FAIREY IS a classic example of a well-managed company that is been savaged by tough trading conditions. The electronic engineer is exposed to all three of the evils that have hammered manufacturers of late.
For a start, it is a big supplier of products to the semiconductor industry, whose output has been dramatically squeezed by overcapacity. It is also a sizeable exporter to Asia. To cap it all, the strength of the dollar and the pound reduces its profits on translation, while sales go to cheaper importers.
These three factors were highlighted in yesterday's interim results. Pre-tax profits fell 31 per cent to pounds 16.5m. The weakness among chip producers accounted for the bulk of the shortfall. Sales were also down as Asia and currencies took their toll. The shares took a predictable tumble and ended 16p down at a year's low of 245p.
The management is doing all the right things to combat this rout, reducing costs through increased outsourcing and greater efficiencies. Optimists also point out that the semiconductor market is highly cyclical and will rebound sharply in the medium term. Fairey's position as the market leader or runner-up in most of its businesses should also stand it in good stead when conditions improve in one or two years' time.
But until then it is difficult to see any upside for the shares. On a multiple of around 10