Advanced Power Components

Specialist electronic components distributor Advanced Power Components (APC) returned to profit in the six months to February, on a 4% sales reduction to £6.47m.

Losses of £281,000 were converted into pre-tax profits of £42,000 during a half-year in which APC enjoyed a net cash inflow of £208,000, versus an outflow of £1.4m a year earlier. CEO Mark Robinson told Growth Company Investor the turnaround was achieved in spite of recent challenges facing the AIM quoted business, including making two acquisitions in 2008 (computer equipment firm Contech and microwave and radio frequency component outfit Novacom) and establishing a new management structure ‘which we thought would help spur our growth. Once these acquisitions were completed, the market went soft at a time when we had increased our operating costs, whilst business fell significantly and the value of the pound fell’.

Robinson added, ‘we weren’t able to protect ourselves from the fall in the value of sterling, costing us £300,000. For the rest of the year we reorganised ourselves and tried to protect ourselves from foreign exchange fluctuations’. The company subsequently lost £430,000 for the year to last August, although it still remains keen on acquisitions to drive growth and Robinson has ambitions to ‘double our turnover over the next five years’.

APC is forecast to produce a swing from losses of £500,000 to pre-tax profits of £200,000 for the current year to August 2010, on £13.4m sales. Based on forecast earnings of 1p, the depressed shares are selling for less than ten times earnings, a rating that reflects recent woes as well as a lack of earnings visibility. Nevertheless, with recovery underway, investors looking to add a risky, but exciting smaller company to their portfolio might be rewarded with a punt.