LONDON -- It's hard to maintain earnings growth in excess of 700% and increases in pretax profits of over 800%. But
, which announced such sterling results Thursday, hopes that by moving its business model forward to encompass the actual creation and ownership of high-tech firms, it can continue to confound the cynics.
Over the past five years, Durlacher has grown from a boutique brokerage to a specialist securities firm offering research, consulting, corporate finance and traditional stockbrokerage services for the new-media and software industries.
Through its equity stakes and strategic holdings in some 30 private and listed high-tech companies, Durlacher boosted its revenue 125% in the six months ended Dec. 31, 1999, to 11.6 million pounds ($18.6 million) and pretax profit by 853% to 5.1 million pounds, which is 89% more than it made during the whole of last year.
Unsurprisingly, Durlacher's stock has matched its earnings performance. The price has risen around 1,500% in the six months to date and, following the results, closed up 1.4% at 39.73 pounds. Also unsurprisingly, the company's strong performance has boosted mutual funds, like
Founders International Small Cap Fund, which is up 130% over the past year and has about 1% of its assets in Durlacher.
It's hard to argue against Durlacher's track record. For example, it owns 6.6% of content, community and communication services provider
, which went public in December and is now valued at 411 million pounds. Geoffrey Chamberlain, chairman and CEO of Durlacher, says six of the companies in which it has a stake will go public within the next four to five months.
Yet while Chamberlain says Durlacher will continue to form joint ventures and take minority stakes in companies it is developing with entrepreneurs, he feels now is the right time for a fundamental shift in Durlacher's business model to become more like
Internet Capital Group
than the classic incubator.
"We have the confidence now to actually build these companies ourselves, to build them from a near standing start," says Chamberlain.
In the next breath, Chamberlain announces the first examples of this approach with two companies, technology group
, in which Durlacher has 83% and 65% ownership, respectively.
45one.com is a paid-for provider of news and analysis covering the IT, communications and media industries for the business-to-business community. 45one.com, which will launch in two to three months, intends to build a worldwide customer base and then leverage this customer base to market other products and services.
Owning what could one day be significant companies in their respective spheres -- and perhaps retaining control of these start-ups even after the IPOs -- could reap huge dividends for Durlacher in the long run.
Big rewards, however, entail big risks.
Andy Bottomley, head of research at Durlacher, is under no illusions about this: "Of course it's a risky business, but we are hedging that risk through our knowledge base," he says, referring to the combination of the research, consulting, corporate finance and stockbrokerage divisions.
As proof of how forward-thinking Durlacher is, he says the firm isn't looking toward the once-dominant areas in the U.K. of Internet service providers and business-to-consumer content providers; it's using its talents to remain ahead of the curve and invest in companies involved in budding technologies such as wireless application protocol, or WAP.
And, in a rare moment of modesty, Chamberlain admits that "only time will tell" how good Durlacher is at predicting these technological trends and making the most of the opportunities presented, but he points to Durlacher's success in the past as a guide to the future.
Indeed, if the past is anything to go by, then Durlacher looks a fairly good bet. However, as
once said, "Hindsight is always 20/20."