The electronics and high performance materials firm has had to massively re-base full year expectations as the smartphones squeeze pinches hard. Laird (LRD) warned that underlying profit before tax for the full year to 31 December 2016 will now come in at about £50m. For the record, that's about 30% shy of the consensus £71m the market had pencilled in.

Investors have been badly burned today, the shares have tanked nearly 46% to 168p, but this bleak writing had been on the wall.

LRD chart

Smartphones slump

Smarphone volumes and orders are being blamed. 'The huge shortfall is attributed to the Performance Materials division, where volumes, pricing and margins at Apple appear to be well short of expectations,' says Numis analyst Nick James today.

In July Shares ran a story on the website, 'Arrested development at Laird', in which we stated:

'At the moment much of Laird's focus is on specialist materials and components for mobile communications, things like high-spec antennas, embedded wireless chips and various radio frequency (RF), microwave and electro-magnetic shielding, much of the latter going into smartphones. And that's part of the problem. Global smartphone sales are in decline, pinching Laird volumes.'

The share price was 293.5p.

Increasing threat

The noose tightened still further and more analysts were getting the jitters by August, prompting us to warn again with the stock at 230p, our conclusion being:

'Most analysts remain bullish on Laird’s longer-term future but it is the near-term on which Berenberg is most concerned, and we share their concern.'

LRD Automotive cars

Laird is taking swift action to stabilise and improve the Performance Materials business, while it has also looked to expand away from smartphones to broaden its markets. Automation and high tech cars are two of its more interesting opportunities, although little ground has been made so far.

'There should be scope to significantly cut the fixed cost base and it will need to be assessed whether Apple and the smartphone market in general represent viable business opportunities,' ominously concludes Numis' Nick James today.


Issue Date: 19 Oct 2016