View from City Road: Amstrad investors left in the dark

Click to follow
The Independent Online
SOMETIMES Alan Sugar's apparent childishness defies belief. After announcing an impressive return to profits yesterday, Amstrad's chairman refused to talk. You turned down my offer to buy the rest of the company and now I don't want to play, he might just as well have said.

A hazy announcement left investors in the dark. The sooner outside shareholders, who own a great deal more of the company than Mr Sugar, make clear their dissatisfaction, the better.

Everyone knows he would prefer to be running a private business, but since his bid failed and Amstrad remains a public company, valued at more than pounds 100m, Mr Sugar has a duty to answer legitimate questions.

A 16 per cent jump in Amstrad's share price to 29p indicated the market's surprise at a 0.2p dividend. But shareholders deserve an explanation as to why the market was allowed to believe that the payout would be passed again. It was of course in Mr Sugar's interests that shareholders should think they had waved goodbye to any income from their shares.

It also helped that most people expected these figures to show at best break-even and probably a sizeable loss. A return to pre-tax profits of pounds 5.6m compared with a pounds 12m loss in last year's first half shows that trading is not nearly as dire as suggested.

Indeed, strip out reorganisation costs, a further stock write-down and the cost to Amstrad shareholders of fighting off their own chairman's approach, and the company notched up a pre-tax profit of nearer pounds 17m.

Assets per share of 46p in the balance sheet look more and more solid as continued write-downs clear out the dross. Amstrad is not such a basket case.

But without further explanation, the statement is of limited use. What exactly do 'buoyant' sales of satellite dishes in the UK and Germany mean? Fax machines showed 'reasonable growth', we are told. From what to what? More important, how much of Amstrad's turnover comes from computers, which are enjoying 'very low and in some cases zero margins'. Traditionally it has been about half, which suggests that the rest of the business is generating pretty healthy returns. That is key information if, as the press release hints, Amstrad is poised to pull out of computers altogether.

Maybe investors should offer Alan Sugar 30p - the same as he offered them late last year - for his shares. It is now clear why he knew that offer to be such a good deal, and why shareholders were right to say no.

(Photograph omitted)