Dealings start tomorrow in Harland Simon Plc. The Milton Keynes-based supplier of drive control systems and associated software to the newspaper production and other continuous process industries is coming to the full Stock Exchange list by way of a placing by Capel-Cure Myers of 4,125,501 – 30% – of its shares. The placing, at 135p a share, is designed to raise UKP1.3m of new money and values the company at UKP18.6m. Despite the placing, CIN Industrial Investments Ltd, Electra Investment Trust Plc, Hambro Group Investments Ltd and Robert Maxwell’s Pergamon Holdings Ltd will continue to hold over 59% of the equity. The last financial year, to March 31 1987, was extremely impressive – at least on the profits front. Pre-tax figures were 175% ahead at UKP1.51m, but turnover rose a mere 2% as the revenue stream from the UKP2.36m per annum electrical site preparation subsidiary, sold to its management in March 1986, dried up. While the dramatic improvement in margins is a good sign, the increasing dependence on a small number of large contracts is not, although spiralling investment in Wapping and elsewhere means that demand for Harland Simons’ systems to control and speed-up newspaper presses and improve the accuracy and quality of the printing will continue unabated for some time to come. Indeed, the company currently has already secured UKP18m worth of orders for delivery over the next two years. Nonetheless, an unhealthy 37.6% of turnover in 1986-87 came from just three customers, including Mirror Group Newspapers, whereas in 1984-5 the three biggest contracts, which included a sub-contract to supply News International at Wapping, produced less than 16%. To make matters worse, revenue from other drive control contracts actually fell. Software, however, which took off in 1985-6, continued its growth in 1986-7 and now accounts for 14% of the business. Two of the products, MIS, a production line performance and monitoring tool, and CIMS, which provides central site control of remote production facilities, run on DEC hardware, while OPAL, a library system which encodes documents and photographs onto optical disks from whence they can rapidly be retrieved, is based on Olivetti hardware and Olivetti FileNet. Developed in conjunction with Olivetti with whom Harland Simon has a marketing agreement, OPAL has so far been targetted at the UK newspaper industry. Harland Simon also has rights to a direct input system for journalists developed by Cerci in France, and recently acquired a 60% stake in a UK seller of US-built image processors. At 135p, Harland Simon is on an historic multiple of 17.5. With considerable profit growth again likely this year and the current investment levels in the newspaper industry forecast to continue for some time, it looks attractive even though it has no quoted directly comparable company. It employs 300 staff.
