Not that interim results which showed pre-tax profits down by 12 per cent at pounds 64.3m, caused the disappointment - they had been largely flagged in a profits warning earlier this year. However, investors who watched their shares lose four-fifths of their value in 18 months had hoped for some signal that the turnaround had begun. They were not impressed by some vague chat about strategy and a 30 per cent dividend cut, and the shares promptly dropped 5.5p to 151.5p.
This may be harsh on John Hirst, Farnell's new chief executive. After just three months in charge he could hardly be expected to have come up with a detailed blueprint. A clearer statement is promised in a few months' time.
However, there are no quick fixes in prospect. Farnell's management is too stretched to deliver the ambitious synergies in the catalogue distribution division promised at the time of the merger with Premier. Mr Hirst is tackling the management issue by appointing four new senior executives. But the question remains whether the synergies are there to be delivered.
Meanwhile, there is little else to do. Flogging off the peripheral manufacturing businesses would not make much difference. Using Farnell's healthy cash flow to buy back shares would placate investors, but Mr Hirst insists he wants to sort out the strategy first.
With the prospect of an economic slowdown in Europe and the US, analysts are cautious. Profits are expected to slump to pounds 122m this year, with a small 3 per cent rise to pounds 126m in the year to February 2000. On a forward earnings multiple of seven the shares are dirt cheap. But until Mr Hirst maps out a clearer strategy there is little prospect of a recovery.Reuse content