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ACAL says headwinds will recede after strong financial performance

Last updated: 13:00 01 Jun 2016 BST, First published: 07:34 01 Jun 2016 BST

printed circuit board to denote the field of electronic supply.
The company has around 20,000 customers around the world.

ACAL PLC (LON:ACL) said it expects the “challenging” trading conditions to abate in the second half of the financial year as it gave an optimistic assessment of the prospects.

The supplier of customised electronics also revealed it has around £20mln of funding available for further acquisitions after spending £22mln on three deals in the 12 months to March 31.

The update came alongside full-year results, which revealed the group to be performing well despite the headwinds caused by currency movements.

Revenues for the period ended March were up 6% at £287.7mln, or 14% at constant exchange rates, while underlying operating profit advanced 36% to £13.6mln once adjusted for the weakness of the euro and Nordic currencies.

IN DEPTH: ACAL in a good place, says CEO

ACAL is now generating more than 50% from its value-added design and manufacturing division, which is reflected in the operating margin of 5.7%, which has almost doubled in the last two years.

It is sitting on a record order book of £85mln, while net debt is a tad over £38mln. The latter figure shouldn’t be a worry as the company is converting all its operating profits into cash.

Investors are being rewarded with a dividend of 8.05p, up 6% on a year ago and representing a yield of just over 3% at the current share price.

Chief executive Nick Jefferies said ACAL had delivered a “strong set of results”, adding: “We are building a highly differentiated, international electronics business, supplying essential technologies to growth markets, and are confident of making further progress in the year ahead."

A large and growing customer base 

ACAL designs, manufactures and distributes electronic products to around 20,000 industrial manufacturers around the world.

This includes supplying temperature sensors for coffee machines, customised transformers for healthcare CT scanners and cable assemblies for stair lifts.

Its key markets are in Europe, with increasing presence in the US and Asia.

What the boss says:

On the business...

“The business is performing, it’s very solid, it has relatively stable revenue patterns and we just need to keep on doing what we do, keep pushing it, keep developing it, keep buying good complimentary businesses where we can get sales and operating synergies, and it will keep driving shareholder value”

On growth...

“Growth organically has been reasonable in difficult markets but we’ve managed to maintain operating margins and that has really boosted profitability”

Room for growth 

At 1pm the shares were steady at 261.28p, valuing the business at £167mln.

Reiterating its ‘buy’ recommendation, the City broker finnCap said the shares are worth 339p each.

“We believe double-digit earnings growth can be sustained into the medium term,” said analyst Guy Hewitt.

He sees revenues growing to £297mln this year and then to £326mln and £341mln, giving adjusted operating profits respectively of £19.5mln, £23.5mln and £25.5mln.

 

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