Electrocomponents shares slide as it reports mixed first half
By Josh White
Date: Tuesday 12 Nov 2019
(Sharecast News) - Electrocomponents described a first half of growth driven by market share gains on Tuesday, reporting a 7.3% improvement in revenue - or 4.5% on a like-for-like basis.
The FTSE 250 company said adjusted operating profit was up 1.5% year-on-year for the six months ended 30 September, although it was down 2.1% on a like-for-like basis, while its adjusted operating profit margin was 0.6 percentage points weaker at 10.8%.
Adjusted profit before tax was up 3.2% at £103.4m, but down 0.4% on a like-for-like basis, while adjusted earnings per share improved 3.5% to 17.8p, but slipped 0.6% when comparing like-for-like.
The company's operating profit was down 5.8% at £91.2m and its profit before tax slid 4.3% to £89m, while its earnings per share were 4.4% lower at 15.2p.
The board declared an interim dividend of 5.9p, which was 11.3% higher than the interim distribution a year ago.
Adjusted free cash flow was down 59.1% year-on-year at £13.9m, while Electrocomponents' net debt grew to £220.7m from £139m, making for a net debt-to-adjusted EBITDA ratio of 0.9x, compared to 0.6x at the halfway point of the prior financial year.
On the operational front, Electrocomponents reported continued outperformance from 'RS PRO', with like-for-like revenue growth of 9.7%, and added that further improvements had been made to its offer.
It also claimed to have taken "another step" towards a "best-in-class customer experience", as its group net promoter score rose 4.2% to 54.7.
The company said it was increasing its investment to improve its offer and drive scalability, and reported that it made "good progress" on strategic initiatives in its technology and supply chain initiatives, which the board said would drive growth and higher returns.
Its gross margin of 43.7% was down 0.7 percentage points - in line with guidance - which the board primarily put down to its product mix and 'OKdo'.
The 4.3% fall in profit before tax was said to be due to British Steel asset write-downs.
Looking at current trading, Electrocomponents said the first six weeks of the second half saw further outperformance, with the company apparently delivering modest growth despite weakness in some of its key underlying markets.
It said it saw market share gains in industrial and "strong growth" in RS PRO, which were largely offset by ongoing softness in electronics.
The board said the firm was continuing to invest for the longer term in supply chain and technology to drive further differentiation and share gains, while accelerating cost actions to support near-term performance.
It claimed to remain "well positioned" to deliver good progress.
"In recent years our executive management team of Lindsley Ruth and David Egan have brought together a strong leadership team, who are executing well on a clear strategy," said chair Peter Johnson.
"The first half saw good revenue growth and strong market share gains in spite of an uncertain market backdrop.
"We will continue to drive share and actively manage our operating costs while increasing investment in strategic initiatives to position the business for the significant longer-term market opportunity."
At 0945 GMT, shares in Electrocomponents were down 13.46% at 611p.
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