One to watch: SMC Group

Published on Friday 19 September 2008 21:52

6.88p UNCH Scotsman says BUY

SMC Group is a company I have mentioned before. The shares have been an unmitigated disaster. SMC is the holding company for a group of architects, engaged in projects throughout the UK, Europe, the Middle East, Asia, the United States and Canada.

The concept behind SMC looked excellent, bringing together architect partnerships from around the country to achieve critical mass and the synergy of cost economies. The creation of the group was at a gallop, with the acquisition of nine businesses in 2006. This rapid pace of expansion proved far too hot. The group proceeded to give a good impression of falling apart, hardly an encouraging development for an architectural business.

However, the cavalry arrived in the form of a new chief executive, Colin Littlemore, and a new executive chairman, Sir Rodney Walker. In September last year, the company posted a pre-tax loss of 4.5 million as a consequence of the re-positioning of the business.

It attempted to merge with Aukett Fitzroy Robinson but failed to tie the knot. Shortly afterwards SMC raised around 15m through a 19-for-five rights issue at 8p. This put the company on a much firmer footing, helping to reduce its administration expenses and secure better banking facilities. In the first six months of this year, the group returned a pre-tax profit of 1.6m.

SMC's shares have drifted back, partly on investor antipathy to smaller companies, but also, perhaps, because of perceived associations with the struggling UK property market. For the patient investor, this could be a good buying opportunity.

&#149 The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.