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.