Small Talk: Bristol & London: lessons of a share crash

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The Independent Online

Readers with good memories may recall some comment on Bristol & London back in November last year, when this column highlighted the ownership structure of the company and the dangers investors face when a majority of shares are held in very few hands.

As it turns out, our caution was more than justified. The stock was trading at 45p in November, and last week the company announced that it will take itself private after the shares hit a low of just 8.5p. In a statement, the company told investors that it believes that the business will have "greater opportunity in the longer term to develop and expand away from a publicly quoted environment".

The results that accompanied the announcement made grim reading and more than justified the dramatic fall in the share price since the company first came to the market at north of 170p in November 2003. A pre-tax loss of £671,000 was even worse than expected as margins have been squeezed at the executive end of the market, where Bristol & London operates, amid very tough competition.

The biggest loser is the founder and chief executive, Richard Abel, who still owns more than 88 per cent of the stock, less than when the company first floated but still a ridiculous amount for a company that has a public quote. Bristol & London will become a private company, assuming Mr Abel votes in favour of the proposition, but it has never really been a public company in the first place.

Even so, some institutions will not escape unscathed. Last May, Mr Abel cut his stake in the company from 95 per cent to 90 per cent through a placing of 1.2 million shares at 90p, organised by the broker Hanson Westhouse. Although the institutions that took part in the placing have, not surprisingly, been reluctant to talk about it, the company is likely to go private at something like 15p per share. No matter that most had very little money in it – no one likes to write off 83 per cent of any investment.

This is a stark reminder that using public markets to give private companies a quote is usually a hiding to nothing. Well, at least anyone seething at developments at Bristol & London can't say they weren't warned.

Deal revives Baltic Oil Terminals

There are some companies listed on Aim that operate in some weird and wonderful places – but only one with operations in Kaliningrad, the Baltic port in the Russian enclave between Poland and Lithuania of the Kaliningrad Oblast. So far it hasn't been a good year for Baltic Oil Terminals as the shares have tanked from 210p in March to just 91.5p on Friday.

But an interesting announcement that went completely ignored by the market last week could mean that a recovery is on the cards, and for brave investors the lack of support has created an excellent buying opportunity.

The weak share price performance can be attributed to one development: Baltic's plans to develop a port, Rybachiy, were in effect gazumped by a rival which built a deeper port, able to attract larger customers. But rather than curse its rotten luck, Baltic did the sensible thing and bought a stake in the deeper port, called Rosbunker.

The chief executive, Simon Escott, told investors last week: "We believe that the Rosbunker interest is an excellent acquisition for Baltic. We recognised Rosbunker's potential threat to our business and took decisive action to turn it to shareholders' advantage by making this investment."

Rosbunker will be the first deep water and ice-free port in the Baltic capable of handling vessels up to 45,000 tons.

This deal in effect resurrects Baltic's prospects and should create positive cashflow in 2008. The development of Rybachiy will continue, and it will concentrate on higher-value refuelling and bunkering services.

The house broker, Arden Securities, is forecasting £14m of pre-tax profit in 2008, putting the stock on a very cheap 4.5 times earnings. If the investment in Rosbunker pays off,that multiple should rise rapidly.

Zenergy powers ahead with prospect of Thyssen Krupp deal

It was a good week for investors in Zenergy, the developer of superconductors highlighted in this column in June at 170p. The company made the first sale of an industrial-scale device based on its High Temperature Superconductor proprietary technology, sending the shares 15 per cent higher to 238.5p.

The company is also set to announce a five-year collaboration with the German steel giant Thyssen Krupp to secure supplies of textured nickel tape, a key raw material used in the generators Zenergy will sell to the global wind and hydro-electric power generation industry.

Although the shares are at the top end of the risk scale, this latest deal is another endorsement of its technology. The stock is thinly traded, but investors can expect to see more upside once the Thyssen Krupp deal is confirmed.

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