Last week ……….
….. the FTSE 100 lost -0.66 % and for the last three months it is -1.24% lower. The FTSE 250 gained 2.6% over three months while the AIM All Share lost 6.95%.
This week ……….
….. UK investor concerns are the lack of UK GDP growth, increasing inflation and the poor outlook for consumer spending. Today, the Consumer Price Index (Inflation) will be reported followed on Wednesday by BOE Interest Rate Meeting Minutes and Unemployment figures. While on Thursday Retail Sales figures will be announced. All Markets may drift lower.
Elektron (EKT) – £44.7m at 42p
New electronic product development is behind the successful recovery in earnings for the January 2011 year end. These can be new products or improved versions of existing products. Elektron is spending £1.3m to improve one of its main connector product ranges. Other products include waterproof wireless antennae and systems used to test hard disc drives. Elektron is changing its management structure following the purchase of Hartest. The sales will be regionally focused while R&D, finance and other operations will be centralised. The latest figures include a 5 month contribution from Hartest. Underlying pre-tax profit jumped from £1.6m to £5.1m in the year to January 2011. Turnover grew from £29.9m to £50m, with around £10m of the growth coming from the existing group and the rest from the Hartest contribution. Elektron expects to continue to grow profit but earnings per share are likely to be held back by a rising tax charge. The company is changing its name to Elektron Technology. The Forecast for the January 2012 year end is a profit of £6.7m on £70m turnover to give and EPS of 4.7p so a prospective P/E of 8.9x.
Net debt was £4.3m at the end of January 2011. The total dividend is 0.8p a share and Elektron expects to push up the dividend each year.
Elektron is keen to make a substantial acquisition that will propel the company towards the £100m market capitalisation level.
Advanced Power Components (APC) – £3.73m at 14.5p
Electronic components distributor Advanced Power Components says that order levels are growing and they are returning to the levels achieved a couple of years ago. Revenues edged up slightly to £6.52m in the six months to February but lower admin and finance costs meant that pre-tax profit grew from £42,000 to £100,000. Gross margin was lower than in the first half of the previous year but it has recovered from the level in the second half of last year. The only weak part of the group supplies hospitals. The imop energy efficiency product made a modest contribution in the period and new distributors are being signed up. This should become an increasingly important part of the group in the next few years and more products are being signed up so they can be sold through the same distributors.
House broker Northland forecasts a profit of £447,000 on revenues of £14m which gives a prospective P/E of around 9x.
Net debt was £1.73m at the end of February 2011.
Nexus (NXS) – £3.6m at 0.33p
Interims for this specialist firewall and IT services group reported a 6.7% increase in sales to £3.2m with an operating profit of £136,000 compared to an £85,000 loss last time the loss for the period was £107,000 compared to £192,000. The Resilience Division which was acquired in 2009 supplies fire wall protection from hackers and produced its first ever EBITDA profit as a result of the investment in training and developing resellers. The sales cycle can be long but the further product development costs are low. The Managed Services business is winning new clients who typically pay monthly over two years which reduces the clients IT capital expenditure requirement which is a great benefit in harder times. This division would benefit from bold-on acquisitions. The trading improvement in operating profits is expected to continue while losses may be reduced for the full year to September.
Although cashflow positive with £324,000, there is net debt of the working capital ratio is tight at 0.52x.