Amstrad bounces back into black

Click to follow
The Independent Online
AMSTRAD, the consumer electronics group in which Alan Sugar controls a 29.9 per cent stake, bounced back into the black in the six months to December helped by a shift away from low margin products.

Although Tesco and other retailers have been selling Amstrad televisions and video recorders for as little as pounds 99, profits in the half year totalled pounds 4.1m, compared to a loss of pounds 900,000 in the same period last year. Amstrad admitted that business with supermarkets is low margin but said the huge volumes involved made up for the relatively low mark-up.

The launch of set-top boxes for digital television in October is a key reason behind the sales boost of 47 per cent although Amstrad has not disclosed the number of units sold.

Amstrad will increasingly have two strands to its business. It has the steady, lower growth consumer products operations selling traditional technology such as TVs and videos.

Added to this is the more focused product range developed by the group's in-house design team. This includes the contract with BSkyB and an agreement with Cable & Wireless to sell a range of C&W branded phones, largely for domestic use.

Waiting to be launched are new products such as the Phone Book, an address book that can be plugged into a telephone and which is expected to retail for pounds 99. The success or otherwise of these new products means Amstrad shares are likely to be volatile as opinions will be formed on the product lines' prospects in the next six months.

Indeed, last year Amstrad shares plunged as low as 27.5p fuelling rumours that Mr Sugar would move to take Amstrad private. This followed his decision to increase his stake in Viglen, the personal computer company, to 72 per cent. However, Amstrad shares have recovered to 50p, up 1.75p yesterday, and Martin Bland, finance director, said Mr Sugar has "no plans to take the business private".

On Beeson Gregory's full year forecast of pounds 6m, the shares trade on a forward multiple of less than 10. The house broker is positive on the shares saying the upside lies in the new product launches. But it could be a bumpy ride.