Electrocomponents (ECM) delivered a 9.8 per cent increase in like-for-like revenue at the half-year mark, while achieving a 1.5 percentage point uplift in the adjusted operating margin. But even though sales growth has remained positive post-period-end, there is a suggestion that volumes could be slowing. The electronics distributor remains on track to meet analysts’ full-year expectations, although shareholders may be wary of the possible impact of external factors such as the US/China trade impasse on aggregate industry demand.
The group reported market share gains in all three regions and came within 60 basis points of its targeted 45 per cent gross profit margin during the period, with profitability buoyed by higher sales and a favourable product mix, partly driven by its own-brand RS PRO range. The business model is being reorganised to drive long-term efficiencies, incurring £5.4m in related costs during the period, although improved cost controls are evident in a 300 basis point improvement in the adjusted operating profit conversion ratio to 25.7 per cent.
Chief executive officer Lindsley Ruth recognises that “we still have room for improvement” to get to the group’s desired cost of sales margin of 30 per cent, while it would “like to get to the teens” on operating margins.
Peel Hunt has upped its adjusted pre-tax profit estimate to £210m for the March 2017 year-end, giving EPS of 24.8p, rising to £228m and 38.3p in FY2020.
| ELECTROCOMPONENTS (ECM) | ||||
| ORD PRICE: | 565p | MARKET VALUE: | £2.51bn | |
| TOUCH: | 564.6-565.8 | 12-MONTH HIGH: | 779p | LOW: 562.4p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 124p* | NET DEBT: | 25% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 824 | 75.7 | 12.4 | 5.25 |
| 2018 | 912 | 93.0 | 15.9 | 5.30 |
| % change | +11 | +23 | +28 | +1 |
| Ex-div: | 29 Nov | |||
| Payment: | 09 Jan | |||
| Includes intangible assets of £319m, or 72p a share | ||||
