The Investment Column: Strong market in electrical supply

Electrocomponents, the electrical supplies distributor, may be dull, but it is definitely worthy. The shares have almost trebled in the past five years as the group has gradually strengthened its grip on its core market of distributing electrical supplies and components to engineers who need fast, efficient service and are prepared to pay for it.

Half-year figures, reported yesterday, showed good underlying progress though the headline numbers were hit by currency factors. Pre-tax profits rose 8.5 per cent to pounds 52.4m, though pounds 700,000 was lost to the effects of sterling's strength.

The other concern is the UK, which accounts for more than two-thirds of group sales. UK sales are ahead by an underlying rate of 5.4 per cent. This is slower than previous years and growth has been constrained by the financial pressure on Electrocomponents' export-led customers. However, the company says there is room for growth as it is still only serving a third of its potential customer base. It is also hoping to lower costs by encouraging customers to order from the CD-Rom version of its catalogue rather than the printed version, which comes in six volumes.

Elsewhere, Europe offers good growth opportunities as the markets there are less well-developed. The Far East is also growing strongly, regardless of the impact of the financial turbulence on those economies. Underlying growth there is a heady 26 per cent.

Net cash of pounds 103m will be used in part to fund higher capital expenditure in the second half, rising from pounds 7m to pounds 30m. On upgraded full-year forecasts of pounds 121m, the shares, up 0.5p at 435p yesterday, trade on a forward rating of 22. That is a 40 per cent premium to the market. Though this is a solid stock with a good track record, the value is already reflected in the price.