Companies: MTW �� POL �� PRV �� RGO �� SPI �� TSTL ��

Pensions consultancy play Mattioli Woods certainly delivered the goods for investors at the interim stage to November, with its half-time numbers prompting profit upgrades from City analysts. Originally backed here at 211p, Mattioli Woods provides bespoke pensions consultancy, mainly for self-invested personal pensions (SIPPs) and small self-administered pension schemes (SSASs), as well as additional financial advice such as estate planning.

The figures revealed a rise in revenues from �4 million to �4.3 million, driven by strong ‘time-costed’ fees and investment income, with pre-tax profits jumping from �1 million to �1.6 million. Operating margins grew strongly, from 27.2 per cent to 35.1 per cent, as management kept a tight reign on costs and the business began to enjoy the benefits of scale.

Mattioli Woods is reaping the benefits of disenchantment with traditional insurance company pension products, which has meant investors are demanding more control over their own pensions. Furthermore, the pensions market is expanding, with the recent A-Day legislation making SIPPs more attractive to high net worth individuals.

Evolution Securities’ Adrian Kearsey says: ‘Mattioli Woods is on track to deliver at least 20 per cent growth in full-year pre-tax profits.’ For the year to May, he predicts a rise from �2.2 million to �2.8 million (a forecast upgraded from �2.7 million) from a top-line �8.6 million (�7.6 million). Earnings of 11.5p leave the 253.5p shares trading on lofty-looking forward multiples of 22 and 18.5 this year and next after a strong run.

Nevertheless, we think there’s plenty of upside. Scope for further upgrades and longer-term bid prospects for this fast-growing niche player sweeten the appeal. Add.

Tristel continues to clean-up

Another company delivering at the interim period was fast-growing infection and contamination control counter Tristel. It delivered a 23.5 per cent surge in profits for the half to December as turnover burgeoned by 44 per cent to �2.57 million.

Growth within the core business of supplying instrument sterilants to UK businesses was steady, with much of the improvement resulting from the June 2006 acquisition of Vernagene Ltd (now renamed Tristel Technologies), a legionella contamination control venture. Profits at the pre-tax line sparked up from �327,000 to �400,000, driving earnings 15.5 per cent higher to 1.19p and allowing for a 27 per cent dividend hike to 0.35p.

The Vernagene deal, as well as the launch of new products, has broadened the product portfolio, better insulating the business from any downturn in NHS spending. Furthermore, the acquisition has taken Tristel into the control of legionella (a waterborne pathogen) in hospitals as well as into contamination control within the food growing and processing industries. Chief executive Paul Swinney insists new products will ensure growth in the second half and beyond, among them products for ultrasound departments, ‘burstable’ sachets and the single-use tray.

Another key development was news that the manufacture of all group products is going to be transferred to a new production facility in Newmarket. Bringing manufacturing in-house has the potential to lift gross margins (as well as June 2008 forecasts) once the facility is fully operational in May.

This year, analysts are looking for strong pre-tax profits growth to �1.06 million from turnover of �5.15 million, giving 47 per cent earnings growth to 3.1p, ahead of �1.5 million profits and 42 per cent EPS growth to 4.4p for 2008. Those growth rates leave the current forward p/e ratio of 19.2 (based on the current 59.5p share price) looking rather miserly, and investors who followed our advice and bought the shares at 60.5p in late 2005 should consider adding to existing holdings.

Support service star pulls in �20 million

Spice Holdings, the utility sector outsourcing star tipped here at 197.5p in early 2005, has lured an impressive �20 million from investors in a placing that should boost liquidity as well as bring down bank debt built up through acquisitions over the past 18 months and provide the financial headroom for further earnings-enhancing deals. Raised with the help of broker KBC Peel Hunt, the placing at a discounted 500p will have a neutral effect on earnings for the years to April 2007 and 2008 thanks to Spice’s strong trading and cross-selling characteristics.

Chief executive Simon Rigby said he remained pleased with the group’s performance since the half-year end, and said each Spice business was well positioned to grow in promising markets. Investors will recall that Spice has its origins in the electricity industry, although it has expanded into the water sector, telecommunications and the public sector, as well as energy management and commercial facilities management.

We urged readers to hold the shares at 293.75p last summer. However, since then Spice has surged north to 513.5p, and trades on a historic earnings multiple of 32 times. We still like this well-managed business, which has good underlying earnings visibility and strong growth prospects, although some profit-taking is undoubtedly in order. Reduce.

Porvair perks up on Parker deal

Porvair, the fast-growing filtration business with an exciting clean energy research and development arm, was one of our recommendations last month, written up as a strong buy at 138.5p. Encouragingly, the shares swiftly received a fillip on some intriguing contract news, firming up by 6.5 per cent to 147.5p in the wake of a well-received deal with Parker Hannifin.

Porvair has clinched an aerospace filtration system supply agreement with the control systems and aerospace components giant, which is expected to be worth $3 million (�1.5 million) over seven years. The Full List group will begin supplying the aerospace filtration systems for Parker’s onboard aircraft fuel tank inerting system, which will be fitted to new Airbus passenger jets from 2008. Charismatic chief executive Ben Stocks expressed delight that Porvair, already working with Parker to develop the filtration system for onboard fuel tank inerting systems used on Boeing aircraft, has now won contracts to supply Parker for both Boeing and Airbus.

We reiterate the strong investment appeal of Porvair, which offers investors strong profits growth – forecasts suggest a rise from �3.1 million to �3.3 million this year, ahead of �4.6 million at the pre-tax line next – good cash generation and dividends, as well as further exciting upside from its array of blue sky clean energy projects, where five years of research and development are starting to bear commercial fruits. If you bought on our advice, sit tight. If you have yet to investigate the company’s appeal, we suggest you do so now.

2ergo to spin off 2safeguard

Mobile ‘convergence’ enabler 2ergo is spinning off its 2safeguard subsidiary onto AIM on 6 March under the new moniker of Broca, as foreshadowed by Growth Company Investor in November.

Loss-making Broca, boasts joint managing director Neale Graham, is a ‘potential industry standard’ whose technology helps authenticate mobile phone traffic, thereby ‘enabling m-commerce’ by turning phones into ‘mobile chip and pin devices’.

It can also be used as a device to secure traditional e-commerce transactions. 2ergo has been ‘encouraged by the strength of enquiries’ for Broca so far, with a ‘small number of initial contracts’ already signed. 2ergo is taking around �7.5 million worth of Broca shares to cover inter-company debt, as well as a �1.9 million cash injection. 2ergo shareholders will receive one Broca share, worth 52p each, for every 2ergo share they hold.

As for the flourishing 2ergo business, investors were recently treated to news at the AGM that trading was ‘on target to exceed market expectations’ for the current year to August, with the UK market becoming increasingly open to convergent mobile communications. This has ensured an excellent pipeline of new business, particularly from the media sector. In addition, operations across the Pond are going swimmingly, with new work having been won from the likes of Disney and ABC. Graham sees the US market, which is catching up with Europe, as a terrific growth opportunity, and excepts prospects to accelerate over the coming months.

Following the demerger news, analyst David Toms of house broker Numis left his forecasts intact, although he did suggest that spinning off the loss-making Broca could lead to upgrades later this year. Interim results are out in May, though forecasts for the full-year point to profits of �4 million and 10.3p of earnings from �40.5 million sales.
2ergo has dialled up truly terrific gains for our readers and we have urged bouts of profit-taking in the past, while remaining supportive of this exciting growth story. At the current 335.5p, however, the forward p/e is a rather stretched 32.5. We still feel the shares are well worth holding for upside. That said, if you have yet to bank some gains, do so, but stay on board for further growth. Hold.

Polaron picked up for a premium

Investors who patiently held intelligent lighting controls counter Polaron have been rewarded with a takeover offer pitched at a 34 per cent premium to our 71p recommendation price of May last year.

Shares in the company raced ahead by more than 20 per cent to 93.25p on the announcement of a recommended cash offer at 95p from Cooper Controls, a subsidiary of New York-listed, Houston-headquartered electrical products giant Cooper Industries. That take-out price values Polaron at �14.86 million and represents a healthy 30 per cent premium to the pre-offer news closing price in September.
Chief executive Joe Stelzer remarked that despite having built up an ‘excellent’ group of businesses since flotation on AIM in March 2004 (by way of a �2.5 million funding priced at 150p), ‘the offer represents an opportunity for shareholders to realise their investment for cash at a substantial premium to the market valuation’.

We agree, especially considering some rather lacklustre half-time results to December, showing turnover flat at �11.1 million and gross margins and adjusted pre-tax profits on the wane due to a change in the sales mix. Growth in sales and orders in the lighting controls business was offset by decreased sales and forward orders in the precision components business. Continuing pre-tax profits, before goodwill and exceptional items, eased from �1 million to �700,000, adjusted earnings fell from 4.8p to 3.5p and the interim dividend was passed. Accept the offer.