Acquisitive electronics distributor Acal (ACL) drops 4% to 258p in morning trading as chief executive Nick Jefferies flags economic slowdown and volatile currencies as key risks for the business.

Like-for-like sales, which track growth excluding acquisitions at constant currencies, gained 2% in the six months ended 30 September. Total group sales are 18% higher than a year earlier as a result of heavy acquisition spend in previous periods offset slightly by a weaker euro.

Operating margin, a key measure of management efficiency, increased above 5%.

But the market is focusing on Jefferies’ comments on conditions in Europe, where Acal does most of its business, and the wider global economy.

Acal chart

‘Although encouraged by some positive European macro indicators, we remain cautious over the effects of any wide economic slowdown and the continuing impact of foreign exchange headwinds.

‘There are several acquisition opportunities in the pipeline and we have debt funding resources available.’

Subscribers can read our in-depth interview with Jefferies, where we argue investors should focus on Acal’s underlying growth rate and returns on capital rather than the high headline gains being delivered through acquisitions.

‘First half sales increased by 30% [at constant currency] and with gross margins higher than last year, we will deliver good growth in first half earnings, as expected,’ says Jefferies in the latest update.

‘Our Design & Manufacturing division and our Custom Distribution business in continental Europe generated good levels of organic growth for the market conditions and last year’s acquisitions of Noratel and Foss are both performing well.’

Issue Date: 15 Oct 2015