SMALLER COMPANIES: Phone firm that fits the bill

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The Independent Online
THE privatisation of British Telecom led to a massive shake-up of the industry and the repercussions are still being felt far and wide.

One was to allow small companies into what had been a closed market. Before then, if you wanted a phone installed then you had to ask BT to do it for you - it didn't matter whether you were ICI, or Mrs Smith at 121 Acacia Avenue.

Future Integrated Telephony (FIT) moved into this niche in 1991, and now operates alongside a myriad of companies that provide businesses with telephone services, from installation to configuration and integration of related software services.

As any entrepreneur knows, opening up a market like this is a huge opportunity. But as with any such initiative, there are plenty of risks.

This was demonstrated at FIT when it was forced to issue a profits warning in July last year. Results in August showed a pre-tax loss of pounds 539,000, against a profit of pounds 296,000 the previous year, and a forecast profit of pounds 200,000 when the company floated a little over a year ago at 115p. Sales, however, had roared ahead to pounds 4.9m from pounds 3.6m.

Needless to say, the shares have slumped and stand at an all-time low of 64.5p, a level they have been stuck at for months.

Managing director Kevin Clarke blamed the pace of expansion - hiring and training new staff, and not enough labour to meet a rapid rise in orders - for the losses.

He may be right. There are signs, however, that these problems are ending. If so, the group should be well placed to break even when it reports interim figures next month.

There are also three exciting developments at FIT which have gone unreported. It has new meter pulsing technology, which will allow hotels to monitor the bills run up by their occupants. It has also been awarded two contracts by Ericsson, the first as exclusive supplier to install the company's new cordless telephone technology, Dect.

And it has been appointed as a consultant to all users of Ericsson equipment for year 2000 problems and compliance.

The key to how the group performs will be margin and cash-flow management. But costs seem more under control, and cash flow and lead times have been reduced. The shares look due for a recovery: buy.