Telephonics - Huge Growth

Its always a risk with AIM stocks but these guys had performed in the past before this was listed. It seems the VIP integration has developed into a bit of a mess and distracted them off the top line growth and it was always a risk (same thing happned to Morrisons after taking over Safeways) and if managment cant deliver the benefits and put the focus back on the Top line again things someone else should.

The Directors are substantial shareholders themselves and you would think they would have more incentive then many to get sales and profits back growing at well above 15% pa. I also note they say today they are seeing "new contract wins" and lets see if that happens anytime soon

Teather and Greenwood is now estimating Profits of £2.9m in 2007 (down from £3.9m which was being forecast pre October) (Looks unlikely to me) and if they had met this years estimates of £1.6m that would have still been 81% profit growth in 2007. (Again was always unlikely to me) Now it looks like they will have around £0.5m profits this year and at best I would expect them to only come in at £2m EBITDA for 2007.

By the way the £2m EBITDA could be achieved on no new contracts as the TPH business pre-VIP made circa £1m EBITDA in 2005 and the VIP as a standalone was also making £0.5m EBITDA. This gives £1.5m EBITDA (maybe a bit more when you factor in the full year of the Cineworld contract) which when adding back in only £0.5m of the £0.8m in costs savings from the integration of VIP should easily see them hitting £2m EBITDA with no new contracts at all. However, we may need to also factor in some higher capital expenditure too.

Its also interesting when you see that brokers for Eckoh have FY07 EPS estimates 0.34p and FY08 0.47p. Thats less then £1.4m profits forecast for 2008 and they are on an EV of £22m.