Derek Pain: Survivor of the dot.com boom has put up a remarkable fight - Spend & Save - Money - The Independent

Derek Pain: Survivor of the dot.com boom has put up a remarkable fight

No Pain, No Gain

Scotty, an audio and video communication and surveillance group, has been a bitter disappointment to shareholders. Its latest capital restructuring is unlikely to offer them any comfort.

Yet around the turn of the century it enjoyed a glamour rating. As Motion Media it was a leading performer in the dot.com madness that propelled the stock market to its highest-ever level. Unlike many it survived the boom and bust, but its shares are now a bedraggled shadow of their former selves.

Resource shares have for years enjoyed the dubious distinction of exhibiting an exceptionally high degree of volatility. But in the dot.com explosion the hi-tech sector produced an eruption of five-minute wonders, probably exceeding any past upheaval on the resources front.

Scotty, it could be argued, has done well to avoid the disasters that overwhelmed many of its peers. Nonetheless, the high cost of its survival has devastated shareholder value.

I first encountered the group in 1996. It held a reception at a Fleet Street pub to mark its share flotation. The main product was video telephones. The idea of viewing the person at the other end of the line as you talked with them was deemed revolutionary. A huge avalanche of orders was anticipated. It never arrived.

But Scotty's video technology has much to commend it. Video conference calls are increasingly popular and seem to have helped to keep the wheels of commerce turning while the Icelandic ash crisis kept airports closed.

Although the company has produced profits and announced a string of contract wins in recent years, its shares have wilted.

The latest capital reorganisation, announced last week, is by no means the first. The shares were floated at 67.5p. They did not take off immediately but at the height of the dot.com boom hit 290p. Shareholders who sold in the good times made a mint; those who displayed patience have, unlike the examples I discussed last week, caught a cold.

The first rejig saw the "heavyweight" shares split. Less than two years ago came another restructuring; this time it was a consolidation as 50 shares were packaged into one, with a 50p nominal value.

Last week's proposed change will reduce the 50p shares to 5p. After the announcement, the shares, which had bumped along in the low 20s and topped 150p just five years ago, slumped to 11p.

The group's yearly report illustrates why the stock market has lost faith. It would appear that Scotty, not for the first time, is planning to raise cash. In the past it has pulled in money by issuing shares, but it has yet to indulge in a rights issue. A 50p par value, with the share price in the doldrums, blocks any more cash-raising activity as shares cannot be issued at a discount to their nominal value.

The chairman, Lord Trafgarne, is at pains to point out that the number of shares each shareholder owns will be unchanged. Their rights and entitlements will be unaffected.

My guess is that Scotty will attempt a rights issue if shareholders approve the reorganisation. But it must be hoping its shares settle down at somewhere near the current price. As I write they are 15.5p, allowing it to offer rights shares (or, perhaps, indulge in a placing) at around 10p.

There is much to be said for Scotty's products. In this age of international tension there is obviously a demand for its sophisticated range of equipment. But government debt problems have reduced the flow of orders. Delays in signing contracts are putting "demands on our cash resources", admits Lord Trafgarne.

The group is a classic example of a small company offering equipment which costs an arm and a leg to develop. It needs a steady stream of orders. There is no doubt that it is in the forefront of the development of civilian and military communication and surveillance equipment. But such products require deep pockets. And its rivals, often major companies, can devote more plentiful resources.

Too often, the group has flattered only to deceive. It has, however, put up a remarkable fight and there must be a good chance that when economic conditions improve its day will come. In the meantime shareholders could face a long wait.

yourmoney@independent.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Life and Style
tech
Arts and Entertainment
Robin Thicke's video for 'Blurred Lines' has been criticised for condoning rape
music
News
Paper trail: the wedding photograph found in the rubble after 9/11 – it took Elizabeth Keefe 13 years to find the people in it
newsWho are the people in this photo? It took Elizabeth Stringer Keefe 13 years to find out
Arts and Entertainment
Matt Damon as Jason Bourne in The Bourne Ultimatum (2007)
filmMatt Damon in talks to return
PROMOTED VIDEO
News
peopleThe report and photo dedicated to the actress’s decolletage has, unsurprisingly, provoked anger
Arts and Entertainment
Evil eye: Douglas Adams in 'mad genius' pose
booksNew biography sheds light on comic genius of Douglas Adams
Life and Style
tech... and together they're worth at least £100 million
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig is believed to be donning skies as 007 for the first time
Arts and Entertainment
Fringe show: 'Cilla', with Sheridan Smith in the title role and Aneurin Barnard as her future husband Bobby Willis
tvEllen E Jones on ITV's 'Cilla'
Life and Style
Bono and Apple CEO Tim Cook announced U2's surprise new album at the iPhone 6 launch
tech(but you can't escape: Bono is always on your iPhone)
Sport
Tim Wiese
sport
Life and Style
Kim Kardashian drawn backlash over her sexy swimsuit selfie, called 'disgusting' and 'nasty'
fashionCritics say magazine only pays attention to fashion trends among rich, white women
Arts and Entertainment
TVShows like Agents of S.H.I.E.L.D are little more than marketing tools
Arts and Entertainment
Hit the roof: hot-tub cinema east London
architectureFrom pools to football pitches, rooftop living is looking up
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Sales Executive

    £20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

    Payroll & Accounts Assistant

    £20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

    SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

    £280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Senior BA - Insurance **URGENT**

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week