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April 5, 1989

AB ELECTRONICS TURNOVER CRIMPED BY FALL IN IBM BUSINESS, BUT PROFITS STILL RISE 11%

By CBR Staff Writer

AB Electronics Products Group Plc of Abercynon, South Wales is standing still at the moment with turnover virtually unchanged at UKP97m. This is because, while all the rest of its sectors are growing, its assembly product group has been hit by reduced schedules from a large computer company with which it has been doing business for the past 20 years. Although AB did not name the client company, its a fairly safe bet that the offender is IBM. All AB would say is that schedules from the customer are now on the upturn. The company’s pre-tax profit rose 10.9% to UKP7m and a significant proportion of this was generated by its automotive subsidiary, AB Elektronik, in Werne, West Germany. Indeed, AB expects the automotive side of its business, which currently contributes 20% of its revenue, to show the greatest growth in the next few years as the investment it is currently making in technologies such as anti-skid braking devices for the top end of the market is realised in applications on mass manufactured cars. Despite a growth in many of the company’s product groups, AB does not expect to beat last year’s 100% surge in pre-tax profit to UKP16.4m. Over the past six months AB has made four small acquisitions as part of its strategy of extending its product base. It purchased Eltec, a major Bradford-based computer distributor in the education and health sectors to help expand its new resale and distribution division, which it has recently taken out from its component division as a stand-alone group. The other three acquisitions have been made to beef up telecommunications. The purchase of Stratos, which manufactures connectors for fibre optic cables, has given AB access to Japanese OEM customers including the mighty Nippon Telegraph & Telephone Corp, while it hopes that this week’s acquisition of Tandata Holdings (CI No 1,147) will prove lucrative because of its Tantel viewdata terminal. The electronics company believes that a lot of business for the Tantel product may well come its way from British Telecom. Finally, AB announced yesterday that it had acquired Huntsleigh Technology Plc’s product line for proximity switches in an effort to extend its sensor business. The company sees telecommunications as another fast growth area especially in the development and manufacture of cable and satellite products, modems and security systems. For example, it is currently working on a UKP1m contract from an unnamed client to produce an automotive locator that can locate a car anywhere in the country to within one yard. It is also ready to manufacture Ferranti’s Zonephones, and expects Ferranti to give the green light for production before the end of this year. As regards the acquisition of Tandata, AB said that job losses when work from its Malvern plant is moved to South Wales would be under 40, and that Tandata’s engineering facility in Cambridge would remain there. All together AB has spent approximately UKP5m on acquisitions over this interim period, and none of the acquisitions have yet had time to make a significant financial contribution to its results. The Welsh company is confident about its future. In the short term it expects its performance in the next six months to bring its figures up to last year’s UKP16m mark, and it will continue to acquire what it termed small seed companies, but declared that it had no intention of turning itself into an acquisition machine.

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