High-tech camera kit supplier Andor Technology (AND:AIM) is fast losing hard-earned blue-chip status after another damaging profit warning. Scientific research funding is rapidly thinning out in the face of ongoing austerity.


While next week's (24 June) half-year figures will be on the money, sales for the year will fall £4 million year-on-year to roughly £54 million, and taxable profits face being slashed by anything from 25% to a third. This is a credibility crisis, make no mistake. The market has swiped over 20% off the shares, or nearly £25 million.


Belfast-based Andor has become the world leader in high specification scientific camera technology used by boffins at the likes of NASA, universities, medical research units and even defence companies around the world. Today it serves more than 10,000 customers in 55 countries, a staggering success story for a Queen's University spin-out in 1989 by a bunch of PhD students who decided to start designing their own high-spec cameras because the ones then available weren't up to scratch.




In fairness, Andor is not alone. Several instrumentation businesses have suffered similarly of late (read Spectris (SXS) here). 'Given its relatively small customer base, Andor has proven to be far from immune,' spelled out Investec analysts today. Shareholders might reasonably wonder if the firm's best days are over.


It's interesting to note that this profits shock comes virtually on the anniversary of a similar one last June when the shares tanked by a third. It's basically the same old reasons; budgets are being squeezed putting academia on the back foot.


The statement points to challenging market conditions with an austerity pinch hitting funding for scientific research in Europe and North America, and that's put the kibosh on big ticket kit sales into equipment manufacturers. That's what worries the most, that orders can be parked, seemingly, so easily.


Andor flags its cash generation and the £21 million of readies on the books, fire power available for product innovation and possible acquisitions. But it needs to be careful with the latter. Others have tried spending their way out of trouble only to find themselves digging a deeper ditch.


'Our market position remains strong and while the current conditions represent a revision to our growth plan, we remain focussed on initiatives to deliver our long-term growth strategy,' Andor says.


But the market may be increasingly inclined to ignore management in future if Andor continues with these nasty surprises. Reputations take years to build, seconds to shred. Andor must be careful it does not allow this to happen, and next week's results will be its first test.

Issue Date: 18 Jun 2013