Watford, Hertfordshire-based Star Computer Group Plc yesterday officially announced its offer to acquire PizzaExpress from G&F Group Ltd for UKP15m (CI No 2,082). Chairman David Blechner said the UKP11m share-placing in the City was oversubscribed at least ten times over, and he envisaged no problems with Star shareholders taking up the remaining UKP4m. The aim behind the takeover is to increase the group’s share price, he said, which is very low at the moment because of lack of confidence in the City for those companies with a capitalisation of less than UKP20m to UKP25m. This situation will be exacerbated, he added, when the USM closes in 1995. Star’s current capitalisation is about UKP4m, and according to Blechner, it would have taken two or three years of consistent profit before Star reached the levels that make public status worthwhile – which is why he decided to share Star’s listing with a private company. But he was keen to go for a non-computer company because he didn’t want to spend the next year arguing over what direction the group should take. He knows nothing about pizzas, he said, and they no nothing about computers, so, in effect, Star will operate as an independent subsidiary of PizzaExpress. Blechner was also quite happy about his company’s interim results and its return to profitability. Pre-tax profits were UKP55,000 against losses of UKP240,000 last time, while turnover increased 9.2% to UKP3.8m. The board is proposing no dividend this time round as it is trying to build up its cash reserves, at present about UKP800,000, but Blechner hopes to restore payment by the year-end in June. He attributed Star’s turnaround to its investment in the research and development of new software packages – about UKP750,000, or about 10% of the group’s turnover, last year; to having won a few large contracts from firms that haven’t bought anything for the past two years or so, such as Coopers & Lybrand – Coopers forked out UKP200,000 for new accountancy packages; and finally, to increased export levels, particularly of Pinnacle service management systems. While all parts of the business were profitable this year, generating increased turnover due to a recovery in all of Star’s markets, Blechner’s main goal this year is to increase sales of Pinnacle and the Tetra and Chameleon accountancy software overseas because ‘the recession has made the domestic market sluggish’. In the past, Star has focussed almost exclusively on the UK.
Pinnacle
He stands a good chance of achieving his goal, he says, because both the US and continental Europe are very weak on packages, while value-added resellers are either non-existant or enormous. Star already has one Pinnacle distributor – an ex-employee – in Germany, and one in Australia, but Blechner does not plan acquisitions to further overseas business. He prefers to encourage existing multinational customers to buy copies for their subsidiaries outside the UK, and to send salesmen to countries where people have expressed an interest. Nonetheless, Blechner said that Pinnacle now generates 25% of its revenues overseas: it won a UKP60,000 software contract in Japan from medical equipment supplier Siemens-Ahashi; and will supply Paris, Frankfurt, Rome and Moscow airports with Pinnacle software too. As for Star Computers, or the commercial systems activities, Blechner simply intends to try and maintain current sales levels. He does not aim to run it down, although it is no longer strategic – ‘it is too big to run down, but not big enough to sell’.
