Small Companies Notebook: Homebuy float anchored on pay-as-you-go TVs

Niche flotation - Real's dog days - Invox on a winner
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The Independent Online

What would the Royle family make of a television where you have to put money in the meter to watch? This is the innovation of Homebuy, a company which offers state of the art televisions, videos and DVD players on hire purchase to people with poor credit histories.

What would the Royle family make of a television where you have to put money in the meter to watch? This is the innovation of Homebuy, a company which offers state of the art televisions, videos and DVD players on hire purchase to people with poor credit histories.

To ensure people keep up the payments, Homebuy's televisions are on a meter, typically providing four hours' viewing for £1. The contents of the meter go towards the monthly payments. In most of Homebuy's 15,000 customers' households there is more cash in the meter at the end of the month than is needed.

Homebuy is floating on AIM later this month, after raising £3.5m to expand its door-to-door sales force and increase its marketing efforts. The company is pushing the hire purchase side of the business hard to make up for the gentle decline in old-fashioned television rental, which accounts for 40 per cent of turnoverand has 30,000 customers. It is adding 1,500 hire purchase customers a month and has also started selling fridge freezers, washing machines and microwaves.

Because Homebuy's customers find it hard to get credit from mainstream lenders, the company is able to charge higher than usual rates of interest, but says that its rates are lower than most rivals'.

The company, based near Birmingham, is the brainchild of Phil Harwood. He will be chairman and chief executive, and has promised to bring non-executives on board over the course of the first year as a public company. The share sale has been organised by Noble & Co, and the stock is expected to start trading next week at 80p.

Niche flotation

Also joining AIM is a new investment company run by one of the junior market's serial directors, Nicolas Greenstone. Niche Group describes itself as a "lender of last resort" for start-up or pre-flotation companies that have found it tough to raise cash. Mr Greenstone has given himself a wide remit, saying he is looking for traditional, "old economy" businesses operating predom- inantly in the UK in niche markets. Niche Group is also flexible as to whether it lends cash or takes equity in its target companies. The group is not raising any money at flotation, saying instead that it could come back to shareholders for funds for big investments. Mr Greenstone, a solicitor by profession, is the chairman of Azure Holdings, the food delivery group which used to be called Room Service, and on the board of Microcap Equities, a "new economy" investment group which shares other directors with Niche. The flotation of Niche has been delayed since June but the company finally gets to market today, a nice birthday present for Mr Greenstone, who turned 60 at the weekend.

Real's dog days

A marketing business named after its founders' two dogs is being bought by Real Affinity, the AIM-listed brand advice and marketing group. Real Affinity is paying up to £2.3m in cash and shares for Holly Benson, which helps design exhibition stands and shop displays and works on bigger marketing projects for the likes of NPower and BP. Real Affinity floated in March 2001, as marketing budgets were being slashed everywhere, but it is hoping its shares can claw their way back through a mix of improving markets and judicious acquisitions. The deal to buy Holly Benson is the second acquisition this year, six months after Real Affinity paid up to £5m for Navigator, a sports marketing business.

Invox on a winner

Congratulations! You have won a fabulous prize! You have been selected to receive a free... aargh. And yet there is money to be made in these spam e-mail/junk text message/internet pop-up special offers. Plenty of money, as the results from Invox attest. The promotions company generates its profits from the premium rate phone calls that winners must dial to claim their prizes. Confident in the company's very strong cash flows, several fund managers have come away from recent meetings with the company thinking its shares are undervalued at 325p.

Invox is out and about in the City because it is trying to explain its recent £25m acquisition of the internet service provider Brightview, which has taken it into a rather different market. Our principal asset, says Invox, is our database of more than 3.5 million names, numbers and addresses so we can market Brightview's service to them. The prizes business and the ISP must deal with phone companies, Invox says, so together will be able to get better deals. It has sounded a bit tenuous, in truth, but it comes back to the cash: Brightview is also highly cash generative. Invox's 7 per cent dividend yield just got even more secure.

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