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Acal slowed by Eurozone's woes; looks across the Atlantic

Full year results from specialist electronics supplier Acal showed a company increasing market share and gross margins in a difficult European market. Small wonder that the company has been eyeing up acquisitions beyond the Old World.
Acal slowed by Eurozone's woes; looks across the Atlantic

Specialist electronics supplier Acal (LON:ACL) said the current financial year has got off to a good start, continuing the second half revival seen last year.

“Both the base Electronics business and the acquired Myrra Group are performing as expected, with combined orders in April and May being 19% higher than the group reported last year and 7% higher excluding Myrra,” said Nick Jefferies, Acal’s chief executive.

For the year to 31 March 2013, the company saw revenue tumble 12% on a constant exchange rates (CER) basis to £219mln, but that conceals a second half pick-up in which order intake returned to growth.

Underlying profit before tax fell 6% on a CER basis to £6.3mln, but the company signalled confidence in the future with a 6% increase in the full year dividend to 8.5p from 8.0p the year before.

The business continues to throw off cash, with free cash flow of £7.7mln representing 112% of underlying operating profit.

At the end of the reporting period, net cash stood at £11.8mln which, in conjunction with £22.2mln of untapped lending facilities, gives this acquisitive company plenty of firepower for future purchases.

Jefferies told Proactive Investors that the market in which they operate is highly fragmented, with many small niche players. Acal could, perhaps, be described as a large niche player, that is looking to get larger.

“The strength of our model is doing stuff that is not widely done elsewhere,” Jefferies explained. In contrast to the likes of Premier Farnell and Electrocomponents, which focus on providing small quantities of off-the-peg components, Acal offer a more bespoke service to electronics firms.

Market conditions in the Eurozone are not currently favourable for the company, but the UK economy is showing signs of life, according to Jefferies, while Acal’s business in Germany is “picking up quite strongly”.

Jefferies is not ruling out continuing to acquire companies in Europe, but expanding beyond its heartlands in the Old World is a prospect that interests the company.

“If you asked, which major territory would you expect to pick up soonest, you’d probably say the US; we would. So, we’re having a good look there [for acquisition opportunities] but also other territories as well,” the chief executive disclosed.

John Harrington
June 04 2013 John Harrington
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