Abacus looks for expansion as sales and profits dip - Embedded.com

Abacus looks for expansion as sales and profits dip

LONDON — The Abacus Group is exploring a number of routes to boost its business following a slowdown in its traditional distribution markets. It has entered into a commercial alliance with a local distributor in Poland, is opening an office in Hong Kong and pushing ahead with its acquisition of Deltron Electronics.

Soyter Ltd, who will represent the Abacus Group in the Polish market and the deal represents the Group’s first formal move into Eastern Europe. Under the agreement, Soyter has direct access to the Abacus Group business system, and can place orders for any components stocked by any of the Group companies for shipment to their premises in Poland the next day. Alternatively, customers can order components from Abacus for delivery in Poland.

Martin Kent, Chief Executive, Abacus Group said, “The relationship with Soyter allows us to continue to support customers technically and logistically when their projects migrate to Poland. It also allows us to address the growing number of business opportunities that originate in Poland. The Eastern European economies in general are seeing rapid growth, both through inward investment and local entrepreneurship, and we are investigating similar Commercial Alliances in other new EU member countries.”

The Group will also open an office on December 1 in Hong Kong with former HB Electronics executive John Harlow, who is presently Vice President Field Marketing for Arrow in Asia Pac, moving to run the operation in January. The Hong Kong office will liaise with suppliers in the region and according to Kent will help also help European customers if they move manufacturing to the region. It will also work with the office that Deltron set up in China in March once the takeover goes through.

Both Abacus and Deltron shareholders are currently receiving documents and both companies plan extraordinary general meetings on 15 December to approve the takeover. The combined company will be the fifth largest component distributor in Europe.

With Deltron also announcing its results, the combined companies would have had total sales £245million in the last financial year to 30 September and expected cost savings of £5million within 2 years of a successful takeover. The acquisition will lead to Deltron shareholders owning 38.5% of the enlarged Abacus share capital and is expected to complete on 17 January 2006.

The Abacus Group turnover was £178.3 million down 5.1% on 2004 but less than the overall sales declines registered in markets it addresses. Profit before tax, exceptional items and intangibles’ amortisation was £8.1 million, down from £10.0 million in 2004.

Brights spots where U.K. market share improvements from 14% to 15% with Trident, CTL and CCS all showing growth over 2004.

Harry Westropp, the Abacus Group Chairman, said, “2005 was in line with the Board’s expectations as announced in July. Notwithstanding the weakness exhibited by our markets, the business has performed ahead of the competition, gaining market share. We believe we are well placed for 2006.” “There were a number of key events in 2005 which affected the Abacus result – some internal, others external. I have already mentioned the general market but there were other issues specific to Abacus. Our special project division of Trident continues to grow but the second half performance was hit by delays in the conversion of firm orders into shipments. We are now much more confident of our ability to assess the longer lead times associated with special projects and can see the sales trend falling into place as we go forward. We consider special projects to be a future growth area and expect it to lead to expansion in other geographical markets.”

“In the Nordic region we reconfigured our structure, closing offices in Finland and reducing our staff in the region by 30 to a total of 60 people. We are however growing our representation for the display business and have added five people in Scandinavia for this activity. This opportunity arose from the collapse of our competitor, Eurodis, from where key staff in the region joined us. In the U.K., the Eurodis failure also proved beneficial to Abacus as we were able to purchase the Company’s customer information. Since August, this has assisted Abacus’s UK sales through the broadening of its customer base.

In the year to 30 September, sales decreased by 5% to £178.3 million, with an equal decline in each half of the year compared to 2004. Despite the tougher market conditions (AFDEC statistics show a 8% decline in the UK, Abacus’s largest market), year on year sales in the UK and Eire decreased by only 2% as the Group increased its market share from 14% in 2004 to 15% in 2005. However, sales declined by 13% in ECC and 16% in Promax in Sterling terms. Based on AFDEC’s figures, in the Nordic region Promax’s market share declined slightly from 4.6% to 4.3% and in Italy, ECC’s share decreased from 4.0% to 3.4%.

During the year, distribution headcount decreased by 39, from 605 at September 2004 to 566 at September 2005, of which 26 related to Promax.

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