Abacus stays steady in rocky waters - Embedded.com

Abacus stays steady in rocky waters

London, UK — In a difficult market for electronic component distributors, the Abacus Group had only a slight sales dip to £147million in its financial year to the end of September helped by expanding its market share in the UK from 12.9% to 14%. Pre-tax profit was down from £9.5million to £8million.

Martin Kent, chief executive of the Abacus Group said, “It is impossible to avoid the consequences of lower volumes and prices, but out strategy of focussing on regional, rather than global customers has minimised the impact on the Group. In the UK our sales fell by 5.4%, and in the Nordic markets by 11% in local currency.”

In the UK distribution compared to the previous 12 months, business volumes fell by 1% and average selling price by 8% while in the Nordic region volumes fell 6.5% and average selling prices by 6%.

The brightlight in the group is Trident, the displays and related products specialist that Abacus bought in October 2000 and which showed a year-on-year advance of 10.9%. This was attributed to the billing of system build projects, particularly in the military area. According to Kent, “Whilst opportunities in the medical industry have not billed as quickly as anticipated, we remain confident that this focus on system build opportunities is becoming a significant contributor to growth.”

The Trident model is already being transferred to the Nordic region and Kent says the plan is to expand it into the Italian market alongside ECC, the component distributor in which Abacus increased its holding from 9% to 60% in October. ECC's sales to the end of September were 40.4million euro (£27.4million) and Kent says the advantages that being part of Abacus can bring to Italian company are starting to filter through with Molex granting it a franchise in the summer and Microsoft indicating that it will gain distribution rights to its embedded software in January.

Promax, the Nordic distribution business, made a slight loss but had maintained gross margins of 21% and Kent says that, “as a result of recent cost reductions we are confident that it will return to profit once market conditions improve”. While Promax's overall market share in the Nordic region is 5.4%, it is around 12% in Denmark, its traditional base and Kent believes that the company should be pushing for at least a 10% overall Nordic market share.

CTL and CCS, the electromechanical assembly businesses, “have both suffered from the difficulties in the UK market but have continued to contribute significantly to the overall profitability of the group”.

The company has two component distribution arms, Abacus Polar and Micromark C&CD and Kent says the later has also performed well, “justifying our strategy of having more than one business in the major markets”.

Kent believes that while early external indicators are showing positive signs for the future he remains cautious and would like to see this continue in to the first quarter of the next calendar year “before we share in that optimism”.

While in general price pressure have stabilised Kent says that they still remain on commodity products. Shortages have been evident but only in Flash and a knock-on effect with some SRAM but in the longer term there are some opportunities looming. “The lack of investment in new semiconductor manufacturing capacity during the last three difficult years should mean that a reasonable increase in demand anywhere in the world will quickly use up available capacity. The global nature of the industry means that this will drive increasing unit prices for everyone, from which we should see a direct benefit in both sales and returns.”

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