Despite the fact that both companies are very much at the smaller end of the UK market, the proposed mergerbetween SMC and Auckett Fitzroy Robinson would have created the UK's largest architecture practice. But the talks were called off on Friday and, although Auckett investors may be relieved, the outlook for SMC remains bleak even if it is still in talks with a private equity buyer.
SMC has had an awful year, culminating in a grim profit warning in May that has sent the shares into freefall. The merger with Auckett could have offered it a way out of its difficulties but with more than £18m of debt on the books and the equity valued at less than half of its debt pile, the company is going to have to work miracles if it is to remain independent.
The word in the markets is that the potential buyer is none other than Stuart McColl, the founder of SMC and still its largest shareholder with 17 per cent of the stock. However, hewas ousted on the back ofMay's warning and given that the stock has fallen 80 per cent since then the chances of an offer at a significant premium to Friday's closing 15p per share price look very slim.
Auckett has a stronger balance sheet and although a successful merger between the two would have required an awful of work it appeared to offer SMC shareholders the chance to recoup a larger proportion of their losses than would taking the company private. The chances are that the talks ended because it would have turned into a merger in name only – with SMC teetering on the brink Auckett was undoubtedly the party in possession of all the aces. For investors, the choice is fairly straightforward – Auckett is in good shape and will likely outperform as a standalone entity now that is not sorting out SMC's woes.
Sensible investors are already out of SMC, and for anyone left in, the future looks precarious to say the least.
Appian back on track
Speed cameras aren't exactly the most popular invention of the last century, possibly vying for the least popular title alongside automated telephone menus and car alarms. But maybe drivers can scrape some of their fines back by having a punt on Appian Technology, a UK company that provides automated number plate recognition systems. The shares have hardly set the market alight over the last six months. Thanks to contract delays the company warning on current year performance back in February, followed another warning in September, sending investors for the exit en masse. The stock is still languishing at under a third of its February value.
However, there may be some better news in the pipeline. The company is poised to announce the completion of its first deal with an original equipment manufacturer, Civica Software, the California-based software group (not to be confused with the UK listed Civica).
Under the terms of the deal, Civica will integrate Appian's technology into the hardware and software it provides to the US government and security services. A first sale of the new equipment has been agreed.
Although financial details of the agreement will notbe revealed, it is a major step in the right direction for Appian. Traders believe there are more deals waiting for the ink to dry, so this could be the start of a significant turnaround in Appian's fortunes
Toledo set to rebound as China lifts nickel demand
The mining sector has been the driving force behind the UK market regaining its high for the year, or at least very close to it. But investors have been buying up the large-cap stocks at the expense of some quality players at the smaller end of the market. Toledo Mining, a nickel producer with assets in the Philippines, has fallen more than 46 per cent since peaking in June. At 475p, the shares were overbought and expensive, so a hefty batch of profit taking was probably in line given the sell-off in the nickel price.
But nickel, in line with other base metals, has rallied significantly and although it remains some way off its all-time high, the signs are that demand is unlikely to shrink any time soon. Only last week, Denis Morozov, chief executive of MMC Norilsk Nickel, the world's largest producer, said he expects demand to remain "robust", particularly from Chinese steel producers.
The company operates out of the Berong nickel mine, and has several other projects due to start producing in the next 18 months. Operating margins are still running at a mouth-watering 70 per cent and the Berong mine alone has enough nickel to last it at least another 20 years.
Toledo looks to be a solid bet among the myriad smaller mining companies, and with the stock beginning to head in the right direction again, this looks like a good entry point for new investors.Reuse content