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Bottom Line: TransTech out of favour

TRANSFER Technology has grown phenomenally in the two years since Geoffrey Robinson, the Labour MP, reversed his engineering businesses into Central & Sheerwood, the property group then controlled by Robert Maxwell. TransTech is now capitalised at over pounds 100m and its interim figures, due next month, should show the benefits of the acquisitions strategy led by Mr Robinson.

But for all the favourable City comment, TransTech shares trade at a substantial discount to the market. Why?

Mr Robinson, who made his name running Jaguar Cars, has sold TransTech two businesses. The first was TransTech itself, which he founded in the mid-1980s and was making pounds 1m a year before he sold it. Why then is this business now losing money? Mr Robinson says this is an accounting nicety, as the parent company transferred all the businesses out of the original TransTech company to other group companies for tax reasons.

The second business Mr Robinson sold to TransTech was Roll Centre, based in Gary, Indiana, for dollars 100,000. This deal was done apparently because the two companies did business together and there were concerns about transfer pricing. Why, then, should Roll Centre still benefit from a dollars 1.5m loan from Mr Robinson and his guarantee for another dollars 2m of borrowings?

The group bought four businesses last year for a total of about pounds 11m. The assets of those businesses have been reduced from nearly pounds 6m to pounds 2.61m through fair value adjustments and TransTech has had to write off pounds 8.3m worth of goodwill. TransTech says the adjustments will not affect future profits. It will be interesting to see what happens if TransTech sells any of these companies.

The group recently changed its auditors to Coopers & Lybrand and its brokers to Kleinwort Benson. But the City lacks confidence in TransTech and it is hard to see when this might improve.