Raising money for any company is always a perilous task as there is no guarantee that it is going to work. But if you are trying to convince investors that your business will work for the third time around, then your job is even harder.
Take, for instance, Evolution Holdings, the owner of defunct retail and distribution outfit Anglo Corporation, which is trying to raise #1.5 million to float itself on the Ofex trading facility (PC Dealer, 11 June).
So what is Ofex? It is an unregulated trading facility managed by JP Jenkins which allows share dealing in unquoted companies and securities off-exchange. Ofex sits below the UK?s two other markets on the London Stock Exchange.
Ofex was launched on 2 October 1995 by John Jenkins to make markets in companies traded under the now scrapped London Stock Exchange Rule 4.2 matched bargain trading facility. It was under the Rule 4.2 listing that Apple dealer Callhaven was quoted before it went into liquidiation.
The Ofex facility is neither regulated nor a market. JP Jenkins is regulated by the Securities & Futures Authority. If companies quoted on Ofex seek to raise finance, they must abide by the Public Offers of Security (POS) regulations.
The facility is open to companies of either plc or limited liability status. Two of the 160 firms currently quoted on Ofex are National Car Parks (NCP) and Weetabix. Ironically, NCP is headed by Sir Donald Gosling, whose son David ran Anglo Corporation until it went into administration in February.
Stuart Tidy, joint MD with Gosling at Anglo, admits that the distribution and retail outfit had looked at using Ofex to raise cash. But because the whole process of floating a company on Ofex takes about three to four months, Anglo did not have time to do the listing as well as paying off its creditors. Ironically, if the firm had managed the listing, it may not have gone into administration.
As part of the process to float on Ofex, companies are required to produce a prospectus to give it to prospective investors. Evolution?s prospectus ? seen by PC Dealer ? states that Evolution Holdings comprises 18 shops trading under the name Silica; a distribution business of SDL which supplies 5,000 independent retail stores; a mail-order catalogue business; and two generic product lines trading under the Hurricane and Techno Plus labels.
The Hurricane PC range was launched in December 1996 and sold through the retail stores. In December, sales hit #500,000, but fell to #165,000 in January because of stock shortages. According to the prospectus, the gross margin on the range is 30 per cent and it is expected to generate sales of more than #1 million each month.
Other plans include relaunching the mail-order business under the name of Silica Direct. Under Anglo?s ownership, the business generated #7.5 million, but was ignored. The group is predicting that it will reach #5 million sales within a year. The company is also creating an online catalogue to provide technical information, and a 24-hour delivery service to configure its own-brand products.
The group is predicting sales of more than #30.1 million and a pre-tax profit of #1.08 million, according to the prospectus.
But these ambitious plans have been questioned by observers, who are sceptical that the different management team will be able to turn Anglo?s fortunes around. This will be the third time someone has attempted to make a success of the company.
One observer said: ?Let?s see what Anglo can do, but I?m not sure that it is going to be third time lucky.? One ex-employee questioned whether the distribution arm, SDL, will be harmed by the fact that it has failed to get support from IBM to distribute its PCs to retailers.
While Evolution Holdings is keeping a low profile by not giving out clear details of its future development, it is clear that it will be looking to increase its profile, improve its service to retailers and make a real go selling PCs in the high street.
It will be interesting to see if Evolution achieves its goals despite the poor history surrounding the company.
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