No Pain, No Gain: US bonanza for a clever little hi-tech company

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The United States has been a disaster area for many British companies - remember, for example, the nightmare suffered by the old Midland Bank. Yet Vislink, a little hi-tech business that has experienced more than the occasional setback in its long life, is enjoying the sort of transatlantic success that eluded so many more famous names in bygone years.

Half-year pre-tax profits surged from £2.1m to £6.1m with most of the increase coming from its American operations. Its US side accounted for some 60 per cent of turnover, producing, at the operating level, profits of £5.7m against £2m in the same period last year.

It is at technology's sharp edge where Vislink, an obscure company with a £97.5m capitalisation, is amassing its dollar fortune. Major changes in the way US broadcasters transmit have prompted the bonanza. And it looks as if the group will continue to reap rich rewards for at least a few more years. City forecasts suggest profits of £12.7m this year (against £6.4m) with £13.1m likely next year. I believe these estimates are ultra-cautious.

New US rules have forced broadcasters to switch channels. Unless legislators embark on another round of changes, Vislink's purple patch will fade. It will then need to bolster income from other sources; it should manage to do so.

It is probably too late to climb aboard Vislink's US bandwagon. The transatlantic success is already reflected in the share price. Still the group has a multitude of fascinating operations. Besides its broadcasting links, which include providing battlefield communications, it is deep into security and law enforcement and even monitoring oil leaks. And it is looking for other activities.

The shares have had an eventful time. They were as low as 10p in 2003 when losses were made. Since then, they have picked up and as the US adventures became more widely appreciated rose sharply; they are now around 80p.

Vislink's hi-tech role is far removed from its early days. It was established, under the name Silvermines, in the 1950s as an Irish miner. Over the years, it evolved into an engineering conglomerate. The old metal-bashing operations were then sold to allow it to focus, under a more appropriate name, on broadcasting and telecommunications.

It is one of the groups headed by Bob Morton. He is not an entrepreneur who hangs on to cash unnecessarily. Vislink is a dividend-paying company and I would expect this year's payment to at the very least double to 1p a share.

Morton is involved with more than a dozen companies, often developing them through takeovers. Vislink enjoys a full listing but shares of many Morton enterprises are traded on the Alternative Investment Market (AIM). He was chairman of MacLellan, the AIM-traded support services group controversially acquired by its bigger rival Interserve in July. Through a series of deals he expanded MacLellan into an important cleaning and security group worth, at the time of the cash and shares takeover, £116m.

But MacLellan shareholders failed to reap their just reward because of the subsequent slump in Interserve shares. At the time of the deal they were valued at 382p. But 10 days after cheques and share certificates arrived on shareholders' doormats accounting errors were announced. The shares touched 260p before recovering some lost ground.

Morton, whose family was a substantial MacLellan shareholder, is leading a campaign that could force compensation. His solicitors have tabled a series of questions about accounting irregularities. Morton wants to knowwhen Interserve's board became aware of the accounting mistakes which, apparently, went back "at least five years". He also wants sight of an internal review being carried out by auditor KPMG.

I wish Morton - and any institutional shareholder taking up the cudgels - luck. As a former MacLellan shareholder, the No Pain, No Gain portfolio should benefit from any success achieved. Extra cash on the table would be the best solution; even a share settlement would have merit.

The tragedy is such cases often enrich only the legal eagles. A striking price for compensation could be difficult to fix. Should it be 382p or 260p - or somewhere in between? And that is assuming no new problems are uncovered, sending the shares lower.

cash@independent.co.uk

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