Small Talk: Blood-testing services make IOS one to watch

Foreign companies in the LSE do not have to inform the market of share dealing
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The Independent Online

It is very common to see shell companies come to AIM with a promise to make acquisitions in one particular sector and then go off and do a deal in a totally different industry.

Well, India Outsourcing Services (IOS) looks to be a company that is going to do exactly what it says on the tin.

The group is believed to be in late-stage negotiations to buy a medical-tests outsourcing player in India in a deal worth up to £20m.

IOS will probably raise fresh equity to pay for the tie-up. Last month, it carried out a preliminary £3m fund raising at 45p.

Its shares closed at 48p on Friday, valuing the group at just more than £4m.

The Indian firm IOS is said to be targeting provides blood-testing services to US healthcare centres and hospitals. Samples are sent to its plant in India from the US where tests are conducted and the results are the e-mailed back to the US.

The arrangement is a lot cheaper for American hospitals than having the tests conducted locally.

The Indian company's other business - again in the US - sees it handle patient records for doctors' offices.

Consultations between a patient and his or her doctor are taped and then sent to India where the company transcribes them and then updates the patient's computer records. In a famously litigious society such as the US, these procedures are increasingly popular.

IOS is certainly a stock to watch in the coming weeks.

LSE confirm loophole

Three weeks ago Small Talk highlighted the important loophole that exists in the AIM rules with regard to disclosures by foreign companies listed on London's junior market.

We pointed out that foreign-registered companies get away with more lax requirements than their UK counterparts when it comes to informing investors of major share purchases or sales. It is partly thanks to this loophole that the £100m fraud at Langbar International took place.

Since our piece, Small Talk has been contacted by readers asking what can be done to close this loophole.

We put this question to the London Stock Exchange, which runs AIM. The Exchange replied that not very much could be done about it and said that the main market also suffers from the same loophole.

The LSE said under UK law individuals have to notify a company of any major share purchases or sales they carry out. It is then up to that company to tell the market about any changes.

However, foreign companies listed in London are not subject to this law. They fall under the jurisdiction of the country where they are registered.

So, although LSE rules insist that a foreign company must inform the market of any major changes to its shareholder register, there is no guarantee that the law of the land where that company is registered compels the individual doing the buying or selling to inform the company.

Hence, insiders at the Bermuda-registered Langbar, who knew the company was worthless, were able to sell millions of pounds worth of shares last Autumn without informing the market.

The lesson for investors is to take care when putting money into foreign-registered companies.

Having a London listing does not necessarily mean a company is bound by the same disclosure rules as a UK-registered company.

Dawson turnaround

Annual results from Dawson International will not disappoint today. In fact, they will show that the recovery at the Scottish cashmere group is well on track.

Analysts expect Dawson to post a full-year profit of more than £2m. It reported a £2m loss in 2004.

The turnaround at the company follows the appointment of Mike Hartley, a former director of textiles group Coats Viyella, as chairman and chief executive in the summer of 2003.

Reforms have seen Dawson carry out a series of disposals, including the sale of Ballantyne, a retail business, as well as the purchase of bed linen firm Dorma.

Dermasalve boost

Dermasalve Sciences will soon be selling a lotion which, it claims, is 99.9 per cent effective against MRSA and other bacterial infections.

The skin-care products distributor will announce today that it has signed an agreement with Drug Delivery Solution (DDS), the creator of the lotion.

Under the terms of the deal, Dermasalve will buy units of the treatment from DDS with the aim of distributing them globally. It is thought that the group will focus on UK hospitals first.

In the NHS alone, MRSA and other bacterial infections caused an estimated 5,000 deaths and cost £1bn per year, so clearly there is a big market for this type of product.

Servocell's AIM list is under lock and key

Servocell, a company that believes it has the technology to power the electronic locks of the future, will announce plans to list on AIM today.

It hopes to raise about £5.5m, which will give it a market capitalisation of more than £20m.

The group's technology is able to significantly reduce the current required to run an electronic lock and this, for the first time, makes them a viable option for securing houses, cars and offices.

Servocell, led by Simon Powell, the chief executive, is looking to secure a piece of a $30bn (£17.4bn) global market for locks.

As well as being cost efficient the technology is very durable, allowing it to survive all sorts of weather conditions. This makes it perfect for use on cargo ships and large trucks.