Just over six months ago
Blame for the second-half set-back falls squarely on a £5m turnover under-shoot that reduced profits by around £2m. This was mainly due to poor sales in Europe and notably Elektron's biggest market, Italy. Sales to the eurozone via Asia were sluggish too. Margins were also depressed by a sharp rise in metal prices (notably tungsten and copper) before selling prices could be increased. And with tax losses largely used up, the 2011-12 tax charge rose from 18 to 24 per cent.
The full results also include special items and non-recurring expenses of £2.2m (previously £1.5m) of which £1.9m (£900,000) related to restructuring costs. Those costs are being incurred to move the company's "subscale, siloed manufacturing businesses" into fewer premises. Following further restructuring this year, Elektron expects to make total annual savings of more than £2m.
Not surprisingly perhaps, management is cautious about current year prospects and so is broker finnCap which forecasts unchanged adjusted pre-tax profits and EPS of £4.7m and 3.3p, respectively. Thereafter, results should improve thanks mainly to new products being launched this year.
|ELEKTRON TECHNOLOGY (EKT)|
|ORD PRICE:||22.375p||MARKET VALUE:||£ 23.9m|
|TOUCH:||21.25-23.5p||12-MONTH HIGH:||45p||LOW: 19.25p|
|DIVIDEND YIELD:||3.7%||PE RATIO:||12|
|NET ASSET VALUE:||15p*||NET DEBT:||28%|
|Year to 31 Jan||Turnover (£m)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 2 May
Payment: 17 Aug
Aim: Electrical equipment
*Includes intangible assets of £4.7m, or 4p a share
Elektron's shares are trading on a modest seven times underlying earnings, but with flat earnings expected this year a re-rating is unlikely in the near term. Hold.
Last IC view: Fairly priced, 23p, 17 Nov 2011