Strontium in the News

AIM Reflections - Published on Monday 21st May 2007

from Tom Bulford, author of Red Hot Penny Shares

Strontium and the Alliance

There are a number of organisations in the UK that purport to help small businesses (‘SMEs’). In the past AIM Reflections has commented upon Access Intelligence, which owns one such, The Marketing Guild. There are also several forums established by, for example, the local Chamber of Commerce where small business owners can get together to share their experiences. David Barker is a former consultant to SMEs who has observed such gatherings. And he reckons that not much gets achieved beyond the ritual exchange of business cards.

So he has set up the Strontium Alliance, which is owned by the AIM-listed Strontium plc. Forty-five year old Barker owns 39% of Strontium while chairman Michael Metcalfe, a former director of ED & F Man and a well-known figure in the City, owns 25%. A third individual, Colin Brompton, owns 13% while having taken £300,000 of shares in a placing in March, stockbroker Wills & Co speaks for a further 13%. So shares in this £2.5m company are as illiquid as they come, but still it is an interesting story and one that has plenty of time to develop and become of interest to other private investors.

New business introductions

With this level of friendly and committed support, Barker is in no hurry. But he has set his sights upon the long-term creation of a professional services company. So far the Strontium Alliance has attracted twenty-one members and has a target of one hundred. Strontium vets each applicant who, if accepted, pays nothing to join but is expected to contribute the names of ten clients. These names are then made available to other members of the Alliance. If a member wishes to put a business proposition to one of the names on the list then for the necessary introduction they must approach the client ‘owner,’ who has the right to turn down the request. However if the introduction leads to the transaction of business, then the introducer will receive 5% of its value, while another 5% will go towards the administration costs of the Alliance.

The Alliance was established only last year, so it is early days. But so far it has attracted companies involved in a range of activities including events management, software support, accountancy, marketing, and research and they have all been invited to attend a one-day seminar in Reading in June. Here, in a structured series of meetings, participants will hope to pick up two new business leads.

Three divisions

Strontium plc, though, consists of more than just the Alliance. It owns three companies and is seeking to acquire more. The first of these is Executive Development Consultants, run by its 73-year old founder Dr Peter Grey. Second is Aspect Information Management, a research organisation that was bought out of Qube Strategic Consultants, a company founded by David Barker. Aspect conducts surveys of employee and customer attitudes as well as market research. The third division is MiAD, a Sevenoaks based company that provides training courses for doctors on behalf of hospital management trusts. MiaD has trained over 20,000 doctors to date, for 100 hospital trusts, and was acquired last month for £226,000 with a further maximum earn out payment of £187,000.

These companies are all themselves members of the Alliance, so stand to benefit from its structure. And with the fees generated by the Alliance expected to do no more than cover the costs of its administration, it is the results of these owned companies that will be reflected in the accounts of Strontium plc, and will ultimately drive the share price.

Not pure altruism

However the running of the Alliance is not an act of pure altruism. Strontium describes itself as a hybrid between a buyer of companies, an investment organisation and a provider of consultancy services. It is ready to advise the small businesses of the Alliance, to invest in them up to a maximum of £250,000, and perhaps eventually buy them out altogether. And what Barker realises is that Strontium’s familiarity with the companies in the Alliance, the people who run them and the business sectors that they represent will put Strontium in an ideal position to make successful investments.

So this is quite a neat plan, which if it works could become the platform for the creation of a large and well diversified company in an area of the stock market, professional services, that can be rewarding for private investors.

Tom Bulford
Tom Bulford writes the small company newsletter, Red Hot Penny Shares, published by Fleet Street Publications

This article appeared on www.armshare.com, a web-site designed to bring AIM companies to the attention of private investors.