Companies: EKT   

Electronic components and systems manufacturer Elektron lost £502,000 in the six months to July (excluding goodwill amortisation and exceptional costs), but chief executive Brian Emmerson expects cost-cutting and a slight recovery in sales will generate cash in the second half. Ben Cobley reports.

Aim-listed Elektron's first-half losses showed a hefty increase on the £66,000 lost in the same period last year, but represented an improvement over the second half of 2001. Turnover fell 9 per cent to £8 million, including the Powertron acquisition, but for the continuing businesses alone it was down 22 per cent – better than a 35 per cent decline in the markets for its products, as calculated by Emmerson.

Elektron (EKT) (formerly Bulgin) consists of five small UK and US subsidiaries, making more than 2,500 products, from simple electronic components and power equipment to high frequency amplifiers and systems. With demand declining from the telecommunications and industrial markets, the going has been tough in recent years.

The board implemented a cost-cutting programme, which Emmerson says is about three-quarters complete. This restored the electronic components arms to profitability during the interim period and next in line for the treatment is power electronics.

That means the second half will see modest exceptional restructuring, after £150,000 in the first six months. The measures are expected to result in a 9 per cent cost reduction for the rest of the year, when sales are expected to increase around 4 per cent.

Emmerson says 'we are looking at a modest profit at the operating level' in the second half. He adds 'we expect to be cash-generative', while admitting 'things are pretty tight on the cash side', with cash management 'the central issue'.

Emmerson reiterates an intention to tap the equity markets again when the company's share price recovers. This could help it make a couple of bolt-on acquisitions.

On the day, the shares fell half a penny to a new low of 4.25p, valuing the group at £2.2 million.