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Alba:H1 results
Consumer electronics manufacturer Alba reported poor results for the half year to September 2005. The company blamed “extremely tough” trading conditions, characterised by low consumer spending and price-cutting in the high street as it returned losses of £6.6m (2004: profit of £7.8m) for the first half of the financial year.
Group turnover was maintained at £306.3m (2004: £305.5m) thanks to a better performance by Grundig (Alba’s share of Grundig’s turnover rose to £56.4m from £39.3m last year). Although turnover improved at Grundig, profitability declined with Alba reporting an operating loss in Grundig of £3m compared to a profit £0.1m last year.
Excluding Grundig, Alba’s turnover declined to £249.9m (2004: £266.2m) and the company reported an operating loss of £2.5m (2004: operating profit £8.5m).
The two problems faced by the firm this year have been shrinking margins and volumes. Retailers experienced continued lower footfall prompting heavy price discounting, adversely affecting margins. High stock levels within retail chains multiplied the effect of lower consumer off take (ie retailers were selling from existing stock which meant that this translated to fewer orders to manufacturers).
The company does not disclose details of manufacturing or operating costs and it impossible to assess if these are reasonable, a factor that does not add to confidence. Alba itself does not sound particularly optimistic in its outlook for the second half, although it is hoping for better Christmas sales to meet earnings expectations.
The outlook for consumer spending is not particularly good in the short term and long term survival will depend on competing effectively with low cost products from overseas.
The share trades at 401.75p, on a prospective PE (2005 earnings) of 21.1x which is high, with a yield of 2.7%.
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