Electrocomponents dips after posting decline in annual profits

Shares in FTSE 250-listed electronics and maintenance products distributor Electrocomponents dipped slightly on Thursday morning after the group unveiled its results for the year ended March 31st showing a decline in headline profit before tax.

Headline pre-tax profit was £98.7m, a decrease of £23.6m - or 19.3% lower than the prior year. The group said that approximately £10m of the decrease was due to fewer trading days and adverse currency movements principally due to the weakening of the euro against sterling compared to the prior year. It said that the remainder of the decrease reflected the lower gross margin and increase in headline operating costs at constant currency.

From a regional perspective the decrease in headline profit before tax was primarily the result of the International business's contribution reducing by £23m, with all regions within International impacted by gross margin pressure and negative operating leverage, the group added. Continental Europe's contribution declined by £8.9m, North America's contribution fell by £8.4m, whilst Asia Pacific's contribution fell by £5.7m.

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There was a significant improvement in headline profit before tax in the second half of the year as compared to the first half, and the group said that this primarily reflected the impact of its actions to improve gross margin and control operating costs together with normal seasonality.

Group underlying sales rose by 1.0% and UK sales grew by 4.0% benefitting from Raspberry Pi sales.

Gross margin declined by 0.8% points and operating costs grew by 2.0% at constant currency.

Headline free cash flow grew by 6.0% to £56.1m, with improved working capital and lower capital expenditure and the group maintained its full-year proposed dividened of 11.75p per share.

Ian Mason, Group Chief Executive Officer, commented: "The group has reported results for the year in line with expectations. Underlying sales grew by 1% whilst headline profit before tax declined in challenging markets. However our initiatives to increase operating margins led to a significant improvement in financial performance in the second half."

He added: "This has been a year of significant change for the group. We have successfully implemented a new global operating model and set a common global strategy. These developments, supported by additional investment, will enable us to increase the rate at which we gain market share and improve profitability over the medium term."

Electrocomponents' share price was down by 4.57% to 262.90p at 10:59 on Thursday.

MF