Smaller Companies: Market scents shopping plans at British Data

THERE are faint rumours in the City that British Data Management is close to making its first acquisition since it came to the market shortly before the general election. BDM's shares notably bucked the market over the last couple of days last week.

Details about the possible acquisition are sketchy, but the company is unlikely to stray outside its field of data management and archive storage.

Confirmation of the purchase could be made this week, and could bring some much needed attention to BDM's shares. Because BDM is unique, being the only quoted company dedicated to data management, its shares have yet to attract a dedicated City following.

Heralded as a stock to watch by several commentators in the run up to flotation, BDM has found its share price, pitched at 125p for the April placing, infected by the stock market's malaise. Surging to a peak of 164p in the post- election euphoria, the price has since dwindled back to 128p, up 5p on Friday.

The flotation helped BDM to tidy up its balance sheet, placing the company in a position of strength from which to negotiate acquisitions - not that it is under pressure to make any.

Organic growth alone enabled the directors confidently to predict tripled profits before tax of pounds 2.38m for the year to June. And taking full account of the pounds 10m raised from the placing, pre-tax profits would be pounds 3.5m, with pounds 1.12m of interest costs erased from the numbers.

That advance in profits contrasts starkly with the pounds 1.7m of losses suffered in 1989, the year that the group was spun out of Britannia Security in a pounds 1m management buyout. The current share price values BDM at pounds 30m.

Principally, BDM conducts its business through three companies. BDM Energy, which claimed 44 per cent of group turnover in 1990/91, provides storage and management of data produced by the oil and gas exploration industry.

Some 37 per cent of turnover was channelled through BDM Commercial, which is involved in storage and retrieval of documents and back-up computer media.

The remainder of sales went through Eurocrate, which hires out nesting and stacking crates for office and commercial removals.

Although service companies are taboo for many, there are external factors working in BDM's favour. The prime one is legislative - companies have to hold records longer than they used to.

There is also the added bonus of customer loyalty, running akin to the British habit of rarely changing bank accounts. If important documents are perceived to be in safe hands, then, the argument runs, why take the risk of re-housing them.

BDM is still worth watching.