Electrocomponents up 24%: Company says recovery is a mixed blessing

ELECTROCOMPONENTS, the electronic products distributor, said yesterday it was detecting a steady improvement in the UK economy in contrast to an increasingly deep recession in Germany and the rest of Europe.

Robert Tomkinson, finance director, said that recovery was a mixed blessing as in recession customers tended to place smaller, more frequent orders to avoid the risk of building up stocks. That tended to improve margins.

A 10 per cent sales increase from continuing operations resulted in a 24 per cent rise in underlying pre-tax profit from pounds 50m to pounds 62m during the year to March. Under new accounting rules reclassifying extraordinary profits as exceptional, profits rose 106 per cent to pounds 52m. The changes resulted from the disposal last year of Misco, a loss-making computer supplier. The sale marked the final stage in Electrocomponents' withdrawal from the distribution of commodity electrical products.

Mr Tomkinson said that Electrocomponents' European operations were performing to plan. Germany, Italy and Denmark remained on target to move into profit during their third years of operation. In the face of deepening recession the French operation improved sales and profits.

In the UK sterling's devaluation was beginning to have an effect on import prices although new product introductions had ensured that sales grew by 7 per cent. Similar growth from new lines this year was expected to receive a boost from economic growth.

Underlying earnings per share rose 26 per cent to 19.3p, although after FRS3 adjustments they emerged at 14.9p. A 5.9p final dividend makes a total for the year of 7.9p, up 13 per cent. Tressan McCarthy, at Panmure Gordon, nudged up her forecast for the current year to pounds 67.3m, implying earnings per share of 20.7p. The shares ended up 7p at 393p.