Stock of the day 14/12/2015 – Premier Farnell PLC

It’s been an undoubted disaster of a year for Premier Farnell, a near uninterrupted fall since the start of June recently culminating in fresh all-time lows.

Can the technology distributor find a solution to its problems with its Q3 trading update on Thursday?

The thing is, for a lot of the first half of the year it looked like Premier Farnell might be able to bounce back from the second half decline seen in 2014, with the stock crossing the £2 mark for the first time in 10 and a half months back in mid-May.


(Source: IT-Finance.com 14/12/2015)

Yet the company began to come unstuck in mid-June, falling by nearly 6.5% as it revealed higher sales of its Raspberry Pi mini-computer had caused gross margins to fall by 1.2% for its fiscal first quarter, leading to a 4.2% fall in operating profit to £45.5 million. Premier Farnell continued to fall across the rest of June and throughout July, before plunging 17.4% at the end of the latter month following a warning that the company’s profits would be 10% lower for the first half of the year.

The market-wide declines of August and the first half of September did nothing to help the stock, especially given that the stock was shuffled out of the FTSE250 during this period, leaving it at around £1.33 on the eve of the company’s half year results. Add onto this yet another profit warning, Premier Farnell now aiming for full year underlying profits of £73 million to £77 million, alongside news that it was selling its Akron Brass business AND the announcement it was cutting its dividend by 41% and the stock fell even lower, diving 22.5% the week after the announcement to sit precariously at around £1.

Things began to pick-up as September turned into October, with rumours of a potential tie-up with rival Electrocomponents lifting Premier Farnell back to £1.15. However, these gains didn’t last long, the stock soon resuming a decline that culminated in its aforementioned all-time low of £0.95 on December 11th. Premier Farnell’s current trading price is £0.99 (IT-Finance.com, 14/12/2015).

In terms of its Q3 statement on Thursday, investors will be waiting with bated breath to see if Premier Farnell can make it through an update without issuing a profit warning, with any positive nears (something of a rarity for the company at the moment) potentially having have upside potential for the stock.

Premier Farnell PLC has a consensus rating of ‘Buy’, comprised of 7 ‘Buy’ ratings, 4 ‘Hold’ ratings and 1 ‘Sell’ rating.