Traditional catalogue distributors such as Electrocomponents (ECM) have struggled to remain relevant in today's digital-led world. A 4 per cent drop in adjusted operating profits to £82m suggests the transition isn't getting any easier, as the company fell victim to a combination of increased discounting, higher sales of low-margin semiconductors, unfavourable currency fluctuations, manufacturing weakness and the disruptive restructuring of its Asian operations.
Disappointed chief Lindsley Ruth demands more in the years ahead, and a 4 per cent rise in the share price indicates that investors are confident this can be achieved. Driving this optimism was the implementation of the group's performance improvement plan in November, which led to a much better second-half performance.
Focusing on the basics and cutting costs triggered higher-than-expected savings and more resilient operating margins in the latter part of the financial year. The UK business was one of the biggest early beneficiaries of a greater drive towards larger corporate accounts, consumables, better online experiences and sales-driven management teams. Investors were also likely to have been encouraged that adjusted free cash flow increased by a fifth to £63m. Better financial discipline means the attractive dividend has been maintained once again.
Broker Numis expects pre-tax profit of £90.4m and EPS of 14.8p for the year to March 2017, up from £76.8m and 12.6p in FY2016.
| ELECTROCOMPONENTS (ECM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 269p | MARKET VALUE: | £1.2bn | |
| TOUCH: | 269-270p | 12-MONTH HIGH: | 278p | LOW: 168p |
| DIVIDEND YIELD: | 4.4% | PE RATIO: | 54 | |
| NET ASSET VALUE: | 81p* | NET DEBT: | 46% | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1.27 | 122 | 19.5 | 11.50 |
| 2013 | 1.24 | 87 | 13.6 | 11.75 |
| 2014 | 1.27 | 101 | 16.3 | 11.75 |
| 2015 | 1.27 | 96 | 16.0 | 11.75 |
| 2016 | 1.29 | 35 | 5.0 | 11.75 |
| % change | +2 | -64 | -69 | - |
Ex-div: 16 Jun Payment: 26 Jul *Includes intangible assets of £241m, or 55p a share | ||||
