Electrocomponents impresses with double-digit growth

Distributor Electrocomponents has made a strong start to its trading year, with continued double-digit revenue growth and improved profitability.

The FTSE 250-listed group increased like-for-like revenue 10% in the three months to 30 June compared to the same time last year, thanks to good growth in all five of its regions, the fastest of which was the Americas which saw like-for-like revenue accelerate 13% in a strong underlying market.

Digital revenue grew broadly in line with overall performance at 9% during the quarter.

Electrocomponents vowed to continue to focus on driving a higher proportion of gross profit into operating profit and will now look to make £12m of annualised cumulative savings by March 2021, with £4m to be delivered during the current financial year. Management are launching initiatives to improve gross profit margins and said they remained confident of delivering stable gross margin in the base business for the year.

Chief executive Lindsley Ruth said, "The year has started well with our continued focus on the customer, digital leadership and sales effectiveness driving strong results across the business."

"We are making good progress on our initiatives to further simplify the way we operate in order to drive a more efficient and scalable operating model. All this means we are confident of delivering further strong progress in the current financial year," added Ruth.

Analysts at Numis, after their first-quarter revenue expectations were surpasses, raised their pre-tax profit and earnings per share estimates following the update.

They noted that the faster revenue growth, coupled with the group's performance improvement plan and the impact of the higher margin IESA acquisition back in May, would drive further strong improvement in Electrocomponents' operating margin next year.

As of 1000 BST, Electrocomponents shares had advanced 3.10% to 750.60p.