LONDON Electronic components and parts services group Acal plc has been held back in the first part of its financial year ended September 2007 due to tough market conditions, with revenues at £77.6 million from on-going activities 1.8 percent lower than for the corresponding period last year.
The figures are restated and do not include those for the IT solutions business, which the company said in September it is selling to Avnet for £41 million (about $ 80 million).
"The deal should get clearance from the European Commission competition authorities early next month and we expect it to be completed by the end of December," Tony Laughton, chief executive of Acal Group told EE Times .
Both EBIT at £2.8 million (2006: £2.7 million ) and profit before taxation and exceptionals at £2.6m million (2006: £2.4 million ) were ahead of last year, reflecting some improvement in gross margins.
Looking ahead, Laughton said "we do not see much change for the rest of the financial year in either the electronics or parts services operations, and do not anticipate any year-on-year growth in the second half year. For us, the focus will be on gaining market share and organic growth through growing out customer base."
However, Laughton did not rule out using the proceeds from the disposal of the IT services group on "strategic acquisitions."
These would more than likely be "in the electronics distribution ioperation, and in Continental Europe, where we are relatively weaker than some of our competitors."
The challenges in the components part of the operation are particularly in the "low technologies" sector, said Laugton, with passives and electromechanicals being the major culprits. "Passives are pretty much commoditized and thus are offering very low margins, while we are seeing no growth whatever in elelectromechanicals."
Growth areas he singles out include RF and microwave devices, driven by the wireless sector, and
power ICs, as well as some other semiconductor sectors.
Profitability in the electronics division in the first half has been affected by the costs from the major investment in people made in the second half of last year to support new product lines, particularly in Germany and Italy, which are not yet generating major revenue.