Acquisitions sent Abacus into the red at the interim, though these key deals are bringing significant operational and margin benefits to the recovering distributor of electronic components.

In January Abacus, which has had its problems of late, paid £34.5m in an all-share transaction for rival Deltron, a deal that took the group into the French and German markets and should yield £5m of annualised savings. Abacus also recently acquired Axess Technology, a £16m acquisition that will cut the dependence of its Trident business on large projects and has given critical mass to Deltron France.

For the half to March, Abacus’ bottom line bore the brunt of acquisition costs, eroding profits of £2.4m to losses of £500,000. However, thanks to a near £20m sales contribution from Deltron in the early months following the acquisition, the top line grew by 21% to £105.3m. Abacus also reported a 14% rise in pre-tax profits, with intangible amortisation and exceptional costs added back, to £4.1m. Integration of the higher margin Deltron business, already enhancing gross margins, is running ahead of schedule and though Abacus expects Deltron's restructuring and transaction costs to total £7.1m, investors should see savings shining through ‘next year and beyond’.

In terms of the core distribution business 2005 proved a sluggish year, but over recent months daily bookings have shown an upward trend. For the year, investors can expect a maintained total dividend of 7.2p from earnings of 13p and profits of £12m, wrought from £242m sales, with future payouts on the rise. On a prospective p/e of 12, Abacus has speculative appeal on the prospects for Deltron, the recovery in its core markets and a strong yield.

Abacus Group	LSE	£38.11m	52.00p	0.00p
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