The designer and manufacturer of electronic systems for satellite and microwave communication and specialist manufacturer for the aerospace market spoke of low levels of business from commercial markets but that the government and defence business has been a source of strength in all operating divisions.
Comprised of three divisions, Intelek spans satellite communications (Paradise Datacom), microwave components (Labtech), and aero structures and components (CML).
Paradise Datacom, which provided 47% of total sales (Labtech: 18%, CML: 35%) closed the year impressively, with sales of £18.3m and an operating profit of £3.6m. March sales included $1.2m of modems and related equipment for an international telecommunications company, with the order booked and delivered within a month. Sales of solid state amplifiers were high, especially to government and defence clients, with one cumulative order totalling more than $6m in the year.
Labtech is expected to have performed in line with last year. Delays on new products caused deferrals of some sales until 2010/2011, while a 6-month delay in the receipt of a particularly large order saw a review in the division structure and some changes implemented before the new financial year. The combined effect of this was that in terms of operating profit, the division just broke even. Although sales were down 25% on the previous year, CML finished the year strongly with sales totalling nearly £14m and an operating profit of £2m. The downturn in sales was blamed almost entirely on the sudden and sharp drop in demand of corporate jets, particularly in the USA. A concerted effort to reduce operating costs in Q1 led to profitable performance at the operating profit level in all 4 quarters. Among other sales, CML secured increase revenues in the joint strike fighter and over £0.5m of new business on the A400M project.
As commercial markets continue to struggle, Intelek plan to further develop their presence in the international defence and security markets, where they expect to see opportunities for further growth.
At the current share price of 15p the shares trade at a lowly 5.4x 2010 March 2010 full year estimates and 4.8x March 2011. Net debt of approx £5m and the small matter of a £6m pension deficit are clearly putting off some, but this looks an interesting story.
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