Trouble-shooters turn to Memex
Sunday 29 June 1997
The US Defence Intelligence Agency has signed up Memex for a pounds 1m contract to develop its Migration Defence Intelligence Threat Data System, while the Nottinghamshire and Durham police forces have agreed to pay pounds 1.25m for Memex's Crimint criminal intelligence system.
From one arcane market to another, Lloyd's of London. Ever since it was forced to fling its doors open to outside capital a few years ago, the insurance market has seen a whirl of deals as companies break into the market. One route has been through the creation of Lloyd's investment trusts (LITs), which specialise in investing directly in syndicates but whose days, certainly for the smaller players, may be edging to a close. While LITs have been a good idea, their structure raises several questions. Lloyd's has strict rules governing the sale and purchase of these stakes, and even when you can buy or sell, it has to be done by a complex auction process. And syndicates require involved management - something LITs were not set up to provide. Passive management of these stakes can be frustrating if managers are looking on, unable to do anything as a syndicate unravels.
London Insurance Market Investment Trust has overcome this, by sheer dint of size, and has begun taking stakes in managing agents. But for many of the smaller trusts, their days must be numbered. By contrast, GoshawK Insurance Holdings looks to be on to a winning formula. Chairman David Hooker is also developing an orphan syndicate management arm, to provide reinsurance to syndicates still in run-off, and has bought in a specialist underwriter with years of experience in this niche. Meanwhile, GoshawK's agreed pounds 35m bid for Matheson Lloyd's Investment Trust will further bolster its capital base.
While the new issues market has been through a quiet patch over the past few weeks, notable exceptions include Ionica, the new domestic telephony supplier. It enters a market where a host of names now compete with the mighty BT - from the original upstart, Mercury, through to the cable companies and a clutch of other contenders, such as Energis.
Ionica will be valued at pounds 570m when it floats on the London and New York stock exchanges next month. The float will raise pounds 125m to fund a network of base stations. The company uses innovative radio technology in which subscribers' calls are transmitted via radio waves from their homes to a base station, and then on to their eventual destination.
As ever, concerns were raised about the effectiveness of valuing a start- up business on a discounted cash-flow method. The compromise seized on by SBC Warburg, Ionica's adviser, was to value the business at pounds 200m less than its discounted cash-flow model. Clearly, Ionica would not be coming to the market if management and its backers did not believe it had a future. But it is too early to judge whether the company can succeed.
On a less exalted scale, Delcam, a Cadcam software developer, is set to come to the Alternative Investment Market next month. A placing is expected to raise pounds 2.3m - of which pounds 1.9m will be new money - to value the business at around pounds 15m. Tilney & Co is the nominated broker. The company's software is used for designing complex engineering shapes. Since 1992, it has achieved compound annual sales growth of 25 per cent, and has made a pre-tax profit every year since 1989. Last year it made over pounds 1m, on sales of pounds 13.6m. It can also boast a blue-chip client list, with names like Mercedes Benz, Volkswagen, Nissan and Royal Doulton.
On Tuesday, MFI Furniture Group will announce final figures. There should be further news on the expansion and conversion of existing stores to the new "Homeworks" format, with the whole chain in this layout within the next two and a half years. MFI Homeworks are smaller stores, selling a wider range of Ikea-like products. The company is also continuing its expansion into France and Spain. Analysts forecast pounds 70m in pre-tax profit, with better margins.
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