Why this small technology company is definitely one to watch

It was in 1878 that the great American inventor Thomas Edison took some tin foil, wrapped it around a cylinder and announced to John Kruesi and Charles Batchelor, This machine is going to talk.'

He recited Mary had a little lamb' - and to everyone's amazement the machine repeated the words exactly. Edison had invented the phonograph, the first machine ever to record and replay sound.

Edison had a winter residence in Fort Myers, Florida, where his neighbour was no lesser person than Henry Ford. Last month I visited these attractive homes overlooking the broad expanse of the Caloosahatchee River, and as I strolled around I listened to a potted history - thanks to a device that would not exist but for Edison's breakthrough.

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This device was the audio guide. Held against the ear and delivering recorded commentary, audio guides have immeasurably improved the experience of sightseeing and the two major players in this growing industry are the California-based Antenna Audio, and the smaller Israeli company Espro (ESP).

Espro owns Acoustiguide which dates back fifty years to 1957 when President Franklin D. Roosevelt's widow narrated a tour of his estate at Hyde Park, New York. Listening to a then state-of-the-art portable reel-to-reel player, visitors could hear tales of daily life and of the various dignitaries who had visited the residence.

Today the basic proposition is no different. But as with everything in the fast changing media world advances in technology have made new services possible.

Now it is not enough to simply go from room to room following the prescribed itinerary. Instead it is possible to pick up the commentary at any stage and wherever you happen to be. It is not enough either to simply be able to listen to commentary.

The latest devices have a screen upon which, for instance, you might see close up details of a picture in an art gallery or even a short film about the exhibit.

But technology is doing more than simply enriching the content. It is also making it available in a variety of ways. Rather than picking up a device containing some pre-recorded content, tourists can now download a recording onto their mobile phone or ipod.

Espro is at the forefront of all these trends. Also it has, in combination with Hewlett Packard, allowed visitors to bookmark' their favorite images and then have them printed out at the end of their tour as perhaps postcards or a poster.

Finally, Espro has come up with a solution to one of the biggest bugbears of a museum trip, the sound of several tour guides speaking in loud voices at the same time. Espro can now supply the guide with a transmitter connected to a microphone, while each group member wears a receiver around the neck connected to headphones. By broadcasting on different frequencies several groups can act independently within the same room and without disturbing other visitors.

Why audio guides are a growing market

Given the fact that the basic audio guide has been around for decades, I was surprised to learn from Espro's chief financial officer Nadav Karni that only about 25%-30% of places in the Western World that could use audio guides are actually doing so, with the proportion elsewhere even lower.

So there is plenty of room for both Espro and Antenna Audio to sign up new customers and Espro has been doing just that, recently announcing deals to provide audio guides for the China Design Now exhibition at the Victoria and Albert Museum, and one for the Australian War Memorial in Sydney. The latter will be based on the latest Opus Touch' device that combines recorded voice and music along with images on a touch screen.

This seems to me to be a pretty attractive business. The number of tourists and tourist attractions is rising inexorably, and as many of the latter are temporary there is a continuing need for new audio commentaries.

Once a contract has been secured for a permanent exhibition it should be fairly easy to hold on to the contract especially as any updating will be much easier for the incumbent than for any new provider that takes over.

The content is either produced by Espro's own staff or else is subcontracted out to third party experts, and there are various possibilities for product extension' for instance in the form of tours in different languages or those specially designed for children.

Espro offers a number of options to those running tourist attractions. It can provide the entire guiding service, complete with the hardware and the personnel or else it can sell the former, allow the customer to manage the service, and then simply provide and update the content.

Espro's shares (ESP) are traded on Plus Market, where at their present price of 18p the company is valued at just over £3m. The company reports its figures in US dollars and according to the forecasts of broker Hardman it will make a $1.4m profit this year on turnover of $17.4m.

If Hardman is right about 2009, Espro will deliver a profit of $2.4m, putting the shares on a forecast P/E ratio of under four. As with most shares trading on Plus, trading liquidity is not the greatest but still, having fallen all the way from a 60p high, they are an interesting proposition at this level.

Definitely one to watch.

This article is taken from Tom Bulford's free daily email, Penny Sleuth'.