ECM.L Share News (ECM)

(Sharecast News) - Electrocomponents, the electronics and industrial components distributor, said it intended to invest more in the Asia Pacific region to "drive faster longer-term growth" after a half year where group profits are expected to grow 27%.Growth in Asia and the Americas slipped in the second quarter compared to the first but this was offset by stronger growth in Europe, especially from the north and centre of the continent. Overall, like-for-like revenue increased 10% in the second quarter, the same as the first.Electrocomponents distributed more than 500,000 products, including semiconductors, single-board computers, workbench equipment, mechanical tools and 3D printers, to electronics design engineers research, machine and panel builders, maintenance engineers and procurement departments.Progress was reported with initiatives to drive gross profit margins, with the business said to be on track to deliver £4m of cost savings over the year from the second phase of its performance improvement plan. Tougher conditions in the second half are expected to result in gross margins remaining be stable for the full year, excluding acquired businesses.Four months' contribution came from IESA, the maintenance, repair and operations business acquired at the end of May. IESA has delivered strong double-digit revenue growth, in line with expectations, and new business performance was said to be "encouraging".As a result, management expects half-year adjusted profit before tax to grow to around £100m from £79m a year ago."We continue to take advantage of the strong momentum in the business to increase investment to support future growth," the company said."In particular we plan to invest in Asia Pacific in both digital and customer acquisition to drive faster longer-term growth in this important region. We are also investing to further develop our capabilities in electronics and single board computing."Shares in Electrocomponents rose more than 3% to 742.6p n early trading on Thursday. Analysts at RBC Capital Markets said the management team "has done a great job, evidenced by strong growth, cost-savings and positive EPS momentum. We see further recovery to come, along with emerging balance sheet options."RBC sees the shares' valuation of 18.1 times full year earnings, or 13.7 on an EV/EBITA basis, with a dividend yield of 2.5%, as looking "full relative to other cyclical distributors, although ECM is one of the few stocks that has delivered positive underlying EPS momentum over the past 12m".Shore Capital said it was a "robust" period of trading but it remains "cautious" on the company from an investment perspective, recognising management's strong operational delivery and "high cyclical exposure and with long term potential exposure to industry disintermediation", but maintaining its 'sell' rating. ShoreCap said group revenue performance was slightly ahead of its expectation, though AsiaPac was not recovering as much as hoped."The acquisition of IESA is indicated to have progressed well with the delivery of strong double digit growth here which pulls through a modest upgrade. In the mix, we expect to lift our underlying revenue expectation by c1%."