Electrocomponents' reorganisation plan lifts shares

(Reuters) - Electrocomponents Plc , a distributor of electronic products for engineers, said it had initiated a performance improvement plan that would lead to significant cost savings, after the company posted disappointing first-half results.

Shares in the company, which makes the low-cost Raspberry Pi computer, rose as much as 6 percent on Thursday, making them one of the top gainers on the FTSE-250 Midcap Index <.FTMC>.

The company said it was targeting annualised cost savings of 25 million pounds, with 6 million pounds of that coming in the fourth quarter of the current financial year.

"We have taken firm action on costs, appointed new management and made some tough decisions on IT. We have a clear plan ... to deliver a sustained improvement in financial performance," Chief Executive Lindsley Ruth said in a statement.

The reorganisation plan includes shutting its office and warehouse in Singapore, consolidating offices in China and moving to a pilot web-based operation in Japan.

Electrocomponents, which distributes 500,000 products sourced from over 2,500 suppliers, also said it planned to increase sales of private-label products to improve margins.

The company reported a 20 percent fall in headline pretax profit to 31.3 million pounds in the six months ended Sept. 30.

Group sales rose to 626.5 million pounds from 616.4 million pounds a year earlier. Gross margins slipped 1.7 percentage points to 43.3 percent.

The company expects a gross restructuring charge of around 42 million pounds in relation to the new strategy, part of which has already been accounted for in the first half.

Electrocomponents also said it expected a higher-than-normal weighting of 2016 full-year profits towards the second half of the financial year.

Shares in the company were trading up 3.8 percent at 236.8 pence at 0930 GMT.

(Reporting by Rahul B and Roshni Menon in Bengaluru; Editing by Anupama Dwivedi)


Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting