Alan Sugar loves wrong-footing the City – his beef is simply that Amstrad Plc’s shares have never had the rating its record justifies – so he must have enjoyed being able to announce a 26.5% surge in first half pre-tax profits to UKP90.1m on sales up 28.8% at UKP351m. That compared with expectations of at best UKP85m pre-tax, with some houses going as low as UKP75m, little above last year’s first half, and of only very modest growth in sales. Amstrad has a presentation problem in that the international consumer electronics market more and more mirrors that of the US, where perhaps as much as 40% of business can be done in the final quarter of the calendar year. As a result, although in the past Amstrad has been very successful in bucking the trend, the company is increasingly faced with the fact that with a year end in June, its better half is going to be its first half. And this time around, Sugar goes out of his way to warn everyone not too look for too much from the current quarter to June. Last time, Amstrad did UKP71m pre-tax in the first half, UKP64m in the second, so even if the second half is only flat, that means UKP154m for the year, but Sugar’s words of warning are intended to damp down over-enthusiastic forecasts, so we wouldn’t be surprised to see UKP165m for the full year. Meltdown Monday Amstrad shares have been a jumpy market since Meltdown Monday, most notably because Dixons Group started making very bearish noises about its business during the run-up to Christmas, sending the entire retail sector into a tailspin. But if Dixons was finding some lines harder to move than it had expected, those lines did not include the ones from Amstrad – Sugar says that the October crash seems to have had absolutely no effect on sales volume, demand or attitude towards any of our products, either in the UK or overseas. Quite the reverse in fact: stocks were excessively depleted by January, and Amstrad has had to step up supply to rebuild them this month and next. In the UK, too, he says that the unexpected difficulty of penetrating the corporate market with the PC1512 Personalike seems to have been overcome with the 1640, where it is now showing its real potential. Outre Manche, says Sugar we are, without doubt, market leaders in France of home and personal computers – why they have magazines dedicated to the Amstrad machines there, a sure sign that a company is a market leader. In Spain, too, Amstrad reckons it is number one in home and personal computers, while the new subsidiary in Italy is already a contributor to the first half figures. As for the US, it produced a creditable start in sales and profit contribution, and Sugar is particularly optimistic about the prospects for the new portable computers there. We plan to penetrate (the US market) mistake-free, he reassures. Total success will no doubt take longer to achieve than we normally expect when compared to European expansion plans. Now there’s a phrase to conjure with! If Amstrad finds the continental markets as receptive to his products as is the UK, while the US is much harder, why are so few other comparable UK companies even trying to penetrate Europe instead of constantly tumbling over each other to lose their shirts in the US? Ships of the portable – with Telecom approval for the modem, started in January.
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