Firm with no bark but plenty of byte

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Most companies are made up of contrasting component businesses. US analysts identify four main categories: dogs are irretrievable loss- makers; cash cows are mature businesses that generate cash; growth stars are businesses that are both growing strongly and generating cash; and last come emerging growth businesses, which consume large chunks of investment cash now in the hope of good returns later. A well-run company ruthlessly disposes of its dogs while retaining an attractive mix of the other categories to fund growth and add excitement to the outlook.

Rebus, a computer services concern spun off from insurance broker CE Heath, does not appear to have any dogs but has the rest. The shares, which were demerged on the basis of one share in Rebus for every share held in CE Heath, opened at 88p. They have moved up to 103p ahead of a planned subscription of pounds 4.8m by former parent Heath to provide additional long-term capital. The attraction to investors is that the valuation looks solidly underpinned by the cash cow and growth star businesses with nothing in it for the exciting emerging growth activities. Yet listening to chief executive Peter Pressland, it is clear that the group faces a huge opportunity. As that message gets through, the share price should move ahead strongly.

A key business for Rebus is the provision of administration systems to the insurance industry via its subsidiary, Datasure. This is a solid growth business with revenue up from around pounds 2m in 1986 to pounds 26m for the year to 31 March 1995. Profits suffered a hiccup in 1993 when some Lloyd's underwriter customers disappeared as a result of the well-publicised troubles affecting the insurance market. In response, the group has been targeting company underwriters with great success. Profits have bounced back in the last two years.

There are two areas of potential within Datasure. One is the development of an electronic trading system for the insurance industry analogous to the systems in the stock market. The group is the market leader, with 60 per cent of the market for its Broker 2000 system. Another highly profitable business is payroll processing. It not only supplies the systems but takes direct responsibility for the activity. This generates three streams of revenue - supplying and maintaining the software, supplying the hardware, and actually doing the work. Turnover has grown from nowhere to pounds 2m last year and is now running at pounds 3m.

The biggest business in the group is Peterborough Software, the human/payroll systems division. The group is the market leader with 73 of the top 100 companies and 20 per cent of the UK working population paid through its systems. Sales have grown from pounds 7m to pounds 30m since 1986. Like Datasure, this is a solid business; in total 56 per cent of group revenue is both recurring and contractually fixed for years into the future. Quite modest new customer gains can give Rebus a respectable growth rate and Peterborough, which made profits of more than pounds 5m in 1994-95, is winning new customers in areas such as local government and hospital trusts.

Nevertheless, Peterborough is somewhere between a growth star and a cash cow business; for real excitement Rebus needs something else. The businesses with that kind of potential are media broadcast systems for the fast-growing cable and satellite TV industry and a mobile phone directory. A third, already generating revenue, is Saffron Computer Systems, which enables local authorities to outsource their housing management systems.

Surprisingly, according to Mr Pressland, the television industry uses a mix of software systems and packages and does not yet have a package specially developed for programme scheduling and control of advertising and purchasing. Some big industry names have looked at Rebus's system and been impressed. First orders could be won later this year with a hefty initial charge and chunky recurring revenues of perhaps pounds 50,000 a year per channel.

The other big opportunity is the mobile phone directory. There will never be a book directory of numbers because the service providers will not allow rivals to access their customer base. But Mr Pressland's idea is to set up a directory enquiries service. Plans are well advanced with development spending on media systems and mobile phones expected to top pounds 1m this year, up from pounds 650,000 in 1995. The revenue potential is dramatic with up to 5 million mobile phone subscribers against some 9 million land lines.

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