The Investment Column : Plugged in Pifco builds up steam

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The Independent Online
A 16 per cent jump in Pifco's pre-tax profits for the year to April from pounds 2.7m to pounds 3.12m showed the small appliance manufacturer is back on track after last year's disappointment. Despite chairman Michael Webber's perennial caution, consumer confidence is plainly reviving and prospects look brighter.

At this mature and relatively low- value added end of the electronics market, however, growth needs more than a general uptick in the economy. New products are essential, new geographical markets a help, and acquisitions are realistically the only way to pro- vide economies of scale and wide-brand portfolios that will drive up margin growth.

No surprise then that after being left at the altar last year by a French hairdryer maker, Pifco is now actively seeking another deal, probably in Europe where it intends to generate half its sales, compared with the current 28 per cent of sales.

With pounds 6.4m in the bank and a willingness to take on debts and issue new shares, there is plainly the scope to tackle a sizeable purchase. And with the successful integration of Russel Hobbs Tower a few years ago, Pifco has proved it does possess the management ability to take on a big challenge.

On the new product front, the introduction of new, patented, printed element technology for the 25 million-a-year world kettle market augurs well. Noticeably faster, more energy efficient and less prone to limescale than the traditional kettle, the new product can be expected to take a good slice of the 5 million UK market after it is introduced in September.

Forecasts for the current year of about pounds 3.4m, for earnings of 18.9p, put the shares, up 5p to 269p, on a prospective price/earnings ratio of 14. That suggests that the company is solid and well-managed, but compared with a relatively pedestrian growth rate of 7 per cent, it is high enough.

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