Chloride back in the black

The Investment Column

Chloride was one of the worst performing shares of the 1980s and results in the current decade have been even less inspiring. Since 1991, when Keith Hodgkinson moved over from GEC as chief executive, the accounts have been littered with exceptional charges as the management has gradually dumped the once-famous batteries business and moved into electronic and electrical products.

It has now returned to the black for only the second time in the five years Mr Hodgkinson has been at the helm. Pre-tax profits of pounds 6.97m in the 12 months to March replaced a loss of pounds 318,000 last time. The figures overstate the improvement, given that a previous pounds 2.79m loss on disposals turned into a gain of pounds 1.38m in the latest period. Even so, operating profits from continuing businesses soared 48 per cent to pounds 6.45m.

The group remains heavily dependent on its uninterruptible power supplies operation, which represents over four-fifths of group operating profits. But with computer networking growing in popularity and the use of ever- more sophisticated electronic apparatus in everything from shops to turnstile systems, prospects are good. With overall order levels up 30 per cent as well, last year's 22 per cent rise in profits to pounds 4.36m should be repeatable.

Much of the rest of the group's growth from core businesses came from reduction or elimination of losses. Emergency lighting in the UK cut its deficit by around pounds 500,000 and is now "just" back in profit, while the specialist battery chargers to power switching distribution division staged a pounds 681,000 turnround to profits of pounds 364,000.

The company is now proposing to release pounds 14m from its pension fund by effectively transferring most of the liabilities to Legal & General, and the company could have as much as pounds 20m to spend by the end of this year.

Even so, questions remain. Advanced Design Electronics, the burglar alarm business for which Chloride paid pounds 6.5m, has plunged to a pounds 797,000 loss in its first full year with the group. Meanwhile it has yet to build a commanding position in any of its business areas.

Profits of pounds 7m this year would put the shares, up 0.25p at 29.25p, on a prospective p/e of 15. High enough for now.