Small-cap focus: Technology - Financial Times

Dolly Parton at the Dollywood theme park, where Accesso provides queuing technology

Britain’s big listed technology companies have shown their worth in recent months — with Arm Holdings being acquired by Japan’s SoftBank for a record £24bn, and Micro Focus combining with HP Enterprise’s software arm in a $9bn deal, to bring the old Autonomy software business back to these shores.

But, further down the pecking order, there is little stability and the sector lacks obvious rising stars. There is, however, more diversity among the small-caps — offering UK tech investors a range of risk/return profiles.

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Sepura

Sepura, the radio communications equipment maker, can trace its roots to old Pye electronics conglomerate that made everything from coastal radar systems to TVs to Status Quo records. But, this year, it has been anything but the status quo for the Cambridge-based business.

As the manufacturer of walkie-talkies for the emergency services, it had been one of the UK technology sector’s quiet achievers — until a nasty profit warning in April. Two months later, it was forced to raise £65m in a share placing and open offer at 35p per share — a fraction of the near-200p its shares had commanded only two months earlier. Nothing has gone right for Sepura since. Another warning earlier this month, based on further order delays, knocked 73 per cent off the share price in a single day. Its chairman has decided to seek new pastures. And its chief executive has had to take an indeterminate leave of absence due to ill health.

With its shares down 90 per cent since the first warning in April, Sepura’s market capitalisation is less than the money it raised in June. It is likely to remain profitable but the numbers are all expected to tumble this year.

That has led to renewed takeover speculation. Sepura was approached in July but the mystery bidder walked away. It might now be tempted back.

Accesso

Few UK chief executives receive a signed photo from Dolly Parton in their first week in the job. But Tom Burnet, now executive chairman of Accesso, received a warm Appalachian welcome when he took over at the company — then called Lo-Q — in 2010. His Twyford-based company had supplied queue-busting technology to Dollywood, the country singer’s US theme park.

Since then, the business — which started with a handheld device allowing people to jump queues at theme parks — has blossomed into a fully-fledged ticketing business. Accesso believes that whether people are going to the London Eye, a Rod Stewart concert or a football match, they would be willing to pay for more convenient access.

So, alongside more deals to roll out its core technology at various Legolands and water parks around the world, it has started handling ticketing for Ed Sheeran gigs and Puebla FC in Mexico. That helped to lift first-half revenue by 24 per cent, to almost $40m, and take pre-tax profit to $2.2m.

Investors are fans — and have been queueing up to buy: Accesso shares have risen 81 per cent in the past year, valuing the company at £323m. But, now trading on 40 times earnings, their holders will not want any future thrills and spills.

Seeing Machines

When your technology is designed to stop fatal car accidents by waking up drowsy drivers, a “spin out” is the last thing you want to hear about.

But that is what some are saying could happen at Seeing Machines, the automotive monitoring business. Originating in Australian academic circles, the business initially tracked basketball trajectories. Since then, it has found a niche monitoring glaucoma and selling in-car systems that sound the alarm when a driver’s eyes become heavy.

This technology has found favour in industries such as mining, where drivers work long shifts. However, Seeing Machines has worked to make the technology more ubiquitous with an embedded chip called Fovio, intended for passenger cars and commercial vehicles. Over time, though, the company also sees a role for the technology in connected devices — the so-called ‘internet of things’ — and in artificial intelligence. Broker FinnCap says this hints at a much broader market than first expected.

A new standalone automotive business is being structured within Seeing Machines with a view to a carve out. That has kicked the shares up a gear — they rose 20 per cent last week — and suggests investors who have backed the company since the start might finally pull out of the slow lane.

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