07_2009_sc_pro

smallcapshares

PROFESSIONAL









uncovering small cap stocks for capital growth issue 122 July 2009

issue 105 February 2008







THE MARKET newideas

VT GROUP BUY page 8









▲

8 May 9 June* HAMWORTHY BUY page 10









▲

FTSE 100 4,462.1 4,404.8 -1.3% DART GROUP BUY page 12









▲

FTSE All Share 2,281.5 2,251.8 -1.3%

FTSE Smallcap 2,343 2,315.8 -1.2%

*Record date for prices in this issue



After hitting the 4,500 barrier for the first time since January the

bignews

FTSE 100 slipped back slightly in June, putting a break on what has H&T page 2









▲

been a three month blue-chip rally.

Pawnbroker reveals trading

Miners Vedanta Resources and Randgold Resources were the best is ahead of expectations, again!

performers in the FTSE 100 since our last issue, their shares gain-

ing by 25% and 19% respectively as commodity prices continued AVON RUBBER page 2









▲

to rise. Banks did not perform quite so well, the Royal Bank of

Scotland and Lloyds being the worst performers in the FTSE 100 Back into profitability for the first half of 2009

during the period.

TELECOM PLUS page 4









▲

Small caps have also edged back slightly since our last issue, but Earnings up 37% in year to March 2009

there have been plenty of huge risers in that time. One of the big-

gest gainers was taxi manufacturer Manganese Bronze, which saw GOALS SOCCER CENTRES page 6









▲

its shares rise by 88% as it announced an in line trading update

and details of a £10 million placing to fund its international growth Nets £11 million to fund further growth

ambitions.

At the other end of the scale shares in camera shop operator

Jessops lost 71% of their value as it announced losses of £5.9 mil-

lion for the six months to 31st March 2009 and told investors that

it is unlikely they will realise any value from their equity as talks with

lenders continue over debt restructuring.

updates

6,000

HILL & SMITH BUY page 2

5,000 XP POWER BUY page 2

FTSE100

4,000 KENTZ BUY page 3

PLANT HEALTH CARE LONG TERM BUY page 3

3,000

Smallcap PHOENIX IT BUY page 4

2,000 All Share GB GROUP BUY page 5



Feb Aug Feb Aug Feb Aug Feb Aug Feb Aug Feb Aug Feb AND MANY MORE…

03 03 04 04 05 05 06 06 07 07 08 08 09



SHARE DEALINGS PAGE 5

rebased

FASTEST MOVERS PAGE 6

THE RECKONING PAGE 7

140

NEWSFLOW PAGE 14

EDITOR’S MESSAGE PAGE 16

120



FTSE100

100



Smallcap

80









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smallcapshares July 2009







HILL & SMITH

COMMENT ▼

The shares have performed well since the time of the results in

HILS £167.7m 221.5p BUY February, but with earnings per share of 34.7p expected for cal-

endar 2009 they still only trade on a current year rating of 6. The

INTERIM RESULTS FULL LIST

opening of the new plant in China should help support the shares

Construction services group Hill & Smith has released its interim in the near term and help drive margin - and therefore profits -

management statement covering the period from 1st January growth in the longer term. This, along with the firm's continued

2009 to 12th May 2009. Trading was in line with expectations in commitment to R&D spend, cements XP Power's position in a $2

the period, with the infrastructure division in particular putting in billion market growing at an annualised rate of 17%. BUY.

a very strong performance. Where demand has weakened, costs

have been adjusted accordingly.

The Infrastructure business, which is grouped into HS Roads, HS

Rail, HS Utilities and HS Security segments, was the group's star H&T

performer during the period as demand for infrastructure prod- HAT £73.5m 208p BUY

ucts remained strong during the recession. The Roads segment TRADING UPDATE AIM

is benefiting from the M25 widening project, which should run

In a short update, pawnbroker H&T has once again announced

through to 2012, supporting strong demand for the firm's rental

that trading is ahead of expectations. The main reason for this

stock. The group has also made inroads in the US market, with

outperformance is the strong gold price (you may remember that

demand for its Zoneguard safety systems set to be lifted by the $27

the firm decided not to go ahead with its hedging policy at the

billion highways allocation of the American Economic Recovery

time of the full year results), which is boosting retail sales, auc-

and Reinvestment stimulus package. Security and Utilities also

tion values and scrap gold prices. The group also highlighted the

enjoyed buoyant trading levels. Meanwhile, trading at the group's

continuing success of its store expansion programme and said it

Galvanizing Services and Building Products businesses has been

remains positive about its prospects for the remainder of the year.

much tougher, but the firm has been careful to ensure that costs

COMMENT ▼

reflect the lower levels of demand in both cases.

This positive update has prompted earnings upgrades amongst bro-

Net debt fell by £5.4 million during the first quarter from its year

kers. For 2009, earnings per share forecasts have been increased by

end level of £146.2 million and remains well within the group's

11% to 27.2p, and for 2010 28.9p of earnings are expected, an

£216 million borrowing limit. Hill & Smith also took the oppor-

increase of 5% on previous estimates. Clearly, the decision not to

tunity to fix some of its floating rate debt at attractive rates. The

go ahead with a gold price hedging policy was a sound one and

group believes it is well placed to benefit from economic stimulus

there could be more upgrades in store if the gold price continues to

packages both in the UK and abroad.

appreciate in 2009, which - we believe - appears likely. The shares

COMMENT ▼ have responded well to the good news, but a current rating of just

Hill & Smith shares trade at a small discount to the sector - presum- 7.6 falling to 7.2 suggests there could be more to come. BUY.

ably because of the group's significant debt levels (£146.2 million

as at 31st December 2008) - but we see this as unfair given the

firm's defensive growth qualities, as evidenced by the firm's robust

performance thus far into the recession. The company’s markets AVON RUBBER

are being driven rising levels of government spending in a bid to AVON £22.9m 78.5p BUY

combat the downturn and its earnings visibility remains high, with INTERIM RESULTS FULL LIST

contracts stretching in some cases to 2012.

Rubber products maker Avon has announced its results for the six

Earnings per share are forecast to rise to 34.6p in 2009 and then months to 31st March 2009. Revenues from continuing operations

to 36.9p in 2010, which implies a current year rating of 6.4 fall- increased by 103% to £44.1 million in the period, driven primarily

ing to 6. This is too low given the firm's excellent track record for by the stronger dollar and a successful full period of operation

growing both earnings and dividend payments. A payout of 11p of the company's US Protection and Defence facility. Operating

(covered 3 times by earnings) is expected this year, giving a yield of profits came in at £1.8 million versus a £1.7 million loss for the

5% - another reason to own the shares. BUY. comparative period in 2007/08. Net finance costs doubled to £0.8

million reflecting the higher margins prevailing in capital markets.

This resulted in pre-tax profits of £1 million, up from a loss of £1.6

XP POWER million in 2008, with basic earnings per share of 2.7p. Net debt

increased from £15.1 million at the 2008 year end to £16.5 million

XPP £40m 207.75p BUY as at 31st March 2009, with the stronger dollar adding £4.2 million

TRADING UPDATE FULL LIST to the company's reported net debt. The group has plenty of head-

Power supply products provider XP Power has issued a trading room on its current banking facilities, which stand at £24 million

update for the four months to 30th April 2009. Trading during and are committed to 30th June 2010. Avon was cash generative

the period was in line with expectations, with the firm benefiting during the period to the tune of £4.1 million.

from a combination of new programs secured from existing blue

Do you read our sister publication?

chip customers and a strong US Dollar. The company also man-

aged to increase gross margins due to a higher proportion of its





AIM&PLUS

own products in the sales mix. XP's new manufacturing facility in

China is due to open in the current quarter and this should enable

the firm to produce more higher margin products based on its

own IP and help it secure 'approved vendor' status with its blue

chip customers.

For more details visit www.aimnewsletter.co.uk







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smallcapshares July 2009





The group's star performer in the half was the Protection and telecommunications work on the new Phase 6, liquefied natural

Defence division, which saw total revenues soar by 188% to £31.4 gas storage and loading facility in Ras Laffan Industrial City located

million generating an operating profit of £1.6 million. The com- on the Northeast coast of Qatar. Kentz's work will commence

pany's Cadillac operation performed well during the period, with immediately with the construction phase of the project scheduled

orders for 161,000 mask systems under a five-year DoD contract for completion in December 2009.

and ten year requirements option. Meanwhile, the UK Protection Secondly, Kentz has been awarded the Electrical and Instrumentation

and Defence business secured a £4.5 million order from the UK Scope by Saudi Polymers Company (SPCo) related to the utilities

MoD for S10 masks, with the potential for this to reach £10 million and offsite works for a new petrochemicals project in the Kingdom

over the three years of the contract. However, Avon ISI continued of Saudi Arabia. Commercial production is scheduled to begin in

to suffer from the difficult market conditions and incurred an late 2011. This is the seventh contract win this year for Kentz in

operating loss in the first half of 2009, but a cost reduction pro- Saudi Arabia, where it has now been operating for over 30 years.

gramme did lead to a better performance in the second quarter.

COMMENT ▼

The Protection and Defence order book stood at £85 million at the

period end. On the back of these deals Kentz shares have made up some lost

ground and we believe they will continue to do so following the

The firm's Dairy business saw a marginal increase in total revenues

recent successful reorganisation of the business. With earnings per

to £12.7 million from £10.8 million. Dairy witnessed a strong start

share set to reach 19p in 2009, the shares trade on an undemand-

to the year, although falling milk prices in the second quarter led

ing current year rating of 8 - and that's not discounting net cash

to a softer end to the period. As in the second half of 2008, the

of $154.4 million (c.£94 million) as at 31st December 2008, which

UK Dairy operation was adversely impacted by the increased level

covers well over half the current market capitalisation. BUY.

of allocated overheads at its Hampton Park West facility after the

disposal of the Aerosol gaskets business. The group has begun to



PLANT HEALTH CARE

address this following the proposed restructuring announced on

1st April 2009. Post period end, the company has commenced

discussions with employees regarding the redundancies that will

result from the proposed outsourcing of the manufacture of all PHC £110.7m 210p

dairy products made at the Hampton Park West facility to a Czech LONG TERM BUY

supplier. This transfer is expected to happen before the end of the PLACING, TRIAL RESULTS & MONSANTO ORDER FULL LIST

2009 financial year and the costs are expected to be recouped

Natural plant products provider Plant Health Care has raised £10.5

within two years.

million (before expenses) through a placing of 7 million shares at

COMMENT ▼ 150p each. The net proceeds will be used to strengthen the compa-

After a terrible 2008, Avon has been gaining operational momen- ny's balance sheet and to provide working capital for the group.

tum through its contracts with the US and UK defence depart- The cash will also help the company to fund a further order which

ments, and the shares seem to be performing well in response. has been received for its harpin seed treatment from partner, the

The return to profitability during the period in question marks a food biotechnology firm Monsanto, for the 2010 growing season.

milestone for the group, while its ever-growing order book means While the total size of the orders which have now been received by

earnings visibility is looking good. The Dairy business has experi- Plant Health Care for harpin far exceed the top of its range of expec-

enced its fair share of problems but the fact that it remained profit- tations for the first year of its long-term agreement with Monsanto,

able and cash generative during the period is encouraging. With the expected value of the deals have not been revealed.

plenty of scope for further orders, there is obviously the potential

Meanwhile, recent data published in the Journal of the American

for outperformance here.

Society of Horticultural Science have demonstrated the efficacy of

The firm remains on track to post pre-tax profits of £2.5 million harpin when used on lettuce. In trials, harpin treated lettuce con-

and earnings of 4.3p in 2009. In 2010 forecasts are for £3.5 million sistently showed better visual quality and lower microbial popula-

and 6.5p respectively, putting the shares on a forward multiple of tion than a control group. In additional experiments it was shown

12 times. While the valuation is beginning to look a lot fairer, it is that antioxidants increased by 40% in head leaves when plants

by no means demanding for a business well on the way to recov- were treated with the two higher rates of harpin.

ery with excellent earnings visibility. The balance sheet remains a

COMMENT ▼

concern, but we note that net debt was reduced on a constant

currency basis. BUY. The shares have responded well to the recent good news and are

now trading at around their highest levels for six months. The plac-

ing is excellent news, it allaying funding concerns and leaving the



KENTZ firm with sufficient cash to last until the middle of 2010 at the very

least. Plant Health Care remains on a sound footing as its long-

KENZ £177.5m 152.5p BUY term licensing agreement with Monsanto provides the foundations

for a considerable ramp-up in royalty payments in the near future.

CONTRACT WINS AIM

However, it is hard to see the shares making any significant head-

Engineering and construction group Kentz has won two major way until the firm can dispel the cloud hanging over the future of

contracts since our last issue. Firstly, the company has been award- its other major technology, Myconate. Nevertheless, the product's

ed a multi-million dollar contract by Qatargas Operating Company proven efficacy means this should simply be a matter of “when”

Limited. The project includes the electrical, instrumentation and rather than “if”. LONG-TERM BUY.





Institutional shareholdings

We do our best to report significant changes in institutional sharehold-

ings. However, this is a complex area and we do not guarantee we always

present the most meaningful aspects of this information, nor that it is

always accurate.







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smallcapshares July 2009





on sales of £560 million, giving earnings per share of 26.7p. That

TELECOM PLUS* should fund a 25p payout.



TEP £187.4m 274.5p BUY Telecom Plus is becoming a much more mature business, and as

such it will take a lot more effort to drive the kind of growth inves-

FULL YEAR RESULTS FULL LIST tors have become accustomed to seeing in recent years. However,

Telecom Plus, the independent provider of multiple utility services, we would point out that the business model remains highly scal-

has produced a solid set of final results for the year ended 31st able and that the economic climate remains conducive to Telecoms’

March 2009. Pre-tax profits for the year increased by 34% to £22.5 value offering. It is also worth bearing in mind that the 30-day

million on group turnover of £278.3 million, up 49% on 2008. window during which International Power can exercise its option

Earnings per share increased by 37% to 24.2p and the company to acquire the remaining 70% of Oxford Power Holdings (Telecom

recommended a final dividend of 12.5p, bringing the total dividend Plus: 20%) which it does not already own is due to commence

for the year to 17.5p, an increase of 25% on 2008. shortly. The formula under which this option can be exercised

On the balance sheet, year end net cash balances fell by £4.9 mil- places a value of approximately £15 million on Telecom’s stake in

lion to £25.4 million. This was down to capex required to grow this business.

the group's energy business and the impact of the cold winter, Shares in Telecom Plus were hit by a mini sell-off following these

combined with higher retail energy prices, which has increased results and have also been hit by fears of the company dropping

budget plan debtors by £14.1 million to £23.2 million, and the cost out of the FTSE 250 at the upcoming reshuffle. However, we would

of purchasing and refurbishing the company's new headquarters view this as an opportunity for investors to get on-board. Trading

for around £10 million. on a forward rating of 10.3, the shares remain good value given

The total number of services provided by the company reached the firm's excellent growth prospects, good earnings visibility and

over 790,000, a 34% increase. There was also a 69% increase in alluring yield. We note that they go ex-dividend on 10th July. Get

membership of the group's Business Club to 16,163, and customer them while you can! BUY.

numbers increased by 30% to 281,000. Instrumental in the growth

in numbers was the dramatic expansion of the distributor base,

which grew by 38% to 27,000 with growth accelerating during

the fourth quarter. Churn increased slightly from around 1.8%

PHOENIX IT

per month to 2% per month, largely due to the faster organic PNX £147.5m 196.25p BUY

growth, but average spend per customer has increased by 21% FINAL RESULTS FULL LIST

to £1,057. IT support services business Phoenix IT turned in a solid perform-

Post period end Telecom Plus has experienced continued high levels ance in the year to 31st December 2008 despite increasingly

of activity, with growth in both new customer and new distributor difficult conditions being experienced in its markets. Helped by a

numbers. The firm's business model provides a good measure of first full year contribution from ICM Computing Group, which was

earnings visibility, but it remains difficult to provide accurate guid- acquired in June 2007, the company saw revenues rise by 9.7%

ance on short-term profitability in periods of rapid growth. The to £253.2 million. Pre-tax profits adjusted for non-recurring items

board considers the rapid growth currently being experienced is and amortisation grew by 10.6% to £28.3 million and earnings

the best way to maximise shareholder value in the medium term, adjusted on the same basis were up by 9.1% to 26.3p. The total

notwithstanding any pressure this may create on profitability in the dividend for the year was increased by 15% to 6.3p.

meantime. Along with a reduction in finance income of around The good performance also filtered through to cash flow, there

£1.5 million caused by lower interest rates, the funding of this being £51.6 million generated from operations in the period, repre-

growth will impact on reported earnings. Moreover, lower energy senting 145% of adjusted operating profits. Net debt was reduced

margins following reductions in retail prices, additional fixed costs by £14.5 million, ending the year at £88.4 million, this being com-

associated with the new headquarters and an increase in bad debts fortably within total facilities of £109 million. Interest cover also

means that it is unlikely that Telecom will post such strong results remained comfortable, rising from 6.3 times in 2008 to 6.7.

for the current year.

A restructuring of the group during the period moved the business

COMMENT ▼ from five operating divisions into the three of; Business Continuity,

Due to the aforementioned reasons, earnings forecasts for this year which serves the business continuity and disaster recovery market;

have been revised downwards. For 2010, brokers now expect earn- Partner Services, which supplies support services to large partner

ings per share of around 18.1p on pre-tax profits of around £17 organisations; and Mid-Market, which serves the UK corporate and

million and sales of around £411 million - but the firm has stated public sector mid-market.

that its dividend target of 22.5p for 2010 will remain, meaning the The best performance across the divisions was in Business Continuity

shares still offer a prospective yield of 8.2% at the current price. where revenues rose by 22% to £51.2 million and operation profits

2011 should see the company post pre-tax profits of £25.1 million rose by 47.1% to £13 million. On a pro-forma basis, assuming

that ICM Computing had been acquired on the first day of the

comparative period, revenues would have increased by 12.5% and

operating profits by 37.5%. At the period end the order book for

Do you read our sister publication? the division stood at £98.8 million, an increase of 6.2% and repre-

senting almost 2 years of divisional income.





AIM&PLUS

Partner Services experienced tougher conditions, with revenues

increasing by just 2.5% to £105.5 million and operating profits

slipping by 9.1% to £17.6 million as margins were hit. Contract

renewal rates fell from 86% to 66% and the order book slipped to

£142.2 million from £170.3 million a year earlier.

For more details visit www.aimnewsletter.co.uk Finally, in Mid-Market, revenues rose 12.3% to £96.5 million and

operating profits were up 12.1% to £10 million. The order book







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smallcapshares July 2009





decreased by 1.4% to £45.9 million as at 31st March reflecting business, while currently suffering from the effects of the recession,

an increase in time being taken by some new customers to reach continues to command a leading position in its market and has

purchasing decisions and a decrease in the contract renewal rate good opportunities for growth in the long-term.

from 92% to 87%. As well as having opportunities to expand its operations in the

In terms of the outlook Phoenix expects the challenging market areas of fraud reduction & online gaming the company looks

conditions to continue throughout 2009 but expects to benefit well placed to take advantage of the move away from paper

from good earnings visibility provided by its order book and recur- based identification checks towards the more efficient and less

ring revenues, The total group order book stood at £286.9 million costly electronic methods that it provides. Also boding well for the

at the year end, down 7.9% on the same time in 2007, and annual growth of the industry is a private members bill which has recently

contract values (recurring revenues) stood at £179.9 million, been read in the House of Lords, which if enacted would make it a

down 2%. requirement for online retailers to verify whether a person buying

COMMENT ▼ goods or services meets the legal minimum age.

Phoenix put in a reasonable performance for the financial year, Current market forecasts see earnings rising to 2.4p in 2010 and to

with results being slightly ahead of consensus market expecta- 2.8p in 2011, putting the shares on respective price earnings ratios

tions. Into the 2009 financial year and the company's wide spread of 9.6 and 8.2. These figures fall to 7.3 and 6.3 if we strip out the

of customers (in 2008 no contract was larger than 4%) and high net cash of 5.4p per share.

exposure to more defensive industries such as the public sector and Considering the growth expected in the coming years, the com-

utilities, combined with the high levels of recurring revenues and pany's debt free balance sheet and the historic yield of 5%, we do

strong order book, should put it in a good position to perform well. not think the current share price is too demanding. We are already

Despite the recessionary pressures in the market there is always up by 9.5% on our tip in the last edition of the newsletter but the

the need for companies to invest in IT services, particularly in the stance remains at BUY.

outsourcing of IT functions which Phoenix offers, to maintain and

improve their competitive positions.

Market forecasts are largely unchanged on the back of the results.

Broker Numis is looking for earnings to grow to 26.5p in the cur-

ELECO

rent financial year, putting the shares on a multiple of 7.4 times. If, ELCO £22.1m 36.5p SELL

as expected, a 6.6p dividend is paid in 2010 the shares will yield a PROFITS WARNING AIM

reasonable 3.4%. For a highly cash generative business, which has We advised online readers to sell shares in Eleco at 36.5p

manageable debt and a good position in its markets we believe the on 5th June. They now trade at 37.5p and our stance is

shares offer good value. BUY unchanged. The original article read:

The construction and software firm Eleco has followed up

its January profits warning with... another profits warning.

GB GROUP Unfortunately, difficult market conditions previously flagged in the

core Precast Concrete business have remained and as such a strong

GBG £19.6m 23p BUY finish previously expected for the year will now not happen. Orders

FINAL RESULTS FULL LIST

Identity verification specialist GB Group has reported that revenues

grew by 23% to £23.8 million in year to 31st March 2009, in line

with guidance given in a recent trading statement. At the pre-tax INTERESTING SHARE DEALINGS

level (before share based payments) the company posted a profit

of £1.7 million, compared to a loss of £0.2 million in the previous Company Number of Shares Deal size % Deal value

year. Following many years of being in the red GB has now been

profitable for six consecutive quarters. Earnings for the period were

PURCHASES

1.8p and that prompted at 15% increase in the total dividend for

the year to 1.15p per share.

Biocompatibles International 2,480 0.0063 £4,920

There was a particularly good performance from the core

Biocompatibles International 2,500 0.0064 £4,500

DataAuthentication business in the year, revenues rising by an

impressive 56% to £11.7 million, with growth coming from both Biocompatibles International 6,970 0.018 £11,700



new clients and increased volumes from existing clients. In the eaga 8,000 0.0032 £9,640

DataIntegrity and DataSolutions businesses revenues were up eaga 50,000 0.02 £60,500

slightly, by £0.2 million to £12.1 million. GB Group ended the year Genus 5,000 0.0084 £30,000

with net cash of £4.5 million, up from £4.3 million twelve months

Genus 1,000 0.0017 £5,760

earlier, despite having paid out £845,000 in dividends during the

Genus 1,000 0.0017 £5,790

year.

Aero Inventory 27,500 0.053 £49,800

In recent months GB has seen more subdued market conditions,

BATM Advanced

with trading in April and May said to be below that of last year. Communications 200,000 0.05 £62,800

Revenues in the year to date (2nd June) amount to £3.4 million,

Hill & Smith

down £0.4 million on the same period in 2008. However, the posi- Holdings 50,000 0.066 £98,800

tion is not as bad as it seems as a £0.35 million one-off licence

settlement was recognised in the same period last year. SALES

COMMENT ▼

There are no real surprises in these results as the company had RM Group 10,000 0.011 £16,200

previously issued a reasonably detailed update covering trading in Domino's Pizza 500,000 0.31 £1,030,000

the period. They do however confirm that GB's identity verification







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smallcapshares July 2009





in the Bell & Webster Concrete business, which were expected in stagnate at best. We note the house broker's price target for the

the fourth quarter of the current year, have been confirmed later shares is 38p, just 1.5p above the current price. Eleco may be worth

than expected or been implemented more slowly than expected. revisiting in several months time but for now there is little upside

In addition, the company's operations in the European and South to be had. SELL.

African building systems markets, which have previously proven

to be resilient to the current economic downturn, are now said to

be suffering. Overall, Precast Concrete revenues fell by 46% in the

four months to April and while a slight improvement is expected

in May and June operating profits in the division are now expected

GOALS SOCCER

to be significantly below previous expectations.

CENTRES

On the software side of the business a significant shortfall in

anticipated revenues from Visualisation software is expected as a

GOAL £82.8m 197.75p BUY

PLACING FULL LIST

result of a poor performance from the company's Grand Designs

3D software in the UK and the failure of the company's appointed Five a-side football centre operator Goals Soccer Centres has

distributor in the US to deliver an effective launch of the product. conditionally raised £11 million before expenses in a placing at

The outcome is that Visualisation is not expected to improve on its 165p per share in order to accelerate its expansion strategy. The

losses of last year. placing, which was carried out at a 7% discount to the previ-

ous day's market price, has been fully underwritten by KBC

In the group as a whole Eleco has stated that no improvement on

Peel Hunt and will enable the company to increase its rate of

the interim results may be apparent for the full year. Encouragingly,

openings from four to six per annum from 2010. Goals has also

steps taken during the year have resulted in annual operating cost sav-

announced that it continues to perform in line with expecta-

ings of £2.7 million. Further cost reductions are also under review.

tions and is on schedule to open four new centres during 2009.

COMMENT ▼ COMMENT ▼

Unlike many businesses in the small cap world Eleco has yet to see We welcome this development at Goals, with the shares hav-

any green shoots sprouting out of the economic downturn. We ing been issued at a reasonable price (13 times historic earnings)

note that the decision to pay an interim dividend was based upon considering the current market conditions. The cash will help the

the "cautious optimism" that the company had regarding the final company to expand its current 32 centre empire and enable it to

quarter of the year and as such we now think it highly likely that make up ground with rival Powerleague which currently operates

the final dividend will be scrapped, leaving investors with a pay- 43 centres. Goals should have 47 centres by the end of 2011 if

ment of just 0.4p per share for the year. current targets are met. The cash will also help to strengthen the

The shares lost around a quarter of their value on the back of this balance sheet, which as at 31st December 2008 showed net debt

news and at the current 36.5p most of the gains enjoyed during of £41.5 million.

the recent small cap rally have been wiped out. On the house Shares in Goals have performed well in recent months. After almost

broker's revised forecast for 2.5p of earnings in the full year to slipping below the 100p mark in February this year they rallied to

June 2009 and 3.8p in 2010 the shares now trade on a current 208p before settling back to their current level. In light of the plac-

year multiple of 14.6 and forward multiple of 9.6. Granted, the ing and trading update broker Numis now expects the company to

company is likely to survive the downturn - it had net cash of just post earnings of 14p in the year to December 2009 and earnings of

under £1 million as at 31st December 2008 and bank facilities of 15.3p in 2010. In our opinion the forward price earnings multiple of

£14.5 million committed up to 2012 - but until orders start picking 12.9 is worth paying considering the steady growth in the number

up in the precast concrete business we believe that the shares will of centres, which in the medium to long-term should feed through

into increased earnings. BUY.









1 month risers 1 month fallers

Porvair 60.4% Panceltica -55.3%

RCG Holdings 35.7% Minorplanet Systems -46.2%

Kewill 35% e2v Technologies -36.5%

Phoenix IT 30.8% PV Crystalox Solar -35.3%

Eros International 29.6% London Capital Group -33.4%





6 month risers 6 month fallers

Pendragon 657% Panceltica -95.1%

Kalahari Minerals 301.5% Summit -77.2%

Avon Rubber 214% e2v Technologies -57.1%

International Ferro Metals 158.8% Cosalt -56.4%

Platinum Australia 158.1% Minorplanet Systems -51.7%









6 Have your details changed? Call 020 7562 3370 or email violet.kazandzhieva@t1ps.com

smallcapshares July 2009



May 09 Biocompatibles International 122 195 Gain 60%

Jun 09 GB Group 21 23 Gain 10%



THE RECKONING Jun 09 Clarkson

* Corporate clients of RSH

557



** Owned by the t1ps Smaller Companies Growth Fund

625 Gain 12%





† Adjusted for share restructuring

CURRENT PORTFOLIO

Tip Tip Current

Date Company Price Price Status

RECENT EXITED BUYS

Jan 02 Trafficmaster 53 30 Loss -43%

Nov 02 KCOM 47 27.25 Loss -42% Exit Tip Exit

May 03 Cardiff Property 513 600 Gain 17% Date Company Price Price Status

Aug 03 Celsis 135 188.5 Gain 40%

Oct 03 ACAL 578 110 Loss -81% Jan 07 Topps Tiles 61.75 248 Gain 302%

Mar 04 Spring 135 38.25 Loss -72% Jan 07 Universal Salvage 124 147.5 Gain 19%

Mar 04 Porvair 141 77 Loss -45% Jan 07 Halma 163 223 Gain 37%

Sep 04 Microgen 56 55.5 Loss -1% Jan 07 Isotron 435 839.5 Gain 93%

Mar 05 Goals Soccer Centres 108 197.75 Gain 83% Jan 07 RHM 271.5 378.25 Gain 40%

Apr 05 Management Consulting 62 32 Loss -48% Feb 07 UNITE 162 546 Gain 237%

May 05 TT Electronics 201 28.25 Loss -86% Feb 07 Teesland 70 159.5 Gain 128%

Jul 05 Kewill Systems 73 79 Gain 8% Mar 07 VITEC 355 557.5 Gain 57%

Oct 05 Brammer 204 119 Loss -42% Mar 07 Ted Baker 244 629 Gain 158%

Feb 06 SOCO 784 1324 Gain 69% Mar 07 Brown N 122 314.5 Gain 158%

Mar 06 S&U 545 405 Loss -26% Mar 07 Renishaw 417 708 Gain 70%

Apr 06 Intelek 12.5 15.5 Gain 24% Mar 07 Hornby 170 284.5 Gain 67%

Sep 06 Kenmare Resources* 40 20.75 Loss -48% Apr 07 Jessops 108 53.5 Loss -51%

Oct 06 Powerleague 68 36.25 Loss -47% Apr 07 Keller 242 879.5 Gain 263%

Oct 06 Platinum Australia 36.25 55.5 Gain 53% Apr 07 Wilmington 122 250 Gain 105%

Nov 06 Telspec 7.5 3.5 Loss -53% Apr 07 Devro 79 141 Gain 78%

Nov 06 Cropper, James 149.5 111 Loss -26% Apr 07 Genetix 47 76.5 Gain 63%

Jan 07 Ambrian Capital* 55 27.75 Loss -50% Apr 07 Hill & Smith 217 325.75 Gain 50%

Jan 07 CybIT 46.5 31.5 Loss -32% May 07 Chaucer 53 98.75 Gain 86%

Feb 07 Spice† 101.4 69.25 Loss -32% May 07 ICM Computer 412 505 Gain 23%

Feb 07 Research Now 477.5 337.5 Loss -29% May 07 Computer Software 114 150 Gain 32%

Feb 07 Northern Petroleum* 88.5 120.5 Gain 36% May 07 Gyrus 318 444 Gain 40%

Mar 07 Anite 83 38.5 Loss -54% May 07 Hardy Underwriting 205 282.5 Gain 38%

Mar 07 SThree 418 218 Loss -48% May 07 Thorpe F W 340 637.5 Gain 88%

Apr 07 MinorPlanet 54.5 3.5 Loss -94% May 07 Severfield-Rowen 298 1,995 Gain 569%

May 07 Alexander Mining 21.75 3.25 Loss -85% May 07 Sondex 245 355 Gain 45%

May 07 Chemring 2020 1972 Loss -2% May 07 Clarkson 516 1,005 Gain 95%

Jun 07 Summit 124 5.25 Loss -96% May 07 Air Partner 663 1,010 Gain 52%

Jun 07 GoIndustry-DoveBid 22.5 2 Loss -91% Jun 07 Zetex 48 101.5 Gain 111%

Jul 07 K3 Business Technologies** 154.5 79.5 Loss -49% Jun 07 SDL Intl 38 378.5 Gain 896%

Jul 07 IQE 15 9.5 Loss -37% Jun 07 Headlam 415 586 Gain 41%

Aug 07 Kalahari Minerals 28.75 133.5 Gain 364% Jun 07 Games Workshop 759 260 Loss -66%

Sep 07 Speymill 89.25 17 Loss -81% Jul 07 Imagination Tech 75 119.75 Gain 60%

Sep 07 Creston 136 59 Loss -57% Jul 07 MITIE 154 263.25 Gain 71%

Oct 07 Harvey Hash 71.5 39.5 Loss -45% Jul 07 Holidaybreak 459 854 Gain 86%

Oct 07 RC Group 100 78 Loss -22% Jul 07 Redstone 63 88 Gain 40%

Nov 07 E2V Technologies 285 68 Loss -76% Jul 07 Abacus 215 115 Loss -47%

Nov 07 Aero Inventory 576.5 190 Loss -67% Aug 07 Clinphone 190 162.5 Loss -14%

Nov 07 Healthcare Locums 103 184.75 Gain 79% Aug 07 SpaceandPeople 54 145.5 Gain 169%

Dec 07 Skyepharma† 1625 156 Loss -90% Aug-07 IX Europe 45 125 Gain 178%

Dec 07 Quadnetics 337.5 133 Loss -61% Aug 07 Glotel 68 70 Gain 3%

Dec 07 Avon Rubber 171.5 78.5 Loss -54% Aug 07 Accys Technologies 123 418 Gain 240%

Jan 08 D1 Oils 129.25 8.75 Loss -93% Sept 07 Mothercare 217 405.25 Gain 87%

Jan 08 Parity 65 13.75 Loss -79% Sept 07 Vislink 52 82.5 Gain 59%

Jan 08 Carclo 95.5 89.5 Loss -6% Sept 07 VT Group 264 624 Gain 136%

Feb 08 Eros International 392.5 105 Loss -73% Sept 07 Millbrook Scientific 6 2.125 Loss -65%

Mar 08 Safestore 152 76.75 Loss -50% Sept 07 Claimar Care 81.5 148.5 Gain 82%

Mar 08 Phoenix IT 245.75 196.25 Loss -20% Sept 07 WSP Group 350 756 Gain 116%

Mar 08 Wolfson Microelectronics 139.25 111.25 Loss -20% Nov 07 Independent Media Distribution 28 46 Gain 64%

Apr 08 Kier 1304 1000 Loss -23% Nov 07 Sportech 15 13.25 Loss -15%

Apr 08 Fisher, James 598 467 Loss -22% Nov 07 Ricardo 215 319 Gain 48%

Apr 08 Kentz 136 152.5 Gain 12% Nov 07 Amstrad 143 150 Gain 5%

May 08 Anglesey Mining 18.75 4.25 Loss -77% Dec 07 Revenue Assurance 104 200 Gain 92%

May 08 Plant Health Care 331 212 Loss -36% Jan 08 Homeserve 484 1741 Gain 260%

Jun 08 Panceltica 102.75 2.25 Loss -98% Jan 08 Smart J Contractors 665 887.5 Gain 33%

Jun 08 Hampson Industries 162 85.5 Loss -47% Feb 08 Accident Exchange 240 83.75 Loss -65%

Jul 08 Huntsworth 64.75 54.25 Loss -16% Feb 08 Instore 55 6.075 Loss -89%

Jul 08 Pendragon 28.5 27.25 Loss -4% Apr 08 RDF Media 206 127.5 Loss -38%

Jul 08 Domino's Pizza** 211.25 203.25 Loss -4% Apr 08 VEGA 193 280 Gain 45%

Aug 08 eaga 101 125.75 Gain 25% May 08 Wagon 37.75 17.25 Loss -54%

Sep 08 Cosalt 245.5 56 Loss -77% May 08 Forth Ports 1356 1991 Gain 47%

Sep 08 Coal of Africa 130 81 Loss -38% May 08 Kofax 203 208 Gain 2%

Sep 08 Costain 25 25 N/A 0% Jul 08 Flying Brands 230 71 Loss -69%

Oct 08 MDM Engineering 152.5 110.5 Loss -28% Jul 08 Hilton Food 172.5 223 Gain 29%

Oct 08 XP Power 235 207.75 Loss -12% Aug 08 Tanfield 90.75 8.7 Loss -90%

Nov 08 Platmin 132.5 56 Loss -58% Sep 08 Begbies Traynor 156 160.75 Gain 3%

Nov 08 Lamprell 198 122.5 Loss -38% Sep 08 Jarvis 89 21.75 Loss -76%

Nov 08 International Ferro Metals 36 44 Gain 22% Sep 08 Horizon Technology 63.75 92.5 Gain 45%

Dec 08 NEOVIA Financial 48.5 45.5 Loss -6% Oct 08 Financial Objects 61 60 Loss -2%

Dec 08 Hill & Smith 195.75 221.5 Gain 13% Nov 08 Trifast 65 37 Loss -43%

Dec 08 H&T 157.5 208 Gain 32% Nov 08 Clapham House 314 95 Loss -70%

Jan 09 Telecom Plus 357 274.5 Loss -23% Nov 08 Journey Group 156 4.375 Loss -97%

Jan 09 Hargreaves Services 475 495 Gain 4% Nov 08 Entertainment Rights 31 3 Loss -90%

Feb 09 London Capital Group 283 156.25 Loss -45% Mar 09 OCZ 166.5 8 Loss -95%

Feb 09 RM Group 169.75 165 Loss -3% Mar 08 ServicePower 33 3.75 Loss -89%

Feb 09 Asian Citrus 154 247.5 Gain 61% Apr 09 BSS Group 237.5 300 Gain 26%

Mar 09 Chime Communications 54 116.25 Gain 115% Apr 09 GTL Resources 162.5 15 Loss -91%

Mar 09 Kalahari Minerals 44.25 133.5 Gain 202% Apr 09 New Britain Palm Oil 315 250 Loss -21%

Apr 09 Genus 542 514 Loss -5% Apr 09 Imperial Energy 756 1253 Gain 66%

Apr 09 Fiberweb 32.5 65.5 Gain 102% June 09 Dmatek 118 210 Gain 78%

May 09 PV Crystalox Solar 90 77 Loss -14% June 09 Dunelm 154 241.75 Gain 57%

May 09 BATM Advanced Communications 28.5 35.5 Gain 25% Jul 09 Eleco 55 36.5 Loss -34%









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smallcapshares July 2009







KEY DATES ▼

1966 Merger of shipbuilders Vosper

and Thornycroft



VT GROUP 1977

1985

Vosper Thornycroft nationalised

Management buy-out

1988 Listed on LSE

2002 Changed name to VT Group

VTG July 2008 VT Shipbuilding merged with BAE

Systems' Surface Fleet Solutions

475p subsidiary to form BVT Surface Fleet

Jan 2009 Announces intention to sell share in

BUY BVT Surface Fleet







We first covered VT Group in the newsletter in July 2004

when the shares were trading at 264p. We exited in

September 2007 at 624p, slightly too early in hindsight as

the shares broke 700p in early 2008, but still ensuring that

readers walked away with a 136% gain. With the shares

SECTOR Aerospace & Defence currently at 474.5p we believe that there is an opportunity

to enter back into a solid, growing company at an attrac-

MARKET Full List

tive price.

MARKET CAPITALISATION £849 million

HISTORIC RATING 14

PROSPECTIVE RATING

PRICE TO SALES - 2009

12.3

0.8

THE BUSINESS ▼

Beginning life as a shipbuilder, VT Group has significantly diversi-

OPERATING MARGIN - 2009 6.1% fied its offerings in the past few decades moving steadily towards

INTEREST COVER - 2009 13.7 the support services sector. As it stands today the business operates

DIVIDEND YIELD - 2009 3% through four main divisions.

PEG - 2010 0.9 Originally named Merlin Communications and formed out of the

PENSION DEFICIT £43.6 million - 31/03/2009 privatisation of the BBC Word Service’s transmission network in

1997, VT Communications designs, builds and operates special-

SHARE PRICE 12M 421.25p/685p ist communications networks and systems. Operating mainly in

SPREAD 474p/475p the broadcast and defence & security markets, customers in this

SHARES IN ISSUE 178.81 million division include the likes of the UK Government, the Ministry of

NORMAL MARKET SIZE 8,000 Defence, NATO and the BBC.

NEXT NEWS 30th July – AGM VT Education & Skills is the largest education and training com-

pany in the UK, providing services including work-based training,

BROKER RBS Hoare Govett consultancy and facilities management, amongst many others, to

HEAD OFFICE Southampton - 023 8083 9001 schools, organisations and central and local governments. This

WEBSITE www.vtplc.com business was expanded in July 2008 when VT acquired the 50% of

the shares that it did not own in Flagship, the Royal Navy’s training

partner, from BAE Systems in a deal worth £81.8 million.

VT Services Inc., as the Inc suggests, is VT’s US based subsidiary.

Operating through the three divisions of VT Aepco, VT Griffin

and VT Milcom, the business provides engineering and logistics,

facilities maintenance, electronics engineering, communications

installation and support services mainly to the US Government

and military.

VT Support Services manages projects for its clients in the aero-

space, emergency services, defence and commercial markets,

both in the UK and overseas. Current customers include British

Airways, the UK Fire & Rescue Authorities and the Metropolitan

BALANCE SHEET AS AT 31/03/2009

Police. In June last year the division was awarded - via Ascent, its

net assets £330.7 million 50/50 joint-venture with technology firm Lockheed Martin UK - a

net current assets £39.1 million major 25 year, £6 billion contract for the UK Military Flying Training

net debt £186.4 million System (UKMFTS) to provide training to all UK military air crew for

the Royal Navy, Royal Air Force and Army Air Corps. The division

is the largest in the group by revenues, it generating 37% of total

FINANCIAL RECORD & FORECASTS turnover in the last financial year.

Years to March 2008A 2009A 2010E 2011E As we speak VT maintains its place in the Shipbuilding market

Turnover £845.4m £1.1bn £1.2bn £1.28bn through a joint-venture with BAE Systems, BVT Surface Fleet,

Pre-tax Profits £61.6m £86.6m £97.5m £109.4m

which came into being in July 2008. VT has a 45% stake in the

joint-venture but under the agreement has equal voting rights with

Earnings 24.1p 33.9p 38.5p 43.6p BAE. BVT Surface Fleet is the largest shipbuilder in the UK, design-

Dividends 13.1p 14.4p 15.7p 16.8p ing and manufacturing warships, including aircraft carriers, frigates

and destroyers, and support vessels, with the Ministry of Defence

PE Ratio 19.7 14 12.3 10.9

Source: Company accounts & consensus forecasts









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smallcapshares July 2009





BUSINESS RATING 59

SECTOR ■■■■■■ OPPORTUNITIES & RISKS ▼

MANAGEMENT ■■■■■■ One of the main reasons that we are drawn to the company at this

PROFITABILITY ■■■■ moment in time is that we believe the planned sale of the stake in the

TRACK RECORD ■■■■■■ BVT venture could deliver a re-rating. After certain downwards adjust-

ments, relating to pension liabilities interest and other items, it is expect-

PROSPECTS ■■■■■■ ed that the company will receive around £330 million from the sale. This

BALANCE SHEET ■■■■■ will leave VT with net cash of around £140 million and will enable the

MARKET SHARE ■■■■■ company to focus on expanding its higher margin engineering based

SIMPLICITY ■■■■ support services activities, both organically and via acquisitions. We

believe that the market has yet to fully appreciate this development, the

EXECUTION RISK (LACK OF) ■■■■ shares having fallen since the proposed deal was announced, and that

SHAREHOLDER FOCUS ■■■■■■ on completion, which is expected by 1st July at the latest, the shares

PRODUCT UNIQUENESS ■■■ could receive a well deserved boost.

INVESTOR EXCITEMENT (LACK OF) ■■■■ In other areas of the business there are plenty of growth opportunities

available for the group. In the Communications business VT is cur-

rently competing for a contract with the Joint Military Air Traffic Services

(JMATS) Public Private Partnership (PPP) programme, due to be awarded

in 2013. This programme, worth an estimated £1 billion, is for air traf-

fic and related data management services to the UK military in the UK

and overseas. In Support Services, AirKnight, another joint-venture with

Lockheed Martin UK, is one of two remaining bidders for the UK's multi-

being its main customer. However, in January this year VT Group billion pound Search and Rescue (Helicopter) (SAR-H) programme. A

agreed, earlier than previously expected, to sell its share in the preferred bidder decision is anticipated in late 2009. In Support Services

joint-venture to BAE. This is discussed in further detail below. the company also sees opportunities to grow in the waste and nuclear

sectors in the coming years. Also, the Education business looks set to

benefit from the Government's commitment to both the education and

the skills agenda.

CURRENT TRADING ▼ In terms of risks we see two major issues surrounding the business.

Results for the twelve months to 31st March 2009, which were Firstly, in relation to certain loss making contracts, for the Royal Navy

posted in mid-May, demonstrated another year of strong growth. of Oman and the Trinidad & Tobago Coastguard, which VT brought

Revenues from continuing operations for the period - not including into the BVT venture, the company has stated that it will potentially be

VT’s shipbuilding activities, which were classified as discontinued making a capital injection into BVT. The company is currently in discus-

operations in the accounts - grew by 30% to just under £1.1 sions with BAE over these contracts but as yet no provisions have been

billion. Underlying pre-tax profits, those before amortisation, joint- made in the accounts for the capital injection. We note that BAE, in

venture taxation, exceptional items and changes in the fair value of its accounts for 2008, reported loss provisions for the contracts of £96

derivatives, increased by 41% to £86.6 million. Adjusted earnings million, which would equate to around £43 million for VT’s share. While

were up 41% to 33.9p per share and that prompted a 10% hike this would represent a significant outflow for the business the cash

in the full year dividend to 14.4p. generative operations and cash inflow from the BVT sale should mean

that it is not company threatening.

Operating cash conversion from continuing operations during the

period was strong at 105%. The net debt position at the period Secondly, there are concerns over the levels of Government spending

end was £186.4 million, a rise of £41.5 million over the twelve on defence, in both the US and the UK, in light of the current economic

months, mainly due to costs associated with the VT Flagship downturn - especially given VT’s large exposure to the sector. If current

acquisition. VT Group had banking facilities of £305 million at the expectations are met however there should not be any problems. In the

period end, of which £129.9 million had been drawn down as at UK, the defence budget is set to increase from £32.6 billion in 2007/08

31st March, leaving plenty of headroom (£175.1 million) to fund to £36.9 billion in 2010/11, representing, in real terms, average annual

further acquisitions. Interest payments for the period increased by growth of 1.5%. In the US, figures from the Department of Defense (sic)

£2.8 million to £6.8 million, but these were comfortably covered, see annual rises in the budget of 4% per annum.

13.7 times by underlying operating profits.

During the year all divisions managed to grow both turnover and

underlying operating profits. Only VT Support Services failed to

improve operating margins. At the period end the order book

VALUATION ▼

In terms of market cap VT Group is a little bit larger than our usual

across the group stood at $4.5 billion, up 12% over the year.

recommendations but it has done us well before and as it looks

There was a particularly good performance from VT Education & like it could do again we are happy to recommend it. The com-

Skills, which, benefitting from the VT Flagship acquisition posted pany is cash generative, has a good track record of growth and

divisional operating profits up 75% to £23.6 million. Growth also the balance sheet is strong. On a forward price earnings multiple

came as a result of a raft of new contract wins, including with of 10.9 - which we believe is good value considering the excellent

British Energy, BMW Group and under the Government’s Building earnings visibility provided by the order book and the opportuni-

Schools for the Future scheme. ties for growth - and prospective 2010 yield of 3.3%, the shares

VT Communications saw organic operating profit growth of 17% are a BUY ■

in the year, to £19.8 million. The performance was put down to

operational efficiencies seen on older contracts, combined with

new contracts with the Future Strategic Tanker Aircraft (FSTA) and

the UKMFTS projects making initial contributions.

Over in the US, there was also a good performance from VT

Services Inc., which grew operating profits by 64% £14.1 million.

This was on the back of the previous year acquisition of VT Aepco,

which contributed nine months worth of trading to the numbers,

and foreign exchange gains of £1.5 million. Giving excellent earn-

ings visibility to future years, the division secured contract exten-

sions and renewals of $180 million during the year.

Finally amongst the continuing operations, the Support Services

business grew operating profits by 35% to £35.9 million. Within

the aerospace sector the division began delivery under its contracts

with the UKMFTS and FSTA programmes during the year, both

contributing to organic revenue and profit growth.









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smallcapshares July 2009





KEY DATES ▼



1911 Founded





HAMWORTHY

1962 Acquired by Powell Duffryn

2004 Listed on AIM



HMY

264.75p

BUY THE BUSINESS ▼

Hamworthy specialises in the design and manufacture of marine

fluid handling systems, with a focus on gas handling, pumping and

water management. Its products, for which it has a strong and reli-

able track record, cover all types of merchant and naval vessels and

offshore applications, particularly oil and gas services. Despite the

SECTOR General Industrials expectations of falling profits in the next couple of years we believe

MARKET FTSE AIM 50 the company's scope of products, regional diversification and

MARKET CAPITALISATION £120.2 million strong reputation make it a well-rounded long-term investment.

HISTORIC RATING 7.3 Founded in 1911, Hamworthy was acquired by Powell Duffryn

PROSPECTIVE RATING 8.8 plc in 1962. Following a series of acquisitions in the 1990s, the

company further expanded its operations by opening an assembly

PRICE TO SALES 0.48 facility at Suzhou, China in November 1998 which was replaced

OPERATING MARGIN 9% with a larger and more modern facility in 2001. It floated on AIM

DIVIDEND YIELD 3.6% in 2004 and won the AIM Company of the Year Award in 2007.

Headquartered in Poole, Dorset the company is now a truly global

SHARE PRICE 12M 153p/585p

player, with design, development and production facilities in the

SPREAD 238p/242p UK, Germany, Norway, Denmark, Singapore and China, along with

SHARES IN ISSUE 45.41 million sales and service support in key marine locations including South

NEXT NEWS AGM - July Korea, China, the US, the Netherlands, Spain, Dubai and India. It

now employs over 1,100 people worldwide.

BROKER Numis

Demand for Hamworthy’s products is underpinned by two key end

HEAD OFFICE Fleets Corner

markets: energy production and transportation (c.80%) and the

Poole cruise ship industry (c.20%). However, another important factor is

Dorset the drive for more environmentally friendly fluid handling systems

WEBSITE www.hamworthy.com which is underpinned by ongoing legislation. The firm has success-

fully diversified its business mix so that around 60% of its revenue

is derived from non-new shipbuilding activities, compared with just

20% two years ago.



MANAGEMENT ▼

Non-Executive Chairman Gordon Page joined the board in

June 2004. He is also non-executive chairman of PH Warr plc

and a non-executive director of Lockheed Martin UK Holdings

Limited. Page worked for Rolls-Royce from 1962-1989 and held

a number of senior commercial and marketing positions. He

joined aerospace and defence firm Cobham in 1990, occupying

the roles of chief executive from 1992-2001 and chairman from

2001-2008.

Chief Executive Joe Oatley joined the company in September

2007, having spent 3 years as managing director of Weir

Strachan & Henshaw, a leading defence and nuclear engineer-

ing firm. Prior to that his experience was predominantly in the

BALANCE SHEET AS AT 31/03/2009 engineering sector, where he occupied roles including manag-

net assets £62.6 million ing director, and in strategy development and acquisitions.

net assets per share 138p

net cash £55.5 million









FINANCIAL RECORD & FORECASTS

Year to March 2008A 2009E 2010E 2011E

Turnover £231.8m £252.8m £240m £200m

Pre-tax profits £17.4m £22.3m £18.5m £15m

Earnings 28.6p 36.5p 30.1p 24.8p

PE Ratio 9.3 7.3 8.8 10.7





Source: Evolution Securities









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smallcapshares July 2009





to 14.47 million. Although it would be naïve to suggest that the

BUSINESS RATING: 64 cruise market will not be affected by the current downturn, the

SECTOR ■■■ industry is likely to maintain its growth for some time, at least

MANAGEMENT ■■■■■■■ until 2020. In recent years growth has always been better than

PROFITABILITY ■■■■■ expected, and 20 million passengers are expected by 2015.

TRACK RECORD ■■■■■■■ Being a ‘late-cycle’ business, Hamworthy is currently operating in

PROSPECTS ■■■■ the down phase of its business cycle while many other industrial

BALANCE SHEET ■■■■■■■ firms are beginning to see an upturn. There is a risk in buying

into a stock that is entering a cyclical downturn in that visibility is

MARKET SHARE ■■■■■■ shortening and the downturn may be worse than first anticipated.

SIMPLICITY ■■■■ Limiting the reduction in the order book will be crucial during the

EXECUTION RISK (LACK OF) ■■■■ short-medium term. On the plus side however, the market has

SHAREHOLDER FOCUS ■■■■■ already anticipated this and the share price is a very long way from

PRODUCT UNIQUENESS ■■■■■ 2008 highs.

INVESTOR EXCITEMENT (LACK OF) ■■■■■■■



Paul Crompton, Finance Director, has been in his current posi- VALUATION ▼

tion since 1994. He spent five years at Ernst & Young and has Hamworthy operates in multiple sectors so there is no obvious

held senior financial and general management roles within the or direct peer group comparison available. However, the nearest

electronics and aerospace industries including a main board relationship can be drawn against the oil services sector which

directorship at Penny & Giles International. trades on a current rating of around 10, with a long-term average

of around 15. In common with other oil services firms exposed to

the offshore market, Hamworthy is likely to see a slowdown in

CURRENT TRADING ▼ revenues and a deterioration in margins during the year to March

2010. However, we believe the firm is well placed to successfully

Hamworthy’s most recent set of results (for the year to March 31st emerge from the current downturn given its cash resources and

2009) are largely academic as the market will be looking ahead the growing scope of its business. Of particular note is the growth

to future prospects given the late-cycle nature of the business. in the after-sales business, which increased revenues by 23.8%

For the record, operating profits increased by 42.3% to £23 mil- during the year to March 2009 to £36.3 million. This part of the

lion on revenues up by 9.1% to £253 million. The key metrics for business is not cyclical as it is “opex” rather than “capex” driven,

investors were the 22.1% fall in order intake (to £178 million) and and it commands higher margins. Similarly, the environmental leg-

the 16.5% fall in the value of the order book (to £260 million). islation factor provides a measure of protection against the cyclical

This was as expected, being the result of lower levels of new ves- elements of the business.

sel orders across all ship types and the deferral of costly offshore Although order backlogs are shortening in many of Hamworthy’s

projects. markets, enquiry levels remain high. This would suggest that there

During the year, Gas Systems sales declined by 15% and profits by is a substantial amount of pent-up demand awaiting signs of an

32% (to £3.7 million) with the second half weaker than the first. improvement in economic conditions. It is worth remembering

This reflected the delivery of a backlog in the LNG carriers division. here that Hamworthy is a global operator and could easily benefit

In anticipation of tougher trading, management has reduced the from an improvement in conditions in the Far East even if Western

headcount by 25%, in line with current activity levels. This is not economies continue to stagnate. China in particular is becoming

the largest division but the main division of concern given the increasingly anxious about the security of its energy supplies – a

contracting nature of the business. The Pump Systems division development that could work towards Hamworthy’s advantage.

performed well (operating profits: £12.5 million), although the The firm is confident it can meet expectations for the year to March

second half was more in line with normal trends after an excep- 31st 2010, which implies a current year rating of 8.8 for the shares.

tional performance in the first half. Meanwhile, Water Systems For 2011 – the likely nadir for earnings - the forecast rating is 10.7.

sales surged 33% with strong profit growth underpinned by new If we subtract cash of 120p per share, the rating falls to just 5. For

environmental standards. shares that would normally trade on a high teens multiple in better

The firm ended the year with net cash and cash equivalents of times, we see this is an attractive juncture to get on board. On a

£55.5 million (equivalent to 120p per share). As the order book five year view Hamworthy is a BUY ■

shrinks, the level of pre-payments will fall and impact cash, but the

low capital intensity of the business means Hamworthy will remain

cash generative going forward. Brokers are forecasting a net cash

position of around £60 million for the end of the current year.







OPPORTUNITIES & RISKS ▼

Hamworthy is a firm which is exposed to two long term growth

markets: energy and energy transportation, and the cruise ship

industry. As time goes by and oil reserves become depleted,

exploration and development activity will be increasingly drawn

to offshore sites where drilling costs are higher but where reserves

potential is greater. Hamworthy’s expertise in pumping systems

should enable it to benefit from this long-term trend. Meanwhile,

the logistics of transporting hydrocarbons is becoming ever more

complex, and geo-political issues mean that in many cases a simple

pipeline arrangement is either not feasible or not preferable. The

growing energy needs of the world’s population should therefore

ensure that the demand for tankers and FPSOs remains strong in

the longer term.

The cruise industry has undergone a remarkable period of expan-

sion during recent times. Between 1995 and 2005 the number of

cruises sold annually worldwide grew by 152% from 5.72 million









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smallcapshares July 2009





KEY DATES ▼

1991 Listed on LSE



DART GROUP Aug 2005



Aug 2005

Sells stake in Benair Freight

International

Moves from Full List to AIM

DTG April 2006 Acquires ambient distribution

business, RF Fielding

57.25p Aug 2006 Undergoes 4 for 1 share split

BUY Feb 2007 Jet2 Holidays launched









THE BUSINESS ▼

Dart Group is an interesting Leeds based business with a dual-

operation business model.

The core Aviation business trades through airline Jet2.com,

SSECTOR Travel & Leisure which, via its fleet of 30 aircraft, provides low cost flights on a

MARKET AIM number of leisure routes from its bases in the North of England.

INDEX AIM All Share At present the company is based at 6 regional airports: Belfast,

Blackpool, Edinburgh, Leeds-Bradford, Manchester and Newcastle.

MARKET CAPITALISATION £80 million The company directly owns 29 of its aircraft, 21 of which are

HISTORIC RATING 4.1 Boeing 737-300s and 8 are Boeing 757-200s. The 235 seat

PROSPECTIVE RATING 6.2 Boeing 757-200, which has a 3,500 nautical mile range, enables

the company to provide flights to destinations as distant as the

PRICE TO SALES - 2008 0.18 Eastern Mediterranean, Red Sea, Canary Islands and New York, as

OPERATING MARGIN – H1 2009 13.1% well as to a range of traditional Western Mediterranean resorts.

INTEREST COVER – H1 2009 15 Jet2holidays.com, the company’s ATOL protected package holiday

operator, was launched in February 2007. As at 30th September

DIVIDEND YIELD – 2008 N/A 2008 the operation had sold over 25,000 holidays in the half year

SHARE PRICE 12M 12.5p/59.75p to September 2008 and it is expected that it will make an increas-

SPREAD 56.75p/57.75p ingly significant contribution to the airline's passenger numbers

over the coming years. Jet2 also provides passenger charter serv-

SHARES IN ISSUE 141.08 million ices, as well as cargo services for clients such as the Royal Mail, for

NORMAL MARKET SIZE 5,000 whom it transports first class mail overnight.

NEXT NEWS Full Year Results – 30th July The Distribution division operates through subsidiary, Fowler

BROKER Collins Stewart Welch-Coolchain. The company is one of the country’s lead-

ing distributers of fresh and temperature controlled produce to

HEAD OFFICE Leeds supermarkets and their suppliers, food manufacturers, growers

0113 238 7455 and importers. Services provided from its distribution centres

WEBSITE www.dartgroup.co.uk in Spalding (Lincolnshire), Teynham (Kent), Washington (Tyne &

Wear), Stockport (Cheshire) and Portsmouth (Hampshire) include

both chilled and ambient storage and distribution together with

warehousing operations. In addition, the company also has port

operations in Sheerness and Southampton. Also part of the divi-

sion, Fowler Welch Ambient, whose business was acquired out

of administration in 2006, offers product distribution services to

a wide customer base including multinationals and independents

across a whole range of industries, from food and drink to paper

and plastics.









BALANCE SHEET AS AT 30/09/2008

net assets £98.2 million

net debt £7.2 million









FINANCIAL RECORD & FORECASTS

Years to March 2007A 2008A 2009E 2010E

Turnover £349m £429m £405m £420m

Pre-tax Profits £14.1m £3.9m £27m £18m

Earnings 9.3p 2.15p 13.8p 9.2p

PE Ratio 6.2 26.6 4.1 6.2





Source: Company accounts & Numis









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smallcapshares July 2009



In its results Dart stated that it expected second half trading to be

in line with the previous year. However, in a highly positive trading

BUSINESS RATING: 59 update, which was released in mid-April, the company stated that

SECTOR ■■■■■ from the period to 4th December 2008 to 31st March 2009 it had

MANAGEMENT ■■■■■■ in fact traded ahead of expectations. At Jet2 a cautious approach

to the winter schedule and a strong charter programme benefited

PROFITABILITY ■■■■■ the business, with scheduled bookings and load factors for summer

TRACK RECORD ■■■■■ 2009 in line with 2008 levels. Fowler Welch-Coolchain performed

PROSPECTS ■■■■■ in line with expectations in the period. Group cash flow was said

BALANCE SHEET ■■■■■■ to remain strong and at the period end Dart had positive cash

MARKET SHARE ■■■■ balances. Results for the full year to 31st March 2009, which are

expected to be released on 30th July, are also expected to benefit

SIMPLICITY ■■■■■ from the strength of the US dollar.

EXECUTION RISK (LACK OF) ■■■■■

SHAREHOLDER FOCUS ■■■■■■

PRODUCT UNIQUENESS ■■■

INVESTOR EXCITEMENT (LACK OF) ■■■■









MANAGEMENT ▼

Chairman and Chief Executive, Phillip Meeson, is a former Royal

Air Force pilot, was five times British Aerobatic champion from

1978 and before he founded the precursor to Dart Group he

built up a car dealership in London and a vehicle distribution busi-

ness. In April 1983 his private company purchased the Channel

Express Group which, at that time, was a flower distributor. Out of

Channel Express he developed Dart’s current two business sectors

before listing the company on the Unlisted Securities Market (the

precursor to AIM) in 1988 and moving it up to the Main Market of

the LSE three years later.

Andrew Merrick, Group Finance Director, joined the group in his

current position in July 2007. Prior to joining the company he held

a number of senior finance positions at both Bradford & Bingley

and the Thomas Cook Group.







CURRENT TRADING ▼ VALUATION ▼

Following a 72.3% fall in pre-tax profits in the year to March 31st Due to lower revenues from the winter flying season Dart’s opera-

2008, occurring as a result of investment in expanding the Jet2 tions have traditionally been loss making in the second half of the

business, Dart got back on the growth track in the first half of year and in that respect 2009 is not expected to be an exception.

2009. In the six months to 30th September 2008 revenues grew For the full year to 31st March revenues are expected by broker

by 8% to £272.8 million and pre-tax profits grew by 97% to £36.3 Arden to hit £405 million, pre-tax profits £27 million and earnings

million. Despite the strong performance Dart decided not to rec- 13.8p. As a result of the current recession, in 2010 earnings are

ommend a dividend for the half in light of the current economic expected to slip to 9.2p, with a recovery in 2011 seen as being

conditions. likely.

During the period £20.3 million of cash was generated from

operations. This compared to an outflow of £0.5 million in the first Despite the expected fall in profits this year we are attracted to Dart

half of the previous year and was achieved despite a seasonal fall for a number of reasons. The current year price earnings multiple of

in the level of advanced Jet2 customer payments, which peaked in 6.2 is low and should fall going forward as the economy, and there-

March. Net debt was £7.2 million at the period end, down from fore earnings, improve. What’s more the shares currently trade at a

£17.2 million six months earlier. 19% discount to net assets of £98.2 million as at 30th September

The performance for the half was mainly driven by buoyant trading 2008, with this being backed by tangibles worth £193.4 million.

at Jet2, which saw revenues increase by 11% to £215.6 million While no dividend is being paid at present the company has paid

and underlying EBITDA rise 77% to £52.7 million. During the one historically and we would expect it to be reinstated once eco-

period Jet2 flew 2.3 million passengers, down from 2.6 million. nomic conditions improve. BUY ■

Nevertheless, both yields and load factors (how full the planes

were) both increased as the company focused on its popular routes

and exited certain loss making routes - the number of routes served

was cut by 3 to 74 in the half. Ancillary revenues per passenger

grew by 76% to £15.17, charter revenues were up 70% and load

factors were up to 80.4% from 74%. New destinations, including

Croatia, Turkey and the Red Sea, have been added for this sum-

mer, with increased flights from Manchester, while overall capacity

will be maintained at levels similar to those of summer 2008.

At Fowler Welch-Coolchain sales slipped slightly during the period,

from £58.8 million to £57.2 million. The loss of two accounts

affected the numbers but these were more than replaced by

new business wins, notable deals including with pork producer

Tulip Limited for warehousing and distribution services and with

supermarket giant Tesco for store deliveries. During the period 10

acres of additional land were purchased at the company’s site in

Spalding in order to expand the site. The ambient business saw

volumes improve in the year and a positive contribution is expected

from the operation for the full year.









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NEWSFLOW CybIT CYH Aug 04 Feb 09 Buy

Industrial Transportation. Provider of telematics services. AIM.

D1 Oils DOO Jan 08 Apr 09 Speculative Buy

0.0%



-23.3%

This table covers all stocks we have profiled and have not sold Biofuels. Biofuels company focusing on the non-food product, Jatropha.

 – price has moved by 15% or more in the month. Has the rights to over 200,000 hectares of land in Africa, India and South

East Asia. AIM.

tip tip last update recent month 4 June - Joint-Venture Funding Problems

epic date price date / stance price / change Domino's Pizza** DOM Jul 08 June 09 Buy 1.1%

Travel & Leisure. Pizza franchisee operating throughout the UK & Ireland.

ACAL ACL Oct 03 Mar 09 Hold -8.3% Has over 500 stores and plans to open 50 more per annum. Full List

Electronic & Electrical Equipment. European distributor of electronic E2V Technologies E2V Nov 07 May 09 Hold -36.5%

components which emphasises value-added and custom designs. Full list. Electronic & Electrical Equipment. A designer, developer and manufac-

1 June - Final Results turer of specialised components and subsystems. Full List

Aero Inventory AI. Nov 07 Apr 09 Buy 2.8% 8 June - Final Results

Aerospace & Defence. Aerospace parts service provider. Recently won eaga EAGA Aug 08 June 09 Buy -4.0%

huge deal with Quantas worth $1.6 billion. AIM Support Services. The UK's leading provider of residential energy efficient

Alexander Mining AXM May 07 June 09 Speculative Buy 8.7% services. Full List.

Mining. Owner of a major Argentinean copper mine along with explora- Eros International EROS Feb 08 May 0 Buy 29.6%

tion projects. Focus now on technology exploitation. AIM. Media. World leading producer and distributor of Bollywood film con-

Ambrian Capital* AMBR Jan 07 Nov 08 Strong Hold 0.0% tent.

Equity Investment. Highly successful asset management team plus invest- AIM.

ment banking arm. AIM. Fiberweb FWEB April 09 June 09 Buy 25.4%

Anglesey Mining AYM May 08 Dec 08 Buy 0.0% Support Services. One of the world's largest suppliers of high perform-

Mining. Owns Parys Mountain zinc-copper-lead project in Anglesey and ance, speciality non-woven fabrics. Full List.

a 50% holding in the Labrador Iron Mines, located in Labrador Canada. Fisher, James FSJ Apr 08 June 09 Buy 8.1%

Full List Marine Support Services. Provider of specialist marine support services

Anite AIE Mar 07 Apr 09 Buy 21.3% i.e.. ship management & nuclear decommissioning. Full List.

Software & Services. Software provider geared to wireless telecoms mar- GB Group GBG June 09 July 09 Buy 8.2%

ket and travel sector. Full list. Software & Computer Services. Leading provider of electronic identity

22 May - Trading Statement verification offerings. Full List.

Asian Citrus ACHL Feb 09 May 09 Buy 16.5%  2 June - Final Results

Food Producers & Processors. The largest orange plantation owner in Genus GNS Apr 09 June 0 Buy -13.2%

China. AIM Pharmaceuticals & Biotechnology. One of the world's leading animal

Avon Rubber AVON Dec 07 July 09 Buy 22.7%  genetics companies. Full List.

Electronics & Electrical Equipment. Manufacturer of technologically Goals Soccer CentresGOAL Mar 05 July 09 Buy 1.3%

advanced rubber products. Full List Travel & Leisure. Chain of five-a-side football centres run by proven man-

21 May - Interim Results agement team. AIM.

BATM Advanced 4 June - Placing

Communications BVC May 09 May 09 5.2% GoIndustry-DoveBid GOI Jun 07 June 09 Hold 0.0%

Technology Hardware & Equipment. Provider of ethernet Support Services. Global leader in the valuation and sale of surplus indus-

technology for the operation of next generation networks. Full List. trial machinery, with strong network and growing internet sales. AIM.

12 May - Interim Management Statement

H&T HAT Dec 08 July 09 Buy 8.6%

Biocompatibles General retailers. By pledge book the largest pawnbroker in the UK

International BII Mzy 09 June 09 Buy 11.4% ahead of Albermarle & Bond. AIM

Health Care Equipment & Services. Medical technology company operat- 13 May - Trading Update

ing in the field of drug-device combination products. Full List.

Hampson Industries HAMP Jun 08 May 09 Buy -16.6%

Brammer BRAM Oct 05 Apr 09 Buy -5.9% Aerospace & Defence. Components and structures provider with a fast

Support Services. European distributor of industrial consumables to growing Aerospace division. Full list.

manufacturing plants. Full List. 3 June - Final Results

Carclo CAR Jan 08 Apr 09 Buy 2.3% Hargreaves Services HSP Jan 09 Apr 09 Buy

Chemicals. Supplier of technical plastics components. Full List. 7.7%

Cardiff Property CDFF May 03/May 08 June 09 Buy 0.0% Support Services. Minerals and support services firm. Owns the Maltby

Real Estate. Tiny founder-driven property developer and investor in the Colliery in South Yorkshire. AIM

Thames Valley. Full List. Harvey Nash HVN Oct 07 Apr 09 Buy -9.2%

Celsis CEL Aug 03 Apr 09 Buy -4.6% Support Services. Professional recruitment consultancy and IT outsourcing

Healthcare Equipment & Services. Technically advanced microbial testing provider. Full list.

products for food and pharma-manufacturers. Full List. Healthcare Locums HLO Nov 07 June 09 Buy 21.2%

Chemring CHG May 07 May 09 Buy -4.7% Support Services. Highly acquisitive specialist healthcare agency. AIM

Aerospace & Defence. Niche defence business with 50% share of coun- Hill & Smith HILS Dec 08 July 09 Buy -11.4%

termeasures market. Full List. Industrial Engineering. Infrastructure focused engineering firm oper-

Chime Communications ates through the three divisions of Infrastructure Products, Galvanising

CHW Mar 09 June 09 Buy 1.5% Services and Building & Construction product. Full List. 12 May - Interim

Media. One of the UK's largest listed marketing services providers. Full List. Management Statement

Clarkson CKN June 09 June 09 Buy 11.6% Huntsworth HNT Jul 08 May 09 Buy -12.5%

Industrial Transportation. One of the world's largest shipping services Media. International public relations and healthcare communications

groups. Has broking, financial, support and research divisions. Full List. business. Full list

Coal of Africa CZA Sept 08 Oct 08 Buy 4.5% 14 May - Interim Management Statement

Mining. Has portfolio of South African coal assets. AIM 8 Intelek ITK Apr 06/Jan09 Feb 09 Buy 0.0%

June - Commissioning of Mooiplaats Coal Handling & Preparation Plant Technology Hardware & Equipment. Supplier of products and services for

Cosalt CSLT Sept 08 July 09 Buy -24.8%  electronic communications, with an emphasis on broadband applications.

General Industrials. Provides marine safety equipment and protective Also suppliers components, sub-assemblies and kits of parts in metals or

clothing, as well as the maintenance, provision and testing of related composite materials to the aerospace and transport sectors. AIM.

safety equipment. Full List. 26 May - Trading Update International Ferro Metals

Costain COST Sept 08 June 09 Buy -3.9% vIFL Nov 08 Apr 09 Hold -5.4%

Construction & Materials. International engineering and construction Industrial Metals. Ferrochrome producer which owns the Buffelsfontein

contractor. Full List. project in South Africa. Full List

Creston CRE Sep 07 June 09 Buy 0.9% 20 May - Interim Management Statement and Production Report

Media. Undertakes a range of marketing services. Full List IQE IQE Jul 07 Oct 08 Buy -7.3%

Cropper, James CRPR Nov 06 June 09 Hold 16.8%  Technology Hardware & Equipment. The world's largest wafer manufac-

Paper & Packaging. Speciality paper maker and materials group. Full List. turer, for use in wireless communication devices. AIM.

K3 Business

Technologies** KBT Jul 07 Oct 08 Buy -5.9%



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smallcapshares July 2009



Software. Largest UK distributor of business management software, Platmin PPN Nov 08 Nov 08 Speculative Buy -7.4%

Microsoft Dynamics. AIM. Mining. Has four platinum group metals projects in the Bushveld complex,

Kalahari Minerals KAH Aug 07 May 09 Strong Hold 17.6% South Africa. AIM.

Mining. Kalahari has a varied portfolio of exploration projects in 27 May - Final Results

Namibia at various levels of development which include copper zinc 4 June - Pilanesberg Mine Receives Full Power Allocation

and uranium prospects. AIM Porvair PRV Mar 04 Dec 08 Buy 60.4%

28 May - Drilling Results Chemicals. Developer of microporous fibres and other materials supposedly

KCOM KCOM Nov 02 Nov 08 Hold 4.8% on verge of breakthrough of several technologies. Full list.

Fixed Line Telecoms. Fixed line phones in Hull plus semi-national new 4 June - Trading Update

generation trunk network seeking small business customers. Full list. Powerleague PWR Oct 06 May 09 Buy -8.2%

2 June - Final Results Travel & Leisure. Leading operator of five-a-side football centres. AIM.

Kenmare Resources*KMR Sep 06 Jun 08 Strong Hold 0.0% PV Crystalox Solar PVCS May 09 May 09 Buy -35.3% 

Mining. Owns a massive titanium mine in Mozambique. Full list. Electronics & Electrical Equipment. One of the world’s largest manufactur-

Kentz KENZ Apr 08 July 09 Buy 8.9% ers of multicrystalline ingots and silicon wafers, the key components used

Construction & Materials. Engineering contractor joined Aim in in solar power systems. Full List

February 2008. AIM. 15 May - Interim Management Statement

27 May - Contract Quadnetics QDG Dec 07 Apr 09 Buy 0.0%

5 June - Contract Electronics & Electrical Equipment. Provider of CCTV surveillance equip-

Kewill Systems KWL Jul 05 June 09 Buy 35.0% ment and systems across the world. AIM.

Software & Computer Services. Logistics control software for retailers RC Group RCG Oct 07 May 09 Buy 35.7%

and distributors in US and Europe. Full list. Software & Computer Services. Hong Kong based technology group pro-

Kier KIE Apr 08 June 09 Buy -6.4% viding biometric security products mainly to the south-east Asian markets.

Construction & Materials. Construction, development and service com- AIM.

pany, specialising in building and civil engineering, support services, Research Now RNOW Feb 07 June 09 Buy -2.6%

private house building and property development. Full list. Media. Rapidly growing online market research business. AIM.

14 May - Interim Management Statement RM Group RM. Feb 09 May 09 Buy 16.2% 

Lamprell LAM Nov 08 Nov 08 Buy 22.5% Software & Technology. Leading supplier of educational technology to

Oil Equipment & Services. Provider of specialist engineering services to schools and colleges in the UK. Full List.

the international oil & gas sector. AIM. S&U SUS Mar 06 Nov 08 Buy -1.2%

18 May - Interim Management Statement General Financial. Consumer credit and car finance provider, including

London financial services, hire purchase and sales of electrical and household mer-

Capital Group LCG Feb 09 June 09 Buy -33.4%  chandise in the UK. Full list.

General Financial. Specialist in online trading services including spread- Safestore SAFE Mar 08 Apr 09 Buy -5.3%

betting. AIM. Real Estate. By number of stores the UK's largest provider of self storage

Management space. Full list.

Consulting MMC Apr 05 June 09 Hold 0.8% Skyepharma SKP Dec 07 Mar 09 Speculative Buy -14.5%

Support Services. Specialist firms of consultants implementing opera- Pharmaceuticals. Pharma with a raft of approved products in the oral,

tional improvements at no net cost to their clients. Operates globally inhalation and topical delivery areas. Major product in development,

across five continents. Full list. Flutiform, could transform the company's earnings. Full List

MDM Engineering MDM Oct 08 Feb 09 Buy 22 May - Flutiform NDA Accepted for Review

26.3% Support Services. African focused minerals process 9 June - Research Update

and project management business. AIM SOCO SIA Feb 06 May 09 Hold 0.2%

Microgen MCGN Sep 04 June 09 Buy -1.8% Oil & Gas Producers. Oil explorer specialising in exotic locations, currently

oftware & Computer Services. IT services and consultancy run by an ex- Yemen, Vietnam and Congo. Full list.

senior executive of Dell. Full list. 13 May - Interim Management Statement

MinorPlanet MPS Apr 07 Oct 08 Hold -46.2% Speymill SYG Sep 07 Mar 09 Hold -20.9%

Electronic & Electrical Equipment. Leading telematics provider making Support Services & Investment. Has property funds based in Germany and

strong recovery. AIM. China with property management and property support services divisions.

NEOVIA Financial NEO Dec 08 June 09 Buy 6.4% AIM

General Financial. The world's leading independent online payments Spice SPI Feb 07 Apr 09 Buy 25.9%

business. AIM Support Services. Highly acquisitive support service operator focused on

Northern utilities. AIM. 12 May - Pre-close Trading Update

Petroleum* ** NOP Feb 07 Nov 08 Buy 0.0% Spring SRG Mar 04 June 09 Buy -12.1%

Oil & Gas Producers. Explorer with attractive portfolio of oil and gas Support Services. One of the UK’s larger suppliers of contract software

assets in the Netherlands, the UK and Italy. AIM. developers and temporary IT staff. Full list.

Panceltica PANC Jun 08 Nov 08 Hold -55.3%  SThree STHR Mar 07 May 09 Hold -7.1%

Construction & Materials. Provides fast track fabrication and construc- Support Services. Specialist IT staffing geared towards ICT, finance, human

tion of residential and commercial property units using its proprietary resources, engineering and pharma. Full list.

technology, the Scottsdale technique. AIM 5 June - Trading Update

Parity PTY Jan 08 May 09 Hold -5.2% Summit SUMM Jun 07 Dec 07 Buy 0.0%

Software & Computer Services. UK focused IT services company. Pharmaceuticals & Biotechnology. Niche drug discovery business with

Operates through three divisions; Resources, Training and Solutions. Full List. screening services for top life sciences firms. AIM.

14 May - Interim Management Statement Telecom Plus TEP Jan 09 July 09 Buy -3.7%

Pendragon PDG Jul 09 Aug 08 Speculative Buy 10.1% Telecommunications. Independent utility services provider. Operates

Automotive. Largest independent operator of franchised motor car through the Utility Warehouse brand name. Full List.20 May - Final Results

dealerships in the UK. Full list. Telspec TSP Nov 06 Mar 09 Hold -17.7%

Phoenix IT PNX Mar 08 July 09 Buy 30.8%  Telecoms Equipment. Failing telecoms business recently taken over by new

IT Services. Provider of IT Services including systems management, disas- management. Full list.

ter recovery services and remote telephone support. Full list Trafficmaster TFC Jan 02 May 09 Buy -3.2%

1 June - Final Results Leading UK telematics technology provider. Full list.

Plant Health Care PHC May 08 July 09 Long-term Buy 11.3% 20 May - Interim Management Statement

Chemicals. Plant Health Care develops naturally based products for use TT Electronics TTG May 05 Dec 08 Hold -7.4%

in the agriculture and horticulture markets. AIM. Electronics & Electrical Equipment. Electronics operations focused on

12 May - EGM Statement planes, trains, automobiles, telecoms, computers and utilities. Full list.

19 May - Test Results 13 May - Interim Management Statement

2 June - Monsanto Order Wolfson Microelectronics WLF Mar 08 June 09 Hold -4.9%

Platinum Australia PLAA Oct 06 Dec 08 Buy 14.4% Hardware & Equipment. Supplier of mixed signal semiconductor chips.

Mining. Junior explorer with three projects in development. Smokey Full list

Hills and Kalplats are headed towards production. Also developed pat- XP Power XPP Oct 08 July 09 Buy 6.0%

ented Panton Process. AIM. 11 May - Kalahari New Mineral Resource Electronic & Electrical Equipment. Supplier of power supply products to the

22 May - Acquisition mid-tier electronics industry. Full List

28 May - AUS$61.2 million Placing 15 May - Trading Statement









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And finally...

editor'smessage

COSALT The recent European elections fired a warning shot to politicians

looking for further European integration, but will it be enough to

prevent EU regulation from smothering the UK financial sector? The

CSLT £14.8m 56p BUY UK’s – and specifically the City of London’s – financial prominence

TRADING UPDATE FULL LIST has long been the object of European envy, and EU politicians have had

a field day lashing out at the shortcomings of ‘Anglo-Saxon’ capitalism

In an unscheduled trading update, oil and gas safety equipment during the economic crisis. The current political consensus for the need

for tighter financial regulation has presented them with an irresistible

provider Cosalt has reported that the improvements in trading opportunity to end London’s hegemony in international finance.

now being experienced may not be sufficient to make up for The European Commission recently announced its intention to create

three regulatory authorities with their own staff, full-time president

earlier weaknesses seen in February and March. As such, the

and independent budget. If there is a dispute between regulators

group now expects profits for the current year to October to fall from EU countries over how to proceed, these EU bodies can “settle

the matter” by binding mediation, with final jurisdiction given to the

short of current expectations. Cosalt also said it recently entered European Court. Whatever regulatory authority the UK is left with,

into a partnership agreement with wire rope manufacturer Bridon be it the FSA or some other replacement institution, its powers would

be seriously curtailed by this piece of legislation. The move is subject

International to develop and expand its reach into the Aberdeen to a majority vote, and given that it supposedly concerns “internal

matters” the UK has no veto over it. The only hope for the UK and

based North Sea oil and gas arena. This will enable the company

the City of London is that other member states do not want their

to increase the range of services it offers its customers. individual regulatory bodies replaced.



COMMENT ▼ In an earlier swipe at London, the Commission put forward a new

directive concerning hedge funds and private equity which proposes

Coming on top of the setback earlier this year, this news is disap- imposing “demanding regulatory standards” on all managers with

funds over the value of 100 million Euros (£89 million). The regula-

pointing, especially given the hopes for an improvement in trading tions will also extend to “all major sources of risks in the alternative

investment value chain” including “key service providers ... deposi-

at the beginning of the second half. Nevertheless, we see this as

taries and administrators”. The directive says they will be “subject to

a short-term setback in that the recovery will simply not be as robust regulatory standards”. Hedge funds and private equity had

very little to do with the financial crisis, so this is clearly an attack

swift as was erstwhile thought. Brokers are suggesting earnings on the financial system of the UK, where most of Europe’s hedge

forecasts may have to be cut by around 30% (to c.15.1p), but this funds are located. Given that these institutions are basically invest-

ment tools for rich people, it is also an attack on the wealthy. The

would still only suggest that the shares trade on a current rating of only effect this will have is to make European (i.e. UK) private equity

and hedge funds less efficient and more expensive to investors, and

3.7. The net debt position remains a concern (circa £27 million as

consequently investors will take their money abroad.

at 26th October 2008), and investors may have to accept a scrap-

If we are to fight back we must act quickly as the EU is mounting a

ping of the dividend payment this year so that the firm can get its second attempt to push through the EU Constitution - after it has

already been voted down by French and Dutch voters, along with

finances in order. However, we view the current price as attractive the Irish more recently. Our own government likes us to think the

for a cyclical play that will no doubt command a premium rating Constitution means very little to us, but letting it go ahead without

a UK referendum would effectively amount to the extinguishing of

in fairer times. BUY. the entire British legal system. Somewhere around 80% of all our

new laws now come from the EU, but the new Constitution poses a

much greater threat as it would transform the European Court into

a kind of supreme court with jurisdiction over the entire spectrum

of the legal system, rather than its current narrowly-defined com-

mercial law mandate. This would replace British Common Law with

European Napoleonic Law (which forbids unless specifically allowed,

as opposed to vice-versa in the case of the former). It is not just our

financial and economic future which is at stake: the EU is attempt-

ing to create a unitary state by trampling on the rights of individual

The next edition of the smallcapshares newsletter will be posted first states and voters.

class to subscribers on 3rd July





smallcapshares

The Small Cap Shares Analyst Team e-mail: richard.gill@t1ps.com

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Small Cap Shares is owned by T1ps.com which is regulated by the Financial Services Authority to provide investment advice and is bound by its rules. We make every

effort to ensure that the facts we publish are correct and that adequate research has been undertaken before we make recommendations. However we cannot be held

legally responsible for errors, omissions or inaccuracies. The value of investments can go down as well as up. Past performance is no guarantee of future success.

Some of the shares recommended here will be smaller company shares. By their nature such investments can be relatively illiquid and thus hard to trade. And that makes

such investments more of a high risk than larger company shares.

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