Yesterday's interim figures, showing pre-tax profits soaring 79 per cent to pounds 3.63m in the six months to October, give some clue to the spectacular recent performance. The new team has successfully turned the group round and is now setting its mind to rebuilding it, using one of its original businesses involved in the distribution of power transmission components as a base.
What has been achieved is evident from the progress of this industrial distribution division, whose focus has been widened from the pounds 350m power transmission market to the much bigger industrial maintenance market, put at pounds 2bn by the company. Margins have multiplied from 2.1 per cent in 1993/94 to just over 9 per cent in the latest figures and Johnson and his team reckon there is plenty more to go for.
They point to the 14 per cent enjoyed by market leader Brammer and suggest that several further small add-on acquisitions could buy the extra pounds 30m sales needed to bring margins to the levels of their rival. The latest figures were propelled by three small purchases for a total of pounds 7.5m, which are thought to have added pounds 600,000 to divisional profits up from pounds 2.29m to pounds 4.01m in the six months.
But the group moved up a gear last August when it took on Dowding & Mills in the plant repair and service market with the rights-funded pounds 15.2m acquisition of British Electrical Repairs and Lewis Group. At number two position behind Dowding, with around half its 25 per cent share, these two businesses will form the core of a new electro-mechanical services division.
After a pounds 500,000 restructuring provision, they lost pounds 190,000 in the latest figures, but even getting partway towards Dowding's peak margins of over 17 per cent would transform the business.
Even so, full-year profits of pounds 7.5m would put the shares on a chunky prospective multiple of 20 and, with the market background said to be difficult, they may mark time. Hold.