Shares dive as Premier warns of drop in operating margins

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Premier Farnell, the Leeds-based distributor of small electronics and electronic parts, warned that full-year operating margins would be slightly below prior year levels as it experienced softer trading conditions in Asia and Europe.

Shares in the FTSE-250 company fell nearly 10 per cent to their lowest since June 2012. The stock was one of the top percentage losers on the stock exchange.

Premier Farnell, led by chief executive Laurence Bain, said gross margins fell 0.5 percentage points, or 50 basis points, hurt by softer market conditions in Asia and Europe as well as the mix of business.

“We see ‘slightly’ as down 20-30 basis points,” RBC Capital Markets analyst David Greenall said. Premier Farnell reported operating margins of 9.6 per cent in the year ended February 2, 2014.

“Management stresses that this is due to geographical (slower growth in high-margin Asia Pacific and acceleration in low-margin North America) and product mix rather than the customer discounts mentioned by Electrocomponents yesterday,” Jefferies analysts said in a note.

Premier Farnell reported a 2.7 per cent rise in sales per day in the third quarter, reflecting a lower contribution from its industrial products business compared with an “exceptionally” strong period last year.

Sales in Akron Brass, its industrial products division, fell 5.8 per cent. The company had a major contract win from Hindustan Petroleum Corp in the second half of last year.

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