Investment: Sober view of Roxboro spin

HARRY TEE, the chief executive of the electronics group Roxboro, is a master of City spin. The smooth Scot was at it again yesterday, extolling the virtues of the company focus on "growing niche sectors" within the electronic engineering market.

Looking at the headline numbers, it's difficult to disagree. A 25 per cent jump in profits to pounds 8.9m in a half which saw scores of competitors suffering from Asian flu, the pound and other evils is not to be sniffed at.

But the divisional breakdown makes more sober reading. Most of the earnings growth came in the sensors division, which benefited from a boom in orders for hi-tech devices for aerospace. This helped to make up for a pedestrian performance from the rest of the business. Growth in the components division, which supplies LED flashing lights to the computer industry, slowed as the Asian crisis took its toll on its US customers.

The instrumentation unit, which sells information technology equipment to power stations, was also affected by the crisis in Asia and posted a slight fall in sales and a small rise in profits.

Mr Tee argues that Roxboro's future is guaranteed by the sensors division, which is shielded from global economic vagaries by long-term contracts. But sensors accounts for less than a third of Roxboro's sales and less than half of operating profits. The bulk of the business will be hostage to economic gloom and depressed markets.

The shares rebounded 5p to 201p yesterday after a sharp fall in the past two months. On full-year forecasts of around pounds 18m, they trade on a forward multiple of just over nine. They look cheap and may well come good in the long run, but for the time being they are no better than a hold.