Component supplier Laird PLC (LON:LRD) saw shares fall 50 percent in early trade on Wednesday after issuing a profit warning amidst a challenging smartphone market.
Laird supply components to smartphone makers including Samsung and Apple, and been impacted by slowing growth in the smartphone market. People are changing mobile phones less frequently in developed markets, and where it was once customary to upgrade each year, more consumers are now taking up 2 year contracts.
In early trade Laird shares were trading down 50 percent from the previous day’s close changing hands below 154p a share. Shares attempted a short-lived rally which petered out in afternoon trade.
Information technology research company Gartner noted:
“The smartphone market has reached 90 percent penetration in the mature markets of North America, Western Europe, Japan and Mature Asia/Pacific, slowing future growth. Furthermore, users in these regions are not replacing or upgrading their smartphone as often as in previous years. In the mature markets, premium phone users are extending life cycles to 2.5 years, which is not going to change drastically over the next five years.”
This has resulted in Laird warning that underlying pre-tax profits would be about 30% lower than last year. In their third-quarter trading statement, they said:
“The acceleration of production for mobile devices has come much later than in previous cycles and visibility on volumes remains poor.
“In addition, we have experienced increased margin pressure due to unprecedented pricing pressures and some operational factors.
“This has led to a very challenging trading performance in PM (performance materials) in Q3 and we now anticipate full year group underlying profit before tax to be around £50m.”
The full Q3 RNS statement can be viewed here.
19/10/2016