No Pain, No Gain: Avesco has the potential to create more millionaires

Avesco has had an adventurous time since slipping quietly on to the stock market in the late 1980s. It has changed its direction and shape, indulging in at least two demergers and buying and selling businesses.

I vaguely recall attending a low-key City presentation at the time of the flotation. I was not particularly impressed by yet another electronics enterprise and paid little attention to it. But perhaps I should have been more alert. It has certainly enjoyed an eventful ride, with its shares, like so many in the hi-tech zone, having a highly volatile run.

The current Avesco supplies equipment for occasions such as showbiz award ceremonies and high-powered motor shows as well as cameras and such for television groups covering major events like next year's football World Cup. It has just recorded an £800,000 interim loss but is expecting a strong second-half performance, and should achieve full-year profits of about £2.2m.

But the present group bears little resemblance to the old operation I encountered in the tumultuous late 1980s (remember Big Bang and the devastating Black Monday-led stock market crash), nor indeed to the various shapes it acquired in subsequent years.

Besides occasionally buying and selling businesses, it undertook a major spin-off when it split from the old Videologic operation. Then, last year, came the biggest deal of all with the demerger of its media division, InvestinMedia.

The departure of the media side, famed for its near-50 per cent stake in the owner of the long-running Who Wants To Be a Millionaire? TV quiz, stripped Avesco of much of its old-style glamour. Comparing today's Avesco with the pre-demerger group is rather hazardous and, perhaps, a trifle unfair. Still, there is no escaping the simple fact that in the dot.com madness Avesco shares were above £10 and, largely thanks to the media side, profits zoomed ahead .

Indeed, the acquisition of the stake in the money-spinning TV quiz is probably a contender for the deal of the (last) century. In 1996, Avesco paid £713,000 for its interest; in 2000 alone it contributed £11.7m to the group.

The man behind the Avesco story is 57-year-old Richard Murray, now a non-executive director and chairman of the quoted InvestinMedia. He is a significant shareholder in both companies. Murray is also chairman of Charlton, the listed football club. He has been a major influence in its transformation from no-hoper into a leading constituent of the Premiership.

The head of Avesco is Ian Martin. He has the task of proving that he is not running the poor relation of the Murray empire. And he has a strong hand. For the advent of high-definition TV, offering much sharper images, provides tantalising possibilities.

Gearing up for HDTV is expensive. But Avesco has the resources, helped along by a summertime £2.4m share placing (at 90p). It believes HDTV will take off next year. Already, it is used to a limited extent in the US and, with the BBC, BSkyB and NTL declaring interest, should soon gather momentum in this country.

HDTV could be the biggest TV switch-on since the introduction of colour, and there could be 4.5 million sets in use here by 2008. Coverage of sports events, already a major Avesco activity, will require the HDTV equipment the group has acquired. Martin hopes his cameras will be used to beam pictures around the world. Next year offers such delights as the football World Cup, the Winter Olympics, the Ryder Cup and the Asian Games, so he should have no shortage of opportunities.

But only the Olympics will contribute to this year's profits; the rest come into next year. Analyst Dominic Convey of KBC Peel Hunt expects profits for that year, ending in March 2007, to come out at £3m.

The presentation side should prosper. For example, its US business has already put together a record order book for January, its key month, helped by the Detroit Motor Show.

At around 90p, capitalising the company at £20m, the shares are not on a particularly demanding rating. There might not be much to go for in the short term, but if the group does score from HDTV, its rewards could be quite considerable. Indeed, it is now engaged in an investment road-show aimed at institutions and private-client stockbrokers. It clearly thinks it has an encouraging message for the investment community.

Martin does not strike me as a man prone to exaggeration. So when he said: "At no other time since I became involved with Avesco have I seen as much opportunity for the group as I can see today," I, for one, am prepared to go along with him.

cash@independent.co.uk

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