Webb to kick-start deals in recruitment sector

Small Companies Notebook
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The recruitment sector is set for a burst of merger and acquisition activity - and Peter Webb, the small-cap fund manager with the big public profile, is just the man to kick-start the process.

The recruitment sector is set for a burst of merger and acquisition activity - and Peter Webb, the small-cap fund manager with the big public profile, is just the man to kick-start the process.

Mr Webb, the head of Unicorn Asset Management, has built up substantial stakes in a series of the UK's smaller players and reckons on bashing a few heads together in order to trigger consolidation. The sector still looks very fragmented. Unicorn has been able to build holdings of 27 per cent in MSB International - an ambitious company held back by cash flow problems - and of 25 per cent in Lorien - a specialist in IT staff. Both look like they could be targets.

Mr Webb's other major holdings in the sector include Robert Walters and Quantica, the latter being a likely acquiror, in his view. Quantica has a broad range of staffing businesses, spanning IT, healthcare, the law and construction, but its bidding ambitions could be constrained by a modest share-price rating. It is several brokers' pick of a sector that could benefit from improving UK business confidence.

Mr Webb could use his positions to stimulate champion-building mergers among the smaller players, and he is unafraid to act. Only last Friday he put Dynamic Commercial Finance (a debt collection company tipped in this column two weeks ago) into play by selling his 29 per cent stake to one of the company's rivals. If his sector charges won't consolidate of their own accord, Mr Webb could force the pace. Or, as he puts it more cryptically: "If the turkeys aren't going to vote for Christmas, I'm going to have to put them in the oven."

Intellexis a 'buy'

Intellexis, a professional training and e-learning business, has been an almost wholly disastrous investment since it joined the market in 2000 but its house broker, Teather & Greenwood, has finally mustered the courage to rate the stock as a "buy". The situation has been transformed by the acquisition of Key Skills, which trains people for the Prince2 project management qualification that is increasingly being used by the private sector. T&G is forecasting only for the current financial year, saying the stock looks cheap relative to these maiden earnings. But the broker is silent on next year's earnings, which clued-up investors believe will show a significant jump.

Motion Media

There's a sense of impatience on the bulletin boards over the length of time it is taking for Motion Media, the popular but perennially disappointing videophone developer, to sort out its reverse takeover with Scotty, a military communications group. It looks like it will be mid-June before any prospectus is out, and presentations to the City have been drawing only a mixed reception.

The company is trying to raise £5m to fund a post-merger restructuring and for working capital, with a mooted placing price of 12p per share, compared with the 12.75p at which the shares were suspended in March. Poor Garey De Angelis, Motion Media's chief executive, has borne the brunt of the criticism for the company's fall from grace, and in particular its overestimation of the take-up of video conferencing technologies. But it is the Scotty team who have faced the most searching questions, since the new company will be almost wholly focused on their products and will even be renamed Scotty. One fund manager emerged from his meeting saying he couldn't fathom why Scotty wanted to do the deal. Scotty, for its part, says it wants access to Motion Media's non-PC-based technologies to complement its own suite of products. These include mobile videophones used by the German army, British navy and broadcasters such as al-Jazeera.

Eden eyes AIM move

The lightly-regulated Ofex market seems to be losing companies as fast as it is enticing others to join. Another company is rumoured to be mulling a move up to the London Stock Exchange's AIM market, this time Eden Research, a drug and agricultural group.

The company posted encouraging final results last week, with much interest centring on its treatment for Pierce's disease, which affects vines and causes millions of dollars of damage to the US wine industry. Eden's US partner is carrying out further research into applying the product to other major crops such as peaches, pecans, almonds, avocados, tomatoes, onions and strawberries. Good trial results could provide the springboard needed to launch on AIM.

Get switched on

Get Group, which sells electrical wiring, plugs, sockets, switches, fans and heaters, is never going to be the sparkiest investment. But the company has developed a range of cheap, ultra-thin sockets and light switches that barely stick out from the wall, and which don't have any screws showing. It is a good little innovation that is helping Get improve profitability, despite the relentless pressure on margins elsewhere. With a nice little dividend (the interim payout should be increased 10 per cent today), the company is switched on to investors' needs.

Those heading for the beaches and bars of Benidorm, Alicante and the like this summer may well encounter Holiday FM, which plans to start broadcasting in some of the Brits' favourite destinations. Stations in Ibiza and Majorca are going live in the next few weeks.

Holiday FM offers a mixture of music shows from London's Capital FM and local info, sponsored by tourist boards who hope to encourage people to stop sitting around getting bladdered and go out and do something cultural instead.

The project is the brainchild of Tim Foster, formerly of Warner cinemas, who is also planning to introduce similar stations to cruise liners. His company, Independent Network Broadcasting, is looking to raise £1m to tide it over the summer before listing either in the autumn or next spring. Stay tuned. Atlas