Electrocomponents Plc Trading Statement

Electrocomponents plc today issues a trading update for its first quarter ended 30 June 2017

 

	Sales growth(1)
Regional Hub	Quarter to June 2017	Quarter to March 2017
Northern Europe	10%	5%
Southern Europe	11%	5%
Central Europe	11%	6%
Total Europe	11%	5%
Asia & Emerging Markets	18%	9%
The Americas	16%	16%
Group	13%	8%

 

We have made a strong start to the year to March 2018, with an acceleration in revenue growth and improved profits despite continued investment to drive future growth.

 

Q1 underlying revenue growth accelerated to 13% with all regions seeing double-digit underlying revenue growth. During Q1 we have seen a three percentage point headwind from fewer trading days, as such constant currency revenue growth, not adjusted for trading days, was closer to 10%.

 

o  Our end markets continued to be strong and our focus on improved customer service, online experience and sales effectiveness has driven market share gains in the quarter.

o  The acceleration in Q1 revenue growth has been driven by an increase in growth in Europe and Asia.  Asia and the Americas in particular, have seen strong double-digit growth against a period of weak trading comparatives. Trading comparatives for all our regions will toughen as the year progresses.

o  eCommerce, which represents around 60% of revenues, saw revenue growth of around 13% in Q1, with growth accelerating on the back of the step-up in investment in digital marketing initiated in H2 2017.

o  RS Pro, our own-brand business, which accounts for around 12% of revenues saw revenue growth of around 8% in Q1. 

·     We expect the gross margin⁽²⁾  to be broadly stable in Q1 on the previous year and at a similar level to that seen in H1 2017, with foreign exchange benefits offsetting both an unfavourable product and geographic mix during the period. The geographic mix relates to faster growth in our lower gross margin hub in the Americas and product mix reflects faster growth in lower gross margin product categories such as semiconductors during the period.

·     We continue to focus on increasing efficiency so we can convert a higher proportion of gross profit into operating profit. We remain on track to deliver the £5 million of additional net annualised cost savings in the current financial year, giving a cumulative total of £30 million of annualised savings by March 2018. However, during the first half of 2018 we will see an annualisation of the increase in investment in areas such as digital, talent and RS Pro that was made during the second half of 2017 to drive faster growth. We are also seeing higher variable and incentive costs associated with faster revenue growth.

·     We remain focused on driving cash flow and we have a strong balance sheet. On 30^th June 2017 the maturing $85m US Private Placement was repaid in full.

·     We are consolidating our Oxford based head office and our London based digital operations into a single head office and digital hub in London Kings Cross. This will lead to an exceptional charge of around £4 million in the first half of the year to March 2018.

 

Lindsley Ruth, Chief Executive Officer, commented

"We have had an encouraging first quarter and while it remains early days, it is pleasing to see our focus on the customer, improved execution and increased sales effectiveness driving strong results across the business. Whilst the external macro environment remains uncertain, we have a strong platform and concrete transformation initiatives and we remain confident of delivering good progress in the current financial year."

 

 

Enquiries:

David Egan	Group Finance Director	01865 204000
Polly Elvin	Investor Relations and Corporate PR	01865 207427
Martin Robinson/David Allchurch	Tulchan Communications	020 7353 4200

                               

Notes:

1.        Revenue growth rates, unless otherwise stated, are adjusted for trading days and currency movements ("underlying revenue growth").

2.        As we disclosed in the Annual Report, gross margin has been re-presented for a change in the classification of the write-down of inventory to net realisable value to cost of sales from distribution and market expenses (see note 1 on page 88 of our 2017 Annual Report for more details).

3.        Our profits remain sensitive to movements in exchange rates on translation of overseas profits. At the time of our preliminary results on May 23 the Euro spot rate was 1.16 and US dollar spot rate was 1.30, in the first quarter our average exchange rates were 1.16 and 1.28. Every 1 cent movement in the Euro will have a £1.0m impact on profits. Every 1 cent movement in US $ will have a £0.3m impact on profits.

 

 

 

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