Electrocomponents PLC (LSE:ECM) shares edged lower on Friday morning despite the FTSE 250 firm saying it is trading ahead of expectations.
The group reported a 31% increase in like-for-like sales in the six months to the end of September from the year before but the second quarter saw growth slow to 26% from 37% in the first quarter.
Compared to the same period of 2020 (i.e. pre-pandemic), half-year revenue was 22% higher on a like-for-like basis.
The board said the rest of the year will see much tougher comparatives and a number of external challenges, including supply chain shortages, which are affecting industrial production and increasing cost pressures. As a result, it said its full-year profit would likely be more weighted to the first half than in previous years.
Nevertheless, it felt confident enough to predict that full-year revenue growth and the adjusted operating profit margin would be slightly ahead of the guidance provided at the time of the group’s first-quarter update.
"Our trading has remained very strong across all regions as we have worked closely with suppliers to ensure our product availability, delivery and service offer remain robust, which has driven further growth in both customers and average order value. This has led to our financial performance to date being stronger than expected. We remain cautious about the external challenges and the resulting impact this could have on industry supply and customer demand, but our differentiated offer means we are well placed strategically to continue to gain market share and take advantage of the significant growth opportunities we see," said Lindsley Ruth, the group's chief executive officer.
Peel Hunt said it was a strong trading update, with trading remaining very strong across all regions.
“Management is guiding to trading slightly ahead of the guidance given at 1Q, but when we feed through the revenue growth and margin beat that translates to an adjusted PBT [profit before tax] upgrade 5% for FY22E to £268mln,” Peel Hunt said.
“Optically this still means a weighting to 1H, as we are mindful of external challenges, ongoing global supply chain issues, and higher cost pressures, but the momentum in the business is impressive and we note that exit rates into 2H are strong. Crucially management is still guiding confidently to its 2025E ambition of mid-teens operating margin,” the broker added, as it raised its target price to 1,390p from 1,325p.