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Dewhurst (LSE:DWHA) has a number of niche manufacturing and distribution business with many of them displaying high market shares, strong reputations and long-standing relationships with customers and the agents of clients (e.g. architect specifying Dewhurst lift components for new high rise building).
The UK and Europe businesses
Dewhurst UK Manufacturing
What it does:
- Pushbuttons, e.g. those in the Shard lifts, the new Elizabeth Line, Dubai train station, Network Rail elevators, the tallest building in Hong Kong, Heathrow’s Terminal 5 lifts
- Key switches – locks lifts so only those with a key can get at the controls
- Displays, e.g. electric display boards on London Underground
- Lanterns – waiting passengers can see which elevator has arrived.
- Fixtures – the entire panel in lifts with all the electronics behind it
- Customising design for prestigious interiors of lifts.
- Destination control – lifts figuring out where a lift is to go.
- Rail multi-sounder – doors talking to passengers, e.g. “door about to close”.
Good growth was achieved in 2016, but that has tailed off since to leave the business with slow or no growth.
Thames Valley Controls
Lift control and remote monitoring of lifts (e.g. gives operational information online such as reports lift performance), also CCTV, e.g. in Manchester’s Arndale Centre.
Local Councils and Housing Associations use Dewhurst’s “Non Invasive Monitoring” system providing both lift monitoring and breakdown indication irrespective of make of lift. The online dashboard gives customers instant breakdown advice, KPI reports for tenants and better management of repairs.
2017 was “another challenging year” for this division, but the pattern of declining sales was reversed with “a small but important increase”.
Traffic Management Products
Mostly the manufacture of road bollards that bounce back when run over. This division was bought about a decade ago and was a perennial disappointment.
However, in 2016 sales grew “significantly”, and in 2017 “slightly”. These bollards are highly customisable regarding style, signs and banding (976 variations available), with short lead times offered to customers. Far Eastern sales are growing.
The comment in the half year report to end-March 2018 regarding the overall picture of UK sales from existing divisions (lifts, bollards, etc.) was that it was “varied but overall were up”.
A&A Electrical Distribution – the new UK division
This business was bought by Dewhurst in June for between £10.5m and £12.25m cash. It has a 50,000 sq ft warehouse in London containing 30,000 lift components and other electrical equipment, such as those for escalators. It has stocked Dewhurst’s products for many years alongside those from other manufacturers, and can supply anywhere in the UK within the day.
Acquiring A&A will enhance Dewhurst’s market position – I imagine international competitors are concerned that Dewhurst now controls this powerful distributor. Buying it with cash, at a low price relative to its proven profits (over £3m before tax), is likely to push up earnings per share very significantly.
Alan and Ann Warren, who started A&A 35 years ago, are now ready to at least semi-retire. They will both stay on for a short while to help smooth the transition, and Alan will join Dewhurst’s main board as a NED (remuneration: £20k).
The main executive replacement at A&A will be John Bailey, appointed MD. John has been with Dewhurst since 2008 and was until recently MD of Traffic Management Products. The FD of A&A will be Jeremy Dewhurst, a chartered accountant, formerly with Deloitte’s.
Dewhurst Hungary
A decade ago Dewhurst built a factory in Hungary to manufacture its keypads for ATMs etc. This was at the behest of a major customer. I was concerned at the time because of overreliance on one customer.
Today, this customer accounts for over 90% of the division’s £10m or so of the keypad revenue, which is split across the UK, Europe, Asia & Australia and the Americas. Sales were up 8% in the year to September 2017, but in the six months to end March they declined. In April and May 2018 they “picked up a little”, but “we do expect a declining trend on these products over the long term” (Interim report).
There seems to be a reduction in demand for ATMs, which Dewhurst directors think is related to the reduced use of cash as people use more contactless payment methods.
At least we can take comfort from knowing that Dewhurst Hungary accounts for only one-seventh of Group turnover these days.
Dupar Controls
Based in Canada, Dupar offers a broad range of components f
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