Following a poor start to the year, trading is picking up pace for Wolfson as its investment in developing new audio chips for smartphones and tablets pays off. The company has reported losses every year since it was ditched by Apple in early 2008. But with second quarter sales jumping 33 per cent to $40.3m (£25.7m) compared with a weak first three months of the year and sales momentum building, a second-half underlying profit is anticipated.
Consumer electronics companies are acting cautiously given uncertainties about demand and the market has lingering fears that Wolfson has too much exposure to brands that lack serious consumer draw, which makes for less sure-fire product launches. That said, Wolfson’s technology is being used in Samsung’s fast-selling Galaxy SIII smartphone, among other first-half product launches. And the company has also been working with several unnamed leading manufacturers in the second quarter – the dream ticket would be if one was Apple.
Third-quarter revenues are expected to come in at between $46m and $54m dependent on how clients ramp up new products. Meanwhile, gross margins are expected to remain at between 48 and 49 per cent following a 140 basis point improvement in the first half.
Broker Peel Hunt expects Wolfson to more or less break even on an underlying basis in 2012 followed by pre-tax profits of £9.2m in 2013 and EPS of 6p (2011: -£7.4m/-4.6p).
| Wolfson Microelectronics (WLF) | ||||
|---|---|---|---|---|
| ORD PRICE: | 205p | MARKET VALUE: | £239m | |
| TOUCH: | 203-207 | 12-MONTH HIGH: | 217p | LOW: 96p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 116c* | NET CASH: | $49m | |
| Half-year to 1 Jul | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (c) | Dividend per share (c) |
|---|---|---|---|---|
| 2011 | 79.7 | -7.1 | -4.5 | nil |
| 2012 | 70.6 | -11.1 | -7.2 | nil |
| % change | - | |||
Ex-div: na Payment: na *NAV includes $32m of intangible assets, or $0.28 a share £1 = $1.57 | ||||
