Despite generally challenging conditions for equity investment, PLUS Markets’ September trading figures report close to a 100 per cent increase in trading values and volumes on the previous month. Some would say that business is always slow in August, but Paul Haddock, head of capital markets at PLUS, believes that September’s figures are a clear indication that despite an unfavourable climate, PLUS is still able to do business and is seeing a degree of growth.
“We had a good start to 2008, with a number of new companies coming to the market and fundraisings, which is surprising in this environment,”says Haddock.
In the first three-quarters of the year, there were 34 new admissions to the small and mid-cap market and fundraising totalled £54.33 million.
Haddock explains: “PLUS-quoted companies raising smaller amounts of money are still managing to get deals away. The funds are coming through from the smaller institutions and there is still a fair amount of Venture Capital Trust (VCT) and private equity money available.”
Acquisition trail
Recent M&A activity on PLUS includes Staffordshire-based Keycom, a broadband services provider steered by CEO Rod Matthews, which acquired Wrexham-based rival MCW Group and sister firm Mediaforce LLP for £2.1 million in cash and a deferred element of between £1.2 and £2 million. The deal was financed through a share placing on PLUS last month, which raised a total of £4.4 million. The proceeds will also be used for working capital.
Matthews says: “I am delighted with the response that we have received to this fundraising. The support seen from existing and new shareholders has been encouraging, especially in this difficult market environment. We now have the necessary financial resources to continue our consolidation strategy and are delighted to be able to announce the acquisition of MCW.”
Keycom provides broadband services in student rooms and rooms occupied by members of the armed forces. In the six months ended 31 March, Keycom posted gross profits of £647,000 on a turnover of £1.02 million. Recent figures show that basic broadband services generate 82 per cent of the company’s total revenue.
Train to gain
PLUS-quoted Woodspeen Training, which is on a corporate mission to acquire and develop businesses engaged in the delivery of vocation training to adults in the UK, hit the acquisition trail in April.
Led by executive chairman Charles Prior, co-founder of BPP Holdings, the training company acquired Futures Centres, a training venture based in the south-west, for up to £2.7 million in a move to snap up minnows within the vocational training market.
The initial payment of £1.15 million comprised £650,000 in cash, £100,000 in convertible loan notes and 800,000 shares issued at 50p per share. Further payments are due if agreed targets are met.
Prior observes: “The government-funded vocational training market is highly fragmented, and we believe this provides an excellent opportunity to build a large and profitable business by consolidating the sector and realising the synergies that such consolidation brings.”
Woodspeen continues to eye a number of other potential acquisitions.
Secondary market
Haddock says PLUS is keen to encourage liquidity in the secondary market to enable growth companies, such as Keycom and Woodspeen, to raise funds or to use their own paper to finance acquisitions.
“PLUS is a growth market and there are some companies that may not be very liquid, but it is our job as a Recognised Investment Exchange to facilitate liquidity. We have to make sure the mechanisms are in place to ensure companies have a good crack at seeing a degree of liquidity in the secondary market to enable them to go on and do what they want to do – to see growth in their share price.”
To boost liquidity at the market, PLUS is presently engaged in a well-publicised spat with the London Stock Exchange (LSE).
PLUS is in court over a rule that prevents the trading of AIM securities on other markets. The rule requires that trades completed on markets other than the LSE be reported to the LSE, which means that every AIM company has to elect to be traded on PLUS.
At present some 90 AIM companies are already dual-traded on PLUS, and the majority of these companies see 50 per cent and more in market share of their trading on PLUS.
“There are a bunch of small and medium-sized securities that can only be traded on the LSE at the moment because of its rules. We think this is unfair and flies in the face of what the Markets in Financial Instruments Directive (MiFID) is all about – increasing competition and choice in the secondary market,” he says.
Haddock says the FSA and the Treasury agree with his point of view and that the rule needs to change.
“We are going to court to get this rule changed. We do mean to trade the 1,600 AIM securities, currently not traded on our market and the reason we want to do this is because our market participants want to trade them,” he says.
“We have to be able to facilitate this in our market.”
Deals at a glance:
Acquirer: Keycom plc
Sector: it hardware
Targets: MCW Group and Mediaforce LLP
Value: £2.1 million in cash and £1.2 to £2 million in deferred consideration
FUNDRAISING: £4.4 million
Advisers: Seymour Pierce and Beachcroft
Acquirer: Woodspeen Training plc
Sector: Support services
Targets: Futures Training Centres ltd
Value: Up to £2.7 million
Advisers: Whim Gully Capital LLP
