Intelek – 13.5p AIM-listed company Intelek has released results for the first half of 2008-09 and these demonstrate excellent progress despite the well documented problems in the broad economy.

The company designs and manufactures electronic systems for satellite and microwave communications and is split into three divisions, of all which saw increases in both sales and operating profit. Paradise Datacom, the satellite communications equipment division, saw sales increase from £7.8m to £8.1m and an operating margin of 20 per cent was achieved, meaning that operating profit came in at £1.65m (2007: £1.45m). Labtech Microwave sales edged up from £3.5m to £3.7m and, although operating profit was fairly minimal, it did show some progress, rising to £0.05m from £0.01m a year earlier. In aerostructures, CML saw a surge in operating profit to £1.2m (2007: £0.76m) on the back of sales which increased by 15 per cent.

In the six months to September 30, 2008, group turnover increased by eight per cent to £18.8m (2007: £17.3m). Of this, £0.3m was as a result of the strengthening US dollar. The underlying operating margin rose from ten per cent to 13 per cent and this saw underlying profit before tax jump by 39 per cent to £2.05m (2007: £1.48m). Underlying earnings per share rose from 1.15p to 1.64p. The interim dividend was lifted by 0.015p to 0.165p, a year-on-year increase of 10 per cent, with the shares due to go ex-dividend on December 17.

All three divisions have reported strong performance and the combined effect is that the current year looks set to be one of excellent progress. With orders looking very healthy, the increase in sales and profit recorded in the first half should continue and confidence in the future has been underlined by a ten per cent increase in the interim dividend. Although net debt only edged down slightly over the six months to September 30, it stood at a very manageable level of £3.81m at the interim stage. The pension deficit was reduced to £4.8m, or £3.5m after tax, which does not look to create a fundamental problem.

In the current climate it is refreshing to see a company discussing growth rather than damage limitation and investment will continue in order to achieve organic growth. Intelek also has one eye on suitable acquisitions within its core activity and, given the constraints many businesses are facing, it would not be surprising if there was corporate activity at some stage. The shares continue to trade on a very undemanding rating in view of the company's seemingly bright future.

WARNING: Opinions expressed are the writer’s judgments at the time of writing. The information does not constitute a personal recommendation and readers should seek their own professional advice as to the suitability of the investments.