Switch to web sees Premier saving £15m

The Leeds-based company, which issued a profits warning in July after its sales were hit by the global economic slowdown, said adjusted pre-tax profits for the three months to July 31 rose 0.9 per cent to £23m. First half pre-tax profits rose 6.6 per cent to £47.1m and the group maintained its interim dividend at 4.4p per share. Premier’s chief executive Harriet Green is focusing on cost cutting in order to meet profit targets. “The conversion to the web is a key part of our strategy,” she said. “Over 50 per cent of our trading is e-commerce in Asia, it’s 73 per cent in Europe and 40 per cent in North America.” In addition to the switch to web sales, which has involved the closure of branches in the US, cost savings are being made from the lower cost of packaging and shipping as sales have gone down, a reduction in hiring new people and a cut down on travel. Despite the reduction in recruitment, the global workforce has risen by 11 per cent and in Leeds the headcount has risen by 23 per cent over the past two years. Premier, which sells products ranging from batteries and chargers to computer components and security products in Europe, North America and Asia Pacific, said a two per cent fall in August sales indicates that the economic environment is still tough. “It could just be seasonal movement, July to August, it’s very hard for us to tell. “We will focus on our growth margin and cost plans, while investing in the business,” said Ms Green. “I don’t know if it’s long term slower growth, or whether it’s double dip,” she added. “My own personal view is we’re in a slower, global grind-it-out growth. The good thing is, as we saw in 2009, we’re a very robust organisation.” She added that the decision to keep the interim dividend at 4.4p shows the group’s confidence in its profitability. “We’re a screamingly good yield,” she said. Investec analyst Guy Hewett, who retained his ‘hold’ rating, said: “First half results are slightly better than we feared, but continue to highlight a difficult outlook, with August sales down two per cent.” The group, which reported second quarter sales growth of 1.4 per cent, made £2.1m of cost savings in the period. “In taking these actions quickly and effectively we believe we will ensure maximisation of our sales, operating profit and cash positions to drive towards achieving our expectations this year,” said Ms Green. Analysts are expecting full-year pre-tax profits of around £94m. Analyst Adrian Kearsey at Evolution said: “While the second quarter results clearly show a mid cycle slowdown, somehow the collapse in earnings, predicted by the share price, has not materialised. “The outlook is uncertain, with August sales down two per cent. Given the weak environment this is to be expected.” The global economic slowdown, especially in North America and Europe, has been exacerbated by companies overstocking following the Japanese tsunami. The company, which is increasingly targeting the high-spending electronic design engineer community, has limited visibility over future orders. Most of Premier’s products are shipped the same or the next day. ros.snowdon@ypn.co.uk