AIMprospector

five AIM companies profiled

Ten years of triumphThe AIM contender for UK’s Most Successful Share

Issue 2 April 2014

high-tech, turnaround and recovery plays

what the budget means for AIM

significant news from last month’s companies

FREE to private investors

Supported by

AIMprospector

2 www.aimprospector.co.uk

Welcome back to AIM Prospector, the monthly magazine dedicated to AIM-quoted companies.

Remember, if you want to receive AIM Prospector 24 hours before it is published to the internet, register your email address at www.aimprospector.co.uk.This month our featured TOPpick is one the most successful companies quoted on

AIM. It just might be the most successful London-listed company of all. Those of you

who know me and know AIM may already have guessed which company I am talking

about. If you have not, flick to page five for the lowdown on this top performer.

Elsewhere this issue you will find a financial services firm under new

management who will be working to put an annus horribilis behind it. There is the

company growing sales fast in London’s booming construction market and the

technology player that has been signing up blue-chip partners at a lick. Finally

there is the AIM company rolling out restaurants in London the South East.

Congratulations to anyone who got the identity of any of these without looking!

It has been a busy month for companies recently featured in AIMprospector. Maintel announced a 15% sales and dividend increase with its finals. EMIS

reported a 22% increase in sales, met with a 13% dividend hike. Goals Soccer

Centres successfully completed an £11.5m placing. This amounted to another

10% more shares being issued, at a price similar to the previous close. It was

Sigma Capital that stole the show however, selling 25% more shares in their

company at a 7% discount to the previous day’s share price. I expect these well-

timed fundraisings will have a significant effect on how quickly Goals and Sigma

can achieve their ambitions.

Christie Group has its full year results scheduled

for March 31st.

On top of all this good news is the absolute

barnstormer of a budget. The hike in the annual ISA

allowance is a huge 30%. Given the propensity for

private investors to invest in AIM, I’m guessing that

this could lead to another significant increase in

private investor participation.

Enjoy this AIMprospector and good luck with your AIM endeavours.

David O’Hara, Editor, AIMprospector

ContentsRichoux ...........................p 4

RWS ................................p 5

ISG ..................................p 7

London Capital Group ....p8

Proxama ..........................p 9

next month ....................p 10

Contacttwitter: @aimprospector.co.uk

email: editor@aimprospector.co.uk

www.aimprospector.co.uk

Published by:Blackthorn Focus Limited

www.blackthornfocus.com

AIMprospector

five AIM companies profiled

Ten years of triumphThe AIM contender for UK’s Most Successful Share

Issue 2 April 2014

high-tech, turnaround and recovery plays

what the budget means for AIM

significant news from last month’s companies

FREE to private investors

Supported by

AIMprospector

www.aimprospector.co.uk 3

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INVESTOR RELATIONS

AIMprospector

4 www.aimprospector.co.uk

17% of the company.

Strangely, I regard many of these

points as positives. Engaging with ‘the

market’ is an expensive and time-

consuming activity. With so little free

float there is unlikely to ever be a

liquid market for the shares, whatever

the company does. Large management

shareholdings are a significant

incentive to succeed.

The facts demonstrate the

investment case better still. In 2007,

Richoux reported a £0.5m loss on

£2.5m of group sales. By 2012, this

had improved to a £0.9m profit on

£10m of sales. In the most recent

six-month period, increased openings

helped Richoux to report a 13% sales

increase and a similar improvement in

operating profits.

For smaller investors who can live

with Richoux’s atypical set-up, there

is a successful business here, run by

industry heavyweights. Furthermore,

Richoux is well-financed for continued

expansion.

its six month and full year results. The

last separate trading statement was

issued in July 2012, when the company

reported a significant improvement

in profitability. The company’s

septuagenarian Chief Executive, Mr

Salvatore Diliberto, is never mentioned

as a shareholder contact in regulatory

statements. For a number of years, the

company has not retained financial

PR. That’s a little unusual for a £30m

company, particularly one that

operates leisure brands and would be

expected to welcome media coverage.

I can find no published forecasts for

the company, suggesting that Richoux

does not seek analyst coverage and

has negotiated commensurately lower

broker fees in return.

Finally, nearly 80% of the

company’s shares are owned by just

four investors. Unusually, for a quoted

business, three of these are private

investors: Hon. Robert Rayne (17% of

all shares), CEO Salvatore Diliberto

(21%) and Mr Phillip Kaye (24%). The

Kaye family are major players in the

UK’s casual dining scene. Phillip Kaye

was the man behind the Garfunkel’s,

Deep Pan Pizza, ASK and Zizzi brands.

His nephew Jonathan is today boss of

AIM-quoted Prezzo. The fourth major

shareholder is Michinoko Limited with

With a portfolio of sixteen restaurants operating four themes, Richoux Group has grown sales steadily and is now reporting profits. Better still, the company has a significant net cash position. If a retail format with the potential to

roll-out nationwide is identified early,

share price gains can be significant

when the business scales. A great AIM

example is Prezzo: profits have soared

as the chain has expanded.

Richoux has existed on AIM for

over ten years in a number of guises.

Previously known as City Gourmets,

Madisons Coffee and then Gourmet

Holdings, Richoux Group plc took its

current name in 2008.

The company runs seven Italian-

style Villagio restaurants, two Zippers

restaurant bar and grill establishments,

five Dean’s Diners and four of the

eponymous Richoux.

Three years ago, the company ran

twelve restaurants. Since then, Richoux

has added one more Zippers, a further

Dean’s Diner and another three

Villagios.

On researching Richoux Group, I

am struck by a number of peculiarities.

First, the company rarely issues any

information on trading other than with

Richoux Group (LON:RIC)

FOR

Winning, established formats

Strong balance sheet and cash generation

AGAINST

Rich valuation

Hard to buy shares in size

Market cap £31m

Bid:offer 32p:35p

P/E (historical) 32.5

Yield (historical) 0

52week low:high 11p:37p

Richoux Group is a classic AIM restaurant roll-out story

no published forecasts for the

company

unlikely to ever be a liquid market

for the shares

management shareholdings are a

significant incentive to succeed

AIMprospector TOPpick

www.aimprospector.co.uk 5

TOPpick: AIM blue-chip RWS Holdings may be the UK’s most successful listed company Buckinghamshire-based RWS Holdings is a supplier of translation services to patent filers worldwide. The company boasts a remarkable ten year record of uninterrupted sales, profit and dividend increases.More than two thirds of RWS’

business is the translation of patent

applications. Here, RWS translates the

patent filings of an innovator such as

AstraZeneca into the languages of the

territories where it wants protection.

This requires a double-whammy of

know-how: both linguistics and the

application area i.e. pharmaceuticals or

engineering. This level of expertise is

rare, meaning that RWS can demand a

high price.

Around one fifth of sales comes

from commercial translation services.

9% of sales comes from information

services and a recent acquisition.

If you were thinking that RWS’ ten

year record was achieved with small

advances you are wrong. In 2003, the

company made £27m of sales and

£5.6m of pre-tax profit. A dividend of

5p per share was declared. For 2013,

RWS reported total sales of £77m,

pre-tax profit of £21m and dividends

per share of 20.25p.

In the last five years, EPS has been

increasing at an average rate of 9.8%

a year. Dividends have been raised by

14.3% a year on average. Sales have

been increasing at an average rate

of 7.4%. According to Stockopedia,

only nine UK-listed companies have a

better record over the last five years. It

is a job to find another company with

a London listing that can match RWS’

record over the decade.

RWS has thrived thanks to

operating at the confluence of

three major trends: outsourcing, the

increase in patent applications and

globalisation. As firms have become

more willing to procure services from

outside providers, organisations that

previously translated their work in-

house have been turning to RWS. A

recent presentation made by RWS to

investors revealed the huge growth in

patent applications. In the ten years

from 2002 to 2012, a key measure of

patent applications showed an 80%

rise. In only one year did applications

fall – a decline of 5%. The average

annual increase in annual applications

in the ten year period was 5.6%. The

third leg, globalisation, has increased

pressures on inventors to file in

multiple territories. The result has been

a bonanza of work and profits for RWS.

As the company has become

known as a market leader, it has

grown market share further. This has

been managed while still maintaining

a diverse customer base. RWS’ ten

largest clients are drawn from across

a number of different sectors and

together account for just 27% of all

sales. No single customer brings in

more than 6% of revenues.

The company’s most recent trading

statement reported good growth from

the core patent translation services.

level of expertise is rare,

meaning that RWS can demand

a high price.

Dividends have been raised by

14.3% a year on average.

RWS headquarters, Chalfont St. Peter

AIMprospector TOPpick

6 www.aimprospector.co.uk

Further good news came from news of

trading at inovia, the recently acquired

web-based patent filing specialist.

inovia was purchased in a deal that

completed in September 2013 as part

of RWS’ strategy to buy businesses

with “demonstrable growth prospects

in closely related sectors”. inovia was

previously RWS’ biggest customer. The

acquisition looks set to be a significant

success with sales already exceeding

RWS’ expectations.

Executive Chairman, Andrew Brode,

is more than just the boss of RWS.

He personally owns 5% of the shares

in the company. A family trust he set

up controls another 37%. That makes

Mr Brode’s stake in RWS one of the

most valuable AIM shareholdings in

existence.

Mr Brode is 73. That fact leads

many to question how much longer

he will keep RWS out of the clutches

of an acquirer. Although a purchase

would require little more than Mr

Brode’s assent, I do not regard a sale

prior to Mr Brode’s retirement as

inevitable. RWS’ scale and ability to

deliver income makes the company’s

shares an attractive long-term store

of wealth. Another question to wrestle

with is whether a manager could ever

be identified who Mr Brode would

trust to run the business.

The growth story at RWS is

expected to continue for another two

years at least. Broker consensus is for a

16% increase in EPS this year, followed

by a 6% rise the year after. The

dividend is forecast to be increased by

11% for two years.

As of year-end, RWS enjoyed a net

current asset position of £21m, £18m

of which was cash.

RWS is the classic AIM blue chip. It

possesses a track record and financial

strength that few other companies can

compete with. Although its long term

ownership status is hard to guess, the

company has such a strong market

position that it will likely continue to

reward shareholders for many years to

come.

RWS Holdings (LON:RWS)

FOR

Proven winner

Industry outlook still favourable

AGAINST

More highly rated than usual

One key person

Market cap £417m

Bid:offer 965p:998p

P/E (forecast) 22.8

Yield (forecast) 2.4%

52week low:high 629p:1030p

a bonanza of work and

profits for RWS

The typical RWS employee is a first-class languages graduate

Event - April 30thThe Blackthorn Focus event will again be showcasing six AIM-quoted companies on April 30th at the offices of finnCap

Presentations begin at 10am on Wednesday, April 30th.

The event is free for private investors.

To apply for your place at the event click on the button below:

Fund managers and private client wealth managers who would like to meet

the management of any of these companies should contact Blackthorn

Focus here:

Media should contact Vicky Watkins at MHP Communications

(020 3128 8100).

Return from companies presenting at past AIM Investor Focus events:

April 2012 AIM Investor Focus: mean average +41%, median average return +66%.April 2013 AIM Investor Focus: mean +57%, median +56%October 2013 AIM Investor Focus: mean +17%, median +24%

AIMprospector

8 www.aimprospector.co.uk

ISG report a 17% sales decline in

this division. However, confidence

improved and the company won

some large, prestigious residential

work.

The picture was much brighter in

UK Fit Out as a 76% sales increase

flowed through to a 50% rise in

underlying profit. More wins followed

the half-year close, with the company

announcing that it had won the

largest London office fit out contract

of the last twelve months, a £125

million deal for Swiss bank UBS’ new

UK headquarters. Less than one week

later, this was followed by the news

that ISG has won a £30m contract to

remodel and refurbish London’s Art

Deco Adelphi building.

UK Retail showed a more subdued

performance. This division typically

works through ongoing frameworks

with the likes of Marks & Spencer and

Waitrose, refurbishing and updating

sites throughout the year.

The opportunity for UK Fit Out to

dramatically increase group profits is

clear. In the last full year, this division

reported a 28% increase in operating

profits on a 42% increase in sales.

The recent six-month results revealed

that sales growth has continued to

accelerate. UK Fit Out reported a

£254m order book for the current

financial year compared with £129m

twelve months previously.

Office fit out specialist ISG is perfectly positioned to ride London’s building boom.Unusually for a firm operating in the construction industry, ISG paid its shareholders a dividend throughout the financial crisis. Anyone that held on was well-rewarded – the shares now trade at a five year high.Previously named Interior Services

Group, ISG is a building-services firm

with 2,500 staff. As the UK economy

recovers, successful large companies

and retail chains are looking to expand

again. This has led to a dramatic

increase in business at ISG.

The company segments its

reporting among seven divisions:

UK Construction, UK Fit Out and

Engineering Services, UK Retail,

Continental Europe, Middle East, Asia

and Rest of the World. Last year’s

annual report confirmed that the first

three divisions delivered 85% of all

group sales and employ around 70%

of ISG’s staff.

The absence of the Olympic

Games makes 2013 comparatives

difficult in the UK Construction

division. The first half of 2014 saw

Some investors will be put

off ISG due to its thin operating

margins. Margins remain low as the

company completes work agreed

during a much tougher environment.

However, the UK’s return to growth,

led by a continuing construction

boom in London, could herald a

vast improvement in profits. Indeed,

according to financial website

Stockopedia, analysts expect a 60%

increase in earnings per share for the

current financial year, with another

30% increase the year after.

As London races to build more

skyscraper offices and higher-rising

high-end residential properties, ISG is

ideally placed to profit.

ISG (LON:ISG)

FOR

Net cash position

Highly regarded in industry

AGAINST

Low margins

Some recovery priced in

Market cap £115m

Bid:offer 286p:290p

P/E (forecast) 12.6

Yield (forecast) 3.3%

52week low:high 127p:324p

three divisions delivered 85% of

sales

won the largest London office fit

out contract

analysts expect a 60% increase

in EPS

AIMprospector

www.aimprospector.co.uk 9

With new management in place and legacy issues accounted for, London Capital Group is now positioned for progress.In 2008, financial spread bet firm

London Capital Group declared a net

profit of £7.6m and a dividend of 11p.

In 2012, problems set in and the firm

fell to an operating loss. The most

recent trading statement confirmed

expectations of an adjusted pre-tax

profit for 2013 of £2.4m.

London Capital Group (LCG), is

the AIM-quoted business behind

the Capital Spreads and Intertrader

brands. LCG uses these brands to offer

financial spread bet and Contract

For Difference services to the public.

In addition, LCG uses its expertise

and technology to offer ‘white label’

services to other betting providers.

Here, a specialist stockbroker or

sports betting provider will offer

its clients a spread bet/CFD service

under their own brand. LCG then

delivers the services through all of its

own technology, administration and

regulatory capability.

One example is BetVictor

Financials, an LCG provision to the

Victor Chandler betting operation.

Other white label customers include

European betting behemoth Bwin.

party and Saxo Bank.

Under a typical white label

agreement, a customer like Victor

Chandler will receive a fee from LCG

each time a new client is recruited. The

end user would then legally become

a client of LCG. As the relationship

continues, LCG would continue to pay

BetVictor fees depending on the level

of client activity.

2013 was a wretched year for

London Capital Group. Complaints

to the Financial Ombudsman

Service (FOS) resulted in £1.2m of

compensation being paid to customers

of an LCG managed FX fund. This was

followed by the departure of founder

and CEO Simon Denham. The new

CEO of the company then resigned

after little more than six months at

the helm, citing personal reasons.

Between all of this, shares in LCG

fell in September 2013 as it was

announced that it would be losing one

of its largest white label customers.

TradeFair, the financials offering from

BetFair, had previously contributed

around 5% of LCG’s gross profits. The

arrangement ended at the beginning

of the year.

CEO since July is Kevin Ashby,

the former CEO of AIM-quoted

Patsystems. Mr Ashby was joined in

December by David Sparks, a former

regional FD for Sportingbet prior to its

takeover by William Hill/GVC.

The most recent trading statement

from LCG prepared shareholders for a

series of considerable write-downs and

exceptional expenses. FOS claims, legal

settlements, restructuring costs and IT

changes were all flagged.

Before running intro trouble, the

company was a successful, profitable

dividend payer. In an industry

dominated by one large competitor (IG

Markets), a cleaned-up London Capital

Group would be a handy acquisition

for an ambitious second-tier player.

However, with the final FOS bill still

undecided, such a takeover is unlikely

to arrive imminently. That leaves Mr

Ashby and his team with the challenge

of returning LCG to being a high-

margin spread bet provider and white

label operation.

AIM spread bet firm has both turnaround and takeover potential

London Capital Group Holdings

(LON:LCG)

FOR

Clear upside if management can get it right

Profitable on an underlying basis

AGAINST

Market now more competitive

No obvious edge on competition

Market cap £19m

Bid:offer 32p:34p

P/E (forecast) no forecasts available

Yield (forecast) no forecasts available

52week low:high 29p:48p

white label customers include

Bwin.party

2013 was a wretched year

London Capital Group would be a

handy acquisition

AIMprospector

10 www.aimprospector.co.uk

similar ‘assets’ (advertising posters,

kiosks) at UK railway stations. Proxama

gets paid on a Cost Per Tap model,

along with receiving set-up fees and

payments for reporting analytics.

The company has also been

selected as partner for Weve Pouch,

a loyalty scheme offering to retailers.

Weve is a joint venture between

O2, EE and Vodafone. The aim is to

integrate loyalty and mobile while

seamlessly interfacing with a store’s

crucial Point of Sale systems.

It is still early days for Proxama.

The company remains loss-making but

well-funded after the £8.6m (before

expenses) placing. Demand for this

technology and level of consumer

interaction is unproven. History

shows however, that if an AIM-quoted

company like Proxama can establish

itself in a profitable niche, a larger

organisation will likely bid for the

company in short order.

Leading tech firm combines partners and potential

AIM youngster Proxama is making fast progress in the NFC land-grabProxama came to AIM in August 2013

through a reverse takeover. Since then,

the company has announced one set

of six-month results in September,

raised funds in a placing in December

and issued an interim management

statement in January of this year.

Proxama specialises in integrating

Near Field Communications (NFC)

and other mobile commerce

technologies. Since listing, the

company has interspersed its financial

announcements with a series of

impressive partnership announcements.

If the technology proves to be a hit

with consumers, shares in Proxama

could be a big winner.

Services offered include mobile

marketing via NFC, in-store mobile

loyalty, payments and mobile wallets.

Customers using Proxama’s services

include mobile operators, banks,

retailers and card issuers.

Marketing runs through Proxama’s

TapPoint solution. Here, a user can tap

a device with their mobile phone (such

as bus shelter advertisement) to receive

current offers or vouchers from a brand.

In-store mobile loyalty can remove

the need for membership cards

and deliver electronic couponing.

Proxama’s solution also enables

product information to be transferred

to a mobile device, for example via a

QR code.

The mobile wallet provision is a

software infrastructure that Proxama

can offer any business looking to

launch a loyalty scheme or mobile

payment ability.

Proxama’s technology enables

businesses to secure an enhanced

connection with a customer,

frequently at lower cost.

One example is Proxama’s recently

announced partnership with Argos. At

the end of January, it was announced

that Proxama had delivered an in-

store NFC solution at 40 Argos sites

across the UK. Argos plans to use

this to get their shopping app onto

more customers’ phones, along with

offers available at that time. For Argos,

this will help push further mobile

interaction and reduce hard-copy

catalogue demand.

Another striking deal was

announced in October of last year with

CBS Outdoor. Proxama will be powering

all of CBS Outdoor’s NFC-enabled

advertising worldwide. By the end of

the year, this will include 5,000 devices

on the London underground and 2,000

Proxama (LON:PROX)

FOR

Blue-chip partners already using technology

Product use could scale dramatically

AGAINST

No profits yet

Valuation demands belief in bright future

Market cap £48m

Bid:offer 5.9p:6.25p

P/E (forecast) N/A (losses forecast)

Yield (forecast) 0

52week low:high 2.25p:8.63p

impressive partnership

announcements

an enhanced connection with

a customer, frequently at

lower cost

Another striking deal was

announced in October

AIMprospector

www.aimprospector.co.uk 11

Next month:Another five companies will be profiled in the May edition of AIMprospectorSubject to newsflow, we will be leading with a long-established AIM company that may not be around for much longer.

The share register of this profitable dividend payer has become so concertinaed that a well-heeled investor could very

quickly gather the required assent to purchase the firm outright.

As the tax and investment rules become even more favourable toward AIM-quoted shares, AIM Prospector will continue

to highlight the companies available for investment.

To get the lowdown on these stocks, make sure you get the notification email by joining the distribution list on the AIM

Prospector website. Your details will not be shared with any other organisation.

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Blackthorn Focus is a financial publications and events businessdedicated to the financial markets.

AIM Investor Focus is anAIM-dedicated investor and

media event exclusive to AIMquoted companies. The event will next run

on April 30th.

NEDucation is an update event for non-executive directors

of UK-listed companies. NEDucation will next run on

April 15th at the offices of BDO.

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