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UPDATE 1-Premier Farnell warns of lower full-year operating profit
February 5, 2015 / 9:09 AM / 3 years ago

UPDATE 1-Premier Farnell warns of lower full-year operating profit

(Adds details, analyst comment, share movement)

Feb 5 (Reuters) - Premier Farnell Plc, a distributor of small electronics and electronic parts, warned of a lower full-year operating profit as strategic initiatives and discounting of the credit-card sized computer Raspberry Pi hurt gross margins.

Shares in the FTSE-250 company fell more than 12 percent to their lowest since October 2011. The stock was one of the top percentage losers on the London Stock Exchange on Thursday morning.

Premier Farnell said it estimated operating profit of 86 million pounds to 88 million pounds ($130 million-$133 million) for the year to Feb. 1. The company reported an operating profit of 91.5 million pounds a year earlier.

The company said in November that full-year operating margins would be slightly below prior year levels as it experienced softer trading conditions in Asia and Europe.

“Overall a slightly disappointing update from Premier Farnell with further mix/margin and currency pressures offsetting improving revenue trends ... As such it is geared to global economic recovery but for now markets remain challenging and revenue visibility is low,” N+1 Singer analysts said.

The brokerage has a “sell” rating on the stock.

Premier Farnell, which sells about half a million products through its websites including Newark, Farnell and element 14, said in June that it would combine its marketing and distribution businesses in the Americas, Europe and Asia Pacific regions to boost performance.

The company said then that it would see annual cost savings of 6 million pounds to 8 million pounds.

The marketing and distribution business accounted for about 80 percent of its total turnover for the fiscal year ended Feb. 2, 2014.

Premier Farnell, which started out as a radio parts seller in 1939, said on Thursday that full-year sales per day would grow 3.3 percent, and increased its cost saving target to between 10 million to 12 million pounds per year.

The Americas accounted for about 47 percent of the London-based company’s revenue in the last financial year. Premier said forex volatility would hurt full-year reported profit by 2 million pounds.

Share in Premier Farnell were down 11.2 percent at 150.40 pence at 0905 GMT. ($1 = 0.6580 pounds) (Reporting by Noor Zainab Hussain in Bengaluru; Editing by Gopakumar Warrier)

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