U.K. manufacturing decline blamed for hitting Electrocomponents profits - Embedded.com

U.K. manufacturing decline blamed for hitting Electrocomponents profits

LONDON — International business now provides over half of the Electrocomponent's total revenue, which was £396.8million in the six months to the end of September, up from £379.5million in the same period last year. Profit before tax fell from £49.6million to £33.6million.

Bob Lawson, Electrocomponents Chairman, said, “The combined results for the Group of sales up by 3% and profits down by 29% mask significantly different levels of performance by region. In line with the long-term trend of declining manufacturing in the UK, coupled with continuing pressure on the gross margin and the high incremental costs of the Enterprise Business System (EBS) implementation, RS UK has suffered a substantial reduction in profits.

“Conversely, the International business, which now represents 56% of Group revenue, delivered an overall increase in sales of £21m (9%). Continental Europe sales growth rate doubled to 5% with Asia and Rest of World achieving 14% and continued high growth in North America of 14%.”

The company is extending its electronic and electromechanical (EEM) range with 90,000 additional products in the UK, France, Germany and Italy. This is part of a 3 year plan announced in May and which includes a strategy to focus separately on two distinct customer groups – EEM: those working in the research and development and maintenance sectors that require the electronic and electromechanical offer and C&U: those in all sectors who have a wider range of product requirements and who value convenient and urgent service effectively maintenance, repair and operations.

The plan also include implementation of the EBS, creation of a lower cost infrastructure and substantially improving the medium term financial performance of the business and maintaining the current level of dividend for 3 years.

The next implementation of the EBS project is in the UK, in the final quarter of this financial year. This implementation covers the largest group operating company and the central Group hub (all central processes and support to the International business). The system build and integrated system testing are now complete and the new hosting centre and outsourced support contract is in place.

The first step in the creation of a lower cost infrastructure has been taken with the announcement of reorganisation costs of £1.7million in this half year with ongoing annual savings of £2.0million including the removal of around 40 roles.

Group revenue increased 2.9% with the UK business declining by 3.6% and the International business growing by 8.7%. North America (14.0%) and Asia and Rest of World (13.9%) showed particularly strong growth. e-Commerce revenue continues to grow quickly (28.6%), across all markets and e-Commerce channels and is now 23.3% of sales, up from 18.6% last year.

U.K. revenue was £176.3million with an e-commerce contribution of 26.4% up from 20.1% the previous year. Throughout most of this period, the year on year revenue performance was around 3% below last year. However, in September, there was a further step down to a 6% decline, driven by a lower average order value and average order frequency, which was experienced in most sectors of the economy and regions of the country, but particularly in electronic and electrical manufacturing in the South of England. Sales via the network of 15 trade counters continue to grow, although at a lower rate than last year.

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