FinnCap have been making waves over the last three years since their spinoff from old school private client manager J.M. Finn. Led by the progressively minded CEO Sam Smith, the broker can now justifiably claim to be the second largest AIM broker with an 80 strong client roster that is growing quickly. But some revenue streams are getting harder to come by. Many firms have been reporting results that are suffering from a dwindling of traditional commission based broking revenues and FinnCap is no exception. But not being firm to stand still, they are finding ways to add extra value to their corporate clients which is hoped will generate further loyalty and brand awareness.
Last night FinnCap hosted their first retail roadshow in partnership with David Stredder, the active private investor and director of ShareSoc, who runs the Mello investor group meetings usually held in Beckenham. The retail roadshow market is a fragmented one with providers having mixed reputations, but the Mello events have been run very effectively for several years for the benefit of investors, free from any commercial interest. This initiative by FinnCap can be taken as a positive sign that the predominantly institutional market of London may be beginning to appreciate that individual investors en masse are a significant untapped source of market liquidity.
FinnCap gave over their presentation room in New Broad Street to allow four companies to present to the group of 40 or so investors. Presenting were two of FinnCap's clients Amino Technologies and Idox, joined by RheoChem and the Innovation Group; a spread of businesses ranging across technology, business services and oil; sectors that have been and are currently very popular with private investors.
Credit must go to FinnCap for being forward thinking in their attitude and to David Stredder for organising the investor group. Other brokers will be taking note that through social media and publicly facing websites such as Stockopedia and the Motley Fool, large groups of private investors can be mobilised extremely quickly and that the costs of running retail roadshows are minimal. If FinnCap continue to be progressive and proactive in their approach their client roster will soon reach beyond that of current AIM leader Seymour Pierce from whom they appear to be winning clients.
A brief summary of each presentation continues. Other attendees may wish to elaborate on each in the comment section below.
Amino Technologies (LON:AMO)
£26m mCap Amino Technologies manufactures IPTV set top boxes for 850 customers enabling network operators to deliver TV based entertainment over broadband. Floating in 2004 the company enjoyed a brief head start over competition and made some waves in the US market before becoming unstuck in 2007 with poor handling of the mpeg4 format as it emerged. As Chairman Keith Todd explained to the group, the company has 'nailed it now' and highlighted Amino's latest deal with Telecom Italia, a world first service rollout to blend "over-the-top" internet content alongside traditional cable/satellite content in hybrid boxes. Citing market research into the OTT market, Todd aimed to convince investors that the market for OTT to TV products would reach over $400m by 2015 from its current sub $100m level.
Todd flagged their recent Intel partnership as an indication of the opportunity in the area. Traditionally Intel hasn't entered a new sector unless it anticipated big volumes. Record revenues and unit sales for 2010 were highlights from Amino's presentation, but some audience members remained concerned about the significant working capital requirements and the resulting drain on cash resources. It remains to be seen whether Amino can deliver its value proposition effectively in a world of converging technologies.
£59m mCap Idox supplies software, solutions and recruitment services to the management of local government and organisations. While Idox began as a dot.com listing spun out from a financial services software business in 2000 it became unfocused once the bubble burst. In a robust presentation, Richard Kellet-Clarke CEO detailed the change in fortunes that the new management team have brought to Idox since their introduction in 2006. By redirecting the focus of the business away from recruitment and growing through acquisition, the team have increased recurring revenue streams, raised gross margins from 65% to 83%, and delivered increasing profitability to what FinnCap expect should reach £10.5m pre-tax in 2011.
With growth drivers for the business expected through the transition to SaaS provision and further opportunities in the private sector market, Kellet-Clarke believes his team can continue to grow organically and through acquisition and stated that he was confident the company will meet their forecasts. FinnCap highlights the company's strength in visibility and cashflow is anticipating eps of 2.2p for 2011 putting the company on a forward p/e of 8.
£37m mCap Rheochem has historically struggled to be understood well by investors. Its range of business interests and mixed strategy have led to a classification as an oil services firm on AIM versus an industrial on ASX. While the company has interests in oil exploration and production it has traditionally not been perceived as a pure play. The company is addressing that with a disposal of its fluids business and a business simplification. The company is to be renamed as Lochard Energy Group Plc and will focus on the development of its assets and exploration opportunities in the North Sea. The company's Athena development project, operated by Ithaca Energy, is expected to start production in Q4 2011 with an initial gross production estimated at 22,000 bpd of which Rheochem has a 10% interest. Other opportunities for the group lie in its 10 other exploration and appraisal assets in the North Sea highlighted in recent regulatory announcements.
The black cloud on the horizon for Rheochem is that they have a court case being brought against them by Senergy regarding a drilling contract dispute due in court in Q4. Mike Rose, non-executive director presenting, explained that Rheochem never signed the contract and that the board were confident that the claim would not succeed.
Last to present was Andrew Roberts, CEO of £154m mCap Innovation Group, a software company providing SaaS and business process outsourcing company for the insurance and associated industries. It was put together through a slew of 40 odd acquisitions from 2002 to 2007 when it began to have problems. While Roberts had previously been Chairman, City financiers insisted he move to an executive role to bring the company back into shape. A significant restructuring was undergone in 2009-2010 purging a layer of management, moving to a smaller HQ and making each country operation stand on its own feet. In the second half or 2010 the BPO business returned to profitability and is now cash generative. While TIG has a growing operation in India, Roberts doesn't want to go to China citing other's difficulties in attaining profitability there. He says he has 'plenty of geography to double, treble or quadruple revenue' already in their current global operations that span North America, Europe, Asia and South Africa.
Roberts gave an impressive presentation and appears to be willing to force through the tough decisions required to invest for the long term. his ambition is to become a FTSE 250 company within 2 or 3 years. Brokers are forecasting a £14m pre-tax profit for 2011.
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