Monday, 26 May 2008

Geoff Squire doubles stake in TiG

Innovation Group (TiG) was the biggest faller amongst the UK SITS stocks last week – down 21% at 21.5p. Clearly my friend Geoff Squire, the Chairman of Innovation, thought ‘enough is enough’ and bought another 10m shares at 21.5p (ie a £2.15m investment) – thus doubling his stake in Innovation to c3.1%.

The share decline had been occasioned by the release of interim results on Tuesday. Revenues grew 33% to £64.2m – boosted by acquisitions of Nobilas, First Notice and others. But adjusted profits were a third lower to £4.0m.

TiG plays in the 3rd generation BPO marketplace. As readers know I am a fan of BPO which still enjoys double-digit growth. 75% of TiG’s revenues now come from outsourcing – an increase of 48%. I particularly like TiG’s 83% recurring revenue base. They are much less reliant on new software product sales than they were a few years back. Thank goodness, as software sales at £16.2m were pretty flat.

So, with TiG, it’s not “the vision bit” that’s the problem, it’s ‘the execution bit”. Investors and analysts alike have got frustrated that the vision hasn’t translated into profit performance or cash generation. They also seem increasingly worried about the many acquisitions. Are they really working? Or are they causing a distraction to the management in building the core business?

Whatever, TiG share performance has been frustrating, to say the least. They have been in the 25-35p range for 3 years now. Geoff Squire joined TiG as an NED in 2001 when TiG’s market valuation exceeded £1b – those were the days! He became Chairman in June 2002 by which time the market valuation had slumped to £300m. Geoff had to face and address some pretty major problems and there were some pretty rocky times!

But after all that work and, let’s be fair, great progress, TiG now has valuation of just £140m. So maybe we should all take note of Geoff’s major purchase at what I’m sure Geoff believes will be the low of 21.5p .

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