Small Measurements Build a Market

Late last year, Millbrook Scientific Instruments launched itself on London's Alternative Investment Market (AIM), a stock exchange for young and growing companies. The start of trading marks the rapid maturing of the U.K. firm.

Millbrook was founded in 1995 to commercialize developments in secondary ion mass spectrometry (SIMS) and other measurement fields. Its concept: a compact surface analyzer based on SIMS technology that would be inexpensive enough to offer industrial and academic researchers an attractive alternative to traditional large, multi-million-dollar SIMS units.

Buoyed by the MiniSIMS prototype completed in 1997 and various government and venture-capital grants, the company achieved sales of close to $200,000 in 2000, says Chairman F. Peter Stefanini--not bad given that it only began selling its instruments that year.

Stefanini himself joined the company in 2000. "On my third day on the job," he quips, "my most important job was to bring in a bottle of milk" for tea and coffee.

However, with a background in senior management in a variety of companies ranging from Unilever to chemical specialties producer Croda to management buyouts, Stefanini soon was charting a course to expand the company.

And expand it has: Sales for the fiscal year that ended March 31, 2004, were $1.62 million at the average 2004 exchange rate; its operating loss--which excludes a considerable amount of goodwill from acquisitions that must be amortized--was $295,000. In the fiscal year ending this coming March 31, Stefanini expects the company to turn a profit, on sales that will comfortably top $3 million.

Millbrook has made two acquisitions to extend its nanoscience expertise. Aquila, a specialist in optoelectronic measurement of thin films, was acquired in March 2003; Micro Materials, which makes nanotesting instrumentation, was acquired last September. Each company is active in its own distinct technology niche, but they have a common potential customer base consisting of universities and research institutes and a range of industries that need chemical, optical, and mechanical measurements of thin films and surfaces.

"We are in nanoscale surface characterization--nanometrology," Stefanini says. "No matter what the nanotechnology does, at all stages you need to measure it. We enable researchers to test very thin coatings and so on, for example, for optical fibers, turbine blades, and coatings on hip joints."

ABOUT 40% of the company's sales are to industry, and the rest are to universities and research institutions, says Nicholas J. Long, sales director.

As Long notes, industrial sales run a gamut of applications from space and avionics to printing, lasers, electronics, and pharmaceuticals. "The potential is very good, but it is difficult to focus on any one or even several areas," he observes.

The instruments typically sell for $75,000 to $275,000, with a range of options that can be purchased up front or later. "You don't have regular sales in this kind of business," Stefanini points out. "You can go a couple of months without selling an instrument, then you'll sell several. I no longer pay any attention to monthly sales reports--they mean very little. Quarterly reports are better, and half-yearly reports will give you a good indication of what is happening to the company."

The company is investing in new developments, he says. Nearing launch is Millbrook's MiniTOF, or time of flight, unit, which raises the capability for mass detection from about 300 mass units now to at least 1,000. That will open up applications in polymer testing, for example. Millbrook also has developed a large-sample chamber to accommodate more sizeable objects for analysis.

For optoelectronic testing, Aquila has developed a confocal microscope that allows the same measurements provided by its current nkd spectrophotometers--for refractive index (n), extinction coefficient (k), and layer thickness (d)--but on curved or irregular surfaces.

And at Micro Materials, developments have focused on expanding operational parameters from the 500 ºC currently possible to 750 ºC, and down to –40 ºC for tasks such as measuring nanoindentation, scratch and impact resistance, and film hardness. The low-temperature version is particularly useful for polymer testing, Stefanini says.

"We can see organic growth to nearly $8 million in three years," Stefanini says. "But we should be growing faster than that--and we will through acquisitions. Nanometrology will be the key thing we will grow the business around." But he has strict acquisition criteria for his small company. At the top of the checklist: A candidate must already have customers and existing products. An acquisition would be too risky otherwise, he says.

Millbrook's "buy and build" strategy aims to expand the scale of the company and increase shareholder value more effectively and rapidly than organic growth alone can, Stefanini adds. It will also speed Millbrook toward a critical mass and broader base to reduce its vulnerability to the uneven cash flow associated with capital-goods sales. "We have ambitious growth plans for our business and are confident that being on the AIM will put us in a much better position to realize these plans," he says.