Significantly reduced profit margins in its core assembly and microelectronics businesses, higher interest rates, and operating problems were blamed for the fall in pre-tax profits at yesterday’s announcement of AB Electronic Products Group Plc’s interim results; a sharp decline in orders from the defence sector has also sealed the fate of AB’s connector manufacturing plant at Nottingham, resulting in 220 job losses, with further rationalisation across the group’s activities imminent. Chairman Peter Phillips stated however that plans to replace one of AB’s smaller factories in South Wales with a larger one devoted to more surface mount work were still going ahead, but at a markedly slower rate. Phillips explained that interest rates had had such a negative effect on profits because of uncomfortably high borrowing required to finance the building of a new plant in Austria and to fund the growth in sales, which were 27% up on last time; capital expenditure was at the relatively high level of UKP7m, but this was set to fall significantly in the second half. Among the operating problems mentioned by Abercynon, Mid Glamorgan-based AB were delays in the completion of previously signed contracts: British Telecommunications Plc was cited as one of a number of firms that had put back the delivery requirements on a substantial order for which AB had already bought in the materials. British Telecom had also effectively pulled the plug on AB-owned Tandata Holdings, which AB acquired (CI No 1,298) specifically to supply the viewdata terminals for British Telecom’s proposed equivalent to the hugely successful French Minitel information service. Development on the British Telecom service was scrapped two months ago, and the Tandata engineers that were working on the Tantel terminals are at this moment negotiating a management buy-out of the engineering section; the rest of Tandata is ex pected to carry on in areas such as the provision of equipment for satellite data transmission. At this point, AB stressed that it bears no ill-will towards British Telecom, and is definitely not out to find a scapegoat: group managing director Ted Merrette acc epted that the acquisition of Tandata was based on a calculated risk, and this was why, in the contract, full payment for Tandata was dependent on British Telecom following through with its development of the information service. A breakdown of total sales rev ealed that assembly still accounted for about a third of AB’s business, with components and telecommunicat ions accounting for 13% each, resale and distribution 15%, aerospace and defence 10%, and automotive opera tions 17%. For the future, AB will be concentrating on the production of microprocessors, transducers and interconnect systems and Phillips claimed that the order books were substantially above those of last year. Despite a 26% drop in net profit to UKP3.3m, net dividend was held at fourpence. The problems had been signalled, and City response was muted, with the shares dipping only a penny to 260 pence. – Mark John
