Companies: ITK   

Intelek, which designs and makes electronic systems for satellite and microwave communications, beat upgraded forecasts with a 30% underlying pre-tax profits push for the year to March.

Also a specialist manufacturer for the buoyant aerospace market, Intelek grew profits from £1.8m to £2.3m on turnover of £36.8m (£35.2m), with gross margins climbing to 28.9% (27.7%). Driving dramatic improvement, explained chief executive Ian Brodie, was an extremely good performance from two of Intelek’s three businesses.

A 40%-plus profits surge to £3m was transmitted by Paradise Datacom, which enjoyed strong sales of satellite modems and amplifiers to government programmes (the US in particular is a big buyer of satellite communications systems) and newsgathering vehicles. Brodie sees growth prospects aplenty in new markets such as India, China, Africa and South America. CML’s 45% profits rise to £1.6m reflected its growing reputation as a reliable ‘aerostructures’ supplier to the Airbus A320 and Raytheon Hawker 800 corporate jet programmes.

Pegging back performance, however, was loss-making microwave circuit boards business Labtech, hit by a downturn in the telecommunications market. A number of major customers were de-stocking in the final quarter, though Brodie forecasts a return to break-even in the first half of this year.

For March 2008, Brewin Dolphin’s Jon Lienard expects growth in pre-tax profits to £2.7m, giving 2.1p of earnings and a likely 0.42p dividend. Based on those estimates, the shares are trading on a very modest forward p/e of 9 with a prospective yield of 2.2%. What is more, Intelek has reduced its pension deficit by 60%, restoring a degree of balance-sheet strength and enabling management to scout for acquisitions. Despite a clouded recent history, Intelek has visible investment appeal.

Intelek	AIM	£14.85m	17.00p	0.50p
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