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CUI Global set for strong 2018 as Brexit troubles subside

Uncertainty surrounding Brexit and a temporary halt to a key contract in Italy weighed on CUI’s Orbital subsidiary in 2017, but things started to turn around in the fourth quarter
data centre
CUI Global has two subsidiaries: CUI Inc and Orbital Gas Systems

Uncertainty around Britain’s exit from the European Union hit CUI Global Inc’s (NASDAQ:CUI) revenues and profits last year, but the Oregon-based group expects to bounce back with a bang in 2018.

In a statement Wednesday, CUI said revenues fell to US$83.3mln (2016: US$86.5mln) in the 12 months ended 31 December 2017.

US$3.2mln goodwill impairment

A dip in margins to 33.5% (2016: 37.3%) weighed on gross profits, which dropped to US$27.9mln from US$32.3mln a year earlier.

Overall, CUI posted a consolidated net loss of US$12.6mln, or 56 US cents, for 2017 – wider than the US$7.3mln, or 35 US cents, it recorded last time around.

The company – which has two subsidiaries; CUI Inc and Orbital Gas Systems – said the full-year results included a US$3.2mln goodwill impairment from Orbital’s UK business.

That one-time charge was to reflect the longer-than-expected temporary halt in shipping of GasPT devices to the national gas transmission company in Italy and “softness” in the UK market which CUI put down to “post-Brexit uncertainty”.

Solid fourth quarter

Business showed signs of picking up again in the fourth quarter though, with revenues rising year-on-year to US$21.1mln in the three months through December 31 (Q4 2016: US$19.4mln).

The final quarter of the year also saw CUI receive the first major order for its ICE Switch technology, which is aimed at unlocking capacity in data centres.

READ: First major order for ICE Switch

The order for 950 units was placed by a customer in China in October, with CUI delivering them in January.

“As we enter fiscal 2018, we have ahead of us multiple paths for growth in both segments of our business,” said president and chief executive William Clough.

“With our new, larger facility in Houston in operation, we now have access to larger integration opportunities from energy operators in the region, while in Europe we see the return of large projects that had been put on hold following the Brexit vote.”

Momentum rolls into 2018

The momentum built up towards the end of 2017 has rolled over into the New Year, and Orbital has won almost US$7mln worth of energy projects so far in the year-to-date.

Over at CUI Inc, that division recently secured key safety certification for its ICE Block technology which should help to drive sales growth going forward, while it also received a chunky US$2.9mln order at the end of February.

Earnings call

“Our strategy [is] to drive demand for our solutions across both of our business segments in fiscal 2017 is yielding multiple paths for faster growth in fiscal 2018,” Clough said in an earnings call with analysts.

“We expect continued strong performance in our power business, with the introduction of the new ICE solution, serving the key driver of growth in our power and electromechanical segment.

“In our energy segment, we are seeing forward movement in integration projects previously suspended in Western Europe; that together with potentially larger dollar value opportunities out of our new Houston facility and the steps we’ve taken to seed the market for additional energy product sales across multiple geographies, put us on a growth path in our energy segment.”

Shares closed down 14.1% to US$2.79 

--Updates for share price and additional CEO quotes--

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