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April 28, 1988


By CBR Staff Writer

What is the company up to? many long-time followers of Apricot Computers Plc in the City and the industry were asking yesterday as the company announced that it had agreed terms to pay a total of almost UKP8m in cash and shares to acquire a graphics terminals manufacturer with a blue-chip customer list that had singularly failed to live up to its promise since its flotation some 30 months ago, and an insurance software specialist so tiny that its profits were well nigh invisible last year. Sigmex International Plc is one of those companies that one feels must come right soon – it has some very sexy contracts with West Germany’s Bundespost and with Nato and European defence ministries, notably in the Netherlands, and one or two blue chip OEM customers such as Norsk Data. But it made a pre-tax loss of UKP1m on sales of UKP6.3m in its most recent half year, and a skinny UKP1.2m on UKP17.9m in the year to June 1987. And Apricot is not exactly paying top dollar for all the technical expertise within the company: its three-for seven share exchange offer valued Sigmex at just UKP3.9m at the time of the announcement. The difficulty is in seeing how Sigmex fits in with Apricot’s purely commercial business. Apricot talks of more use of common components, but while all its own products are Intel-based, Sigmex is firmly a Motorola shop. The idea of combining Sigmex graphics boards with Apricot 80386-based workstations is fair enough as far as it goes, but the fit is imperfect at best, and unless Apricot closes the Sigmex plant in Horsham, Sussex, the enlarged group would seem to have an excess of manufacturing capacity. As for Adatco, while the price being paid for Sigmex looks pretty low – one would have thought that a company like UEI Plc could have derived a lot more than Apricot from acquisition of Sigmex, the price being paid for the insurance software developer looks extortionate – UKP1.525m cash and shares worth nearly UKP500,000 up-front, the cash being raised by a vendor placing, and up to UKP1.5m more, at least 25% of it in shares. That requires the company to make UKP500,000 pre-tax in the year to August 1988, which does seem a tall order given that year it did a mere UKP3,000 pre-tax on turnover of UKP1.2m. In principle, acquisition of specialist software companies makes a lot of sense for Apricot, particularly in the thriving insurance field, but the software is for DEC VAX machines rather than anything Apricot builds, so the synergy is again less than compelling. Apricot sees the two acquisitions adding UKP1m to pre tax profits this year: let’s hope they do.

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