A profit warning from hi-tech electronics firm E2V Technologies (E2V) is hardly a shock (read here), sparking a 17% slump in the shares to 108p (31 Jan). This is a company that has for a long time struggled to find its growth groove. Broker Investec now predicts revenue of £195.7 million for the year to end March, less than 2008's £204 million.
It's the old story of slow decision-making by customers, orders being moved to the right, chuck in a few technical difficulties, and original second half growth targets get sliced in half. Management is well aware of the company's short comings and have for a couple of years now tried to concentrate on markets where it sees the best opportunities such as defence, semiconductor solutions and highly-advanced digital imaging.
Progress has been made in magnetrons, for example, where it is working with FTSE 100 miner Rio Tinto (RIO). The plan is to build microwave technology magnetrons the size of a house capable of sifting previously abandoned slag heaps for small amounts of ore. Sadly, it is a typical example of project where start dates are being pushed back.
The Chelmsford-based company spells out its order pipeline, £153 million-worth as of December 2012, £118 million pencilled in for the next 12 months, but even so it still struggles to second guess quite when and from where new orders will arrive. Perhaps the one area of relative certainly remains its dividend. Over twice-covered by expected EPS (even after analysts' red pen attack on forecasts) implies a yield of 3.8% for 2013, and E2V typically throws off the sort of cash to pay it, with £17 million in the bank. That's useful from an income point of view, but it clearly needs to address the uncertain growth. Until it does, E2V looks destined to remain susceptible to these sort of operational wobbles.