How this ex-army officer plans to tap in to the security market

A tiny security company is about to launch on the Alternative Investments Market. It’s a decent business with scope to grow, says Tom Bulford. Here, he looks at what it’s got going for it.

When the Arab Spring kicked off last year, security consultants advised foreign workers to get out of the region as quickly as possible. Fine, but how? Former British Army officer John Blamire reckons that plenty of security consultants can tell you what to do, but few of them can make it happen. That leaves a gap in the security market and he intends to fill it with his company, Falanx Group.

Falanx plans to launch on the AIM market, with a tiny value of c£5m. It has a few good things going for it: it has a couple of major contracts that should make good money; it shouldn’t have to rely upon endless infusions of shareholder capital; and the rating of the shares does not appear demanding. But the delivery of Falanx’s strategic plans is what will count, and here the story has a few wrinkles of interest to long time followers of the AIM market.

It’s the resolution that is the key

The basic premise is this: Falanx owns Stirling Assynt, which provides security and intelligence reports for governments and global corporations. It produces regular country reports and has an intelligence service that helps businesses decide whether or not to embark upon a new venture in a foreign land, and resolve any crises once they have done so. With over 100 clients, most of which subscribe a few thousand pounds a year for the service, this looks like a decent business with scope to grow.

But John Blamire thinks that Stirling Assynt can be the foundation for a lot more. He thinks that it can open doors to new customers and identify problems that need resolution. Rather than simply telling the customer that there is a problem, Blamire wants Falanx to be able to sort it out.

Given the range of possible problems, this sounds like a tall order. For example, when I spoke to him on the phone, Blamire mentioned cyber security – the protection of computing networks from illegal attack – as an important part of the service. But large specialist companies are devoted to this alone and it is hard to see how a tiny AIM company can hope to compete. Given an irregular workload and a range of required services, the strategy seems suited to a sub-contracting model, albeit one for which Falanx takes real responsibility for delivery.

Plenty of opportunities in this dangerous world

Acquisitions are promised, paid for in shares. But already Falanx has two intriguing relationships. The first of these gives it an exclusive licence in the Middle East, North Africa and Singapore, and a non-exclusive licence in China and Hong Kong to supply security blinds.

In the event of an explosion these snap shut in 25 milliseconds to form a shield. These were developed by Brian Wilkins whose company, Security Blinds, is owned by Eruma (AIM: ERU). Last November, Eruma announced that it had appointed Saudi Technical Support (STS) as its exclusive distribution partner within the Kingdom of Saudi Arabia.

Wilkins resigned from the board of Eruma in January, and Eruma itself is now the subject of a court imposed winding up order. Nevertheless Falanx appears confident of securing a major contract in the Middle East where the threat of terrorism is great.

Next Falanx has a second relationship with another AIM-listed company of dubious provenance. This is Environmental Recycling (ENRT), owner of the powder impression moulding process that recycles plastic by first turning it into granules and then using it as a filler between two hardened plastic skins. Formerly known as 3DM Worldwide, this was once a stock market favourite, but has struggled to turn the promise of its technology into shareholder value. Falanx is paying $100,000 to Environmental Technologies for the privilege of developing security products using the process, as well as royalties on any sales.

Other relationships include an agreement with Weslan Security Consultants, which provides former army personnel as armed guards in in the mining, oil and maritime industries,. But immediate profitability is set to come from a deal that will see Falanx, through Stirling Assynt, train the staff of a Middle Eastern government in-country, on behalf of the UK defence and a security supplier Qinetiq (QQ.).

Falanx looks set to come to the market with a good chance of immediate profitability and plenty of opportunities in a dangerous world. But it is hard to know exactly how it might develop. Investors like to see a company delivering against a straightforward strategy. With such expectations, running a public company can be a minefield. But as an ex-Army officer, John Blamire should be able to cope.

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