Bottom Line: No new inspiration from Sugar

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The Independent Online
IF yesterday did not produce the explicit statement of strategy from Amstrad the market was hoping for, it was not because Alan Sugar was being his usual disingenuous self. It seems he is genuinely in the dark about where to take the company from here.

Personal computers, making an undisclosed loss, are out. Telecommunications, on the back of the recent spate of cellular phone service launches, are in. Good thinking, but nothing to upset analysts' calculations.

That did not stop the shareholders who rejected Mr Sugar's 30p offer last year being proved right in the short term by yesterday's jump in the share price from 45p to 48.5p. What yesterday's worse-than-expected loss confirmed, however, is that while the downside is still limited, Amstrad is very much ex-growth.

With 30p of a now quite realistic assets-per-share figure of 44p in hard cash, the shares are well supported. But trading is still uninspiring and, as Mr Sugar admits, the company's products have long since lost any unique selling point.

The improving share price was more a reflection of the return of the prodigal son to the City fold than of any excitement about prospects.

First non-execs, then the admission that a chief executive will be needed to help guide Amstrad through its post-PC expansion, even a meeting with analysts to discuss the figures. Mr Sugar will probably start talking to the press next.

He has always considered that a thankless task but, as he admitted yesterday, he has got used to those over a decade of creating innovative products only for his competitors to reap the benefit.

But innovation is what Amstrad will have to do if it is to return to anything like decent margins. Even if returns double from their current 5 per cent, a 10 per cent margin and a normal tax charge point to earnings of only 4.5p a share.

A price/earnings ratio of 10 does not seem demanding until you factor in the inherent volatility of Amstrad's earnings. Investors who were wise enough to send Mr Sugar packing last year would be well advised to pocket their profit now.