading update indicating that they expected to show profitability for 2009. The final results are now out and it turns out the company was not only right but very modest too. As revenues increased by 120 per cent to $18.3 million, operating profit swung from a loss of $3.6 million to a gain of $2.8 million.
Business improved dramatically for Lifeline during 2009. Most importantly, the technology was fully validated by the evidence from large-scale studies showing that kidneys preserved by the company’s LifePort machine delivered superior outcomes to traditional methods. By year end, 350 LifePorts were established in more than 100 renal transplant centres in 15 countries around the world. Lifeline is now expanding into new territories with the Kidney Transporter and continues developing the technology for liver and pancreas.
The successful turnaround was a lifeline for shareholders who had seen the share price drop from 150p at the IPO to 40p last summer. Now at 190p the company is back in the world of the living.
NXT (NTX 13p / £20.62m)
Full listed provider of unique sound solutions, best known for its flat panel loudspeaker and touch screen technologies, last week issued its interim management statement for the period 1 January 2010 to 26 April 2010. We write on NXT for the first time, and in summary, the company seemed to be saying that revenues, due to royalty income being low particularly for portable consumer products, are below management expectations thus far in the year.
NXT completed a fund raise and acquisition in the period. A successful fundraising of approximately £1m in February ensured sufficient resources to exploit the momentum NXT has in both the TouchSound and BMR (Balanced Mode Radiator) technologies. Audium semiconductor technology is an industry-leading, ultra-efficient audio power amplifier that enables a longer play time for portable and wireless battery-powered audio products. NXT has been monitoring this technology for some time and after a review of the current status of Audium’s power-efficient chip, NXT secured the purchase of the intellectual property and associated assets for a nominal amount. The first application of the Audium silicon to complement BMR will be an Audio-USB product. It is possible that future applications may include wireless speakers for home entertainment.
NXT continues to make positive progress with Nissha Printing Company Limited on the development of small screen touch applications that generate separate tactile feedback sensations at different locations through the use of multi-touch screen functions. The Company is in negotiation with a number of the major participants in the large touch screen market and anticipates prototypes and technical feasibility studies to generate licences in the near future. An example of the sorts of prototypes being developed is a 42 inch infrared LCD touch screen exhibited at the recent Hong Kong Electronics Fair.
NXT has continued to test the principle of participating in the supply chain. Selling exciters directly to customers with a “shrink-wrap” licence has been successful and the Company has now secured Partsexpress.com as an online distribution partner. The Company will be launching its new website shortly, and this will enable components to be sourced directly from NXT.
NXT continues to see disappointing royalty returns for portable consumer products. The portable speaker market has not delivered the upturn in revenues anticipated at the beginning of 2010. Although many new products were launched and a number of promotional orders have been received, the orders placed have been for small quantities as buyers remain conservative. In addition certain customers’ new product launches, such as Tunebug, have been delayed by a few months and have impacted on the revenue flow anticipated for the six months to 30 June 2010. Growth in royalties will be generated in the television category where, in the period under review, NXT announced two new models featuring BMR slim drive units. Automotive royalties have recovered to pre-recession levels and there is continued interest in new applications from different levels within the supply chain.
Revenues for the period, so far, are below management expectations. Its share price is back down to the levels of nearly 12 months ago, despite having got up to nearly 18 pence towards the end of 2009. However, a better second half result is expected compared to the first half, although this is dependent upon signing further new licences. Following the Hong Kong Electronics Fair the target list of licensees is expanding but companies continue to be cautious when considering new technology investment.
Sprue Aegis (SPRP.PL 39.5p / £13.32m)
PLUS quoted designer and marketer of the FireAngel range of innovative safety products, last week announced its results for the financial year ended 31 December 2009. Based in Coventry, Sprue Aegis designs, manufactures and distributes innovative home safety products, notably smoke, carbon monoxide detectors and wireless safety accessories under the FireAngel brand. FireAngel has become the leading approved supplier of smoke alarms to the UK’s Fire Brigades via the “FireBuy” National procurement framework. Other distribution channels include social housing, electrical distributors, utility providers and the leisure industry.
Turnover was up 53 per cent to £14.4m and profit before tax came in at £1.9m, up 19 per cent. Revenue growth was driven by the expansion of its customer base, particularly in the social housing and utility sectors. Interestingly, Sprue has proposed the payment of a maiden final dividend of 0.5 pence per share in respect of financial year 2009.
Sprue’s appointment, announced to the market on 7 April 2010, as the exclusive distributor for BRK Brands Europe Limited to distribute, alongside its FireAngel products, BRK’s entire range of fire, smoke and related safety products and safes, cements Sprue’s position as Europe’s leading suppliers to the fire and home safety market and provides the Group with an excellent platform for growth. The distribution agreement broadens its UK customer base, adding new retail accounts including Wickes, Focus, Costco and Robert Dyas. Sprue expects the arrangement to be earnings enhancing in 2010 with the potential to build sustainable growth in the future, with the potential of BRK Incorporated distributing selected FireAngel products in the Americas.
Cash increased from £1.6m to £2.7m at the end of 2009 and management suggest that Q1 2010 was a strong quarter again in operating performance, such that 2010 looks set to be another interesting year for the Group. Sprue share price has more than doubled over the past year from 16.5 pence on May 1st 2009 to 39.5 pence currently. We write on Sprue for the first time; it had a cracking 2009 and looks all spruced up for another good year…
Stanelco (SEO 0.26p/ £7.7m)
Stanelco, the bioplastics business has announced its finals to December 2009 which saw revenues of £17.9m (£14.8m) with a loss before tax of £3.6m (loss £0.5m) after additional legal costs of £1.3m (£0.6m) from the defence of the Novamont action. The group ended the period with net debt of £4.61m (net debt £2.36m). Overall, Biome Bioplastics increased revenues 30 per cent, Biotec by 23 per cent and RF Applications by 23 per cent. Encouragingly, the group saw a 20 per cent lift in H2 on H1 sales with operational loss reducing from £1.5m in H1 to £1 1m in H2 so that the revenue growth enabled the bioplastics operations to move into profits ahead of the Novamont costs. The group has announced plans to raise a further £3.5m through a placing and open offer, with a minimum of £2.7m. The expiry of the rights attaching to a “Golden Share” in its Biotec will see it consolidate 50 per cent of that operation rather than 100 per cent in the past. In a trading statement the group confirmed continued progress with group revenues in Q1 of £2.6m (£2.1m) so it looks like solid progress is being made.
Tandem Group (TND 99p / £5.49m)
AIM listed manufacturer and distributor of sports and leisure equipment, namely bikes, despite difficult trading conditions, appears to have maintained profitability, borrowings were reduced and its balance sheet was strengthened as it reported its full year results ended 31 Jan 2010. Revenue increased 1.5 per cent to £35.7m and EPS was 17.67p compared with 5.34p last year. Cash as at 31 January 2010 was £1.19m, a substantial improvement. Tandem does not propose to pay a dividend but has said that it will keep the position under review, given that it continues to be faced with significant cost pressures in respect of US dollar volatility, increases in freight and raw material prices, shipping line disruptions and Far East labour shortages. That being said, taking a quick look at the numbers, it struck us as disappointing that a dividend was not being paid, particularly as its statement says that “the Group is now in a position to actively explore opportunities for growth in our bicycles and accessories and sports, leisure and toys businesses, both organically and by acquisition.” We write on Tandem for the first time so perhaps we need to get to know it better before opining on the dividend policy.
Sales for the 12 weeks to 23 April 2010 were 24 per cent up on the previous year, although revenue for the year to 31 January 2011 is currently expected to be slightly down on the previous year principally due to the reduction in national retailer sales on bicycles and competition from new licences on sports, leisure and toys. Gross margin and profitability will also be under pressure as a result of the issues referred to above.
In the year to 31 January 2010 the sports, leisure and toys business was significantly more profitable than bicycles. However, although this sector can grow profits rapidly, the nature of character licences makes it far more volatile. By contrast, the bicycle business, with its well established brands, provides a platform for steady progression. A number of new licences for 2010, particularly in wheeled toys, include Moxie Girlz, Iron Man 2, Star Wars and Doctor Who. Tandem is already creating products for the 2011 ranges and has successfully secured licences for Ben & Holly’s Little Kingdom, Tinga Tinga Tales and Angelina Ballerina.
Tandem’s share price has also more than doubled in the past year from 44.5 pence on May 1st 2009 to just shy of 100 pence currently. Despite Tandem’s good performance, it appears that the company is taking a cautious view going forwards and that some of its good wins it prefers to see as one offs. One to watch and get to know better.
Transense Technologies (TRT 7p/ £5.3m)*
Transense announced this week that it has signed a distribution agreement with RFID Chile, the Chilean National Mining Company for its Translogik subsidiary. The miner will utilise the Tyre Pressure Monitoring System which provides real-time tyre temperature and pressure management system. The trial is due to start on 10th May 2010 and the system will be fitted to three dumper trucks which are fitted with huge 57 inch tyres. The tyres used for trucks in the mining industry are exceedingly expensive, often costing tens of thousands of dollars and so maximising the life and performance of each one really does make a difference to the costs of the mine, as well as enhancing production by minimising breakdowns and replacement lead times. We think this is a most interesting trial of the Translogik technology and if successful could open the door to interest from many other miners across the world, all looking to improve tyre efficiency and increase their margins. As this is just one part of the Transense offering now is the time to pick up some shares.
Zeta Compliance Group (ZCGP.PL 37.5p / £3.26m)
Last week PLUS quoted Zeta had two announcements, with three pieces of news. Namely an accreditation within the Contractors Health and Safety Assessment Scheme and also a contract win and contract extension. Zeta Compliance Group provides products and services to enable organisations with large estates to ensure that they systematically meet their Environmental, Health and Safety obligations. It carries out risk assessment and monitoring services in respect of water and air hygiene where Legionella and MRSA are principal concerns.
Zeta last week announced that it has been engaged by one of the largest multidisciplinary laboratories in the world to implement ZetaSafe as a Quality Control platform to all of its routine analytical laboratories in the United States and Canada. The initial order is worth over $300,000 and is scheduled to be completed by 31 September 2010. Zeta also announces that it had a major contract extended with one of its long established customers, one of the major high street retailers, to provide water hygiene surveys for 900 new properties assimilated into their Estate. The extension to the order is valued at over £90,000 and is to be completed by 31 January 2011. Zeta has also had risk assessment business renewed from the same customer valued at £60,000 over the next 12 months.
We write on Zeta for the first time. We are impressed by their list of blue chip clients, namely high street chains (Boots, Superdrug), Banks (Barclays), Universities (Oxford), hospitals, facilities management companies and managing agents (DTZ). This is a great little business at first blush, as all businesses have to comply with Health and Safety Laws, and there are a multitude of statutory regulations in the water, fire and gas space, to name but a few. Zeta’s technology (its real time database) and consultancy mean it is leading edge, particularly in water and air. ZetaSafe is a web based database that hosts businesses critical data and ZetaMobile gets data onto the web quickly from the field, crucial in data recovery situations. We expect Zeta may have its full year results soon (year end 31 January) and await those to opine further, but we expect to see a number of acquisitions driving this stock as well as sold organic growth as its client list grows and contracted revenues increase and as the Law surrounding this area, business productivity issues and brand protection drive clients to Zeta.
*A corporate client of Hybridan LLP
The Hybridan Small Cap Wrap is a weekly review of some of the most interesting small cap stories of the past week. Our review will usually be of those companies whose market capitalisations are less than £50m although we may occasionally cover larger companies.