Electrocomponents sees slower sales slide

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Electrocomponents, the international supplier of electrical parts to businesses, pointed to improving sales trends in all major economic regions as it maintained its interim dividend on Friday.

The company saw interim profits fall from nearly 60 per cent from £59m ($98m) to £25m in the six months to September 30, on revenues down 15 per cent from £488m to £447m.

Ian Mason, chief executive, said a dip in sales, which hit 17 per cent in the first quarter, had lessened to a 13 per cent fall in the second quarter and subsided to an 8 per cent year-on-year fall in October. The company supplies a range of 500,000 products – including hard hats, cables and calculators – to a global base of 1.5m manufacturing customers.

Poor trading at the beginning of the year prompted Electrocomponents to issue a profits warning and scrap a special dividend in April, after reporting a 5 per cent fall in annual group sales to March 31.

Mr Mason suggested recovering sales in the second half would be flattered by improving comparables with sales volumes last year, which began to deteriorate in the third quarter last year.

Simon Boddie, finance director, said the company was on track to deliver full-year profits of £60m or above, based on historic experience of a 40/60 split between first and second half earnings at the electrical supplier. The company made profits of £96.5m in the year to March 31.

An interim dividend of 5p is uncovered by earnings per share of 3.9p.

Electrocomponents took no exceptional charges during the period as it implemented a job cuts and savings programme designed to shave 10 per cent from operating expenditure.

“We are operationally geared so when sales go down, it’s good, but when sales go down, it hurts,” said Mr Mason.

The company expected to win improved market share in a highly fragmented sector as demand from manufacturers recovered, he added. Web-based sales continued to grow and now account for 43 per cent of sales.

Though there was some pricing pressure among clients, the reliability of Electrocomponents in rapidly delivering of parts for time-sensitive orders had helped to protect margins.

Collins Stewart on Friday maintained a “hold” recommendation, arguing that “should current sales-per-day trends continue then risks to profit forecasts could be on the upside”. Ambrian also maintained a “hold” recommendation, noting a “significant fall in profits, but an improving sales trend” and adding “a near 7 per cent dividend yield is clearly attractive”.

Shares in the company rose 3.1p to 163.1p, valuing its equity at £697m.

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