19th Nov 2015 08:18
LONDON (Alliance News) - Electrocomponents PLC Thursday said it has initiated a "major performance improvement plan" following what it called a "disappointing" performance in its first half, as it reported a drop in pretax profit.
For the half year to end-June Electrocomponents reported a pretax profit of GBP19.9 million, down from GBP57.1 million a year before, as a rise in revenue to GBP626.5 million from GBP616.4 million a year before was offset by a GBP31.3 million write-down of new website costs. The company's previous year results were restated due to a change in the accounting recognition of vendor rebates.
On a headline basis, stripping out write-downs, pension changes and reorganisation costs, pretax profit fell to GBP31.3 million from GBP39.0 million.
The company said that past investment has not delivered the expected step-up in revenue growth, and the company's results continued to be hit by a step-down in gross margin it saw in the third quarter of its previous financial year. As a result, it is putting in place a new strategy which it said will lead to "significant cost savings" in its current financial year and beyond.
This plan is targeting yearly cost savings of GBP25 million, GBP6 million of which are expected to be delivered in the fourth quarter of its current financial year. Electrocomponents expects a gross restructuring charge of around GBP42 million in relation to its new strategy.
"We have initiated a plan to make Electrocomponents a more efficient and responsive organisation. The reorganisation of the group is based on three core principles that lie at the heart of successful distribution businesses: customer focus, accountability and simplicity," said Chief Executive Officer Lindsley Ruth in a statement.
"We have taken firm action on costs, appointed new management and made some tough decisions on IT. We have a clear plan, strong financial position and an energised leadership team that are determined to deliver a sustained improvement in financial performance and the opportunity is huge," Ruth added.
The company proposed an interim dividend of 5.0 pence, in line with the previous year.
Shares in Electrocomponents were up 3.9% at 237.00 pence Thursday morning
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
ECM.L