Companies: CCS    CPH    CSW    PHSC    SNX    XLD   

The Growth Company Investor team select the stocks they believe will thrive in the year ahead

Leslie Copeland
Computer Software Group
Ticker: CSW
Share price: 68p
Market Cap: £38.2m
52-week high/low: 68.5p/51.5p


Computer Software Group will win in 2006
I believe that Computer Software Group is the closest investors will come to a sure bet in the next 12 months.

The group – led skillfully by Vin Murria and chaired by the venerable Michael Jackson (of Sage fame) – is likely to nearly double sales in the year to March, hike profits fivefold to around £5 million and maintain its momentum in a software niche it is rapidly making its own.

The group has three divisions – Business Solutions (based around the IBM iSeries customer relationship management product); Not For Profit, focusing on charities’ CRM and membership needs (it is slowly becoming the biggest player here); and Field Services, which provides, among other things, mobile data and workflow solutions.
Sales growth has come from canny acquisitions (‘we are an aggressive predator,’ says Murria), an intense focus on synergies and cross-selling opportunities, as well as innovative product launches into its three core sectors.

Its debts are manageable, it is generating a lot of cash and further acquisitions are on the cards. How long before it hits annual revenues of £50 million-plus? I’d wager not long at all. Which begs the question: why does it sport a p/e of just 8 for 2007?

Oliver Haill
Clapham House
Ticker: CPH
Share price: 165p
Market cap: £33.3m
52-week high/low: 173.5p/122.5p

Buy into Greeks, bicycles and burgers
Led by the business dynamo that is David Page – the man who took Pizza Express on a ride from its 40p float up to a £9.50 high– it’s not surprising to see that shares in Clapham House are valued at over 70 times earnings for the full year.

However, 2007’s predicted earnings put the shares on a more attractive p/e of 24.3 and with 27 restaurants across three brands – The Real Greek, Bombay Bicycle Club and Gourmet Burger Kitchen – the group has the foundation for rapid growth across the UK if its brands can withstand the expansion.

Many are betting they can. Nine new sites opened in the last seven months and management have £9.6 million cash for further intended sites for all three brands in the second half and beyond. Evidence of progress came in recent interims that contained a maiden pre-tax profit of £281,000 on turnover more than tripled to £8.6 million. It’s time to feast on the shares.

James Crux
Synexus
Ticker: SNX
Share price: 87.5p
Market cap: £19.0m
52-week high/low: 94.5p/72p

Synexus poised for healthy growth
My tip for the coming year is Synexus, which was recently brought to AIM by Brewin Dolphin with a £3.5 million funding at 65p. It boasts experienced pharmaceuticals entrepreneur Mike Redmond as chairman and specialises in recruiting patients for clinical trials for the global pharmaceutical industry, where clients include such market giants as GlaxoSmithKline and Novartis.

Through its own UK network of investigator sites, the company finds patients, screens them for suitability, and then manages them through the trial before collecting the data and reporting back to clients.

The Synexus model apparently delivers patients faster and at a lower cost than the outdated method of relying on NHS GPs and hospital consultants. Better quality data is another huge plus for its major pharma customers. Large global players are urging Synexus to set up its model in emerging countries like India, Poland and Russia. Profits are forecast to come in at £1.4 million from £10.2 million sales for the year to March. It’s my share of the year.

Elliott Davis
Clarity Commerce
Ticker: CCS
Share price: 77.5p
Market cap: £12.0m
52-week high/low: 80p/63.5p

Clarity Commerce to come good
Though latest interims from Clarity Commerce showed only modest growth, 2005/06 looks as if it may still prove to be a breakthrough year for the supplier of software to the entertainment, hospitality and leisure sectors.

The finalisation of a new £2.3 million three-year contract with catering and business support services group Sodexho looks a particularly fascinating development and has the potential to significantly enhance the markets Clarity is able to address.
Installations in hospitals, army barracks and major corporate facilities are expected as part of this deal.

Chief executive Graham York is also keen to see a sharp increase in the company’s international presence, an ambition shared by new chairman John O’Connell.

For the full year house broker Bridgewell anticipates profits in the region of £1.2 million. Should Clarity achieve this and secure several further orders on the back of the Sodexho deal, its current £12 million market valuation would start to look rather modest.

Robert Tyerman
Xceldiam
Ticker: XLD
Share price: 48p
Market cap: £26.4m
52-week high/low: 48p/44.5p

A gem from Africa
Despite questions about how long the mining boom can last, scandals have so far been comparatively few. The bull case, based on new demand from China, India and other new economic powerhouses both for raw materials and baubles, remains plausible.

Diamonds face an increasingly tight supply/demand position. One company hoping to cash in is recent AIM float Xceldiam, which is prospecting for gems in gem-rich Angola.
Tim George, ex-De Beers diamond colossus, heads Xceldiam, which has a key stake in Angola’s Luangue prospect, near other exciting gem projects. At 48p, it could repay a high-risk flutter.

Christopher Spink
PHSC
Ticker: PHSC
Share price: 70p
Market cap: £6.9m
52-week high/low: 77.5p/65p

PHSC: safer prospects
Following my failed punt last year, when I thought troubled credit card producer ID Data was about to turn the corner, I have decided to abandon such recovery plays and am choosing a much safer prospect this time.

PHSC, a consultant specialising in health and safety advice, slipped quietly from OFEX onto AIM this July. This is a budding area and the group reported a £476,000 pre-tax profit in the year to March on turnover of £2.22 million.

Since then, another major acquisition of an asbestos specialist surveyor has been made, producing pre-tax profits of £333,000 from £1.5 million turnover in the ten months to February. The purchase has complementary clients to whom PHSC could cross-sell additional services. This suggests pre-tax profits could pass £1 million in the current year. At 70p, the company is worth just £6.9 million. That is too low for a profitable concern in this fast-expanding area.