Video and broadcast equipment group Avesco Plc, intends to push ahead with demerging and floating multimedia firm, VideoLogic Ltd as soon as practicable (CI No 2,139). This, according to chairman Richard Murray could be any time between now and December next year, depending on how long it takes the company to ramp up VideoLogic’s management and sales teams. There are several reasons for the decision. First, Murray reckons that in time, VideoLogic’s potential is such that it would dominate the rest of the group. So, he wants to put the firm in a position, where it can exploit the market to its full potential without having to carry round the rest of the baggage. VideoLogic’s chief executive, Tony McLaren, claimed it has already grabbed 80% of the high-end point-of-sale and training market, and expects to win about 20% of such new areas as video for Windows and low-cost video capture in time. VideoLogic is currently working with IBM Corp on designing and implementing low-cost multimedia products, which he says will be sold in every personal computer store in the US and Europe, via mail order and catalogues. We intend to give the retail channel a hard time, he added. The intention is to release about 11 new products in the year ahead. And it is possible to keep such products cheap to appeal to the mass market, he said, because the firm undertakes no manufacturing of its own – it subcontracts such work out to sites in the Far East, Europe and the US, prefering to concentrate on what it does best. VideoLogic also intends to broaden its customer base still further. It aims to sell high volumes of both chips and board level products OEM, and expects to announce agreements with several major personal computer companies in the next few weeks.
Visibility
The second reason for demerging and floating VideoLogic is related to visibility. Murray feels the firm must be seen to be in control of its own destiny in an exploding market because you only get one chance. Especially as it is currently negotiating with several unnamed telecommunications and semiconductor companies to ensure VideoLogic’s technology has the widest possible penetration as the whole multimedia market develops. Nonetheless, Murray did admit that other parts of Avesco’s business had been neglected to finance building up the business. Almost all of the group’s UKP3.3m research and development spend was focussed on the firm, which as a result made losses of UKP677,000. Turnover rose by 51.9% to UKP11m, however. And Avesco will pay shareholders no final dividend, so it can afford to keep on investing in VideoLogic. He did emphasise though that the company currently generates enough money to make profits, but reckons current high levels of expenditure are justified. The rewards will be big, if we get it right, he said. For the year ending March 31, Chessington, Surrey-based Avesco overall saw turnover rise 30.9% to UKP23.4m sales increased in all areas of business – apart from VideoLogic, these comprise broadcast services and television products. Pre-tax losses were UKP1.3m, some UKP200,000 better than anticipated and represented a marked improvement on last year’s losses of UKP2.3m. The March share issue, which raised about UKP12m, more than doubled shareholders funds to UKP123m and cut the company’s gearing to 12%. Some of the cash will also be used to fund VideoLogic’s expansion into Japan and the Far East and to build up distribution channels in the US, France and Germany, it says.
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