CCTV firm IndigoVision says it is under-rated by City

If the buyback is triggered, IndigoVision will pay investors up to 105 per cent of the share price around the time of the purchase.

Yesterday’s closing price of 252p is just one quarter of the group’s peak value. And investors stand to receive far less than the 400p approach that is believed to have been made in an attempted management buyout in 2011, even including a 70p special dividend paid in 2012.

The move comes just months before IndigoVision’s long-term chairman Hamish Grossart leaves the business, and follows a partial recovery in a share price that plunged from 520p in June 2014 to 125.5p two years later.

“Sometimes you get a more pronounced difference in what the board views as a value of a business [compared to the share price]… sometimes, there’s not the lag,” said chief executive Marcus Kneen, noting that markets react quicker to “bad news” than “good news”.

IndigoVision’s share price reached a closing peak of 1007.5p in February 2007. Its fall from this price was exacerbated by the company’s exposure to the oil and gas downturn.

“The [falling] oil price impacted sales in 2015,” said Mr Kneen. “It had a big impact on sales and share price. And IndigoVision has repositioned its resource from more oil-driven economies to the likes of the work we’re doing in the USA and that’s what we’re doing for more stable results.”

Over two days last week, shares in IndigoVision surged 29 per cent to 228p after an upbeat trading statement in which the board declared it was “more positive than it has been for some time”.

In 2011, IndigoVision was approached about a management buyout by its chief executive Oliver Vellacott, backed by Scottish Equity Partners (SEP). An approach believed to have been pitched at about 400p per share was rebuffed by the company.

Mr Vellacott left the business around this time, to be replaced by Mr Kneen, who at the time was finance chief.

The following September IndigoVision paid a 70p per share special dividend after seeing a 123 per cent increase in underlying operating profit.

During the buyout efforts, SEP, an early investor in the business before its 2000 flotation, acquired a 6.63 per cent stake in the group. Mr Vellacott held more than 22 per cent. In October 2012, Mr Vellacott sold his entire £8m stake in the business. The following month, SEP exited with a £1m gain.

With the proposed buyback, IndigoVision’s current largest shareholder, New Pistoia, may see its 29.89 per cent stake rise above 30 per cent through stock dilution.

There exists a mandatory requirement for any single shareholder reaching 30 per cent of a company’s ordinary shareholding to make an offer for the remaining shares, but IndigoVision noted that New Pistoia would not be required to make a bid for the whole company.

Mr Kneen denied there had been pressure from shareholders to instigate the programme, saying: “It is a sensible thing to do, really. If it’s appropriate we would, we’re not saying ‘we are going to do this’, it’s a sign we can do this and if it’s the right thing to do we will do it.”

The group revealed in a statement to the stock market that the purchase of up to 375,000 shares will be made from time to time, using existing cash resources.

IndigoVision said its policy was to maintain a strong balance sheet, with net cash balances, to provide headroom and flexibility for future investments, should the opportunity arise.

“However, having regard to the cash profile of the company’s trading activities; the persistent gap between the market valuation of the company and the board’s assessment of intrinsic value; and the earnings per share benefit arising from the deployment of surplus cash to retire equity in the prevailing environment of nominal interest rates, the directors consider that implementation of the buyback programme on the terms proposed is in the interests of shareholders as a whole,” it said.

IndigoVision has appointed N+1 Singer Capital Markets to purchase the shares.