Derek Pain: Survivor of the 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 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 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 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.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

Arts and Entertainment
Books should be for everyone, says Els, 8. Publisher Scholastic now agrees
booksAn eight-year-old saw a pirate book was ‘for boys’ and took on the publishers
Life and Style
Mary Beard received abuse after speaking positively on 'Question Time' about immigrant workers: 'When people say ridiculous, untrue and hurtful things, then I think you should call them out'
Life and Style
Most mail-order brides are thought to come from Thailand, the Philippines and Romania
Life and Style
Margaret Thatcher, with her director of publicity Sir Gordon Reece, who helped her and the Tory Party to victory in 1979
voicesThe subject is being celebrated by the V&A museum, triggering some happy memories for former PR man DJ Taylor
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Business Analyst - Financial Services - City, London

    £50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

    SThree: Trainee Recruitment Consultant

    £18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

    Recruitment Genius: Administrator - IFA Based

    £22000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...

    Day In a Page

    General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

    Chuka Umunna: A virus of racism runs through Ukip

    The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
    Yemen crisis: This exotic war will soon become Europe's problem

    Yemen's exotic war will soon affect Europe

    Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
    Marginal Streets project aims to document voters in the run-up to the General Election

    Marginal Streets project documents voters

    Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
    Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

    The real-life kingdom of Westeros

    Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
    How to survive a social-media mauling, by the tough women of Twitter

    How to survive a Twitter mauling

    Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
    Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

    At dawn, the young remember the young

    A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

    Follow the money as never before

    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
    Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

    Samuel West interview

    The actor and director on austerity, unionisation, and not mentioning his famous parents
    General Election 2015: Imagine if the leading political parties were fashion labels

    Imagine if the leading political parties were fashion labels

    Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
    Public relations as 'art'? Surely not

    Confessions of a former PR man

    The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
    Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

    Bill Granger's luxurious sweet treats

    Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
    London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

    The mother of all goodbyes

    Paula Radcliffe's farewell to the London Marathon will be a family affair
    Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

    Steven Naismith: 'We know we must do better'

    The Everton forward explains the reasons behind club's decline this season
    Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

    Michael Calvin's Last Word

    Praise to Wenger for having the courage of his convictions