Shares in Premier Farnell (PFL) slid 10 per cent after the electronics distributor warned that strategic initiatives and selling off old stock cheaply had caused profits to fall.
Clearing stocks of earlier models of Raspberry Pis at a discount ahead of the launch of the second generation of credit card-sized computers had a negative effect on margins. So too did plans to increase annual cost savings by about £4m, which is expected to result in a £10m hit over the next two years.
As a result, the FTSE 250 group expects full-year operating profits to be between £86m and £88m, compared with £91.5m last year, and gross margins are expected to decline by one percentage point in the second half of the year to 36.3 per cent.
This news sent investors into panic, despite a new online platform and expansion into China prompting the group to forecast sales growth of 3.3 per cent. Weak sentiment, meanwhile, has revived talk that Premier could seek a merger with its larger peer Electrocomponents (ECM). Broker N+1 Singer expects adjusted pre-tax profit of £70m for 2015, giving adjusted EPS of 13.1p (down from £76.3m and 14.3p in 2014).
