Alphameric Plc was reeling from another crash in its share price yesterday after disappointing interims, a drastic re-structuring effort and the inevitable talk of takeovers. The management had to watch pre-announcement nerves take the price down by 25 pence in the morning, and by lunchtime saw a further 12 pence off the price at 34 pence, an all time low. The shares stood at 240p just a year ago. In seeking a partner for its great white hope division of Data Broadcasting, Alphameric is flirting with potential predators for the whole company, attracting their attention and throwing open its books. It may prove more attractive to larger technology firms to take advantage of the low share price, and bid for the firm, rather than stump up the full asking price for involvement in the new Broadcast technology. The company confessed that the two or three potential partners are all big and wield powerful financial muscle. The City had overlooked this point in yesterday’s share price, but we may see it bounce back over the coming weeks, and especially after it finalises and names its Broadcast partner in two to three months. Douglas Craig-Wood, Alphameric chairman, remained philosophical and stressed the swingeing 20% cuts to the company’s overall costs and that had been gained by almost 25% cutback in staff, a similar cut in factory floorspace, and an emphasis on return to profit in its mature businesses. Alphameric has closed three of its divisions, FTT Alphameric Voice on Long Island, New York, acquired last year for over UKP1m; its bodyshopping contract programmer division, Alphameric Systems, and IGG Systems, which sold outdoor mobile displays. Craig-Wood said: There was a complete absence of orders for the IGG displays in this half, and Alphameric Systems did next to nothing, down from UKP500,000 last year. He insisted that the businesses that he has left intact lost just UKP800,000 in the half year, and that the forward order position of all three remaining divisions is healthy, with an order famine, in just the second and third quarters of last year causing most of the red ink. A further UKP1.3m was lost by the businesses that are closing and UKP2.5m of losses are associated with shut-down costs. The company is also closing its Portsmouth factory which made the IGG displays, reducing the entire company to Andover and Nimes in France. The old Bishopsgate terminal factory near Guildford was closed at the beginning of the year. The company didn’t break down the rest of its internal profits, but since the half-year loss to September 30 only came to UKP2.5m there has to be some profitable parts to the company within the keyboards, financial terminals and dealing systems that make up its main business. One disturbing figure though was a UKP500,000 interest item and an admission from the company that the 34% gearing with which it started the year with had risen. Has it risen a significant amount to finance the losses? The company refused to address the question and the year-end balance sheet will make interesting reading. The three operating divisions are now Keyboards and Manufacturing; Data Broadcasting and Financial, generating UKP4.6m, UKP3m and UKP4.7m respectively. Craig-Wood admits to a squeeze in ther keyboards market, with the order book coming down from six months to under three months folowing moves to just-in-time manufacture by its main clients. But had adds that the Alphameric SA subsidiary has found new customers for keyboards in Bull and Olivetti, while six specialist US short-run keyboard makers in the US have gone under, arguably leaving more room for Alphameric keyboards. Financial systems has almost doubled over last year and the company is now delivering sbstantial orders in Tokyo and New York and is less reliant on the flimsy UK financial market. But Data Broadcasting is the division that makes Craid-Wood’s eyes light up. It is based on the idea of transmitting data on the unused sidebands of frequency modulation radio and television transmissions, rather like Ceefax and Oracle, but using it to service
private clients data distribution needs. Prominent users are Coral and Ladbrokes, the bookmaking agencies, the Halifax, Reuters and Marks & Spencer, and the Stock Exchange and Craig-Wood claims that all these customers owe something to Alphameric, even where it is just the design of the prototype. In the US, where Data Broadcasting is more developed, over 60% is concentrated in the financial sector, an area Alphameric has avoided to date, keeping to retail, because it felt it was too dependent on the financial sector already. But to exploit Data Broadcasting fully he feels it needs risk capital, and more muscle than Alphameric. That’s why we made the decision six months ago to look for a joint venture. Agreement on a deal is expected to be just two or three months away but is attracting large, potentially predator type firms into his boardroom and the right deal is proving difficult to strike without losing the benefit of the technology for our shareholders. It doesn’t take too much calculation to decide that for around UKP9m or UKP10m, a predator could asset-strip Alphameric, get his money back by unloading the two more stable businesses, (for instance Apricot might like the financial terminals and dealing systems business to got with its own financial systems) and be the UK market leader in Data Broadcasting overnight. Consider any bid at the right priceAnd the shares are widely held, with only about 15% in safe hands. It certainly hasn’t escaped Craig-Wood, and he gave the universal we will consider any takeover bid at the right price, reply when the question was raised. There had been takeovertures, but none from potential Data Broadcasting partners, nor from Apricot. I haven’t heard from Roger Foster in 15 years, said Craig-Wood. If the share price drops any further, Foster would have to join a queue if he did find anything to discuss.
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