Shares: Shells that can hide pearls: Firms revitalised under their old names may well be worth watching

INVESTORS love to play with new toys. That is why it is always worth keeping a close eye on name changes, on new management, on new issues, after they have started trading, and on revitalised shell companies.

The latter can be particularly interesting because they often start trading with much less hype than a new issue and slowly build up speed with a growing fan club of investors who have become aware that exciting things are happening. I have selected shares in four companies that began as shells and are producing fireworks - with the potential for more action to come.

Coal Investments is suspended at 76p, so investors who like the story will have to wait until trading resumes on 29 March. The shares will come back ex a rights issue at four for 21 at 65p rights issue so the equivalent price would be 74.24p. The company is a vehicle for the talents of Malcolm Edwards, formerly commercial director of British Coal, and is being used to acquire licences to operate closed coal mines. The consideration takes the form of a royalty on production revenues so the money being raised, about pounds 11.5m, is for working capital to bring the mines back on stream.

Part of the funding is coming from an issue of loan stock and there are warrants attached to both that and the shares. Both look attractive in their own right. The loan stock is a zero coupon which, if held to redemption in April 1999, will yield 13.23 per cent. The warrants are exercisable at 85p until 30 April 1998 and should offer dramatic leverage for investors as well as raising a further pounds 5.3m for the company if exercised in full. If things do not work out, the warrants would expire worthless.

The company believes that it will be able to operate the mines profitably though there will be a substantial loss in the year to 31 March 1995 as it begins to build up production.

Outsiders expect profits to be approaching pounds 3m by 1997, dropping the p/e at the suspension price to around 11. Further corporate activity looks assured and Coal Investments could be a substantial business.

Another former shell growing at breakneck speed is Bill Cran's Birkby Group. The company joined the stock market in May 1992 when it reversed into Finlan Group and there has been a string of deals since then at roughly three-monthly intervals. The shares now stand at 278p. The group's core activity is converting disused mills in the Pennines area into low- cost, flexible accommodation for small entrepreneurial businesses who do not want the commitment of a long lease. Additional revenue comes from vehicle rental (the fleet now totals some 1,500 vehicles and trailers) and other forms of credit. Birkby is in the throes of its biggest move to date, with the acquisition of the quoted In Shops, mainly for shares but with a partial cash alternative. The deal will roughly double the group's size.

In Shops does something similar to Birkby but with small shopping centres. It recently acquired a chain of food discounters with the idea of using them to boost pedestrian traffic, thus enhancing the attractiveness of its 66 shopping centres. Rationalisation costs and the skills of the Birkby team in raising occupancy levels at In Shops suggest to outsiders that profits for the combined group could reach more than pounds 8m for a p/e a little over 20. That may look high but profits could continue to move ahead sharply if occupancy levels do improve.

Utility Cable at 37p is yet another product of the shell revitalisation skills of Luke Johnson and Stephen Hargrave, whose earlier successes include Pizza Express and Crabtree. The pair acquired a stake in the virtually defunct investment trust Baillie Gifford Technology. They then reversed into it two cable-laying companies and changed the name. Outsiders jokingly describe the group as the only UK quoted multimedia business that actually makes money. It is capitalised at only pounds 16.4m, small change in this industry. On the other hand, its contribution to the multimedia revolution is to lay the ducting for the cable franchise owners. Since it entered this business in 1989, after a management buy-out, it has won 13 contracts with all the top 10 cable companies and 15 on a fast-growth path. One observer is looking for a profits sequence of pounds 1.25m for the year to August 1992 followed by pounds 2.4m for 1993, pounds 3.6m forecast for 1994 and pounds 4.8m for 1995 to drop the p/e to 16. The latter forecast is described as conservative since it assumes that no more contracts are won yet only 12 per cent of UK homes are connected and huge sums are being committed by the cable companies.

Last but not least is the transformation of Berisford International at 229p by Alan Bowkett, whose purchase of the Magnet fitted-kitchens-and- doors business has been described as the corporate coup of the decade. Tom Duxbury privatised the business in 1989 at a cost of pounds 629m against profits of more than pounds 70m but at the worst stage of the cycle. Mr Bowkett has just bought it back from a group of badly bruised banks for a net pounds 26m against assets of some pounds 110m and turnover of pounds 180m. The business is breaking even just as the cycle seems to be turning up again. He has detailed plans for revitalising the business, which manufactures 75 per cent of the products it sells through a 230- branch network. Outsiders look for profits to reach around pounds 17m in 1995 with a low tax charge against a market capitalisation of pounds 340m. Before the deal Berisford was capitalised at pounds 120m against pounds 83m of net assets, which are steadily being turned into cash. It does not look too late to buy given the scale of the opportunity for the business.

(Photograph omitted)

The cartoon produced by Bruce MacKinnon for the Halifax Chronicle-Herald on Thursday, showing the bronze soldiers of the war memorial in Ottawa welcoming Corporal Cirillo into their midst
The Edge and his wife, Morleigh Steinberg, at the Academy Awards in 2014
peopleGuitarist faces protests over plan to build mansions in Malibu
Nigel Farage has backed DJ Mike Read's new Ukip song
voicesNigel Farage: Where is the Left’s outrage over the sexual abuse of girls in the North of England?
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Developer with T-SQL, Watford, Hertfordshire - £350 - £360

£350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...

Chief Financial Officer

120-150k: Accountancy Action: We are looking for an experienced CFO from a min...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

Day In a Page

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

'Renée Zellweger's real crime was to age'

The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

Disney plans live-action remakes of animated classics

From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
Thousands of teenagers to visit battlefields of the First World War in new Government scheme

Pupils to visit First World War battlefields

A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
The 10 best smartphone accessories

Make the most of your mobile: 10 best smartphone accessories

Try these add-ons for everything from secret charging to making sure you never lose your keys again
Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

Liverpool v Real Madrid

Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
West Indies tour of India: Hurricane set to sweep Windies into the shadows

Hurricane set to sweep Windies into the shadows

Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?