Electrocomponents Creamed by Raspberry Pi

LONDON -- Shares in Electrocomponents (LSE: ECM.L  ) plunged 8% to 202 pence after the distributor of the Raspberry Pi computer warned that full-year profits would be below market expectations.

The company, which operates under the banners of RS Components in the U.K. and Allied Electronics in the U.S., said first-half sales are likely to be flat as a result of challenging economic conditions.

Electrocomponents said, "Group gross margin is likely to be around 1.2% points below the prior year, affected by the increased use of customer discounts, stronger performance from lower-margin technologies, including Raspberry Pi, and adverse foreign exchange movements." It also said operating costs are expected to be 4% higher. However, it added that the additional cost will be skewed to the first half. Consequently, pre-tax profit for the first six months of the year comes to around 40 million pounds compared with 59 million pounds last time.

That said, Electrocomponents believes that second-half profits should benefit from actions to improve operating margins. Nevertheless, it reckons that given the worse-than-expected first-half performance, and assuming no change in market conditions, it still expects full-year headline pre-tax profits to be lower than market forecasts, which call for about 110 million pounds.

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David does not own shares in Electrocomponents. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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