CAMPAIGNS: Financial PR - Interest high as tech firm Detica floats

Client: Detica
PR Team: Financial Dynamics international tech division
Campaign: IPO
Timescale: January - May for the IPO, retained thereafter
Budget: Undisclosed

Surrey-based technology firm Detica's decision to float on 30 April was made in a bid to raise funds to clear reported bank debts of £1.4m, to reinvest in growth and redeem preference shares.

Formed in 1977 as the Smith Group, this now medium-sized firm started by specialising in the national security market.

By 1997, the company was subject to a management buy-out led by the current chief executive, Dr Tom Black, and backed by venture capitalists Candover Investments.

It has now diversified to focus on both security and 'customer relationship management' technology, boasting customers such as National Express, Lloyds TSB and the Ministry of Defence.

Six months ahead of the IPO, the company finally discarded its Smith Group tag, rebranding as Detica.

Objectives

To gain a share price between 440p and 510p on the debut and to ensure that major shareholders, notably Candover with a 40 per cent share and Black with 12 per cent, received a good return on their investment.

It was also crucial to ensure that enough funds - estimated at £13.3m - were raised for investment.

Financial Dynamics was also tasked with making sure the company's recent rebrand gained media coverage.

Strategy and Plan

As the first tech firm to float for around a year, financial media interest was expected to be high.

If the share price was high, it could be a beacon of hope to others in the sector; if low it would be used to indicate that technology was still a risky investment.

In the face of inevitable interest, Financial Dynamics decided that a pro-active strategy would be more likely to succeed than an 'IPO by stealth' approach.

It was key that the management were plain-speaking about the IPO and stressed the benefits to the company of the money raised.

Senior managers, including Black, were given media training by Financial Dynamics partner Claire Gillingwater and were made available for interview when the company announced its intention to float on 18 March.

It was also important that Financial Dynamics made journalists and investors aware the share value should be taken in the context of a volatile tech sector. This was seen as especially important as in April, when the price range prospectus was launched, the tech sector took another battering. US tech firms began to announce weaker-than-expected earnings from the first quarter of 2002 and the LSE's techMARK index fell 11 per cent in two weeks that month.

As Edward Bridges, the Financial Dynamics partner leading the account points out, this 'was not good news for the technology sector.'

UK national newspapers, the investment trade press, regional press and business TV stations were highlighted as key targets.

Measurement and Evaluation

TV coverage was small, restricted to one profile piece

on Bloomberg on its early morning slot and a mention on CNBC's 'market wrap'.

Other coverage was national, rather than regional and centred on the national press business pages, with the highlight being a front-page slot on The Financial Times's Companies and Markets section.

Coverage between the announcement of the intention to float on 18 March and the float at the end of April was plentiful - and largely favourable - across the national business pages. For example, the FT reported on 9 April that staff at Detica 'are set to share a windfall of up to £55m'.

Also, an Independent piece on 19 March focused on the flotation in terms of it raising hope in a troubled sector.

Importantly for the PR campaign, the company's recent rebrand was mentioned frequently, as was further positive mention of the benefits of the IPO for staff and the potential for growth.

Nonetheless, when it became apparent that the initial share price target was over- ambitious, coverage became negative. The Independent on 26 April declared that 'Detica was yesterday forced to admit that investors had given its upcoming flotation a poor reception.' And, under the headline 'Downer for Detica on Debut Day', the Evening Standard on 30 April said: 'Detica began trading and slumped to a hefty discount.'

That said, by June, Financial Dynamics' message that the poor share price should be taken into the context of the troubled tech market began to shine through. The posting of its full-year results in mid-June was an opportunity to reveal that company profits were on the up.

Most national press coverage focused on the low share price now only in context of the strength of the company's turnover. The Daily Telegraph on 19 June even made the claim that Detica was 'one of the few companies to have been positively affected by 11 September'.

Results

Detica's share price on its debut was far worse than expected. It was forced to lower price expectations, with shares offered at 400p when floated.

Since then, the price has plummeted further - seven weeks after the float it slid to a low of 332.5p. As PRWeek went to press, the price stood at 347p.

However, in terms of funds raised, the company exceeded its target, managing to gain £14.1m. Further good news came in early June when it delivered an annual operating profit increase of 25 per cent.

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