Crash-proof technology firms

Investors traditionally find the high technology area of the stock market a minefield. An area of dramatic growth and potential, it is more volatile than the overall stock market. One canny approach, however, is to focus on service companies which profit from growth and changing products without the risk that a technology may be replaced by a rival. Two companies that fit the bill and look set for growth are MSB International, at 417.5p, and Ideal Hardware, at 695p.

I wrote about them in May last year when MSB stood at 245p and Ideal at 605p. Although very different - Ideal distributes data storage products, while MSB supplies IT personnel on short-term contracts - they share an aggressive sales approach. Each has dedicated sales forces who make most, or all, of their income from commission. Both manage to grow sales aggressively without compromising quality. Ideal has won a string of awards, while MSB prides itself on never promising suitable contract personnel without being able to deliver.

James Wickes, the 35-year-old businessman behind Ideal Hardware, says that given the prospects he and his colleagues would "need to be idiots" not to take advantage of the market.

According to Dataquest, the European data storage market is expected to more than treble from $6.6bn (pounds 4bn) in 1996 to $22.9bn (pounds 13.7bn) in 2000. If Ideal can just hold its market share, it should do well. Between 1992 and 1996 turnover grew at a compound annual rate of 46 per cent, from pounds 30.4m to pounds 138m and by 24 per cent in the last half-year from pounds 60.9m to pounds 75.6m.

Ideal Hardware is a wholesaler supplying re-sellers of computer equipment. Demand is booming because of the ever-increasing requirements for storing data. Part of Ideal's market edge comes from keeping its customers up to date with technology. In addition to comprehensive catalogues and CD-Roms, it broadcasts a daily television programme covering new product developments to many of the 8,500 re-sellers it supplies. The Internet is becoming a highly cost-effective way of informing customers.

Growth will benefit from a new 70,000 square foot warehouse at Chessington with the capacity to expand. Cash generation is strong, enabling the warehouse to be financed largely out of working capital. The year end is changing from 30 April to 31 July with a second set of interims due for the six months to 2 May 1997. Recent forecasts suggested earnings per share rising at around a 20 per cent rate to 29.5p for 1996-97 followed by 36.4p. My hunch is earnings for the later period could be nearer 40p, implying a price earnings (PE) multiple somewhere around 17.

MSB International, which is due to report its first set of full year figures as a quoted company in mid-April, is arguably growing even faster. Demand for qualified personnel is buoyant as the "millennium problem" - the inability of many computers to distinguish between the year 2000 and the year 1900 - joins with other requirements such as Europe moving to a single currency and firms introducing networked computer systems. It adds up to soaring demand and charge-out rates for IT contractors. MSB rates have risen by 11 per cent and the number of con- tractors has climbed to over 1,300.

Growth seems likely to continue with qualified IT personnel becoming scarce. At the halfway stage last October, MSB's sales climbed 91 per cent to pounds 30m with pre-tax profits up 71 per cent to pounds 2.35m. Margins slipped from 9 to 8 per cent partly because of fewer permanent placements and the distractions of flotation. A move to larger premises is helping growth, and margins are expected to rebound in 1997. Full-year profits should reach pounds 5.5m for the year to 31 January 1997, dropping the PE to 22.5 times, with a further sharp fall likely in 1997-98 as turnover heads for pounds l00m, taking profits to a likely pounds 8m-pounds 9m.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
Frank Turner performing at 93 Feet East
musicReview: 93 Feet East, London
News
Toronto tops the charts across a range of indexes
news

World cities ranked in terms of safety, food security and 'liveability'

Extras
indybest
Voices
A mother and her child
voices
Voices
The veterans Mark Hayward, Hugh Thompson and Sean Staines (back) with Grayson Perry (front left) and Evgeny Lebedev
charity appealMaverick artist Grayson Perry backs our campaign
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

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee