WHEN JOHN Webber and David Ellingham moved in on London &Edinburgh Publishing it was an obscure tiddler, seemingly headingfor oblivion. The company had not enjoyed an easy flotation and itsearly life on the stock market was difficult. At one time its shareswere bumping along at a neglected 4.5p.
The Webber/Ellingham combination wasted no time reorganising theoriginal publishing business and used the group's status as a quotedcompany to set out on the acquisition trail. In the past few yearsthe duo has splashed out around pounds 14m - in cash, loan notes andshares - for a handful of businesses. L&E, now rejoicing under themore trendy title of Profile Media Group, has evolved into a mediaand communications force specialising in niche areas such as turningout publications under contract for a diverse range oforganisations.
Last week Profile cut its biggest deal yet, paying pounds 13.6m(in cash, loan notes and shares) for Marketlink MarketingCommunications, a supplier of support services for stores, mailorder and internet sales. And with the giant HSBC investment groupas its stockbroker, Profile is clearly determined to push througheven bigger deals.
I understand it nurses ambitions of achieving a major US takeoverwhich would transform the company. It almost clinched the deal a fewmonths ago. But its shares, 60.75p last year, have not escaped theTMT fallout and it was unable to finish the transaction. The MMCdeal has helped the shares; they have climbed to 38.5p from a low of33.5p. HSBC analyst Michael Morris has put a 70p target price on theshares, the sort of level which, no doubt, would resurrect theshelved US deal. He says: 'We suggest the risk [for Profile] is onthe upside as its strong financials and cash flow characteristicsmake it attractive in today's markets.'
I met David Ellingham in the Eighties when he was a majorinfluence in the transition of what was then one of the stockmarket's oldest shells, the Wolverhampton Steam Laundry, into asuccessful business specialising in school holidays. It went at agenerous price.
John Webber is in entertainment and sports management. He ischairman of CSS Stellar, like Profile, an Aim-traded company and hehas sports management and marketing involvements. CSS shares floatedat 180p in December and are now 247.5p.
The MMC acquisition is earnings-enhancing for Profile. It willnot make much impact on this year's performance, expected by HSBC tobe profits of pounds 5.4m, but next year's figure, originallyforecast at around pounds 7m, is now, I suspect, likely to approachpounds 9m. Such a display would put the shares on only 7.6 timesprospective earnings, a lower rating than other similar publisherssuch as Highbury House.
Of course, the Webber/Ellingham determination to grow Profilecould overtake any rating calculations. I suspect Profile will soonhit the takeover trail again, to become a more rounded media group.It is already deeply involved in sports books and guides, includingthe Good Ski Guide, and has a growing and profitable involvement inproviding services for part- work publishers.
I have decided to add Profile to the no pain, no gain portfolio.It is likely to replace the delinquent Lynx computer group, whichhas almost exhausted my patience.
But S&U, a finance group, produced much better than expectedprofits and increased its dividend. The shares, enlisted at 292.5pin June 1999, are now 383.5p after touching 405p. I alighted on S&Ubecause I felt its shares were unjustly on a much lower rating thanits rivals, and management changes and a more progressive outlookhad been ignored by the market. A new car hire-purchase offshootalso intrigued me.
Well, the car HP operation produced pounds 907,000; more thanhalf the 27 per cent profits increase to pounds 7,6m.The dividend isup 12 per cent at 23.5p. S&U expects its traditional credit businessas well as the new HP offshoot to make further headway this year. Ithink we should stay with the shares.
