News on television

Last week, I mentioned improving news flow as an important investment criterion for selecting shares. The company I am going to tell you about today has been one of my favourite investments of the last two years. It has had an incredible flow of news during the past 12 months and operates in an industry that is constantly in the news.

In the mid-1980s, Roger Luard and a group of investors were invited to take management control of Flextech, which owned minority interests in a number of oil-related businesses. One of the companies, Expro, had promise, but the others were hopeless. Luard increased Flextech's holding in Expro to 100 per cent and sold off the rest.

Over a period of six years, pretax profits were then increased from next to nothing to pounds 7m per annum. The institutions liked this expanding oil services company, but Luard had ambitions to get into the media business. Quietly, Flextech bought control of Children's Channel (a loss-making European cable and satellite channel), applied for and won a number of cable franchises and acquired a minority interest in HIT, a programme distributor.

Flextech then sold Expro for pounds 55m and returned pounds 40m, equivalent to 120p per share, to its startled shareholders. At the time the shares were around 160p, so investors had every reason to enthuse about the change of direction.

If, at that point, the company had been renamed 'Cable-Sat Communications' or something similar, the shares might have quickly established a large following and be much better known today. However, Roger Luard and his board decided to stick with the rather dull name of Flextech.

Since then a deal has been arranged with United Artists, a subsidiary of TCI, the largest cable company in the US and much in the news today. Through a joint venture, TCI also has very substantial cable interests in the UK. United Artists bought into Children's Channel, providing the company, at one stroke, with capital and a valuable association to help with distribution.

The second leg of this obscure company (I say 'obscure' because hardly anyone has heard of Flextech - there are no brokers' circulars available, so recognition is still to come) is a 39/61 deal between Flextech itself and Family Channel, part of another major US corporation. A UK version of the successful US Family Channel began broadcasting in September this year, having leased early evening and night-time satellite hours from (guess who) Children's Channel, which had recently acquired 24 hours a day of time on an Astra satellite.

Neither channel will make money in 1994, but both form part of Sky's new pounds 6.99 per month basic package. All participants in the package receive part of the subscription monies (as they already do from cable companies) and this should ensure fast-rising profitability for the channels from 1995. The scope for increased revenues from advertising is also considerable. Presently, there are around 3 million satellite and cable homes in the UK and the projection for the year 2000 is for up to 10 million.

The third leg of this extraordinary business is a joint venture in home shopping. Again this is with a US corporation, albeit a smaller one, called Quantum International. The partnership is between Children's Channel and Quantum, whereby Children's Channel's spare hours on Astra have been used since May this year to sell direct to homes in Europe via 'infomercials'. I understand from a recent quote that the Quantum/ Children's Channel venture has produced rising profits month on month since inception.

It is hard to make a reliable profit forecast for Flextech as so many of the figures are nebulous. My best guess is that in 1994 it will break even and, by 1995, earnings per share will be around 12p (excluding the valuable cable franchises). By then, the company will be seen to be growing fast and should command a high multiple.

Another factor has to be taken into account. Roger Luard and his board are brilliant at deals that keep adding value to their companies. On past performance, by 1995, they are very likely to have done a few more deals, taking Flextech a further quantum leap forward.

Meanwhile, there is little doubt that the news flow from Flextech will continue hot and strong. For example, home shopping is very topical at the moment and as Sky continues to expand, its success will ripple through to both Children's Channel and Flextech.

Most important, the potential cable, satellite and home shopping boom in the UK is dominated by News International and American telephone and cable companies. Flextech is the only pure play in the UK stock market and as such has the opportunity to develop into a really substantial media company. In that event, I suppose I could become quite fond of the name.

Flextech's shares are currently 154p to buy, capitalising the company at approximately pounds 52.8m. I recommend them to you as a long-term investment.

If you follow any of my recommendations, you should use a running stop-loss at 25 per cent below the highest price the shares reach after you purchase them. If, for example, Flextech's shares rise to, say, 200p and then begin to fall, the stop-loss would come into operation at 150p.

The author is an active investor who may hold any shares he recommends in this column. Shares can go down as well as up. The author has agreed not to deal in a share within six weeks before and after any mention in this column.

Suggested Topics
Arts and Entertainment
The eyes have it: Kate Bush
music
Arts and Entertainment
booksNovelist takes aim at Orwell's rules for writing plain English
Arts and Entertainment
Al Pacino in ‘The Humbling’, as an ageing actor
filmHam among the brilliance as actor premieres two films at festival
News
Fifi Trixibelle Geldof with her mother, Paula Yates, in 1985
people
PROMOTED VIDEO
Sport
Mario Balotelli in action during his Liverpool debut
football ...but he can't get on the scoresheet in impressive debut
Environment
Pigeons have been found with traces of cocaine and painkillers in their system
environmentCan species be 'de-extincted'?
Arts and Entertainment
booksExclusive extract from Howard Jacobson’s acclaimed new novel
News
i100
Arts and Entertainment
A Pilgrim’s Progress is described by its publisher as “the one-and-only definitive record” of David Hockney's life and works
people
Sport
Loic Remy signs for Chelsea
footballBlues wrap up deal on the eve of the transfer window
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
i100
Arts and Entertainment
Art
Arts and Entertainment
Elizabeth McGovern as Cora, Countess of Grantham and Richard E Grant as Simon Bricker
TV
Life and Style
Instagram daredevils get thousands of followers
techMeet the daredevil photographers redefining urban exploration with death-defying stunts
Arts and Entertainment
Diana Beard, nicknamed by the press as 'Dirty Diana'
TVDaughter says contestant was manipulated 'to boost ratings'
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

C# .NET Developer (PHP, Ruby, Open Source, Blogs)

£40000 - £70000 per annum + Bonus+Benefits+Package: Harrington Starr: C# .NET ...

Data Analyst/Developer (Good education, Data mining, modelling,

£40000 - £70000 per annum + benefits+bonus+package: Harrington Starr: Data Ana...

Law Costs

Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

Day In a Page

Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor