Trading on the Telephone
In the early 1990s most share trading was conducted through expensive full service stockbrokers. ShareLink was established to provide telephone based execution only stockbroking services. The investment in ShareLink gave Graphite exposure to this rapidly growing sector.
ShareLink was established within BT as an execution-only stockbroker based in Birmingham, providing telephone share dealing services to retail investors. The company was established in 1987 and grew rapidly in a market that was dominated by share issues from privatisations. The privatisation programme led to a rapid rise in share ownership in the general population. By the time of the buy-out, over 250,000 clients had dealt through ShareLink.
ShareLink was a very small business for its majority shareholder and one of very few execution-only stockbrokers. There were opportunities to reduce costs and increase market share. The company’s service was both efficient and price competitive, particularly by comparison with traditional advisory stockbrokers. The business was highly automated, had low overheads and surplus capacity. The marginal cost of any increase in volumes was minimal.
Under Graphite's ownership, ShareLink:
- increased revenue in the year after the buy-out despite no major privatisation issues
- successfully launched a number of new products
- doubled operating profit in a year from £1.8 million to £3.7 million
- increased operating margins from 13.7 per cent to 27.0 per cent
- generated strong cash flow enabling a substantial early loan repayment
In 1993 ShareLink was listed on the London Stock Exchange with a market capitalisation of £42.1 million, generating a multiple of 7.4 times cost and an IRR of 300 per cent.
