Shieldtech

Homeland security products play Shieldtech slipped into the red for the half-year to December, although the AIM-traded concern did achieve decent top line growth led by lively export markets.

Warrington-based Shieldtech, which designs and distributes protection equipment and is known for making highly comfortable body armour used by police and military forces, grew interim sales 11.5% to £5.6m. However, profits of £49,000 made way for pre-tax losses of £82,000, after amortisation costs, a burgeoning interest charge and costs pertaining to the resignation of the finance director in September.

In still-challenging markets, underlying operating profits grew from £236,000 to £350,000, with new export business offsetting lack of demand from the UK police market. Demand for body armour from the police sector dented the financials, with the board once again irked by a further delay to the award of the UK national framework agreement, which will be used by the Metropolitan and other police forces.

Overseas markets proved a major positive however, with Shieldtech achieving successful deliveries of ballistic panels for the ‘Osprey’ body armour system to the Ministry of Defence (MoD) and noting increasing interest in its new protective garment ranges.

‘A significant flow’ of orders arose from its long-term deal signed last June with UNICEF (recent shipments have headed towards disaster-struck Haiti to help with the humanitarian relief operations there), whilst new contract wins have been secured across Europe, in Portugal, Iraq, Italy and Belgium.

Offering organic and acquisitive development potential in a market with good growth fundamentals, the timing of domestic orders is admittedly tough to call. And given this lack of visibility, recent losses and a lacklustre price performance – Growth Company Investor backed the shares at 9.5p in November – investors could be forgiven for cutting losses.

Nevertheless, we feel patience could be rewarded, with Shieldtech well-placed to pick-up on much pent-up demand. Sit tight and hold for price recovery.