Small-cap Week, January 9


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Bryce Elder

Majestic Wine was among the week’s top performers after its Christmas trading update showed a promising start to management’s three-year turnround plan.

The retailer posted like-for-like sales up 12.3 per cent, including growth at its eponymous core brand of 7.6 per cent from 2.3 per cent at the half year. Majestic shares rose 19 per cent in response, with Investec Securities and Liberum Capital both advising a “buy”.

Junior commodity producers tumbled in tandem with metals and oil, which raised fresh concerns about balance sheet strength across the sector. North Sea-focused Premier Oil and EnQuest were off 38 per cent and 11.8 per cent respectively, while Lamprell , the oil services group, dropped 28.1 per cent after Numis Securities moved from “buy” to “hold”.

Lonmin lost 27 per cent, with the South African platinum producer sitting at a near 40 per cent discount to the price of last year’s rescue rights issue.

Retailer Game Digital was off 20.7 per cent after Liberum downgraded to “hold” and cut its full-year dividend forecast by a fifth. The cyclical nature of the video games industry means Game needs to hold back more cash, it said.

GW Pharmaceuticals faded 13.3 per cent awaiting results of a key final-stage trial of its Epidiolex seizure suppressant, due this quarter.

Watchstone , the renamed remains of insurance claims group Quindell, was down 11.4 per cent after it sold its property and maintenance companies for just £1.

Laundry group cleans up its act after near collapse

Chart: Johnson Service

Johnson Service Group, the 200-year-old business that started out dying silk before becoming the UK’s largest dry-cleaning chain, has been recovering since its near collapse in 2007. This week, it said that trading in 2015 would meet forecasts and debt had fallen slightly to about £71m, writes Kate Burgess.

Analysts forecast that earnings per share will be 6.1p for the year to December, up from 5.2p in 2014, and pre-tax profits will rise to £25m from £20m.

Johnson’s shares are a long way above their 9.5p low of eight years ago, when debt stood at more than £180m and the group came close to breaching banking covenants. Now that the Cheshire-based company has shifted its focus from high-street dry cleaning to the more lucrative business of laundering and renting table cloths and napkins to the catering trade, the share price is up to 88p.

Last year, it bought London Linen, which supplies The Wolseley restaurant in Mayfair and Jamie Oliver’s chain, for £65m. In November, it paid £6.5m for Ashbon Services and has said more acquisitions will follow.

Cyber security group Corero surges after $1m order wins

Chart: Corero Network Security

Shares in Corero Network Security jumped almost 80 per cent this week after the cyber security group announced a pair of big contract wins, writes Nicholas Megaw.

The company protects internet service providers and online businesses from distributed denial of service attacks, a type of hack which disables servers by flooding them with traffic.

Despite their simplicity, DDoS attacks have been used in recent high-profile attacks on targets including TalkTalk, the BBC and a string of Greek banks.

A $700,000 deal announced on Wednesday marked the biggest order to date for Corero’s flagship DDoS defence system. Together with another $400,000 order announced on Tuesday, the two contracts alone are worth more than a quarter of the company’s revenues in its last six-month reporting period.

Shares closed up 6.75 per cent at 27.5p on Friday, their highest level in three years.

APC Technology has strong week after contract success

chart, APC Technology share price

Shares in APC Technology rose nearly 16 per cent during a week in which the group reported contract wins and a “sense of optimism” on the back of full-year results and an operational review, writes Jeremy Wright.

APC, which supplies equipment and services to help organisations manage energy and water usage more efficiently, as well as providing specialist electronic components to industry, had suffered a “challenging” 2015, chairman Leonard Seelig said.

The shares gained more than 15 per cent on Wednesday after APC’s energy efficiency technologies business, Minimise Energy, announced that it had won a number of big contracts.

Under chief executive Richard Hodgson , the company said it had made good progress with its group-wide operational review and had introduced initiatives to deliver an annualised £1m in cost savings.

A gross profit of £7.8m in the year to August was £200,000 up on the previous 12 months, but translated into a post-tax loss of £5.8m after exceptional costs of £3.9m, including discontinued activities, the company said. The stock ended the week at 10.16p.

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