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Pawnbroking rewards Albemarle & Bond

This pawnbroking, cheque-cashing and jewellery-retailing venture started life in 1986 with a single Bristol pawnbrokers. Through internal growth and strategic acquisition, helped by major funding in 1998, the company now flourishes and should continue to reward investors.

The Reading-headquartered outfit, chaired by Charles Nicolson, floated on AIM in September 1995 at 12p a share, and has been a consistently strong performer. The shares now stand at 112p, valuing the company at £53 million.

In February, Albemarle & Bond reported a 15 per cent improvement in pre-tax profits to £2.99 million for the half to December. This happened as turnover rose 6.7 per cent to £12.7 million. Earnings also sparkled up to 4.5p a share.

The biggest part of the business today is issuing loans against the security of gold jewellery and diamonds, but, as a result, Albemarle & Bond is also a major seller of second-hand and new gold jewellery.

During the half, pawnbroking income grew 11 per cent, income from cheque-cashing was lifted by seven per cent and income from pay day advances (known as micro-loans) edged up by five per cent.

The one downward trend was a one per cent drop off in retail sales but chairman Nicolson insisted this slight decline was 'more than compensated for by better margins'. There was also good progress made with Speedloan, the group's small, unsecured loan product.

During the half, Albemarle & Bond acquired one shop and the acquisitions of a further four will be completed shortly. On account of the group's continuing strong performance the interim payout was raised by 17 per cent to 1.35p.

New products help Flomerics

Like most software suppliers, electronics prototyping business Flomerics floundered badly when IT expenditure was purged in late 2000. However, unlike many, the company remained profitable. So it is surprising that – having achieved its best profit in four years of £671,000 last year – the shares have remained stubbornly flat.

Flomerics is approaching its tenth AIM anniversary with the wind behind it again, at last. Traditionally, designers of electronic equipment have used its software analytics tools to manage the thermal emissions of new products. Now, following lengthy development, the group also provides solutions for electromagnetic emissions and printed circuit board design.

As a result, Flomerics has more tools to sell to both new and existing customers – and the product suite has been further enhanced by April’s acquisition of Hungarian firm MicRed, a specialist in chip design, that is already profitable and counts the likes of IBM, Intel and Samsung among its customers.

Expectations are that this deal will be earnings-enhancing from the outset and will enable the company to build on progress already being made in the emerging electronics markets of China and India.

For the full year Adam Lawson from house broker Teather & Greenwood expects profits (before goodwill) of £955,000, on sales of £11.5 million. A year on he anticipates further rises to £1.4 million from £13.5 million respectively. At current levels Flomerics’ shares trade on a prospective p/e of 12.8 for 2005 and 8.6 in 2006.

Ten years into Flomerics’ AIM adventure, veteran chief executive and founder David Tatchell is poised to step down. For investors, however, his company’s story could be just beginning.

Crackers ignite International Greetings

Since floating on AIM in October 1995, greetings product designer and manufacturer International Greetings has gone from strength to strength. Turnover and profit growth have been consistent, underpinned by a series of acquisitions.

The company was founded by joint chief executive Anders Hedlund in 1979, principally manufacturing gift wrap. Fellow joint chief executive Nick Fisher joined a year later and, between them, they’ve overseen 11 acquisitions extending the product range from decorative accessories to children’s licensed stationery and bags.

The company’s most recent purchase, Napier Industries, will strengthen its Christmas cracker range, as it produces Tom Smith crackers. The acquisition cost £4.8 million but Napier made profits of £1.2 million last year and has assets of £3.7 million.

With a global presence in the US, the Far East and Eastern Europe, International Greetings is pushing Western European growth by adding a 400,000 sq ft factory for its Netherlands-based Hoomark business. But the company is also thriving through its exclusive licences to produce stationery for film giants 20th Century Fox and Disney, creating goods with branding from Barbie and The Incredibles to name but two.

House broker Arden Partners forecasts that pre-tax profits for the year to March will increase £2.2 million, or 18.2 per cent, to £14.3 million, rising to £15.5 million in 2006. The resultant earnings per share of 25.8p serves up a reasonable prospective p/e of 15.3. While the share price might have grown from 50p in 1995 to a current 395p, there’s still plenty of mileage left in the stock.

Lawrence transforms prospects

Peter Lawrence has transformed the business that he brought to AIM a decade ago. Back then the company principally supplied products to pet shops, such as cat litter, which Lawrence, chairman and largest shareholder in his eponymous enterprise, had himself introduced into the UK.

This division was finally sold last year, leaving the group to focus on developing animal drugs and feed. Lawrence’s major achievement was securing EU approval for pig pneumonia treatment Aivlosin in May 2004. This rigorous process took ten years but was vindicated by US giant Schering-Plough agreeing to distribute the drug throughout Europe.

Lawrence reckons the commercial benefits will be substantial, as few new drugs now look likely to be accepted by the authorities because of the sensitivity of introducing chemicals into the food chain.

Interims to last September show little progress – initial sales of Aivlosin were only made after that period. And it was not until October that Lawrence bought out its joint venture partner in the drug development business – set up to produce and register generic rivals to best-selling animal drugs as they come off patent – for £21 million in cash and shares.

Now Lawrence wants to register Aivlosin in the US. This will enable it to benefit from its full sales potential, estimated at $200 million annually. The group’s shares have more than trebled over the past three years at the prospect of Lawrence focusing on such higher margin products.

House broker Charles Stanley predicts that by the year to March 2006, when the transformed group will be purely focused on animal drugs, Lawrence will make a £5.9 million pre-tax profit, or 12.7p earnings per share. That gives a p/e of 26.9, reflecting the premium investors need to pay for such excellent growth prospects.

Maclellan still appealing

This group began its AIM life as Baris, a supplier of, amongst other things, suspended ceilings to the construction industry. After a few deals, all of them masterminded by small company supremo Bob Morton, it had morphed into Jordec, which specialised in decommissioning nuclear power stations.

In 1999 it began a strategic move away from a reliance on its nuclear work by buying Checkclean for £2.15 million. The main deal though was a year later, when facilities management group Maclellan reversed into Jordec in a £15.4 million deal.

Since then it has continued on the acquisition trail, snapping up all manner of cleaning, building and grounds maintenance enterprises – ten to be exact – to create a venture which, at the last juncture, delivered pre-exceptional, pre-tax profits of £6.7 million on sales of £190.3 million. Cash inflow for 2004 was £8.9 million and the order book by March this year had burgeoned to over £622 million.

There have been a few mishaps along the way – most recently to do with unexpected restructuring costs – while a failed bid earlier this year dampened investor enthusiasm further.

But under chief executive John Foley and Channel Islands resident Morton, it is highly likely that its rating will recover (the bulk of this year’s revenues is already secured) and that further corporate actions will be launched sooner rather than later.

2005 sales should hit £238 million and profits tumble in at almost £9 million, with earnings expected to rise to 5.94p.

Blips blunt NWF

Chief executive Graham Scott runs Nantwich-based NWF Group, which floated on AIM in September 1995 at 285p, as a traditional conglomerate, with different divisions subject, it is hoped, to different cycles and thus able to smooth out profits performance. The company has four divisions – animal feed manufacture, grocery, garden centres and oil distribution – and claims to have achieved double-digit compound average growth for the past seven years.

In fact, this has been an uneven progression. In the year to January 2004, pre-tax profit rose only 2.4 per cent to £5.17 million and in the six months to last November profits fell 36 per cent to £963,000 pre-tax on interim turnover 21 per cent ahead at £108.6 million.

NWF, where longstanding investor Fjarfestingarfelagio Atorka (an Icelandic investment group) holds 11.2 per cent of the shares, says first-half profits were hit by start-up costs for a new 19,000-pallet warehouse in Chester in the distribution division and the impact of poor summer weather on garden centres. Animal feeds increased its market share and fuels increased volumes by 12 per cent.

The company, which recently sold six country stores and bought Victoria Garden Centre in Yorkshire, warned the other day that full-year profits would be ‘slightly lower than expected’, in the light of high fuel prices, rising labour costs and a late start to spring trading at the garden centres.

House broker Charles Stanley has reduced its current full-year profits forecast to £4.5 million pre-tax. The shares, which topped £7 earlier this year, now trade at 562.5p and have scope for recovery.