SMALLER COMPANIES: Orbis directors find secure home for spare cash

Directors have been busy buying shares in Orbis, a small security services firm. Such share purchases - or sales - can often be a timely indicator of management's own view of a company's prospects, and their valuation of the business compared with the market's assessment. Chief executive Trevor Brentnall, alongside Peter Hindley, a non-exec, and Ian Quinlan, the chairman, have each bought 10,000 shares at 38.5p each to add to some already respectable holdings.

The message from Mr Brentnall was blunt: "We thought the shares looked undervalued."

The group, currently capitalised at a little over pounds 27m, is still a minnow by stock market standards. But since Mr Brentnall arrived as chief executive in 1994, the shares have made rapid progress, only to hit something of a plateau over the last year. From 18p two years ago, to 38p on Friday, they remain below the 48p high they hit a year ago.

Some of the flatness follows a couple of profit warnings in the sector from the likes of Blick and Norbain.

However, the group produced a decent set of interim figures in December, when pre-tax profits rose 59 per cent to pounds 1.3m. Of this, pounds 397,000 of profit came from Estdale, and Intruder Detector Systems, the two most recent acquisitions by the company. Sales rose 49 per cent to pounds 12.6m.

In August, it paid pounds 2.35m for Estdale Integrated Systems, which designs, installs and maintains access control, closed-circuit television and integrated security systems.

Intruder Detector Systems has some promising attributes, which should see it make further good organic growth. The subsidiary supplies a complete security service for council property and housing associations, guarding empty properties. A temporary radio transmitting battery operated alarm is installed on the property, which is then monitored by the company. A 20-minute response time is guaranteed to the client. The market for this is rising, as councils become more eager to guard their vacant properties.

Bolt-on acquisitions will continue to feature as part of the strategy, while the integration of Galequest, bought for pounds 9m in 1995, continues on target. That process will be completed by 31 March, as promised.

Estdale will be earnings neutral for its first year, and there is no sign that this expectation will not be met.

Given management's vote of confidence, with cash, it would seem churlish to rate the shares as anything other than a buy.

richard phillips Copyright: IOS & Bloomberg

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