‘We were a tiny fish on the main market,’ says Neville Davis, chief executive of Compel, the £34.25 million IT counter that moved down from the Full List last month. The group struggled to make a name for itself there, despite being an established business and a leading provider of Oracle solutions, serving behemoths such as BT and Cable & Wireless. ‘We’ve actually been listed since 1994… and we’ve been profitable for some time.’ What’s more, the Stevenage-based group actually dominates the UK IT equipment rental market through Hamilton Rentals (one of their more high-profile jobs is running the servers for the BBC’s election night ‘swing-o-meter’ programme).

As well as being more suitable in terms of the group’s size, AIM will enable Compel, which has made four acquisitions over the past three years, to buy businesses far more cost effectively.

Davis doesn’t over-hype prospects – he prefers to deliver and let the numbers do the talking. However, he did point out that market conditions in the areas of the IT industry in which Compel operates are positive, with solutions that encompass software and technology from firms such as Oracle claiming a rising share of IT budget spend.

While not the biggest fan of this sector, I like Compel for a number of reasons. Its market-leading positions are enabling it to grow ahead of the sector, which Davis says has returned to sensible and sustainable growth (Compel will directly benefit from increased take-up of Oracle applications suites), and its low rating fails to reflect past performance or prospects.

For June 2007, analysts envisage a rise in pre-tax profits from £3.7 million to £4.2 million, producing earnings of 8.7p. The 11.6 forward p/e for the 101p shares is too meagre. Plus it has £5.5 million cash.

Intelek an intelligent speculation
Intelek, a £12.7 million technology minnow now focused on the satellite end of the wireless communications market, moves to AIM this month. Like migratory predecessors, the company, which designs electronic systems for satellite communication, believes the lighter regulatory touch will allow it to execute transactions (acquisitions or disposals) more speedily and cheaply.

Interims to September showed a marked improvement, with the top line lifted from £16.8 million to £18.4 million and underlying profits perking up 28 per cent to £1.02 million.

Paradise Datacom, a subsidiary designer of satellite modems and amplifiers, enjoyed a 60 per cent plus rise in operating profits, with its amplifier range thriving in a buoyant US government sector. Composite components business CML also did well, enjoying steady sales and operating profits growth.

Overall, the results were pegged back by trickier trading at Labtech, a maker of high-end microwave components. It moved into the red on lower sales, largely due to a drop in older volume programmes and margin pressure from rising raw material costs.

Analyst Jon Lienard at Brewin Dolphin thinks things are moving in the right direction – he nudged his numbers for 2007 and 2008 northwards. He argues profits could track as high as £2.13 million this year, giving earnings of 1.68p and a forward rating for the 14.5p shares of only 8.6, dropping to 7.8 the following year.

Small businesses carry risk, and this one has a colourful history. Nevertheless, there’s plenty of growth potential in the group’s high-tech communications divisions, orders are improving and bolder punters could profit.