Strontium in the News

Strontium - One to buy

Quite why Strontium is choosing to list on AIM as opposed to OFEX, we are not entirely sure, however with a free float of just 15%, an interesting business, a decent management team, and a market capitalisation of just £1.832 million; we think this company could deliver share price success, even if its recipe is not a particularly subtle one. No new money is being raised at this point in time, so what you see is what you get. A small company with an interesting story to tell.

Strontium is a UK based operation, providing a portfolio of services to SMEs, micro businesses, VCs and professional advisors alongside larger organisations. The company is essentially an investor in people and their businesses. If you take their marketing paraphernalia at face value, Strontium invests to help businesses grow. Bring out the buckets. Seriously though, this company does provide a useful service, with its investment taking a number of guises. Usually this is investment capital, but often finance is supplemented by specialist management skills. This investment can, on occasion, be success based.

The group and its various subsidiaries provide the specialist skills and consultancy services in a number of areas. Principally these are planning, people, information, funding, sales, PR and marketing. Essentially, Strontium aims to be a principle source of acquisition funding. Its approach is very much one based around cherry picking and therefore is not a traditional banking style money lender or broker. It won't take on the riff raff just for the sake of a quick fee.

The business is currently split into two divisions. Aspect Information Management and Executive Development Consultants, the latter of which the group owns a 76% stake. Aspect provides specialised research services in the areas of customer, employee and general market information. EDC provides personal coaching and development services to company executives. Alongside these two trading subsidiaries, the group operates a business division under the brand 'Collectpoint'. This division provides a managed network of alternative drop off and pick up locations for parcel traffic in the UK. Whilst this may seem like an odd mix, the reality is that each of the businesses are strangely complimentary to one another. Indeed, it is the company's objective to develop a diversified professional services group through the collective brand of 'The Strontium Alliance". The aim of the alliance is to create a community of up to 100 professional service enterprises each of which will typically employ less than 10 people and have turnover of less than £2 million per year. Through this alliance, it intends to improve turnover and efficiency of both its external corporate clients and its own members.

The concept of this alliance is simple. The company believes that many smaller organisations are unable to do business with larger firms or break into larger markets due to the smaller company’s perceived lack of management experience and the necessary understanding of how to do business with larger and/or multinational entities. It is Strontium's objective to allow such smaller companies to enter into these markets via the Alliance. Anticipating for a moment that each new Alliance member has a turnover of less than £2 million, being part of such a vehicle could potentially allow it the capability to experience dramatic revenue growth by leveraging the complementary skill sets of other Alliance members to exploit opportunities with third party corporate clients.

There is method in the madness of this ambitious alliance. The company will look to invest in the Alliance members, which, in its opinion, have the capacity for exceptional growth and profits. It is a multi-thronged approach.

Strontium is already a profitable company. For the 9 month period to 30th June, the company reported a pre-tax profit of £198,903 on sales of £531,434. The profit would have been £233,387 had it not been for an exceptional charge of £34,484 on the back of losses associated with the sale of a subsidiary company. The numbers are certainly pretty impressive for a company of its size. Led by managing director, David Barker, Strontium maintains a small management team of just two, with Barker assisted by non-exec Michael Metcalfe, a former director of both ED & F Man and LIFFE.

We like this company and believe that there is a clear opportunity for success here. It has an interesting business model with a management team that is well able to plan and execute its business strategy. On a historical price earnings of 13.1 and a business with a potentially exciting growth story, this stock is headed northwards. A free float of just 15% does seem a little silly and so does listing a £1.8 million market cap company on AIM - but there is little doubt that the company will benefit from an increased profile, albeit it at a rather hefty cost. Still, with so few shares available and a business that looks to be heading in an exciting direction, this stock looks well placed to move sharply higher. "Buy".

Contact Details: City Financial Associates (Liam Murray) 020 7090 815

This article first appeared on www.allnewissues.com