As forecast, Abercynon, Mid Glamorgan-based AB Electronic Products Group Plc has plunged into the red during the first half to December 31, reporting pre-tax losses of UKP2m, against UKP5.4m profits for the same period in 1989, on turnover that fell 6% to UKP116m. All sectors, with the exception of Germany and Austria – countries that have so far escaped the recession were affected. Compared with the second half of 1989, total sales have dropped by 18%. Following the recent closure of the Wolsey Electronics telecommunications facility in Pontypridd, and the Abercarn, Gwent-based electronics assembly operation, the total headcount reduction to date has been 1,000 – and a further 500 positions may be axed before the year end, representing a 25% reduction overall. The company has been hard hit by the UK recession and reckons the only way to ride the storm is to operate at a lower level of activity, by looking at merging further facilities, continuing to reduce overheads, reducing stocks, and focusing on fewer product groups – this, admits group chairman Sir Peter Phillips, will entail disposals of some businesses, although he isn’t saying which. The company wants to home in on the sectors that have shown the fastest growth – automotive electronics, for example, which does well in Germany. While the board would not comment on whether AB’s various defence businesses might be candidates for disposal, Sir Peter did concede that defence components is unlikely to feature as one of the company’s core businesses – AB is surely not the only manufacturer to have found the defence sector to have tightened up during the recession, particularly during the Gulf War when general funds dissipated and many projects were cut back. It does admit, however, that its components were used in torpedoes in the Gulf. The assembly product group suffered from lower sales as demand from computer manufacturers like IBM fell. The telecommunications product group increased its turnover but was affected by difficulties in the satellite and cable television market, caused by the disruption of the BSB/Sky merger – in addition to supplying professional equipment to BSkyB, AB makes consumer products badged for Grundig and Ferguson. AB Electronic’s UK sales to overseas customers rose by 8.4% to UKP32m in the first half. Overseas business – AB Electronics has factories on the continent – is 75% contributed by Germany, 15% by Austria, and the balance by France and Scandinavia. Group borrowings currently stand at UKP40m, a figure which AB hopes to have reduced by June by the reduced need for working capital. Gearing levels of 80% to 90% are anticipated at the year end. While he doesn’t expect the second half to yield better results than the first six months, managing director Ted Merrette is optimistic that AB Electronics will see a return to profitability in the next financial year – the trouble with cost-cutting, he says, is that it takes a while for the benefits to feed through.
