LONDON (Alliance News) - Elektron Technology PLC saw its shares rise Thursday morning after it swung to a pretax profit in its last financial year as cost cutting and some price increases more than offset an expected drop in revenue that's down to falling sales of legacy products and a decision to rationalise low-margin products.
The engineer of connection, monitoring and control products is growing through a revamp, ramping up sales of new products it has launched in the last three years that it thinks will provide a higher growth platform than the legacy products. For those legacy products, it is cutting costs and defending market positions "where possible".
It reported a pretax profit of GBP0.2 million for the year ended January 31, compared with a loss of GBP6.7 million a year earlier, even though revenue declined to GBP44.4 million, from GBP46.3 million. Operating expenses and cost of sales both fell as it reduced sales, while selective price increases also helped offset the revenue decline.
"These results clearly demonstrate the progress we have made during the full-year period as we have continued to rebalance our business and invest in establishing a high growth portfolio of brands for the longer term," Chief Executive John Wilson said.
"We are now fully focused on key new product development programmes, in particular relating to the Checkit brand. The board is confident that this strategy will generate longer term growth across the business," he added.
Checkit is a food safety system in the start-up phase. The company expects to ramp up development spending and sales and marketing of the product this year, absorbing much of the cashflow from its established products.
The company said overall trading in the first two months of the current financial year has been in line with its own expectations.
Elektron raised GBP3.3 million in a share placing and open offer last June, boosting its net cash inflow last year, but improved working capital control and the improved operating performance also allowed it to cut its debt to GBP2.7 million, from GBP8.0 million at the end of its previous financial year.
The company still has a cloud hanging over it in the form of litigation brought by shareholder Barrie Bridge, who launched a claim against six current and former directors alleging various breaches of duty by the directors, including dishonesty, 'a reckless acquisition spree', illegal share price manipulation, and the implementation of unfair bonus and share schemes without proper shareholder approval.
Two of those directors are no longer defendants after a court ruling last October, and the company said that based on legal advice it thinks it highly unlikely that the court will allow the claim against the remaining directors to continue. A hearing is scheduled for June. Elektron said it has still decided against making a provision for potential costs in light of the professional advice it has received.
Elektron Technology shares were up 15.3% at 5.48 pence Thursday morning.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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