BTG looks a bet for risk lovers

Jarvis Hotels; Merant
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The Independent Online

BTG, which finds inventions and tries to commercialise them, could be a big winner if its Varisolve non-surgical treatment for varicose veins succeeds in clinical trials. Regulators in the US and Europe have given BTG the go-ahead to skip early-stage investigations of the treatment and instead start phase three clinical trials, the last hurdle before seeking marketing approval.

Analysts believe that Varisolve is a potential blockbuster that could achieve sales of more than $2bn (£1.4bn) a year. Initial findings suggest that Varisolve has an 80 per cent success rate, similar to having surgery. It could be available in Europe by 2005 and a year later in the US.

About 150m people have varicose veins in the developed world, but just 5 per cent submit to surgery, put off by the high cost and risks involved. If Varisolve, a far cheaper treatment at £500 a leg, can attract just a fraction of the market, it should easily achieve its sales forecasts.

The chief executive, Ian Harvey, also believes that BTG is well placed to take advantage of the current economic downturn. He sees opportunities to buy intellectual property rights as entrepreneurs and scientists find it increasingly difficult to get funding to bring their ideas to market.

The company had a £7m loss in the year to March, from a £0.9m profit the previous year, as it pumped resources into developing Varisolve. Revenues rose 28 per cent to £36.8m. BTG has £127.3m of cash in the bank, which Mr Harvey expects to last for four years, by which time BTG should be profitable and funding itself from internally generated cash.

Shares in BTG fell 20p to 1,260p after its strong run before the results. About 18 months ago the shares changed hands for roughly 400p, before the market began to recognise Varisolve's potential. This is a very volatile stock and hard to value, but it could prove a worthwhile investment for risk lovers looking to build exposure to the technology sector during a downturn.

Jarvis Hotels

The net asset value of Jarvis Hotels, the country's fifth- largest hotelier, far outstrips the company's £200m market value. That fact underlies yesterday's bold moves to re-brand the hotel chain and to pursue a financial restructuring as consolidation pressures mount across the sector.

The re-branding will see Jarvis hoist the banner of Marriott's Ramada International over its 66 hotels. Jarvis will get access to Marriott's global booking system and hopes this provides a fillip to future sales growth. It also expects the 20-year link-up will bring economies in purchasing and marketing. In return, Jarvis will pay franchise and marketing fees and a commission on reservations.

Under the restructuring, Jarvis is planning a refinancing, possibly involving a sale and lease-back of its £400m property portfolio. Unloading the assets would position Jarvis to become a hospitality management services company focusing on winning management contracts from property companies and financial institutions. It would also pay for a big share buyback or a special dividend.

The shake-up took place as Jarvis reported that pre-tax profits for the year to March grew 12 per cent to £31.1m. Turnover advanced 12 per cent to £177m, while the total dividend gained 0.3p to 5.6p. That healthy performance was built on single-digit percentage rises in average room rates to £53.38 and occupancy to 68.8 per cent.

Trading during the last 10 weeks has been less bouyant, with John Jarvis, the chairman, expressing concern about the "serious impact" of the foot-and-mouth outbreak on UK domestic tourism. At its London and Edinburgh hotels, he noted, turnover declined 7 per cent from a year ago, although business and conference bookings remained undisturbed.

That could make the consensus forecast of earnings per share for the current year to March ­ 13.7p ­ somewhat illusive. The shares duly lost 3p yesterday to 113.5p. But with a prospective yield exceeding 5 per cent and the strong likelihood of funds being channelled back to investors, the shares look well supported. Hold.

Merant

Software companies need lightening-fast execution and a ruthless focus on product development. Merant, however, has trailed on both fronts and has thus continually disappointed investors.

The sale yesterday of its Micro Focus legacy software business for £45m ($62.5m) ­ and the decision of Gary Greenfield, chief executive, to step down ­ pushed the shares toward a rare leap, adding 11.5p to 91p.

Although this could prove to be the turning point for the company, investors should stay on the sidelines pending further progress. Avoid.

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