Hybridan Smallcap Wrap featuring Alliance Pharma and Brainjuicer

This week: A pharma aspirin’ for greater things, a marketing group with digital brainpower and no stain no gain for a dry cleaning outfit.

Alliance Pharma plc (APH 16.8 p / £27.1m)

The specialty pharmaceutical company issued a pre-close trading update this week. Trading has been strong with half year sales in the region of £13.2m, an increase of 33% over the first half of last year. The margins have improved and profits are expected to be not less than £2.7m. Alliance Pharma’s shares have increased five-fold this year. Independent research house, Hardman & Co, has upgraded its FY09 sales and profits forecasts to £26.9m and £5.3m respectively (previously £25.1m and £4.1m). Alliance Pharma has its own brand of aspirin, a range of emollients and other Over the Counter products that can be found on pharmacy shelves. Alliance Pharma gave the markets every hope that its share price would continue to do well; certainly the last ten days have seen a good rise in its share price (+30%), perhaps one where investors and company are truly “Allied”, particularly with a dividend payment promised for 2010.

Bglobal plc (BGBL 16.3 p / £12.8m)

The market-leading provider of smart metering services to the UK energy market, this week said it has secured a substantial new source of meter asset funding from Barclays which has made up to £15m of funds available to provide ongoing lease finance arrangements to customers buying Bglobal's innovative smart meter services. A lack of available funds to drive forward Bglobal's smart meter installation programme has held the company back, but we now fully expect it to go on to “be global” at some point, although this boost from Barclay’s should enable them to crack the UK at least. Separately on 6th July, BGlobal announced its new Energy Counts campaign for business customers seeking to comply with the government directives on carbon reduction. Don’t forget, the government has stated it wants all energy meters in the UK to be swapped for new smart devices by 2020; this is a massive opportunity for BGlobal and with the asset financing in place, what is there to hold them back?

Brainjuicer Group plc (BJU 130.0p/£16.8m)

Brainjuicer, the group that ‘juices’ the ‘brains’ of its in-house analysts to come up with innovative marketing ideas, has seen revenue growth of 22 per cent for the six months to 30 June. The company has an unusual approach, as its techniques focus on consumers as emotional, rather than purely rational, beings. And while this may seem a rather airy-fairy idea in our practical society, it’s certainly proving popular with makers of consumer goods. Small wonder, then, that Unilever is a 38 per cent shareholder. Revenue growth is, however, down from 42 per cent in the 2008 financial year, reflecting a tougher economic climate. But the group has a healthy £1.2m of net cash and its more `innovative ‘juicy’ products now comprise 54 per cent of turnover, up from 47 per cent in 2008. And these products are typically higher margin.

Digital Marketing Group plc (DIGI 39.0p/£26.3m)

Digital Marketing Group released a robust set of results for the year to 31 March 2009 with gross profits increasing by 13% and profits before tax by 19%. These results reflect the structural trends favouring digital media, but are also down to the relative defensiveness of digital marketing. This resilience is in turn due to several factors: digital marketing is more measurable than more traditional forms of advertising and marketing; it offers greater opportunity to capture data; and campaigns can be adapted at short notice. Despite this, trading at DMG became tougher in the second half, with slower client decision-making and reduced visibility – and management does not expect an improvement in the first half of the 2010 financial year. DMG has also announced the launch of Digital Brain: Search. This switched-on service takes into account the entire series of clicks online users make in order to go from initial search to actual purchase, enabling marketers to target consumers at several points along that journey. Similarly DMG announced the launch of DemographDMG, which applies insights into consumer psychology to digital marketing. The group undoubtedly faces a tough economic environment, but it has borrowing headroom, operates in an attractive niche and has applied its analogue brains to creating some innovative new services. As such, DMG looks well positioned not just to make it through the recession, but to prosper thereafter.

EPE Special Opportunities plc (ESO 26.0p/£6.9m)

EPE, the specialist investor in distressed and insolvent companies, has announced its latest net asset value per share of 72.7 p. This compares with the current share price of 26p and so must be seen as an attractive buying opportunity. The portfolio includes the specialist tea retailer Whittard of Chelsea, which was acquired out of administration in December 2008, and Autocue, the manufacturer of teleprompting tools used by broadcasters. In addition to the existing portfolio EPE raised £5m of new money last month to take advantage of opportunities to pick up bust business in the current recession. As EPE is the only private equity investor focussed solely on distressed assets that is quoted on a UK stock exchange we think there’s every chance it could go from bust to boom.

European Nickel plc (ENK 7.0p/£34.0m)

Two weeks ago we reported that European Nickel appeared to be edging closer to securing project finance for its flagship nickel laterite heap leach operation in Turkey. Well, we are delighted to see that progress continues apace. The Company announced this week the termination of an off-take agreement with BHP Billiton in relation to half of the output from the project and a new off-take agreement with their Chinese partner to take all of the output. The significance of this may not be immediately clear but we understand from management that as their Chinese partner will now take all the output the project now qualifies for Chinese state support thus ensuring Chinese bank project finance. This is a significant milestone and the company continues to remain on track to secure project finance this year. With the oft elusive funding package now coming together we continue to see great upside.

HML Holdings plc (HML 13.5p/£4.3m)

Two weeks ago we reported on the record results released by property management services company HML Holdings when the share price was 10p. This week, the CEO, Robert Plumb has snapped up 22,500 shares at 11.6p driving the share price up 15% to a nine month high of 11.5p.

Innovision Research & Technology plc (INN 23.0 p / £14.2m)

It pays to play tag. Having won three major contracts for its Near Field Communications (NFC) technology with some of the largest global semiconductor companies in the last few months, there is little doubt that Innovision’s technology is both market leading and at the stage where it is about to be implemented rapidly into a large number of mass market consumer applications. If there was ever a right time to seize the opportunity, this is it. Innovision has raised £5.4 million in order to increase its ability to win and deliver additional major contracts. As more and more handsets are enabled with Innovision’s NFC technology, the company will benefit from potentially large royalty streams. The market for tags could be huge with applications for contactless cards in ticketing, payments and loyalty schemes, smart posters, business cards, music downloads, easy pairing of devices and other peer-to-peer connectivity solutions no-one has thought of yet. Existing shareholders may balk at the non pre-emptive, heavily discounted placing that is conditional upon a number of approvals. Nevertheless, the company will probably never look back after this.

Johnson Service Group plc (JSG 13.5 p / £33.7m)

The dry cleaning group issued an upbeat pre-close statement this week. Overall trading conditions in the first half of the year are in line with expectations and the company hinted that it had a strong platform for growth in 2010.    Johnson remains confident of achieving a satisfactory result for 2009 as it has won a number of contracts which will impact the second half of the year positively. You could say the company is leaving no stain unturned.

Plant Impact plc (PIM 30.0 p / £10.0m)*

The developer of plant stress management technologies, continues to make an impact and last week announced a placing to raise £1.46m. The company will use the proceeds to finance further development and testing of its range of nutrient products to provide further evidence of efficacy, thereby improving its commercial prospects. Blue chip institutional investors, such as Gartmore and Blackrock, supported the fund raise, and new investors participated also. We believe that Plant Impact has some potentially
disruptive technologies which could contribute to easing emerging agricultural sustainability issues and which have access to the large and growing fertiliser & agro- chemical markets - worth an estimated $111bn in 2008. Any weakness in the Company's share price should only be seen as a buying opportunity. Great to see this one raise some monies, which should help it reap what it grows.

Toledo Mining plc (TMC 34.0 p / £10.0m)

When the going gets tough, the tough get fundraising. To have shareholders who support you when you need them is worth a lot of, err, nickel. Toledo, which has interest in several large nickel laterite projects in the Philippines, has raised £3.3 million of which one third is from the largest existing shareholder Daintree Resources. We assume the other major shareholder European Nickel did not participate as they focus on developing their operations at C?aldag in Turkey.    However, a new large owner is the Kostyantin Zhevago controlled Fevamotinico with a ten per cent holding. After the company had to suspend mining and shipping activities last year due to lower demand and prices, this funding comes as a relief and opportunity for the company to pursue short term and long term goals.

It has always been Toledo’s strategy to retain more value by processing the ore themselves, and part of this funding will finance a drilling campaign to prove a sufficient resource at the Berong project. Other funds will be used to meet conditions necessary to start direct ore shipping operations at the Ipilan project. Whilst this placing took place earlier than management had previously indicated, it provides resources to move ahead with projects during uncertain times. It is also a sign of increased belief by investors in Chinese demand for commodities.

*A Corporate client of Hybridan LLP