Premier Farnell to cut costs

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Electronics distributor Premier Farnell said third quarter profits fell 18 per cent due to lower revenues in the UK.

The Leeds-based group, which sells products such as batteries, computer parts and security products to engineers in over 100 countries, said it will cut costs and expects to save £4m a year.

Adjusted pre-tax profits slipped to £17.3m for the third quarter, down from £21.1 m.

Sales fell 1.6 per cent to £233.5m.

The company, which started out as a radio parts seller in 1939, posted a 2.3 per cent fall in its marketing and distribution business. UK revenues from the business fell 7.3 per cent.

Revenues from the industrial products division grew 8.1 per cent.

Premier Farnell makes 92 per cent of total revenues from its marketing and distribution business, while the industrial products business brings in the rest.

In September, rival Electrocomponents warned of a drop in profits this year due to adverse market conditions, prompting its shift to low-margin products and further discounts.

Analyst Robin Speakman at Shore Capital said: “Conditions remain tough for the electrical/electronics distributors and despite some signs of improvement in August, reported at the interim results in September, volatility has remained a feature of the market with a return to like-for-like declines across the group in the third quarter overall.

“Apart from Asia Pacific, all regions were below our expectation, with the heaviest declines centred in Europe including the UK. Full year downgrades to our forecasts will follow in line with this performance. As a cyclical point, it is true to say that the bottom is getting ever closer, but visibility remains weak.”