LONDON (Alliance News) - Elektron Technology PLC saw its shares rise Thursday after it reported an underlying operating profit for the first half of its financial year, and said new products and technical capabilities were driving up new business opportunities which should return it to growth and profitability.
The Cambridge-based technology company, which makes things like switches, connectors and monitoring and control products for scientific, medical, industrial and commercial use, also said it had cut its debt and would continue to do so.
The company has been going through a revamp, investing in new product development that is targeting the so-called Internet of Things, a product for harsh environment inter-connectivity, and ranges of nano-positioning devices. Its first Internet of Things product is a food safety monitoring system. It has rationalised its legacy portfolio, selling some and closing its operations in India.
It has also had to sort out problems with its manufacturing, after the move of its China-based operations to an existing base in Tunisia, as well as a UK factory move, proved more complicated than expected.
Its aim was to take short-term pain in an attempt to drive strong future growth by focusing on new technologies. It also needed to cut debt and strip costs out of the business.
"The production issues we encountered last year are now resolved and the underlying operating performance of the group has improved as a result of the actions taken during the second half of last year," Chief Executive John Wilson said in a statement.
The company reported a narrowed operating loss of GBP0.4 million for the six months to end-July, compared with a GBP2.1 million loss a year, thanks to its cost cutting and as exceptional items, including restructuring expenses, impairments and some finance items, fell to GBP1.0 million, from GBP2.1 million. Excluding those items, its underlying operating profit rose to GBP0.6 million, from nothing a year earlier.
Revenue declined to GBP22.1 million in the first half, from GBP22.6 million a year earlier, but it said it is seeing increasing demand for its new products. Sales of new products were up 90% on the year at GBP1.9 million, and it said it is on track to derive 15% of revenue from the products in its 2017/18 financial year.
"We continue to see an increase in the level of new business opportunities as a result of our new product offering and technical capabilities. In the medium term, the conversion of these opportunities is expected to restore the group to growth and profitability. In addition, we are excited by the medium term potential of our Internet of Things offering," Wilson said.
It also said that while demand for its legacy products is continuing to erode, there are tentative signs that the decline in instrumentation, monitoring and control sales is coming to an end.
The CEO is expecting the company's trading performance in the second half to be similar to the first half, and it's targeting a further reduction in net debt.
The company cut its net debt to GBP4.7 million by the end of July, from GBP8.0 million at the end of January, thanks to the improved performance, working capital management, and mainly its recent fund raising.
In April, Elektron Technology had put itself up for sale as it considered strategic alternatives for the business. It attracted several takeover offers, the best being a 10 pence a share. However, it took down the for sale sign in June, saying it wasn't prepared to accept that, and instead raised GBP3.3 million in a share placing and open offer.
Elektron Technology shares were up 11.8% at 4.75 pence Thursday morning, one of the biggest rises on the AIM All-Share index.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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