7th Dec 2006 07:00
Premier Farnell plc 7 December 2006 RESULTS FOR THE THIRD QUARTER AND NINE MONTHS for the period ended 29th October 2006 of the Financial Year ending 28th January 2007Key Financials ‚£m Q3 06/7 Q3 05/6 Q3 growth 9M 06/7 9M 05/6 9M growthContinuing (restated) at CER(b) (restated) at CER(b)operations(a) ‚£m ‚£m ‚£m ‚£m(Unaudited)Revenue 207.6 198.5 7.5%¢â‚¬ 628.9 576.0 9.5%¢â‚¬ Operating 20.5 16.4 30.6% 62.3 49.9 24.8%profit(c)Operating profit 20.5 17.8 19.9% 62.3 51.3 21.4%beforereorganisationcostsProfit before 15.4 10.8 49.5% 46.1 33.5 37.6%taxation(c)Profit beforetaxation and 15.4 12.2 31.6% 46.1 34.9 32.1%reorganisationcostsEarnings pershare(c)- total 5.7p 2.8p 111.1% 11.6p 7.4p 56.8%- continuing 2.9p 2.6p 16.0% 8.6p 7.2p 19.4%operationsNotes:(a) Continuing operations exclude the Kent business, part of theIndustrial Products Division, which was sold on 31st July 2006. The results ofthis discontinued operation are shown as a single number on the face of theincome statement below profit after tax and are thus excluded from the tradingresults discussed in this statement, including comparative information.Further details are given in note 5 to the financial information.
(b) CER - constant exchange rates
(c) The third quarter and nine month results for the prior year are stated after reorganisation costs of ‚£1.4m relating to the Group's 2005/6 redundancy programme.
Highlights
- Continued sales growth with third quarter sales per day up 7.5% on the prior year.
- Fourth consecutive quarter of incremental improvement in underlying gross margin percentage.*
- Third quarter operating profit up 30.6% at constant exchange rates (19.9% before prior year reorganisation costs).
- Third quarter operating margin of 9.9% (2005/6: 9.0% before reorganisation costs), demonstrating continued cost control whilst continuing to grow our business.
- Strong operational gearing** across the Group in the third quarter of 23.4% (excluding prior year reorganisation costs and at constant exchange rates), with all areas of the business achieving operational gearing in excess of 20%.
- Profit before taxation for the third quarter up 49.5% at constant exchange rates (31.6% before prior year reorganisation costs).
- Cash generated from continuing operations up 38.1% in the third quarter on the prior year as working capital remains under tight control.
- Announced our strategic review plans and now moving into the implementation phase.
Commenting on the Q3 results, Harriet Green, Group Chief Executive, said:
"Q3 was an exciting period for Premier Farnell which saw usannounce our strategic review plans and deliver another quarter of goodfinancial results, with strong operational gearing right across the Group.This outcome provides a platform for further growth in the fourth quarteragainst last year and to deliver our full year expectations. Looking forward,I believe Premier Farnell is well placed to provide first class differentiatedservice for customers and supplier partners, as well as deliver value forshareholders."
* Underlying gross margin is stated before the impact of the RoHS inventory provision taken in the fourth quarter of 2005/6
** Operational gearing represents the year on year increase in adjusted operating profit compared to the increase in sales, both at constant exchange rates.
¢â‚¬ percentage changes in sales
Comparison of sales for specific periods is affected by three variables:
1. Changes in exchange rates used to translate the overseas sales in different currencies into sterling;
2. Differences in the number of working days;
3. Disposal or acquisition of businesses.
Throughout this statement, in order to reflect underlying business performance, percentage changes in sales are based on sales per day for continuing businesses at constant exchange rates and for like periods, unless otherwise stated.
For further information, contact:
Harriet Green, Group Chief Premier Farnell plc +44 (0) 20 7851 4100Executive Mark Whiteling, Group FinanceDirector Andrew Lewis, Group FinancialControllerRichard Mountain Financial Dynamics +44 (0) 20 7269 7291 (UK) A conference call for investors and analysts with Harriet Green andMark Whiteling will take place on 7th December 2006 at 08:30am. To obtaindial-in details please call Elaine Ryman at Financial Dynamics on +44 (0) 207269 7121. The conference call will be recorded and available on the Group website later that day.
The Company's announcements and presentations are published at www.premierfarnell.com, together with business information, the 2006 Annual Report and Accounts, and links to all other Group web sites.
The Company's Preliminary Results for the year ending 28th January 2007 are expected to be published in the week beginning 12th March 2007.
Premier Farnell plc
STATEMENT ON THIRD QUARTER AND NINE MONTHS RESULTS
for the period ended 29th October 2006
Premier Farnell, a leading high service distributor providing essential products and services to engineers and purchasing professionals globally, today announces its results for the third quarter and nine months ended 29th October 2006.
Note: percentage changes in sales
Comparison of sales for specific periods is affected by three variables:
1. Changes in exchange rates used to translate the overseas sales in different currencies into sterling;
2. Differences in the number of working days;
3. Disposal or acquisition of businesses.
Throughout this statement, in order to reflect underlying business performance, percentage changes in sales are based on sales per day for continuing businesses at constant exchange rates and for like periods, unless otherwise stated.
Chief Executive's Operational Overview
Q3 was an exciting quarter for the Group in which we saw strong performance in key areas and announced our strategic review plans. We have now moved into the implementation phase.
Our strategic review highlighted the need to continue to build onthe core fundamentals of distribution that the Group already does so well, butwith an increased focus through the significant market differentiatinginitiatives identified. We believe these will maximise the opportunity forcontinued profitable growth and increase our global reach and opportunity. Wehave received extremely positive feedback already from both our customers andour supplier partners.We will develop a market leading position globally through ourfocus on the fast growing electronic design market - a new state of the artweb platform offering speed and simplicity to customers and increasedinvestment in the developing regions of China and Eastern Europe. We will alsocontinue to drive enhanced regional focus on our core maintenance, repair andoperations (MRO) business and maintain our focus on the profitability ofBuckHickman InOne, although its long-term future is unlikely to be within theGroup.The Q3 results have built further upon our strong first half and weapproach the end of the year in a positive position. We have seen continuedsales growth, with third quarter sales per day from continuing operations up7.5% on the prior year and in line with the second quarter. Sales havecontinued to grow well across the Group and in Europe and the UK we have grownabove market rates and continue to take share. Particularly satisfying is ourgross margin performance which has now delivered four consecutive quarters ofincremental improvement, with the third quarter up 0.5 percentage points overthe prior year. Commitment to gross margin maintenance is a critical componentof our future plans, and fundamental to a successful distribution business.We continue to drive business efficiencies and control costseffectively and have seen strong operational gearing across all regions, withNorth Americaat 22.9% in the third quarter. These factors are reflected in ourpre-tax profit for the nine months, which was up 37.6% on the prior year. Ourcash performance also remains strong, with the increase in working capitalsignificantly less than the underlying sales growth. We expect to fund ourstrategic changes from ongoing business performance.Our expansion into China continues to make excellent progress withour new Mandarin Chinese catalogue, with prices in local currency, now inproduction. Work on our enhanced, fully transactional Chinese website withMandarin search engine is also making good progress. Our offering in theregion is strongly focused on the products and services required by therapidly growing body of electronic design engineers (EDE) and will becompliant with the first phase of the China RoHS legislation. With the Chinesegovernment's deadline for compliance by 1st March 2007, our 20,000 compliantstock keeping units (skus) and in-depth knowledge and experience gained fromimplementation across Europe will enable us to support our Chinese customerswell through this complex change. In addition, our logistics plans are welladvanced with a major logistic provider agreeing to stock our products toensure delivery to all major regions of China within 1-2 days. Furtherinvestments are planned and an independent Mandarin language EnterpriseResource Planning (ERP) system is also now being implemented.
There continues to be strong US demand for our market leading RoHS proposition. Within Europe, with the compliance deadline having passed in July, RoHS is now having less incremental impact on sales.
Our new web platform, which is being deployed globally, offerscustomers a greatly superior service - it is simpler and significantly fasterwith improved data quality, search capability and enhanced functionality. Thecontent and design has been driven by customer feedback and early indicationsshow an increase in traffic through the new platform. As we continue to buildour multi-channel capability, eCommerce sales continue to grow. This changingbalance of sales transactions is having a positive impact on cost efficienciesand margins as we drive to achieve our strategic goals.Ongoing investment in products and services to meet the needs ofour growing EDE customer base is critical and we have made a number of keyfranchise additions during the quarter, including, significantly, theextension of our Analog Devices franchise into North America, and globaldevelopments with Cypress Semi-conductor and ZMD. We are adding over 70,000skus targeted at the design needs of the EDE customer group with a further500,000 lines to be available on demand - a powerful offering. We believe thatthe Group's broad portfolio now includes the majority of the world's leadingsemiconductor, passive and electromechanical brands, offering a compellingproposition to electronic design engineers globally.We continue to believe that we will see growth opportunities in ourmarkets and that we will benefit from the focus on new and emerging markets.Our strategic review has been thorough, and considered in detail all aspectsof the business. I am confident that the combination of our new strategy, wellplanned and executed, and our continued focus on those things we do well willprovide a first class differentiated service offering to our customers, makeus a partner of choice for suppliers and employees and deliver increasedshareholder value.
Financial Results
Note: Continuing operations exclude the Kent business, part of theIndustrial Products Division, which was sold on 31st July 2006. The results ofthis discontinued operation are shown as a single number on the face of theincome statement below profit after tax and are thus excluded from the tradingresults discussed in this statement, including comparative information.Further details are given in note 5 to the financial information.
Revenue
Third Quarter results
Sales in the third quarter from continuing operations were ‚£207.6 million (2005/6: ‚£198.5 million). Sales per day from continuing businesses increased 7.5% on the prior year, compared to 10.5% year on year growth in the first half, reflecting the stronger comparator in the second half of last year.
Nine Months results
Sales in the first nine months from continuing operations were ‚£628.9 million (2005/6: ‚£576.0 million). Sales per day from continuing businesses increased 9.5% on the prior year, or 8.7% excluding the impact of acquisitions made in the prior year.
Margins and Operating Profit
Third Quarter results
The gross margin from continuing operations in the third quarterwas 38.4%, up from 37.9% in the same period last year, and also marking thefourth consecutive quarter of underlying gross margin improvement. Operatingprofit from continuing operations was ‚£20.5 million (2005/6: ‚£16.4 million,after reorganisation costs of ‚£1.4 million), producing an operating margin of9.9% (2005/6: 8.3% or 9.0% before reorganisation costs). There was a negativeimpact on operating profit from the translation of overseas results comparedto prior year of ‚£0.7 million, principally as a result of the weakness of theUS dollar. At constant exchange rates, the increase in operating profitcompared to the prior year was 30.6% or 19.9% before reorganisation costs in2005/6.Nine Months results
Gross margin from continuing operations in the first nine months was 38.3% (2005/6: 38.2%). Operating profit in the first nine months from continuing businesses was ‚£62.3 million (2005/6: ‚£49.9 million after reorganisation costs of ‚£1.4 million), producing an operating margin of 9.9% (2005/6: 8.7% or 8.9% before reorganisation costs) and reflecting the operational gearing achieved in the period.
Finance Costs
Net finance costs in the first nine months were ‚£16.2 million. This comprises net interest payable of ‚£10.1 million (2005/6: ‚£10.3 million) which was covered 6.2 times by operating profit, and a charge of ‚£6.1 million (2005/6: ‚£6.1 million) in respect of the Company's convertible preference shares.
Profit Before Tax and Taxation Charge
Reported profit before tax from continuing operations in the first nine months was ‚£46.1million (2005/6: ‚£33.5 million after reorganisation costs of ‚£1.4 million). Profit before tax increased 37.6% year-on-year or 32.1% before reorganisation costs, remaining significantly ahead of the rate of sales growth achieved.
The taxation charge for the first nine months was at an effective rate of 29.0% of profit before tax and preference dividends (2005/6: 19.2%).
Disposal of Kent
On 31st July 2006, the Group disposed of its Kent business, part ofthe Industrial Products Division, to Barnes Group Inc. The cash considerationreceived in the third quarter, net of disposal costs and tax paid, was ‚£20.8million. The pre-tax profit on disposal recognised in the third quarterresults was ‚£12.2 million. Kent is a specialist automotive consumablesbusiness with sales in 2005/6 of ‚£40.5 million and an operating profit of ‚£2.1million.
Return on Net Operating Assets
Return on net operating assets in the nine months was 26.3% (2005/6: 21.6%).
Earnings per Share
Total earnings per share in the nine months were 11.6 pence (2005/6: 7.4 pence). Earnings per share from continuing operations in the first nine months were 8.6 pence (2005/6: 7.2 pence).
Balance Sheet and Cash Flow
Net cash generated from continuing operations in the third quarterwas ‚£21.4 million, 38.1% up on the prior year. Working capital continued to betightly controlled with the increase of ‚£2.7 million in the quarter relatingto the normal seasonal increase in receivables. On a year to date basis, thegrowth in working capital is significantly less than the growth in underlyingsales. Net cash inflow during the first nine months was ‚£20.8 million,reflecting the net proceeds from the disposal of the Kent business (2005/6:net cash outflow of ‚£4.7 million before the cost of businesses acquired). Netfinancial liabilities at the end of the quarter were ‚£296.5 million (29thJanuary 2006: ‚£330.1 million), including ‚£111.2 million attributable to theCompany's preference shares.
Marketing and Distribution Division (MDD)
MDD comprises: Newark InOne; Farnell InOne; BuckHickman InOne; MCM, an InOne Company, and CPC.
Q3 06/7 Q3 05/6 Q3 growth 9M 06/7 9M 05/6 9M growth at CER* at CER* ‚£m ‚£m ‚£m ‚£mRevenue 189.0 180.2 7.6% 573.0 527.0 9.0%Operating profit 19.7 15.9 28.8% 59.7 49.4 20.9% 19.7 17.1 19.4% 59.7 50.6 18.0% Adjusted operatingprofit **Operating margin % 10.4% 8.8% 10.4% 9.4%Adjusted operating 10.4% 9.5% 10.4% 9.6%margin % **
*Constant exchange rates ** Before reorganisation costs in 2005/6 of ‚£1.2m
Third quarter sales grew 7.6% on the prior year, and at constantexchange rates adjusted operating profit increased 19.4%. Operational gearingin the third quarter, being the year on year increase in adjusted operatingprofit compared to the increase in sales, both at constant exchange rates, wasstrong at 23.9%. Although the impact of foreign exchange has been neutral overthe nine months to date, we saw a much weaker US dollar in the third quarterthis year compared to the prior year. The negative impact on third quarteroperating profit from the translation of overseas results was ‚£0.6 million,due principally to the weak US dollar, and we would anticipate, if similarexchange rates prevail for the balance of the year, to be similarly impactedin the fourth quarter.
eCommerce sales during the quarter were up 23% on the prior year and accounted for 24% of total MDD sales.
MDD Americas
Newark InOne and MCM, an InOne Company.
Q3 06/7 Q3 05/6 Q3 growth 9M 06/7 9M 05/6 9M growth at CER* at CER* ‚£m ‚£m ‚£m ‚£mRevenue 84.0 81.0 9.0% 255.5 229.5 11.7%Operating profit 7.9 6.0 41.1% 23.4 19.2 21.2%Adjusted operating 7.9 6.7 25.4% 23.4 19.9 17.0%profit **Operating margin % 9.4% 7.4% 9.2% 8.4%Adjusted operating 9.4% 8.3% 9.2% 8.7%margin % **
*Constant exchange rates ** Before reorganisation costs in 2005/6 of ‚£0.7m
Third quarter sales were up 9.0% on the prior year representing acontinued strong performance measured against the stronger comparative in thethird quarter of last year. Gross margin was maintained at the level achievedin the first half and was 0.4 percentage points above the third quarter of theprior year, reflecting the continued benefit from focusing on core markets andaccounts, and the increase in the proportion of sales to new and smallercustomers. The third quarter operating margin of 9.4% compares to 8.3%achieved in the prior year (before reorganisation costs) with operationalgearing strong at 22.9%.
Web sales in the Americas in the first nine months were up 15%. Our new web platform, which is being deployed globally, will significantly enhance our web offering in the US.
Newark InOne has maintained its leadership position relating to RoHS. Some 550,000 copies of the September catalogue have been delivered, which has been reformatted to show products by product category and also highlight the RoHS status of products.
MCM continued to grow sales, reflecting the targeted marketing ofcore customers and channels, and the further enhancements to the new web-sitelaunched at the end of last year, with web sales increasing 38% in the thirdquarter over the prior year.
Sales from operations in Mexico continued to grow strongly following the transfer of all sales support activities to the expanded facility in Guadalajara.
MDD Europe and Asia Pacific
Farnell InOne, BuckHickman InOne and CPC.
Q3 06/7 Q3 05/6 Q3 growth 9M 06/7 9M 05/6 9M growth at CER* at CER* ‚£m ‚£m ‚£m ‚£mRevenue 105.0 99.2 6.4% 317.5 297.5 6.9%Operating profit 11.8 9.9 21.6% 36.3 30.2 20.6%Adjusted operating 11.8 10.4 15.7% 36.3 30.7 18.6%profit **Operating margin % 11.2% 10.0% 11.4% 10.2%Adjusted operating 11.2% 10.5% 11.4% 10.3%margin %
* Constant Exchange Rates ** Before reorganisation costs in 2005/6 of ‚£0.5m
Sales were up 6.4% in the quarter. Overall market conditionscontinue to show year on year improvement, albeit at a slowing rate in the UK,evidencing strong market share performance of our Farnell InOne UK business asit maintained its sales growth rate. The operating margin of 11.2% was aheadof the prior year, reflecting an improved gross margin and tight control ofcosts. Operational gearing in the third quarter was strong at 25.0%.Revenue by region Q3 06/7 Q3 05/6 Sales 9M 06/7 9M 05/6 Sales ‚£m ‚£m growth ‚£m ‚£m
growth
UK (including exports) 68.5 66.6 2.8% 205.7 198.0 3.9% Mainland Europe
28.9 25.0 16.1% 88.2 77.3 14.5%Asia Pacific 7.6 7.6 5.8% 23.6 22.2 7.4%The division's UK sales overall (including exports) increased 2.8%in the third quarter, reflecting continued strong sales at Farnell InOne andCPC, offset by the anticipated sales decline at BuckHickman InOne. Salesthrough the Farnell InOne brand in the UK increased 8.2% in the third quarter,following a strong first half performance.Sales per day through the BuckHickman InOne brand were down 6.4%during the quarter which was largely due to lower order volumes from a majorautomotive customer. The implementation of the restructuring programme forBuckHickman InOne, which puts in place a new service and logistics model forthe business, continued on plan during the quarter.
CPC's sales rose 6.4% in the third quarter with new initiatives in marketing continuing to deliver success, including the launch of the new catalogue in August, customer acquisition drives into new segments and an enhanced focus on web, supported by improved service levels and the new web infrastructure. CPC achieved record web sales in the third quarter, up 31% on the prior year.
In mainland Europe, Farnell InOne continued to deliver a very strong performance, with third quarter year-on-year growth of 16.1%. Sales in all significant mainland European markets continued to deliver double digit growth over the prior year with our multi-channel approach and web growth driving performance.
Sales growth in Asia was up 12.1% in the third quarter, driven by strong growth in active customer numbers in Singapore, Malaysia and Hong Kong. In Australia, the performance of the business continues to show improvement with positive year on year sales growth for the second consecutive quarter.
In August, the Europe and Asia Pacific region successfully upgradedits web infrastructure to deliver enhanced speed and reliability to all threetrading brands. Performance improvements have exceeded expectations and allkey web metrics are improving. Driven by this improved platform, third quarterweb sales for the region were up 52% on the prior year.
Industrial Products Division (IPD)
Continuing businesses Q3 06/7 Q3 05/6 Q3 growth 9M 06/7 9M 05/6 9M growth (restated) at CER* (restated) at CER* ‚£m ‚£m ‚£m ‚£mRevenue 18.6 18.3 6.9% 55.9 49.0 14.3%Operating profit 3.3 3.1 10.0% 9.9 8.4 17.9%Operating margin 17.7% 16.9% 17.7% 17.1%
*Constant exchange rates
Sales grew 6.9% in the third quarter and operational gearing was 27.3%. In the nine months, sales grew 14.3%, or 5.7% excluding the effect of the acquisition of Weldon by Akron Brass in June 2005. At constant exchange rates, operating profit in the nine months was ‚£1.5 million ahead of last year, helped by the contribution from Weldon.
Akron Brass
Akron Brass grew sales by 10.5% in the third quarter, withincreased orders from the traditional fire apparatus manufacturers andmunicipal fire departments and strong performances from the international andindustrial markets where sales grew by over 20% year on year. Large orderswere also received by Weldon for its lighting devices and electrical controlsolutions.TPC Wire & CableTPC achieved sales growth of 9.0% in the third quarter, with thebusiness continuing to benefit from its successful diversification from the USautomotive sector, which continues to face difficult trading conditions, intoother markets including mining, utilities and government. Despite thecontinuing raw material cost pressures, the business continues to successfullymaintain margin through pricing strategies and effective management of thesupply chain.
Outlook
Q3 was an exciting period for Premier Farnell which saw us announceour strategic review plans and deliver another quarter of good financialresults, with strong operational gearing right across the Group. This outcomeprovides a platform for further growth in the fourth quarter against last yearand to deliver our full year expectations. Looking forward, I believe PremierFarnell is well placed to provide first class differentiated service forcustomers and supplier partners, as well as deliver value for shareholders.This press release contains certain forward-looking statementsrelating to the business of the Group and certain of its plans and objectives,including, but not limited to, future capital expenditures, future ordinaryexpenditures and future actions to be taken by the Group in connection withsuch capital and ordinary expenditures, the expected benefits and futureactions to be taken by the Group in respect of certain sales and marketinginitiatives, operating efficiencies and economies of scale. By their natureforward-looking statements involve risk and uncertainty because they relate toevents and depend on circumstances that will occur in the future. Actualexpenditures made and actions taken may differ materially from the Group'sexpectations contained in the forward-looking statements as a result ofvarious factors, many of which are beyond the control of the Group. Thesefactors include, but are not limited to, actions taken in response toenactment of RoHS and similar legislation, the results of, and implementationof initiatives arising from, the Group's strategic business review, theimplementation of cost-saving initiatives to offset current market conditions,continued use and acceptance of e-commerce programs and systems and the impacton other distribution systems, the ability to expand into new markets andterritories, the implementation of new sales and marketing initiatives,changes in demand for electronic, electrical, electromagnetic and industrialproducts, rapid changes in distribution of products and customer expectations,the ability to introduce and customers' acceptance of new services, productsand product lines, product availability, the impact of competitive pricing,fluctuations in foreign currencies, and changes in interest rates and overallmarket conditions, particularly the impact of changes in world-wide andnational economies.CONSOLIDATED INCOME STATEMENTFor the third quarter and nine months ended 29th October 2006 2005/6 2005/6 2006/7 Third 2006/7 Nine 2005/6 Third quarter Nine months Full year quarter unaudited months unaudited audited unaudited
(restated) unaudited (restated) (restated)
Notes ‚£m ‚£m ‚£m ‚£m ‚£m Continuing operationsRevenue 2 207.6 198.5 628.9 576.0 773.5Cost of sales- before RoHS inventory provision (127.8) (123.3) (388.0) (355.7) (478.2)- RoHS inventory provision - - - - (6.6)Total cost of sales (127.8) (123.3) (388.0) (355.7) (484.8)Gross profit 79.8 75.2 240.9 220.3 288.7Net operating expenses- before reorganisation costs (59.3) (57.4) (178.6) (169.0) (225.2)- reorganisation costs - (1.4) - (1.4) (5.3)Total net operating expenses (59.3) (58.8) (178.6) (170.4) (230.5)Operating profit- before RoHS inventory provisionand reorganisation costs 20.5 17.8 62.3 51.3 70.1- RoHS inventory provision - - - - (6.6)- reorganisation costs - (1.4) - (1.4) (5.3)Total operating profit 2 20.5 16.4 62.3 49.9 58.2Finance income (interest receivable) 0.1 0.1 0.4 0.2 0.4Finance costs- interest payable (3.1) (3.7) (10.5) (10.5) (14.4)- preference dividends (1.7) (1.6) (5.1) (5.0) (6.7)- premium on redemptionof preference shares (0.4) (0.4) (1.0) (1.1) (1.5)Total finance costs (5.2) (5.7) (16.6) (16.6) (22.6)Profit before taxation 3 15.4 10.8 46.1 33.5 36.0Taxation 4 (4.9) (1.2) (14.8) (7.4) (6.0)Profit after taxation fromcontinuing operations 10.5 9.6 31.3 26.1 30.0Profit after taxation fromdiscontinued operation 5 10.1 0.4 10.7 0.7 1.1Profit for the period (attributableto ordinary shareholders) 20.6 10.0 42.0 26.8 31.1Earnings per share 6Basic 5.7p 2.8p 11.6p 7.4p 8.6pDiluted 5.7p 2.8p 11.5p 7.4p 8.6p Earnings per share fromcontinuing operations 6Basic 2.9p 2.6p 8.6p 7.2p 8.3pDiluted 2.9p 2.6p 8.6p 7.2p 8.3p Ordinary dividendsInterim - proposed 4.0p 4.0p 4.0pFinal - proposed 5.0pPaid 9.0p 9.0p 9.0pImpact on shareholders'funds (‚£m) 32.6 32.6 32.6 Prior year figures have been restated to reflect the reclassification of theKent business as a discontinued operation following its disposal on 31st July2006. Further details are given in note 5.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE For the third quarter and nine months ended 29th October 2006
2006/7 2005/6 2006/7 2005/6 2005/6 Third Third Nine Nine Full quarter quarter months months year unaudited unaudited unaudited unaudited audited Notes ‚£m ‚£m ‚£m ‚£m ‚£m Profit for the period 20.6 10.0 42.0 26.8 31.1 Net exchange adjustments (1.1) (0.5) (1.8) (5.1) (4.5)Actuarial losses on pensions andother post-retirement obligations - - - - (8.2)Deferred tax on actuarial losses - - -
- 2.4Net losses not recognisedin the income statement 9 (1.1) (0.5) (1.8) (5.1) (10.3)
Total recognised income for the period 19.5 9.5 40.2
21.7 20.8
Effect of change in accountingfor preference shares (includingdeferred tax of ‚£4.7m) 9 (111.0) (111.0) Total recognised expensesince prior year (89.3) (90.2)CONSOLIDATED BALANCE SHEETAs at 29th October 2006 29th 30th October October 29th 2006 2005 January 2006 unaudited unaudited audited Notes ‚£m ‚£m ‚£mASSETSNon-current assetsGoodwill 49.7 49.8 50.0Other intangible assets 21.1 28.3 27.5Property, plant and equipment 61.2 67.0 67.3Retirement benefit asset 50.5 48.6 52.0Deferred tax assets 0.6 0.5 0.3Total non-current assets 183.1 194.2 197.1 Current assetsInventories 168.3 168.6 163.2Trade and other receivables 138.2 146.5 142.8Cash and cash equivalents 7 31.8 40.0 40.5Total current assets 338.3 355.1 346.5 LIABILITIESCurrent liabilitiesFinancial liabilities 7 (3.0) (88.4) (92.8)Trade and other payables (103.1) (103.5) (93.9)Current tax payable (36.6) (35.7) (29.5)Short-term provisions 8 (1.4) (0.1) (3.2)Total current liabilities (144.1) (227.7) (219.4) Net current assets 194.2 127.4 127.1 Non-current liabilitiesFinancial liabilities 7 (325.3) (284.5) (277.8)Retirement and otherpost-employment benefits (36.1) (25.3) (38.5)Deferred tax liabilities (22.6) (29.0) (25.2)Other provisions 8 (1.0) (0.9) (1.1)Total non-current liabilities (385.0) (339.7) (342.6) NET LIABILITIES (7.7) (18.1) (18.4) EQUITYOrdinary shares 18.2 18.1 18.1Equity element ofpreference shares 19.9 19.9 19.9Share premium 21.4 20.3 20.5Capital redemption reserve 0.8 0.8 0.8Hedging reserve - (0.1) (0.2)Cumulative translation reserve (4.1) (2.9) (2.3)Retained earnings (63.9) (74.2) (75.2)TOTAL EQUITY 9 (7.7) (18.1) (18.4)SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWSFor the third quarter and nine months ended 29th October 2006 2005/6 2006/7 2005/6 2005/6 2006/7 Third Nine Third quarter Nine months Full year quarter unaudited months unaudited audited unaudited (restated)
unaudited (restated) (restated)
Notes ‚£m ‚£m
‚£m ‚£m ‚£m
Cash flows from operating activitiesOperating profit from continuing operations 20.5 16.4
62.3 49.9 58.2Exceptional items:- income statement impact - 1.4 - 1.4 11.9- cash impact (0.8) (1.4) (2.0) (1.4) (2.0)
Net impact of exceptional items (0.8) - (2.0) - 9.9Depreciation and amortisation 5.0 5.7 15.0 15.8 20.8Changes in working capital(before exceptional items) (2.7) (6.8) (10.4) (11.3) (11.1)Other non-cash movements(before exceptional items) (0.6) 0.2 (0.9) 0.4 (1.0)Cash generated fromcontinuing operations 21.4 15.5 64.0 54.8 76.8Discontinued operations - 1.4
(0.1) 1.6 2.5Interest received 0.1 0.1 0.5 0.2 0.4Interest paid (1.5) (0.3) (9.4) (7.3) (14.3)Dividends paid onpreference shares - - (3.4) (3.4) (6.7)Taxation paid (5.1) (3.1) (13.3) (11.3) (14.3)Net cash generatedfrom operating activities 14.9 13.6 38.3 34.6 44.4 Cash flows frominvesting activitiesPurchase of businesses - - - (7.6) (7.6)Disposal of businesses 5 20.8 - 20.8 - -Proceeds from sale ofproperty, plant and equipment - 0.1
2.1 1.1 1.1Purchase of property,plant and equipment (1.8) (1.9) (4.8) (4.1) (5.8)Purchase of intangibleassets (computer software) (1.5) (1.2) (4.2) (3.5) (5.7)Net cash generated from/
(used in) investing activities 17.5 (3.0)
13.9 (14.1) (18.0) Cash flows fromfinancing activitiesSEC de-registration costs - - - (0.3) (0.3)Issue of ordinary shares 0.1 - 1.2 0.1 0.1New bank loans - 10.6 78.9 22.7 22.7Repayment of bank loans (19.8) - (105.6) - (8.3)Dividends paid to shareholders (14.5) (14.5) (32.6) (32.6) (32.6)Net cash used infinancing activities (34.2) (3.9) (58.1) (10.1) (18.4) Net (decrease)/increase in cash,cash equivalents andbank overdrafts (1.8) 6.7 (5.9) 10.4 8.0Cash, cash equivalentsand bank overdrafts atbeginning of period 31.6 32.0 35.6 27.2 27.2Exchange (losses)/gains (0.9) 0.2 (0.8) 1.3 0.4Cash, cash equivalentsand bank overdraftsat end of period 28.9 38.9 28.9 38.9 35.6 Reconciliation of netfinancial liabilitiesNet financial liabilitiesat beginning of period,as previously reported (330.1) (200.7) (200.7)Implementation of accountingfor financial instrumentsin accordance with IAS 39:
- reclassification of preference shares
- (106.3) (106.3)Net financial liabilitiesat beginning of period,as restated (330.1) (307.0) (307.0)Net (decrease)/increase in cash,cash equivalentsand bank overdrafts (5.9) 10.4 8.0Decrease/(increase) in debt 26.7 (22.7) (14.4)Premium on redemptionof preference shares (1.0) (1.1) (1.5)
Derivative financial instruments
0.2 (0.1) (0.2)Exchange movement 13.6 (12.4) (15.0)Net financial liabilitiesat end of period 7 (296.5) (332.9) (330.1) Prior year figures have been restated to reflect the reclassification of theKent business as a discontinued operation following its disposal on 31st July2006. Further details are given in note 5.Notes1. Basis of preparationThe unaudited consolidated financial information in this report has beenprepared applying the accounting policies disclosed in the Group's 2006 AnnualReport and Accounts on pages 33 to 36. The Group's 2006 Annual Report andAccounts, on which the Company's auditors, PricewaterhouseCoopers LLP, havegiven an unqualified opinion in accordance with Section 235 of the CompaniesAct 2005, is available on the Company's website at www.premierfarnell.com orfrom 150 Armley Road, Leeds, LS12 2QQ.2. Segment information (continuingoperations) 2005/6 2005/6 2006/7 Third 2006/7 Nine 2005/6 Third quarter Nine months Full year quarter unaudited months unaudited audited unaudited (restated) unaudited (restated) (restated) ‚£m ‚£m ‚£m ‚£m ‚£m RevenueMarketing andDistribution DivisionAmericas 84.0 81.0 255.5 229.5 310.0Europe and Asia Pacific 105.0 99.2 317.5 297.5 396.4Total Marketing andDistribution Division 189.0 180.2 573.0 527.0 706.4
Industrial Products Division 18.6 18.3 55.9 49.0
67.1 207.6 198.5 628.9 576.0 773.5 Operating profitMarketing andDistribution DivisionAmericas- before RoHS inventoryprovision andreorganisation costs 7.9 6.7 23.4 19.9 27.1- RoHS inventory provision - - - - (4.2)- reorganisation costs - (0.7) - (0.7) (0.7) 7.9 6.0 23.4 19.2 22.2Europe and Asia Pacific- before RoHS inventoryprovision andreorganisation costs 11.8 10.4 36.3 30.7 41.5- RoHS inventory provision - - - - (2.4)- reorganisation costs - (0.5) - (0.5) (4.4) 11.8 9.9 36.3 30.2 34.7Total Marketing andDistribution Division 19.7 15.9 59.7 49.4 56.9
Industrial Products Division 3.3 3.1 9.9 8.4
12.0
Head Office costs- before reorganisation costs (2.5) (2.4) (7.3) (7.7)
(10.5)- reorganisation costs - (0.2) - (0.2) (0.2) (2.5) (2.6) (7.3) (7.9) (10.7) 20.5 16.4 62.3 49.9 58.2 Prior year figures have been restated to reflect the reclassification of theKent business, part of the Industrial Products Division, as a discontinuedoperation following its disposal on 31st July 2006. Further details are givenin note 5.3. Profit before taxation(continuing operations) Profit before taxation isstated after charging/(crediting): 2006/7 2005/6 2006/7 2005/6 Third Third Nine Nine 2005/6 quarter quarter months months Full year unaudited unaudited unaudited unaudited audited ‚£m ‚£m ‚£m ‚£m ‚£m Share-based payments 0.6 0.6 1.9 1.6 2.1Defined benefitpension schemes (net) (0.6) (0.3) (1.4) (1.0) (2.4)Severance costs
(former Group Chief Executive) - - - 0.5
0.5RoHS inventory provision - - - - 6.6Reorganisation costs - 1.4 - 1.4 5.3
The negotiations with regard to the former Group Chief Executive's pension entitlement referred to in the 2006 Annual Report were concluded in the second quarter and a payment of ‚£0.3 million was made.
In the year ended 29th January 2006, a provision of ‚£6.6 million was made inthe fourth quarter for obsolete and slow moving non-compliant inventory as aresult of the European Union's Directive relating to the Restriction of theuse of certain Hazardous Substances (RoHS).
Reorganisation costs in the year ended 29th January 2006, comprised ‚£1.4 million charged in the third quarter for severance costs relating to the Group's redundancy programme, and ‚£3.9 million charged in the fourth quarter relating to the restructuring of the BuckHickman InOne business.
4. Taxation
The taxation charge includes provision at an effective rate for the nine months on profit before tax from continuing operations and preference dividends of 29.0% (2005/6: 19.2%), being the estimated effective rate of taxation for the year ending 28th January 2007.
5. Discontinued operation
On 31st July 2006, the Group disposed of Kent, a specialist automotive consumables business and part of the Industrial Products Division. Consequently, the Kent business has been reclassified as a discontinued operation and its trading results are included in the income statement as a single line below profit after taxation from continuing operations, with comparatives restated accordingly. The impact of this discontinued operation on the income statement is as follows:
2006/7 2005/6 2006/7 2005/6 2005/6 Third Third Nine Nine Full quarter quarter months months year unaudited unaudited unaudited unaudited audited ‚£m ‚£m ‚£m ‚£m ‚£mPost tax resultsRevenue - 10.1 21.3 29.6 40.5 Gross margin - 6.9 14.5 20.5 27.8Net operating expenses - (6.1) (13.6) (19.2) (25.7)Operating profit - 0.8 0.9 1.3 2.1Taxation - (0.4) (0.3) (0.6) (1.0)Profit after taxation - 0.4 0.6 0.7 1.1 Gain on disposal
Gain on disposal of net assets 12.2 - 12.2 -
-Taxation (2.1) - (2.1) - -Net gain on disposal 10.1 - 10.1 - -
Total income statement impact 10.1 0.4 10.7 0.7 1.1
The net cash inflow from the disposal of this business during the thirdquarter comprises the cash consideration, net of disposal costs paid, of ‚£21.7million, less tax paid of ‚£0.9 million. The operational cash flows from thisbusiness were not significant to the Group.6. Earnings per shareBasic 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 granted toemployees where the exercise price is less than the average market price ofthe Company's ordinary shares during the period.
Earnings and the weighted average number of ordinary shares used in the calculations of earnings per share are set out below.
2006/7 Nine 2005/6 Nine months months 2005/6 Full unaudited unaudited year audited ‚£m ‚£m ‚£m Profit attributable toordinary shareholders 42.0 26.8 31.1 Number Number Number Weighted averagenumber of shares 363,258,777 362,721,889 362,729,711Dilutive effect of share options 1,326,090 174,179 376,557Diluted weightedaverage number of shares 364,584,867 362,896,068 363,106,268 7. Net financial liabilities 29th October 30th October 29th January 2006 2005 2006 unaudited unaudited audited ‚£m ‚£m ‚£m Cash and cash equivalents 31.8 40.0 40.5Unsecured loans and overdrafts (217.1) (263.0) (260.2)Net financial liabilitiesbefore preferenceshares and derivatives (185.3) (223.0) (219.7)Preference shares (111.2) (109.8) (110.2)Derivative financial instruments - (0.1) (0.2)Net financial liabilities (296.5) (332.9) (330.1) Net financial liabilities areanalysed in the balancesheet as follows: Current assetsCash and cash equivalents 31.8 40.0 40.5 Current liabilitiesBank overdrafts (2.9) (1.1) (4.9)7.2% US dollarGuaranteed Senior Notespayable 2006 - (87.1) (87.6)Other loans (0.1) (0.1) (0.1)Derivative financial instruments - (0.1) (0.2) (3.0) (88.4) (92.8) Non-current liabilitiesBank loans (93.1) (45.7) (37.9)5.3% US dollar GuaranteedSenior Notes payable 2010 (34.7) (37.1) (37.3)5.9% US dollar GuaranteedSenior Notes payable 2013 (83.7) (89.3) (89.8)Other loans (2.6) (2.6) (2.6)Preference shares (111.2) (109.8) (110.2) (325.3) (284.5) (277.8) 8. Provisions 29th October 30th October 2006 2005 29th January unaudited unaudited 2006 audited ‚£m ‚£m ‚£mCurrent:- reorganisation costs 1.3 - 3.1- dilapidation costs 0.1 0.1 0.1 Non-current:- reorganisation costs - - 0.2- dilapidation costs 1.0 0.9 0.9 2.4 1.0 4.3
9. Consolidated statement of changes in shareholders' equity
2006/7 Nine 2005/6 Nine 2005/6 Full months months year unaudited unaudited audited ‚£m ‚£m ‚£m Total equity atbeginning of year,as previously reported (18.4) 102.5 102.5Implementation of accountingfor financial instruments inaccordance with IAS 32 and IAS 39:- reclassification of preferenceshares as debt - (106.3) (106.3)- associated deferred tax - (4.7) (4.7)Total equity at beginning of year,as restated (18.4) (8.5) (8.5)Profit for the period 42.0 26.8 31.1Net gains and lossesrecognised directly in equity (1.8) (5.1) (10.3)Ordinary dividends declared (32.6) (32.6) (32.6)Ordinary shares issued 1.0 0.1 0.3Share-based payments 1.9 1.6 2.1Derivative financial instruments 0.2 (0.1) (0.2)SEC de-registration costs - (0.3) (0.3)Total equity at end of year (7.7) (18.1) (18.4) 10.Exchange ratesThe principal average exchange rates used to translate the Group's overseasprofits were as follows: 2006/7 2005/6 Third Third 2006/7 Nine 2005/6 Nine 2005/6 Full quarter quarter months months year US dollar 1.89 1.79 1.83 1.83 1.80Euro 1.48 1.47 1.46 1.46 1.46 11. Dividend
The preference share dividend for the six months ending 26th January 2007 will be paid on 26th January 2007 to preference shareholders on the register at close of business on 29th December 2006.
PREMIER FARNELL PLCRelated Shares:
PFL.L