13th Nov 2014 13:41
LONDON (Alliance News) - Electrocomponents PLC shares lost ground on Thursday after the company's pretax profit rose despite a fall in revenue but it said it was facing difficult conditions in most of its markets and said revenue had been hit by fewer trading days and sterling strength in the first half.
Shares in the company were among the worst performers in the FTSE 250 throughout the day on Thursday, and were down 7.4% in early afternoon trade to 217.4 pence.
Pretax profit for the electronics and maintenance products distributor rose to GBP55.5 million in the six months to September 30 from GBP44.6 million a year earlier, despite revenue in the period coming down to GBP616.4 million against GBP635.4 million last year.
The company said its reported pretax profit figure was boosted to the tune of GBP20 million from a non-cash pension credit, but its headline pretax profit dropped 16%, owing to fewer trading days in the period and the strength of sterling against other currencies.
Electrocomponents said its underlying sales growth for the period was 3%, with a 5% rise in international sales but a 2% fall in the UK. The group said it had seen deteriorating market conditions in Europe and the UK, with flat trading conditions in Asia Pacific and an improvement in the US market. The performance in the UK and France both fell below the company's expectations.
The French business proved the main drag on the company's European business, with sales falling to GBP213.3 million from GBP223.3 million last year. The downturn in the French manufacturing industry prompted Electrocomponents to put in place measures to try and mitigate the impact of the downturn, which it has now extended to its German business in the face of weakness in that market.
In the UK, sales fell to GBP180.1 million from GBP185.3 million last year, tracking a decline seen across the industry but weaker than it had expected given the UK manufacturing PMI was above the 50-point mark throughout the trading period. The UK business experienced weaker demand from customers in the government, utilities and defence sectors and its contribution to group profit fell by 6.1%.
Asia Pacific sales were down to GBP76.5 million from GBP81.7 million, boosted by its performance in Greater China but held back by slowing sales growth in Japan and a flat performance in Australasia.
North America proved the only bright spot, with sales up to GBP146.5 million from GBP145.1 million on the back of a strong performance for its Famous For product ranges, strong e-commerce sales growth and benefits from its widespread network of US sales offices.
The group said its interim dividend will be maintained at 5 pence per share.
Electrocomponents warned group sales at the start of the second half of the year have been lower than anticipated, despite moves taken by the company to improve its performance in key markets. The group said it will continue to invest over the second half, in spite of difficult economic conditions, in order to meet its medium-term targets.
The company also said Ian Mason, who has been its chief executive for thirteen years, is to step down at the end of its financial year in March 2015. Electrocomponents said it has started the search for a successor to Mason.
By Sam Unsted; [email protected]; @SamUAtAlliance
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