Investment: New name not Ideal solution
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Your support makes all the difference.WHAT'S IN a name? Not much, if Ideal Hardware is to be believed.
The past year has been far from ideal for the computer data storage products distributor. After a brief love affair with the City, an oversupply of products caused prices - and therefore profit margins - to slide dramatically. The result is pre-tax profits down 10 per cent to pounds 8.71m in the year to 31 July and shares down to just a quarter of what where they stood 18 months ago.
So Ideal is making a new start. From now on it will be known in the City as InterX, although its distribution business will hang on to the Ideal name. Management is also moving 50 service personnel into a new division, to be called Ideal Unisolve. To emphasise the shift, employees will be given a new set of share options - presumably because the old ones are virtually worthless.
Will this make a difference? Perhaps. But a more likely reason for yesterday's 37.5p share price jump to 222.5p lies in Ideal's upbeat trading statement. Prices have stabilised, trading is strong and the market is expected to grow by 50 per cent in the coming year.
The question, however, is what this growth is worth. Unless it can really beef up its services division, Ideal remains vulnerable to gyrating demand and price erosion.
On a discount forward earnings multiple of below 10, the shares are cheap and due a bounce. But in its current form - despite the new name - Ideal is unlikely to regain the premium rating it once enjoyed.
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