10th Jun 2010 07:00
Premier Farnell plc 10 June 2010 Results for the First Quarter of the Financial Year ending 30 January 2011 Key Financials £m Q1 10/11 Q1 09/10 Q1Continuing operations £m £m Growth (a)(unaudited) Revenue 244.9 204.3 +20%
Underlying operating profit (b) 27.0 17.5 +45%
Total operating profit 27.0 13.5 +85% Underlying profit before tax 22.2 13.0 +71%(b) Total profit before taxation 22.2 9.0 +147% Underlying earnings per share 4.4p 2.4p +83%(b) Basic earnings per share 4.4p 1.7p +159% Free cash flow (c) 14.8 23.1 -36%Financial Highlights * The strength and growth opportunities inherent in our strategy combined with improving market conditions have driven year on year Group sales growth of 19.6%.
* Strong sales growth together with the positive impact of our operational
gearing has resulted in operating profit growth of 45.2%.
* The return to positive year on year sales growth in MDD Americas in
February accelerated throughout the quarter, representing an upward trend
in sales per day for the past eleven months. The division's first quarter
sales grew 17.0% and underlying operating profit grew 121.4%, with the business also seeing a significant year on year improvement in gross margin. * Sales momentum in our other MDD regions from the fourth quarter has
accelerated, with Europe and APAC delivering year on year sales growth of
26.2% and 50.9%, respectively.
* Our first quarter gross margin increased a further 0.5 percentage points
over the fourth quarter to 40.8%, representing the sixth consecutive quarter of gross margin improvement, a clear differentiator in our industry.
* The Group's first quarter underlying return on sales increased to 11.0%, a
0.5 percentage point improvement on the prior quarter and a 2.4 percentage
point increase on the prior year. * Net financial liabilities reduced by £15.3 million in the quarter, excluding the impact of exchange rates.
Strategic Highlights
* Our global EDE sales have continued to significantly outperform our global
MRO sales, reflecting the ongoing focus and investment in our EDE
proposition.
* eCommerce sales accounted for 44.0% of first quarter MDD sales. In Europe,
the channel accounted for over 60% of sales as we exited the quarter and in
APAC eCommerce accounted for 53.8% of first quarter sales. In MDD Americas
eCommerce accounted for 28.7% of sales, a significant tipping point beyond
which many of our businesses' transformation to the web has accelerated
during the first three years of our strategy.
* Our developing international markets of Greater China, India and Eastern
Europe continue to deliver strong growth, with sales up 112.8%, 74.0% and
75.6%, respectively on the prior year.
* Our investments in the right inventory and new products at the right time
continue to ensure our proposition fully supports our customers' needs as
the electronics supply chain recalibrates and design innovation increases.
* element14, our online community for design engineers, is now attracting up
to 6,000 customers a day, clicking through to our transactional websites at
an average rate of 6.5%. * We have updated our success metrics for the next three years. These include: developing international markets to account for 30% of total sales; increasing eCommerce sales to 70% of total
MDD sales and a return on sales of 12%-15%. Commenting on the results, Harriet Green, Group Chief Executive, said:
"The successful execution of our strategy together with increased activitylevels within the global electronics supply chain has seen the positive salestrends from February continue throughout the quarter, with Group sales growing20% year on year. This sales performance, combined with the operationalleverage inherent in our business, has resulted in year on year underlyingoperating profit growth of 45%."The very positive momentum in sales growth that we have seen in the firstquarter has accelerated in all of our distribution businesses in May, withGroup sales growing 30% year on year. The broader economic background is stillsomewhat variable and our business model inherently provides us with limitedvisibility. However, the strength of our strategy and the continuingtransformation of our organisation are reflected in our updated successmetrics. In the current year we remain confident that strategically andoperationally our focus on execution will drive continuing year on year salesgrowth."
For further information, contact:
Harriet Green, Chief Executive Premier Farnell plc +44 (0) 20 7851 4100 Officer
Mark Whiteling, Chief Financial
Officer 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, including element14 our community website for electronic design engineers.
The 2010 Annual Report and Accounts is now available online and can be accessed at www.premierfarnell.com/annualreport2010.
The results for the second quarter of the financial year ending 30 January 2011 will be announced on 9 September 2010.
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. Underlying operating profit, profit before taxation and earnings per share
in the prior year excludes restructuring costs of £4.0 million.
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.
Premier Farnell plc
Results for the First Quarter of the Financial Year ending 30 January 2011
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 30 January 2011.
Chief Executive's Operational Overview
Our focus on the Electronic Design Engineering (EDE) sector, the web and theworld's emerging markets, combined with our ability to capitalise on heightenedactivity levels within the electronics supply chain has led to our firstquarter sales growing 19.6% year on year. This sales performance, together withthe benefit of the cost actions we took to permanently reduce our operatingcosts by £16 million, has delivered year on year underlying operating profitgrowth of 45.2%. The Group's first quarter gross margin was up 0.5 percentagepoints incrementally over the fourth quarter to 40.8%, reflecting the continuedvalue that our customers attribute to our proposition. This is the sixthconsecutive quarter of gross margin improvement, as the higher margincharacteristics of the EDE sector continue to improve our profitability andtruly differentiate us in the high service industry. Our transformation tobecome a web-centric business continues to deliver operating efficiencies and,together with the benefit of cost actions taken, has resulted in the Group'sfirst quarter underlying return on sales increasing to 11.0%. This was led bythe improvement in the MDD's underlying return on sales, which increased 0.7percentage points in the quarter to 12.0%, up 2.9 percentage points year onyear. As we continue our strategic transformation we remain committed toleveraging the web to drive further efficiencies while continuing to embed ourcore strategy to increase our market share. To ensure we communicate ourperformance with clarity and consistency over the next three years we haverevised our success metrics, which are outlined later in this statement.The strength and success of our strategy has been a fundamental driver in ourperformance and key in our ability to grow our business profitably. During thequarter our EDE sales again outperformed our Maintenance, Repair and Operations(MRO) sales globally and we will continue to focus on the higher growth EDEsector, investing in our proposition as we become a provider of designengineering services and solutions integral to the EDE market. Sales from ourdeveloping markets accounted for 21.8% of Group sales, with first quarter salesin Eastern Europe achieving their highest ever level, delivering year on yearsales growth of 75.6%. Greater China and India again delivered strong year onyear growth of 112.8% and 74.0%, respectively, and in the near future we willfurther strengthen our proposition in APAC, evolving our brand as we enter theelectronics markets in South Korea, Thailand and Taiwan. In the quartereCommerce accounted for 44.0% of total MDD sales. In Europe the channelaccounted for 59.3% of sales and exited the quarter accounting for over 60% ofsales. The speed with which Europe has reached this milestone represents asignificant achievement, with sales via the web having more than doubled sincewe began to transform our organisation just over three years ago. In APAC 53.8%of sales came via eCommerce channels and in North America web sales grew 63.0%,with eCommerce now accounting for 28.7% of sales. This level of penetration inNorth America represents a significant tipping point beyond which many of our businesses' transformation to the web has accelerated during the first three years of our strategy.All of our businesses, excluding Akron Brass whose wider market continues toface challenges, delivered positive year on year sales growth. The positivetrends seen in MDD Americas' sales in February continued throughout thequarter, with the division's first quarter sales growing 17.0%, representing anupward trend in sales per day for the last eleven months. At the start of thequarter we announced the appointment of Gert Labuschagne as the new Presidentof Newark. With the completion of our North American branch restructuring andthe launch of our US element14 store, Gert and the strengthened management teamat Newark will focus on accelerating Newark's strategic transformation,increasing the business' profitability and driving further market share gains.In APAC, our increasingly strong proposition continues to deliver significantgrowth, with first quarter sales up 50.9% year on year. In Europe the momentumseen in the previous quarter accelerated into the first quarter, where salesgrew 26.2% year on year. Through understanding and acting upon theconversational swirls generated by customers on element14 we have significantlyincreased our ability to identify when and where to invest in our productportfolio to better meet future customer needs. By investing in the rightinventory at the right time we are able to fully support our customers' needsas design innovation increases, while also capitalising on opportunities withinthe electronics supply chain. This is further evidenced by our average ordervalues, which saw an increasing trend during the quarter.As highlighted in March, this year we will incur incremental revenue costs ofcirca £5.0 million as we continue to transform our business. The majority ofthis expenditure will be in the second half of the year. Of the £5.0 million, £3.0 million are one-off-costs which relate to the web positioning and brandingof element14, and with our online community for design engineers now attractingup to 6,000 customers a day, the growing presence of element14 within the EDEcommunity is clear. Indeed the engagement level of customers working within theonline community continues to rise, with the average time spent by eachcustomer on the site growing 78.0% on the prior quarter, and with customersclicking through to our transactional websites at an average rate of 6.5%, thestrength of social media marketing compared to other digital marketingactivities remains clear. The increase in the number of customers workingwithin element14, together with the launch of a new `feel' browsing environmenthas led to the site increasing its Google Page Rank from 5 to 6 (the highestrank obtainable is 10), demonstrating the rapidly increasing relevance andengaging nature of this industry-leading community to our EDE market. Providingour customers with services beyond product is increasingly an integral part ofour high service offering. During the quarter the freemium version of CadSoft'sEAGLE Computer Added Design (CAD) software was downloaded in 43 differentcountries, with 80% of the customers who downloaded the software being new toPremier Farnell. In the quarter our MDD total active customer base increased by5.9% and we remain committed to enhancing our proposition to attract newcustomers while continually strengthening our ability to meet our customers'needs. Our inventory selection and investment in new technologies is key toenhancing our proposition and during the quarter globally we added 13,500 newEDE products. Of these, 1,500 were also new to the market, as our suppliersincreasingly look to partner with us when introducing new-to-markettechnologies into the EDE community. Through embracing our environmentalresponsibilities and embedding our Corporate Social Responsibility (CSR)programme right across our business we have built an organisation that can betrusted. We continue to lead our industry in this area and our recentachievement of scoring 96% in the Business in the Community (BiTC) CorporateResponsibility index saw us become one of only 4 FTSE250 companies and the onlydistributor supporting electronic design engineers to be awarded the Platinumlevel within the index.Other Distribution Businesses
First quarter sales at CPC grew 8.2% year on year as the business continued tobuild on its strong performance seen throughout last year. CPCs investment inSearch Engine Optimisation (SEO) improvements and effective high profilemarketing initiatives has seen a year on year increase of 60.4% in the numberof customer visits to its website, and its active customer base growing 20.2%year on year. For the quarter MCM delivered year on year sales growth of 0.9%,led by a continued focus on the web, where first quarter sales grew 4.4% yearon year.
Industrial Products Division (IPD)
Sales at TPC grew 37.2% year on year. This strong sales growth has in part beendriven by the business' continued execution of its strategy to target newproduct segments via the web, with first quarter web sales growing 37.5%sequentially on the prior quarter and sales from new product segments growing34.1% year on year. Sales at Akron Brass declined 4.4% year on year. Despitethe negative impact that reduced government spending has had on some of the endmarkets served by Akron, the business has continued to take market share, withthe global fire apparatus market estimated to have declined 8.7%, based on thelatest available data. In the quarter sales from new products accounted for12.8% of sales, as the business remains committed to designing new products todifferentiate its proposition. Akron continues to expand its reach globally andin the quarter it announced an international reorganisation that would allowthe business to further penetrate developing markets in Asia, the Middle Eastand mainland Europe.Updated Success Metrics
In 2006 we began a three year journey to transform our organisation throughfocusing on the EDE customer segment, driving sales via the web,internationalising our business model and driving profitable MRO growth. Overthese three years we have tracked our transformation and the execution of ourstrategy through the same internal and external success metrics, which havebeen embedded across all of our businesses and aligned with our incentive andcompensation plans. The next 1,000 days will see us continue to transform ourbusiness and execute our core strategy, while breathing new life into ourproposition with the introduction of a number of new strategic initiatives.The importance of our next 1,000 day journey is clear and it is critical thatwe ensure all of our success metrics are consistently communicated withtransparency. Outlined below are our updated success metrics, based on how weenvisage the shape of the business will change:
* We will continue to target sales per day growth of 6%-8%. This is a
combination of the estimated 0%-3% growth in the global MRO market, being
offset by our focus on the EDE market which is has an estimated growth rate
of 6%-8%, and the higher growth developing international markets.
* Our gross margin stability is a clear differentiator in our industry and as
we move forward we will continue to deliver a stable gross margin,
reflecting the continued value that customers attribute to our proposition
while also providing a key platform to deliver operational gearing.
* Increasing our profitability through the accelerated transformation of our
business is at the forefront of focus and for the next phase of our strategy we have increased our target return on sales to 12%-15%. * Our ongoing focus to drive further operational efficiencies in our
business, together with the growing online trends in the way EDEs work, has
led to us increasing the target for MDD sales through eCommerce channels to
70%.
* Growing our business in the world's developing markets will be critical to
future success and as we increase our international footprint we have
raised our goal to 30% of total sales to come from the world's developing
markets.
* A growing MDD active customer base is at the core of our ability to deliver
on many of our business objectives. Therefore we have set a new target of a
6% per annum growth rate in the MDD active customer base, defined as the
number of customers who have transacted with us in the last 6 months.
* As a service business, our results are achieved through our people and
having an actively engaged employee base is critical to success. To this
end we will continue to target an annual employee engagement score that exceeds the benchmark for high performing companies. * The global success of our element14 community and the element14 brand itself are both increasingly important to the future success of our
business. As we move forward we have set a new target to achieve a Google
Page Rank score of 7 for the element14 community, providing a clear and true reflection of the site's importance and relevance within the EDE sector. * Each year we benchmark our CSR programme through the BiTC Corporate
Responsibility index and, as we continue to enhance our CSR practices, we
aim to achieve and retain the highest (Platinum Plus) level in the BiTC
Corporate Responsibility index.
* We remain committed to increasing the effectiveness of investments in our
operational assets and in recognition of this we will continue to target a
return on net operating assets of greater than 30% for the Group. * Over the next three years we remain committed to improving the profitability and cash flow performance of our business and we will continue to target a free cash flow to sales ratio of 6%.
* With our successful programmes to drive improved cash efficiency continuing
to deliver benefits we have lowered our target working capital to sales
ratio to be less than 22%.
Outlook
The very positive momentum in sales growth that we have seen in the firstquarter has accelerated in all of our distribution businesses in May, withGroup sales growing 29.7% year on year. The broader economic background isstill somewhat variable and our business model inherently provides us withlimited visibility. However, the strength of our strategy and the continuingtransformation of our organisation are reflected in our updated successmetrics. In the current year we remain confident that strategically andoperationally our focus on execution will drive continuing year on year salesgrowth.Financial ResultsRevenue
Sales for the first quarter were £244.9 million (2009/10: £204.3 million or £204.8 million at constant exchange rates). Sales per day increased by 19.6%,reflecting a strong performance in all major MDD regions including the Americaswhich grew 17.0%. The average exchange rate for the US dollar against sterlingwas $1.53 (2009/10: $1.47) and the average exchange rate for the Euro againststerling was Euro 1.13 (2009/10: Euro 1.11).
Margins and Operating Profit
The gross margin for the first quarter was 40.8% (2009/10: 39.4% or 39.6% atconstant exchange rates). This compares with 40.3% in the fourth quarter of theprior year reflecting continued stability as we manage our business effectivelythrough changes in the economic climate.Underlying net operating expenses in the quarter were 29.8% of sales comparedwith 30.8% in the prior year reflecting the impact of the increase in sales andthe ongoing benefits arising from our cost reduction activities including prioryear restructuring programmes.Underlying operating profit was £27.0 million (2009/10: £17.5 million),producing an operating margin of 11.0% compared to 8.6% in the first quarter ofthe prior year and 10.5% in the fourth quarter reflecting the leverage from ourincreased sales, operating efficiencies as we transition to the web andbenefits from our cost reduction programmes. Operational gearing, being theyear on year increase in operating profit as a percentage of the increase insales, all at constant exchange rates, was 20.9%. At constant exchange rates,the increase in underlying operating profit compared with the prior year was45.2%.
Total operating profit for the quarter was £27.0 million (2009/10: £13.5 million) reflecting a year on year increase of 84.9% at constant exchange rates. 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 sterlingimpacts the Group's operating profit by approximately £200,000 per annum, and aone cent movement in the exchange rate between the Euro and sterling impactsthe Group's operating profit by approximately £200,000 per annum.
Finance Costs
Net finance costs in the first quarter were £4.8 million (2009/10: £4.5million). This comprises net interest payable of £3.7 million (2009/10: £3.4million), which was covered 7.3 times by underlying operating profit, and a netcharge of £1.1 million (2009/10: £1.1 million) in respect of the Company'sconvertible preference shares.
Profit Before Tax
Underlying profit before tax in the first quarter was £22.2 million (2009/10: £13.0 million). Total profit before tax in the first quarter was £22.2 million(2009/10: £9.0 million).Taxation Charge
The taxation charge for the quarter was at the estimated effective rate for the current financial year of 28.0% (2009/10: 29.0%) of profit before tax and preference dividends.
Return on Net Operating Assets
The return on net operating assets for the first quarter was 33.5% before restructuring costs (2009/10: 27.9% before restructuring costs), compared with our strategic target of 30%.
Earnings per Share
Underlying earnings per share were 4.4 pence (2009/10: 2.4 pence). Total earnings per share for the first quarter were 4.4 pence (2009/10: 1.7 pence).
Cash Flow and Net Financial Liabilities
Net cash generated from operations in the first quarter was £21.6 million (2009/10: £24.5 million) or £22.0 million excluding the cash impact of 2009/10restructuring costs (2009/10: £26.0 million), representing 80.0% of operatingprofit or 81.5% excluding the impact of restructuring costs, which isconsistent with our normal first quarter seasonal trend. Working capitalincreased by £9.6 million reflecting targeted inventory investment and a higherlevel of receivables in line with the increase in sales. Our working capital tosales ratio in the quarter was 25.7%. Free cash flow for the quarter, beingcash generated from continuing operations less net capital expenditure,interest, preference dividends and tax, was £14.4 million, or £14.8 millionexcluding the cash impact of 2009/10 restructuring costs, (2009/10: £21.6million or £23.1 million excluding restructuring). Our free cash flow to salesratio in the quarter was 6.0%.Net financial liabilities at the end of the first quarter were £255.0 million(31 January 2010: £264.2 million), including £60.4 million (31 January 2010: £60.2 million) attributable to the Company's preference shares. The impact ofexchange rates in the period was to increase net financial liabilities by £6.1million, principally in relation to our US$ denominated private placement loannotes.Financial Position
Premier Farnell's financial position remains robust with good liquidity andstrong free cash flow. At the quarter end the Group's syndicate bank facilitiestotalled £170 million of which £150 million expires in January 2013, and £20million in May 2012. Based on these facilities, our headroom on bank borrowingsat the quarter end was £78.3 million which, together with our net cash positionof £46.2 million, gives us a healthy funding position.In addition to the above facilities, on 3 June 2010 the Group entered into anagreement to extend and increase its above noted £20 million revolving creditfacility due May 2012 to £35 million and to extend the expiry date to January2013. Also, on 31 March 2010 the Group entered into a $75 million US PrivatePlacement Shelf Facility. This agreement allows loan notes with an expiryperiod of up to 10 years to be issued in the period up to 31 March 2012.
The Group will repay its $66 million US Private Placement notes as they fall due on 13 June 2010 out of its existing facilities.
Operations
Marketing and Distribution Division (MDD)
(Newark and Farnell businesses including Premier Electronics, CPC and MCM)
Q1 10/11 Q1 09/10 Q1 growth £m £m Revenue 224.5 183.7 21.3%
Underlying operating profit* 27.0 16.7 50.8%
Underlying operating margin % 12.0% 9.1%
* excluding restructuring costs in 2009/10 of £4.0 million
Sales for the MDD Division grew 21.3% in the quarter, with the strength of ourstrategic proposition enabling us to capitalise on heightened activity levelsin the electronics supply chain, as we focus on the EDE sector, the web and theinternationalisation of our business. The Americas, Europe and Asia Pacificregions all saw strong sales growth and our key emerging markets, GreaterChina, India and Eastern Europe, saw a combined sales growth of 90.7% as wecontinue to strengthen our proposition in these territories. This quarter hascontinued to see a significant improvement in the electronic component industrystatistics. The Semiconductor Industry Association (SIA) themselves cited theimprovements in their statistics across the globe to be largely driven by thehigh volume demand in 3G wireless communications and weaker comparatives.Record sales growth recently reported in the volume electronic componentindustry signifies the continuing increase in volume purchasing activitiesacross the globe, furthering supporting the SIA's comment. This acceleration ofvolume electronic component sales also influences the growth in Association ofFranchised Distributors of Electronic Components (AFDEC) and Distributors andManufacturers Association of Semiconductors (DMASS) statistics, which both takeinto account the performance of large volume distributor's in their respectiveregions.The underlying operating margin improved to 12.0% reflecting the leverage fromthe increase in sales, the efficiencies from our continued transition to theweb, and the benefits from our restructuring actions undertaken in the prioryear in the Americas and Europe. Underlying operating profit increased by 50.8%on the first quarter in the prior year. Our ongoing web transformation resultedin web sales for the Division growing 43.5% in the quarter and total ecommercesales being 44.0% of total sales, with Europe exiting the quarter at 60%, wellon the way to achieving the new 1,000 days strategic target of 70%.MDD Americas(Newark) Q1 10/11 Q1 09/10 Q1 £m £m growth Revenue 96.3 83.7 17.0% Underlying operating profit* 6.2 2.9 121.4% Underlying operating margin % 6.4% 3.5%
* excluding restructuring costs in 2009/10 of £1.1 million
Newark's sales have continued the upward trend seen since the low point of oursecond quarter last year, with sales increasing 26.6% over that period. Salesin the first quarter grew 17.0% year on year, as the business' strategictransformation continues to accelerate following its branch restructuring lastyear and the launch of its US element14 store. Our EDE sales performanceaccelerated further as we continue to drive the business mix towards thisstrategic segment. The SIA reported North American year on year sales growth of48.9% for the equivalent period. Our focus towards the profitable and highergrowth MRO market segments has also contributed to Newark's first quarter salesperformance and combined with our continued drive towards the higher margin EDEsector the business has seen a significant year on year increase in its firstquarter gross margin.We continue to leverage our industry leading website and new branch structureto attract new customers and support the transition of our existing customersto our content rich web environments. This focus, together with the recentlaunch of our US element14 store has driven year on year growth of 7.8% in thenumber of new EDE customers in the region and first quarter year on year websales growth of 63.0%, with Newark's proportion of sales via eCommerce channelsincreasing to 28.7%.First quarter underlying operating profit increased by 121.4% and underlyingoperating margin increased to 6.4%, the third consecutive quarter of sequentialimprovement.MDD Europe and Asia Pacific
(Farnell and Premier Electronics)
Q1 10/11 Q1 09/10 Q1 £m £m growth Revenue 104.5 77.4 29.6%
Underlying operating profit* 18.6 11.5 45.3%
Underlying operating margin % 17.8% 14.9%
*excluding restructuring costs in 2009/10 of £2.9 million
Sales in the first quarter grew 29.6%, with sequential growth of 15.5% over thefourth quarter last year, reflecting the strength of our embedded strategicfocus on the EDE sector in this region, together with the continuing rapidgrowth in our international regions, driven by our industry leading webproposition. Underlying operating margin improved to 17.8% compared to 14.9% inthe first quarter last year, reflecting the leverage from the increase insales, and cost benefits from both the increasing transition to the web andprior year restructuring actions. As a consequence, underlying operating profitincreased 45.3% on the prior year.Our web transformation continues in MDD Europe and Asia Pacific with thedivision's web sales growing 43.0% in the quarter and eCommerce sales nowaccounting for 59.3% of total sales in Europe, and achieving over 60% in April,and 53.8% in Asia Pacific.Revenue by region Q1 10/11 Q1 09/10 Q1 £m £m growth UK (including exports) 35.0 27.9 25.2% Mainland Europe 53.5 39.8 27.4% Asia Pacific 16.0 9.7 50.9%
Sales for Farnell Europe, including the UK, grew 26.2% in the quarter, with allmajor regions reporting strong positive growth. This compares to the Europeanmarket which grew 33.2% for the calendar first quarter, according to the DMASS.First quarter sales in Eastern Europe grew 75.6% year on year as thesignificant opportunities for growth in the region continue to be exploited,particularly in Poland and Romania. We continue to enhance our presence in theregion with customer registrations at key exhibitions in Warsaw and Prague morethan doubling on last year.Farnell UK's first quarter sales grew 18.1%, compared with the UK market whichaccording to the most recent data from AFDEC grew 21.2% excluding Farnell, forthe equivalent period.The strength of our strategic drive in the Asia Pacific region is clear withgrowth in the quarter of over 50%. This compares to the wider APAC market wherethe SIA reported sales had grown 55.1% year on year, for the equivalent period.In Greater China and India we are continuing to deliver significant growth withstrategic investments and a focussed approach delivering a strong EDE and weboffering. During the quarter we saw sales growth of 112.8% and 74.0% in GreaterChina and India, respectively. Our expansion in this region will continue as weenter the market in South Korea, Thailand and Taiwan in the next quarter.Other Distribution Businesses(CPC and MCM) Q1 10/11 Q1 09/10 Q1 £m £m growth Revenue 23.7 22.6 6.2% Underlying operating profit 2.2 2.3 -4.3% Underlying operating margin % 9.3% 10.2% CPC has continued the strong performance it achieved last year with firstquarter sales growth of 8.2% despite the highly competitive and difficult UKmarket. This quarter saw the launch of its 2010 catalogue with an extensiverange of over 100,000 products, including 15,000 new product additions. CPC'simpressive performance continued to reflect the success of its marketingstrategy together with improvements in search engine optimisation with websitevisits increasing by over 60% and web sales growing by 19.7% in the quarter.These activities have resulted in a 20.2% increase in CPC's active customerbase.MCM sales grew 0.9% in the first quarter. Whilst market conditions showed somesign of improvement, the impact of the North American economic environmentcontinued to be challenging, particularly on the business' larger NationalAccount customers. As a consequence, the business is implementing a strategy toreduce dependency on such accounts, through increased marketing investment, anincrease in the outbound sales team and the introduction of new products, whichrepresented 24.0% of total sales for the quarter.
Industrial Products Division (IPD)
(Akron Brass and TPC Wire & Cable)
Q1 10/11 Q1 09/10 Q1 £m £m growth Revenue 20.4 20.6 3.0% Underlying operating profit 3.2 3.2 3.2% Underlying operating margin % 15.7% 15.5%
TPC Wire & Cable
TPC's first quarter sales grew an impressive 37.2% reflecting the success ofits restructuring last year, designed to develop a multi-channel focus across anumber of specific and new market segments. The focus by the management team onopportunities for growth, and decreased reliance now placed on its traditionalmarkets, including automotive and steel, has helped drive this strongperformance despite the general market conditions. New product segments grew34.1% year on year and include oil and gas, government, mining, food, crane
andutilities.Akron BrassSales at Akron Brass declined 4.4% in the quarter reflecting tighter controlsaround government spending which impacted some of the end markets served byAkron. This impact was partially mitigated by new product development, with newproducts representing 12.8% of sales in the quarter, and by the reorganisationof Akron's international business in order to further penetrate into overseasmarkets including Asia and the Middle East.This press release contains certain forward-looking statements relating to thebusiness of the Group and certain of its plans and objectives, including, butnot limited to, future capital expenditures, future ordinary expenditures andfuture actions to be taken by the Group in connection with such capital andordinary expenditures, the expected benefits and future actions to be taken bythe Group in respect of certain sales and marketing initiatives, operatingefficiencies and economies of scale. By their nature forward-looking statementsinvolve risk and uncertainty because they relate to events and depend oncircumstances that will occur in the future. Actual expenditures made andactions taken may differ materially from the Group's expectations contained inthe forward-looking statements as a result of various factors, many of whichare beyond the control of the Group. These factors include, but are not limitedto, the implementation of initiatives supporting the Group's strategy, theeffect of legislation and regulatory enactments, recruitment and integration ofnew personnel, the implementation of cost-saving initiatives to offset currentmarket conditions, continued use and acceptance of e-commerce programs andsystems, the ability to expand into new markets and territories, theimplementation of new sales and marketing initiatives, changes in demand forelectronic, electrical, electromagnetic and industrial products, rapid changesin distribution of products and customer expectations, the ability to introduceand customers' acceptance of new services, products and product lines, productavailability, the impact of competitive pricing, fluctuations in foreigncurrencies, and changes in interest rates and overall market conditions,particularly the impact of changes in world-wide and national economies. TheGroup does not intend to update the forward-looking statements made herein.Condensed Consolidated Income Statement For the first quarter ended 2nd May 2010
2010/11 2009/10 2009/10 First First Full quarter quarter year unaudited unaudited audited Notes £m £m £m Continuing operations Revenue 2 244.9 204.3 795.3 Cost of sales (144.9) (123.8) (478.9) Gross profit 100.0 80.5 316.4 Net operating expenses - before restructuring costs and pension (73.0) (63.0) (243.7)changes - restructuring costs 3 - (4.0) (7.6) - net one-off income from pension changes 3 - - 6.3 Total net operating expenses (73.0) (67.0) (245.0) Operating profit
- before restructuring costs and pension 27.0 17.5
72.7changes - restructuring costs 3 - (4.0) (7.6) - net one-off income from pension changes 3 - - 6.3 Total operating profit 2 27.0 13.5 71.4
Finance income (interest receivable) - 0.1
0.5 Finance costs - interest payable (3.7) (3.5) (14.1) - preference dividends (0.9) (0.9) (3.5) - premium on redemption of preference (0.2) (0.2) (0.8)shares Total finance costs (4.8) (4.6) (18.4) Profit before taxation 3 22.2 9.0 53.5 Taxation 4 (6.5) (2.9) (16.0)
Profit for the period (attributable to 15.7 6.1
37.5ordinary shareholders) Earnings per share 5 Basic 4.4p 1.7p 10.4p Diluted 4.3p 1.7p 10.3p Ordinary dividends Interim - proposed 4.2p Final - proposed 5.2p Paid 9.4p
Impact on shareholders' funds (£m)
34.0
Condensed Consolidated Statement of Comprehensive Income For the first quarter ended 2nd May 2010
2010/11 2009/10 2009/10 First First Full quarter quarter year unaudited unaudited audited £m £m £m Profit for the period 15.7 6.1 37.5 Net exchange adjustments 1.9 (0.1) 1.1 Actuarial losses on pensions and other - - (12.2) post-retirement obligations
Deferred tax credit on actuarial losses - - 4.1 Net fair value (losses)/gains on cash flow (0.2) 1.9 4.1
hedges
Other comprehensive income for the period 1.7 1.8 (2.9) Total comprehensive income for the period 17.4 7.9 34.6 (attributable to ordinary shareholders) The accompanying notes form an integral part of this unaudited condensed consolidated financial information. Condensed Consolidated Balance Sheet
As at 2nd May 2010 2nd May 3rd May 31st January 2010 2009 2010 unaudited unaudited audited Notes £m £m £m ASSETS Non-current assets Goodwill 35.1 32.3 34.8 Other intangible assets 24.5 24.7 24.2
Property, plant and equipment 52.4 54.8
53.4 Deferred tax assets 12.2 5.0 12.2 Total non-current assets 124.2 116.8 124.6 Current assets Inventories 187.3 185.1 175.2 Financial assets 6 0.3 - 1.1 Trade and other receivables 145.0 119.7 126.7 Cash and cash equivalents 6 46.2 30.3 26.6 Total current assets 378.8 335.1 329.6 LIABILITIES Current liabilities Financial liabilities 6 (43.2) (2.4) (43.1) Trade and other payables (117.6) (88.7) (101.6) Current tax payable (30.4) (22.3) (27.4) Total current liabilities (191.2) (113.4) (172.1) Net current assets 187.6 221.7 157.5 Non-current liabilities Financial liabilities 6 (258.3) (294.8) (248.8) Retirement and other post-employment (38.8) (35.1) (38.8)benefits Deferred tax liabilities (3.1) (6.0) (3.0) Total non-current liabilities (300.2) (335.9) (290.6) NET ASSETS/(LIABILITIES) 11.6 2.6 (8.5) EQUITY Ordinary shares 18.3 18.3 18.3
Equity element of preference shares 10.4 10.4
10.4 Share premium 26.1 23.8 24.2 Capital redemption reserve 4.4 4.4 4.4 Hedging reserve 0.2 (1.8) 0.4
Cumulative translation reserve 18.3 15.2
16.4 Retained earnings (66.1) (67.7) (82.6) TOTAL EQUITY 11.6 2.6 (8.5)
Condensed Consolidated Statement of changes in Equity For the first quarter ended 2nd May 2010
2010/11 2009/10 2009/10 First First Full quarter quarter year unaudited unaudited audited £m £m £m Total equity at beginning of period (8.5) (5.6) (5.6) Profit for the period 15.7 6.1 37.5 Other comprehensive expense 1.7 1.8
(2.9)
Total comprehensive income 17.4 7.9
34.6
Transactions with owners:
Ordinary dividends paid - - (34.0) Ordinary shares issued 1.9 - 0.4 Purchase of ordinary shares - - (5.0) Share-based payments 0.8 0.3 1.1 Total transactions with owners 2.7 0.3
(37.5)
Total equity at end of period 11.6 2.6
(8.5)
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 2nd May 2010
2010/11 2009/10 2009/10 First First Full quarter quarter year unaudited unaudited audited Notes £m £m £m
Cash flows from operating activities
Operating profit 27.0 13.5 71.4
Restructuring/pension changes: - net income statement impact - 4.0
1.3 - cash impact (0.4) (1.5) (7.1) Net (cash)/non-cash impact of (0.4) 2.5
(5.8)
restructuring/pension changes Depreciation and amortisation 4.7 5.0
19.5
Changes in working capital (9.6) 3.1
12.8
Additional funding for post retirement (1.3) (0.5) (2.9)defined benefit plans Other non-cash movements 1.2 0.9 3.3
Total cash generated from operations 21.6 24.5
98.3 Interest received - 0.1 0.5 Interest paid (1.3) (1.1) (12.5) Dividends paid on preference shares - - (3.5) Taxation paid (3.5) 0.6 (11.6)
Net cash generated from operating 16.8 24.1
71.2activities
Cash flows from investing activities
Acquisition of business - - (6.2)
Proceeds from sale of property, plant and - -
0.1equipment Purchase of property, plant and equipment (0.7) (1.0)
(5.5)
Purchase of intangible assets (computer (1.7) (1.5) (6.5)software) Net cash used in investing activities (2.4) (2.5)
(18.1)
Cash flows from financing activities
Issue of ordinary shares 1.9 - 0.4 Purchase of ordinary shares - - (5.0) New bank loans 4.0 128.1 144.1 Repayment of bank loans - (158.7) (169.8) Dividends paid to ordinary shareholders - -
(34.0)
Net cash generated from/(used in) 5.9 (30.6) (64.3)financing activities Net increase/(decrease) in cash, cash 20.3 (9.0)
(11.2)
equivalents and bank overdrafts Cash, cash equivalents and bank overdrafts 25.4 39.0
39.0at beginning of period Exchange gains/(losses) 0.5 0.3 (2.4)
Cash, cash equivalents and bank overdrafts 46.2 30.3
25.4at end of period
Reconciliation of net financial
liabilities Net financial liabilities at beginning of (264.2) (295.9) (295.9)year Net increase/(decrease) in cash, cash 20.3 (9.0)
(11.2)
equivalents and bank overdrafts
(Increase)/decrease in debt (4.0) 30.6 25.7 Premium on redemption of preference shares (0.2) (0.2)
(0.8)
Derivative financial instruments (0.3) 2.1
5.0
Amortisation of arrangement fees (0.5) (0.3) (1.7) Exchange movement (6.1) 5.8 14.7
Net financial liabilities at end of year 6 (255.0) (266.9) (264.2)
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 2010 Annual Report and Accounts on pages
92 to 96, 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 other than IFRS 3 (revised), Business Combinations, which will impact the accounting of future business acquisitions. 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 31st January 2010,
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 237 of the Companies Act 1985. Copies of the Company's 2010 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 information 2010/11 First quarter (unaudited) 2009/2010
First quarter (unaudited)
Before After Before After restructuring Restructuring restructuring restructuring
Restructuring restructuring costs costs costs costs costs costs £m £m £m £m £m £m Revenue Marketing and Distribution Division Americas 96.3 - 96.3 83.7 - 83.7 Europe and 104.5 - 104.5 77.4 - 77.4 Asia Pacific Other 23.7 - 23.7 22.6 - 22.6 Distribution Businesses Total 224.5 - 224.5 183.7 - 183.7 Marketing and Distribution Division Industrial 20.4 - 20.4 20.6 - 20.6 Products Division 244.9 - 244.9 204.3 - 204.3 Operating profit Marketing and Distribution Division Americas 6.2 - 6.2 2.9 (1.1) 1.8 Europe and 18.6 - 18.6 11.5 (2.9) 8.6 Asia Pacific Other 2.2 - 2.2 2.3 - 2.3 Distribution Businesses Total 27.0 - 27.0 16.7 (4.0) 12.7 Marketing and Distribution Division Industrial 3.2 - 3.2 3.2 - 3.2 Products Division Head Office (3.2) - (3.2) (2.4) - (2.4) costs 27.0 - 27.0 17.5 (4.0) 13.5 2009/10 Full Year (audited) Before After restructuring Restructuring restructuring costs/pension costs/pension costs/pension changes changes changes £m £m £m Revenue Marketing and Distribution Division Americas 310.0 - 310.0 Europe and 317.0 - 317.0 Asia Pacific Other 91.4 - 91.4 Distribution Businesses Total 718.4 - 718.4 Marketing and Distribution Division Industrial 76.9 - 76.9 Products Division 795.3 - 795.3 Operating profit Marketing and Distribution Division Americas 12.3 0.3 12.6 Europe and 48.5 (2.9) 45.6 Asia Pacific Other 9.0 0.3 9.3 Distribution Businesses Total 69.8 (2.3) 67.5 Marketing and Distribution Division Industrial 13.6 1.0 14.6 Products Division Head Office (10.7) - (10.7) costs 72.7 (1.3) 71.4
The segments shown above are the segments for which summary management account information is presented to the Board which is deemed to be the Group's chief operating decision maker.
3 Profit before taxation Profit before taxation is stated after the following: 2010/11 2009/10 2009/10 First First Full quarter quarter year unaudited unaudited audited £m £m £m One-off (charges)/ credits: - restructuring costs - (4.0) (7.6) - net one-off income - - 6.3 from pension changes - (4.0) (1.3) Charge for share-based (0.8) (0.3) (1.1) payments Charge for defined (0.5) (1.2) (3.2) benefit pension schemes
Due to their significance, restructuring costs and the net one-off income
from pension changes are disclosed separately on the face of the income
statement. 4 Taxation
The taxation charge represents an effective tax rate for the full year on
profit before tax and preference dividends of 28.0% (2009/10: 29.0%).
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. 2010/11 2009/10 First quarter (unaudited) First quarter (unaudited) Basic per Diluted per Basic per Diluted per Earnings share share Earnings share share amount amount amount amount £m pence pence £m pence pence Earnings per share Profit 15.7 4.4 4.3 6.1 1.7 1.7 attributable to ordinary shareholders Restructuring - - - 4.0 1.1 1.1 costs Tax - - - (1.3) (0.4) (0.4) attributable to restructuring costs Profit 15.7 4.4 4.3 8.8 2.4 2.4 attributable to ordinary shareholders before gain on purchase of preference shares, restructuring costs and the net one-off income from pension changes Number Number Weighted 359,911,448 362,443,906 average number of shares Dilutive effect 4,090,231 2,623,803 of share options Diluted 364,001,679 365,067,709 weighted average number of shares 2009/10 Full Year (audited) Basic per Diluted per Earnings share share amount amount £m pence pence Earnings per share Profit 37.5 10.4 10.3 attributable to ordinary shareholders Restructuring 7.6 2.1 2.1 costs Tax (2.5) (0.7) (0.7) attributable to restructuring costs Net one-off (6.3) (1.8) (1.8) income from pension changes 2.4 0.7 Profit 38.7 10.7 10.6 attributable to ordinary shareholders before gain on purchase of preference shares, restructuring costs and the net one-off income from pension changes Number Weighted 360,456,270 average number of shares Dilutive effect 2,947,102 of share options Diluted 363,403,372 weighted average number of shares Earnings per share before the gain on purchase of preference shares and excluding restructuring costs and the net one-off income from pension
changes have been provided in order to facilitate year on year comparison.
6 Net financial liabilities 2nd May 3rd May 31st January 2010 2009 2010 unaudited unaudited audited £m £m £m Cash and cash equivalents 46.2 30.3
26.6
Unsecured loans and overdrafts (241.1) (235.3)
(231.2)
Net financial liabilities before (194.9) (205.0)
(204.6)
preference shares and derivatives Preference shares (60.4) (59.6) (60.2) Derivative financial instruments (net) 0.3 (2.3) 0.6 Net financial liabilities (255.0) (266.9)
(264.2)
Net financial liabilities are analysed in the balance sheet as follows: Current assets Cash and cash equivalents 46.2 30.3
26.6
Derivative financial instruments 0.3 - 1.1 46.5 30.3 27.7 Current liabilities Bank overdrafts - - (1.2) 5.3% US dollar Guaranteed Senior Notes (43.1) - (41.3) payable 2011 Other loans (0.1) (0.1) (0.1) Derivative financial instruments - (2.3) (0.5) (43.2) (2.4) (43.1) Non-current liabilities Bank loans (89.5) (79.3) (85.2) 5.3% US dollar Guaranteed Senior Notes - (44.3) - payable 2011 5.9% US dollar Guaranteed Senior Notes (103.9) (106.7) (99.4) payable 2013 Other loans (4.5) (4.9) (4.0) Preference shares (60.4) (59.6) (60.2) (258.3) (294.8) (248.8) At 2nd May 2010, the Group's syndicate bank facilities totalled £170
million of which £150 million expires in January 2013, and £20 million in
May 2012. Based on these facilities, the headroom on bank borrowings at the quarter end was £78.3 million. In addition to these facilities, on
3rd June 2010 the Group entered into an agreement to extend and increase
the existing £20m facility due May 2012 to £35 million and to extend the
expiry date to January 2013. Also, on 31 March 2010 the Group entered
into 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. 7 Exchange rates The principal average exchange rates used to translate the Group's overseas profits were as follows: 2010/11 2009/10 2009/10 First First Full quarter quarter year US dollar 1.53 1.47 1.59 Euro 1.13 1.11 1.13
vendorRelated Shares:
PFL.L