16th Jun 2011 07:00
Premier Farnell plc 16 June 2011
Results for the First Quarter of the Financial Year ending 29 January 2012
Key Financials £m Q1 11/12 Q1 10/11 Q1 Continuing operations £m £m Growth (a) (unaudited) Adjusted revenue (b) 252.5 240.1 8% Total revenue 252.5 244.9 6%
Adjusted operating profit (b) 28.5 26.2 13%
Total operating profit 46.3 27.0 79%
Adjusted profit before tax (b) 24.1 21.4 13%
Total profit before taxation 41.9 22.2 89%
Adjusted earnings per share (b) 4.7p 4.2p 12%
Basic earnings per share 8.9p 4.4p 102% Free cash flow (c) 6.6 14.8 -55%Financial Highlights
Group sales grew above our targeted range of 6%-8%, up 8.3% year on year despite the tough comparator which is when the Group rebounded early from the recession to deliver strong adjusted first quarter sales growth of 19.3%.
First quarter sales in all three major MDD regions grew sequentially over the prior quarter on what were the highest fourth quarter sales for more than ten years, while first quarter sales from our electronics distribution businesses are up over 12% on pre-recessionary levels.
Group first quarter operating profit grew 13.3% year on year. This was led by MDD Americas' strong operating profit growth of 51.8%, as the region continues to benefit from the cost efficiencies associated with its web transformation and its EDE penetration increasing to 42.0%.
First quarter gross margin was up 0.3 percentage points year on year at 40.7%, in-line with our full year 2011 gross margin, and has now remained stable for five and half years.
MDD's return on sales increased 0.7 percentage points year on year to 12.7%, led by a year on year improvement of 2.7 percentage points in MDD Americas' return on sales.
During the quarter we took action to increase our inventory by £6.0 million following the Japanese disaster, of which £2.2 million had been received by the quarter end. Despite this our adjusted working capital to sales ratio improved 1.0 percentage point year on year to 24.3%.
Following the disposal of TPC Wire and Cable in the quarter, net debt, including the preference shares, ended the period at £226.8 million, representing a ratio of net debt to EBITDA of 1.7.
Strategic Highlights
During the quarter global EDE sales grew 8.3% year on year, while our global MRO sales grew 10.5% year on year, reflecting the later cycle recovery in the MRO sector.
We continue to reduce our exposure to less profitable MRO market segments, whilst focusing on our target high growth MRO market segments. For example, first quarter sales growth in the `Oil & Gas' and `Robotics' segments outperformed our global MRO sales growth by 8.5 percentage points.
First quarter sales via the web grew 30.2% year on year and eCommerce accounted for 53.7% of MDD sales, with eCommerce sales in Europe now accounting for 70.7% of sales.
First quarter sales in our emerging markets continued to grow strongly, up 40.1% year on year, driving sales from our developing markets to account for 23.7% of Group sales.
The element14 community received 645,000 visits from customers during the quarter and we continue to leverage innovations like our element14 community to acquire new customers, with our MDD active customer base growing 5.8% year on year.
Launch of our next wave of innovation including the initial release of the element14 knode, our interactive ecosystem of engineering solutions which we will continue to evolve.
Subsequent to quarter end, Valerie Gooding CBE succeeded Sir Peter Gershon as Chairman of the Board at the Company's AGM. We expect to be announcing the appointment and joining date of our new CFO shortly.Commenting on the results, Harriet Green, Group Chief Executive, said:
"The Group's sales momentum strengthened in the first quarter, with sales up 3.0% quarter on quarter and 8.3% year on year, which is above our targeted 6%-8% range. Our operating profit grew 13.3% year on year, a performance which was led by the North American business, where first quarter operating profit grew 51.8% year on year.
"We remain focused on delivering sustainable profitable growth across the economic and product cycles. When we look back to pre-recessionary levels, adjusted Group first quarter sales are up over 10% and we are now achieving structural year on year sales growth beyond the levels that we had prior to the recession. Although we recognise that our business model inherently provides us with limited visibility, the Board expects second quarter sales growth to be in-line with our target range and remains confident that the Group will continue to capitalise on the profitable growth opportunities inherent in its strategy."
For further information, contact:
Harriet Green, Chief Executive Premier Farnell plc +44 (0) 20 7851 4100Officer Andrew Lorenz Financial Dynamics +44 (0) 20 7269 7291 (UK)
Premier Farnell's announcements and presentations are published at www. premierfarnell.com together with business information and links to all other Group web sites.
To learn more about our exciting new innovation, the element14 knode, follow this link http://www.element14.com/community/community/knode. In addition, it is our intention to hold a live demonstration of the element14 knode at an investor day to be held on 28 September 2011. We will also take this opportunity to provide an update on our progress with the next 1,000 day strategy.
The 2011 Annual Report and Accounts is now available online and can be accessed at http://annualreport2011.premierfarnell.com.The results for the second quarter of the financial year ending 29 January 2012 will be announced on 8 September 2011.
Notes:
(a) Throughout this statement, in order to reflect underlying business performance,
sales growth is based on sales per day for continuing businesses at constant
exchange rates and for like periods, and growth in operating profit is
calculated at constant exchange rates, unless otherwise stated.
(b) The disposal of the TPC Wire & Cable (TPC) business, part of the Industrial
Products Division, at the start of the quarter (31 January 2011), does not qualify for accounting treatment as a discontinued operation. Accordingly, the Group's 2010/11 results have not been restated. However, to aid comparison, when referring to the performance of the Group, within the financial highlights, strategic highlights, outlook, Chief Executive's comment and the Chief Executive's Operational Overview section of this statement all prior year comparators have been adjusted to exclude the trading results of TPC. In addition, adjusted revenue, operating profit, profit before tax, and earnings per share in the table above, exclude the trading results of TPC in the prior year and the gain on sale in the current year (pre-tax gain of £17.8m, post-tax gain £15.0m).
(c) Free cash flow comprises total cash generated from operations, excluding cash
flows related to restructuring, less net capital expenditure, interest,
preference dividends and tax payments. Free cash flow also excludes proceeds on
sale of TPC in the first quarter of the financial year ending 29 January 2012.
Premier Farnell plc
Results for the First Quarter of the Financial Year ending 29 January 2012
Premier Farnell, the leading multi-channel, high service distributor supporting millions of engineers and purchasing professionals globally, announces its results for the first quarter of the financial year ending 29 January 2012.
Chief Executive's Operational Overview
The Group's sales momentum continued to accelerate in the first quarter, with adjusted Group sales growing 3.0% sequentially over the fourth quarter. Adjusted sales grew 8.3% year on year, which is above our targeted range of 6%-8% and compares to the equivalent period last year when the Group rebounded early from the recession to deliver strong adjusted first quarter sales growth of 19.3%. When compared to the pre-recessionary first quarter sales levels of financial year 2009, Group sales are up over 10% while sales from our electronics distribution businesses are up over 12%, reflecting our drive to deliver sustained profitable growth across the economic and product cycles. We continue to deliver gross margin stability and in the quarter our adjusted gross margin was up 0.3 percentage points year on year at 40.7%, in-line with our full year 2011 adjusted gross margin of 40.7%. This performance represents five and half years of the Group consistently delivering a stable to improving gross margin, which is unrivalled in the high service distribution industry and is a clear reflection of the value customers attribute to our proposition.
Our first quarter sales and operating profit growth reflects our continued drive to shift the Group's sales mix towards the Electronic Design Engineering (EDE) sector and targeted Maintenance Repair and Operation (MRO) market segments. We measure EDE sales growth based on sales of EDE centric technologies (e.g. semiconductors, discrete and passive components, software etc) which are critical in supporting EDEs in the design of electronic products, and in the first quarter our global EDE sales grew 8.3%. Our global first quarter MRO sales grew 10.5%, which in part is reflective of a later cycle recovery in the MRO sector. However, we remain focused on executing our strategy for profitable growth. To this end, during the quarter we continued to reduce our exposure to the commoditised and, therefore, less profitable market segments within the MRO sector, while accelerating our drive towards the high growth MRO market segments in which our high service proposition is valued. For example, global first quarter sales growth within our targeted high growth MRO market segments such as `Robotics' and `Oil & Gas' outperformed total first quarter MRO sales growth by 8.5 percentage points. In North America, sales growth within the high growth MRO market segments of `Robotics' and `Oil & Gas' outperformed the region's total MRO sales growth by 16.0 percentage points.
Our continued drive to move the proportion of the North American MRO business towards our targeted higher growth, more profitable MRO market segments, together with the region's ongoing strategic focus towards EDE and the web, played a key role in MDD Americas' first quarter operating profit increasing 51.8% year on year. In addition, North America's first quarter return on sales improved 2.7 percentage points year on year to 9.1%. The Division's profitability continues to be a fundamental driver behind the Group's operating profit growth and in the quarter the Group's adjusted operating profit grew 13.3% year on year, while the Group's adjusted return on sales increased 0.4 percentage points year on year to 11.3%.
Our first quarter EDE sales accounted for 55.5% of our electronics distribution sales, while strong growth in our emerging markets has driven developing market sales to account for 23.7% of Group sales. We remain focused on transforming our business around the web as we look to drive further operational efficiencies and reduce our operating costs. In the quarter MDD web sales grew 30.2% year on year, while eCommerce accounted for 53.7% of first quarter MDD sales. Our element14 community continues to cement its position as the cornerstone around which our customers interact, commune and conduct their design research. In the first quarter the site received 645,000 visits from customers, as the `Japan Emergency' pages of the community became the hub for information on how the Japanese crisis is impacting the electronics supply chain. This area of the element14 community alone saw over 100,000 document downloads in the first quarter and with the time spent by customers working within the community up 33.5% on the prior quarter we have seen a 10.2% increase in the number of click-throughs from the community to our transactional websites. In addition to the clear growth drivers inherent in the strategy, we continue to leverage investments like our element14 community to acquire new customers and in the quarter our MDD active customer base grew 5.8% year on year. This growth in our customer base, together with our strong strategic progress, has been and continues to be fundamental to the Group's ongoing positive sales and operating profit performance.
As we accelerate the execution of our next 1,000 day strategic initiatives we recently released our next wave of innovation which leverages the power of combining commerce and community to truly differentiate our proposition. In bringing another first to our industry we launched the first phase of the element14 knode (knowledge for design engineers), our interactive ecosystem of engineering solutions. The element14 knode represents a significant strategic step forward with our services beyond product proposition, bringing together design tools, rapid Printed Circuit Board (PCB) prototyping services, engineering software and solutions, electronics information and technical data, within a single online location. The element14 knode's online browsing environment has been designed to allow customers to move intuitively through the different stages of the design cycle, moving from one of the numerous tailored "design rooms" to the next, until their design is complete. Initial reaction to the element14 knode following its launch has been positive, with the global electronics press and design solution specialists commenting that "it's an engineering Google" and "Premier Farnell's wave of innovation continues". To coincide with the launch of the element14 knode, we are in the final design stages of a new CadSoft website. The site has been designed using new techniques to optimise its content from a Search Engine Optimisation (SEO) perspective, ensuring much higher online visibility of CadSoft and its EAGLE Computer Aided Design (CAD) software. The element14 knode and our continually strengthening services beyond product offering will increasingly become an intrinsic part of our proposition, building on our acquisition of CadSoft where first quarter sales of the EAGLE CAD software through our electronics distribution businesses grew 211.4% year on year. As we move forward we are focused on leveraging our core distribution offering in combination with our ability to provide customers with software, services and technology solutions to drive accelerated customer acquisition and increased sales as we support new and existing customers at every phase of the design cycle.
First quarter sales in all three of our major MDD regions grew sequentially over the fourth quarter, with sales up 8.7% in Europe, 1.1% in North America and 4.8% in Asia Pacific. First quarter sales in Europe grew 16.6% year on year, having exited the quarter with sales per day in the month of April reaching a record high for the business. Sales in our Eastern European business continued to grow strongly, up 42.8% on the prior year, while EDE now accounts for 66.8% of all European sales. Europe's eCommerce sales in the quarter accounted for 70.7% of sales, a level of eCommerce penetration that means the European business has now surpassed our target of 70% of sales to come via eCommerce. However, with some of our European businesses already delivering over 80% of sales via eCommerce, we remain focused on driving more of the region's sales via the web. To this end, we continue to reshape our European operations around the web to ensure we have the most efficient operating cost base and a competitive organisational structure to support our customers. The first quarter sales performance delivered in MDD Americas has led to the business returning back to the size it was prior to the downturn, as sales grew 5.4% year on year. This growth was in part driven by the region's web sales which grew 22.3% year on year, while in total eCommerce sales accounted for 37.6% of MDD Americas' first quarter sales. This represents an 8.9 percentage point improvement year on year, reflecting the continued acceleration in MDD Americas transition to become a web-based business. Our ongoing focus towards driving the region's rich EDE proposition has seen EDE sales as a percentage of total sales increase to 42.0%.
Our sales in Greater China and India continued to grow strongly during the quarter, up 14.1% and 50.5% year on year, respectively, while combined sales in our new businesses in Taiwan, Thailand and South Korea were up 76.2% sequentially on the prior quarter. Despite the strong performance of our emerging markets in Asia Pacific, our sales performance in Singapore and Malaysia was disappointing and robust action is being taken to refocus our efforts in these markets on high growth opportunities. Our performance in these markets led to Asia Pacific's total first quarter sales declining 3.7% year on year, although Asia Pacific's sales did grow sequentially quarter on quarter. First quarter web sales in Asia Pacific grew 19.1% year on year and eCommerce accounted for 57.7% of total sales, while EDE sales accounted for 60.9% of the region's sales. The direct impact of the recent disaster in Japan on the Group's performance has been limited, with our Japanese sales representing just 0.2% of Group sales and the business having a very small direct Japanese supply chain.
On a wider scale, the full extent of the disruption to the electronics supply chain is still evolving as demand for replenishment product starts to be impacted. However, through leveraging our strong supplier relationships and the insightful trends emerging on the element14 community, we have been able to make inventory investments in those technologies we believe to be most at risk from the impact of the Japanese disaster. During the quarter we took the decision to increase our inventory in these technology areas by £6.0 million as we recognise the heightened importance and value our customers place on our high service proposition at this time.
Key to our service proposition is the depth and breadth of our product portfolio and, in addition to the decision to increase our inventory in specific product areas by £6.0 million following the disaster in Japan, we added 16,000 new EDE products during the quarter to ensure our complete technology offering continues to meet our customers' needs. Leveraging our industry leading proposition to deliver market share gains within the high growth vertical markets continues to be a focus for the Group. In the quarter we launched new transactional micro-sites targeted at the high growth alternative energy, wireless and instrumentation and measurement vertical markets - all of which combine community with commerce via their respective communities on element14. Our approach to creating a more sustainable business underpins much of the Group's strategic direction, while also ensuring the Group remains competitive in a rapidly changing world. As a consequence of our ongoing sustainability work, at the start of the quarter the Group was listed as one of the world's most ethical companies by Ethisphere for the first time.
Other Distribution Businesses
First quarter sales at CPC grew 2.4% year on year driven by strong customer acquisition, with CPC's number of new active customers growing 9.4% on the prior year. eCommerce accounted for 42.2% of total sales, a new high for the business as sales via the web grew 13.6% year on year. Sales from higher margin private label products grew 11.4% year on year, in part driven by the addition of 900 new private label products in the quarter. MCM's first quarter sales grew 0.5% year on year, led by web sales which were up 10.4% on the prior year. The business' total active customer base grew 11.7% year on year. The growth in active customers has been driven by new product introduction, with 2,100 new products added in the quarter, online enhancements to its website and digital marketing campaigns.
Industrial Products Division (IPD)
First quarter sales at Akron Brass grew 2.4% year on year - the first time in two years that the business has delivered two consecutive quarters of growth. International sales saw an acceleration in the quarter, up 59.9% year on year and, in particular, sales in the emerging markets of China, the Middle East and Latin America, grew 449.8%, 294.6% and 123.2%, respectively, year on year. New product development remains key to the differentiation of Akron's proposition and in the quarter the business launched three new product lines to market, helping to drive sales from new products to account for 13.3% of total sales. As noted in our year end results, on 31 January 2011 the Group completed the sale of its TPC Wire and Cable business for a total consideration of $43 million.
The Board
On 25 May 2011 the Company announced the appointment of its new Chairman and non-executive director Valerie Gooding CBE who subsequently succeeded Sir Peter Gershon on June 14 2011, following his retirement at the Company's AGM. Valerie brings global experience to the Board, including 10 years as CEO of BUPA as well as having previously held the position of Director of Asia Pacific at British Airways. The Group would like to thank Sir Peter Gershon for the strong leadership and invaluable counsel he has provided to Premier Farnell during his tenure as Chairman. We expect to be announcing the appointment and joining date of our new CFO shortly.
Outlook
We remain focused on delivering sustainable profitable growth across the economic and product cycles. When we look back to pre-recessionary levels, adjusted Group first quarter sales are up over 10% and we are now achieving structural year on year sales growth beyond the levels that we had prior to the recession. Although we recognise that our business model inherently provides us with limited visibility, the Board expects second quarter sales growth to be in-line with our target range and remains confident that the Group will continue to capitalise on the profitable growth opportunities inherent in its strategy.
Financial Results
Note: The disposal of the TPC Wire & Cable (TPC) business, part of the Industrial Products Division, at the start of the quarter (31 January 2011), does not qualify for accounting treatment as a discontinued operation. References below to adjusted sales, profit, cash and ratios exclude the results of TPC Wire & Cable in respect of previous periods and the gain on sale in the current period.
Revenue
Sales for the first quarter were £252.5 million (2010/11 adjusted sales: £240.1 million). At constant exchange rates, adjusted sales in the prior year were £ 233.9 million, resulting in first quarter growth this year of 8.3%, which is ahead of our target range of 6-8%.
Total sales per day increased 6.3% on the prior year at constant exchange rates.
The average exchange rate for the US dollar against sterling was $1.62 (2010/ 11: $1.53) and the average exchange rate for the Euro against sterling was Euro 1.14 (2010/11: Euro 1.13).
Margins and Operating Profit
Gross margin for the first quarter was 40.7%, compared with adjusted gross margin of 40.4% in the first quarter of the prior year, and in line with the adjusted 2010/11 full financial year gross margin, demonstrating our continued achievement of stability.
Adjusted net operating expenses in the quarter were 29.4% of sales compared with 29.5% in the first quarter of the prior year. Adjusted operating profit was £28.5 million (2010/11: £26.2 million), producing an operating margin of 11.3% compared with 10.9% in the first quarter of the prior year. This increase is despite the ongoing investment in our strategic initiatives which is offset by the ongoing benefits arising from our cost reduction activities.
Total first quarter gross margin in the prior year was 40.8%. Total net operating expenses in the current quarter includes the provisional pre-tax gain on the sale of TPC of £17.8 million to give a total operating profit in the quarter of £46.3 million. Total operating profit in the prior year was £27.0 million, giving a return on sales of 11.0%.
At constant exchange rates, the increase in adjusted operating profit was 13.3%, whilst the increase in reported operating profit was 78.8%.
There was a beneficial impact on operating profit of £1.1 million from the translation of overseas results compared with the prior year.
Foreign Currency Impact
A one cent movement in the exchange rate between the US dollar and sterling impacts the Group's operating profit by approximately £250,000 per annum, and a one cent movement in the exchange rate between the Euro and sterling impacts the Group's operating profit by approximately £500,000 per annum.
Finance Costs
Net finance costs in the first quarter were £4.4 million (2010/11: £4.8 million). This comprises net interest payable of £3.3 million (2010/11: £3.7 million), which was covered 14.0 times by total operating profit or 8.6 times by adjusted operating profit, and a net charge of £1.1 million (2010/11: £1.1 million) in respect of the Company's convertible preference shares.
Profit Before Tax
Adjusted profit before tax in the first quarter was £24.1 million (2010/11: £ 21.4 million), an increase of 12.6% on the prior year.
Total profit before tax in the quarter was £41.9 million (2010/11: £22.2 million).
Taxation Charge
Excluding the impact of the gain on the sale of TPC, the taxation charge for the quarter was at the estimated effective rate for the current financial year of 27.5% (2010/11: 28.0%) of profit before tax and preference dividends. The provisional taxation charge arising on the gain on disposal of TPC amounted to £2.8 million.
Disposal of TPC Wire & Cable
On 31 January 2011, the Group completed the sale of the entire issued share capital of TPC Wire & Cable Corp. ("TPC") to Pfingsten Partners LLC for a total cash consideration of $43 million. The sale of TPC, a leading US distributor of industrial wire and cable and part of IPD, is part of the Group's core strategy to focus on the EDE and profitable MRO markets.
The sale of TPC does not qualify for accounting treatment as a discontinued operation. The provisional pre-tax gain on the sale amounts to £17.8 million, and is included in net operating expenses, and the estimated tax charge arising on the gain is £2.8 million. The pre-tax accounting gain includes the requirement to recycle currency translation adjustments relating to TPC that have previously been posted directly to reserves, amounting to a gain of £0.8 million. The trading results of TPC in 2010/11 were not material to the Group, with full year sales of £20.7 million and a full year operating profit of £3.6 million.
Return on Net Operating Assets
The return on net operating assets for the first quarter was 41.7% (2010/11: 33.8%), compared with our strategic target of greater than 30%.
Earnings per Share
Adjusted earnings per share were 4.7 pence (2010/11 4.2 pence), an increase of 11.9% on the prior year. Basic earnings per share for the first quarter were 8.9 pence (2010/11: 4.4 pence).
Cash Flow and Net Financial Liabilities
Our utilisation of working capital has improved in the quarter, with adjusted working capital as a percentage of sales at 24.3% compared with 25.3% in the first quarter of the prior year. In absolute terms, working capital increased by £16.2 million. This reflects a higher level of receivables consistent with our first quarter sales momentum and the receipt of additional inventory of £ 2.2 million to secure our key product supply following the disaster in Japan earlier this year.
Net cash generated from operations in the first quarter was £17.4 million (2010 /11: £21.6 million or £22.0 million excluding the impact of previous years restructuring costs) representing 61.1% of adjusted operating profit. Free cash flow for the quarter, being cash generated from continuing operations less net capital expenditure, interest, and tax, was £6.6 million, (2010/11: £14.8 million excluding the impact of previous years restructuring costs). Our free cash flow to sales ratio in the quarter was 2.6%.
Net financial liabilities at the end of the first quarter were £226.8 million (30 January 2011: £262.9 million), including £61.2 million (30 January 2011: £ 61.0 million) attributable to the Company's preference shares. This represents a ratio of net debt to EBITDA of 1.7. The impact of exchange rates in the period was to decrease net financial liabilities by £6.0 million, principally in relation to our US$ denominated private placement loan notes.
Financial Position
Premier Farnell's financial position remains robust with good liquidity and strong free cash flow. At the quarter end, our headroom on bank borrowings was £85.9 million under Facilities in place until January 2013. This headroom, combined with our net cash position of £53.7 million, gives us a secure funding position. In addition, the Group also has unused facilities of $45 million as part of its US Private Placement Shelf Facility agreement.
Operations
Marketing and Distribution Division (MDD)
(Newark and Farnell businesses including element14, CPC and MCM)
Q1 11/12 Q1 10/11 Q1 growth £m £m Revenue 237.5 224.5 8.7% Operating profit 30.1 27.0 15.9% Operating margin % 12.7% 12.0%
First quarter sales for the MDD Division grew sequentially 3.6% on what were the highest fourth quarter sales for more than ten years and 8.7% year on year, ahead of our 6-8% strategic target, with sales per day increasing throughout the quarter. This represents an outperformance when compared to the wider market, with sales growth for global semiconductors up 3.9% year on year for the equivalent period, as reported by the Semiconductor Industry Association (SIA). When compared to the pre-recessionary sales levels in the first quarter of financial year 2009, sales from our electronics distribution businesses have grown 12.6%. This sales performance is a clear indication of the growth opportunities inherent in our strategy as well as our focus to increase our share of the high service distribution market. Indeed, we continue to focus on leveraging our investments to acquire new customers and in the quarter our MDD active customer base grew 5.8% year on year.
First quarter EDE sales grew 8.3%, while EDE sales now comprise 55.5% of total sales from our electronics distribution businesses which is within our strategic target range of 50-70% sales to come via EDE. Our focus towards the higher growth, more profitable MRO market segments continues to be a fundamental pillar of our strategy. Global first quarter sales growth within our targeted high growth MRO market segments such as `Robotics' and `Oil & Gas' outperformed total first quarter MRO sales growth by 8.5 percentage points.
Sales in the division's international markets have continued to deliver strong growth and in the key emerging markets of Greater China, India and Eastern Europe, together with sales from our new web-based markets of Taiwan, Thailand and South Korea, combined first quarter sales grew 40.1%.
All the distribution businesses have continued to drive growth via the web, with MDD web sales growing 30.2% in the quarter and eCommerce now accounting for 53.7% of total MDD sales. Our European business achieved its strategic target in the quarter with ecommerce penetration now at 70.7%, driven by the continued development of our web proposition.
Operating margin for the quarter improved 0.7 points year on year to 12.7%, while the Division's operating profit increased 15.9% year on year, reflecting leverage from our increased sales, and the efficiencies that continue to accrue as a result of our cost saving initiatives.
MDD Americas(Newark) Q1 11/12 Q1 10/11 Q1 growth £m £m Revenue 96.3 96.3 5.4% Operating profit 8.8 6.2 51.8% Operating margin % 9.1% 6.4%
MDD Americas' first quarter sales grew 5.4% year on year and 1.1% on the prior quarter. During the quarter, the business added 8,000 new EDE products to its portfolio, over 20% of which were new-to-market products. This continued focus towards enhancing our North American EDE proposition resulted in the proportion of first quarter EDE sales increasing to account for 42.0% of total sales. In the wider North American semiconductor market, the SIA reported that sales increased 9.5% in the three months to April. MDD Americas continues to focus on transitioning its sales from the more commoditised, less profitable, MRO market segments, towards the higher growth, more profitable market segments within the MRO sector and in the first quarter we have seen segments such as `Robotics' and `Oil & Gas' outperform the region's total MRO sales growth by 16.0 percentage points.
We continue to leverage our industry leading website with a continued focus on high service and ongoing improvement in our service to our customers evidenced by our improving customer experience scores. The quarter also saw MDD Americas' take an important step forward in its branding journey, with the design of our North American website evolving to take on more of the element14 design and feel. First quarter web sales in the region grew 22.3% in the quarter with, eCommerce channels now accounting for 37.6% of sales.
The execution of the Group's strategy in North America continues to drive a significant improvement in the region's operating profit, which in the first quarter increased 51.8% year on year. MDD Americas' return on sales improved to 9.1%, as the business remains focused on delivering profitable growth through efficient and cost effective sales channels.
MDD Europe and Asia Pacific(Farnell and element14) Q1 11/12 Q1 10/11 Q1 growth £m £m Revenue 117.7 104.5 13.2% Operating profit 19.4 18.6 7.8% Operating margin % 16.5% 17.8%
Sales in the first quarter grew 13.2%, with Europe delivering a record level in its sales per day for the month of April. Sequentially, sales grew 8.1% on the fourth quarter, reflecting the ongoing strength of the embedded EDE focus in this region, together with continuing expansion in our international regions and the strength of our web proposition. The division continues to deliver a strong operating margin, at 16.5% for the quarter. Web sales grew 35.7% in the quarter with eCommerce sales accounting for 68.9% for the Division as a whole.
Revenue by region Q1 11/12 Q1 10/11 Q1 growth £m £m UK 31.9 27.9 16.3%
Rest of Europe (incl exports) 70.0 60.6 16.7%
Asia Pacific 15.8 16.0 -3.7%
Note: sales analysis has been revised to reflect export sales in Rest of Europe in order to give a more appropriate geographic split. Comparatives have been restated accordingly.
Sales in the European business, including the UK, grew strongly at 16.6% year on year and 8.7% sequentially on the fourth quarter. The region's continued focus on EDE customers contributed to the European business achieving 66.8% EDE penetration, with the region's EDE active customer base growing 7.8% in the first quarter. Our European transformation to become an EDE-centric business is the most advanced within MDD and, as such, much of its growth is being driven from this high growth customer segment. Overall, our growth in Europe continues to outperform the growth seen in the wider European semiconductor market, where the SIA reported that sales for the equivalent period grew 6.0% year on year. First quarter web sales in the region grew 37.8% year on year as the business achieved its strategic goal of over 70% of sales through eCommerce channels. The business continues to capitalise on the significant opportunities for growth in Eastern Europe with year on year growth of 42.8%. The success of the strong relationships we have with our suppliers has resulted in the business being awarded European Distributor of the Year by Honeywell and High Service Distributor of the Year for Tektronix.
Farnell UK sales grew 16.3% in the quarter. This represents an outperformance of the wider market when compared with the most recent data from the Association of Franchised Distributors of Electronic Components (AFDEC) who reported sales growth of 15.6% for 3 months to April, excluding Farnell.
In Asia Pacific, first quarter sales grew sequentially on the fourth quarter by 4.8%. Year on year, sales in our key emerging markets of Greater China and India, grew 14.1% and 50.5%, respectively. However, our first quarter sales performance in Singapore and Malaysia was disappointing and we are committed to refocusing our efforts in these markets towards high growth opportunities. This resulted in the region as a whole reporting a year on year sales decline of 3.7%. For the three months to April, the SIA reported that semiconductor sales in Asia Pacific grew 4.8% year on year. Our first quarter web sales in the region grew 19.1% with eCommerce penetration increasing to 57.7%, while EDE sales accounted for 60.9% of the region's sales.
Other Distribution Businesses(CPC and MCM) Q1 11/12 Q1 10/11 Q1 growth £m £m Revenue 23.5 23.7 1.9% Operating profit 1.9 2.2 -12.4% Operating margin % 8.1% 9.3%
CPC achieved sales growth of 2.4% in the quarter, despite the uncertain UK consumer market conditions, supported by robust marketing programmes and the addition of more than 4,100 new products. These enhancements to CPC's proposition, together with the business' focus towards delivering a best-in-class customer experience, has been fundamental in driving a 9.4% year on year increase in the number of new active customers in the first quarter. CPC continues to drive sales via the web, with first quarter eCommerce penetration increasing to 42.2%.
First quarter sales at MCM grew 0.5% year on year, although the business continues to be challenged by the North American economic environment. However, the addition of more than 20,000 new products and investments in web based marketing resulted in the business achieving strong positive year on year growth, with web sales growing 10.4%.
Industrial Products Division (IPD)
(Akron Brass) Q1 11/12 Q1 10/11 Q1 growth £m £m Adjusted revenue* 15.0 15.6 2.4% Adjusted operating profit* 2.2 2.4 -2.3% Adjusted operating margin % 14.7% 15.4%
* Adjusted to exclude the impact of TPC which was sold on 31 January 2011.
Sales at Akron Brass grew 2.4% year on year, despite the highly challenging conditions in the US fire truck market, with government spending being severely curtailed and new fire truck shipments having declined by 26.8% year on year. This outperformance is supported by Akron's successful strategic drive in to international markets with over 22% of sales now coming from these markets. Overall, sales outside the US grew 59.9% year on year with key markets including China, which grew 449.8%, Latin America which grew 123.2%, and the Middle East which grew 294.6%.
This press release contains certain forward-looking statements relating to the business of the Group and certain of its plans and objectives, including, but not limited to, future capital expenditures, future ordinary expenditures and future actions to be taken by the Group in connection with such capital and ordinary expenditures, the expected benefits and future actions to be taken by the Group in respect of certain sales and marketing initiatives, operating efficiencies and economies of scale. By their nature forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Actual expenditures made and actions taken may differ materially from the Group's expectations contained in the forward-looking statements as a result of various factors, many of which are beyond the control of the Group. These factors include, but are not limited to, the implementation of initiatives supporting the Group's strategy, the effect of legislation and regulatory enactments, recruitment and integration of new personnel, the implementation of cost-saving initiatives, continued use and acceptance of e-commerce programs and systems, implementation of new IT systems, the ability to expand into new markets and territories, the implementation of new sales and marketing initiatives, changes in demand for electronic, electrical, electromagnetic and industrial products, rapid changes in distribution of products and customer expectations, the ability to introduce and customers' acceptance of new services, products and product lines, product availability, the impact of competitive pricing, fluctuations in foreign currencies, and changes in interest rates and overall market conditions, particularly the impact of changes in world-wide and national economies. The Group does not intend to update the forward-looking statements made herein.
Condensed Consolidated Income Statement For the first quarter ended 1st May 2011 2011/12 2010/11 2010/11 First First Full quarter quarter year unaudited unaudited audited Notes £m £m £m Continuing operations Revenue 2 252.5 244.9 990.8 Cost of sales (149.7) (144.9) (583.3) Gross profit 102.8 100.0 407.5 Net operating expenses - before gain on disposal of subsidiary (74.3) (73.0) (295.4)undertaking - gain on disposal of subsidiary 3 17.8 - -undertaking Total net operating expenses (56.5) (73.0) (295.4) Operating profit - before gain on disposal of subsidiary 28.5 27.0 112.1undertaking - gain on disposal of subsidiary 3 17.8 - -undertaking Total operating profit 2 46.3 27.0 112.1 Finance income (interest receivable) - - 0.1 Finance costs - interest payable (3.3) (3.7) (14.6) - preference dividends (0.9) (0.9) (3.5) - premium on redemption of preference (0.2) (0.2) (0.8)shares Total finance costs (4.4) (4.8) (18.9) Profit before taxation 41.9 22.2 93.3 Taxation 4 (9.7) (6.5) (27.1) Profit for the period attributable to 32.2 15.7 66.2ordinary shareholders Earnings per share 5 Basic 8.9p 4.4p 18.3p Diluted 8.7p 4.3p 18.0p Ordinary dividends Interim - proposed 4.4p Final - proposed 6.0p Paid 9.6p Impact on shareholders' funds (£m) 34.7Condensed Consolidated Statement of Comprehensive Income For the first quarter ended 1st May 2011 2011/12 2010/11 2010/11 First First Full quarter quarter year unaudited unaudited audited £m £m £m
Profit for the period attributable to ordinary 32.2 15.7 66.2 shareholders
Net exchange adjustments (0.8) 1.9 3.6 Recycling of cumulative translation (0.8) - - adjustments on disposal of subsidiary undertaking Actuarial losses on pensions and other - - (0.7) post-retirement obligations Deferred tax credit on actuarial losses on - - 0.3 pensions and other post retirement obligations Deferred tax credit on share-based payments - - 2.3
Net fair value losses on cash flow hedges (1.8) (0.2) (1.2)
Other comprehensive income for the period (3.4) 1.7 4.3
Total comprehensive income for the period 28.8 17.4 70.5 attributable to ordinary shareholders The accompanying notes form an integral part of this unaudited condensed consolidated
financial information.
Condensed Consolidated Balance Sheet As at 1st May 2011 1st May 2nd May 30th January 2011 2010 2011 unaudited unaudited audited Notes £m £m £m ASSETS Non-current assets Goodwill 34.5 35.1 34.8 Other intangible assets 23.7 24.5 24.3 Property, plant and equipment 54.2 52.4 54.4 Deferred tax assets 13.9 12.2 13.9 Total non-current assets 126.3 124.2 127.4 Current assets Inventories 209.5 187.3 214.7 Financial assets 6 - 0.3 - Trade and other receivables 151.0 145.0 141.4 Cash and cash equivalents 6 53.7 46.2 33.4 Total current assets (excluding assets of disposal group classified 414.2 378.8 389.5as held for sale) Assets of disposal group - - 8.7classified as held for sale Total current assets 414.2 378.8 398.2 LIABILITIES Current liabilities Financial liabilities 6 (3.2) (43.2) (1.3) Trade and other payables (121.9) (117.6) (126.6) Current tax payable (31.0) (30.4) (23.6) Total current liabilities (excluding liabilities of disposal group (156.1) (191.2) (151.5)classified as held for sale) Liabilities of disposal group - - (0.9)classified as held for sale Total current liabilities (156.1) (191.2) (152.4) Net current assets 258.1 187.6 245.8 Non-current liabilities Financial liabilities 6 (277.3) (258.3) (295.0) Retirement and other (34.6) (38.8) (36.3)post-employment benefits Deferred tax liabilities (3.5) (3.1) (3.5) Total non-current liabilities (315.4) (300.2) (334.8) NET ASSETS 69.0 11.6 38.4 EQUITY Ordinary shares 18.4 18.3 18.4 Equity element of preference 10.4 10.4 10.4shares Share premium 29.0 26.1 28.5 Capital redemption reserve 4.4 4.4 4.4 Hedging reserve (2.6) 0.2 (0.8) Cumulative translation reserve 18.4 18.3 20.0 Retained earnings (9.0) (66.1) (42.5) TOTAL EQUITY 69.0 11.6 38.4 Condensed Consolidated Statement of changes in Equity For the first quarter ended 1st May 2011 2011/12 2010/11 2010/11 First First Full quarter quarter year unaudited unaudited audited £m £m £m
Total equity at beginning of period 38.4 (8.5) (8.5)
Profit for the period 32.2 15.7 66.2 Other comprehensive (expense)/income (3.4) 1.7 4.3 Total comprehensive income 28.8 17.4 70.5 Transactions with owners: Ordinary dividends paid - - (34.7) Ordinary share capital subscribed 0.5 1.9 4.4 Share-based payments 1.3 0.8 6.7 Total transactions with owners 1.8 2.7 (23.6) Total equity at end of period 69.0 11.6 38.4 The accompanying notes form an integral part of this unaudited
condensed consolidated financial information.
Condensed Consolidated Statement of Cash Flows
For the first quarter ended 1st May 2011 2011/12 2010/11 2010/11 First First Full quarter quarter year unaudited unaudited audited Notes £m £m £m Cash flows from operating activities Total operating profit 46.3 27.0 112.1 Gain on disposal of subsidiary (17.8) - - undertaking Cash Impact of 2009/10 restructuring/ pension - (0.4) (0.8) changes Depreciation and amortisation 4.6 4.7 19.1 Changes in working capital (16.2) (9.6) (31.7) Additional funding for post retirement (0.8) (1.3) (3.9) defined benefit plans Other non-cash movements 1.3 1.2 7.2 Total cash generated from operations 17.4 21.6 102.0 Interest received - - 0.1 Interest paid (1.4) (1.3) (12.7) Dividends paid on preference shares - - (3.5) Taxation paid (4.0) (3.5) (29.6) Net cash generated from operating 12.0 16.8 56.3 activities Cash flows from investing activities Proceeds from disposal of subsidiary undertaking 25.5 - - Purchase of property, plant and (3.2) (0.7) (8.6) equipment Purchase of intangible assets (computer (2.2) (1.7) (10.5) software) Net cash used in investing activities 20.1 (2.4) (19.1) Cash flows from financing activities Issue of ordinary shares 0.5 1.9 4.4 New bank loans - 4.0 67.8 Repayment of bank loans (12.0) - (67.8) Dividends paid to ordinary shareholders - - (34.7) Net cash (used in) / generated from financing activities (11.5) 5.9 (30.3) Net increase in cash, cash equivalents and bank overdrafts 20.6 20.3 6.9 Cash, cash equivalents and bank 33.4 25.4 25.4 overdrafts at beginning of period Exchange (losses)/gains (0.3) 0.5 1.1 Cash, cash equivalents and bank 53.7 46.2 33.4 overdrafts at end of period Reconciliation of net financial liabilities
Net financial liabilities at beginning (262.9) (264.2) (264.2) of year
Net increase in cash, cash equivalents 20.6 20.3 6.9 and bank overdrafts Decrease/(increase) in debt 12.0 (4.0) - Premium on redemption of preference (0.2) (0.2) (0.8) shares Derivative financial instruments (1.9) (0.3) (1.8) Amortisation of arrangement fees (0.4) (0.5) (2.0) Exchange movement 6.0 (6.1) (1.0)
Net financial liabilities at end of 6 (226.8) (255.0) (262.9) period
The accompanying notes form an integral part of this unaudited condensed consolidated financial information. Notes 1 Basis of preparation The unaudited condensed consolidated financial information in this report has been prepared based on International Financial Reporting Standards (IFRSs), as adopted by the European Union, and applying the accounting policies disclosed in the Group's 2011 Annual Report and Accounts on pages 100 to 103, except as described below. There are no new standards or amendments to standards which are mandatory for the first time in the current financial year which would have a significant impact on the Group. This condensed consolidated financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the financial year ended 30 January 2011, have been delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain any statement under Section 498 of the Companies Act 2006. Copies of the Company's 2011 Annual Report and Accounts are available from Premier Farnell plc, 150 Armley Road, Leeds, LS12 2QQ, England, or from the Company's website at www.premierfarnell.com. 2 Segment 2011/12 First quarter (unaudited) 2010/11 information Before Profit on After disposal of disposal of disposal of First Full subsidiary subsidiary subsidiary quarter year undertaking undertaking undertaking unaudited audited £m £m £m £m £m Revenue Marketing and Distribution Division Americas 96.3 - 96.3 96.3 386.3 Europe and Asia 117.7 - 117.7 104.5 423.5 Pacific Other 23.5 - 23.5 23.7 98.0 Distribution Businesses Total Marketing 237.5 - 237.5 224.5 907.8 and Distribution Division Industrial 15.0 - 15.0 20.4 83.0 Products Division 252.5 - 252.5 244.9 990.8 Operating profit Marketing and Distribution Division Americas 8.8 - 8.8 6.2 29.1 Europe and Asia 19.4 - 19.4 18.6 74.7 Pacific Other 1.9 - 1.9 2.2 9.3 Distribution Businesses Total Marketing 30.1 - 30.1 27.0 113.1 and Distribution Division Industrial 2.2 17.8 20.0 3.2 14.2 Products Division Head Office (3.8) - (3.8) (3.2) (15.2) costs 28.5 17.8 46.3 27.0 112.13 Gain on disposal of subsidiary undertaking On 31 January 2011, the Group disposed of TPC Wire & Cable ("TPC"), part of the Industrial Products Division, to Pfingston Partners LLC for a cash consideration payable on completion of $43 million (before costs). The disposal of TPC does not qualify as a discontinued operation under IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations" and consequently the results of TPC for prior periods are shown within continuing operations. The provisional gain on disposal of TPC of £17.8 million before taxation is summarised below. 2011/12 First quarter £m Net sale proceeds 24.6 Net assets disposed: Goodwill 0.1 Property, plant and equipment 0.5 Inventory 4.9 Trade and other receivables 3.1 Trade and other payables (1.0) Total net assets disposed 7.6 Gain on disposal before recycling of cumulative 17.0translation adjustments and taxation Recycling of cumulative translation adjustments 0.8 Provisional gain on disposal before taxation 17.8 Tax on gain on disposal (note 4) (2.8) Provisional gain on disposal 15.0
The gain on disposal includes the recycling of £0.8 million of net cumulative currency translation adjustments relating to TPC which were previously posted directly to reserves. During the prior year, TPC contributed £20.7 million of sales,
£3.6 million of operating profit and £2.7 million of operating cash flow to the Group's
results. During the first quarter of the prior year, TPC contributed £4.8 million of
sales, £0.8 million of operating profit and £0.6 million of operating cash flow.
4 Taxation The taxation charge is based on an expected effective tax rate for the 2011/ 12 full financial year on profit before tax, preference dividends and gain on disposal of subsidiary undertaking of 27.5% (2010/11: 28.0%). In addition, the provisional taxation charge on the profit on disposal of TPC is £2.8 million. 5 Earnings per share Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders for the period by the weighted average number of ordinary shares in issue during the period, excluding those shares held by the Premier Farnell Executive Trust. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume issue of all dilutive potential ordinary shares, being those share options and awards with a non-market based performance condition granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period, and those shares with a market based performance condition based on the current estimate of the number of shares that will vest under the performance criteria. Reconciliations of earnings and the weighted average number of ordinary shares used in the calculations are set out below. 2011/12 First quarter (unaudited) Basic per Diluted per Earnings share amount share amount £m pence pence Earnings per share Profit attributable to ordinary 32.2 8.9 8.7shareholders
Gain on disposal of subsidiary undertaking (17.8) (4.9) (4.8)
Tax on gain on disposal of subsidiary 2.8 0.7 0.7undertaking Profit attributable to ordinary 17.2 4.7 4.6shareholders before gain on disposal of subsidiary undertaking Number Weighted average number of shares 362,271,261 Dilutive effect of share options 8,483,771 Diluted weighted average number of shares 370,755,032 2010/11 First quarter (unaudited) Basic per Diluted per Earnings share amount share amount £m pence pence Earnings per share Profit attributable to ordinary 15.7 4.4 4.3shareholders Number Weighted average number of shares 359,911,448 Dilutive effect of share options 4,090,231 Diluted weighted average number of 364,001,679shares 2010/11 Full Year (audited) Basic per Diluted per Earnings share amount share amount £m pence pence Earnings per share Profit attributable to ordinary 66.2 18.3 18.0shareholders Number Weighted average number of shares 361,149,321 Dilutive effect of share options 6,670,893 Diluted weighted average number of 367,820,214shares 6 Net financial liabilities 1st May 2nd May 30th January 2011 2010 2011 unaudited unaudited audited £m £m £m Cash and cash equivalents 53.7 46.2 33.4 Unsecured loans and overdrafts (216.2) (241.1) (234.1) Net financial liabilities before (162.5) (194.9) (200.7) preference shares and derivatives Preference shares (61.2) (60.4) (61.0) Derivative financial instruments (3.1) 0.3 (1.2) (net) Net financial liabilities (226.8) (255.0) (262.9) Net financial liabilities are analysed in the balance sheet as follows: Current assets Cash and cash equivalents 53.7 46.2 33.4 Derivative financial instruments - 0.3 - 53.7 46.5 33.4 Current liabilities 5.3% US dollar Guaranteed - (43.1) - Senior Notes payable 2011 Other loans (0.1) (0.1) (0.1) Derivative financial instruments (3.1) - (1.2) (3.2) (43.2) (1.3) Non-current liabilities Bank loans (97.9) (89.5) (109.9) 5.9% US dollar Guaranteed (94.8) (103.9) (100.6) Senior Notes payable 2013 5.2% US dollar Guaranteed Senior (18.1) - (19.0) Notes payable 2017 Other loans (5.3) (4.5) (4.5) Preference shares (61.2) (60.4) (61.0) (277.3) (258.3) (295.0) At 1 May 2011, the Group's syndicate bank facilities totalled £185 million expiring in January 2013. Based on these facilities, the headroom on bank borrowings at the quarter end was £85.9 million. The Group is also party to a $75 million US Private Placement Shelf Facility. This agreement allows loan notes with an expiry period of the up to 10 years to be issued in the period up to 31 March 2012. At 1 May 2011, a total of $30 million had been drawn down on this facility. 7 Exchange rates The principal average exchange rates used to translate the Group's overseas profits were as follows: 2011/12 2010/11 2010/11 First First Full quarter quarter year US dollar 1.62 1.53 1.54 Euro 1.14 1.13 1.17
vendorRelated Shares:
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