Electrocomponents fizzles lower on mixed Q2 update

2nd Oct 2014 15:07

A mixed second quarter update from engineering parts distributor Electrocomponents saw margins slipping due to stronger growth in North America and sales team restructuring plans for Asia and UK.Sales in the UK and Asia slipped during the second quarter, but with the US growth accelerating and continental Europe flat, group sales growth remained at 3% for the first six months of the financial year.International sales were 5% for the first half, with Continental Europe's growth staying at 2% across both quarters, the US rising from 8% in the first quarter to 12% in the second, but Asian growth weakening from 8% to 1%.The UK sales decline stayed at 2%, with UK sales excluding Raspberry Pi having declined by 1%."There has been good progress implementing the group's global strategy during the period", the FTSE 250 company said in its statement."eCommerce sales growth in half one was around 5% and sales of our 'Famous For' product categories, comprising our electronics and automation and control ranges, grew by around 5%."It added that the year-on-year decline in gross margin in the first half is expected to be similar to the first quarter decline of 0.8% points, due to typically lower gross margins in North America.First-half operating profits are likely face a £4m hit from fewer trading days and adverse currency movements compared to 2013, while the restructuring of sales teams in Asia Pacific and the UK will see £2m of reorganisation costs after headline profit before tax.Chief executive Ian Mason said: "During the second half we will be continuing the planned investment in the strategy and are confident that it will enable us to grow our market share and improve our financial performance over the medium term."Broker Shore Capital expects to see further acceleration margin weakening in the second half if North America continues to grow strongly verses the rest of the group."We remain cautious on prospects for Electrocomponents, the UK appears structurally difficult again with a weak PMI's, Europe is also likely to continue to be difficult for the immediate period driven by economic woes."