In our digitalised age we're often reminded of the commercial benefits of specialisation. But there's a flipside: namely, an overreliance on individual market strands. Until recently, Laird (LRD) provided a case in point through its exposure to overcrowded smartphone and tablet markets. The wireless connectivity specialist hasn't exactly weaned itself off this segment, but it has been diversifying both in terms of its end markets and customer base.
Although management anticipates a "strengthening in the smartphone cycle", results at the half-year stage still point to a challenging market backdrop. Even so, revenues were up, driven in part by contributions from recent acquisitions, LSR and Novero. The integration of Novero will bolster Laird's market share within the automotive sector, but higher than expected remedial costs linked to the deal ate into margins and profitability at the wireless systems division. This fed through into a 31 per cent decline in adjusted group profits, to £21.1m.
The half-year numbers are hardly inspiring, but they shouldn't detract from management's attempts to put the group on a more profitable footing. The continuing "step change" to Laird's operating model is on track to deliver anticipated cost savings of $20m a year. The group isn't overburdened through borrowings despite the acquisitions, while a cash conversion rate of 120 per cent points to sound treasury management.
JPMorgan Cazenove expects adjusted profits of £86m and EPS of 26p for the December year-end, up from £73m and 21.8p in 2015.
| LAIRD (LRD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 289p | MARKET VALUE: | £784m | |
| TOUCH: | 288.9p-289p | 12-MONTH HIGH: | 410p | LOW: 272p |
| DIVIDEND YIELD: | 4.5% | PE RATIO: | NA | |
| NET ASSET VALUE: | 163p* | NET DEBT: | 58% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 306 | 21.6 | 5.5 | 4.40 |
| 2016 | 353 | 6.2 | 0.7 | 4.53 |
| % change | +15 | -71 | -87 | +3 |
Ex-div: 3 Nov Payment: 2 Dec *Includes intangible assets of £756m, or 279p a share | ||||
