Small Talk: Maiden dividend puts IS Pharma at odds with its peers

The conventional wisdom is that if you want to make money in the small-cap pharmaceuticals sector, look at a range of companies that you reckon might hit the big time and invest in them all. And at the same time prepare to lose all your money. Like picking greyhounds, selecting pharma winners is a fine, if not impossible, art, but those who put money into IS Pharma are celebrating. Remarkably for a company of its size – less than £30m market capitalisation – the speciality pharmaceuticals group, which takes established or late-stage medicines and aims to sell them more efficiently, has announced a maiden dividend payment, rewarding those who have kept the faith.

The divi is of course, very welcome, but having been told by virtually every other small-cap pharma firm in the past that any spare cash is to be reinvested in the company's development and growth, etc, backers might actually view the payment with a little trepidation, particularly as IS says it "continues to focus on its strategy of growth through the acquisition, development and growth of late-stage speciality products".

The group says the payment is a reflection of "the strong and sustainable increase in revenues and profits, together with a further strengthened balance sheet". The chief executive, Tim Wright, added: "The announcement of our maiden dividend further underlines our confidence in the strength and continued growth of our business."

Any waverers might be consoled by the fact that other investors are continuing to back the business. Last week Abingworth, a specialist life sciences investor, became IS Pharma's largest shareholder, effectively taking a 13 per cent stake for £3.6m. The deal came at a premium to IS's share price.

"We are delighted to join IS Pharma at this crucial stage in its development and see substantial growth opportunities ahead," said Joseph Anderson, a partner at Abingworth. "We look forward to becoming partners with the company as it reaches towards its goal of becoming a leading specialty pharmaceutical player in Europe."

Asos shows way at AIM awards

And the winner is ... Asos. The online clothing retailer was named company of the year at last week's AIM awards, which were held in London and sponsored by Ford Sinclair and PricewaterhouseCoopers. This year's bash was probably the first time in the past three years that the great and the good of the Alternative Investment Market have gathered and not felt the Grim Reaper breathing down their necks.

Indeed, some of the other winners last Thursday were among those that needed a fair amount of emergency surgery during the financial downturn. The best performing share gong went to Software Radio Technologies, a company which produces radio communications devices and which was bought by the managing director, Simon Tucker, after he overheard a conversation on a train.

By any standards, the company had a woeful 2009 that saw its share price drop by more than 90 per cent, but those investors who abandoned the stock (and there were plenty) will be wincing after seeing the shares leap by more than 540 per cent in the past 12 months. The share price gains come after a decent run for the group when it has penned some impressive deals for its AIS products, which are used in navigation and homeland-security identification and tracking applications.

So well done to SRT, but of course, the real plaudits go to Asos. The group, which is often seen as a takeover target, put in a remarkable performance during the downturn, repeatedly returning impressive numbers.

Thursday's award came on the same day that the group posted decent quarterly numbers, saying it remains on course to hit full-year targets, driven largely by strong overseas sales.

Asos' chief executive, Nick Robertson, said: "Our US website launched during September and we expect to be live with both our French and German websites by the end of October. With retail gross margin ahead of [the] prior year and costs tightly managed, we expect our full-year results to be in line with market expectations."

Who's afraid of the Spending Review?

Everything getting better on Aim is a very welcome development, but of course, all enthusiasm needs to be tempered ahead of this week's Comprehensive Spending Review, which promises to do much to put the brakes on the economic recovery while attempting to plug the hole in the budget deficit. The event is an opportunity for City researchers to sharpen their pencils and pontificate on the likely results for a range of sectors. The latest is Edison and its views on the technology sector.

Perhaps counter-intuitively, it reckons the cuts are not all bad news for the small-cap tech sector. "It is old news that the upcoming UK [spending] review will be draconian," Edison says. "Companies have known for some time that large-scale public projects in particular are under severe threat and the UK IT industry will not escape. Eagle-eyed investors will notice though that several niche healthcare IT stocks actually rallied post the announced NHS IT restructuring and £700m budget reduction."

The watchers agree that the large "mega-caps" will come under pressure, "as their consultancy service businesses will be prime target for renegotiation or elimination" but suggest that smaller, more nimble firms may be able to capitalise. Edison says: "The devil here is in the detail but while we do expect casualties, many of these companies have built their businesses through offering genuine productivity or efficiency benefits, often in competition with the industry behemoths."