Management at Electrocomponents (ECM) had warned that full-year figures might appear a little anaemic in the face of strong 2017 comparators. It needn’t have bothered. Reported revenues were boosted by £140m in positive currency translations last time around, against £22m for the year to March 2018, but adjusted operating profit was still up by a third to £177m, on an underlying margin of 10.4 per cent, up 1.6 percentage points on FY2017.
The electronics distributor’s results came in ahead of expectations, with a favourable product mix partially offsetting reorganisation costs and asset write-downs. Investors will be encouraged by a return to profitability for the Asia Pacific division in the second half, which is significant given Electrocomponents is looking to decentralise the business in favour of a “regional model” which, among other perceived advantages, will enable the group to quickly adapt to changes in local marketplaces. Management wants to remove duplicated business processes through this transition, and is targeting annualised cost savings of £12m by 2021, a third of which should be achieved in the current financial year.
The balance sheet remains in decent shape and the changes under way point to improved capital discipline over the medium term. The group also continues to generate good levels of free cash flow on the back of high conversion rates, with an implied dividend cover ratio of 1.7 times.
Broker Numis forecasts adjusted pre-tax profit of £206m for FY2019, giving EPS of 34.6p, against £173m and 28.1p for the recently finished period.
| ELECTROCOMPONENTS (ECM) | ||||
| ORD PRICE: | 689p | MARKET VALUE: | £3.05bn | |
| TOUCH: | 689-691p | 12-MONTH HIGH: | 712p | LOW: 547p |
| DIVIDEND YIELD: | 1.7% | PE RATIO: | 23 | |
| NET ASSET VALUE: | 109p* | NET DEBT: | 13% | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 1.27 | 101 | 16.3 | 11.75 |
| 2015 | 1.27 | 96.1 | 16.0 | 11.75 |
| 2016 | 1.29 | 34.9 | 5.0 | 11.75 |
| 2017 | 1.51 | 127 | 20.9 | 12.30 |
| 2018 | 1.71 | 169 | 33.9 | 13.25 |
| % change | +13 | +33 | +62 | +8 |
| Ex-div: | 14 Jun | |||
| Payment: | 25 Jul | |||
| *Includes intangible assets of £233m, or 53p a share. | ||||
