8th Sep 2011 07:00
Premier Farnell plc
8 September 2011
Results for the Second Quarter and Half Year ended 31 July 2011 of the Financial Year ending 29 January 2012
Key Financials £m Q2 11/12 Q2 10/11 Q2 H1 11/12 H1 10/11 H1 Continuing £m £m Growth £m £m Growthoperations (a) (a) (unaudited)
Adjusted revenue (b) 245.4 246.9 1.4% 497.9 487.0 4.8% Total revenue
245.4 252.1 -0.6% 497.9 497.0
2.8%
Adjusted operating 27.5 27.5 1.8% 56.0 53.7 7.4%profit (b)Total operating 27.5 28.5 -1.6% 73.8 55.5 37.4%profitAdjusted profit 23.0 22.8 0.9% 47.1 44.2 6.6%before tax (b)Total profit before 23.0 23.8 -3.4% 64.9 46.0 41.1%taxationAdjusted earnings 4.5p 4.5p - 9.3p 8.7p 6.9%per share (b)Basic earnings per 4.5p 4.7p -4.3% 13.4p 9.0p 48.9%shareInterim ordinary 4.4p 4.4p - 4.4p 4.4p -dividendFree cash flow (c) 3.4 4.7 -27.7% 10.0 19.5 -48.7%
Financial Highlights
- Group sales grew 4.8% in the first half and 1.4% in the second quarter despite the economic slowdown and the very strong comparators of 25% and 30%respectively.
- The Group delivered the best Q2 sales per day and operating profit since our strategy began (at constant exchange rates and after adjusting for the sale of TPC). Compared to the pre-recessionary sales levels in the second quarter of financial year 2009, sales from our electronics distribution businesses have grown 11.7%.
- Following management actions second quarter sales in Asia Pacific grew 4.2% sequentially on Q1, with absolute sales per day in Singapore and Malaysia stable during the quarter.
- Second quarter gross margin of 39.8% contributed to a first half gross margin of 40.3%, stable with the prior year first half of 40.4%.
- Operating profit has grown 1.8% in Q2 (2010/11 Q2: 73%) giving first half operating profit growth of 7.4% (2010/11: 58%) and return on sales in the first half increased to 11.2% for the Group and 12.5% for MDD.
- Continued strong cash conversion with Q2 operating cash flow representing 94.9% of operating profit (2010/11: 91.9%).
- Management actions have delivered a reduction in planned costs of £2.1 million in Q2 with a further £15 million reduction in planned cost for the second half. Planned H2 capital expenditure reduced by 35% giving full year forecast of £25 million.
- The board has approved an interim dividend of 4.4 pence per share in line with the prior year.
Strategic Highlights
- Focus on the tactical execution of our strategic drivers - EDE, web, internationalisation and profitable MRO - intensified in face of the uncertain market conditions.
- Active customer base remains an important indicator of future performance and has continued to grow with 5.5% year on year growth in the first half.
- Second quarter sales via the web grew 19.0%, helped by the newly launched element14 knode. eCommerce sales now account for 55.1% of total MDD sales, an increase of 9.2 percentage points on Q2 of the prior year. Europe now exceeds our performance metric at 72.8%.
- Sales from our developing markets accounted for 23.9% of Group sales in the second quarter as we continue to move towards our strategic target of 30%, supported by our new markets of Taiwan, South Korea and Thailand where second quarter sales grew 46.8% sequentially.
- Element14 community registered users increased through the quarter, 10% higher overall than Q1 and six times higher than Q2 in the prior year with over 600,000 visits in the quarter.
Commenting on the results, Harriet Green, GroupChief Executive, said:"We are confident that our strategy will deliver sustainableprofitable growth across the economic and product cycles and we are pleasedwith the progress that we continue to make in its execution. We recognise thatour business model inherently provides us with limited forward visibility, andthat current global economic conditions are uncertain. August's performancewas negative - down 2.0% year on year, against very strong comparatives lastyear. We remain cautious in light of this continuing uncertain economicenvironment. As a result we have already taken action to accelerate thefurther transformation of our cost base to ensure cost efficiency whilstfocussing capital expenditure strategically. In taking these actions quicklyand effectively we believe we will ensure maximisation of our sales, operatingprofit and cash positions to drive towards achieving our expectations thisyear."
For further information, contact:
Harriet Green, Chief Premier Farnell plc +44 (0) 20 7851 4100Executive Officer Nicholas Cadbury, ChiefFinancial OfficerAndrew Lorenz Financial Dynamics +44 (0) 20 7269 7291 (UK) Premier Farnell's announcements and presentationsare published at www.premierfarnell.com together with business information andlinks to all other Group web sites.To learn more about our exciting new innovation,the element14 knode, follow this linkhttp://www.element14.com/community/community/knode. In addition, it is ourintention to hold a live demonstration of the element14 knode at an investorday to be held on 28 September 2011. We will also take this opportunity toprovide an update on our progress with the next 1,000 day strategy.The 2011 Annual Report and Accounts is nowavailable online and can be accessed athttp://annualreport2011.premierfarnell.com. The results for the third quarterof the financial year ending 29 January 2012 will be announced on 8 December2011.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 ofthe Industrial Products Division, at the start of the first quarter (31January 2011), does not qualify for accounting treatment as a discontinuedoperation. 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, ChiefExecutive's comment and the Chief Executive's Operational Overview section ofthis statement all prior year comparators have been adjusted to exclude thetrading results of TPC. In addition, adjusted revenue, operating profit,profit before tax, and earnings per share in the table above, exclude thetrading results of TPC in the prior year and the gain on sale in the currentyear (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 Second Quarter and Half Year Ended 31 July 2011 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 second quarter of the financial year ending 29 January 2012.
Chief Executive's Operational Overview
Despite growing economic uncertainty as the quarter progressed, and someimpact on sales phasing as markets reacted to the Japanese disaster in March,our sales activity levels were stable throughout Q2. Against the challengingcomparators from last year, when we grew by 30% in Q2 and 25% in H1, our salesper day growth this year was 1.4% in Q2 and 4.8% in H1. Our H1 gross margin of40.3% represents year on year stability and our return on sales has increasedyear on year for both Q2 and H1.Against tough prior year comparators and in lightof softening markets globally the achievement of sales growth in Q2 waschallenging. Overall our major MDD regions grew 1.3% year on year with Europeachieving growth of 5.8% whilst North America and Asia Pacific declined by2.5% and 2.0%, respectively. Asia Pacific and North America achieved stabilityin activity levels across the quarter whilst Europe saw a softening across thequarter. Each market continues to make strategic progress and become more costefficient. We exited Q2 with our key forward looking metric of active customerbase increasing by 5.5% year on year. E-commerce penetration globallyincreased by a further 1.4 percentage points to 55.1%, with all our threemajor regions showing progression. In the first half we have balanced thegrowth opportunity afforded by cyclical MRO with our strategic focus on EDEand profitable MRO segments. Global MRO sales grew 8.1% in the second quarterand EDE penetration at 54.8% was in line with our committed target of 50-70%of sales. Through focus on the key tactical metrics of strategic delivery -web penetration and growth in EDE active customer base - we will ensurecontinued performance and increased resilience.In light of the challenging market conditionswhich are expected to continue into the second half we have undertaken a fullreview of our cost base and planned capital expenditure. We now have over 59%more of our MDD business through web channels than we did pre-recession threeyears ago as our progression to a web based business continues, bringing theresultant efficiencies and allowing us to take strategic cost actions promptlywithout impact to the customer or our strategic progress. As committed in the7 July trading update we have taken out planned costs of £2.1 million in thesecond quarter. Further planned costs of £15 million will be removed in thesecond half, with a third of this coming from permanent structural change,bringing a one-off charge of approximately £2.6 million in Q3. Additionally,the continued refocusing of our investments to grow and enhance our eCommerceand EDE proposition will ensure we continue our business transformation whilstreducing our planned H2 capital expenditure by 35%. This will deliver a fullyear capital expenditure expectation of £25 million.In North America our strategic transformationcontinues with progress on the key profitability drivers in Q2. E-commercepenetration increased by a further 1.5 percentage points on Q1 to 39.1% whilstEDE penetration at 42.0% continued to demonstrate strategic progression. Thisperformance, combined with the ongoing transition of our cost base to reflectour web focussed model resulted in first half return on sales for the regionof 8.7%, up 32% on the prior year. In addition, year on year profit growth inthe first half of 34.6% compared to sales growth of 1.4%. The efficiency weare building into our North American model prepares us well for changingmarket conditions.Our focus on emerging markets continues and hasdriven developing market sales to account for 23.9% of Group sales, supportedby growth in the critical markets of Greater China, India and Eastern Europe.Combined sales in our new businesses in Taiwan, Thailand and South Korea wereup 46.8% sequentially on the first quarter, with costs managed aggressively inline with a web business model. This growth in developing markets alsoreflects the sales stability we have brought to the markets of Singapore andMalaysia during the second quarter - which underperformed in Q1. Theorganisational changes required to ensure the key metrics of new customeracquisition and web conversion return to our targeted rates have taken placeand as such we expect Singapore and Malaysian performance to improve in H2.Progress in Asia is reflected in APAC's second quarter sequential sales growthof 4.2%.The organisation of our business around the web continues to gainmomentum with further strategic enhancements to our proposition launched inthe quarter as we drive further operational efficiencies and strengthen ouron-line customer relationships. In the second quarter MDD web sales grew 19.0%year on year, while eCommerce accounted for 55.1% of second quarter MDD sales.Europe has now eclipsed our 50-70% target by taking 72.8% of business throughechannels. Our community continues to grow as a central component of ourcustomer engagement and proposition with a 30% increase in overall visitsthrough the quarter, and an increase in participation, registrations and timespent on the site demonstrating the value that engineers place on our contentand its significance in their work.Our focus on EDE customers remains key to ourstrategy and the element14 Knode, launched in the quarter to support EDEsonline in their research, design, development, prototyping and ultimatelypurchasing, has helped us drive a further 10% increase in the element 14registered users. Page views continue to exceed 600,000, testament to thequality of information and technical data available to engineers.Additionally, during the quarter we added 15,500 new esoteric and new tomarket EDE products, maintaining our position as the leading provider of newtechnology in the high service distribution industry. As well as enriching ourproduct portfolio, we have further extended our technology line card with theaddition of 6 new supplier partnerships, including Micrium and Intersilglobally recognised as key industry innovators.As a further step in the development of ourservices beyond product strategy, Newark has entered into a strategicagreement with Transcat, Inc. to provide calibration services to our customersin Canada and the USA. Under the terms of this agreement, Transcat willpurchase the assets of Newark's three existing calibration laboratories and wewill now offer our customers access to their high quality service offeringthrough a network of seventeen geographically disbursed laboratories. Thedisposal consideration was £1.9 million.
Other Distribution Businesses
Second quarter sales at CPC grew 4.0% in Q2,driven by continued strong customer acquisition, with CPC's number of newactive customers growing 9.4% on the prior year. eCommerce accounted for 43.1%of total sales, a new high for the business as sales via the web grew 11.7%year on year. Sales from higher margin private label products grew 11.4% yearon year, in part driven by the addition of 900 new private label products inthe quarter. MCM experienced challenging market conditions in the secondquarter with sales falling by 3.2% year on year. Strategic progressioncontinues to reduce the business' reliance on larger customers with growth inthe active customer base of 10.7% in July versus the prior year contributingto 1.0% sequential sales growth.
Industrial Products Division (IPD)
Despite challenging market conditions Akron Brass produced a strong Q2performance with sales growth of 4.0% year on year - its third quarter of yearon year growth since emerging from recession. International sales continue todevelop strongly in the first half, up 49.5% year on year, with sales in theemerging markets of China, the Middle East and Latin America, growing 300%,230% and 81%, respectively. New product development remains key to thedifferentiation of Akron's proposition and in the quarter the businesslaunched three new product lines to market, helping to drive sales from newproducts to account for 15.8% of total sales in the first half.
The Board
Nicholas Cadbury has now joined the Company and Board as Chief Financial Officer. Nicholas brings a wealth of commercial and financial experience to the Group after 17 years at Dixons Retail plc where he has been Group CFO since 2008, a role that encompassed a broad remit including responsibility for IT, operational delivery, cost optimisation and the Group's strategic development. The Group thanks Mark Whiteling for the valuable guidance and contribution he has made in driving the execution of our strategy and consequently the business' financial performance.
The Board recognises the benefits to the Company of diversity in its workforceand in the composition of the Board itself. While the Company will continue tomake all appointments based on the best candidate for the role, its target isfor women to make up 30% of management grade employees. The Company is well onthe way to achieving this, with women representing 27% of the executivedirector and their direct report population.
The Board itself has achieved the 2015 goal of 25% female membership recommended by Lord Davies earlier this year, for FTSE100 companies, following the appointment of Val Gooding.
Outlook
We are confident that our strategy will deliver sustainableprofitable growth across the economic and product cycles and we are pleasedwith the progress that we continue to make in its execution. We recognise thatour business model inherently provides us with limited forward visibility, andthat current global economic conditions are uncertain. August's performancewas negative - down 2.0% year on year, against very strong comparatives lastyear. We remain cautious in light of this continuing uncertain economicenvironment. As a result we have already taken action to accelerate thefurther transformation of our cost base to ensure cost efficiency whilstfocussing capital expenditure strategically. In taking these actions quicklyand effectively we believe we will ensure maximisation of our sales, operatingprofit and cash positions to drive towards achieving our expectations thisyear.
3 Year Success Metrics
Our performance against our 3 year successmetrics wasKey Performance Indicators Goal Achieved in H1 Achieved in Q2Sales per day growth 6-8% 4.80% 1.4%Gross margin % Stability 40.3% (stable) 39.8%Return on sales % 12%-15% 11.2% (MDD 12.5%) 11.2% (MDD 12.3%)Return on net operatingassets % >30% 40.3% 40.3%Working capital as a % ofsales
Financial Results
Note: The disposal of the TPC Wire & Cable (TPC)business, part of the Industrial Products Division, at the start of thefinancial year (31 January 2011), does not qualify for accounting treatment asa discontinued operation. References below to adjusted sales, profit, cash andratios exclude the results of TPC Wire & Cable in respect of previous periodsand the gain on sale in the current period.
Revenue
Half Year
Sales for the first half were £497.9 million(2010/11 adjusted sales: £487.0 million). At constant exchange rates, adjustedsales in the prior year were £476.1 million, resulting in first half growththis year of 4.8%.The average exchange rate for the US dollaragainst sterling was $1.62 (2010/11: $1.52) and the average exchange rate forthe Euro against sterling was Euro 1.14 (2010/11: Euro 1.16).
Second Quarter
Sales for the second quarter were £245.4 million(2010/11 adjusted sales: £246.9 million). At constant exchange rates, adjustedsales in the prior year were £242.2 million, resulting in second quartergrowth this year of 1.4%.The average exchange rate for the US dollaragainst sterling was $1.62 (2010/11: $1.51) and the average exchange rate forthe Euro against sterling was Euro 1.14 (2010/11: Euro 1.19).
Margins and Operating Profit
Half Year
Gross margin for the first half was 40.3%, compared with adjusted gross margin of 40.4% in the first half of the prior year, and demonstrating our continued achievement of stability.
Adjusted net operating expenses in the first halfwere 29.0% of sales compared with 29.4% in the first half of the prior yearreflecting the benefits from our ongoing cost reduction activities despitecontinuing with our strategic investments. Adjusted operating profit was £56.0million (2010/11: £53.7 million), producing an operating margin of 11.2%compared with 11.0% in the first half of the prior year.Total first half gross margin in the prior yearwas 40.8%. Total net operating expenses in the first half includes the firstquarter provisional pre-tax gain on the sale of TPC of £17.8 million to give atotal operating profit in the first half of £73.8 million. Total operatingprofit in the prior year was £55.5 million, giving a return on sales of 11.2%.At constant exchange rates, the increase inadjusted operating profit was 7.4%.
There was a beneficial impact on operating profit of £1.6 million from the translation of overseas results compared with the prior year.
Second Quarter
Gross margin for the second quarter was 39.8%,compared with adjusted gross margin of 40.4% in the second quarter prior yearand the long term average gross margin percentage of 39.6% over the last fouryears. Adjusted net operating expenses in the second quarter were 28.6% ofsales compared with 29.3% in the second quarter of the prior year. Adjustedoperating profit was £27.5 million (2010/11: £27.5 million), producing anoperating margin of 11.2% compared with 11.1% in the second quarter of theprior year.There was a beneficial impact on operating profitof £0.5 million from the translation of overseas results compared with theprior year. At constant exchange rates, adjusted operating profit increased
by1.8% on the prior year.Foreign Currency ImpactA one cent movement in the exchange rate betweenthe US dollar and sterling impacts the Group's operating profit byapproximately £250,000 per annum, and a one cent movement in the exchange ratebetween the Euro and sterling impacts the Group's operating profit byapproximately £500,000 per annum.
Finance Costs
Net finance costs in the first half were £8.9million (2010/11: £9.5 million). This comprises net interest payable of £6.7million (2010/11: £7.3 million), which was covered 11.0 times by totaloperating profit or 8.4 times by adjusted operating profit, and a net chargeof £2.2 million (2010/11: £2.2 million) in respect of the Company'sconvertible preference shares.
Profit Before Tax
Adjusted profit before tax in the first half was£47.1 million (2010/11: £44.2 million), an increase of 6.6% on the prior year.Total profit before tax in the first half was £64.9 million (2010/11: £46.0million).Adjusted profit before tax in the second quarterwas £23.0 million (2010/11: £22.8 million), an increase of 0.9% on the prioryear. Total profit before tax in the quarter was £23.0 million (2010/11: £23.8million).Taxation ChargeExcluding the impact of the gain on the sale ofTPC, the taxation charge for the quarter was at the estimated effective ratefor the current financial year of 27.5% (2010/11: 28.0%) of profit before taxand preference dividends. The provisional taxation charge arising on the gainon disposal of TPC amounted to £2.8 million.
Disposal of TPC Wire & Cable
On 31 January 2011, the Group completed the saleof the entire issued share capital of TPC Wire & Cable Corp. ("TPC") toPfingsten Partners LLC for a total cash consideration of $43 million. The saleof 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 MROmarkets.The sale of TPC does not qualify for accountingtreatment as a discontinued operation. The provisional pre-tax gain on thesale amounts to £17.8 million, and is included in net operating expenses, andthe estimated tax charge arising on the gain is £2.8 million. The pre-taxaccounting gain includes the requirement to recycle currency translationadjustments relating to TPC that have previously been posted directly toreserves, amounting to a gain of £0.8 million. The trading results of TPC in2010/11 were not material to the Group, with full year sales of £20.7 millionand a full year operating profit of £3.6 million.
Return on Net Operating Assets
The return on net operating assets for the firsthalf was 40.3% (2010/11: 39.2%), compared with our strategic target of greaterthan 30%.Earnings per ShareAdjusted earnings per share for the first halfwere 9.3 pence (2010/11 earnings per share adjusted to eliminate the tradingresults of TPC 8.7 pence), an increase of 6.9% on the prior year. Basicearnings per share for the first half were 13.4 pence (2010/11: 9.0 pence).Adjusted earnings per share for the secondquarter were 4.5 pence (2010/11 4.5 pence). Basic earnings per share for thesecond quarter were 4.5 pence (2010/11: 4.7 pence).
Interim Dividend
The dividend of 4.4 pence per share (2010/11: 4.4 pence per share) will be paid on 19th October 2011 to shareholders on the register on 23rd September 2011.
Cash Flow and Net Financial Liabilities
Conversion of operating profit into operatingcash flow at 94.9% (2010/11: 91.9%) represented a strong performance. In theexpectation of a period of slower growth we anticipate working capital willmoderate as inventory levels are managed down in the second half with cashgeneration increased further.Total cash generated from operations in thesecond quarter was £26.1 million (2010/11: £26.2 million or £26.3 millionexcluding the impact of previous years restructuring costs). Free cash flowfor the quarter, being cash generated from continuing operations less netcapital expenditure, interest, and tax, was £3.4 million, (2010/11: £4.7million excluding the impact of previous years restructuring costs). Our freecash flow to sales ratio in the quarter was 1.4%.Net financial liabilities at the end of the firsthalf were £251.3 million (30 January 2011: £262.9 million), including £61.4million (30 January 2011: £61.0 million) attributable to the Company'spreference shares. This represents a ratio of net debt to EBITDA of 1.9. Theimpact of exchange rates in the period was to decrease net financialliabilities by £3.2 million, principally in relation to our US$ denominatedprivate placement loan notes.
Financial Position
Premier Farnell's financial position remainsrobust with good liquidity and strong free cash flow. At the quarter end, ourheadroom on bank borrowings was £66 million under facilities in place untilJanuary 2013. This headroom, combined with our net cash position of £50.6million, gives us a secure funding position. In addition, the Group also hasunused facilities of $45 million as part of its US Private Placement ShelfFacility agreement.
Operations
Marketing and Distribution Division (MDD)
(Newark and Farnell businesses includingelement14, CPC and MCM) Q2 11/12 Q2 10/11 Q2 H1 11/12 H1 10/11 H1 growth growth £m £m £m £mRevenue 229.6 230.6 1.3% 467.1 455.1 5.0%Operating profit 28.2 28.2 1.8% 58.3 55.2 8.6%Operating margin % 12.3% 12.2% 12.5% 12.1%Second quarter sales in the MDD division grew by1.3% against the prior year in which growth of 32.4% was achieved. Whencompared to the pre-recessionary sales levels in the second quarter offinancial year 2009, sales from our electronics distribution businesses havegrown 11.7%. In the first half our MDD sales growth was 5.0% (H1 2010/11:26.7%). There has been increasing evidence of softening global marketconditions throughout the second quarter. Despite this our sales per daylevels have remained stable throughout this period. Market conditions in thesecond half are unclear - however with year on year growth of 5.5% in ouractive customer base - our only forward looking metric - we are wellpositioned to maximise the available opportunity.Our long term sustainable growth strategy isfounded on EDE products and customers. In the second quarter we added afurther 16,000 new EDE products to our portfolio bringing the total added inthe first half to over 31,500. This continued strengthening of our productoffering is key to our ability to continue to grow our active customer baseand market share.As the developing global economic conditions havecontinued to be unclear throughout the first half, with end users restrictingcapital expenditure, the opportunity for late cycle higher value but lowermargin MRO business has increased. We have maintained our strategic focus onEDE and profitable MRO throughout the period and have managed our growth andprofitability by participating only in activities that match our strategiccriteria. This has enabled us to maintain gross margin stability in the firsthalf.Sales in the division's international marketshave continued to deliver strong growth and in the key emerging markets ofGreater China, India and Eastern Europe, together with sales from our newweb-based markets of Taiwan, Thailand and South Korea, combined second quartersales grew 28.4%.All the distribution businesses have continued todrive growth via the web, with MDD web sales growing 19.0% in the quarter andeCommerce now accounting for 55.1% of total MDD sales. Our European businessachieved its strategic target in the first quarter, and continued this in thesecond quarter, with eCommerce penetration now at 72.8%, driven by thecontinued development of our web proposition.MDD Americas(Newark) Q2 11/12 Q2 10/11 Q2 H1 11/12 H1 10/11 H1 growth growth £m £m £m £mRevenue 92.0 99.9 -2.5% 188.3 196.2 1.4%Operating profit 7.5 6.8 18.8% 16.3 13.0 34.6%Operating margin % 8.2% 6.8% 8.7% 6.6%In difficult market conditions and against prioryear growth of 31.9% the second quarter saw sales 2.5% lower than the prioryear. In the wider North American semiconductor market, the SIA reported thatsales declined 2.0% in the three months to July. Despite these challengingconditions for sales growth MDD Americas delivered Q2 operating profit growthof 18.8% - giving a return on sales of 8.2% up from 6.8% in the prior year.First half sales growth of 1.4% delivered operating profit growth of 34.6%.During the first half, the business added over 14,000 new EDE products to itsportfolio, over 20% of which were new-to-market products. As evidence of thecontinued enhancement of our North American EDE Proposition, EDE sales nowaccount for 42.0% of the region's total business. MDD Americas continues tofocus on transitioning its sales from the more commoditised, less profitableMRO market segments, towards the higher growth, more profitable marketsegments within the MRO sector and in the second quarter we have seen thesesegments grow as a percentage of North American sales by 1% over Q1.The improved profitability of the business isdriven by our progression to the web and our cost optimisation activities. Inthe second quarter web sales grew 7.6% year on year with eCommerce nowaccounting for 39.1% of total sales, more than double where it was three yearsago.
MDD Europe and Asia Pacific
(Farnell and element14)
Q2 11/12 Q2 10/11 Q2 H1 11/12 H1 10/11 H1 growth growth £m £m £m £mRevenue 113.1 106.3 4.4% 230.8 210.8 8.8%Operating profit 18.4 19.0 -3.5% 37.8 37.6 2.0%Operating margin % 16.3% 17.9% 16.4% 17.8%Sales in the second quarter grew 4.4% and 8.8% inthe first half, reflecting the ongoing, embedded EDE focus, together withcontinued expansion in our international regions and the strength of our webproposition. Web sales grew 24.2% in the second quarter, with eCommercepenetration for the division now at 70.6%, an increase of 1.7 percentagepoints on the first quarter with Europe continuing to surpass our successmetric of 70%. The division continues to deliver a strong operating margin, at16.3% for the quarter and 16.4% for the first half. We continue to investstrategically in APAC to maximise the opportunity for future growth in thishigh potential region.Revenue by region Q2 11/12 Q2 10/11 Revenue H1 11/12 H1 10/11 Revenue growth growth £m £m £m £mUK 30.4 28.4 6.8% 62.3 56.3 11.4%Rest of Europe 65.4 61.0 5.3% 135.4 121.5 10.8% (including exports)Asia Pacific 17.3 16.9 -2.0% 33.1 33.0 -2.8%
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 5.8% year on year. The region's continued focus on EDE customerscontributed to the European business achieving 66.1% EDE penetration, with theregion's EDE active customer base growing 7.7% in the second quarter. OurEuropean transformation to become an EDE-centric business remains the mostadvanced within MDD. Overall, our growth in Europe continues to outperform thegrowth seen in the wider European semiconductor market, where the SIA reportedthat sales grew 0.7% in the three months to July. Second quarter web sales inthe region grew 24.2% year on year as the business continues to surpass itssuccess metric of over 70% of sales through eCommerce channels, with thesecond quarter at 72.8%. The business continues to capitalise on thesignificant opportunities for growth in Eastern Europe with year on year salesgrowth of 35.3%.Sales growth for the UK continued to be strong at6.8% for the second quarter giving 11.4% for the first half.In Asia Pacific our sales grew 4.2% sequentiallyfrom Q1 with the level of absolute sales per day in Singapore and Malaysiastable during the quarter. Year on year, second quarter sales declined 2.0%compared to the first quarter decline of 3.7%. Second quarter web sales in theregion grew 23.8% with eCommerce penetration increasing to 58.4%, while EDEsales accounted for 59.7% of the region's sales. The organisational changesrequired to ensure the key metrics of new customer acquisition and webconversion return to our targeted rates have taken place and as such we expectSingapore and Malaysian performance to continue to improve in the second halfof the year.
Other Distribution Businesses
(CPC and MCM) Q2 11/12 Q2 10/11 Q2 H1 11/12 H1 10/11 H1 growth growth £m £m £m £mRevenue 24.5 24.4 2.0% 48.0 48.1 2.0%Operating profit 2.3 2.4 -1.6% 4.2 4.6 -7.1%Operating margin % 9.4% 9.8% 8.8% 9.6%CPC achieved sales growth of 4.0% in the secondquarter and 3.2% in the first half, despite the uncertain UK consumer marketconditions, supported by robust marketing programmes and the addition of morethan 4,100 new products. These enhancements to CPC's proposition, togetherwith the business' focus towards delivering a best-in-class customerexperience, has been fundamental in driving a 9.4% year on year increase inthe number of active customers in the first half. CPC continues to drive salesvia the web, with second quarter eCommerce sales now accounting for 43.1% ofsales.In challenging market conditions second quartersales at MCM declined 3.2% year on year. The business continues to drivegrowth in its active customer base through the web in order to reduce relianceon its larger customers. Through the addition of more than 1,400 new productsin the first half and investments in web based marketing web sales in thesecond quarter grew 12.9 %.
Industrial Products Division (IPD)
(Akron Brass) Q2 11/12 Q2 10/11 Q2 H1 11/12 H1 10/11 H1 growth growth £m £m £m £m
Adjusted revenue* 15.8 16.3 4.0% 30.8 31.9 3.2% Adjusted operating 2.4 2.8 -7.0% 4.6 5.2 -4.8% profit* Adjusted operating 15.2% 17.3%
14.9% 16.3%
margin*
* Adjusted to exclude the impact of TPC which wassold on 31 January 2011.Sales at Akron Brass grew 4.0% year on year in the second quarter,despite the ongoing highly challenging conditions in the US fire truck market,with government spending being severely curtailed and new fire truck shipmentshaving declined by 13% year on year. This outperformance is supported byAkron's continued and successful strategic drive in to international marketswith over 22% of sales now coming from these markets. Overall, sales outsidethe US grew 49.5% year on year in the first half with key markets includingChina, which grew 300%, Latin America which grew 81%, and the Middle Eastwhich grew 230%. The business is now recognised as a key importer to China ofmonitors to aerial fire truck manufacturers
Risk and Uncertainties
The principal risks and uncertainties facing the Group for the remaining six months of the year and the ways in which they are mitigated are largely unchanged since they were described in the Company's 2011 Annual Report and Accounts on pages 47 to 49.
In addition, as noted in this statement we have taken actions to ensure we will deliver our strategy in a period of slow growth and can leverage the investment we have made in Asia Pacific during the second half of this year. In addition we note that we have established a discrete data function to ensure that our data and content strategy fully supports our ability to provide high quality product information and rich insights for suppliers on customer behaviour.
As set out in the annual report, we continue to believe in our EDE strategy delivering a growth rate above the overall electronics market and that the strategy remains equally relevant in the current global economic situation over the longer term.
This press release contains certainforward-looking statements relating to the business of the Group and certainof its plans and objectives, including, but not limited to, future capitalexpenditures, future ordinary expenditures and future actions to be taken bythe Group in connection with such capital and ordinary expenditures, theexpected benefits and future actions to be taken by the Group in respect ofcertain sales and marketing initiatives, operating efficiencies and economiesof scale. By their nature forward-looking statements involve risk anduncertainty because they relate to events and depend on circumstances thatwill occur in the future. Actual expenditures made and actions taken maydiffer materially from the Group's expectations contained in theforward-looking statements as a result of various factors, many of which arebeyond 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 integrationof new personnel, the implementation of cost-saving initiatives, continued useand acceptance of e-commerce programs and systems, implementation of new ITsystems, 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 tointroduce and customers' acceptance of new services, products and productlines, product availability, the impact of competitive pricing, fluctuationsin foreign currencies, and changes in interest rates and overall marketconditions, particularly the impact of changes in world-wide and nationaleconomies. The Group does not intend to update the forward-looking statementsmade herein.
Condensed Consolidated Income Statement
For the second quarter and half year ended 31 July 2011
2011/12 2010/11 2011/12 2010/11 2010/11 Second Second First First Full quarter quarter half half year
unaudited unaudited unaudited unaudited audited
Notes £m £m £m £m £m Continuing operationsRevenue 4 245.4 252.1 497.9 497.0 990.8Cost of sales (147.7) (149.2) (297.4) (294.1) (583.3)Gross profit 97.7 102.9 200.5 202.9 407.5Net operating expenses- before gain on disposal of subsidiary undertaking (70.2) (74.4) (144.5) (147.4) (295.4)- gain on disposal of subsidiary undertaking 5 - - 17.8 - -Total net operating expenses (70.2) (74.4) (126.7) (147.4) (295.4)Operating profit- before gain on disposal of subsidiary undertaking 27.5 28.5 56.0 55.5 112.1- gain on disposal of subsidiary undertaking 5 - - 17.8 - -Total operating profit 4 27.5 28.5 73.8 55.5 112.1Finance income (interest receivable) - 0.1 - 0.1 0.1Finance costs- interest payable (3.4) (3.7) (6.7) (7.4) (14.6)- preference dividends (0.9) (0.9) (1.8) (1.8) (3.5)- premium on redemption of preference shares (0.2) (0.2) (0.4) (0.4) (0.8)Total finance costs (4.5) (4.8) (8.9) (9.6) (18.9)Profit before taxation 23.0 23.8 64.9 46.0 93.3Taxation 6 (6.5) (6.9) (16.2) (13.4) (27.1)Profit for the period attributable to ordinary shareholders 16.5 16.9 48.7 32.6 66.2 Earnings per share 7Basic 4.5p 4.7p 13.4p 9.0p 18.3pDiluted 4.5p 4.6p 13.2p 8.9p 18.0p Ordinary dividendsInterim - proposed 4.4p 4.4p 4.4pFinal - proposed 6.0pPaid 6.0p 5.2p 9.6p
Impact on shareholders' funds (£m) 21.8 18.8 34.7
Condensed Consolidated Statement of Comprehensive Income
For the second quarter and half year ended 31 July 2011
2011/12 2010/11 2011/12 2010/11 2010/11 Second Second First First Full quarter quarter half half year
unaudited unaudited unaudited unaudited audited
£m £m £m £m £m
Profit for the period attributable toordinary shareholders 16.5 16.9 48.7 32.6 66.2 Net exchange adjustments 0.9 (1.1) 0.1 0.8 3.6Recycling of cumulative translationadjustments on disposal of subsidiaryundertaking - - (0.8) - -Actuarial losses on pensions andother post-retirement obligations (4.5) - (4.5) - (0.7)Deferred tax credit on actuarial losseson pensions and other postretirement obligations 1.3 - 1.3 - 0.3Deferred tax credit on share-basedpayments - - - - 2.3Net fair value gains / (losses) on cashflow hedges 1.4 2.7 (0.4) 2.5 (1.2)Other comprehensive income for theperiod
(0.9) 1.6 (4.3) 3.3 4.3
Total comprehensive income for theperiod attributable to ordinaryshareholders
15.6 18.5 44.4 35.9 70.5
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Condensed Consolidated Balance Sheet
As at 31 July 2011 31st July 1st August 30th January 2011 2010 2011 unaudited unaudited audited Notes £m £m £mASSETSNon-current assetsGoodwill 34.6 34.9 34.8Other intangible assets 27.9 22.8 24.3Property, plant and equipment 52.5 52.1 54.4Deferred tax assets 15.2 12.2 13.9Total non-current assets 130.2 122.0 127.4 Current assetsInventories 225.2 199.2 214.7Financial assets 8 - 3.8 -Trade and other receivables 143.6 147.2 141.4Cash and cash equivalents 8
50.6 41.4 33.4 Total current assets (excluding assets of disposal group classified as held for sale)
419.4 391.6 389.5Assets of disposal group classified as held for sale
- - 8.7Total current assets 419.4 391.6 398.2 LIABILITIESCurrent liabilitiesFinancial liabilities 8 (1.8) (1.0) (1.3)Trade and other payables (120.4) (124.6) (126.6)Current tax payable
(26.2) (26.9) (23.6) Total current liabilities (excluding liabilities of disposal group classified as held for sale)
(148.4) (152.5) (151.5)Liabilities of disposal group classified as held for sale - - (0.9)Total current liabilities (148.4) (152.5) (152.4) Net current assets 271.0 239.1 245.8 Non-current liabilitiesFinancial liabilities 8 (300.1) (305.8) (295.0)Retirement and other post-employment benefits (38.9) (37.6) (36.3)Deferred tax liabilities (3.5) (3.1) (3.5)Total non-current liabilities (342.5) (346.5) (334.8) NET ASSETS 58.7 14.6 38.4 EQUITYOrdinary shares 18.5 18.4 18.4Equity element of preference shares 10.4 10.4 10.4Share premium 31.1 27.2 28.5Capital redemption reserve 4.4 4.4 4.4Hedging reserve (1.2) 2.9 (0.8)Cumulative translation reserve 19.3 17.2 20.0Retained earnings (23.8) (65.9) (42.5)TOTAL EQUITY 58.7 14.6 38.4
Condensed Consolidated Statement of changes in Equity
For the half year ended 31 July 2011
2011/12 2010/11 2010/11 First First Full half half year unaudited unaudited audited £m £m £m
Total equity at beginning of period 38.4 (8.5) (8.5)
Profit for the period 48.7 32.6 66.2Other comprehensive expense (4.3) 3.3 4.3Total comprehensive income 44.4 35.9 70.5 Transactions with owners:Ordinary dividends paid (21.8) (18.8) (34.7)
Ordinary share capital subscribed 2.7 3.1 4.4Purchase or ordinary shares (5.8) - -Share-based payments 0.8 2.9 6.7Total transactions with owners (24.1) (12.8) (23.6) Total equity at end of period 58.7 14.6 38.4
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Condensed Consolidated Statement of Cash Flows
For the second quarter and half year ended 31 July 2011
2011/12 2010/11 2011/12 2010/11 2010/11 Second Second First First Full quarter quarter half half year unaudited unaudited unaudited unaudited audited Notes £m £m £m £m £m Cash flows from operating activitiesTotal operating profit 27.5 28.5 73.8 55.5 112.1Gain on disposal ofsubsidiary undertaking - - (17.8) - -Cash Impact of 2009/10restructuring/pensionchanges - (0.1) - (0.5) (0.8)Depreciation and amortisation 4.1 4.8 8.7 9.5 19.1Changes in working capital (4.3) (8.3) (20.5) (17.9) (31.7)Additional funding for postretirement defined benefitplans (0.7) (0.7) (1.5) (2.0) (3.9)Other non-cash movements (0.5) 2.0 0.8 3.2 7.2Total cash generated fromoperations 26.1 26.2 43.5 47.8 102.0Interest received - 0.1 - 0.1 0.1Interest paid (4.5) (5.4) (5.9) (6.7) (12.7)Dividends paid onpreference shares (1.8) (1.8) (1.8) (1.8) (3.5)Taxation paid (10.8) (10.6) (14.8) (14.1) (29.6)Net cash generated fromoperating activities 9.0 8.5 21.0 25.3 56.3 Cash flows frominvesting activitiesNet (costs) / proceeds fromdisposal of subsidiaryundertaking (0.6) - 24.9 - -Proceeds from disposal /(purchase) of property, plantand equipment 0.7 (1.8) (2.5) (2.5) (8.6)Purchase of intangibleassets (computer software) (6.3) (2.1) (8.5) (3.8) (10.5)Net cash (used in) /generated from investingactivities (6.2) (3.9) 13.9 (6.3) (19.1) Cash flows fromfinancing activitiesPurchase of ordinary shares (5.8) - (5.8) - -Issue of ordinary shares 2.2 1.2 2.7 3.1 4.4New bank loans 27.3 52.8 27.3 56.8 67.8Repayment of bank loans (6.7) (43.4) (18.7) (43.4) (67.8)Dividends paid to ordinaryshareholders (21.8) (18.8) (21.8) (18.8) (34.7)Net cash (used in) /generated from financingactivities (4.8) (8.2) (16.3) (2.3) (30.3) Net increase in cash, cashequivalents and bankoverdrafts (2.0) (3.6) 18.6 16.7 6.9Cash, cash equivalents andbank overdrafts at beginningof period 53.7 46.2 33.4 25.4 25.4Exchange (losses)/gains (1.1) (1.2) (1.4) (0.7) 1.1Cash, cash equivalentsand bank overdrafts at endof period 50.6 41.4 50.6 41.4 33.4 Reconciliation of netfinancial liabilitiesNet financial liabilities atbeginning of year (262.9) (264.2) (264.2)Net increase in cash, cash
equivalents and bank overdrafts 18.6
16.7 6.9Increase in debt (8.6) (13.4) -Premium on redemption ofpreference shares (0.4) (0.4) (0.8)Derivative financialinstruments (0.2) 2.3 (1.8)
Amortisation of arrangement fees (1.0)
(0.9) (2.0)Exchange movement 3.2 (1.7) (1.0)Net financial liabilities atend of period 8 (251.3) (261.6) (262.9)
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Notes
1 General information
Premier Farnell plc (the "Company") is a company incorporated and domiciled in the UK and is listed on the London Stock Exchange. The address of the Company's registered office is Farnell House, Forge Lane, Leeds, LS12 2NE, England. The Company's registered number is 876412.
This condensed consolidated financial information was approved for issue on 8 September 2011.
This condensed consolidated financial information does not comprise statutoryaccounts within the meaning of Section 498 of the Companies Act 2006.Statutory accounts for the financial year ended 30 January 2011, have beendelivered to the Registrar of Companies. The report of the auditors on thoseaccounts was unqualified and did not contain any statement under Section 237of the Companies Act 1985. Copies of the Company's Annual Report and Accountsare available from Premier Farnell plc, 150 Armley Road, Leeds, LS12 2QQ,England, or from the Company's website at www.premierfarnell.com.
2 Basis of preparation
This condensed consolidated financial information for the second quarter andhalf year ended 31 July 2011, has been prepared in accordance with theDisclosure and Transparency Rules of the Financial Services Authority and withIAS 34, Interim Financial Reporting, as adopted by the European Union. Thiscondensed consolidated financial information should be read in conjunctionwith the consolidated financial statements included in the Company's AnnualReport and Accounts for the financial year ended 30 January 2011, which havebeen prepared in accordance with International Financial Reporting Standards(IFRSs) as adopted by the European Union. The interim financial informationhas not been audited or reviewed by auditors pursuant to the AuditingPractices Board's guidance on Review of Interim Financial Information.
3 Accounting policies
The following new standards, amendments to standards and interpretations aremandatory for the first time for the financial year beginning 31 January 2011,but do not have a significant impact on the Group:- IAS 24 (revised) 'Related party disclosures'- Amendment to IAS 32 'Financial instruments: Presentation on classificationof rights issues' - Amendment to IFRS 1 'First time adoption on financialinstrument disclosures' - Annual improvements to International FinancialReporting Standards 2010 - Amendment to IFRIC 14 'Presentation onclassification of rights issues' - IFRIC 10 'Extinguishing financialliabilities with equity instruments'The following new standards, new interpretations and amendments to standardsand interpretations have been issued but are not effective for the financialyear beginning 31 January 2011 and have not been early adopted:- Amendment to IAS 1 'Presentation of financial statements' on othercomprehensive income' - Amendment to IAS 12 'Income taxes' on deferrred tax'- IAS 27 (Revised 2011) 'Separate financial statements'- Amendment to IFRS 7 'Financial Instruments: Disclosures on derecognition'- IFRS 9 'Financial Instruments'- IFRS 10 'Consolidated Financial Statements'- IFRS 11 'Joint arrangements'- IFRS 12 'Disclosure of interests in other entities'- IFRS 13 'Fair value measurement'Taxes on income in the interim periods are accrued using the estimatedeffective tax rate that would be applicable to expected total annual earnings.4 Segment information 2011/12 Second quarter (unaudited) 2010/11 Before Profit on After disposal of disposal of disposal of Second Full subsidiary subsidiary subsidiary quarter year undertaking undertaking undertaking unaudited audited £m £m £m £m £m Revenue Marketing and Distribution Division Americas 92.0 - 92.0 99.9 386.3 Europe and Asia Pacific 113.1 - 113.1 106.3 423.5 Other Distribution Businesses 24.5 - 24.5 24.4 98.0 Total Marketing and Distribution Division 229.6 - 229.6 230.6 907.8 Industrial Products Division 15.8 - 15.8 21.5 83.0 245.4 - 245.4 252.1 990.8 Operating profit Marketing and Distribution Division Americas 7.5 - 7.5 6.8 29.1 Europe and Asia Pacific 18.4 - 18.4 19.0 74.7 Other Distribution Businesses 2.3 - 2.3 2.4 9.3 Total Marketing and Distribution Division 28.2 - 28.2 28.2 113.1 Industrial Products Division 2.4 - 2.4 3.8 14.2 Head Office costs (3.1) - (3.1) (3.5) (15.2) 27.5 - 27.5 28.5 112.1 2011/12 First half (unaudited) 2010/11 Before Profit on After disposal of disposal of disposal of First subsidiary subsidiary subsidiary half undertaking undertaking undertaking unaudited £m £m £m £m
Revenue
Marketing and Distribution Division
Americas 188.3 -
188.3 196.2
Europe and Asia Pacific 230.8 -
230.8 210.8
Other Distribution Businesses 48.0 -
48.0 48.1
Total Marketing and Distribution Division 467.1 -
467.1 455.1
Industrial Products Division 30.8 - 30.8 41.9 497.9 - 497.9 497.0 Operating profit
Marketing and Distribution Division
Americas 16.3 -
16.3 13.0
Europe and Asia Pacific 37.8 -
37.8 37.6
Other Distribution Businesses 4.2 -
4.2 4.6
Total Marketing and Distribution Division 58.3 -
58.3 55.2
Industrial Products Division 4.6 17.8 22.4 7.0 Head Office costs (6.9) - (6.9) (6.7) 56.0 17.8 73.8 55.5 31 July 1 August 31 January 2011 2010 2011 £m £m £m Segment assets
Marketing and Distribution Division
Americas 153.6 144.7 153.0 Europe and Asia Pacific 250.4 222.3 235.8 Other Distribution Businesses 40.5 42.3 39.5 Total Marketing and Distribution Division 444.5 409.3 428.3 Industrial Products Division 38.1 45.6 48.1
Head Office 1.2 1.3 1.9 Segment assets 483.8 456.2 478.3 Unallocated assets: Cash and cash equivalents 50.6 41.4 33.4 Deferred tax assets 15.2 12.2 13.9 Financial assets - 3.8 - Total assets 549.6 513.6 525.6
5 Gain on disposal of subsidiary undertaking
On 31 January 2011, the Group disposed of TPC Wire & Cable ("TPC"), part ofthe Industrial Products Division, to Pfingston Partners LLC for a cashconsideration payable on completion of $43 million (before costs). Thedisposal of TPC does not qualify as a discontinued operation under IFRS 5"Non-current Assets Held for Sale and Discontinued Operations" andconsequently the results of TPC for prior periods are shown within continuingoperations. The provisional gain on disposal of TPC of £17.8 million beforetaxation is summarised below. 2011/12 First half £m Net sale proceeds 24.6 Net assets disposed of: 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 translation adjustments and
taxation 17.0 Recycling of cumulative translation adjustments 0.8 Provisional gain on disposal before taxation 17.8 Tax on gain on disposal (note 6) (2.8) Provisional gain on disposal 15.0 The gain on disposal includes the recycling of £0.8 million of net cumulativecurrency translation adjustments relating to TPC which were previously posteddirectly to reserves. During the prior year, TPC contributed £20.7 million ofsales, £3.6 million of operating profit to the Group's results and £2.7million of operating cash flow. During the second quarter of the prior year,TPC contributed £5.2 million of sales (first half: £10.0m), £1.0 million ofoperating profit (first half: £1.8m) and £0.9 million of operating cash flow(first half: £1.6m).6 TaxationThe taxation charge is based on an expected effective tax rate for the 2011/12full financial year on profit before tax, preference dividends and gain ondisposal of subsidiary undertaking of 27.5% (2010/11: 28.0%). In addition, theprovisional taxation charge on the profit on disposal of TPC is £2.8 million.
7 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable toordinary shareholders for the period by the weighted average number ofordinary shares in issue during the period, excluding those shares held by thePremier Farnell Executive Trust. For diluted earnings per share, the weightedaverage number of ordinary shares in issue is adjusted to assume issue of alldilutive potential ordinary shares, being those share options and awards witha non-market based performance condition granted to employees where theexercise price is less than the average market price of the Company's ordinaryshares during the period, and those shares with a market based performancecondition based on the current estimate of the number of shares that will vestunder 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 half (unaudited) Basic per Diluted per Earnings share amount share amount £m pence pence Earnings per share Profit attributable to ordinary shareholders 48.7 13.4 13.2 Gain on disposal of subsidiary undertaking (17.8) (4.9) (4.9) Tax on gain on disposal of subsidiary undertaking 2.8 0.8 0.8 Profit attributable to ordinary shareholders before gain on disposal of subsidiary undertaking 33.7 9.3 9.1 Number Weighted average number of shares 362,830,794 Dilutive effect of share options 7,109,034 Diluted weighted average number of shares 369,939,828 2010/11 First half (unaudited) Basic per Diluted per Earnings share amount share amount £m pence pence Earnings per share Profit attributable to ordinary shareholders 32.6 9.0 8.9 Number Weighted average number of shares 360,471,117 Dilutive effect of share options 4,126,897 Diluted weighted average number of shares 364,598,014 2010/11 Full Year (audited) Basic per Diluted per Earnings share amount share amount £m pence pence Earnings per share Profit attributable to ordinary shareholders 66.2 18.3 18.0 Number Weighted average number of shares 361,149,321 Dilutive effect of share options 6,670,893 Diluted weighted average number of shares 367,820,2148 Net financial liabilities 31st July 1st August 30th January 2011 2010 2011 unaudited unaudited audited £m £m £m
Cash and cash equivalents 50.6 41.4 33.4
Unsecured loans and
overdrafts (239.1) (245.3) (234.1)
Net financial liabilities
before preference shares
and derivatives (188.5) (203.9) (200.7) Preference shares (61.4) (60.6) (61.0)
Derivative financial
instruments (net) (1.4) 2.9 (1.2)
Net financial liabilities (251.3) (261.6) (262.9)
Net financial liabilities
are analysed in the
balance sheet as follows:
Current assets
Cash and cash equivalents 50.6 41.4 33.4
Derivative financial instruments - 3.8 - 50.6 45.2 33.4 Current liabilities 5.3% US dollar Guaranteed Senior Notes payable 2011 - - - Other loans (0.4) (0.1) (0.1) Derivative financial instruments (1.4) (0.9) (1.2) (1.8) (1.0) (1.3) Non-current liabilities Bank loans (118.2) (120.5) (109.9) 5.9% US dollar Guaranteed Senior Notes payable 2013 (96.8) (100.6) 5.2% US dollar Guaranteed Senior Notes payable 2017 (18.4) (101.3) (19.0) Other loans (5.3) (19.1) (4.5) Preference shares (61.4) (60.6) (61.0) (300.1) (305.8) (295.0) At 31 July 2011, the Group's syndicate bank facilities totalled £185 millionexpiring in January 2013. Based on these facilities, the headroom on bankborrowings at 31 July 2011 was £66 million. The Group is also party to a $75million US Private Placement Shelf Facility. This agreement allows loan noteswith an expiry period of the up to 10 years to be issued in the period up to31 March 2012. At 31 July 2011, a total of $30 million had been drawn down
onthis facility.9 Pension commitments
The valuation of the Group's defined benefit pension schemes in the UK and theUS has been updated at 31 July 2011 on an actuarial basis, applying currentdiscount and inflation rate assumptions and incorporating the market value ofassets at 31 July 2011. This valuation adjustment also reflects the statutoryrequirement for the measure of minimum pension increases to be switched fromRPI to CPI. The overall net impact of £4.5 million (£3.2 million net ofassociated deferred tax) has been taken through the statement of othercomprehensive income.
10 Exchange rates
The principal average exchange rates used to translate the Group's overseas profits were as follows:
2011/12 2010/11 2011/12 2010/11 2010/11 Second Second First First Full quarter quarter half half year US dollar 1.62 1.51 1.62 1.52 1.54Euro 1.14 1.19 1.14 1.16 1.1711 Ordinary dividendAn interim dividend of 4.4 pence per share (2010/11: 4.4 pence per share) willbe paid on 19 October 2011 to ordinary shareholders on the register at closeof business on 23 September 2011, absorbing £16.0 million of shareholders'funds (2010/11: £15.9 million).
Statement of Directors' Responsibilities
The directors named below confirm that, to the best of their knowledge andbelief, this condensed consolidated interim financial information has beenprepared in accordance with IAS 34 as adopted by the European Union, and thatthe interim management report herein includes a fair review of the informationrequired by DTR 4.2.7 and DTR 4.2.8.On 1 August 2011 Mark Whiteling resigned from the Board of directors and on 1September 2011 Nicholas Cadbury was appointed to the Board as Chief FinancialOfficer. Otherwise, the directors of Premier Farnell plc are as listed in theCompany's 2011 Annual Report and Accounts.By order of the BoardHarriet Green Nicholas CadburyChief Executive Officer Chief Financial Officer8 September 2011 8 September 2011
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