What it is not doing, at least for the moment, is attempting to lay down a bridgehead in North America, where it is unrepresented. The group is too polite to draw attention to the travails of Farnell, which over the past year has suffered a shareholder revolt and a profits warning, but Electro's shares have outperformed its rival's by more than 50 per cent since its controversial pounds 1.8bn takeover of Premier of the US in January 1996.
Yesterday's figures from Electro, showing pre-tax profits up 13 per cent to pounds 112m in the year to March, suggest the stock market has been right in its relative valuations. The 7.8 per cent growth in UK sales to pounds 397m last year means Electro probably took market share from its rival. Meanwhile, European sales growth rates at between 18 and 25 per cent remain respectable.
However, the European slowdown evident last year has continued, with UK growth decelerating to 6 per cent in the second half, a rate that has been maintained into the new year. Electro will use its pounds 84.5m cash pile to double capital expenditure this year and over 18 months expects to double the product offering on the Continent to the 80,000 lines available in the UK.
Assuming profits of pounds 120m this year, the shares, up 12.5p at 412.5p, stand on a forward multiple of 22, which looks fair value for such a quality company.Reuse content