Companies: EKT   

Power electronics and components group Elektron lost £2.7 million in the year to January after spending £1.5 million on a restructuring. Chief executive Mike Emmerson claims this has paved the way for a return to profit. Ben Cobley reports.

Before exceptional costs, Elektron lost £1.2 million – against a pre-tax profit of £905,000 in 2000-1 – on turnover down £600,000 to £16.9 million. The telecoms and industrial applications markets proved to be tough, although conditions improved in sectors such as medicine and science, defence and utilities.

Since January, gearing has fallen from 100 per cent to 36 per cent following the sale and leaseback of properties. Cash reserves rose from £941,000 to £1.5 million, partly due to a £610,000 share placing at 9p in November. This brought both of the Pennine Downing AIM VCTs and NatWest (part of Royal Bank of Scotland) onto the shareholder register.

Chairman Alastair Winter concedes that exceptional costs of £1.5 million 'warrant specific comment'. Some £347,000 of the total went on restructuring struggling Bulgin Components, and £343,000 on the aborted implementation of a new IT system there (now the subject of legal action).

Thwarted acquisitions cost £211,000. Meanwhile, another £600,000 was written off on a pension scheme reorganisation. Emmerson claims: 'We are one of the first companies to do this' – namely crystallize its open-ended pension liabilities by ending its schemes and establishing new ones to avoid potential hits.

Meanwhile, £1.2 million has been cut from the group's cost base. Emmerson says: 'The market remains uncertain and we will continue to align revenues with overheads.'

Regarding acquisitions, Emmerson says: 'We are clear about targets, but if a company is not available on terms we are satisfied with we will not buy it'.

What Emmerson himself will be buying is shares. Asked whether he was thinking of picking up some more (to add to a 0.5 per cent stake), his straight answer was 'yes'.

But these shares will have to rise before more purchases are made, and further funds will be sought should an opportunity arise.

The shares were today unchanged at 8.5p, giving Elektron a market cap of £4.4 million. Its net asset value was £4.2 million at year-end, including £1.6 million of goodwill.