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TOP NEWS: Electrocomponents annual profit to be ahead of expectations

Tue, 11th Jan 2022 10:11

(Alliance News) - Electrocomponents PLC has said on Tuesday it expects annual profit to be "slightly ahead" of market expectations, following strong trading in the third quarter.

The London, England-based distributor of industrial and electrical parts said the market consensus for adjusted pretax profit stands at GBP278.2 million for the year ending March 31, which would reflect at least a 53% rise from GBP181.7 million the prior year.

Electrocomponents said this is due to strong trading in its third quarter ended December 31. The company saw like-for-like revenue growth of 21% during this period. This was despite "tougher comparatives", and ongoing pressure from outbound freight, supply chain constraints, and increased labour costs.

The company reported gross margin gains, owing to tighter pricing strategies, and greater product management work. It is also seeing higher returns and operating leverage as a result of increasing average order values.

In its Europe, Middle East & Asia division, like-for-like revenues grew by 14% in its third quarter. It saw the strongest outperformance in Germany, which it attributes to new management and new sales approaches. Plans to expand the German distribution centre will see "further operational benefits", the company said.

The Americas division outperformance, with revenue growth of 37% in the third quarter, was due to a sales-focused culture, with emphasis on digital, as well as an expanded product offering. Electrocomponents saw growth in market share in the Asia Pacific region, and a growth in revenue of 25% in its third quarter, due to increased digital penetration, a "refocused" sales process, and increased holding of inventory.

Like-for-like digital participation grew by 64% in the third quarter of the company's year, helping to drive web revenue growth of 27% in the same period.

However, Electrocomponents predicts labour shortages caused by the Omicron variant will "intensify" in the fourth quarter.

"Our strong trading momentum continued into the third quarter, thanks to the exceptional effort of our people as we worked closely with our suppliers and customers in the challenging environment. Our product availability and breadth, service and solutions offer and omni-channel capabilities have driven further market share gains. As we enter Q4 we are mindful of external pressures, including the Omicron variant and supply chain constraints, although our better than expected Q3 trading means we expect full year profit to be slightly ahead of consensus estimate," said Chief Executive Officer Lindsley Ruth.

Shares in Electrocomponents rose by 1.5% to 1,192.36 pence each in London during Tuesday morning trading.

By Elizabeth Winter; elizabethwinter@alliancenews.com

Copyright 2022 Alliance News Limited. All Rights Reserved.

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