LONDON The Abacus Group plc, a European electronic components distributor, has seen turnover down 6.4 percent to £139.1 million (about $275 million) in the six months ended March 31, 2008. Gross profit is down 7.8 percent to £34.3million (about $67.9 million) which the company says reflects trading conditions and impact of the stronger euro on U.K. cost of sales
Profit before tax (after exceptionals and amortization) is £5.8million (about $11.5 million) compared with £5.9million (about $11.7 million) in the same period 12 months ago.
“Trading in the first half of 2008 has been ahead of the Board's expectations, said Harry Westropp, Abacus Group chairman. “But for the rest of the year is now expected to be in line with second half 2007. Whilst market conditions have remained stable, I am pleased that the Group continues to be profitable and cash generative and that each of the country operations is trading profitably.”
“In the light of the significant currency fluctuations experienced in the last nine months, the Group no longer takes out foreign exchange cover except for specific transactions,” said Westropp. “Generally, short term movements have an impact on the business and can be protected, whilst only longer term currency change can be reflected in pricing to customers.”
The euro exchange rate has also had an impact on the balance sheet. Borrowings at the end of March 2008 were £62.9 million (about $124.5 million), an increase of £3.0 million (about $6 million) from September 30, 2007.
The company has sold two properties providing £5.7 million (about $11.3 million) to reduce the level of borrowings. This benefit has been offset by an increase in inventory from £38.7 million (about $76.6 million) at September 30, 2007 to £45.7 million (about $90.5 million) at March 31, 2008 (including £1.7million (about $3.4 million) increase from translating European stock at the rate of €1.254 (about $2) at March 31, 2008 rather than €1.433 (about $2.25) at Sept 30, 2007). The level of inventory is being actively managed to ensure that it reduces to a level considered sufficient to support business needs which the company's board believes would be approximately £3 million (about $6 million) lower.
“It is encouraging that the trading conditions have not deteriorated further as the macro economic situation has become more difficult and so the Board is confident that by the end of this year the group will have lower debt levels and continuing satisfactory sales performance,” said Westropp.