Small Cap Wrap: Month: November 2009

AIM Breakfast - Archive

23 Nov 2009

This week: FFastFill gets OTC, a brainstorming performance from Imaginatik, and how Huntsworth is going global  

AdEPT Telecom (ADT 23.5p/£4.95m)
Interims to September 2009 of the independent provider of telecom services saw revenues fall to £13.01m (£14.76m) with underlying pre-tax profits of £1.83m (£1.75m) and EPS 4.9p (5.4p). The company blamed lower economic activity for reduced call volumes together with a more aggressive stance on non-paying customers who have been disconnected as part of a drive to reduce bad debts (which have been more than halved). It is hard to escape the feeling that this company, which came to the market at 140p trumpeting an aggressive and efficient buy and build model, has stalled.  Additional funding from either the banks or the equity markets for new acquisitions isn’t there and whilst it’s trying to extract as much as possible from its existing business this is a long hard slog without much to show. For the full year to March 2010 analysts are expecting £0.55m profit  with 6.5p earnings per share putting the company on a rating of 3.6 times.  Seems cheap? Yes, but the group is weighed down by net debt of £10.23m (about 3 times annualised EBITDA) which could easily see the group in the hands of the bank if it proves less than adept.

Anglesey Mining plc (AYM 15p/£22.93m)
Anglesey’s TSX-listed and 50 per cent owned Labrador Iron Mines has filed its second quarter financial statements.  The debt free company had C$28 million (£16 million) in cash as at 30th September and reports that it has made steady progress in advancing the Schefferville iron ore project towards mining production in 2010.

FFastFill (FFA 7.75p/£30.25m)

The software group specialising in providing trading technologies to the derivatives market has now made the crucial step to profitability. In the six months to September 2009, gross profit grew by 17 per cent, to £5.86m, which helped the group turn from an operating loss of £0.42m in the first half of the 2009 to an operating profit of £0.5 in these results. Key to this success was a 27 per cent rise in higher-margin software-as-a-service (Saas) revenue. And this bears out the fact that the Saas model offers some key benefits: all clients can be managed from a single shared infrastructure; this system is more cost effective both for FFastFill and its customers; and clients don’t have to make capital spending investments to set the system up. Growth prospects are also underpinned by a tightening regulatory regime for securities traded over the counter (OTC). Chairman Keith Todd said that, as these trades look to be required to be centrally cleared through one of the international clearing houses, so FFastFill’s addressable market will grow significantly, driving demand for its middle and back office solutions. FFastFill, then, looks increasingly up to speed.

Freshwater (FWUK 29p/£4.48m)
Regional public relations specialist Freshwater has not had an easy year. But it is not alone! Driven by a harsh recessionary climate, revenue for the year to August 2009 fell by 10.8 per cent, to £6.7m, while EPS dropped from 6.26p to 1.53p. And business in the consumer, property, conference and technology sectors was hit particularly hard. There is, however, real light at the end of the Severn Tunnel for the Cardiff-headquartered outfit. The group reported an improvement in the second half of the year and, at the analysts’  briefing, chief executive Steve Howell said the fourth quarter saw Freshwater “getting back to expected profitability”. Furthermore, this improvement in trading has continued into the current financial year and Mr Howell said he views “the immediate and long term future of the Company with confidence”. The group has secured significant cost reductions, issued earn-out payments on all acquisitions made prior to July 2009, successfully diversified into a wide range of sectors and has net debt of just £0.86m. Significantly, 30-35 per cent of revenues relate to ‘statutory’ notices typically concerning healthcare and planning issues – a key defensive attribute. And we view positively the group’s continued expansion into digital activities, as the public relations industry is in our view a beneficiary of the anything-goes culture of the blogosphere.

Fusion IP (FIP  34p/£14.33m)
We covered struggling Fusion last week after announcing its £3m emergency rescue by IP Group.  Now, to try and inject a bit of momentum the university commercialisation company has announced it has recently completed a licensing deal with a leading global orthopaedic company for orthopaedic planning software. The software was originated by the Medical Physics team at the University of Sheffield. The deal, which was worth just over £0.8m in total, resulted in a one-off licence fee income for Fusion of just over £0.4m. This is the first major licence fee generated since the expanded agreement with University of Sheffield IP which gives Fusion the right to license out any University originated IP for half of  net income. Fusion is targeting breakeven in 2011/12 and is now well underpinned by cash from IP Group. However, as a one-off deaf this is relatively small and there will be no recurring income, which this sort of company needs. Nothing to blow the fuses just yet then.

Hasgrove (HGV 54p/£12.87m)
The public affairs and digital communications group has, since October, seen a ‘significant improvement’  in client activity, securing business (with groups such as Coca Cola and GSK) worth £1m on an annualised basis. But there has also been a deferral on some significant projects, which are now expected to be delayed until 2010. Furthermore, the group’s focus on the faster growing areas of association management and digital marketing has required additional costs in terms of recruitment, pre-sales and proposals activity. But Hasgrove’s digital credentials have been further cemented with the acquisition of education-focused digital technology outfit MCL Digital and digital marketing group Underwired. The upshot of all this is that the group expects full-year headline pre-tax profits of £2.6m, with an exceptional restructuring charge of £0.8m. The shares fell by 8.5 per cent on the day of the announcement, but Hasgrove is not the only marketing group to face the wrath of the downturn, and recent positive trading activity does suggest upside potential.

Huntsworth (HNT 64.75p/£135.41m)

In a trading update for the four months to the end of October 2009 Huntsworth said its earnings are in line with expectations for the full year. Some 96 per cent of annual forecast revenues are now committed and management expects 70 per cent of revenues for 2010 to be committed by January 2010. The rationalisation of the business continues apace, with the group’s 26 brands now organised into four key brands, at a cost of between £8m and £10m. Crucially, this new branding is set to increase the potential for multi-office and global opportunities. It’s reassuring, then, that Huntsworth is being invited to pitch for more global clients in its Grayling brand. And a few juicy global client wins could well see the group achieving its aim of significantly improved organic growth in 2011.

Hydrodec (HYR 13p/£34.76m)
Hydrodec, the green tech company that produces new speciality oils using spent oil as the primary feedstock, appears back on track after a difficult first half of 2009 which was seriously impacted by a combination of the global financial crisis, the oil price collapse and initial operational challenges at its Canton plant. Production and sales volumes in the third quarter of 2009 (5.2m litres and 3.7m litres respectively) exceeded those of the entire first half of the year and the ramp-up of production is continuing into the fourth quarter with record production in October.  The company reported that transformer oil prices remained soft well into the fourth quarter largely but that recently announced price increases of around 10 per cent by the major refiners indicate the market is improving. In addition, feedstock costs, over which the company has greater control, are being progressively reduced through a wider portfolio of feedstock suppliers.  Interestingly, the company also reported that it is in advanced stages of negotiation for an off-take arrangement with one of its largest existing customers for more than 11 million litres of 2010 Canton SUPERfine production and expects to secure additional commitments for another 7.5 million litres before the year end.  Hydrodec is trading at less than half its value at the beginning of the year but with its prospects improving rapidly we expect this one to power ahead soon.

Imaginatik (IMTK 8.25P/£13.14M)
Imaginatik provides software and services for “Collective Intelligence” or “Idea Management”, tracking the thought processes and tapping into the brain power of employees within a business, using the employees as an additional resource.  Whilst this is still niche at the moment, Imaginatik expect it to be mainstream within 2 years.  In fact, as validation of the whole area, more than $40m has been raised by mainly US businesses in the sector recently. In its interim results Imaginatik increased revenue by 26 per cent to £2.3m despite the troubled global economy, and signed multi-year deals giving visibility on future revenue.  The business traditionally has a better second half, and this is expected again this year, especially as it has increased spending on Sales and Marketing to drive the business forward.  There has been a restructuring of the sales team too, giving each division specific focus, be it for new business or for upselling to existing customers.  The result of this should be seen in the year end results, as management expects it to take 4 to 6 months for new sales staff to become fully productive.  Additionally there is a new version of the software about to be rolled out in January 2010, giving an improved, sleeker, better user experience. The shares have risen 78 per cent since January (when they were just over 4.5p) but we still imagine it could be a great second half for Imaginatik!

Lipoxen PLC (LPX 13.5p/£21.23m)
Lipoxen, a biotech company that develops new and improved versions of existing drugs and vaccines, has signed a collaboration agreement that allows the Russian pharmaceutical company Pharmsynthez to apply Lipoxen’s ImuXen technology to create three vaccine candidates for secondary progressive multiple sclerosis, HIV and non-Hodgkins lymphoma.  Also, Lipoxen’s PolyXen technology will be applied to active compounds to create three pharmaceutical candidates for treatment of cystic fibrosis, acute myeloid leukaemia and type 2 diabetes.  With no monetary resources required from Lipoxen to achieve human clinical proof of principle, the company also benefits from having the rights to use all relevant clinical trial data to conduct further trials and seek marketing authorisation in all other territories than the Russian Federation (where Lipoxen will receive 10 per cent royalties of all net sales).  Four of the product candidates target rare diseases that may benefit from shortened clinical pathways and market exclusivity periods in the EU and the US.  Pharmsynthez expects to complete testing by the end of next year. This agreement is another deal that underscores Lipoxen’s cost effective business model.  Should their partner achieve human clinical proof of concept at no cost to Lipoxen, the company will not only be gaining royalties and worldwide marketing rights (except Russia), but the new compounds will further validate Lipoxen’s exciting technologies and further enhance its portfolio.

Minster Pharmaceuticals plc (MPM 5.25p/£3.09m)
In its results for the six months to 30th September Minster announces that it has decided to find a partner for the further development of Tonabersat, which has potential in several neurological indications.  We reported a few months ago how this compound, which failed a Phase IIb study in migraine prevention, has shown a significant preventive effect in migraine with aura.  This has been further supported in academic papers describing the mechanism of action and potential utility in epilepsy and neuropathic pain.  For a company with the appropriate resources Tonabersat could become an exciting development programme. Minster also announced that it is preparing its other compound Sabcomeline for a Phase II proof of concept study in the treatment of cognitive decline in schizophrenia.  This is currently an unmet clinical need with sufferers unable to work.  There are 1.5 million schizophrenia sufferers in the US alone. With £4.8 million in the bank, the market values Minster at a lot less.  If the company is successful in finding a partner for Tonabersat and gets started on the Phase II study for Sabcomeline, then Minster’s share price is unlikely to stay at this depressed level.

Serabi Mining Plc (SRB 2.075p/£6.14m)

Shareholders of Serabi, the northern Brazilian gold mining company, now have the opportunity to participate on equal terms to the placing announced last week.  For every 14 shares existing shareholders can subscribe to 1 new share at 1.5p per share under this open offer.  If fully taken up the offer will raise £317,000 on top of the £2.4 million raised last week.  Serabi has identified a number of targets and will use the funds to prioritise and drill 4-6 of them next year. The company hopes to be able to identify two or three Palito “look-a-likes” (the existing mine) that can be developed concurrently so that they would be feeding into a central processing plant.  Loyal shareholders should consider staying involved in a company that appears to have become much more focused and determined to realise the potential value of its extensive exploration portfolio.

UBC Media (UBC 5p/£9.76m)

In the half-year to 30 September 2009, UBC Media had a welcome rise in revenues (up 9 per cent, to £1.94m) and an equally welcome reduction in reported operating loss (from £0.61m in the first half of 2009 to £0.33m in this first half) as the group benefited from cost cutting. Since the sale of the commercial division (which produced news and travel bulletins for radio stations in return for advertising space) the group has been repositioning itself as a content and software business, and we note with interest the acquisition of Radio Lynx, which produces ad funded content for blue chip clients such as Nokia and Tesco. And revenues in the radio division were flat, at £1.4m, a creditable performance in a downturn. Reassuringly, 60 per cent of this year’s BBC radio revenues have been confirmed for the next 12 months. Turnover in the software division, however, fell from £0.31m to £0.28m, but a new deal has been secured with Bauer Radio group and a software agreement has been renewed with the BBC. But what really matters here is what UBC is going to do with its £9.7m cash pile. Watch this space.

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. Our review is not intended to constitute research and is not to be taken as investment advice.

16 Nov 2009

This week: Pinewood Shepperton continues to diversify, Highams is on a high, and a GEM of a biofuels company

Avanti Communications (AVN 445.5p/£204.28m)
Satellite broadband operator Avanti has announced three contract wins, including a contract to prepare for larger scale deployment of satellite backhaul for rural mobile broadband access (part of the government’s Digital Britain project) and a contract with a consortium to help standardise satellite broadband services for the European Space Agency. All this sees Avanti continuing to put building blocks in place for potentially stratospheric growth, as long as its satellite is successfully launched in the second quarter of 2010. If that happens, Avanti should blast off big time.

Alumasc (ALU 102.5p/£37.04m)
Alumasc has a portfolio of market leading engineering and building businesses. Over 85 per cent of group revenue is from sustainable products, which help to reduce energy and water use. For example, it holds the number one positions in green roofs (roofs planted with grasses, providing insulation and a reduction in water run-off whilst being low maintenance), solar shading and control (an aluminium frame of fins or levers around the outside of a building, this moves throughout the day to provide shade from the sun to reduce the need for air conditioning) and wall insulation for social housing refurbishment. Demand for these products is driven partly by the stringent building regulations as well as the general awareness of climate change and the desire to be more in tune with the environment and reduce unnecessary energy usage. Although Alumasc has been impacted by the recession and the reduction in commercial building construction this has been somewhat mitigated by the keenness for sustainable building products. Alumasc are presented with great opportunities with high profile upcoming infrastructure projects such as the Olympics, Thames Gateway and Crossrail, as well as export potential to the US and the Middle East in particular.

Anglesey Mining plc (AYM 16.00p/£24.46m)
Anglesey has reported that its TSX-listed and 50 per cent owned Labrador Iron Mines has doubled the NI 43-101 compliant resource estimate for the James, Redmond 2B and Redmond 5 deposits in Western Labrador.  These deposits comprise the first stage of targeted production from this iron ore project where previous resource estimates where made prior to 1982.  The increase means that the expected life of the Phase One project can be extended by almost two years.

Fusion IP (FIP 33.5p/£14.12m) and IP Group (IPO 55.75p / £141.41m)
Intellectual property commercialisation company IP Group is investing £3m for a 19.8 per cent stake in struggling AIM-listed Fusion IP, a company which owns 100 per cent of the rights to intellectual property generated by the universities of Sheffield and Cardiff.  IP Group has also been granted the option to buy one-fifth of Fusion’s interest in any spin-off company created from Cardiff University and the University of Sheffield, at a pre-determined valuation of £500,000 and if it does so it will be obliged to invest a minimum of 20 per cent of the initial seed capital provided to each company.  “The strategic investment in Fusion … consolidates our market leading position in the UK intellectual property commercialisation sector and we look forward to working closely with Fusion’s management team and portfolio,” said Alan Aubrey, chief executive of IP Group. IP Group said the second half of the year has seen a positive performance with the value of the company’s portfolio rising from £97.1m at the end of June to £98.8m, as at 6 November.  The increase was largely due the increase in value of the 14 companies in the group’s portfolio which are quoted on either AIM or PLUS Markets; these recorded a net fair value gain of £1.4m (3.9 per cent) during the period to 6 November 2009.  Fusion posted a full year loss, excluding subsidiary spin-out costs and amortisation, reduced to £1.1m (2008: GBP1.6m) and a group loss, after write downs, of £5.0m (2008: GBP5.0m).  Our take on this is that the option arrangement with IP Group is a value shifting mechanic in IP Group’s favour and only accepted by Fusion because its available cash resources (as opposed to cash supposedly ring fenced for investment) were insufficient to meet its obligations.  Funding wasn’t available from the market and so it had no choice but to fall into IP Group’s clutches. Not surprisingly, Fusion’s share price is at an all time low and we can’t help but believe the market’s called this one right.  A cost base of over £1.5m seems hard to justify in times when exits of investee companies are so uncertain and fee income is only £400,000.  The concept of exploiting university IP is sound.  A low running cost base and good recurring revenues equally so.  If only they could be fused – and Fusion hasn’t.

GEM Biofuels (GBF 13p/£4.11m)
GEM Biofuels uses jatropha grown in Madagascar to produce biodiesel feedstock.  It is not a refinery and it does not make the actual biodiesel. Instead, it grows, harvests, crushes and then sells the oil produced from seeds onto a biodiesel manufacturer. GEM leases the land from the local community but, unlike competitors, it owns the jatropha trees.  There is no need to irrigate the plantation and GEM doesn’t use arable land, so there is no “food versus fuel” contention.  There simply aren’t enough nutrients in the soil to grow food crops.  Jatropha trees generally begin producing after 2 or 3 years and reach maturity after 5 years whilst remaining productive for upwards of 30 years and are able to withstand periods of drought. GEM has 55,700 hectares of jatropha trees planted out, with this number rising to 200,000 by 2012, with a total of 492,500 hectares secured. Legislation is driving demand for biodiesel and thus the need for feedstock. In the UK all diesel must contain 5 per cent biodiesel in the mix by 2010, in France 10 per cent.   The group has an agreement in place to sell 55 per cent to Singapore on a 10 year contract, the remaining 45 per cent will be sold into Europe at prevailing spot prices. The combination of cheap land, keen local workforce (harvesting is highly manual work) and perennial crops keeps costs low, whilst the sustainability issues favour alternatives to mineral oil push demand leading to exciting times ahead for GEM Biofuels.

Highams Systems Services Group plc (HSS 2.375p / £1.64m)
Last week, the AIM-quoted recruitment consultancy and a leading niche provider of business, technology and professional services to the insurance and financial services sectors announced its interim results for the six months ended 30 September 2009. At a well attended analyst presentation, the Company was able to trumpet a return to profit of £40,000 (2008: loss £261,000), largely due to a firm control over costs, improved market conditions and a focus on sales. The chairman of Highams, commented: “We expect further progress during the following six months and look forward to our future growth.” The share price reacted very well on the day of its interims and has been going in the right direction for the past three months. The realignment of the business model has paid off and the market recognised this on the day of the interims last week. Permanent recruitment has shown signs of recovery, which is interesting as a general comment on the economy. We believe that Highgams has got it right in focusing on sales, and with eight out of sixteen staff in sales, further sales people are currently being recruited. The CEO Mark de Lacy said that his business was very much one like a trading floor with an open exchange of information between researchers and sales consultants on CVs and roles which appeared to go down well with those present at the meeting. Highams wants to become a £50m turnover business, with 300 contractors on the books; currently at £3.77m revenue and 70 contractors, there is a long way to go and we expect to see the odd acquisition along the way. However at current levels this stock has an undemanding valuation and we suggest it is well worth a look.

HML Holdings (HMLH 15.25p/£4.81m)
HML, the property management group, has reported that in the half year to September revenues nudged up slightly to £4.4m (£4.3m) although earnings were down to £55,000 (£83,000).  Still, it’s good to see a property company surviving and making money even in this market, although, to be fair, HML is really a property services business rather than a developer or landlord.  It currently manages 26,000 private residential properties and whilst small in market cap terms, the management team is experienced in building service businesses. Robert Plumb, CEO, was previously involved in the property services sector, having built and consolidated Hercules prior to its sale to Erinaceous in 2004. Profit contributions are derived from insurance services, surveying (transaction based), lettings and treasury, all related to the core management business and it’s these revenue lines that have proved resilient. Revenue is recurring and HML enjoys good retention rates for its residential management service. On a price to sales ratio the shares are still conservatively rated although on our preferred measure of price/earnings the group still needs to grow into its current valuation. Next year’s p/e ratio is 18x which does seem a little toppy but we are talking of earnings growing from a very small number here. Increased interest rates, new mandates secured on the back of efficient administration, possible acquisitions and residential transactional volumes should help in the medium term. This is no ten-bagger but a low risk, predictable stock that should have a place in every portfolio. Ultimately, however, we suspect Plumb’s end game is another exit a la Hercules at which point a 30p take out price might not seem that rich.

Imaginatik (IMTK 8.25p/£13.14m)
The group that builds software enabling individuals within and beyond corporations to collaborate on corporate ideas development has secured a multi-year service and software contract win. Due to commercial sensitivity, Imaginatik could not give details of the deal, which is with a global financial services group. But chief executive Mark Turrell issued some positive noises, saying: “We are experiencing a renewed interest in innovation, particularly within the financial services industry.” You might even call Imaginatik a bankable commodity.

Latchways (LTC 665p/£74.01m)
Latchways designs and manufactures equipment to protect people working at height, such as on rooftops, cranes, ladders and telecom masts.  They also have an installation and servicing business.  These business lines are in some part a reflection of the construction industry and the tricky economic climate, and Latchways has seen cautiousness from their customers in the first 6 months of the year due to less construction starts.  However they recently announced a pre-tax profit of £3.6m, and expect to meet analysts’ estimates for the full year.  It has strong cash flows, at 132 per cent of operating profit and net cash of £6.2m. It also has great potential for growth in the US and the Middle East through marketing and any ‘good fit’ acquisitions as well as having already seen great progress in France for its Guardrail product, where there is continued opportunity and they are optimistic for this to expand. Additionally, it hopes to break into new markets: oil and gas (it has its SRL products placed with 12 drilling contractors, these are in the field for a trial periods of six months which Latchways will look to convert into orders); wind power (it has a solution for the engineers to get from the boat to the turbine safely during installation); and the UK military, where the Wingrip product is installed on RAF bases.  There are cross selling opportunities and retrofit markets to be exploited, especially with the utility companies, most of whom use Latchways already. The Company also has ongoing design work for the 2012 Olympics, which could really raise their profile (and their share price)!

Milestone Group (MSG 2.05p / £1.85m)*
AIM listed provider of digital media solutions and technology last week announced its final results for the year ended 30 September 2009. Milestone’s share price has been ticking up little by little lately as Deborah White, the CEO, has continued to turn the business around and produce positive news flow. In the past year, Deborah has reduced the Group’s losses by over 50 per cent and balance sheet liabilities by a further 20 per cent. She has closed the loss making Oxford Broadcasting and sold all of the analogue licences. As part of the turnaround, we have announced recently in our Small Cap Wrap the new appointments of Per Bonato – Business Development Director, Dr Marios Gerogiokas – Director of Wireless Services and Cooper Handley – Creative Director and head of the in house web development team. The Company rebranding has been completed and post period end, MSG did two deals to complement its web design division, one with JumpStart Wireless and one with Ve Interactive.  JumpStart’s innovative technology is a cost-effective solution to transform any mobile device into a reporting tool for employees working remotely from company premises. Under the agreement, Milestone is entitled to a sales commission of 15 per cent of gross revenues. Ve Interactive Ltd is in the space of online shopping cart abandonment solutions, which are specialised, web-based solutions for e-vendors to improve sales conversion from abandoned shopping carts. Again, under the agreement, Milestone is entitled to a sales commission of 15 per cent of gross revenues created by Milestone from Ve Capture. Ms White commented: “This is an exciting time for us as we move towards generating revenues with the three new areas of the business. We look forward to building a positive future for our shareholders.” The Company has a clear strategy of actively growing a portfolio of controlling and non-controlling stakes in digital technology, content or service companies. MSG is now firmly focused on generating revenue to help support the business expansion and we believe that this stock is also well worth a look now that the turnaround is almost complete.

Motive Television (MTV 0.575p/£1.88m)
When the private sector is in the doldrums, it makes sense to focus on the public sector. And this is something Motive Television has done quite adeptly. Indeed, it has announced another order for the BBC, this time for its subsidiary Scarlet Television to produce Delia’s Classic Christmas, a one-hour special for BBC2. Motive’s strategy today is to focus on the distribution of television set-top boxes. But continued success on the programme-making front could provide funding to develop its new strategy, or raise the value of its programme-making subsidiaries, should they ever be sold. We read with interest, then, chief executive Mick Pilsworth’s statement that a number of further BBC commissions are expected to be announced shortly.

Pilat Media (PGB 27p/£15.99m)
Pilat Media, which supplies business management software to the media industry, has signed a new contract with Brazil’s largest television programming company, Globosat, for the licensing and maintenance of its Integrated Broadcast Management System (IBMS). Management estimates the contract will provide an additional £1m in sales in the next financial year, with further subsequent revenues after the system goes live. This is Pilat’s first significant deal in South America and management hopes to continue to expand in the region.

Pinewood Shepperton (PWS 133.75p/£60.06m)
Pinewood Shepperton is no one-trick-pony. World renowned for its film studios, the group has successfully diversified into services for the television industry. It also has expertise in management of media property, with considerable commercial property assets of its own, including media parks that serve as hubs for the creative industries. And this diversification continues with the announcement of a contract with Canal+ Image UK, part of French media conglomerate Vivendi, to provide an archival service including the managed storage, preservation and restoration of audio and picture assets. This preservation and restoration service is a new revenue stream for the group and so further widens its skill set. Pinewood, then, continues to branch out.

Sarantel Group PLC (SLG 2.50p/£4.75m)
Following a positive trading statement, Sarantel announced a placing of £2.3 million.  This will provide the company with working capital for further development and marketing of its high-performance filtering antennas for portable wireless devices.  Throughout the year Sarantel has reported a number of design wins and production orders that has resulted in a 55 increase in revenues for the year ended 30th September.  Despite challenging economic conditions, sales of the company’s consumer GPS solutions have remained stable as they are being deployed in much broader range of applications.  Most significant, however, is Sarantel’s strategy of focusing on the high-margin niche markets which has turned out to be very successful.  We are registering signals of breakeven in the near future with our antennas.

Serabi Mining Plc (SRB 2.025p/£2.84m)
We wrote some months ago that Serabi, which is sitting on an extensive exploration portfolio and a small gold mining operation in northern Brazil, was in need of more capital to execute on its strategy of developing further mines in the region and that without access to capital the company would be unable to fully utilise these assets and further prove the potential of the many exciting opportunities within its extensive land position. Well, a few months later and the company’s coffers have been replenished with £2.4 million from a placing. The company can now go ahead and conduct a variety of geophysical and geochemical analyses as a follow-up to the extensive airborne survey that resulted in a prioritised target list of 18 areas of potential gold mineralization. Further studies could yield a list of 7-10 targets being advanced to drill-ready status over the next year. The company hopes to be able to identify two or three Palito “look-a-likes” (the existing mine) that can be developed concurrently so that they would be feeding into a central processing plant.  We are pleased to see that Serabi is able to advance its many opportunities in a considered and rational way and look forward to hear about the results of the analyses in late Q1 2010.

Solomon Gold PLC (SOLG 7.125p/£7.46m)
Solomon, an exploration company with a number of highly prospective licences in a region that is known for giant copper/gold porphyry systems, has announced a placing of $3 million (£1.7 million). All the directors participated in the placing and the proceeds will be used for ongoing work at the company’s project areas outside the Newmont joint venture project, as well as for advancement of a diversification strategy.

SpiriTel (STP 48p / £3.01m)
SpiriTel, the business communications service provider that we reported on last week, has hardly paused for breath, as it announced last week the acquisition of ADK Communications for an initial £1 million in line with its acquisition strategy as a consolidator of the highly fragmented telecoms reseller sector. ADK, based in Hertfordshire, is a provider of voice and data services to almost 300 SME customers. The acquisition increases SpiriTel’s customer base to approximately 2,800 businesses. ADK is SpiriTel’s eighth acquisition in three years and follows last week’s announcement of a substantial fundraising and the acquisition of Edge Solutions. The company is expecting the ADK deal to be immediately earnings enhancing and, as with SpiriTel’s previous acquisitions, will be swiftly integrated into SpiriTel’s Business Division which it hopes will provide additional operational synergies. Still, however, the share price remains in the doldrums.  We say to the company: improve your own communications and put some spirit in your share price.

Surgical Innovations Group PLC (SUN 1.675p/£6.64m)
All the directors of Surgical Innovations, a maker of laparoscopic tools and instruments used by surgeons in minimally invasive surgery, have together purchased a total of 6.2 million shares in the market over the last two weeks.  We commented a month ago on how the share price has underperformed the market and that investors in our opinion were unduly underestimating the current value and growth potential of the company, as its significant capital investments are now starting to bear fruit.  Obviously, the directors are optimistic as well.

Synchronica (SYNC 3.5p/£20.65m)
The mobile technology specialist’s news deluge has continued with the announcement of a first order for its low-cost devices ahead of expectations. This order is from an unnamed Central African mobile operator (which recently took out a 100,000 user licence with Synchronica) and devices are set to start shipping before the end of the year. Revenues from the order are, however, expected to be modest. Significantly, though, the group has seen strong interest for this product and management says it “continues to be optimistic” about the sales and profit potential from work with its collaboration partners.

Ultimate Finance (UFG 14.75p / £2.95m)
This small but perfectly formed finance company has had a great run recently, and is up almost three times this year.  This looks likely to continue at its chairman reported at last week’s AGM that “The first four months of the financial year have seen trading in accordance with expectations, notwithstanding the difficult economic background. With demand continuing for our services, and a reliable flow of funding to serve demand, the Board remains confident in the future development of the Company.” With the UK banks continuing to suffer from capital rationing we see great opportunities for alternative finance providers to SMEs, such as this one, to really provide the ultimate in finance.

*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.

09 Nov 2009

This week: More contracts for Synchronica, LMS is at a healthy discount, and why Tornado is a blast for Faroe Petroleum 

Avanti Communications (AVN 393.5p/£177m)
It is perhaps fitting that broadband satellite operator Avanti Communications announced on fireworks night that its HYLAS satellite payload has arrived safely at the ISRO satellite assembly facility in India. It is now in the final stage of assembly and is on track for launch from French Guyana in the second quarter of 2010. Crucially, the launch will allow Avanti to transfer its leased satellite capacity to HYLAS, enhancing group margins in the process. And, with the European Commission having set aside funding for regional broadband across Europe, which the company will be well-placed to supply, Avanti’s star looks in the ascendant.

Bglobal (BGBL 54.5p/£40.5m)
BGlobal, the supplier of smart meters, has announced it is raising £2.25m by a placing of new shares at 49p.  This placing, coupled with the facility of £15m made available to the company by Barclays, means that Bglobal is in a strong position to make the most of a growing market that will be pushed forward by government legislation. There were 17,666 meter installations in the six months to September 2009, more than double the number installed in the first half of the previous year. Bglobal installed 3,993 meters in September, which is around the number where it will breakeven on a monthly basis. House broker Charles Stanley expects 45,000 meters to be installed in the year to March 2010 – suggesting more than 27,000 installations in the second half. The cash raised enables 5,000 meter installations a month to be achieved. There is no shortage of customers. Bglobal recently won an installation contract with Gazprom, which is trying to establish itself in the UK. Gazprom is expected to target 100,000 customers over the first three years.  This week the company also announced that it is supplying micro-gen meters for a trial by npower. These meters can be used by customers who export electricity back to the grid. This enables the customer to see how much energy they are using and how much they will be paid for any electricity they supply. Charles Stanley forecasts that Bglobal will breakeven on more than doubled revenues of £13.4m in the year to March 2010. A profit of £4.5m and a nil tax charge is forecast for the year to March 2011. At 50.75p a share, that equates to a prospective 2010-11 multiple of less than nine timrd. The Bglobal share price has almost quadrupled in the past six months on the back of the announcement of the Barclays facility at the beginning of July. Whilst Bglobal disappointed in its early years as an AIM company, the company now appears to be on track to Bgreat.

CustomVis (CUS 1.23p/£2.37m)
The leading developer, manufacturer and distributor of solid state laser systems for the refractive surgical industry announced it has been granted approval for its presbyopia treatment by the Therapeutic Goods Administration, Australia’s regulatory agency for medical drugs and devices.  CustomVis is now one of the first refractive laser developers in the world to be granted regulatory approval for the treatment of presbyopia. As well as Australian approval, the treatment has been granted European CE approval, allowing the procedure to be carried out within the European Union. The Company believes this is the first presbyopia treatment of this method of laser surgery to receive CE approval. Presbyopia is an age-associated progressive loss of the focusing power of the eye’s lens, making it difficult to see objects close-up. CustomVis expects to conduct simple software upgrades over the next two months, thereby allowing surgeons operating its lasers to begin offering this treatment to their patients shortly. PresBvis users will be charged on a per-patient basis, bringing a new cash flow stream into the business, with fees paid in advance to CustomVis for each treatment performed. Whilst CustomVis has gone up 40 per cent over the last year, it has been a bit range bound over the last three months. Sales growth that could result from this approval may be what the share needs to help it to start performing.

Faroe Petroleum (FPM 115.75p/£121.24m)
The independent  oil and  gas company  focusing principally  on   exploration,   appraisal  and   undeveloped   field opportunities in the Atlantic  margin, the North  Sea and Norway,  is pleased to announce the completion of the side-track well drilled  on the  Tornado  discovery,  West  of  Shetland,  (Faroe  7.5 per cent working interest). OMV, as operator for the licence, has completed the drilling of the side-track to the Tornado discovery well.  CEO Graham Stewart commented: “The appraisal well has reconfirmed the presence of a significant accumulation   of hydrocarbons. Tornado  is  the  second  of   a  firm  five-well  Atlantic   Margin exploration drilling programme  which Faroe is  undertaking over  the coming months.   The first well in the programme, announced in October, made a significant discovery, the Glenlivet gas field, which is currently being appraised.   Faroe is  scheduled  to  drill  three further very  high  impact  exploration wells:  the  Anne  Marie  oil prospect in the Faroes (operated by Eni), the Cardhu oil prospect  in the UK (operated  by BP)  and the Lagavulin  oil prospect  in the  UK (operated by Chevron)”. Faroe also last week announced the results of the second side track appraisal well on the recent Glenlivet gas discovery, the aforementioned first well in the programme.  This second side track was successfully drilled and last week additionally confirmed the extent of the high quality gas bearing reservoir. Faroe has performed well since we began our coverage and we continue to maintain that we believe that it still has far to go.

Hutchison China Medtech (HCM 197.5p/£101.18m)
Last week, this low risk high reward specialty pharma, otherwise known as Chi-Med, announced the completion of its 223-patient global Phase IIb clinical trial of HMPL-004 in patients with mild-to-moderate active ulcerative colitis, a form of inflammatory bowel disease.  Top-line data analysis demonstrated that the trial clearly succeeded in meeting its primary efficacy endpoint of clinical response with a decrease in rectal bleeding.  It also met its key secondary endpoints in relation to clinical remission and mucosal healing. A key opinion leader commented: “As a natural oral product, it offers a promising treatment option in UC and warrants continuous development into Phase III clinical tests.” This share has performed brilliantly over the past year and has had a strong run over the past few weeks on good news. We like the mix of different businesses (biotech drug development, generics and healthcare products) and also geographical areas (Europe, Mainland China…) and suggest it is well worth a look.

Kenmare Resources (KMR 24.5p/£217m)
Kenmare’s main asset is the Moma mine on the coast of Mozambique, with 7 per cent of the world’s titanium minerals.  Titanium is used in two main ways: as a metal, in the aerospace industry and for medical instruments; and as a pigment for paints and surface coatings. The company dredges mines, which costs approximately only 20 per cent of the costs of alternative mining techniques.  Additionally, over 20 per cent of titanium feedstock comes from South Africa, which has very expensive cost of power compared to KMR’s 20 year hydro-electricity deal, enhancing their competitive edge.  The mine is also next to the export terminals, giving them an advantage over peers who have to transport the products to the ships of customers.  Kenmare has recently completed a set of projects to upgrade the plant and equipment and expects to reach full ramp up of capacity by the end of this year. The company was the winner of the Nedbank Capital Green Mining Socio-Economic Award 2009 for Corporate Social Responsibility, demonstrating its commitment to the local area, where it is the sole employer, with over 75 per cent of employees coming from the community. The use of titanium is closely linked to wealth and economic growth, meaning there was a significant drop in consumption due to the global recession over the last year. However, Kenmare has seen improvements in shipments in the 3rd quarter of this year and expects price escalation by the middle of 2010. Dupont, a customer and a major consumer of titanium minerals, forecast the market to have a compound annual growth rate of on average 7.5 per cent. Kenmare has potential for expansion, with its huge ore reserves, and it expects a feasibility study to be completed by the middle of next year.  Its experience, combined with a low cost of production and plenty of available water for dredge mining, gives Kenmare the scope to really succeed.

LMS Capital (LMS 44.5p/£121m)

Investment company LMS Capital, which specialises in investing in US and UK small to medium sized companies, has seen its net asset value recover in the second half of 2009 after a tough first half of the year.  Net asset value (NAV) per share at the end of September stood at 87p, up 5 per cent from the end-June level but down 2 per cent from the NAV per share at the end of 2008. During October, however, two of the company’s biggest investments – ProStrakan and Weatherford International – saw their share prices weaken, and the company estimates that this, along with the weakening of the US dollar in October, has pushed the NAV per share back towards the 83p level.  Funds invested by the company in unquoted securities and to meet fund calls totalled £10.5m in the third quarter, while proceeds from sales of quoted securities and fund distributions totalled £6.5m. The total value of the company’s portfolio at the end of September 2009 was £219.7m, split 58 per cent/42 per cent in favour of US assets. Around 46 per cent of the holdings are in funds, while 29 per cent are in quoted equities and 25 per cent in unquoted assets.  At the end of the reporting period the company had uncalled commitments to funds of £62.6m, which it expects to be called over the next five years.  We like the fact that LMS is currently “open for business” which should allow it to invest on particularly attractive terms at this stage of the cycle. It also has permanent capital so that it’s not constrained by the shorter term time frames of other investors or subject to liquidity issues that unforeseen redemptions may cause.  And, with the shares currently trading at a near 50 per discount to NAV we can see this going only one way.

Milestone Group (MSG 2p/£1.77m)
The media group last week announced the appointment of Mr. Per Bonato as Business Development Director. Mr Bonato previously worked with Cisco systems as Gateway Global Account Manager. Mr Bonato will join the team in London with a remit to develop and monetise the recent strategic relationships entered into between Milestone and both JumpStart Wireless and Ve Interactive, and to assist in the recruitment and establishment of a UK sales team. He will also aid the in-house creative, marketing and sales team with identifying potential new business for the Web Development team in the UK and Europe. This media minnow doesn’t look like it will have miles to go until it starts to generate revenues, and at the current valuation, this is an attractive play for those wanting some media exposure. The share price has ticked up a little on recent news announcements.

Pulse Group (PGRP 3.25p/£2.98m)
The PLUS listed market research organisation last week announced that it has recently been awarded `Official Research Partner’ for AdAsia09. AdAsia is the largest advertising, marketing, communications and media congress held in this region. The Pulse Group is a leading provider of research process outsourced services within the Asia-Pacific region predominantly to market research and media companies. It also provides its services to companies based in other parts of the world who have a need to conduct research within the Asia-Pacific region. Sadly, the shares have been coming off recently on the back of a lack of concrete news, and trade at significantly less than its initial public offering price on PLUS in June 2008.

Quarto (QRT 113p/£23.1m)
In a recessionary environment it helps not to have to rely on advertising. And this has benefited Quarto, a publisher of books, rather than of advertising-dependant magazines or newspapers. Even so, books are not completely immune to wider economic pressures and revenue for the nine months to 30 September 2009 did decline by 6 per cent, to £74.7m, while profit before tax fell by 9 per cent, to £3.1m. But it’s worth remembering that the group was up against tough comparables, with revenue up 13 per cent in the 2008 financial year. Management has, however, responded by cutting costs and improving the gross margin. And it reassured that results for year to date remain in line with expectations. And that makes good reading for investors.

Seeing Machines Limited (SEE 1.625p / £5.07m)
The leading developer of advanced computer-based imaging software systems last week announced that Mr James Fulton Muir has stepped down as Chairman and will continue to serve as a non-executive director. Non-executive director Mr William Mobbs has been elected as the Chairman with immediate effect. We don’t suspect anything sinister in this, but seeing that the share price has been tracking off lately, feel that we need some good news on a deal soon. During the last financial year, the company restructured and we believe could potentially have a number of good announcements to come in terms of client wins.

Spiritel (STP 48.5p/£3.0m)

SpiriTel, the business communications service provider, has issued of up to £10m loan notes to help fund the acquisition of Edge Solutions for an initial consideration of £3.6m. The new funds will be used to allow the company to continue its successful acquisition strategy as a consolidator of the highly fragmented telecoms reseller sector. The fundraise, led by SpiriTel’s largest shareholder Penta Capital, includes participation by Synergy Capital and Toscafund. The loan notes are convertible at 40p per ordinary share with a 10 per cent yield and are repayable at the Company’s option, no later than November 2014, with a 20 per cent redemption premium. Edge is SpiriTel’s seventh acquisition in three years and the company stated that it expected it to be immediately earnings enhancing.  SpiriTel’s model is to swiftly integrate its acquisitions, providing operational cost synergies. The majority of SpiriTel’s revenues are now recurring in nature under long term contracts, providing an increased level of earnings visibility to the Group. So far so good but the market’s not impressed and the share price has continued its long decline from a peak of 190p in August 2008. We’d like to see the group sharpen up its communications to the market as we think there’s something interesting here but until then we wouldn’t rush in.

Synchronica (SYNC 3.75p/£21.7m)
With Sychronica, ‘newsflow’ sometimes seems a less apt description than ‘news torrent’. And the past week saw the mobile services provider announce a $0.27m contract with a Southern-African mobile operator for a licence for its mobile email product, Mobile Gateway, as well as a professional services contract. This was swiftly followed by a first purchase order for low cost mobile devices, from a Central-African mobile operator. Under a collaboration agreement, Synchronica will receive 3 per cent commission from the sales of the devices. Significantly, management said it ‘continues to be optimistic’ about the sales and profit potential from the collaboration agreement in 2010 and beyond. Sounds like good news to us.

TyraTech, Inc (TYR 20p/£4.1m)
TyraTech, a company with a unique eco-technology for safe and effective control of pests, parasites and insects, has announced that partner Arysta LifeScience North America is introducing Shooter.  This product is an insecticide based on TyraTech’s Nature’s Technology and is the first in a line of a new category of effective and safe agricultural pest control products. Arysta just signed the strategic development partnership with TyraTech in August this year and we had not expected to see any products being developed and marketed until 2010.  We believe this demonstrates the ability of TyraTech’s strategy of using a partnership model to ensure maximum reach into many markets at a fast pace and low cost.  The development costs are carried by the partners while TyraTech receives licence fees, royalties and additional upside from profit-sharing agreements at the same time as it is benefiting from increased margins from economies of scale in manufacturing.  This year, in addition to the Arysta partnership, TyraTech has also substantially advanced its partnerships with Terminix (for household and commercial insect control), TyraChem (for insect and fungal disease in tropical fruit) and with Clarke Mosquito.  Last month the company also confirmed that it has successfully achieved the second milestone in its functional food contract with Kraft Foods resulting in an immediate payment. We are getting increasingly comfortable with TyraTech’s developments and believe the company’s problems are behind it with the most likely surprise to investors over the next six months to be on the upside.

*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.

03 Nov 2009

This week: Lifting the lid on LiDCO, why Rockhopper could be rolling out the barrels, and a roofing company that’s going through the ceiling

Anglesey Mining (AYM 13.00p / £19.87m)

Anglesey Mining has reported that a licence exchange deal has been agreed between its TSX-listed and 50%-owned Labrador Iron Mines (LIM) operation and New Millennium Capital Corp (NML). The two sides have agreed to swap some of their respective mineral licences in Labrador province, Canada, in order to eliminate the fragmentation of the ownership of some of the mining rights in the Schefferville area. It will enable both parties to separately mine and optimise their respective direct shipping ore (DSO) deposits as efficiently as possible. The agreement represents the exchange by each party of equal quantities of approximately 13 million tons of iron ore. Both sides have agreed to work collaboratively to facilitate their respective extraction, processing and transportation activities by enabling each other to apply for all required surface rights. In relation to the transport both sides separately agreed a Rail Co-operation Agreement to reconstruct a rail spur line which will run from the main rail line near Schefferville approximately 2.5 miles to LIM’s planned processing centre on a further approximately 13 miles to NML’s planned processing centre. Anglesey has done well in recent months to eliminate the discount its shares were trading at to the value of its stake in LIM (its 50 per cent is worth approximately £20m) but in addition Anglesey owns the Parys Mountain copper, lead and zinc property in North Wales, which is currently in care and maintenance. Your intrepid reporter visited this site some years ago and believes that if the recent recovery in base metal prices is sustained the group would be able to unlock the value of the Parys Mountain project. Now that would be an interesting angle.

Boomerang (BOOM 92p / £8.20m)

The Welsh television production company has announced its results for the year to 31 May. Revenue fell by 5.6 per cent, due largely to a delay in decision-making by broadcasters. But, at the analysts‟ briefing, finance director Mark Fenwick said that, of the £2m-£2.5m shortfall from management‟s earlier expectations only £0.4m has been completely cancelled, with the remainder to be recouped in the current financial year and thereafter. Boomerang has traditionally focused on providing production and television services, including television studio and post-production facilities. But it continues to focus on developing intellectual property in terms of a programme library and programme formats, with scope to sell these abroad – and this is typically a higher margin activity. The group is supported by some favourable headwinds. First off, in the wake of the 2003 Communications Act, independent television producers own the programmes they make for public sector broadcasters. Furthermore, the public sector broadcasters have a quota system in which television production must increasingly come from outside the M25 and outside England, of obvious benefit to a business based in Cardiff. Following the results, Boomerang also announced winning a four-year contract with Welsh channel S4C, worth £3.2m, in addition to the £42.9m pipeline referred to in the full-year results. There’s lovely.

Cluff Gold (CLF 70.50p / £82.58m)

The West African focused gold mining group announced that the operations at the Angovia Gold Mine have reached the required standard for commissioning. Algy Cluff, Chairman and CEO of Cluff Gold said: “With Angovia successfully commissioned, our aggregate target of annualised gold production of 100,000 ounces for Angovia and Kalsaka, appears achievable in the last quarter of this year.” Gold has been and will likely continue to have a good run and we are fans of Mr Cluff’s vehicle.

GETECH Group plc (GTC, 20p / £5.84m)

On Tuesday GETECH Group published its final results for the year ending 31 July 2009 and announced a pre-tax loss of £627,901. This oil exploratory company specialising in an integrated approach to oil prospecting – combining its peerless global gravity and magnetic proprietary database with in-house expert geophysical analysis –had a particularly tough second half of the year due to the huge drop in oil prices to less than $50 a barrel. However in a presentation to analysts, Raymond Wolfson, the CEO of GETECH, said that he remained upbeat that the company would have a good end to the first half of the current year due to the stabilisation of the price of oil at more than $70 a barrel (the minimum price the CEO thought needed for significant oil company investment in exploration). December and January are also traditionally the months when the large oil companies review their budgets for the following year. With significant pre-commitments for geological studies (due for completion in 2009/10) and an extremely low interest £1m debt facility to help the company remain cash-rich, we believe that if the price in oil does indeed hold up, this exploration company will once again be able to tap into the huge oil company reserves.

Hightex (HTIG 7.88p / £11.78m)

Hightex, the designer and installer of large membrane roofs, has been awarded its largest contract to date, to supply the membrane roof and cable system for the Olympic Stadium in Kiev, Ukraine. The contract, worth approximately EUR18.9 million, will involve fabrication and installation of the main roof radial cable system and the complete membrane roof system. The new roof is part of the ongoing redevelopment of the Kiev stadium for the UEFA 2012 Euro football championships. This contract win, together with the recent contract for the national stadium in Warsaw, has substantially increased the visibility of 2010 revenues above EUR10 million. This is a significant turnaround for the group that in recent years has struggled to gain revenue traction and so we now see it as one of the leading companies in the world for the design and installation of large area membrane structures. The market reaction was positive with the share price up 22 per cent on the day the deal was announced. The shares have had a good run recently so definitely one to buy on any share price weakness.

Hutchison China MediTech (HCM 167.5p / £85.80m)

This low risk, high reward specialty pharma, otherwise known as Chi-Med, last week announced that it intends to increase in its ownership of Hutchison Healthcare Limited, one of the three joint ventures which comprise Chi-Med’s China Healthcare Division, from approximately 85 per cent to 100 per cent. Chi-Med’s China Healthcare Division manufactures, distributes and markets pharmaceuticals and health supplements in the fast growing China healthcare market. Since flotation in 2006, it has recorded compound annual organic growth of 28 per cent. HHL’s performance has improved significantly in this year due primarily to the strong growth in one of its product ranges and gaining control in this brand is important to Chi-Med. Last week, Chi-Med also announced that its first-in-human Phase I clinical trial of its proprietary anti-inflammatory drug candidate, HMPL-011, has started in Australia. In pre-clinical studies, the drug candidate has shown efficacy in vivo models of rheumatoid arthritis, multiple sclerosis, and other auto-immune diseases. This phase I study is expected to report results in the first half of 2010. Chi-Med is a Company which often has good news and although its share price has reacted well, we believe that there is more to come.

Intelek (ITK 15p / £13.10m)

Intelek, which makes electronic systems for microwave and satellite communications, has had £0.8m-worth of orders from a North American telecoms group for high-frequency radio link printed circuit boards. This brings the orders from this customer to £1.5m for the current financial year and, significantly, these orders are scheduled for actual delivery in this financial year. The orders lend further support to Intelek’s September trading update, when management said that, following on from a slow start to the year, it had ‘more confidence in a stronger trading performance in the second half’.

LiDCO Group Plc (LID 24.25p/£42.18m)

LiDCO supplies minimally invasive hemodynamic monitoring equipment to hospitals. Despite hospitals having cut back their capex budgets, LiDCO announced in its interim results that sales were up 23% for the six months ended 31 st July. This was primarily due to the successful launch and acceptance of the LiDCOrapid in 2008, a new cardiac output monitor for use in the operating theatre, as well as accelerating sales in the US market where the company has replaced its direct sales force with distribution through Aspect Medical, itself to be acquired by Covidian. Similar agreements have been made with Becton Dickinson and Absolute medical for the Japanese and German markets respectively. LiDCO is benefiting from the urgent needs of the bloated health care systems in the western world to reduce costs. As all kinds of surgical complications add substantial costs to hospitals, patients and insurers, technology and systems that reduce the chances of problems are in great demand. LiDCO offers hospitals a reduced risk of infections and improved outcomes for high-risk surgery patients, thereby reducing complications, hospital stay per patient and costs. The company has a strong cash position and distribution partners who have the financial capabilities to successfully deal with the increasing trend of placing systems for free where the initial cost of the machines are made up (and often more than made up) over time through higher pricing of disposables. It could be well worth having a finger on the pulse of LiDCO.

LXB Retail Properties (LXB 101.75p / £111.93m)

Shares in retail property investor LXB Retail Properties ended its first week of trading at a small premium to the IPO price of 100p. Jersey-registered LXB is a newly formed company that raised £110m to invest in ‘out of town’ retail assets in the UK. The focus will be on food-led retailers which it expects will be the winners from the current turmoil in the retail sector. LXB expects to have a portfolio of 10-15 property assets when it is fully invested. The directors of LXB include Tesco‟s investor relations director Steve Webb and New Look boss Phil Wrigley, who will be LXB’s chairman. That‟s something to chew over.

Motive TV (MTV 0.575p/£1.97m)

Motive TV has secured a commission to produce a documentary for the BBC on caring for disabled children. The programme features Rosa Monckton, a friend of Princess Diana, who has a child with Down’s Syndrome. This is the latest in a line of commissions Motive TV has secured with the BBC and management adds that another significant BBC commission will be announced shortly. Following a strategic review, Motive TV‟s focus today is largely on the distribution of digital set-top boxes. But these commissions can, on the one hand, bring in cash to support the group’s new direction, and, on the other, increase the potential value of the TV production subsidiaries, should they ever be sold. And that would be of interest to anyone with a profit motive.

Renewable Power & Light (RPL 8.5p / £7.55m)

Power production company Renewable Power & Light has completed the sale of its power station at Massena in New York, following the disposal in September of its Elmwood Park power plant in New Jersey. The $8.5 million sale of the two plants was announced at the end of July but required US regulatory approvals. It is understood that the hold up over the sale of Massena was because of a delay in obtaining the go-ahead from New York State authorities. With the sales now completed, the company said it was planning to return cash to shareholders by the end of the year. Renewable Power & Light came to AIM in December 2006 after paying £13.2 million for the two assets with the hope of turning them into profitable biodiesel-powered energy producers. After a string of operational setbacks and soaring losses, the company decided to cut its losses in 2008 and look to sell off the two sites. All in all a disappointing outcome for shareholders but the return of capital is doubtless welcome. The shares, and our reaction, were flat on the news.

Rockhopper Exploration plc (RKH 58.25 p / £46.9m)

The North Falkland Basin oil and gas explorer last week announced that it has placed shares at 54p per share to raise £50m. The Placing Shares equal 115 per cent of the ordinary shares currently in issue and the 54p placing price represents a discount of 16 per cent. Sea Lion and Ernest are Rockhopper’s primary oil prospects. Both have direct hydrocarbon indicators and both are clearly defined on seismic surveys. A further six targets were considered in the CPR which, together with Sea Lion and Ernest, have a potential to contain 3.3 billion barrels of oil in place under the best estimate provided by RPS Energy. The Placing will provide the Company with the necessary funds to finance the drilling in 2010 of two wells on its North Falkland basin prospects and to meet its financial commitments under its 7.5 per cent interest farm-in agreement with Desire in respect of three wells that are to be drilled by Desire in 2010. Rockhopper’s excellent progress has enabled it to raise the funds to move to the next stage of proving whether it has a significant oil discovery on its Falklands Islands licences. Having spent four years since its AIM flotation improving the quality of information about these prospects, the indications are now promising enough for it to be planning to start drilling in early 2010. In its four year stock market history, Rockhopper‟s shares have performed well for an early stage explorer, reflecting steadily improving news about the quality of its oil prospects. Now that drilling is very close, we expect the shares to continue to be healthy, and not to drift while awaiting results.

Sareum Holdings PLC (SAR 0.385p / £4.53m)*

Specialist cancer drug discovery company Sareum last week announced its preliminary results for the year to June 2009 from which we have estimated the current (much reduced) cash burn, which along with monies from recent placings, should put Sareum in a strong position when negotiating licensing deals. Renewed investor awareness of Sareum’s drug discovery programmes has recently enabled it to raise £815k for an expansion of 43.7 per cent of the shares in issue. As a result, it now (at the end of October) has sufficient cash to until at least May 2011. This will enable Sareum to continue licensing talks on Chk1 and on other programmes and to progress outsourced research on its FLT4 and Aurora kinase programmes. Talks have continued with parties interested in Sareum’s Chk1 programme, but as far as we know there is no substance to suggestions that particular companies or agreed deals are yet involved. Strong recent interest in the shares is more likely to have reflected the Autumn biotech conferences at which presentations are being made of progress on the CHK1 joint programme with ICR and CRT. Presentations on the Aurora Kinase, on which Sareum is also working, are similarly being made. Yesterday, Sareum also announced that Dr Tim Mitchell, CEO, will present Sareum’s cancer drug discovery pipeline at BIO-Europe 2009 this week in Vienna. BioEurope is Europe‟s largest biotechnology partnering event. We continue to believe that Sareum is likely to get a deal done in the short to medium term.

Sea Energy PLC (SEA 45p / £30.64m)

Off shore wind play Sea Energy PLC and Taiwan Generations Corporation last week announced that they have concluded a Heads of Terms Agreement under which they will undertake the joint development of TGC’s pipeline of offshore wind farm projects. The companies will work on a variety of projects, commencing with the Changhua Offshore Wind farm, which it is planned will have an installed capacity of up to 600MW. Combining Sea Energy Renewables’ offshore development expertise with TGC’s pipeline of projects, local knowledge and experience, the partners will jointly plan, construct and operate offshore wind farms in Taiwan. The Agreement provides Sea Energy with the right to retain a 25 per cent working interest in the wind farm developments. The Project is expected to require modest initial investment, by both companies, to complete studies, already commenced, which are required to gain a franchise – which equates to regulatory consent – from the Taiwanese Government. The Taiwan Government has set a target of 15 per cent of Taiwan’s electricity to be generated from renewable resources by 2025. The Taiwan Government passed the Renewable Energy Act in July 2009. It is anticipated that the associated feed-in tariff system will be announced by January 2010. Currently Sea Energy has successfully tendered two sites offshore Scotland and is awaiting a decision from the UK‟s Crown Estate regarding Round 3; however there is nothing to stop this company going global given the calibre of its team and their management, which is very much international in its experience. Sea Energy recently changed its name from Ramco Energy PLC and intends to focus now on being an offshore wind Company. We expect to see further announcements on the UK‟s round three by Q1 2010 latest and wouldn‟t be surprised to see news of a more international flavour also.

Seeing Machines Limited (SEE 1.625p / £5.07m)

Leading developer of advanced computer based imaging software systems last week announced fantastic news, as we hoped and alluded to before, that it has launched its TrueField Analyzer (TFA). This is the Company’s revolutionary new device for ophthalmic vision testing initially focused on the glaucoma market, and it is now available initially on limited release in the US. Following initial sales and independent clinical trials the Company intends to pursue licensing the device to a medical devices OEM. The TFA is the first test in the world that offers objective non-contact visual field testing which, Seeing Machines believes, has the potential to transform the diagnosis and management of a range of vision disorders. The TFA was launched on 24 October 2009 at the American Academy of Ophthalmology (AAO) Annual Meeting in San Francisco. We do expect the news flow to relate to client wins over the next six months for Seeing Machines and we continue to like this stock as it would appear to have no shortage of shots on goal.

Synchronica (SYNC 3.625p / £20.93m)

The mobile technology group is hardly out of the news these days. This week it announced a licensing agreement, worth an initial €175,000, with a mobile software provider. Admittedly, the agreement is for the use of some of Synchronica‟s older software products. Even so, Synchronica had revenues of £3.7m in 2008, and this will be a welcome addition to the top line. In fact, we’d call it a nice little earner.

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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.