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Armour Group

  • BY: Andrew Hore |
  • POSTED: 23/11/2010 |

Consumer and automotive electronics products supplier Armour Group has been finding trading tough for the past couple of years but chief executive George Dexter believes that 2011 could be even tougher.

Dexter says that conditions are the toughest he has seen for more than a decade. Competitors are going bust but many are just starting up again without their old debts – to the disappointment of Dexter. All three competitors that recently went bust approached Armour but they would not have added anything to the business.

The consumer business is showing few signs of getting any better with the company’s TV stands business appearing to offer the best short-term prospects. Armour has set up a new factory in China so that it can supply its own TV stands and furniture as well as reselling other companies’ products.

In contrast, automotive business – car radios, speakers, etc – is starting to recover. The car market remains weak but demand from commercial vehicles and tractor manufacturers - high commodity prices are encouraging farmers to replace their existing tractors – is growing.

Revenues rose from £51.6m to £56.6m in the year to August 2010 but materials costs rose faster. Interest costs fell but pre-tax profit still declined from £1.12m to £947,000.

Growth will come from new products rather than the trend in the market. This includes the Q2 Cube internet radio.

Analysts expect a fall in profit to around £200,000 on flat revenues this year.

Armour capitalises some of its product development investment. Last year it was £1.684m, compared with amortisation of £977,000. This is part of the reason why net debt rose from £4.89m to £5.7m at the end of August 2010. That is not even the peak borrowing of the year.

A much lower profit this year and continued product investment means that it will be difficult to reduce debt. However, the development spending will fall as projects come to an end and it is likely to move towards the amortisation charge.

The share price fell 1.25p to 9p, which values Armour at £6.16m.

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