Hybridan's Small Cap Wrap

This article is an edited extract from a non-independent research note issued by Hybridan.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Alliance Pharma (APH) [31.75p/£76.01 million]

The specialty pharmaceutical company provided a pre-close trading update for the year ending 31 December 2011.

In line with market expectations, turnover is expected to be in the region of £46 million for the period, with sales of the company's Hydromol and ImmuCyst products continuing to grow well. Deltacortril however saw increased competition during the period and in particular by the market's move towards uncoated tablets, with sales for the period of £4.7 million. Nu-Seals sales were up 14% on the prior year, but there is a cautious outlook for the year ahead given the Irish government is looking at measures to reduce its spend on medications.

The company believes that cost-saving and efficiency measures that are being implemented, together with acquisitions made during the period (Quinoderm™, Ceanel™, Anbesol™, Ashton & Parsons™ and six products from Beacon Pharmaceuticals), should help counter some of the tough trading conditions out there.

Anglesey Mining (AYM) [28.5p/£45.08 million]

Iron ore miner Anglesey announced it has recommenced diamond drilling at Parys Mountain (100% owned by Anglesey) which is a copper-zinc-lead project with historical resources currently in excess of seven million tonnes at over 9% combined metal.

The initial stage of the drill programme is for the drilling of four holes, the first of which has commenced and has a target depth of 220 to 250 metres, and in total all four will provide a depth of 800 metres. The programme is designed to identify the extent of near-surface locations of the Engine Zone mineralisation.

A further six to eight holes may be drilled depending on initial results, and the results are expected to contribute to an overall review of the mining and production options for the company.

Anglesey also provided preliminary operating results for the 33%-owned James direct shipping (DSO) iron ore project near Schefferville, Quebec (through Labrador Iron Mines Holdings). A total of 1.2 million tonnes of ore was mined and trucked to the Silver Yards area ahead of processing or transport to port to the end of December 2011, with 599,467 wet tonnes being hauled to the port of Sept-Iles, and of which 411,987 wet tonnes were sold to Iron Ore company (IOC) and shipped to China.

Planned total ore mined is expected to be between 2.5 to 3.0 million tonnes in calendar year 2012.

Beowulf Mining (BEM) [12.25p/£25.78 million]

Mineral exploration company Beowulf, which owns several exploration projects in Sweden, noted that while the relevant landowners have consented, objections have been raised by the local Saami community, which is seeking to delay the company's new drilling campaign to May 2012 due to seasonal reindeer herding.

Accordingly, drilling operations at both Kallak North and Kallak South will remain suspended pending completion of the company's ongoing consultation process with the community and the Mining Inspector, seeking to resolve the objections that have been raised.

The company also announced that the resolutions proposed at the general meeting held on Friday 13 January 2012 were all duly approved by shareholders.

Biome Technologies (BIOM) [0.16p/£9.12 million]

Biome Technologies announced that its Stanelco RF Technologies division has signed a contract with Durapipe UK to develop a new and innovative portable induction welding system.

This welding device will work with Durapipe's new plastic pipe system, which contains a steel layer and consequently allows induction heating technology to be used. The welding equipment, developed by Stanelco RF, will allow installers in the field to join pipes and fittings quickly, cleanly and without the use of adhesives.

The development contract is expected to lead to a multi-year manufacture and supply contract with Stanelco RF Technologies, with first deliveries of the equipment expected to commence in early 2013. Biome anticipates this project will generate revenues in excess of £2 million over a three to four-year period.

Centaur Media (CAU) [35.25p/£50 million]

The business information and events company is expected to report underlying year-on-year revenue growth of 4% in the six months to December 2011.

Digital revenues continued to be the primary driver of growth, while print revenues were broadly flat. In the same period, EBITDA margins increased from 4.5% to 6.5%, reflecting the benefits of restructuring and the impact of the disposals completed.

The company also completed two acquisitions, of IPL and VBR, in the first half of the financial year for a total initial consideration of £4.3 million. Taking both these transactions into account, net debt at 31 December was £5.5 million.

Centaur's earnings and cash flows are heavily weighted towards the second half of the financial year and the management expects to be cash positive by 30 June 2012.

Cosalt (CSLT) [0.3p/£1.21 million]

Further to Oval's offer for the issued share capital of Cosalt being declared wholly unconditional on 9 January 2012, the board of Cosalt confirmed it has agreed revised arrangements for the provision of borrowing facilities to the company by Oval.

The board also confirmed that Ken Murray, Maurice White and Yarom Ophir resigned as non-executive directors with effect from 9 January 2011. The board now comprises non-executive chairman David Ross and chief executive officer Trevor Sands.

Forbidden Technologies (FBT) [36p/£31.17 million]

Forbidden Technologies, the developer of a Cloud video platform for the social media world, provided a trading update for the year ended 31 December 2011.

Operating in four segments, the company has made good progress, with double digit-percentage sales growth and an expansion in the visible sales pipeline for 2012.

In episodic television, the company is scaling up by signing up Post Houses to act as channels to market, making FORscene available to their production company clients - first-half 2011 sales in broadcast post increased by 94% and continued to increase through the year.

Real time use, including news and sport, has seen major partners signed for both in 2011, whilst large scale video systems (as delivered by Systems Integrators) although seeing slower progress than expected, has large potential scale at marginal cost to the company.

A fourth segment, video for the consumer and the social media world, is expected to make progress through the Canadian distributor, Formidable Technologies (though this has not come through in results yet).

In December, the company announced an important licensing deal with YouTube, which is expected to make a significant contribution to the results for 2012 and creates a good opportunity ahead.

Galileo Resources (GLR) [40p/£30.22 million]

The board of Galileo Resources, the emerging African rare earth exploration company, announced further positive drilling results from the latest two boreholes, GVH005 and GVH006, drilled on its Glenover rare earths joint venture project, north of Thabazimbi in the Limpopo Province of South Africa.

The results confirm the good REO mineralisation reported in November and December for the project's first four boreholes. A further 15 boreholes (GVH007 to GVH021) have been drilled - around the old open pit - which completes the drilling programme. Six of the 15 boreholes have been logged and samples sent for analysis.

Immunodiagnostic Systems Holdings (IDH) [420p/£119.29 million]

Immunodiagnostic Systems, a leading producer of diagnostic testing kits and automated systems for the clinical and research markets, announced the appointment of Gerard Murray as finance director of the company with effect from 1 April 2012. This follows on from Paul Hailes's decision to stand down on 31 March 2012 and his move within the group to its North American operations.

Late last year the company reported positive interims for the six months to September 2011 (revenue was up 21%, and pre-tax profit up by 17%), though it also saw that the impending introduction of competing automated products was coinciding with efforts to contain health budgets, particularly in the US - increasing pricing pressure - and some disruption to equipment ordering patterns was taking place.

Despite this the company continues to believe overall prospects are good and the appointment of Murray, together with the internal move of Hailes demonstrates the structural strengthening that is taking place to help bolster the company.

Landkom International () [2.62p/£11.42 million]

The AIM-listed Ukrainian producer of agriculture commodities provided an update to shareholders on the recommended acquisition by Alpcot Agro AB.

Alpcot shareholders approved the acquisition and authorised the issue of new shares and other matters at an extraordinary general meeting in Stockholm, which the Landkom board believes will now secure a transaction by the end of January and recommends its own shareholders to vote in favour of the acquisition.

Motive TV (MTV) [0.14p/£3.84 million]

MTV provided a trading update for the year ended 31 December 2011 in which it announced it expects results to be broadly in line with market expectations.

Though the company provided no numerical expectations, it has gained some success in gaining recognition of its product range in the video industry in both Europe and the Americas. A number of pilots, market tests and technical trials are underway or starting in the first quarter of 2012, and while Europe remains sluggish due to the financial crisis, the company is confident about closing sales that have already commenced.

Furthermore, the company continues to explore opportunities in Asia and South America - markets which it feels have been somewhat insulated from the downturn.

The company also announced the award of three grants totalling £205,000 towards the costs of three sports documentaries for Setanta Sports, and that it had signed an agreement with Digital Media Europe to pursue opportunities in the licensing and deployment of Motive's Video2Go technology (designed to enable brand owners to deliver self-created, self-owned, advertising-based content direct to a customers' mobile device in vertical markets) in markets outside the television industry.

Plexus Holdings (POS) [88.5p/£70.96 million]

Plexus Holdings, the oil and gas engineering services business, announced it has conducted a placing at a price of 78p per share, with an aggregate value of approximately £6.2 million before expenses.

The company also announced it has received £260,000 funding from Maersk Oil North Sea UK towards the company's 20,000 psi High Pressure/High Temperature (HP/HT) Mudline Tieback wellhead system joint industry project development programme. Testing and manufacturing of the prototype is underway, with assembly scheduled for the third quarter of this financial year, and final deployment and commercialisation is targeted for mid-2012.

The Tieback system design will allow HP/HT exploration wells and pre-drilled production wells to be converted into either subsea or platform producing wells. These wells, which have an estimated cost of between £50 million and £300 million, are currently abandoned after drilling and to date there is no other technology in the market which can 'save' or 'convert' such wells.

In addition, the HP/HT Mudline Tieback technology has the potential to shorten the development cycle of an oil and gas field by several years and in turn provide further substantial financial benefits, as it would allow the pre-drilling of production wells to commence before a production platform is put in place.

Plexus's chairman, Robert Adair, has notified the company that he will be retiring as a director and chairman with effect from no later than 30 June 2012, and is therefore now selling his interests in Plexus totalling 3,505,425 existing ordinary shares as part of the placing. Shareholders should note that the process to select and appoint a new chairman is underway and the board expects to announce further details in due course.

Rockhopper Exploration (RKH) [275p/£781.43 million]

Rockhopper Exploration, the North Falkland Basin oil and gas exploration company, was the subject of weekend press rumours that the company is in talks with oil and gas giants Cairn Energy (CNE). The Sunday Times newspaper, which did not cite sources, suggested that Cairn is considering a move into the Falklands area which could involve a partnership with or the acquisition of Rockhopper.

Cairn is sitting on a $1.4 billion (£0.9 billion) cash pile since selling its 40% stake in Cairn India to Vedanta Resources (VED). Interest in the Falklands has heightened since Rockhopper's successful development of its Sea Lion complex there.

Symphony Environment (SYM) [5.25p/£6.71 million]

The specialist advanced plastics technologies company provided a trading update for the 12 months ending 31 December 2011.

Revenues for the period to 31 December 2011 are expected to be in line with the prior year (2010: £8.5 million), with volumes of the main product, d2w, growing by approximately 10% despite some reductions in the European markets.

Finished products sales continue to decrease as planned, as the sales effort focused on d2w, d2p and d2detector product lines. Sales in the final quarter were strong as global demand outside of Europe started to pick up following a quieter period of consolidation. In several territories sales were unexpectedly delayed due to initiation issues which now appear to be resolving.

Symphony's main contracts remain secure for 2012, with indications for potential for further growth. It also has a number of important product trials in place, and negotiations are ongoing with several firms. The markets for its brands are indicating strong potential demand as a result of some positive changes in legislation, as well as more corporate interest in environmental, sustainability and health issues.

Victoria (VCP) [340p/£23.61 million]

Victoria, a leading quality flooring supplier in the UK and Australasia, has become the subject of a very public battle between management and rebel shareholders.

The carpet maker features in our companies and markets editor Richard Beddard's Thrifty 30 portfolio, and was one of his 10 top shares for 2012.

The company declined the request of certain shareholders to change the non-executive directors and announced last week it had put itself up for sale. The rebel shareholders, led by Alexander Anton and New Fortress Finance, then issued a formal demand to the company requiring it to convene a general meeting to replace the board adding it "was very concerned that the request to our response has been to put the company for sale".

The company responded by challenging the validity of the requisition to require the convening of the general meeting. The rebel shareholders assert that they speak for approximately 46% of the issued share capital, so this dispute looks set to run.

*A corporate client of Hybridan LLP

The Hybridan Small Cap Wrap is a weekly review of some of the most interesting small cap stories of the past week. Our review will usually be of those companies whose market capitalisations are less than £50 million although we may occasionally cover larger companies. Our review is not intended to constitute research and is not to be taken as investment advice.

A non-independent research note:

(a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and

(b) is not subject to any prohibition on dealing ahead of the dissemination of investment research (although Hybridan does impose restrictions on personal account dealing in the run up to publishing research as set out in their Conflicts of Interest Policy).

The individuals who prepared this document may be involved in providing other financial services to the company or companies referenced in this document or to other companies who might be said to be competitors of the company or companies referenced in this document. As a result, both Hybridan LLP and the individual partners and/or employees who prepared this document may have responsibilities that conflict with the interests of the persons who receive this document.

It was not originally intended to be distributed to Retail Customers, and is included here for information and discussion purposes only. It does not form a recommendation to invest or otherwise. It is intended as a weekly review of some of the most interesting small cap stories of the past week. The content will usually review companies whose market capitalisations are less than £50 million although we may occasionally cover larger companies.

Our review is not intended to constitute research and is not to be taken as investment advice.