CITY TALK : Verity must turn down volume

The spotlight has once again swung back on to Verity Group, the loudspeakers firm pioneering a revolutionary new flat panel technology.

Its shares have continued their ascent of recent months, and rose another five per cent in the last fortnight, to 52.5p. For most of last year, they had trundled along at under 15p.

The latest news to affect the price came last Tuesday when the firm announced a cross-licensing deal with Noise Cancellation Technologies, a company quoted on Nasdaq in the US.

The deal means the two companies will share their technology, and Verity will pay NCT an up-front royalty fee of $3m (pounds 2m).

Verity has already signed up with NEC, the giant Japanese consumer electronics and personal computing firm, for its technology to be used in its lap- top computers. It all sounds pretty encouraging on paper, and the company is almost certainly doing the right thing when it licenses the technology, rather than try to go it alone.

However, the shares have attracted all sorts of hyperbole, and some of the recent buying has left a suspicious whiff of a stockmarket ramp in action.

The annual worldwide market for loudspeakers is worth a little over pounds 1.7bn. Verity could say justifiably that its technology will be used in items such as laptop computers and mobile phones, which fall outside the conventional speaker market.

Most commercial royalties pay a 3 per cent fee on sales of another company's technology. If that were the case, a back-of-the-envelope calculation suggests that worldwide sales for the new technology will need to top pounds 400m if Verity is to generate pounds 12m in royalty income, and thereby merit its stockmarket tag of pounds 147m - a tall order.

The original speakers and percussion business is worth about pounds 15m to pounds 20m, leaving pounds 120m plus in hopes.

With royalty income of pounds 12m, after central administration costs and tax, say there is pounds 6m left over, putting the shares on a ratio of 20 times 1998 earnings - which is just about right.

Can Verity do it? It seems unlikely - fee income of, at best, pounds 8m by 1998 looks more reasonable. The shares look over-priced, and it is time the market took a more sensible view on this company's financial prospects.

Later this month will see maiden results from LucasVarity, following the merger of the two concerns, under chief executive Victor Rice. Observers are convinced it will announce details of a long mooted share buyback, which will probably be accompanied by a cut of the 7p dividend. There is an argument that some of the surplus cash from this move and cost-cutting will be best returned to shareholders through a share buyback, and LucasVarity has said its leading shareholders approve the move. Share buybacks are a US favourite - which, given LucasVarity's quasi-US status, lends the story credibility.

Tomorrow the market will hear how Manchester United has performed off the field, when it reports its interim results for the six months to the end of January. The range of forecasts is for pre-tax profits of pounds 15.3m to pounds 16m before transfer fees, against pounds 11m last time. Transfer fees are expected to notch up pounds 3.8m, down from the first half figure last year of pounds 4.2m. One boost will come from higher gate receipts; the six months is the first full period since capacity at Old Trafford was increased to 54,000.

The results have been brought forward a day because the club plays the first leg of its European Champions League semi-final against Borussia Dortmund on Tuesday.

The bio-tech merry-go-round continues unabated, with Drew Scientific the latest boy wonder to grab the market's attention. The company had to announce it was working on a new marker for heart disease, after the shares went into orbit over the last few days. They soared another 32.5p on Friday, to 195p.

Given the recent ups and downs in the sector, it is clear that the best approach for wannabe biotech investors is to select a judicious portfolio of shares, and spread some of the risk around.

Pity shareholders in Alpha Omikron, the company with assets ranging from a Hungarian syringe factory to a Russian publishing concern. It was booted off the AIM on Thursday, after its nominated adviser, Henderson Crosthwaite, resigned. The company has had problems proving its assets exceed liabilities, and the future looks bleak. It is a warning, if one were needed, that while the AIM, set up to serve fledgling companies, can offer rich rewards to well-informed investors, equally purchasers must be prepared for the worst.

PROMOTED VIDEO
News
people
Sport
footballArsenal 2 Borussia Dortmund 0: And they can still top the group
News
Andy Murray with his girlfriend of nine years, Kim Sears who he has got engaged to
peopleWimbledon champion announces engagement to girlfriend Kim Sears
Arts and Entertainment
Jake Quickenden and Edwina Currie are joining the I'm A Celebrity...Get Me Out Of Here! camp
tv
Arts and Entertainment
George Mpanga has been shortlisted for the Critics’ Choice prize
music
News
Albert Camus (left) and Jean-Paul Sartre fell out in 1952 and did not speak again before Camus’s death
people
Arts and Entertainment
Roisin, James and Sanjay in the boardroom
tvReview: This week's failing project manager had to go
News
ebooksNow available in paperback
News
Ed Miliband visiting the Holocaust museum in Jerusalem. The Labour leader has spoken more openly of his heritage recently
newsAttacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But are the barbs more sinister?
Arts and Entertainment
'Felfie' (2014) by Alison Jackson
photographyNew exhibition shows how female creatives are changing the way women are portrayed in advertising
News
i100
Extras
indybest
Life and Style
Fright night: the board game dates back to at least 1890
life
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ampersand Consulting LLP: UI Designer/ User Interface Designer (UI, User Flow, Design)

£6000 - £60000 per annum + Bonus and Benefits: Ampersand Consulting LLP: UI De...

SThree: The benefits of Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

h2 Recruit Ltd: Head of Regional Sales - Financial Software - £130,000 OTE

Negotiable: h2 Recruit Ltd: A rapidly expanding, global Software/ SaaS Vendor ...

SThree: Trainee Recruitment Consultants

£20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...

Day In a Page

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game
There's a Good Girl exhibition: How female creatives are changing the way women are portrayed in advertising

In pictures: There's a Good Girl exhibition

The new exhibition reveals how female creatives are changing the way women are portrayed in advertising
UK firm Biscuiteers is giving cookies a makeover - from advent calendars to doll's houses

UK firm Biscuiteers is giving cookies a makeover

It worked with cupcakes, doughnuts and macarons so no wonder someone decided to revamp the humble biscuit
Can SkySaga capture the Minecraft magic?

Can SkySaga capture the Minecraft magic?

It's no surprise that the building game born in Sweden in 2009 and now played by millions, has imitators keen to construct their own mega money-spinner
The King's School is way ahead of the pack when it comes to using the latest classroom technology

Staying connected: The King's School

The school in Cambridgeshire is ahead of the pack when it comes to using the latest classroom technology. Richard Garner discovers how teachers and pupils stay connected
Christmas 2014: 23 best women's perfumes

Festively fragrant: the best women's perfumes

Give a loved one a luxe fragrance this year or treat yourself to a sensual pick-me-up
Arsenal vs Borussia Dortmund: Alex Oxlade-Chamberlain celebrates century with trademark display of speed and intuition

Arsenal vs Borussia Dortmund

The Ox celebrates century with trademark display of speed and intuition
Billy Joe Saunders vs Chris Eubank Jnr: When two worlds collide

When two worlds collide

Traveller Billy Joe Saunders did not have a pampered public-school upbringing - unlike Saturday’s opponent Chris Eubank Jnr
Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?