Digitron to target the US for rapid growth.

Digitron has opened a news sales office in the US...

"Digitron to target high growth in mobile and wireless temperature and pressure measurement industries"http://www.digitron.co.uk/news.aspxInternationalisation strategy:

US sales office opens -Digitron, the provider of handheld and wireless instruments and systems for the food retail, food manufacturing, HVAC and healthcare industries, is re-positioning its business to target high growth areas in the handheld and wireless temperature and pressure measurement industries.Under a new management team, led by Neill Ricketts, Managing Director of Digitron and parent division Elektron Ventures, the 40-year-old company is strategically re-positioning its business to provide bespoke handheld and wireless monitoring solutions. At the same time it is rationalising and redeveloping its range of handheld temperature and pressure measuring instruments to reflect a new generation of customer needs. The company is also fast-tracking its internationalisation strategy with the opening of a staffed US sales office in Thousand Palms, California. The move leverages parent company Elektron PLC’s routes to market in the region. Global sales are being driven by Peter Needham who has been appointed Business Development Manager with responsibility for growing the bespoke handheld and wireless solutions business. Peter joins the management team from a major distributor of wireless communication systems and previously spent 10 years in global thermal system sales. The Digitron handheld product range is being redesigned and manufactured in the UK and is aimed at achieving a market-leading position in quality, reliability, functionality and value. It will be launched in September 2010. The development of the DigiTrak Kyros wireless sensor network system has recently been completed and a significant installation secured at the Dubai Marina hotel in Dubai for the real-time temperature monitoring of over 250 fridges and freezers.Neill Ricketts, Managing Director of Digitron and Elektron Ventures commented: “Elektron has identified the high growth potential for Digitron and has engaged a focused and dynamic management team to deliver the new strategy for the development of bespoke handheld and high value wireless solutions based on our own technologies.“We are currently developing bespoke temperature and pressure instruments for a number of existing and new customers, and wireless monitoring solutions for several large and blue chip organisations. We are in the final stages of discussion with some market leading names in the restaurant, hospitality and retail sectors for the installation of the new DigiTrak Kyros temperature monitoring system across multiple sites and should be in a position to announce new contracts shortly.”Digitron is part of the Elektron Ventures division of Elektron plc.

Acquisition of Hartest PLC.

Acquisition of Hartest Holdings. (to be updated)

"On 30 July 2010, Elektron announced the terms of a mandatory cash offer for the entire issued and to be issued ordinary share capital of Hartest not already owned by Elektron (the "Offer") at an offer price of 90 pence in cash (the "Offer Price") for each Hartest Share (the "Announcement").

Since the Announcement, the board of Hartest has agreed to recommend the Offer at the Offer Price for the reasons set out in the letter from the Chairman of Hartest at Part 1 of the Offer Document. "

The offer for Hartest.

Elektron's offer values Hartest PLC at about £8.3 million. However its believed by the time the deal is finalised on the 12th September HTH could have over £1 million cash on deposit plus the sale of their freehold property the sale been recently concluded. The sale proceeds amounted to a little over £700,000. Taking away cash could reduce the actual cost for Hartest to approx £6.6 million. Hartest has no net debt and will be highly cash generative.

Hartest could well add £1 million to our pre tax profits in the current year and thereafter between £2 million to £3 million pre tax in the short to medium term. I expect Hartest will grow its turnover faster under Elektron's control, they will use each others sales network and distributors to ramp up sales.

Combined group forecast turnover and profits.

The acquisition of Hartest is significant for Elektron. The enlarged group will probably have turnover of circa £50 million for the current year and I estimate pre tax profits of about £5million. For next year I estimate turnover of circa £75 million and pre tax profits of about £8 million.

Such is the significance of the Hartest acquisition Elektron has been shortlisted as Aim transaction of the year see 5 below:-http://www.aim-awards.co.uk/2010/awar.php#6.

AIM Transaction of the Year"The winner of this new award will be a company that has been transformed by a single financial or commercial transaction during the period under review. This is necessarily a wide ranging award, given to recognise a significant achievement by a company in transforming itself, literally at a stroke, and thereby creating significant shareholder value. "

5. AIM Transaction of the Year Sponsored by Zeus Capita
1. Bellzone Mining pl
2. Elektron plc
3. Petra Diamonds Ltd
4. Norman Broadbent plc

Trading update & Upgrade in broker forecasts.

Trading update and broker forecasts (to be updated further).

05 July 2010

Elektron Plc

Trading Update

As Elektron Plc ("Elektron" or the "Group"), the AIM quoted technology based company, approaches the end of its first half, it announces a trading update.

Pre-tax profits for the half year to 31 July 2010 are expected to be significantly ahead of management's previous expectations.

The Board continues to be cautious about the second half because of global economic events. However, the order book remains strong and the Board believes that the Group will perform better than management's previous expectations for the current year.

Elektron expects to release its interim results on 16 September 2010.

Broker Forecasts.

Brokers upgrade pre tax profit £900,000 but state there will be a small tax charge and exceptional items. EPS current year forecast increase to 4.1p. (basic).

Finncap increase price target from 30p to 40p.

Elektron PLC results to 31 Jan 2010

Elektron results to 31st Jan 2010 in brief (to be updated in due course)

Highlights:

Turnover £29,882 (35,644)

Operating profits excluding discontinued operations goodwill exceptional operations £1,763 (£1,0002)

Very strong second half: EBIT of £1.5 million (2009: £0.3 million)

Dividend 0.5p (0.46p) to be paid on 17th August, scrip divi alternative



Outlook

Current sales and EBIT are well ahead of management expectations. Orders for the year to date are currently running at 148% of last year with the current Group order book standing at £8.1 million, 76% up on this time last year. It should however be borne in mind that prior year comparatives were especially weak and that it will be harder to sustain such dramatic percentage increases as the year progresses.

Trading update & Upgrade in broker forecasts.

Trading Update 8th April.

Elektron updated the market on year ended Jan 2010 trading and gave an indication of current trading.

Key points:

a. Due to increased order intake in the final weeks of the financial year the company has seen a signicant increase in profitability pre exceptional costs.

b. Availabe for sale financial assets will have increased £800,000 due to a revaluation.

c. "Elektron is pleased to report that the upward order trend has continued in the first two months of the current financial year giving the Board added confidence in at least meeting market expectations for 2010/11. Queensgate, the nanomeasurement specialist which is part of Elektron Ventures, is performing particularly well."

Finncap Brokers Upgrade:

Key Points:

a. Finncap have upgraded turnover from £29.6 million to £30.3 million and increased EBITDA to £2.8 million. EPS has been upgraded from 1.17 to 1.85 basic eps.

b. Price target increased to 25p from 15p. Finncap indicated the likely hood of further upgrades.

Comments:

Turnover and profits started to bounce back from last Summer onwards and the company finished the year very strong. It looks to me like the strong finish to the latter half of the year has continued on an upward trend into the current year. We are already looking for £3 million pre tax profits on the current year I think they will be comfortably exceeded. As turnover rises more profits fall to the bottom line with rising margins.

Finncap our brokers have already upgraded our forecasts a number of times last year I think they will have to again on the current years forecast earnings.

The brokers have indicated excellent trading in the technology division. That group comprises Bulgin, Arcolectric, Sifam. The bulgin subsidiary is a highly profitable business now investors should not underestimate the increase in trading on profits. What caught me out was the increase in business from Queensgate Instruments that operation is capable of good profits going forward.

The share price has increased over 140% from its low point the last 3 months and with the market cap still under £16 million at the current mid price of 18.25p the share price could double again well before the end of the year. The current multiple is far too low at present on prospects.

Director change sets Elektron's sights ever higher.

Today Elektron appointed Malcolm Argent CBE as a non executive....

http://www.elektronplc.com/news/director_16-02-10.html


Malcolm has had a distinguished career with BT and other appointments have included Deputy Chairman of the Civil Aviation Authority (1995-8) and member of the boards of Westminster Healthcare Holdings PLC (1992-9) and Clerical Medical Investment Group Ltd (1994-2001).

Elektron appear to be setting their sights high appointing directors from Blue Chip companies to this rapidly growing Aim company.

Keith Daley, Chairman commented:

'We are delighted that Malcolm has agreed to join the Elektron board and I am sure that Shareholders will join me in welcoming his appointment at this exciting time for the Company. We are continuing to look for an additional non-executive director to further strengthen the board'.


I can't wait to hear who the next non executive will be.

Broker upgrade and outlook.

Finncap upgraded Elektron's forecasts when they issues a trading statement on 12th January.

They believe recent strong trading will flow through into the first quarter of FY11e. One of the reasons for that is because Elektron mainy manufacture to order, therefore any orders placed in December/January will see profitability flow through to next years figures. Moreover Elektron win one off orders and its likely these will be hinted at to brokers.

The main changes to forecasts on turnover and eps are:-

Year end Jan 2010...

Turnover increased from £28.45m to £29.60 a forecast increase of 4%

EBIT adj from 0.020 to 1.20p a 500% upgrade.

EPS adj 0.01 to 1.15p

The brokers have indicated that Elektron's competitors are on a pe ratio of 13 times earnings and have therefore pencilled in a price target of 15p for Elektron. It has to be said however those forecasts are based on year end Jan 2010 figures and in my view the current share price is undervalued on the current earnings forecasts for Year end Jan 2011 and 2012.

Finncap have left Year end Jan 2011 and year end Jan 2012 unchanged.

Forecasts for Jan 2011 are eps of 3.40p and Jan 2012 of 4.45p

However with current trading appearing to be significantly up on last year, I feel Finncap will have to upgrade 2011 and 2012 forecasts in due course. This is what Elektron said in their recent trading statement..." In December average daily order intake exceeded £175k per day which was a record for that month, representing a 74% increase on the prior year comparable figure."

Further evidence that things are picking up recently, Premier Farnell and Electromponents have indicated good trading of late more so in the far east, the US and China, which are growing strongly.

I am expecting a further pre close statement in due course. At that stage I expect further upgrades to 2010/2011 turnover, profitabiluty and eps.

However if we follow Finncap's methadology on EKT's competitors being placed on a multiple of 13 times earnings on 2011 eps of 3.40p that would equate to a target share price of 44.2p and for Jan year end 2012 on an eps of 4.45p would equate to a target price of 57.85p.

I think however, Elektron should be on a rating of at least 15 times earnings I base that on a strong balance sheet with low gearing, and rapid rise in eps the next 2 years with better prospects than Finncap have indicated.

Finncaps 9th July 2009 cash forecasts show :-

£0,347,000 cash for Jan year end 2010

£2,858,000 cash for Jan year end 2011

£5,908,000cash for Jan year end 2012.

Taking into account trading at year end being significantly higher than broker forecasts, I suspect the cash position will be far better than Finncap have forecast. Moreover interest charges should be lower as Elektron payed a scrip divi, which was accepted by over 50% of shareholders. This will have resulted in further cash savings.

When the company came out with their trading statement in Jan the company also announced a possible sale of their stake in Hartest. Should the Delta offer be accepted on the 22nd February 2010 Elektron will receive proceeds of approx £1.3 million.

My own Cash balance forecasts taking account of uptake in orders at year end and payment of scrip dividend are as follows ;-

For year end Jan 2010.

Previous profit forecasts EBIDTA adj 0.78 million. Upgraded to £.1.02 = an increase of 340k

Estimated saving on scrip dividend of say 200k plus an estimated savings on interest charges of say 50k = 250k

Previously Finns forecast cash balances for Jan year end 2010 £0.347,000 add on above savings of 737,000 = Cash balances at year end 2009 = £1,084,000

For Jan year end 2011 Finns had cash balances of £2,858,000. Add on 737k = £3.585,000. However should the HTH stake sale go through EKT will receive a further £1.3 million less tax which could equate to cash at year end of approx £4,485,000

Finns had cash balances of £5,903,000 for year Jan year end 2012 taking account of the above would equate to approx £7,640,000

Trading statement and possible disposal.

Elektron issued a trading statement on the 12th January and

http://www.elektronplc.com/news/Trading_update_12-01-10.html

Key points :-

a. Significant upturn in orders. December had a daily order intake of 175k per day a record for that month and a 74% increase on the prior year comparable figure.

b. The company indicates profit will significantly exceed broker forecasts.

c. There is to be divisonal reorganisation, the number of divisions reduced from 3 to 2 the two new divisions being Elektron Technology and Elektron Ventures.

d. "The purpose of the reorganisation is to focus the Group and its management on the highest growth opportunities.
ET is currently concentrating on opportunities within the global connector market (estimated $35 billion sales in 2009). Each EV business unit will be managed for growth and where growth is not available, consideration will be given to disposal of the relevant business unit."

e. "The Board announces that it has signed a non binding letter of intent to enter into an irrevocable undertaking to accept an offer, when made, by Delta Controls Limited for all of the issued, and to be issued, share capital of Hartest Holdings plc at a price of 69p per share. There can be no certainty that Delta will make an offer or that any offer made will be successful. However in the event that an offer is successful Elektron expects to receive proceeds of approximately £1.37 million representing a profit on original cost of £0.01m and a profit on last reported carrying value of £0.90m. "

Elektron vacancies point to rapid organic growth.

Elektron PLC has recently been recruiting key staff in both the UK and China as they seek to drive rapid organic growth.

Left click to enlarge picture.

Divisional Managing Director will assist in driving growth forward in the Technology subsidiaries.

"The division will operate a videoconferincing system for board meetings.

The division is placing particular emphasis on the Asia Pacific region which represents 44% of its addressable market but only 14% of existing sales."


Left click to enlarge picture.

One of the vacancies was a divisional finance director for their Technology division in China the subsidiaries comprise Bulgin/Arcolectric/Sifam.

In their job advert the company state they seek to double sales in this division within the next 3 years.

The Technology division is the most profitable part of the company and accounts for about 74% group of turnover. Should the company achieve their sales growth targets the brokers forecasts will be beaten by a wide margin.

Elektron trading statement.

Elektron came out with a trading statement today.

As I stated in my footnote to the brokers forecasts the most profitable subsidiaries doing very nicely indeed.

At the moment the ECD division contrbutes 60% of group turnover the other divisions split 20% hard metal components , 20% from instruments.

Looking a little further ahead I am expecting the instruments operations to not only catch up on ECDs profitability but to be the most profitable business overall. The reason being some of the instruments are high value products and therefore margins will be better.

The company stated they were confident of long term growth in profits and dividends.

Total Carbide launch.

Total Carbide launch new identity and new product line together with a £1.8 million investment programme.

http://www.totalcarbide.com/media/TotalCarbidelaunchOE2009FINAL.pdf

Neill Rickets indicates the subsidiary has already had success in new business in the last 3 months.

The company has developed a new Nickel Chrome alloy for the oil and gas industry.

Institutional Presentations.

Elektron are to have a number of City Institutional Presentations, Sept/Oct 2009

http://www.cityinsights.co.uk/default.aspx

Highlights of 2009 Broker note. (millions)

Sales 2009a £35.64 2010e £28.45 2011e £36.30 2012e 41.50

PTP 09a 1.71 10e 0.01 11e 3.00 12e 5.22

eps pence 09a 2.27 10e 0.01 11e 3.50 12e 4.58

Div pence 09a 0.45p 10e 46p 11e 50p 12e 60p.

Margins 09a 34% 10e 38% 11e 40% 12e 42%

Cash on deposit. 09a £834,000 10e £347,000 11e £2,858,000 12e £5,903,000

Net (debt) cash 09a (3.263) 10e (4,250) 11e (1,739) 12e 1.306.

The company will be ungeared in 2012. The dividend cover will be over 7 times in 2012. I think the company could be paying a far higher dividend and will be pressing the company to do so nearer the time. Bear in mind the company will be ungeared in the same time scale if they meet brokers forecasts.

The brokers regard the strategy off offshoring and investment in IP offers significant returns in the long term. The brokers have forecast that the ECD division will be making pre tax profits of £1 million in fy10 and the other divisions a small loss. However the brokers have indicated that as a conseqence of most of the exceptionals already been taken to the profit and loss account any uplift in sales should enhance current year performance. Having said that the most profitable part of the group being ECD, and the economies starting now to see growth, the brokers forecasts could get beaten on a full years trading. Surprising news today both France and Germany seem to have come out of recession and resumed growth.

Broker forecasts July 2009

The link to the broker forecasts is here...

http://www.mediafire.com/?ixymltywvjj

This thread will be updated later showing the highlights and my own comments on the outlook.

Elektron's 2009 AGM.

A brief summary of EKT's AGM is as follows.

At the start of the meeting the company indicated they could answer no questions on their recent acquistion news. This is not unusual they are governed by FSA rules.

Various shareholders placed a number of questions to the board of directors.

Firstly one shareholder questioned the auditors fee of about £170,000 as being on the high side. The FD Chris Leigh indicated one of the reasons for this was some of Elektron's operating companies were abroad. There were other minor figures questioned in the accounts.

Another question was concern that the Howle subsidiary was not performing when EKT had previously stated the subsidiary would benefit through new products to the oil and gas sector. The new director of Howle answered the question and indicated the oil and gas sector had reduced their orders however he seemed confident things would improve once the oil and gas sector picked up. He also commented on Howle's new website the subsidiary to be renamed Total Carbide. This is their new Total Carbide website... http://www.totalcarbide.com/

I put a number of questions to the board. First I asked the directors about their new product development and whether they could give me an example of some of their new products. Unfortunately due to confidentiality agreements with their customers it was not possible to provide details albeit the company indicated there would be new product announcements before the year end.

My next question was whether they company were happy with their top team they had in place and whether or not there would be further appointments. The company has taken on a number of key staff on lately with excellent credentials. Keith Daley indicated the company were happy with the team they had in place however they still had in mind more appointments in due course. Details of new director appointments are here.. http://www.totalcarbide.com/media/HowleTitmanDirectorAppointmentsJuly2009.pdf

The company had indicated previously they hoped to achieve a turnover of circa £100 million per year and I asked whether or not they were still on track in the medium term. It was confirmed they were.

My last question was with regard to the brokers dividend forecast for the next few years. I stated to the company they had paid on average a dividend cover of about 4 to 5 times the last few years. I thought over 7 times cover for 2012 was too high. One shareholder interupted my question indicating he would rather see the company reinvest rather than paying higher dividends. Keith Daley indicated the board had every intention of enhancing shareholder value apart from any dividends.

The meeting ended.

Elektron results year end Jan 2009

Elektron results came out June.

http://www.elektronplc.com/news/news-11-06-09.html

"Key Points:
Sales £35.6 million (2008: £34.9 million)
Operating profit before exceptional items slightly ahead of guidance at £1.1 million (2008: £2.1 million)
Exceptional charges previously announced of £3.2 million (2008: £1.0 million); cost base substantially reduced
Proposed final dividend up 2.2% to 0.46p per share; scrip issue alternative
Cash of £0.8m (2008: £2.0 million) "

A growth in the dividend shows confidence in the company.

For the last few years the company has been concentrating on cost cutting although that will continue the company is moving forward with more capital spend on Inovation...

"The major focus in the current year will be on Innovation. Elektron has started to implement an Innovation Project, drawing on talent already available within the Group, with a view to achieving substantial growth and greatly enhancing shareholder value. The Group is budgeting £1.4 million in technical spend in the current financial year and we are determined that as much of this as possible will be used to develop new products for growing markets rather than simply maintaining the existing product range."

Stakebuilding in Elektron.

Most of the big holders and directors been stakebuilding in Elektron PLC the last 12 months...

Latest update:-

8th July 2008 Keith Roy director buys 5,000
9th July Keith Daley buys 200,000
23rd July Keith Roy buys 100,000
4th Aug KD buys 100,000
6th Oct KD buys 150,000
13th KR buys 25,000
15th Oct Andrew Perloff buys 525,000
20th Oct KR & KD buys 500,000
24th Oct John Kinder buys 100,000
24th Nov Keith Daley buys 100,000
17th Feb 2009 Keith Daley buys 2,000,000

Total 3,850,000

Elektron stake in Hartest Holdings.

Elektron has recently taken a 23% stake in Hartest PLC.

Both Amshare and EKT's brokers Finncap have mentioned EKTs stake HTH therefore it would seem appropriate to form some kind of analysis of various options open to both companies. After looking at Hartest in depth lately it seems to me there are 2 options.

The first option being whether there is any future for HTH as a stand alone business. The second option what effects any acquisition would have on Elektron.

Option 1 Hartest prospects as a stand alone business....

Hartest PLC has had poor growth on turnover the last 5 years and erratic profits .

In 2004 turnover was £20.08 million and the year just gone year end 2008 turnover was £21.72 million. That's less than 10% increase in turnover in the 5 year period or put it this way an average of 2% a year. Though the company was in profit year end 2004, it lost money 2005 and 2006, 2007 the company made 0.38 million pre tax and year end 2008 the company made 0.88 pre tax. Forecast profits for 2009 are £1.01m.

However since the financial year end the company had a trading update on the date of the AGM on the 12th August 2008. This is what the company said....


"Sales by Group companies in the current financial year are in line with expectations but
margins are coming under pressure in some areas. The Group is not immune from the
general economic climate and the potential deferral of capital expenditure projects by
some customers.
Operating overheads remain under close control, but a number of additional expenses
are being incurred in respect of Group development and the necessary relocation of two
of our companies later in the year."

In order to evaluate Hartest prospects as a stand alone business I have analysed its various operations. as best I could with the amount of information available. What a right rag bag of operations it has too.


Based in Stansted, Essex, Agar Scientific is a leading international supplier of consumables, accessories and specialist equipment for all disciplines of microscopy.


Carnation Designs produces integrated electrical solutions and power management systems for specialist vehicles at its factory at Heckmondwike, Yorkshire.


Hartest Precision Instruments operates from two facilities in the Greater London area; Kingston and Croydon. The company manufactures, sells and distributes a range of specialist instruments and supplies for use in testing, measurement, performance improvement and research around the world. The company has the following separate branded activities - ASL, Sheen, Tinsley, and Wallace.
Cross Technologies operates from facilities in Sandhurst, Berkshire and is engaged in the distribution of specialist healthcare and medical equipment in both the public and private sectors throughout the UK and Ireland. The company trades under two separate brand names, namely CrossTech and QADOS.
On the medical side...Cross Technologies operates from facilities in Sandhurst, Berkshire and is engaged in the distribution of specialist healthcare and medical equipment in both the public and private sectors throughout the UK and Ireland. The company trades under two separate brand names, namely CrossTech and QADOS.

Cross Technologies operates from facilities in Sandhurst, Berkshire and is engaged in the distribution of specialist healthcare and medical equipment in both the public and private sectors throughout the UK and Ireland. The company trades under two separate brand names, namely CrossTech and QADOS.

Financial analysis

The year just ended the largest turnover division was the instrumentation manufacturing/distribution operations which had a turnover of approx £14.082 and made a pre tax profit of £1,141m However within this division they have Carnation designs , (click onto link for accounts ) which had a turnover of approx £1.5m and pre tax profit of approx 84k, Carnation had a deficit of £526,000 on its balance sheet at year end.

The medical distribution side had a turnover of £7.6 million and made 340k pre tax. As a rough analysis this division had approx £1.7 million of net assets.

Future as a stand alone business.

Quite honestly I don't think HTH has a future as a stand alone business. As I said previously HTH has a rag bag of businesses some of which are experiencing difficulties. The company needs to make its mind up whether its a manufacturer or distributor. The healthcare side is making little money and needs to be sold off. As for Carnation its done very little the last few years and I dont rate its future. Carnation would fit in better with a telematics related company. The problem being it has a deficit on its balance sheet and in these markets I am not certain who would buy it I suppose a MBO could be considered but uncertain where they would get finance!

The directors appear to have held on too long to a bad mix of operations in the hope of "jam tomorrow" that some posters have indicated on bulletin boards. I agree! If HTH attempt to dispose of various operations themselves they would end up with a small turnover business with relatively high overheads. Moreover the future for manufacturers is off shoring and HTH do not have offshoring facilities. To look into this now is too late in my opinion. But more concerning for the company is that they lost an important vote as to share issues at the last AGM. That will restrict the company developing the business from here on and obtaining more finance.

In conclusion as a stand alone business HTH future does not look good.

Option 2 to be acquired by a larger company.

The second option is to be acquired by a larger company and as we know EKT has taken a 23% in the company at a cost of £1.3 million according to Finncap.

To be acquired by EKT would make good sense for both companies. EKT has established offshore factories which would improve margins. In particular the instrumentation divisions would fit in well with Sifam, ideal for cross selling and less duplication on products. If EKT was to acquire HTH I would have thought they would sell off or give away Carnation for a nominal sum. With a bit of luck the distribution side could be sold off and reduce EKTs purchase for the entire group.

However EKT are not known for paying a premium price for any company. In the majority of occasions previously they have purchased businesses at a discount to net asset value.

At the moment based on a mid price of approx 51p the market cap of HTH is valued at just over £4 million. That compares to EKT's market cap of just over £10 million on a share price of 11.5p. Looking at the future profitability and growth prospects in both businesses HTH is set to have little prospects in growth going forward and a small growth in profits albeit they have now indicated difficulty going forward. The most that can be expected out of HTH the next few years is just over £1 million pre tax profits in my opinion. EKT brokers have forecast over £3.47 million pre tax for EKT 2010/11 compared to pre tax of approx £2 million last reported. Thats growth of approx 50%. Furthermoe Finncap forecast approx 20% growth in EKT turnover in the same time scale. Bear in mind growth in turnover and profits excludes any acquistions.

Compared to EKT the market cap of HTH looks expensive on growth prospects turnover/profits. Looking at prospects for HTH one would have thought EKT was reluctant to offer any premium if at all for HTH, more so now due to the world economics at the moment.

Private businesses are being sold for about 5 times earnings these days, if EKT was able to acquire HTH on a similar valuation once Carnation and the healthcare side are disposed of and the remaining operations consolidated within Sifam, with cost cuts and further offshoring I would expect earnings enhancing in the short to medium term for EKT.

Conclusion.

In conclusion if any HTH investors are thinking about the future HTH is going nowhere the next few years as a stand alone business in my opinion. They may well think its a good time to accept an offer should one come to the table. Moreover should they invest in EKT the company looks to have very bright prospects going forward.

Global news on energy efficient products.

Elektron have recently designed and and patented new energy efficient products such as new energy efficient fridge and cabinet lighting.

This is from today's issue of the internal Bosch web newsletter -

"Ministers seek to promote power-saving household appliancesThe German federal government has plans to provide financial incentives for the purchase of refrigerators and other electrical appliances that consume less power. Spokespersons for both ministries confirmed that both federal economics minister Michael Glos and federal environment minister Sigmar Gabriel are studying the proposal. The money required would come from the emissions trading scheme with pollution certificates. According to the German Electrical and Electronic Manufacturers’ Association (ZVEI) umbrella organization, the subsidy could be as much as 150 euros for the purchase of a highly efficient refrigerator or freezer. The German business newspaper “Handelsblatt” pointed out that, if the program runs for two years, subsidies would amount to around 260 million euros. (dpa – August 18, 2008)"A similar initiative is a little further down the line in France. The UK Gov have discussed it, but so far, taken no action (as ever!!!).

Arcolelectric are strong all over Europe in Fridge Door Switches, White Goods Switches & Indicators, and stuff like energy efficient Cooker Hood Controllers etc.This type of boost to demand for white goods plays right to one of EKT's strengths.

Elektron AGM update by Armshare.

Armshare has given an update on Elektron following their AGM and made EKT Armshare meeting of the week.

I attended the AGM myself and the company indicated they were to push through price increases on various products to increase margins and thus profitability going forward. There was a new potential shareholder attending the AGM who indicated Elektron managemt had proved their abilitly in relation to obtaining value through their acquistions.

The Armshare update is as follows....

COMPANY MEETINGSi) Attendance at the AGM on 28th July 2008The key purpose of attending was to meet the recently joined NED, Keith Roy (KR), who retired in July 2008 from being a divisional CEO of fully listed Halma plc (for further details, see June 2008 above). Halma has built a reputation over the last 30 years as an engineering group addressing niche markets with a business model which generates very attractive margins - 19% in 2007/8 - by contrast, Elektron's adjusted operating margin for 2007/8 was 6%. KR was attracted to Elektron because a) it owned Bulgin Components and Sifam, both of which were known to him from his days as a practising engineer, b) the opportunity to significantly improve operating margins through applying the Halma value creation principles to both existing divisions as well as to future acquisitions, and c) he could already see in place certain key managers who will respond positively to the application of those principles.The 5 principles which underlie Halma's approach to creating shareholder value are:a) operate in specialised global markets offering long-term growth underpinned by robust growth drivers;b) build businesses which lead specialised global markets through innovative products differentiated on performance and quality rather than price alone;c) recruit and develop top quality boards to lead the businesses and nurture an entrepreneurial culture within a framework of rigorous financial discipline;d) acquire companies and intellectual assets that extend existing activities, enhance entrepreneurial culture, fit into a decentralised operating structure and meet the group's demanding financial performance expectations;e) achieve a high Return on Capital Employed to generate cash efficiently and to fund organic growth, closely targeted acquisitions and sustained dividend growth.With the above background, RK will play a key role in helping the Elektron board select a CEO with the ability to apply the above principles successfully - doing so will dramatically lift the operating margin over the next 2 to 3 years, which with the present level of sales of £35 million (let alone any acquisitions which may be made) will have a significant impact on profit in relation to the market cap of £9.8 million at 4th August 2008.