Bottom Line: Tap into ACT

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The Independent Online
ACT has come full circle in the past 10 years, from a computer services group to a hardware supplier and back again. Wisely so. An impressive five-year record, albeit from a low base, underlines the astuteness of getting out of the commodity end of the computer industry by selling the old Apricot box shifting business three years ago.

Yesterday's figures for the year to March confirmed that the good news is still flowing. Pre-tax profits rose a fifth from pounds 17m to pounds 20.5m, from sales 22 per cent higher at pounds 146m. Earnings per share were 5 per cent better at 11.3p and, stripping out 1991's exceptional share sale profit, the improvement was 14 per cent. The dividend rose almost as fast from 4.5p to 5p.

Despite those figures, and a near quadrupling of profits since 1989, the stock market is grudging in its support. Even after yesterday's 9p rise to 152p, ACT's shares stand at a 20 per cent discount to the rest of the market on the basis of forecast profits this year of pounds 24m and pounds 27.2m to March 1995.

That seems unjust. Three quarters of profits now come from selling financial services software products that attract fat margins. The market, supplied by Kindle, the successful 1991 acquisition, is also growing nicely, with opportunities emerging in Eastern Europe and other developing financial markets.

More recently the acquisition of NMW, the troubled supplier of stockbroker software, looks to have been a bargain. A price tag of pounds 6m bought a company that is making profits of more than pounds 1m a year.

All ACT's divisions throw off lots of cash, so a pounds 25m cash pile looks set to keep on growing. Orders are strong and the company promises another good year. On that basis the rating is measly. Buy.

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