Saucy Stocks

Suggestions that Remnant Media, an 'adult' publishing company spun out of Richard Desmond's porn empire, might list on Aim has raised many city eyebrows. But, if it floats, it will be just one of an array of companies selling sex products and cures, or explicitly using marketing erotica. James Crux reports

The announcement that Remnant Media, the venture that bought 45 'adult' titles from Richard Desmond in a £20 million deal, hoped to become the first pornography company to list in London caused something of a stir in the rather refined confines of the Square Mile.

The group, which used financing from the Bank of Ireland to complete the acquisition of its publications from Desmond, has apparently already raised further expansion funds – £1.5 million has been mooted – with the help of innovative small cap broker Hoodless Brennan. An announcement regarding its listing on Aim, or elsewhere, is expected imminently.

Not entirely new

If it does list on Europe's leading growth market, however, many seasoned investors will hardly bat an eyelid for the simple reason that it will join the ranks of those involved, in one way or another, in the saucy sex sector.

For instance, SKY and Telewest have been offering a generous range of adult television channels for viewers to plug into for many years.

In the telecoms sector MonsterMob and Stream, two innovative mobile phone content groups, already supply ranges of adult and saucy images for punters to download onto their mobile phones.

This hasn't stopped both winning City fans. Business at Stream, in particular, is roaring. The group actually supplies a comprehensive range of live media services to fixed-line and mobile phones and produces all manner of niche products from ringtones and sports results, to psychic and astrological phone updates.

Last year business soared with mobile revenues alone leaping 117% to £3.9 million. Even more significantly in terms of how 2004 pans out, the board said that the German, Spanish and Australian divisions were approaching profitability. The forecast in the market is for profits of £1.7 million on sales of £12.5 million putting the group on a p/e of 18.

Futura's lubrication hopes

In other areas, the focus isn't on titillation or gratification, but on cures. For instance, Futura Medical, a venture that could make immature journalists and analysts blush come presentation time, is a well-funded firm with intriguing products and prospects. The Guildford-based Aim firm develops products combating sexual dysfunction in both men and women, and mainly works on 'over the counter' products. These could prove lucrative as they allow bashful souls to seek remedies to their problems without the need to reveal their problems, in person, to a doctor or nurse.

Its products include MED2001, a treatment for erectile dysfunction that is being 'tweaked' ahead of phase three trials; condom safety device CSD500; and FLD 500, a female lubrication device.

In some welcome recent news, Futura announced completion of the pilot stage of a clinical trial for FLD 500, which is aimed at female partners of male condom users. Quite simply, the product helps women maintain lubrication during sex, cutting back the risk of a condom splitting.

James Barder, chief executive, recently raised £1.75 million at 82p through a joint placing to sate demand from institutional investors. They had taken a liking to its 2003 figures. In the eleven months to 31 December, the group kept pre-tax losses down to £1.46 million. The new money strengthened Futura's negotiating power – acting as a bulwark against potential distributors looking to put the squeeze on.

CST might limber up soon

Futura recently denied an interest in taking over female sexual healthcare and wellbeing brands business CST Medical, which is fronted by renowned female inventor Liz Paul and plans an Aim float later this year. The first product marketed under its Vielle brand, the Vielle Stimulator, has been on sale in Boots since May 2003. This device aims to help women re-invigorate their sex lives, and both the Vielle Stimulator and the Vielle Lubricant, which went on sale this February, are topping sales expectations in Boots across the UK and in Eire.

Not so erotic, but potentially very lucrative, are CST's two new products. The first is a device treating stress incontinence, which affects about six million women in the UK. Halifax-based design agency Blueprint Development has the products' IP rights and manufacturing tools, whilst CST will market it globally through major pharmacies.

The second new product is the first 'home test kit' for the menopause. Managing director Colin Kemp is delighted with the expanding product range and the deal with Blueprint, and says 'we'll be able to pursue our plans for an AIM flotation in the later stages of 2004'.

Sexy valuations at Theo Fennell

While not in the sex trade, we are fans of another venture whose website and marketing marterial have head turning qualities, namely Theo Fennell.

Log on to the website of this bijoux jewellery venture (www.theofennell.com) and what you'll discover is a very tasteful, but certainly sex-oriented, sales and marketing tool.

The Aim-quoted jeweller's pieces are worn by some of the world's most stylish people – and collections like 'Strip' and 'Shaft' have bought Fennell a wide and chic fan base.

In December, the company showed it was regaining its sparkle in the first full year for its new management team. Interim figures to September showed turnover increasing by 26 per cent to £7.5 million, with operating losses reducing from £300,000 to £98,000. At the pre-tax line, the loss was halved from £329,781 to £152,428.

For the year to end-March, forecasts in the market suggest profits of £400,000 pre-tax, giving earnings of 1.6p. These earnings should rise to £750,000 and 2.9p for 2005. At the current 22.5p (against 52-week peaks and troughs of 31p and 17p), the shares look good value, trading as they do on a forward multiple of 14.1 times, falling to just 7.8 times next year.