Electrocomponents to ramp up investment as 'another step change' eyed

The FTSE 250-listed electricals distributor reported a good set of annual results but sales growth has softened in the new trading year

Electrocomponents will accelerate investment as clients are looking for fewer, better partners

Electrocomponents PLC (LON:ECM) posted full-year profits in line with analyst expectations but said there had been some “moderation” in growth in the Americas in the new financial year.

The FTSE 250 electricals distributor reported revenue of £1.88bn for the 12 months to 31 March, up 8.3% on a like-for-like (LFL) basis, while adjusted profit before tax jumped 21% to £214.5m and adjusted earnings per share was by 30% to 37p.

READ: Electrocomponents sees like-for-like revenue growth in all regions

Since then, LFL sales growth has slowed to the low single digits in April, which the group said was hit by the Easter holiday timings, with May having started “encouragingly” and LFL growth “closer” to the trends seen during the prior quarter.

By region, the 2018/19 results saw 8.5% growth from Europe, the Middle East and Africa (EMEA), which represents 64% of group revenue, with 8.6% growth in the Americas, which contributed 26% of revenue, and Asia-Pacific revenue up 6.2%.

In the seven weeks of the 2019/20 period, it said EMEA has seen “good growth” and market share gains, offsetting softness in the Americas, while Asia Pacific has remained flat year-on-year.

Accelerating investment

With clients increasingly looking to consolidate spending among fewer partners, Electrocomponents chief executive Lindsley Ruth said capital investment will be accelerated in the offer to around £80mln, while tightly managing operating costs, as this “will deliver another step change in our progress”, improving efficiency and market share gains.

“Our opportunity remains large, our momentum is strong and we can continue to improve performance,” said Ruth, adding that he believes the group is “well positioned to make good progress in the current financial year”.

The dividend was lifted by 12% to 14.8p, while net debt ended the year at a higher than expected £122mln.

Broker Numis estimated that sales per day growth in the first seven weeks of the new trading year has averaged around 5% and accordingly it had left its headline P&L forecasts unchanged.

"Management has guided to a higher level of capex in FY20-21 to raise the capacity of the US and German distribution centres, increase the scalability of the technology platform and introduce greater automation. Crucially, it anticipates a mid-20s ROCE from these investments in the medium-term."

Electrocomponents shares rose 5% to 636.2p on Tuesday morning. 

Quick facts: Electrocomponents

Price: 652 GBX

Market: LSE
Market Cap: £2.92 billion

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