Advanced Power Components

Electronic components distributor APC has boosted its growth prospects and green credentials through a licensing deal with US-based KVAR.

Fast-growing KVAR’s products can reduce energy usage and lower electricity bills for clients by optimising the performance of electrical motors. Its technology, recognised by both NASA and Honeywell, is able to shave between 8% and 35% from a customer’s utility bill.

APC will now make and distribute KVAR products in commercial and domestic markets outside North and South America. Initially, Europe, the Middle East and Australasia will be targeted, with APC having set up a special division to spearhead the push.

Chief executive Mark Robinson is clearly delighted with the deal, telling Growth Company Investor that ‘the timing of this type of technology could not be better’, with the rapid take-up of such technologies being driven by global carbon emission reduction legislation. In addition, the recession means cash-strapped companies and individuals are clamouring to cut energy costs.

While it is too early to assess the impact on APC’s financials, the KVAR deal has opened up a new, growing market for the group, which distributes its wares via technically knowledgeable sales teams to sectors such as aerospace, defence, transport and the medical sector. Making decent margins and enjoying high levels of repeat business, APC has also proved an astute acquirer of earnings-enhancing businesses such as Contech and Novacom Microwave and remains deal hungry.

Forecasts for the years to August 2008 and 2009 suggest APC will make pre-tax profits of £680,000 and £750,000 respectively. Based on estimated 2009 earnings of 2.6p, its out-of-favour shares trade on a lowly price-to-earnings ratio of five, at which level they represent a decent longer-term recovery bet.

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