Electrocomponents sees FY adjusted pre-tax profit at top end of consensus range

In a trading update for the year to 31 March 2018, the company said adjusted pre-tax profit was expected to come in "slightly ahead" of the top end of the market consensus range of between £161.8m and £171m. This was attributed in part to a better-than-expected performance in gross margin.

Fourth-quarter like-for-like revenue remained at 10%, giving full-year revenue growth of 13%, with all five regions continuing to see "strong" LFL revenue growth in the final quarter despite toughening comparatives.

In Digital, LFL revenue growth of 10% during the quarter led to full-year growth of 13%, while the company's own-brand business, RS Pro, saw LFL revenue growth of 12% in the final quarter, giving FY growth of 11%.

Electrocomponents said it has completed the first phase of the Performance Improvement Plan and delivered cumulative annualised savings of £30m.

"We are currently examining new initiatives to further simplify the way we do business and generate efficiency and we will share more detail on these at our final results in May."

Numis said this was "a strong finish for the year" as it upped the stock to 'buy' from 'add' following a pullback in the shares.

The brokerage lifted its FY18 pre-tax profit forecast by 1% but left its FY19-20 forecasts unchanged ahead of an update at the FY results in May on the savings initiatives.

Meanwhile, RBC Capital Markets said: "The management team has done a great job, evidenced by strong growth, cost-savings and continued positive EPS momentum. We see further recovery to come, along with emerging balance sheet options.

"However, we already factor in margins recovering to 10% and the valuation looks full relative to other cyclical distributors." RBC kept its 'sector perform' stance on the stock.

At 0940 BST, the shares were up 4.6% to 605.20p.