Trading Statement

RNS Number : 3737N

Electrocomponents PLC

28 September 2012

 



Electrocomponents plc, the world's leading distributor of electronics and maintenance products, has today issued a pre-close trading update for the six months ending 30 September 2012 ("H1").

Overview

Full year profits are usually weighted to H2 and as previously indicated this trend will be more pronounced this year. H1 performance is now expected to be lower than anticipated, although we expect profits in H2 to benefit from a combination of a return to sales growth and actions to improve operating margins. Given the lower than expected H1 performance, and assuming no change in market conditions, we expect full year headline profit before tax⁽¹⁾ to be slightly below the lower end of consensus⁽²⁾.

H1 sales performance

Group sales growth in H1 is expected to be flat on the prior year, with maintenance sales growing slightly and electronics sales declining slightly. Within the period sales trends were similar between Q1 and Q2, with continuing strong comparators and a challenging economic environment. During Q2 the rate of sales decline in North America reduced as the quarter progressed. Group eCommerce growth in H1 will be around 3% and in the UK and Continental Europe eCommerce growth is expected to be over 10%. Group eCommerce share in H1 will be around 54%.

	Sales growth(3)
Region	Q1 FY13	Q2 FY13	H1 FY13
Continental Europe	1%	-1%	0%
North America	-4%	-6%	-5%
Asia Pacific	-3%	2%	-1%
International	-2%	-2%	-2%
UK	5%	5%	5%
Group	0%	0%	0%
UK excluding Raspberry Pi(4)	3%	3%	3%

H1 financial performance

We expect that headline profit before tax⁽¹⁾ in H1 will be around £40 million (£59.4m in H1 last year).

Group gross margin is likely to be around 1.2% points below the prior year, impacted by the increased use of customer discounts, stronger performance from lower-margin technologies, including Raspberry Pi⁽⁴⁾, and adverse foreign exchange movements.

Operating costs (at constant foreign exchange) are expected to be around 4% higher than the prior year, of which around £3.5 million, or 2% points, is due to previously disclosed additional costs⁽⁵⁾ which are skewed to H1. Investments to drive future sales growth and inflation are expected to impact operating costs by a further 2% points.

In H1 there have been fewer trading days and adverse foreign exchange movements compared to the prior year, the combined impact on operating profit of which is expected to be around £5 million.

Outlook

We expect results in H2 to benefit from a return to sales growth and actions to improve operating margins. Sales growth should benefit from easier comparators and continued implementation of our strategic initiatives. Gross margins should benefit from targeted selling price increases and actions to improve discount effectiveness. Efficiencies from the implementation of our new global organisation structure are expected to deliver cost savings of £3 million to £4 million in H2. Combined with other cost actions, operating costs as a % of sales should be lower in H2 than H1.

Assuming no change in market conditions we expect full year headline profit before tax⁽¹⁾  to be slightly below the lower end of consensus⁽²⁾.

Organisation structure

During H1 we have made good progress implementing a new organisation structure which will enable the Group to accelerate the implementation of its strategic initiatives and drive efficiency. Further details of this are given in a separate news release published today "Electrocomponents implements new organisation structure to enable a more integrated approach to servicing its worldwide customer base".

Ian Mason, Group Chief Executive, commented:

"Group sales growth in H1 is expected to be flat despite strong comparators and a challenging economic environment. Although we faced a number of headwinds we have made good progress implementing a new organisation structure which will enable us to accelerate the implementation of our strategic initiatives and drive efficiency. With a strong balance sheet and leading global market positions, we believe the Group is well placed to continue to take market share in international markets."

Enquiries:

Ian Mason	Group Chief Executive	01865 204000
Simon Boddie	Group Finance Director	01865 204000
Matt Jones	Head of Investor Relations	01865 207427
John Sunnucks / David Allchurch	Tulchan Communications	020 7353 4200

Notes:

(1)  Headline profit before tax is reported profit before tax before reorganisation costs.

(2)  The consensus for full year headline profit before tax ranges from £110m to £120m.

(3)  Sales growth rates are adjusted for trading days and foreign exchange rate movements.

(4)  All Group sales of the Raspberry Pi globally are recorded in the UK. The Raspberry Pi is a new low-cost, credit card sized single-board computer designed and developed by the Raspberry Pi Foundation, a charity established to promote the development of computer development skills in education across the world.

(5)  The previously disclosed full year 2013 additional costs of £5m comprise European catalogue/marketing costs (c. £2m, all of which incurred in H1), Asia Pacific SAP implementation costs (c. £1m) and non-cash pension charge increases (c. £2m).

Electrocomponents plc - Conference Call Dial-in Instructions
Date:	Friday 28 September 2012
UK Time:	From 07:50h for 08:00h call
Telephone number:	[phone]
Conference ID:	27153839
Chairman:	Ian Mason
Electrocomponents plc - Replay Dial-in Instructions (available until Thursday 11 October 2012)
Replay Telephone number:                             [phone]
Conference Access Number:                           27153839#

 

END

 

 

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