Electron House Plc is beginning to see favourable results from the re-structuring programme that was begun two years ago. Pre-tax profits rose 47% to UKP1.4m, although turnover did fall 1.2% to UKP125.4m. The computer systems, electronic components and services distributor states that it is reaping the benefits of reduced costs and lower working capital. In the last two years, it has decreased the number of its profit centres from 15 to eight. And continuing the trend on the sale of non-core businesses – this year saw the disposal of Kelvin Impex (Aerials) and CEM Systems – and the company is now proposing to sell Bytech Computers Ltd. Subject to shareholder approval, it is hoping to pull out of the high volume, but low margin computer hardware and consumables market, by means of a management buy-out valuing the business, which represents almost half its remaining volume, at UKP9m. Electron House is to collect UKP5m from the deal, which is said to be approximately UKP1.1m more than the net asset value of the operations, and will also pass on Bytech debt amounting to another UKP4m. Thus, the group will be able to reduce borrowings by UKP9m, and reduce the ratio of debt to shareholders’ funds to a comfortable 25% from an overstretched 110%. Nonetheless, the computer peripherals division did contribute UKP61m to the group’s UKP125.4m turnover this year and UKP800,000 to pre-tax profits. Chairman Robert Leigh believes that the profit shortfall will be made up in cost savings and interest reductions. He feels that the sale will enable the company to concentrate its resources on remaining higher margin businesses and will help produce a stronger financial base. Funding for the buy-out is to be provided by investment capital group 3i Plc, in conjunction with Hill Samuel Commercial Finance, County NatWest Ventures Ltd and Midland Montagu Ventures Ltd. Managing director Robert Jefferson, who is heading the buy-out team, feels the transaction will enable the company to capitalise on its position as a market leader in the UK. He aims to increase the range of products on offer in both the computer peripherals and supplies market. Although Electron House’s computer products and systems divisions were said to have produced a generally good result in difficult conditions, profits fell by 9% to UKP2.6m. Sales at CEM Computers suffered due to a temporary moratorium on government spending in Northern Ireland. Despite a more acceptable performance by the electronic components businesses in Australia and New Zealand, sales and profits increased only marginally in the UK. Although Leigh refuses to succumb to any false optimism, he does maintain that business is improving slowly. However, he considers that this is due to an increase in the group’s market share and productivity rather than any real sign of improvement in market conditions.
