Electrocomponents:
In their
own beauty competition against Premier Farnell, Electrocomponents seem to be
winning by being less ugly. In the four months to 31st January 2015,
sales growth was 5%, with International sales up 8%, whilst UK sales were down
by 2%. They point out that eCommerce sales were up 6%, resulting in a 59% share
of total sales. Compared to the six months to September 2014, Group sales
growth has picked up from 3% to 5%, with the UK unchanged at -2%, but
International accelerating to 8% from 5% as North America and Europe pick up
more than Asia tails off. The rub is that product mix and currency headwinds
have seen a 1.3 percentage point drop in gross margin, which they claim to have
started to reverse in January through management action. There is a generally
steadier background than at Premier Farnell, so these are more ‘business as
usual’ numbers.
However, this all points to pre-tax profits of c£80m for eps of
13p, with the last five years having seen a high tide of 19.5p (2011/12) and a
low of 11.8p (2009/10). Since 2011/12 the dividend has plateaued at 11.75p,
which a strong enough balance sheet and jam tomorrow statements have justified.
The shares have flinched and are down 5% at 201p today, so we have a PE of
15.5x and a yield of 5.8%.
None of this should get income growth investors excited. If you
believe that it will all click into place one day, then you may disagree with
me. The other straw to be clutched is the idea that the two ugly sisters could
one day merge and unleash cost cutting on a grand scale. We shall see. (Neil Cumming, 11th February 2015)
These comments are not a personal recommendation to deal. Any
investments can fall as well as rise in value, so you could get back less than
you invest. I may have a financial interest in some of the stocks written
about. www.dividendpower.co.uk
or e-mail at info@dividendpower.co.uk Twitter:
@DividendPower
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