U.S. Markets closed

UK distribution company Electrocomponents targets U.S. and German deals

By Muvija M and Shashwat Awasthi

(Reuters) - British industrial distribution company Electrocomponents (ECM.L) is looking at Germany and the United States for potential bolt-on acquisitions and views China as one of its "greatest investment opportunities" over the next five years.

Electrocomponents made its first acquisition in nearly two decades with its 88 million pound ($114.2 million) purchase of IESA and CEO Lindsley Ruth has now set his sights on gaining increased penetration in the United States and Germany.

"They're two of the biggest markets in the world for the products that we sell," Ruth told Reuters on Thursday after the company gave an upbeat results outlook.

The company, which owns the RS Components, IESA and Allied Electronics & Automation brands, forecast a 27 percent jump in half-year adjusted pretax profit led by strong sales in its RS Pro business.

Ruth's turnaround plan since taking the helm in 2015 has propelled the company's share price to levels last seen around the dot-com bubble, having plunged by 87 percent to 113 pence in 2009. The shares were up 3.2 percent at 741.4 pence at 1056 GMT on Thursday.

Electrocomponents has been cutting costs and simplifying its structure, especially in the Asia-Pacific region, and finance chief David Egan said it plans to invest in both digital and customer acquisitions in the region.

"The investment is across Asia-Pacific, but with an emphasis on China," he told Reuters.

The company has been beefing up RS Pro, its high-margin electric and automation tools business, and said the unit outperformed the group in the half year to Sept. 30, with like-for-like revenue growth of 12 percent.

The FTSE 250 company said it was on track to deliver 4 million pounds of cost savings in the current financial year.

Ruth, whose efforts have brought a threefold increase in like-for-like revenue and saw its Asia-Pacific operations return to profit in the second half of last year, said that the second phase of the turnaround process was almost complete.

"We are quite happy with where we are, but we are still not where we need to be," Ruth said, adding that there is significant room for improvement, especially in China.

Asia-Pacific accounts for 13 percent of the company's total revenue.

(Reporting by Muvija M and Shashwat Awasthi, additional reporting by Shariq Khan in Bengaluru; Editing by Sunil Nair and David Goodman)