Elektron enters exciting nanotechnology arena

Elektron has acquired Sifan Instruments on the 9th Aug 2007.

http://www.sifam.com/

Sifan has 4 operations....Digitron (temperature probes etc) , Control knobs , meters, queensgate instuments ( nanotechnology division).

Sifam is an exciting acquisition for Elektron. It takes them into higher margin and more sophisticated products.

This is what Elektron had to say about the purchase...


Change of ownership at Sifam Instruments Ltd

"We are delighted to announce that Sifam Instruments Ltd has been sold to specialist electrical company Elektron with the deal being finalised on 8th August. Digitron Instrumentation Ltd, a wholly owned subsidiary of Sifam, is also included in the sale of the overall company. We expect the acquisition to bring new ideas and energy resulting in new product and customer service offerings.
Chairman of Sifam Instruments, Ian Bye, said: "I am confident that this is an excellent fit for both parties and that we will benefit from being part of a much larger group.
Chris Leigh, a spokesman for Elektron, says "We have bought Sifam because we believe in the business and it is one that we want to invest in and see prosper, not for job cutting purposes. It will continue to be run in pretty much the same way by the existing management.
Adrian Girling, chief executive of Elektron, said: "We are delighted to welcome the Sifam businesses, with their well-known brand names, to the Elektron team. Sifam and its subsidiaries bring technologies and expertise that will help Elektron decrease its dependence on low cost commodity components.
The purchase ends a period of speculation and uncertainty, and is warmly welcomed by the 180 staff at our Torquay site."

Financial details:-

Elektron paid on completion an initial consideration of £2 million in cash financed from its own resources. The consideration may be increased or reduced on a pound for pound basis by a maximum of £300,000 subject to net assets at completion (with Sifam's freehold property assets included at cost price) being greater or less than £2.1 million and/or profits for the year to 30 November 2007 being greater or less than £285,000.
Post completion, Sifam will settle in full its liability of £910,000 owing to the Sifam Limited Retirement and Death Benefits Plan. No further payments will be due in this respect.

Post acquisition 10th August 2007

Elektron sold the freehold properties and did a sale and lease back to Panther Secutities.

http://www.elektronplc.com/html/DisposalofSifamproperties.htm

Result an exceptional profit of over £1 million !

Elektron PLC reports record profits.

Elektron PLC has now reported record profits for year end 31st Jan 2007.

Highlights:-

Sales increased 16% to £26 million sterling.

Pre tax profit before exceptional items £1,874,000 (£1,791,000)

Eps before exceptional items 1.73p (1.65p)

Cash generated from operations £2,095,000

Dividend rises 14% to 0.4p.

Annualised sales from continuing operations of circa £30 million, treble that of four years ago.

Elektron PLC reported record pre exceptional profits yet again for year end Jan 2007.

The only cautious element in the RNS was Arcolectric sales and margins seemed to have been affected by sterling now at record highs. However the company indicated they were addressing those issues and hope to be manufacturing higher margin products to counter sterling at its all time highs and the impact of high cost of raw materials. It has to be said Arcolectric is UK based and the Bulgin business which has bow been transfered to Tunisia is not now affected by strength of sterling.

Bulgin sales are still strong at and they appear to be doing well in the US. More information can be seen from an earlier blog on the US. The cost savings of approx £900,000 have yet to feed fully through as the company only exitted the Barking factory in March 2007.

The HOH acquisition appears to have been bought on the cheap now as they made £168,000 operating profit before losses of £80,000 incurred at NPE and Richard Loyd for the 3 months under EKT control i.e Nov, Dec, Jan. NPE has now been disposed of and the NPE freehold factory is in negotiations for sale. So is the business of Richard Loyd. According to EKT management sales are rising and they see better things ahead. Following the sale and lease back core debt has been considerably reduced to approx £2 million. The sale of NPE business and the freehold factory will reduce this further. It would seem reasonable to estimate operating profits from the HOH acquisition going forward £500,000 to £750,000 before interest. EKT only paid £3 million for the HOH business the return on capital is approx 20%.

The final dividend rises 14% to 0.40p and the company indicate that the rise in dividend is indicative of confidence in the business. x dividend is on the 8th August and the divi is payable on the 7th Sept 2007. It looks like on past performance EKT will continue a double digit rise in dividends going forward.

It would appear Elektron are still on the acquisition trail and the CE Adrian Girling hopes to grow Elektron to a £100 million turnover business in the medium term.

The company have also indicated they are looking to buy back shares subject to funds not needed elsewhere that said as the buy backs have not re commenced it would appear the company may have their eyes on another acquisition.

In the last 5 years net assets per share have risen at a rapid rate and it seems this could continue:-

Year end 31st Jan 2003 net assets 0.96million net asset value per share 0.63p

Year end 31st Jan 2004 net assets 3.34million net asset value per share 5.30p

Year end 31st Jan 2005 net assets 5.45million net asset value per share 6.29p

Year end 31st Jan 2006 net assets 6.57million net asset value per share 7.57p

Year end 31st Jan 2007 net assets 8 million ...net asset value per share 9.23p

All in all new EKT management have proved they can turn businesses round and provide value for shareholders. There should be some rich rewards for investors holding for the long term.

Arcolectric-Bulgin thrives in the US.

Arcolectic-Bulgin are thriving in the US and have started to issue regular newsletters for their North America partners. New products and new initatives will drive forward growth.

"Arcolectric-Bulgin Components continues to
grow and yes, thrive in North America. The
professionalism and enthusiasm exhibited by
our selling teams not only impresses me, but
our parent organization, Elektron, as well.
New, and innovative opportunities present
themselves daily."

US sales conference...

"Our message was a simple one; we are a reinvigorated
business looking aggressively for growth, by bringing more
flexibility, support and new products to market. Judging by
the feedback, some of which you will find enclosed, the
message was delivered well. It is a credit to all for making this
event a success."

The first edition was published in May 2007 and can be dowloaded here...

http://www.arcolectric.com/downloads/SwichedOn-NewsletterUSA.pdf

Elektron PLC develops eco products.

edit 21st May 2007...

New switches now being marketed...

http://www.electronicstalk.com/news/bul/bul126.html

Elektron is starting to lead the way with eco friendly products. They have a number of new products they are now starting to market in particular an electronic cooker hood switch that can sense when to switch itself on from the cooking fumes and an electronic switch that cuts an iron off if it hasnt been used in a pre determined time. These products are sure to go down very well.
Arcolectric has already benefited from various product designs and this press release from Reading University is very interesting.....

http://www.reading.ac.uk/about/newsandevents/releases/PR194.asp

"Reading student is 'Most Enterprising Student 2005'
Release Date : 08 September 2005
University of Reading student Mark Chatterton is celebrating after winning the Shell STEP Award for the 'Most Enterprising Student' in the central southern England area. Mark scooped the award at a ceremony at the University on Monday 5 September for his work at Surrey-based Arcolectric Ltd.The firm chose Mark, who studies Electronic Engineering, to work on the challenging summer project. In just eight weeks, Mark, 20 managed to design and build a prototype mains rocker switch incorporating a low-cost microcontroller to count mains frequency cycles and disconnect the switch after a pre-determined time.The project has resulted in immediate benefits for Arcolectric, with one manufacturer expressing an interest in purchasing 750,000 units of the product he created.Winner Mark said: "I am thrilled to have come this far in a nationally-recognised competition. I have learned so much this summer, which I am confident will stand me in good stead when I apply for jobs in the future."Presenting the award, Dr Virginie Ruiz, chair of the judges, added: "Congratulations to Mark for winning this award. Achieving what he has in just eight weeks is no mean feat, and I'm confident this will impress future employers."Craig Ollier, 21, and studying Management and Business Administration at Reading, was 'Highly Commended' for his work with @UK. He had to develop a business plan to expand the company into other areas of the world.Shell STEP is a national programme arranging structured summer work placements for students at small and medium-sized businesses (SMEs). It matches undergraduates to SMEs with specific development projects, in order to develop the students' workplace skills. While at the host company, students can put the theory they've learnt at university into practice.As part of the programme support process, students learn about the small business sector and have the opportunity to develop many core skills, such as time and project management, which increases their employability significantly.In the process, the projects can also increase the growth and innovation potential of the host business. Most small businesses involved are convinced by Shell STEP of the value a student project can deliver, with 96% of last year's SME participants stating that they would offer further opportunities to students in the future.Mark beat 12 other local finalists, and he will now go forward to the Shell STEP Regional Final the Shell Centre in London on Wednesday 14 September. More than 1,000 STEP projects took place over the summer this year in the UK overall. "

An investers thoughts....

Reviewing my investments this week end and by coincidence, my profit/loss on EKT is 0p today after 2 years...Now some would say that is a bad investment...but then they, i bet, have held investments that have gone tits up over similar periods of time....and this has not.The fact is, huge profits and loses are invariable linked to high risk and in my opinion, EKT has shown its self to be very low risk and, considering the ups and downs of the markets over the last few years, it has remained a safe place to leave some cash.The downside has been tested with market slumps and a falling dollar...a difficult period in any companies year must be the closing of a production plant and the opening of a new one but this too has been carried out with no adverse affect on production or delivery. Cost have been cut and cash generated has been shrewdly invested to generate more cash and further diversify the core business.The management have not gone the risky, boom/bust route in an effort to attract the traders and rocket the SP...instead they have steadily cut cost with the move abroad for production and assembly, expanded the core business at a sustainable rate with acquisitions(production and property)and opened up new possibility's with far Eastern customers..The upside is we now have money invested in a proven stable company, an expanding company, and a company that has a proven track record of reliability for the investor when times are not so good in the markets.#It would have been nice to buy in now rather than 2 years ago but if we had a crystal ball to tell us these things...well wouldn't life be simple..As it is i think that we will hear from EKT in the next month and i think It will be good news ! ..sure if you want to gamble and take bigger risks you could make quick bucks else where if you are lucky ;-) but i think the proportional, likelihood of making good money here for very little risk is a better bet. With that in mind, I will be adding to my holding here :-)

Disposal of NPE and Richard Loyd

Edit 2nd Oct...Richard Loyd has now been disposed of. EKT can now concentrate on Titman Tools and Howle Carbides both which I expect will prosper under the EKT umbrella.

The disposal of NPE is good news for Elektron. NPE was a loss making operation acquired with Howle holdings. Elektron can now concentrate on the profitable operations of Howle.

http://www.elektronplc.com/html/DisposalofNPEInnotekLtd.htm

NPE reported sales and a loss before tax of £841,000 and £148,000 respectively in its last audited accounts to 30 September 2005. In the sixteen months to 31 January 2007, NPE management accounts show a loss before tax of £218,000 on sales of £1,013,000.

Investors know from Howle's RNS, at the interim period ie prior to EKT purchasing Howle, they made an operating profit £262,00. That profit would of course have been a lot higher but for the NPE losses.

We can now do some further analysis and projected profits for the Howle acquistion...

Howle PLC made an operating profit of £262,000 at the interim period ended 31st March 2006, using some simplistic analysis we can assume that within the figure of £262,000 were included approx £74,000 of losses contributed by NPE. If we then write back any losses it increases the estimated operating profit of Howle Plc to an estimated £336,000 at the interim period end 31st March 2006. On that basis it looks like Howle Holdings has been bought very cheaply indeed at approx £3 million for the whole group. However since the year end NPE business has been sold thus reducing the acquisition of HOH further. Bearing in mind it was indicated from Howle's interim statement that sales were on the increase and there will be more cost cuts to come. On acquisition the Chairman of Howle resigned thus reducing overheads further. I don't know what the chairman was paid but its possible we could allow a further cost saving of £20,000.

The above analysis does not take into account tax and interest costs we will have a better idea when EKT report May/June when hopefully we can refine the analysis.

http://www.investegate.co.uk/Article.aspx?id=200605150701009387C

edit 14 th May 2007...Estimated profitability of Howle writing back any losses incurred by NPE:-

Howle made a profit of £82,000 after interest and before tax for the interim period 31st March, 2006 multiple by 2 makes a potential profit for year end of £164,000 . Write back £148,000 of losses from NPE =£312,000. Tax would then be deducted to arrive at a potential full years earnings. Allowing for tax at 30% =£217,000. Whether there would be a full tax rate of 30% is another matter as presumably the group had tax losses to utilise. What is important is any uplift in turnover could raise any profitability sharply.

In conclusion we can expect Howle to contribute at the very least £312,000 before tax for 2007/8. My own view is more optimistic and I have pencilled in between £500,000 to £750,000 before tax.

If we assume EKT will make an estimated £2 million pre exceptionals this year end 31st Jan 2007 and cost cuts will add £900,000 2007/8 then EKT could well make in excess of £3.5 million allowing for modest growth.

Stakebuilding in Elektron

Elektron shares are tightly held and approx 60% of the shares in issue are held by 7 parties.

Major Shareholders

Mr. J. Kinder, Panther SecuritiesPlc, Trustees of the AF Bulgin Settlements ,Rathbone Nominees Limited,Mr. R.A.R. Bulgin ,Mr. B. Bridge,Specialist Holdings

Andrew Perloff is the ce of Panther securities and he also holds EKT shares in his private pension fund.

Mr John Kinder, Andrew Perloff and Mr Barry Bridge have all increased their holdings the last 12 months.

Great prospects for EKT

I have invested in EKT for several years now and have my own cosy EKT thread on
ADVFN. It seems that the SP may be close to breakout and it is a good time to be invested
in the company.

Next time I visit I will post a link to my thread. Lots of debate and discussion.

Acquisition news, forecasts & tips.

Elektron results are due out late May 2007.

With a new acquisition lately of Howle Holdings investors will be looking for news on how the new operations are faring. In particular investors will be looking at growth prospects for Howle Carbides and Titman Tip tools. Both these operations had small exports prior to the Elektron acquisition and its hoped EKT can drive the sales forward with its large distribution network in over 50 countries.

Its expected the company will increase the final dividend. Most the distributors are bullish on prospects and shareholders are looking for another excellent year of growth.

2007/8 profits should jump sharply due to cost cuts of transfering manufacturing from the Bulgin factory at Barking to Tunisia. The Bulgin factory has now been vacated.

There are no broker forecasts for Elektron however its expected underlying profits for 2006/7 will be circa £2 million excluding exceptionals. For 2007/8 pre tax profits are expected to jump more than 50%.

Share tip... 2006 now dated due to recent acquisitions.

The Japanese, you will recall, were very good at borrowing the inventions of others and manufacturing quality products in very high volumes. And down in the unglamorous setting of East Molesey, I discovered a great little British company that is doing very much the same thing.How do the following innovations sound to you? An iron that turns itself off if it has not been moved from the horizontal position for 20 seconds. A washing machine that recognises the contents of the wash and automatically sets the correct programme. A cooker hood that switches itself on when it smells fumes...These are just some of the products that are coming our way. And they are made possible by the prevalence and affordability of the type of electronic and electromechanical components that I watched being churned out in huge numbers at the south west London factory of Arcoelectric. Unknown in the Square Mile... just the way I like itAlong with Bulgin Components, another business that can trace its history back to the 1930s, Arcoelectric is now owned by Elektron, and run by its executive chairman, Adrian Girling. Girling, 54, could, I am sure, be in charge of a much larger company. He is an Oxford graduate, a Chartered Engineer and a Fellow of the Institute of Electrical Engineers. He is also a highly experienced businessman, having worked all over the world for the likes of ITT, Marconi and Spirent. He is an enthusiast for the manufacturing industry - but is frustrated, too. "Last year was hard work," he reported in May's results statement, "but great fun." But he complained: "There are companies who do not have the channels to market enjoyed by Bulgin and Arcoelectric, who lose money, yet are valued at multiples of sales because they claim to have a unique technological business proposition." That is not a sentence that would win prizes in a literary competition, but it does reveal one thing. Elektron does not employ a PR advisor to smarten up the prose. Which is one reason why it is virtually unknown in the City. But the City's loss is our gain. Because this is a great story that I will take up at the start of 2003, when Girling's reputation as a fixer of problem businesses saw him dropped into a crisis...When the going gets tough, this cost-savvy executive chairman gets goingOne of Elektron's main subsidiaries was facing liquidation, and this threatened to bring down the whole group. Some swift cost-cutting and the sale or closure of three businesses saved the day, and at the end of the year Girling spotted an opportunity to repeat the trick and give the group some real scale. He bought Arcoelectric from the receiver, in exchange for £352,000 and the assumption of £1,515,000 of lease finance debt. A property sale and leaseback, which left Andrew Perloff's Panther Securities with 15% of Elektron's equity, and a separate fund raising, put Elektron on a sound footing, and the accounts reveal that Arcoelectric contributed net assets of £2.6m and made sales of £15m last year.So that was a smart deal and helped Elektron to achieve total sales last year of £22.5m. Elektron produces a very wide range of switches, connectors, battery and fuse holders, indicators and other electro-mechanical components that are sold all around the world. Both Bulgin and Arcoelectric publish large catalogues from which 20% of sales are made, while 45% go directly to OEMs (Original Equipment Manufacturers) and 35% are sold through distributors such as Electrocomponents. Elektron controls the entire production process, from tooling through to the injection moulding of plastic parts, metal forming, plating and assembly. This ensures consistent quality, quick response times and the ability to make small batches. Every hour Elektron is winding 60,000 miniature springs, some only a millimetre in diameter, and pressing 200,000 contacts and terminals. In all, it manufactures 72m components each year. This AIM-listed marvel also pays a dividend! Buy today for 75% gainsNot all of these come from East Molesey, or from Bulgin's factory in Barking, Essex. Twenty million and 10m respectively are manufactured in Arcoelectric's factories in Tunisia and Shenzhen. Using what he describes as the "one kitchen, two restaurants" concept, Girling is gradually integrating the production capacity of Bulgin and Arcoelectric, so that orders can be met from either China, North Africa or the UK, depending on logistic costs and delivery schedules. But he also wants Elektron to become a supplier into the domestic Chinese market. At present the Shenzhen factory can only serve the export market, but it is now being established as a "Wholly Owned Foreign Enterprise", which will permit it to sell into the vast local market. This should accelerate the growth of sales, which was a modest 3% last year, and boost Elektron's share of what is a massive market. Global sales of switches are worth $3.8bn per year, while for connectors the figure is $25bn. Girling reckons that Elektron has about 7%-8% of the market segment that it serves, but is winning share from competitors such as Signal Lux and Molveno in Italy, Germany's Marquardt, Schurter in Switzerland and Defond from China. Some of this is due to product innovation. Girling does "not believe in breaking new ground with high technology", and the research and development bill is minimal. But by simply using existing technology in imaginative ways, Elektron's product designers have steadily come up with new products - a recent best seller being a waterproof Bluetooth wireless connector. My visit to Elektron's offices was enough to show me that shareholders' money is not lavished on elegant surroundings, and such tight cost control is one reason why it has bounced back from the £6m of losses run up in the two years ending 31 January 2003 to record a £0.5m pre-tax profit in 2003/4, rising to £1.5m in 2004/5 and £1.8m last year. Even more impressive was the 20% increase in shareholders' funds last year (now worth 8.3p per share) and the cash generation that saw Elektron finish the year with net cash of £443,000 and leave it poised for expansion.RHPS Verdict: In May Elektron reported a 15% year-on-year increase in its order book, and hinted that it might make an acquisition this year. Given the successful turnaround of Bulgin and Arcoelectric, a similar move would surely be well received. Shares in this financially sound, profitable, dividend-paying and growing business trade on below eight times last year's earnings. This is ridiculous and I am setting a price target of 25p. BUY.

The price target is now dated due to the acquisition of Howle Plc lately and it seems the price target will be raised substantialy.