City Talk: Vitec purchases should switch on earnings from the start

VITEC Group, the broadcast and photographic equipment manufacturer, has just acquired two wireless and audio equipment businesses. It is paying $10.9m (pounds 6.8m) for Systems Wireless of Virginia in the US, and pounds 2m for Hertfordshire-based Drake Electronics.

As Vitec has shown with previous acquisitions, the deals should enhance earnings from the start. Stockbroker Charterhouse Tilney has raised its recommendation on the business from accumulate to buy, and this week SBC Warburg Dillon Read is expected to issue a note setting a target price on the shares of 800p. They closed at 753.5p on Friday.

The group seems to trade on a multiple similar to traditional engineers at around 13 times prospective earnings. There is an argument that the group, with its media-linked markets, deserves a higher rating. Certainly, at these levels the shares look cheap for a business which serves some exciting, rapidly growing industries. Charterhouse estimates that it can produce pounds 48.6m in pre-tax profits for the current year, up from pounds 37.8m last time, and pounds 48.6m in 1999.

The FT-SE has taken a few breathers recently, although the market more than made up all the ground it lost on Thursday by the close of business on Friday.There is no sign of a sell-off, but the well-publicised declines in the wake of Asian and Russian turmoil may have served notice that the market may be on the brink of a standstill.

Looking back, such pauses have not been uncommon. Although current practitioners may be nervously awaiting a nosedive, there is no reason to suppose that this is the most likely outcome. The market is just as likely to simply become bound up within a relatively tight range.

How long might that last? Well, three years would not be unfeasible on the evidence. Such a period of marking time could have some interesting consequences. Perhaps the most striking would be to alter the fundamental perception of equity investment as being driven by capital growth and to refocus attention on dividends.

There are many reasons why this might be a good thing, not least scuppering the iniquitous practice of share buy-backs, which often bring little benefit to ordinary shareholders while lining the pockets of executives cashing in by exercising lucrative share option deals. The dividend used to be the key measure of investment return, but that idea has become somewhat lost in the mists of time and fog of greed. Capital gains were the icing on the cake. In a low-inflation environment, this may prove to be the way forward.

On Friday trading will commence in shares of Itnet, an outsourcing supplier of IT and business process services. For the year to 31 December the group had operating profits of pounds 5.9m (pounds 4.9m in 1996) on sales of pounds 81.7m (pounds 68.7m). The business is valued at pounds 246.1m on the placing price of 350p a share. It is too soon to say where they will start trading, but with an impressive growth record it could be a company to watch.

A note lands on my desk from Salomon Smith Barney extolling the virtues of euroland. The essence of the argument is that European Monetary Union will lead to an enormous single market for equities. From a combined value of $3,600bn (pounds 2,250bn) today the market will be worth $7,500bn in 2005. The firm picks some shares that are likely to be winners and losers from the emergence of a single equity market. Among the winners, only Bank of Ireland represents a London-traded entity, while Diageo is pinpointed as a potential loser.

PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Richard Norris in GQ
mediaGQ features photo shoot with man who underwent full face transplant
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
News
Your picture is everything in the shallow world of online dating
i100
News
The Swiss Re tower or 'Gherkin' was at one time the UK’s most expensive office when German bank IVG and private equity firm Evans Randall bought it
news
Life and Style
Attractive women on the Internet: not a myth
techOkCupid boasts about Facebook-style experiments on users
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

Project Manager (HR)- Bristol - Upto £400 p/day

£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...

Graduate / Trainee Recruitment Consultant - IT

£25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...

HR Business Partner - Banking Finance - Brentwood - £45K

£45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...

PA / Team Secretary - Wimbledon

£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...

Day In a Page

The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
Countries that don’t survey their tigers risk losing them altogether

Countries that don’t survey their tigers risk losing them

Jonathon Porritt sounds the alarm
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz
A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on