The Investment Column: Pressac catches telecoms fever

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The Independent Online
THE PLANETS appear to be moving in favour of Pressac, the electronics group. Just as the automotive industry, the traditional market for its circuits and facia printing technology, was beginning to show signs of trouble, the fast-growing telecoms industry has come to save the day.

Pressac specialises in high-volume manufacturing, and the growth in mobile- phone production means its skills fit the industry perfectly. Yesterday's full-year results show the success of Pressac's shift of emphasis.

Organic growth in telecoms and industrial sales was 36 per cent, compared with 8 per cent in Pressac's automotive division. Margins in the telecoms business climbed from 15 to 17 per cent, as automotive margins slid to 12 per cent.

The division's sales totalled just pounds 6.6m, but the orderbook, says Roger Boissier, the chairman, stands at pounds 30m. To handle demand, the group is looking to build a pounds 5m factory in Scotland.

The rest of Pressac is less exciting. Stripping out the acquisition of Cartier, which contributed from day one of the year, sales were up just pounds 1.4m. The sluggish automotive business represents 76 per cent of sales. While the electronic component of cars is growing at 8 per cent annually, Pressac is not the only player in the market.

The question is whether Pressac's success in the mobile industry is sustainable. The technology, which prints text on the underside of keypads so it doesn't wear off, is not exclusive.

Pressac admits it is a late entrant to the mobile components market. However, it claims the combination of a broad component offering and expertise in high-volume manufacturing give it competitive advantage. Pressac - like every other manufacturer - wants to offer a one-stop shop. It expects mobile components to account for around half of sales within four years.

The group has completed a small restructuring and disposal programme, which will see a pounds 4.6m exceptional goodwill write-off in the current year.

Analysts expect pre-tax profits of pounds 26m and earnings of 18.7p per share this year, rising to pounds 30m and 21.6p in 2001.

The expectation of higher mobile components margins and volumes has seen the shares recover from 172.5p in June after downgrades.

At 228.5p, the shares trade on a forward price/earnings ratio of 12. Given Pressac's fast-growing order book in the cellphone market, the shares are good value.