Bottom Line: Electron fired up

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The Independent Online
THE DECISION by Electron House, a distributor of electronic components, to move out of high- volume/low-margin activities is clearly paying off - if yesterday's news of an underlying 89 per cent improvement in interim pre-tax profits to pounds 1.6m is anything to go by.

Demand for electronic components, particularly semiconductors, reached record levels last year. Manufacturers are tending to concentrate on the top 10 distributors, so firms like Electron are grabbing market share from smaller rivals.

Most semiconductors are made in the US, so sterling's devaluation helped boost business.

In a components market that expanded by about 25 per cent last year, Electron increased sales by 50 per cent. About 25 per cent of its turnover is with Intel, the world's largest maker of semiconductors.

Industry growth is expected to slow to 9 per cent, but Electron has shown an ability to gain share and there should be more to come in both volume and margin terms.

Management still has its work cut out at the systems division, a supplier of IBM and Digital workstations, which turned a pounds 268,000 profit into a pounds 296,000 loss.

Full-year profit forecasts have been lifted from pounds 3.3m to pounds 3.5m, with a dividend of 3p. The shares, at 163p, sell on a prospective multiple of 19.5, a discount to the sector, which should mean outperformance in the longer term.