Join our community of smart investors

Brexit uncertainty takes shine off good results from Acal

The electronic components group continued to deliver despite a challenging trading environment
June 2, 2016

Global economic jitters have weighed on sentiment in Acal (ACL) and other electronic component specialists in recent months. While those concerns are understandable, based on this evidence the group's transition from supplier to designer and manufacturer of higher-value electronics has left it relatively well placed to navigate these storms.

IC TIP: Buy at 262p

Strip out currency headwinds and underlying operating profit surged 36 per cent to £16.3m in the reported period, as the group acquired three design and manufacturing businesses. This higher-margin segment now accounts for nearly 80 per cent of Acal's total profit.

Acquisitions also enabled the group satisfy its other strategic objectives. Sales outside of Europe now account for 17 per cent of total revenues, compared with 12 per cent the prior year. Cross-selling initiatives generated £14.2m of business and helped deliver GDP-beating, constant-currency organic revenue growth of 3 per cent.

These respectable figures were marred by a warning that Brexit uncertainty had triggered nervousness among customers. But chief Nick Jefferies is confident that Acal can continue to prosper regardless, and reckons the second half of the financial year will be much better as "major indicators" point to a sharp upturn in economic activity. A flurry of recent contract wins underpins his faith. Broker Peel Hunt expects adjusted pre-tax profit of £16.6m in the year to March 2017 (from £14.5m in FY2016), giving EPS of 18.6p.

Click here to watch our recent video interview with Mr Jefferies at Acal's headquarters in Guildford.

ACAL (ACL)
ORD PRICE:262pMARKET VALUE:£168m
TOUCH:260-264p12-MONTH HIGH:335pLOW: 235p
DIVIDEND YIELD:3.1%PE RATIO:23
NET ASSET VALUE:159p*NET DEBT:37%

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20122582.77.48.0
20131770.77.48.5
20142124.23.0**6.8**
20152714.35.07.6
20162889.411.48.1
% change+6+119+128+6

Ex-div: 9 Jun

Payment: 29 Jul

*Includes intangible assets of £88.2m, or 137p a share **Restated to reflect £55m rights issue