October sales flat at Electrocomponents

Electronics and maintenance products distributor Electrocomponents has held its interim dividend despite a sharp drop in profits.

The divi has been maintained at 5p, reflecting the board's confidence in the long term prospects of the group.

Investors were braced for a downturn in fortunes after the firm warned on profits in September, but the half-year headline profit before tax figure of £41.5m, down 30.1% from £59.4m the year before, still proved a bit of a disappointment, judging from the share price reaction.

Reported profit before tax in the six months to September 30th fell 34.3% to £39.0m from £59.4m the year before on sales that edged up 0.3% to £606.5m from £626.5m. The sales growth figure has been adjusted to take into account the different number of trading days in the comparative periods and also currency movements.

Current tradingUnderlying sales growth in October was flat year-on-year, as 2% growth in the UK was offset by a 3% decline overseas. The UK growth figure was boosted by business related to Raspberry Pi, the credit card sized computer; without this boost, UK growth would still have been 2% in October.

In the overseas markets, Continental Europe, for once, was not the bad guy, reflecting the fact that European markets have been having a tough time of it for more than a year now, which makes the October year-on-year comparisons less challenging.

During October, Continental Europe grew by 1%, but North America declined by 6% and Asia Pacific fell by 1%, with both regions seeing grim conditions in the electronics market.North America's performance was also affected by Hurricane Sandy at the end of the month.

Results in the second half of the group's fiscal year are expected to benefit from initiatives to drive sales growth, easier sales comparators and management actions to improve operating margins. Gross margins are expected to benefit from targeted selling price increases and actions to improve discount effectiveness.

Headline operating costs as a percentage of sales should be lower in the second half compared to the first half.

"Our new global operating model will allow us to provide a larger, more consistent offer to customers worldwide via our industry-leading eCommerce platform. We are confident that this approach will enable us to accelerate the implementation of our strategic initiatives, drive efficiencies, gain market share from our numerous smaller competitors and deliver a higher rate of long-term growth," claimed Ian Mason.

JH