Investment: ICM is cheap in a costly sector

ICM HAS seen both sides of the City's treatment of information technology stocks. Placed at 180p in May, shares raced to 295p within a few weeks. Since then they've given up almost all of their gains as fund managers ended their brief fling with all things computer-related.

Yesterday the shares enjoyed a 12p bounce to 201.5p as ICM produced maiden pre-tax profits from continuing operations of pounds 3.43m, an increase of 36 per cent. Predictably, the results were well ahead of the pounds 2.85m ICM forecast at flotation.

The company has a decent business providing customer support and IT solutions. The most exciting division, however, is business continuity, which is a fancy description for rushing in with spare computers when a client's systems fail.

The unit accounts for just a small chunk of ICM's revenues but the market is growing at 20 per cent a year and the margins are better than average.

With 75 per cent of its revenues locked into long-term contracts, ICM has a stable base. It is also generating wads of cash - add in the flotation proceeds of pounds 2.1m and the company has an pounds 8.9m cash pile to spend on bolt- on deals.

There are two worries: first, companies may abandon business continuity plans as the economic environment gets tougher. Second, ICM may struggle as larger players enter the market.

Still, with house broker Henry Cooke forecasting profits of pounds 4m next year the shares trade on an undemanding earnings multiple of 14. In a largely over-valued sector, they are cheap.