London-based Electrocomponents Plc has seen an upturn in interim profits due to refocussing on its core business of electronics, electrical and mechanical products distribution. Pre-tax profits rose 33% to ?27m, after ?1m gains from the sale of a property at the Electro Lighting Group, which ceased trading in 1991. Turnover including discontinued operations was flat at ?190.7m, although revenues from continuing operations alone rose 9.5% to ?161.4m. All of Electrocomponents’ sales are catalogue-based. A proposed dividend increase of 5.3% to 2.0 pence was recomm-ended by the board because of the group’s solid performance and positive cash flow. Tight asset control meant that cash resources increased from ?5.1m, after loan notes last time, to ?20.6m. The ?5.5m-worth of loan notes were repaid during the half year, and the company now has no borrowings. The group is split into three divisions: the RS Group, which deals in the industrial marketplace and is divided into RS UK and RS International; Pact which sells electrical goods to DIY sheds and the high street, and Misco Group, which is in the process of being disbanded, but supplies computer peripherals and accessories. RS UK increased sales by 7.5% due to its continuing drive to add new products and services to its catalogue, especially in the mechanical products area, which includes everything from fastners to machine tools. To reflect the increasing importance of the mechanical side, the catalogue, which was split into two parts last November, now comprises electronic components, equipment, such as terminals and electrical test kit, and mechanical goods. Net margins at RS UK have remained stable although it now has to pay local government rates – up until June 1991, RS UK, based in the Corby Enterprise Zone, received tax breaks for being there. Also, for the first time, running costs were payable on the new warehouse in Corby that cost ?21m to build, and investments have been made in a new order processing system. RS International also saw sales increase.
Australian business
The Australian business is beginning to benefit from an economy starting to move out of recession. RS France performed well, and levels of export from the UK to 150 countries worldwide were high. RS operations in Germany opened in April 1991, in Denmark in April 1992 and in Italy in September 1992. All saw a steady growth in sales, although all are loss-making at the moment, a situation expected to continue for the first three years of trading, but each is said to be within budget. Pact had a difficult half, with sales below the equivalent period last year, but it did improve in September and this continued into October. Stringent reductions in overheads meant that only marginal losses were made in the seasonally weaker first half. Operating profits of ?26.1m, up from ?24.5m in 1991 exclude Misco this time, although prior figures included Misco losses under discontinued operations. Despite significant reductions in overheads, trading losses here amounted to ?2.6m up from losses of ?1.8m last time. These losses are set against the ?15.3m provision made at the end of last year, as are losses from the sale of Misco Sweden to its management and the costs of closing Misco France – ?2.2m. Negotiations for the sale of the rest of Misco are still in progress. Chairman Keith Bright remains cautious about the full year given the recessionary climate, saying that the second half of the year will be affected by a full six months planned loss from RS Italy.
