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Electrocomponents H1 results
Parts supplier Electrocomponents’ sales decline has accelerated in in the first half of the current financial year. The H1 results revealed sales down 15.3% at CER. This is much as one would expect in such a cyclical business, and is marginally better than Premier Farnell’s H1 performance.
The rate of decline has progressively worsened from a slight decline in the first half of last year (0.8% at CER), to a large decline in the second half (closer to 10%, although we do not have an exact CER number), to an even worse decline in so far this year. There should be an equally dramatic recovery in response to economic growth.
The improvement in cash flow is largely the result of a decrease in inventories and trade debtors: lower levels running down stock levels, and debtors paying releases cash from working capital. This is not indefinitely sustainable, although the relatively large amounts of both does mean there may be some room for further improvement.
The interim dividend has been maintained, which implies an intention to maintain the full year dividend which, a the current price of 160p gives a yield of 6.8%. The lower profits do mean that this high yield is not completely safe. Electrocomponents will not make much this year, but it has room for recovery as can be seen from its historical earnings. It is on a long term PE of 11.7× over the previous five years.
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