Sugar makes an exit, but what's Psion's game?

Comment

Alan Sugar is one of only a handful of entrepreneurs in Britain who can genuinely claim to have transformed an industry. His IBM clone revolutionised the personal computer business. For a number of years at least, it also made investors in Amstrad a great deal of money. But since then, Mr Sugar has done little of note in consumer electronics. He never found anything of significance to replace the Amstrad PC and though he attempted, unsuccessfully, to take the company private once more, it is plain that essentially he long ago lost interest in his creation. These days he concentrates his energies on the brave new world of digitally packaged football. Flogging Tottenham Hotspur is likely to prove a great deal more profitable than flogging electronic boxes, he figures.

Mr Sugar is probably right to want to get out. He lacks the necessary skills to compete in today's ever more hi-tech and complex markets. Amstrad makes no money from the consumer electronics Mr Sugar understands, and Psion's erudite but commercial David Potter is much more likely to make a good fist of the mobile phone and computer operations that would be Amstrad's only future.

So this is a good deal for Alan Sugar. Amstrad's other shareholders who cold-shouldered the 150p a share Mr Sugar offered four years ago have been vindicated to an extent but it is a close-run thing. Factor in a bit of inflation and most shareholders would have been better off taking the money in 1992 and reinvesting it.

Even less clear-cut is what sort of a deal Psion is striking. One of the market's biggest success stories over the past four years, the shares rose 20-fold between their 23p low in 1992 and their peak last month of 468p. Their 25p fall yesterday to 350p underlined investors' worries that this is a massive deal for a relatively small company, even if part of it is simply a disguised rights issue to use Psion's highly rated paper to get hold of Amstrad's pounds 85m of cash.

Psion has been successful because it has focused on technology it understands and because it grew organically, expanding fast but nurturing its staff within its own research-based culture. It is by no means given that the phone and PC shifters from Brentwood will fit in to this rather highbrow world.

David Potter is not a man to shy away from taking risks when he has to, however, and you can bet your life he has weighed up the pros and cons with scientific precision. It was no nerdy boffin who made a killing on shares in the 1970s to provide the seedcorn for Psion. Backing Psion if it acquires Amstrad becomes a bet on Mr Potter's vision of the future where computing and telecommunications fuse in a technological revolution that will have the Luddites shuddering. All of us wired up, on the move and frantically communicating in a welter of e-mail, downloading databases and wireless fax transmissions. Well, maybe. With a pounds 230m share issue to get past shareholders, this is by no means a done deal.

Some DIY questions are answered

Until their profits warning earlier this year, Wickes and its handsomely paid chairman, Henry Sweetbaum, were the DIY partnership that could do no wrong, darlings of the City in a largely unloved and difficult business. Every now and then, of course, the question would re-emerge; if nobody else can make money out of DIY, how on earth does Mr Sweetbaum manage it? Each time the question was asked, it was explained away. Wickes is not really DIY at all, you understand. It is more of a builder's merchant, where the margins are thicker. And, anyway, the business uses state of the art stock control and IT systems, Mr Sweetbaum insisted. That's how we make money where others fail, he would claim.

Shame to say, most of us bought it. Now it transpires that there was a bit more to it than that. When a company refers to "serious accounting problems" it generally means something a touch more worrying than a spot of the creative stuff. Profits for 1995 and in prior years were overstated, that much is certain. By how much we do not yet know. The accountants are still trying to work that out. It is hard to see how Mr Sweetbaum, one of that exclusive club of executives earning more than pounds 1m a year, can avoid falling on his sword.

More than half his salary last year was bonus. He believes in incentivising his employees with performance-related pay too, and thought this part of the Wickes success story. The problem is that bonus-related pay also provides a powerful motive for cooking the books.

How the board and the auditors, Arthur Andersen, could have allowed this go unnoticed is anyone's guess. What appears to have been going on is a relatively common little scam. There's even been an instance of it in DIY before. It happened at Texas too. So much for all the Cadbury rules and structures put in place to halt the creative accounting practices of the past. They don't seem to have done much good in this case.

Nor did they stop an undignified scramble for the exit among City professionals as they caught wind of the problems. A very substantial quantity of stock was sold before Wickes made its announcement and the shares were suspended. As usual, the big boys got out, leaving the little fellow to face the worse, trapped in the stock and unable to sell. A shabby little episode all round.

Tunnel sweetener must be worth considering

The idea might seem rather hard to take on board right now but in 57 years time when Eurotunnel's concession to operate the Channel Tunnel runs out, British and French taxpayers will inherit a licence to print money, not just by the bucketful but by the trainload. By 2052, Eurotunnel's pounds 8bn debt nightmare will be a very dim memory, the loans will have long been repaid and the tunnel will be the closest thing you will see to a pure profit machine.

In those circumstances, what government in its right mind would short- change the taxpayers of tomorrow by granting Eurotunnel shareholders of today a 30-40 year extension to their concession? France's would because right now it is more alarmed at the prospect of 500,000 enraged investors rampaging through the streets of Paris in protest than the wrath of future taxpayers. Britain, on the other hand, seems determined to defend the next generation's cash cow to the last.

The Government's motives are obviously reasonable enough. But if an extension to the concession is the sweetener that secures the debt refinancing Eurotunnel needs to survive, it seems a price worth considering. For it is government which is in part to blame for Eurotunnel's present pickle by inflating the cost of the tunnel, failing to build supporting rail infrastructure on time and giving the ferries a duty-free extension. If an appeal to its sense of moral duty fails, the British Government might care to reflect on what sort of advertisement it would be for its much- vaunted Private Finance Initiative if Eurotunnel is ultimately buried at sea.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

SThree: Graduate Recruitment Resourcer

£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...

Recruitment Genius: Telesales Executive - OTE £32,000+

£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat