Smaller Companies: Abacus counts on flotation

THE new issues trickle is turning into a flood. The year began with a rush of biotechnology flotations but the electronics sector is poised to take up the baton.

Abacus, a leading distributor of electronics components and micro-chips used in computers, is expected to obtain a listing via a share placing that will value it at about pounds 40m.

The issue, sponsored by Panmure Gordon, is likely to raise pounds 3m to pounds 5m for the company. The balance will go to directors and existing shareholders, which include the Merchant Navy pension fund.

Based in Newbury, Berkshire, Abacus was bought out by its management in 1989 and has grown rapidly through acquisitions and organic expansion. Taxable profits surged from about pounds 700,000 in 1989 to pounds 1.8m in the year to 30 September 1992, on sales up from about pounds 19m to pounds 23m. In the past 12 months pre-tax profits are understood to have jumped to pounds 3m on sales up to pounds 30m.

Abacus distributes high-volume components such as semiconductors, capacitors and resistors. All are used on electronic circuit boards. It holds UK distribution rights from 25 manufacturers including Siemens, Toshiba and National semi-conductors. The products have applications ranging from computers to security and printing. Abacus also provides cabling services to customers.

There are eight sales offices served by a single warehouse in Newbury but Abacus plans several more sites.

The shares are expected to be priced at a discount to its quoted counterparts such as Diploma, Electrocomponents and Farnell. With the sector trading on almost 20 times prospective earnings, Abacus is likely to command a rating in the mid-teens.

The flotation is attracting considerable City interest because of Abacus's record and a strong recovery in demand for semi-conductors. Abacus is looking at acquisitions in complementary product sectors and, longer-term, a possible move into Europe.

The board will own about 25 per cent of its post-flotation equity; the Merchant Navy fund will end up with about a third of its enlarged equity.