The benefits of a successful acquisition strategy and a "move up the value chain" were reflected in a 64 per cent increase in half-year underlying operating profits at Acal (ACL). The electronic component group has been focusing on shifting its business mix towards the higher-margin design and manufacturing unit. This now generates 46 per cent of sales - against 37 per cent for the year to 31 March - and a full three quarters of group profits. If further vindication of the strategic shift is required, it can be noted that operating margins have doubled over the past five years.
Although management is "encouraged by European macro indicators", the group's exposure to continental Europe is a material issue due to the continued strength of sterling. Acal employs transactional hedges, but that leaves a major translational headwind, as the bulk of its sales are in euros or Nordic currencies. The group's top line was pegged back by currency effects to the tune of £13.4m in the period - equivalent to 9 per cent of the total.
The vagaries of currency markets are beyond management's control, but the post period-end deal to acquire Flux AS - a producer of customised magnetic components – promises to boost earnings in Acal's industrial and aerospace applications. Flux is a lead supplier to the European Space Agency.
Sanlam Securities anticipates adjusted EPS of 15.4p for the year to March 2016, flat on the FY 2015 result.
| ACAL (ACL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 281p | MARKET VALUE: | £177m | |
| TOUCH: | 278-281p | 12-MONTH HIGH: | 335p | LOW: 201p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 24 | |
| NET ASSET VALUE: | 143p* | NET DEBT: | 24% | |
| Half-year to 30 Sept | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 121 | 0.1 | -1.1 | 2.20 |
| 2015 | 142 | 4.8 | 5.7 | 2.33 |
| % change | +18 | +4700 | - | +6 |
Ex-div:28 Dec Payment:15 Jan *Includes intangible assets of £65.5m, or 104p a share | ||||
