May 22, 2014 / 12:36 PM / 3 years ago

Electrocomponents' new financial year off to slow start

(Reuters) - Electrocomponents Plc, a British distributor of electronic products for engineers, reported 2 percent growth in sales for the first seven weeks of its financial year, sending its shares down as much as 6.2 percent in early trading.

Electrocomponents' shares were down 3.8 percent at 278.44 pence on the London Stock Exchange at 1258 BST after hitting a low of 271.

UBS analysts cut their price target on the stock to 315 pence from 320, mainly due to higher costs related to the company's marketing and organisational efforts to win market share from smaller competitors around the world.

However, Electrocomponents said sales trends so far in May have improved compared to April.

"What comes into play in the next year is (foreign exchange rates)" Peel Hunt analyst Henry Carver told Reuters. "There is now a fairly chunky headwind, costs are going up, which is going to impact the profit margin," he said.

However, Chief Financial Officer Simon Boddie told Reuters that the strong pound would have a small impact on profit for the year ending March 2015.

Electrocomponents gets about 70 percent of group revenue from outside the UK.

The company said on Thursday its full-year headline pretax profit rose 7.4 percent to 101.1 million pounds in the year ended March 31, helped mainly by demand in Europe and North America.

Revenue rose 2.1 percent to 1.27 billion pounds.

Electrocomponents - which distributes 500,000 products, sourced from over 2,500 suppliers - said underlying sales in the UK declined 1.8 percent.

" ... We have been surprised that it has not done a bit better in the UK, hence we have changed some of the management there", Chief Executive Ian Mason told Reuters.

The management changes were implemented in the second half of last year, the company said.

Electrocomponents, which says it typically supplies electronics design engineers, machine and panel builders and maintenance engineers, said underlying international sales rose 3.8 percent to 898.8 million pounds.

Underlying sales include the impact of foreign exchange rates and the number of trading days.

Electrocomponents, whose brands include RS Components and Allied Electronics, said underlying sales in continental Europe increased 4.1 percent in the year, while North American sales rose 4.2 percent. Sales in the Asia Pacific region rose 2.1 percent. ($1 = 0.5925 British Pounds)

Reporting by Noor Zainab Hussain in Bangalore; Editing by Gopakumar Warrier and Ted Kerr

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