Companies: HDD    HTP    LOQ    NFC    OSG   

Next Fifteen – the biggest tech PR in the States?
Led by chief executive Tim Dyson, public relations business Next Fifteen (NFC) has been international in focus for many years – as you might expect of a company servicing clients such as Microsoft, IBM, SunSystems, Cisco and Adobe. However, despite its global reach, it was something of a tiddler in the numerous territories it operated in outside the UK.

All of that changed last year when it purchased Outcast, a major force in technology public relations in the US. In one fell swoop the deal made NFC one of the major forces in technology PR across the pond. It then proceeded to augment its position in the UK by buying a 25 per cent stake in Lexis, a much respected ‘full-service’ communications group.

There has been much progress since the Autumn of 2005 – two more acquisitions were added and integrated and another 25 per cent of Lexis snapped-up – but the impact of its significant US footprint was writ large all over the accounts for the year to July 2006. On sales up 30 per cent to £56 million, headline profits soared 35 per cent to £4.4 million. As chairman Will Whitehorn explained, the US accounted for over half of sales and profits and there was ‘a strong flow of new business from companies such as eBay, Sprint Nextel, Sun Microsystems and Philips’.

With the company benefiting from good momentum, house broker Bridgewell forecasts a 26 per cent profits increase to £5.3 million this year, which should provide earnings of 6.5p a share. The forward p/e of 10.2 is too low.

Counterfeit gains
OpSec is a company with a lively and colourful history – which is not a compliment. It has had many false dawns, made many losses over the course of many years and has been through two re-brandings (it used to be known as Applied Optical Technologies, and then Applied Holographics before opting for OpSec). Like many a troubled fledgling venture, it has made the painful journey from the Official List to AIM.

However, last year was something of a watershed for the anti-counterfeiting group, as it not only arrested the slide in revenues, but also moved into the black at the pre-tax line, posting profits of £1.73 million on sales of £25.39 million.

That it is profitable is due a range of factors, one of the most important of which is that the Tyneside-based group has been making waves in the States. Its technology has traditionally been used by central banks and government agencies to help them protect currencies and other crucial documents from forgeries. However, it has now diversified into many areas and makes a good living supplying its increasingly hi-tech holograms and complex plastic patches to US basketball, baseball, gridiron and ice hockey league teams. The whizzy products basically allow these ventures to protect the intellectual property rights of their merchandise. In the pharmaceutical sector, the likes of Pfizer use them to protect the packaging of their drugs. Other customers include American Express, General Motors and Warner Brothers. To top it all off, OpSec completed the exciting £7 million acquisition of anti-counterfeiting and anti-diversion software play GenuOne ‘to meet the on-line and supply-chain environment needs of global brand owners.’

In tandem with the resurgence Stateside – which produces the lion’s share of turnover and profits – the UK arm has benefited from a timely restructuring, with costs slashed and an exit made from low margin areas of interest.

In a very welcome trading statement, management recently declared that the European operations ‘have performed very strongly and their profitability will be significantly ahead of the first half of the prior year.’

Analyst Mark Hudson at house broker Oriel admits he has ‘shredded’ his old estimates and ‘taken a stab at new numbers’. He had been expecting sales of around £26.3 million, profits of £2.3 million and earnings of circa 3.9p for the year to March 2007. He now sees a 25 per cent up-tick in earnings to 4.9p, meaning the shares trade for around 12 times this year’s earnings. They could reward a punt.

Hard sell in the US
Oxfordshire-based Hardide – whose patented coatings lengthen the life of engineering components – has not yet seen much share price action since it pulled in a modest £1.4 million at float in April last year. That could be because the company is still young and small, but it is growing fast and expects to triple sales to £2.5 million this year, according to new broker Daniel Stewart.

The excitement at this group is provided by Scottish chief executive Jim Murray-Smith’s decision to lead a charge into the heart of America’s oil industry by opening a plant in Houston in September. This is, of course, the world’s centre for oilfield equipment manufacturing.

Murray-Smith is sure that setting up in Houston ‘wedges our foot in the door of the biggest and most lucrative market in the world.’ His hope is that Hardide can develop and profit from the ‘huge amount of interest that has been shown in our technology.’ The other goal of the Houston move is to enhance and expand its services to current customers there, which provide 20 per cent of group sales. Twenty potential customers are currently at various stages of testing or discussions.

Away from the oil industry, Hardide hopes the coatings will find fame and favour in the defense and aerospace sectors, where they have many applications. There is already a contract in place with BAE Systems for the Eurofighter jet.

‘What we are doing is so far ahead of anyone else,’ boasts Murray-Smith, ‘that’s why multi-billion dollar multinationals are dealing with us.’ With the prospect of a number of significant deals to come though over the course of the next year or two – in the States and beyond – the 11p shares could reward a speculation.

Recruiting and Queuing
Elsewhere, electronic queuing group Lo-Q foresees a net profit this year after cutting interim losses by 70 per cent. The Berkshire-based group’s deal to install and operate its equipment at US theme park operator Six Flags has been extended and this autumn it is installing a pilot system at the Dollywood Theme Park in Tennessee, part-owned by buxom country and western star Dolly Parton. Down from 2002's £1 float to 18.25p now, the shares are only for those who like a bit of a rollercoaster ride.

Of those companies with partial interests in America, it is worth keeping an eye on resurgent recruiter Hat Pin, whose offices in San Francisco and New York helped it to a 148 per cent surge in interim sales to £6.2 million and pre-tax profits of £560,000 – against a restated profit of £658,000 for the whole of the previous year. A recent acquisition – funded by a well supported institutional placing – adds further spice to this stock. The City estimates a profit of £1.9 million and £3.5 million pre-tax profits for this year and the next.