The Investment Column: Plenty for Sugar to do at Viglen
Thursday 12 February 1998
Viglen has been struggling with weak margins and the erosion of average selling prices. Meanwhile its retail operation, run in conjunction with Dixons, has not worked and sales were much lower than anticipated over Christmas.
Cash sales to small businesses have also been under pressure in a highly competitive market. Total sales were pounds 5.7m lower than the previous year.
All this has proved too much for Alan Sugar, who is to take the reins as executive chairman of the group and use his marketing know-how to stimulate sales. Mr Sugar, who owns 35 per cent of the group, is keen on pursuing links with schools and universities, which yields sales of pounds 15.6m.
He is also keen to move away from just selling PCs towards a service- oriented group. The company has been building up its network computers business which installs systems in companies. A deal is expected next week.
But while Mr Sugar's entrepreneurial skills are well proven, the City expressed mixed feelings about his plans for the group and the size of his stake. Mr Sugar feels the shares are grossly under-valued and a feeling persists in the City that he may try to take the group private.
This is not much comfort to shareholders, however, who have seen their investment lose almost half its value since August. On analysts' forecasts of pounds 5m this year the shares trade on a forward rating of 12. Mr Sugar may produce some fireworks but for now that level looks about right.
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