Holders Technology – a poor profits history

PUBLISHED: Sep 28 2019 @ 04:12 | Comments (0) |

Holders Technology’s (LSE:HDT) share price has been held below its net current asset value, NCAV, for many years. Clearly, Mr Market does not trust the directors to stop losing money in the Lighting markets where it has little pricing power, nor to stop generating low returns on capital employed in the printed circuit board materials/components distribution business.

Mr Market seems to expect NCAV to fall year on year. The questions are: is it true that losses are continuing and therefore NCAV is still decreasing? And, is there a more than even chance that profits will rise in the future?

The table below shows both the overall Group profit after tax and the operating profit for each of the two businesses, PCBs and Lighting. Central overheads (those not allocated to either PCBs or Lighting) are under £100,000 pa. Post-tax profit includes deductions for losses on discontinued businesses and exceptional items.

Profits and dividends

£000’s	2010	2011	2012	2013	2014
Revenue	16,314	19,636	13,631	14,265	13,478
Profit after tax	431	240	-437	-196	-373
PCB operating profit	741	1,035	234	241	76
Lighting operating profit	-138	-502	-115	-147	-355
Dividend per share	5.35p	5.35p	2p	2p	1.25p

£000’s	2015	2016	2017	2018	2019H1
Revenue	11,195	11,380	12,208	12,486	6,028
Profit after tax	-361	-395	17	169	49
PCB Operating profit	-28	-1	214	280	30
Lighting operating profit	-26	-342	-134	-13	31
Dividend per share	0.5p	0.5p	0.5p	0.75p	0.25p

The average annual loss for the nine full years is about £95,000 for the company as a whole. Admittedly, that includes a number of write-offs from closing businesses, but it is best to conduct the most warts ‘an all analysis in case these kinds of exceptional losses are repeated.

But the aggregate number disguises a reasonably good performance in the PCB business in six out of these nine years. So, despite the directors saying that the this business “continues to face challenges due to unfavourable market conditions” (Interims to May 2019) the average PCB operating profit over 9 years is £310,000.

The dark days of 2016-17 may be behind it, b

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