6th Dec 2012 07:00
Premier Farnell plc 6 December 2012
Results for the Third Quarter and Nine Months of the 53 week
financial year ending 3 February 2013Key Financials £m Q3 12/13 Q3 11/12 Q3 9M 12/13 9M 11/12 9MContinuing operations £m £m Growth(a) £m £m Growth(a)(unaudited)Total revenue 233.5 241.8 -1.6% 712.7 739.7 -2.8%Adjusted operating 22.0 25.8 -10.4% 72.1 81.8 -9.2%profit(b) - (1.7) (7.9) 16.1Adjusting items(b) 22.0 24.1 -3.7% 64.2 97.9 -33.1%Total operating profitAdjusted profit before 17.3 21.1 -18.0% 57.0 68.2 -16.4%tax(b)Total profit before 17.3 19.4 -10.8% 49.1 84.3 -41.8%taxationAdjusted earnings per 3.4p 4.2p -19.0% 11.2p 13.4p -16.4%share (b)Basic earnings per 3.4p 3.8p -10.5% 9.6p 17.2p -44.2%shareFree cash flow(c) 3.5 14.2 -75.4% 36.5 24.2 50.8% Financial highlights
- Group third quarter year on year sales per day decline of 1.6%, unchanged from the second quarter, reflecting less favourable market conditions overall in September and October compared with the slight growth experienced in August.
- Latest market conditions reported by the SIA(d) show declines of 9.4% in Europe and 0.4% in Asia Pacific, with the Americas reporting growth for the first time since June 2011 of 2.6%, and AFDEC(d) reported a decline of 11.1% in the UK.
- Third quarter gross margin of 38.3% was down 0.2% from the second quarter as we continue to manage in line with market conditions.
- Operating expenses in line with prior year, after adjusting for the impact of the Embest acquisition, as cost actions offset the impact of cost increases.
- £4m of annualised cost savings were implemented early in thefourth quarter with a resultant £0.8m saving expected this year. Depending onour sales trajectory through the fourth quarter, further cost actions will betaken if momentum does not improve.
- Our return on sales, at 9.4% for the third quarter and 10.1% for the first nine months, remains industry leading.
- Operating cash generation(e) (excluding impact of adjusting items) was in line with our expectations at 83.6% of operating profit for the quarter and 111.5% year to date (2011/12: 85.7%).
Strategic highlights
- Our active customer base exited the third quarter up 2.3% on the prior year, excluding Raspberry Pi, compared with the second quarter of 1.0%, giving us confidence in future growth opportunities.
- Raspberry Pi sales in the quarter of £4.1m increased from £3.9m in the second quarter.
- MDD eCommerce penetration increased by 1.1 percentage points from the start of the year to the third quarter at 56.4% and exited at 57.3%.
- The element14 Community maintained its strong progress, receiving over 1.7million visits and adding more than 21,000 new registered users in thequarter, with total registered users now over 138,000. Engagement on the siteincreased with over 100,000 interactions per week by the end of the quarter.
- Emerging markets' sales grew 14.2% in the quarter benefitting from the integration of our Embest acquisition (6.4% growth excluding Embest), and now represent 9.2% of total MDD sales.
- Our multichannel sales transformation continues with our Krakow contact centre now officially opened.
Commenting on the results, Laurence Bain, Group Chief Executive, said:
"After seeing a slightly positive start to the quarter in August,market conditions remained volatile in September and October and we saw yearon year sales declines in those months. As a result, our third quarter salesdeclined 1.6%, in line with that reported in the second quarter. In November,year on year trends in our MDD Europe and APAC region improved slightly, butthe MDD Americas performance declined, partly as a result of the impact ofHurricane Sandy. After adjusting for Sandy, Group year on year sales declined3.2% in November. We continued to manage gross margin as we developinitiatives to meet customer needs in this challenging environment. Keepingour cost base flat year on year has enabled us to continue to achieve anindustry leading return on sales, 9.4% for the quarter and 10.1% for the firstnine months. Our cash performance remains strong, demonstrating the resilienceof our business model in challenging markets.With global conditions continuing to be uncertain, and with verylimited forward order visibility, we have executed cost actions in the fourthquarter which will deliver annualised savings of £4m. In addition, dependingon our sales trajectory through the fourth quarter, further cost actions willbe taken if momentum does not improve. The continued strength of our balancesheet, our growing active customer base and the ongoing evolution of ourcustomer proposition, all give us confidence in our ability to weather thecurrent market challenges while building for future growth.''
For further information, contact:
Laurence Bain, Chief Executive Premier Farnell plc +44 (0) 20 7851 4100 Officer
Mark Whiteling, Chief FinancialOfficerThomas Churchill, InvestorRelationsAndrew Lorenz FTI Consulting +44 (0) 20 7269 7291Richard MountainPremier Farnell's announcements and presentationsare published at www.premierfarnell.com together with business information andlinks to all other Group web sites.The results for the fourth quarter of the 53 weekfinancial year ending 3 February 2013 will be announced on 21 March 2013.
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) Current year adjusted operating profit, profit before tax, andearnings per share in the table above exclude restructuring costs of £7.5m (inthe first quarter) and acquisition costs of £0.4m related to the purchase ofthe entire share capital of Shenzhen Embest Technology Co Ltd (Embest) (in thesecond quarter). In the prior year, adjusted operating profit, profit beforetax, and earnings per share, excluded the gain on sale of TPC Wire & Cable(pre-tax gain of £17.8m), the gain on sale of Newark's calibration servicesbusiness of £1.1m and exclude restructuring costs of £2.8m.(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 excludesnet proceeds from the sale of businesses.
(d) SIA data from Semiconductor Industry Association publication, AFDEC data from Association of Franchised Distributors of Electronic Components, PMI data from relevant Purchasing Managers Index published source in each market.
(e) Operating cash flow (before capital expenditure) as a percentage of adjusted operating profit.
Divisional AnalysisRevenue Q3 12/13 Q3 11/12 Q3 9M 12/13 9M 11/12 9M £m £m Growth £m £m GrowthUK 27.8 30.0 -7.3% 87.8 92.2 -4.8%Rest of Europe 56.2 61.8 -2.4% 176.1 197.3 -5.1%APAC (1) 16.8 15.7 8.4% 50.1 48.8 2.1%MDD Europe & APAC 100.8 107.5 -2.2% 314.0 338.3 -4.0%MDD Americas 89.6 93.1 -3.6% 269.7 281.4 -5.2%MDD Other 26.3 25.6 2.5% 77.8 73.6 5.1%MDD Division 216.7 226.2 -2.3% 661.5 693.3 -3.5%IPD Division 16.8 15.6 8.1% 51.2 46.4 8.3%Group 233.5 241.8 -1.6% 712.7 739.7 -2.8%Adjusted Operating Q3 12/13 Q3 11/12 Q3 9M 12/13 9M 11/12 9MProfit/Return on Sales £m £m Growth £m £m GrowthMDD Europe & APAC(2) 13.0 16.1 -12.6% 46.4 53.9 -9.0% 12.9% 15.0% 14.8% 15.9%MDD Americas(3) 6.5 7.9 -17.6% 19.7 24.2 -19.8% 7.3% 8.5% 7.3% 8.6%MDD Other(4) 2.6 2.5 4.2% 7.5 6.7 11.8% 9.9% 9.8% 9.6% 9.1%MDD Division(5) 22.1 26.5 -12.5% 73.6 84.8 -10.5% 10.2% 11.7% 11.1% 12.2%IPD Division(6) 2.9 2.5 16.6% 8.5 7.1 17.3% 17.3% 16.0% 16.6% 15.3%Head office costs(7) (3.0) (3.2) -6.2% (10.0) (10.1) -1.1%Group 22.0 25.8 -10.4% 72.1 81.8 -9.2% 9.4% 10.7% 10.1% 11.1%Notes:
(1) Current year includes the results of Embest post acquisition on 26 June 2012 (excluding Embest: Q3 -0.5%,
9M -1.5%)
(2) Current year adjusted to exclude impact of £6.9m restructuring costs (Q1)and £0.4m of acquisition costs (Q2) and prior year adjusted to exclude £2.2mof restructuring costs
(3) Current year adjusted to exclude impact of £0.6m restructuring costs (Q1) and prior year adjusted to exclude impact of gain on sale of Calibration services business £1.1m and £0.3m of restructuring costs
(4) Prior year adjusted to exclude £0.1m of restructuring costs
(5) Current year adjusted to exclude impact of £7.5m restructuring costs (Q1)and £0.4m of acquisition costs (Q2) and prior year adjusted to exclude impactof gain on sale of Calibration services business £1.1m and £2.6m ofrestructuring costs
(6) Prior year adjusted to exclude impact of gain on sale £17.8m of TPC Wire & Cable
(7) Prior year adjusted to exclude £0.2m of restructuring costs
Results for the Third Quarter of the 53 week financial year ending 3
February 2013
Introduction
In the third quarter, year on year sales per day performanceimproved compared to the second quarter in our main MDD geographic regions,other than the UK, despite the impact of the challenging global electronicsmarket. The Semiconductor Industry Association (SIA), an indicator forelectronics growth trends, saw the global industry contract by 2.3% year onyear in the three months to October with Europe and Asia Pacific down 9.4% and0.4%, respectively, and with the Americas reporting growth for the first timesince June 2011 of 2.6% compared with the 3.9% decline reported for the threemonths to September.
Our continued gross margin management and cost control has enabled us to achieve industry leading return on sales, 9.4% for the quarter and 10.1% for the nine month period.
SalesThird quarter Group year on year sales per day declined 1.6%,unchanged from the second quarter. The stable sales per day we had seen in theprior four quarters was impacted this quarter by normal seasonality due to theSummer holiday period, although sales per day improved through the quarter.Within our MDD Division the Americas' sales per day was flatsequentially on Q2, a strong performance given the expected seasonal decline.Sales per day declined 3.6% compared to the prior year, an improvement of 0.5percentage points against the year on year decline in the second quarter.
On a year on year basis sales per day for Europe as a whole performed similarly to the second quarter, with a year on year reduction of 4.0%, outperforming the challenging electronics market and growing market share. This compares to the overall European market reported by DMASS (Distributors and Manufacturers Association of Semiconductor Specialists) which reported a decline of 6.0% for the calendar third quarter. Europe outside the UK improved from a 5.2% decline in the second quarter to a 2.4% decline in the third quarter.
In the third quarter UK sales per day fell 7.3% year on year. This compares to the most recent data from the Association of Franchised Distributors of Electronic Components (AFDEC) which reported a decline of 11.1% for the equivalent period.
Against the backdrop of PMI manufacturing readings below 50 in allour Asia Pacific markets except for India and Indonesia, sales per day for theregion reduced by only 0.5% in the quarter (excluding Embest), an improvementof 3.7 percentage points on the equivalent 4.2% decline experienced in thesecond quarter. The acquisition of Embest in the second quarter helped drivetotal APAC sales growth in the third quarter to +8.4% as we embed thisbusiness and begin to benefit from its strategic significance.
Third quarter sales per day from our emerging markets grew 14.2% in the period (6.4% excluding Embest) and now represent 9.2% of global MDD sales.
Our Other Distribution Businesses again performed strongly, withCPC again delivering year on year growth, at 1.9% in the third quarter,despite seeing a sequential sales decline, having benefited from the run up tothe Olympics. CPC's growth is being driven by web-focused customer acquisitionand the introduction of new products sourced globally.Encouragingly, given the weak US consumer electronics market, MCMreturned to 4.5% year on year sales growth in the third quarter in part drivenby the release of its enhanced new catalogue. MCM is now benefiting fromincreased collaboration with CPC and its initiatives to increase focus on theweb, targeted product segments and new product introductions.In the Industrial Products Division, Akron Brass continued toperform strongly, with sales up 8.1% versus the prior year. Akron Brass hasenefited from the ongoing development of its strategic focus on Internationalmarkets and new product areas, whilst early signs of stabilisation in home USmarkets give cause for optimism over the longer term.
Gross margin
Third quarter gross margin of 38.3% was down 0.2% from the second quarter as we develop initiatives that support our customer needs in the current environment. Year on year gross margin performance improved from the second quarter with the year on year reduction down from 1.3% in the second quarter to 0.3% in the third quarter. The successful launch in the second quarter of our lower margin, but strategic, Raspberry Pi product again impacted gross margin by 0.3 percentage points. Gross margin management remains a key area of focus for all of our businesses across the economic cycle.
Costs
The Group continues to manage its cost base both strategically, taking advantage of the globalisation of our business model and efficiencies arising from increased eCommerce activity, and tactically, in response to sales volumes.
At constant exchange rates, third quarter net operating expenseswere flat year on year, after excluding the impact of the Embest acquisitionwhich incurred £0.5m of net operating expenses in the quarter. This resultedin net operating expenses at 28.9% of sales compared with 28.4% in the secondquarter, reflecting the slightly lower sales. This performance reflects thecost actions put in place over recent quarters as the impact of inflationaryincreases is absorbed.As the market environment continues to be challenging and inanticipation of continuing inflationary pressures, early in the fourth quarterwe took actions to reduce costs by £4m pa, through the reduction of 41 heads.These actions will reduce this year's operating expenses by £0.8m with one-offcosts of £1.3m recognised in the fourth quarter.
Return On Sales/Profitability
Focus on the implementation of our strategy, gross margin, and costmanagement, has allowed the Group to deliver industry leading return on salesthroughout the period since our strategy began. Despite the ongoing weaknessin our markets, we delivered third quarter return on sales of 9.4%. The 0.7percentage point reduction from the second quarter return on sales reflectsthe 0.2% decline in gross margin and the impact of operational leverage on thesequentially lower sales in the quarter. Year to date, the Group's return onsales was 10.1%.
Actions across the Group to drive strategic cost efficiencies, alongside continued focus on maximising gross margin relative to market conditions, will protect profitability in the short term and position the business to leverage our significant long term profitable growth opportunities.
Despite sales per day growth being unchanged sequentially, in the third quarter return on sales from MDD Americas improved by 0.3 percentage points over the second quarter indicating positive strategic progress. Our North American business continues to show improvements to its customer focussed strategic metrics and, with focus on gross margin and costs, and whilst its markets remain very challenging, it is well positioned to optimise the impact of recovery in its underlying markets.
Primarily as a consequence of the impact of operational leverage onthe sequentially lower sales in the third quarter the return on sales from ourEuropean and APAC businesses reduced sequentially from 14.7% in the secondquarter to 12.9%. The regions continue to make strategic progress and marketshare gains across the quarter which, combined with growth in the activecustomer base and the strategic cost actions we are taking, gives confidencein the recovery of returns from these markets as conditions improve.
Cash Flow/Balance Sheet
Third quarter cash conversion of 83.6% (2011/12: 103.1%) was inline with our expectations. The year to date conversion at 111.5% (2011/12:85.7%) reflects ongoing focus on the management of working capital. In thethird quarter the Group's inventory levels decreased by £2.5m (at constantexchange rates), despite investment of £5.5m in new products across thetechnology spectrum, as we rebalance our inventory profile through thereduction of slower moving items following our £12.2m investment in the secondquarter. We anticipate that by the year end our inventory levels will be backto those seen at the start of the second quarter.In the third quarter, after payment of the interim dividend, netfinancial liabilities (including preference shares) increased to £243.6m from£234.3m in the prior quarter. The impact of exchange rates in the period wasto reduce net financial liabilities by £6.1m, principally in relation to ourUS$ denominated private placement notes.
Net debt to EBITDA of 2.1 at the end of the third quarter increased from 2.0 in the prior quarter primarily as a result of the timing of the interim dividend payment.
Premier Farnell's financial position remains robust with goodliquidity and strong free cash flow. At the quarter end, our headroom on bankborrowings was £180m under facilities in place until October 2016. Thisheadroom, combined with our net cash position of £108.8m, gives us a securefunding position.
In the third quarter the Group explored the possibility of early repayment of its $159m 2013 USPP notes at terms attractive to the Group. Debt market conditions make settlement on these terms unattractive to the note-holders and as such the notes will remain in issue until planned repayment in June 2013.
Foreign Currency Impact
A one cent movement in the exchange rate between the US dollar andsterling impacts the Group's operating profit by approximately £250,000 perannum, and a one cent movement in the exchange rate between the Euro andsterling impacts the Group's operating profit by approximately £500,000 perannum. There was a detrimental impact on adjusted operating profit for thequarter of £1.2m from the translation of overseas results compared with theprior year.Finance Costs
Net finance costs in the third quarter were £4.7m (2011/12: £4.7m). This comprises net interest payable of £3.6m (2011/12: £3.6m), which was covered 6.1 times by adjusted operating profit, and a net charge of £1.1m (2011/12: £1.1m) in respect of the Company's convertible preference shares.
Profit Before Tax
Total profit before tax in the third quarter was £17.3m (2011/12:£19.4m), a decrease of 10.8% on the previous year and a decrease of 18.0% onan adjusted basis. No adjusting items occurred in the third quarter this yearbut restructuring costs of £2.8m and the gain on sale of Newark's calibrationservices business of £1.1m occurred in the comparable prior year period.
Tax
The effective tax rate of the Group is 27.5% of profit before tax after adding back preference dividends charged within finance costs. The underlying effective tax rate of 27.5% is unchanged from the prior year.
Earnings Per Share
Adjusted basic earnings per share for the third quarter are 3.4p (2011/12: 4.2p). Basic earnings per share after the net impact of one-off items are 3.4p (2011/12: 3.8p).
Pensions
As a consequence of offering to buy out the pension rights ofdeferred members of the Group's US defined benefit pension plan, the Group isexpected to reduce its US net pension liability by approximately £3.7m in thefourth quarter, which will be recorded as a one-off gain through the incomestatement. In addition, this option will help reduce the future risk of the
USPlan.StrategyWhilst global economic and market conditions remain uncertain andchallenging we remain focused on managing the implementation of our strategictransformation. Our strategy has delivered industry leading returns throughoutits implementation and, as we continue to increase our focus on meeting ourcustomers' requirements and delivering our multi channel sales strategy, wealso target further progression in growth and share relative to the market andour competitors.Through the third quarter we delivered a year on year increase inour active customer base of 2.3%, excluding Raspberry Pi, demonstrating theability of our proposition to attract new customers whatever the marketenvironment. We continue to see progress in our customer service metrics withour Net Promoter Score (our internal customer satisfaction metric) increasingthrough the year.
The strength of our customer proposition was increased further in the third quarter with the signing of a new global franchise agreement with the Lattice Semiconductor Corporation, the leading provider of innovative, low cost, low power, programmable semiconductors and power management design solutions.
Our global multi channel sales strategy continues to strengthen. Our European contact centre in Krakow has now formally opened and is fully operational and is already delivering the expected benefits in customer service and marketing. At the end of the financial year we will commence the phased roll out of our new web platform which will deliver significant benefits to our customers and further improve operational efficiency. This will accelerate progress towards our goal of being a digitally focussed enterprise from our current eCommerce penetration in the third quarter of 56.4%, up 1.1 percentage points since the start of the year and exiting the quarter at 57.3%.
The element14 community remains a vibrant and differentiatingsource for electronic design engineers as they collaborate and source theessential information they require in their work. In the third quarter theCommunity received over 1.7 million visits, maintaining the strong progressseen since the launch of Raspberry Pi, as it saw over 95,000 communityinteractions each week, reaching over 100,000 by the end of the quarter, andadded more than 21,000 registered users, with total registered users now over138,000. The Community's innovative approach to customer interaction wasrewarded with awards from Forrester Research Inc. and JiveWorld.Raspberry Pi continues to attract a large number of relevant newcustomers to our proposition, helped by the launch of the new double memory512MB board, with sales strengthening further from the second quarter to£4.1m, and demand exceeding supply. Sales of this revolutionary, credit-cardsized computer have to date attracted 197,000 new customers and contributed tothe significant increase in activity of our community websites, helpingPremier Farnell win the Makey award for "best education/outreach program"against competition including Intel, NASA and Autodesk. The lower marginimpact of Raspberry Pi will diminish as we add a range of higher marginassociated products such as the Gertboard and Pi-Face.Following our second quarter acquisition, Embest, a provider ofembedded development tools based in China, has integrated well into the Groupand has already shown strategic value as part of our services beyond productwork with suppliers such as STMicroelectronics and NXP. In addition, thelaunch of the Freescale Freedom Development Platform earlier this year hasfurther enhanced the product offering we can provide to the design engineeringcommunity. The success of this launch saw Premier Farnell receive four awardsfrom Freescale at the recent Electronica 2012 Fair in Munich. We continue towork closely with Freescale, leveraging Embest's expertise in the embeddedspace. Embest will also be a key supplier of Raspberry Pi associated products.This, together with our element14 community, our unique on line engineerdesign portal, the Knode, and our 40+ transactional sites now provide truesolution partner support to our customers and our suppliers.
Board Changes
On 5 November, Mark Whiteling rejoined the Company and Board asChief Financial Officer. Nicholas Cadbury left the company on 13 November andthe Group would like to thank Nicholas for his contribution whilst at PremierFarnell.OutlookAfter seeing a slightly positive start to the quarter in August,market conditions remained volatile in September and October and we saw yearon year sales declines in those months. As a result, our third quarter salesdeclined 1.6%, in line with that reported in the second quarter. In November,year on year trends in our MDD Europe and APAC region improved slightly, butthe MDD Americas performance declined, partly as a result of the impact ofHurricane Sandy. After adjusting for Sandy, Group year on year sales declined3.2% in November. We continued to manage gross margin as we developinitiatives to meet customer needs in this challenging environment. Keepingour cost base flat year on year has enabled us to continue to achieve anindustry leading return on sales, 9.4% for the quarter and 10.1% for the firstnine months. Our cash performance remains strong, demonstrating the resilienceof our business model in challenging markets.With global conditions continuing to be uncertain, and with verylimited forward order visibility, we have executed cost actions in the fourthquarter which will deliver annualised savings of £4m. In addition, dependingon our sales trajectory through the fourth quarter, further cost actions willbe taken if momentum does not improve. The continued strength of our balancesheet, our growing active customer base and the ongoing evolution of ourcustomer proposition, all give us confidence in our ability to weather thecurrent market challenges while building for future growth.Key Performance Indicators Long-term Goal Achieved in Q3Sales per day growth 6-8% -1.6%Gross margin % Stability 38.3%Return on sales % 12%-15% 9.4%Return on net operating assets % >30% 34.6%Working capital as a % of sales
- adjusted operating expenses (67.4) (67.5) (205.1) (212.0) (277.7)- adjusting items 4 - (1.7) (7.9) 16.1 16.1Total net operating expenses (67.4) (69.2) (213.0) (195.9) (261.6)Operating profit- adjusted operating profit 3 22.0 25.8 72.1
81.8 107.3- adjusting items 4 - (1.7) (7.9) 16.1 16.1Total operating profit 3 22.0 24.1 64.2 97.9 123.4Finance income 0.1 - 0.4 - 0.1Finance costs- interest payable (3.7) (3.6) (12.2) (10.3) (14.6)- preference dividends (0.9) (0.9) (2.7) (2.7) (3.5)- premium on redemption ofpreference shares (0.2) (0.2) (0.6) (0.6) (0.8)Total finance costs (4.8) (4.7) (15.5) (13.6) (18.9)Profit before taxation 17.3 19.4 49.1 84.3 104.6Taxation 5 (5.0) (5.7) (14.2) (21.9) (27.7)Profit for the period attributableto ordinary shareholders 12.3 13.7 34.9 62.4 76.9 Earnings per share 6Basic 3.4p 3.8p 9.6p 17.2p 21.2pDiluted 3.3p 3.7p 9.5p 16.9p 20.9p Ordinary dividendsInterim - proposed 4.4p 4.4p 4.4pFinal - proposed 6.0pPaid 10.4p 10.4p 10.4p
Impact on shareholders' funds (£m) 37.9
37.8 37.8
Condensed Consolidated Statementof Comprehensive Income For the third quarter and nine monthsended 28 October 2012 2012/13 2011/12 2012/13 2011/12 2011/12 Third Third Nine Nine Full quarter quarter months months year
unaudited unaudited unaudited unaudited audited
£m £m £m £m £m
Profit for the period attributable to ordinary shareholders
12.3 13.7 34.9 62.4 76.9
Net exchange adjustments
1.2 (0.2) (0.6) (0.1) 0.4 Recycling of cumulative translation adjustments on disposal of subsidiary undertaking
- - - (0.8) (0.8)Actuarial gains/(losses) on pensions and otherpost-retirement obligations
2.0 (3.9) (12.7) (8.4) (10.0) Deferred tax (charge)/credit on actuarial gains/(losses) on pensions and other post retirement obligations
(0.7) 1.2 3.8 2.5 2.5Deferred tax charge on share based payments - - - - (2.3)Net fair value (losses)/gains on hedges (1.5) - (2.0) (0.4) 2.2Other comprehensive income/(expense) for the period
1.0 (2.9) (11.5) (7.2) (8.0)
Total comprehensive income for the periodattributable to ordinary shareholders
13.3 10.8 23.4 55.2 68.9 The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Condensed Consolidated Balance Sheet
As at 28 October 2012 28 October 30 October 29 January 2012 2011 2012 unaudited unaudited audited Notes £m £m £mASSETSNon-current assetsGoodwill 37.4 34.3 34.3Other intangible assets 30.2 28.7 26.9
Property, plant and equipment 54.6 52.6
57.4Deferred tax assets 11.8 15.0 10.5Total non-current assets 134.0 130.6 129.1 Current assetsInventories 224.9 224.4 214.5Financial assets 7 0.4 - 2.3Trade and other receivables 137.6 148.5 139.5Current tax receivable 1.0 - 1.0Cash and cash equivalents 7 108.8 62.8 116.9Total current assets 472.7 435.7 474.2 LIABILITIESCurrent liabilitiesFinancial liabilities 7 (101.7) (1.8) (1.3)Trade and other payables (125.6) (123.6) (113.4)Current tax payable (14.6) (22.9) (15.6)Total current liabilities (241.9) (148.3) (130.3) Net current assets 230.8 287.4 343.9 Non-current liabilitiesFinancial liabilities 7 (251.1) (317.8) (355.0)
Retirement and other post-employment benefits (53.9) (42.6)
(43.8)Deferred tax liabilities (3.9) (3.5) (6.4)Total non-current liabilities (308.9) (363.9) (405.2) NET ASSETS 55.9 54.1 67.8 EQUITYOrdinary shares 18.5 18.5 18.5
Equity element of preference shares 10.4 10.4
10.4Share premium 31.9 31.1 31.1Capital redemption reserve 4.4 4.4 4.4Hedging reserve (0.6) (1.2) 1.4
Cumulative translation reserve 19.0 19.1
19.6Retained earnings (27.7) (28.2) (17.6)TOTAL EQUITY 55.9 54.1 67.8
Consolidated Statement of changes in Equity
For nine months ended 28 October 2012
2012/13 2011/12 2011/12 Nine Nine Full months months year unaudited unaudited audited £m £m £m Total equity at beginning of period 67.8 38.4 38.4 Profit for the period 34.9 62.4 76.9Other comprehensive expense (11.5) (7.2) (8.0)Total comprehensive income 23.4 55.2 68.9 Transactions with owners:Ordinary dividends paid (37.9) (37.8) (37.8)Ordinary share capital subscribed 0.8 2.7 2.7Purchase of ordinary shares - (5.8) (5.8)Share-based payments 1.8 1.4 1.4Total transactions with owners (35.3) (39.5)
(39.5)
Total equity at end of period 55.9 54.1
67.8
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Condensed Consolidated Statementof Cash Flows For the third quarter and nine monthsended 28 October 2012 2012/13 2011/12 2012/13 2011/12 2011/12 Third Third Nine Nine Full quarter quarter months months year
unaudited unaudited unaudited unaudited audited
Notes
£m £m £m £m £m
Cash flows from operating activitiesOperating profit 3 22.0 24.1 64.2 97.9 123.4Adjusting items:- net income statement impact 4 - 1.7 7.9 (16.1) (16.1)- cash impact (1.6) (1.2) (4.7) (1.2) (2.2)Non cash impact of adjusting items (1.6) 0.5 3.2 (17.3) (18.3)Depreciation and amortisation 4.5 5.0 13.7 13.7 18.2Changes in working capital (8.0) (4.0) (5.3) (24.5) (13.6)Additional funding for post retirementdefined benefit plans (0.8) (0.9) (2.3) (2.4) (3.4)Other non-cash movements 0.7 0.7 2.2 1.5 1.7Total cash generated from operations 16.8 25.4 75.7 68.9 108.0Interest received 0.1 - 0.4 - 0.1Interest paid (1.2) (1.1) (9.0) (7.0) (11.0)
Dividends paid on preference shares - - (1.8) (1.8) (3.5)Taxation paid (7.6) (5.6) (17.0) (20.4) (26.9)Net cash generated from operating activities
8.1 18.7 48.3 39.7 66.7
Cash flows from investing activitiesNet (outflow) / inflow from disposal ofbusinesses (net of tax paid) - (0.3) - 24.6 23.2Net outflow from purchase of business (0.1) - (2.8) - -Purchase of property, plant and equipment (2.1) (2.8) (5.1) (5.3) (9.1)Purchase of intangible assets (computer software) (4.1) (2.9) (11.4) (11.4) (12.6)Net cash (used in)/generated from investing activities
(6.3) (6.0) (19.3) 7.9 1.5
Cash flows from financing activitiesPurchase of ordinary shares - - - (5.8) (5.8)Issue of ordinary shares 0.2 - 0.8 2.7 2.7New borrowings 0.5 51.8 0.7 79.1 174.6Repayment of borrowings - (39.5) - (58.2) (118.9)Dividends paid to ordinary shareholders (16.1) (16.0) (37.9) (37.8) (37.8)Net cash (used in)/generated fromfinancing activities
(15.4) (3.7) (36.4) (20.0) 14.8
Net (decrease)/increase in cash, cashequivalents and bank overdrafts (13.6) 9.0 (7.4) 27.6 83.0Cash, cash equivalents and bank overdraftsat beginning of period 123.7 50.6 116.9 33.4 33.4Exchange gains/(losses) (1.3) 3.2 (0.7) 1.8 0.5Cash, cash equivalents and bankoverdrafts at end of period
108.8 62.8 108.8 62.8 116.9
Reconciliation of net financial liabilitiesNet financial liabilities at beginning of period (237.1) (262.9) (262.9)Net (decrease)/increase in cash, cashequivalents and bank overdrafts (7.4) 27.6 83.0Increase in debt (0.7) (20.9) (55.7)Premium on redemption of preference shares (0.6) (0.6) (0.8)Derivative financial instruments (1.6) - 3.2Amortisation of arrangement fees (0.8) (1.4) (2.1)Exchange movement 4.6 1.4 (1.8)Net financial liabilities at end of period 7 (243.6) (256.8) (237.1)
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Notes
1 Basis of preparation
The unaudited condensed consolidated financial information in this report has been prepared based on International
Financial Reporting Standards (IFRSs), as adopted by the European Union,
and applying the accounting policies disclosed in the Group's 2012 Annual Report and Accounts on pages 122 to 125
except as described below.
There are no new standards or amendments to standards that are mandatory for the first time in the current financial
year which have had a significant impact upon the Group.
This condensed consolidated financial information does not comprise statutory accounts within the meaning of Section
498 of the Companies Act 2006. Statutory accounts for the financial year
ended 29 January 2012, were approved by the board of directors on 19 April 2012 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified
and did not contain any statement under Section 237 of the Companies Act 1985. Copies of the Company's Annual Report
and Accounts are available from Premier Farnell plc, 150 Armley
Road, Leeds, LS12 2QQ, England, or from the Company's website at www.premierfarnell.com. 2 Acquisition
On 26 June 2012, the Group completed its acquisition of the entire issued share capital of Shenzhen Embest Technology
Co Ltd (Embest), a leading provider of embedded system development boards and tools, as well as design engineering
services.
Of the total consideration of £3.4 million, £0.2 million relates to the provisional fair value of net assets acquired
and £3.2 million relates to goodwill attributable to the future profitability of the business. The total consideration
includes deferred consideration of £0.8 million dependent on the performance of the acquired business over the next
two years.
In accordance with IFRS 3 Business Combinations, acquisition costs of £0.4 million have been charged to administrative
expenses and shown as an adjusting item in the consolidated income statement for the period.
Both the trading results of Embest for the period since acquisition, and also for the period since the start of the
financial year had the acquisition taken place on that date, are not material to the Group's results. 3 Segment information
2012/13 Third quarter unaudited
2011/12 Third quarter unaudited
Adjusting Adjusting Before items After Before items After adjusting adjusting adjusting adjusting items (Note 4) items items (Note 4) items £m £m £m £m £m £m Revenue
Marketing and Distribution Division
Americas 89.6 - 89.6
93.1 - 93.1
Europe and Asia Pacific 100.8 - 100.8
107.5 - 107.5
Other Distribution Businesses 26.3 - 26.3
25.6 - 25.6
Total Marketing and Distribution Division 216.7 - 216.7
226.2 - 226.2 Industrial Products Division 16.8 - 16.8 15.6 - 15.6 233.5 - 233.5 241.8 - 241.8 Operating profit
Marketing and Distribution Division
Americas 6.5 - 6.5
7.9 0.8 8.7
Europe and Asia Pacific 13.0 - 13.0
16.1 (2.2) 13.9
Other Distribution Businesses 2.6 - 2.6
2.5 (0.1) 2.4
Total Marketing and Distribution Division 22.1 - 22.1
26.5 (1.5) 25.0
Industrial Products Division 2.9 - 2.9
2.5 - 2.5 Head Office costs (3.0) - (3.0) (3.2) (0.2) (3.4) 22.0 - 22.0 25.8 (1.7) 24.1 2012/13 Nine months unaudited
2011/12 Nine months unaudited
Adjusting Adjusting Before items After Before items After adjusting adjusting adjusting adjusting items (Note 4) items items (Note 4) items £m £m £m £m £m £m Revenue
Marketing and Distribution Division
Americas 269.7 - 269.7
281.4 - 281.4
Europe and Asia Pacific 314.0 - 314.0
338.3 - 338.3
Other Distribution Businesses 77.8 - 77.8
73.6 - 73.6
Total Marketing and Distribution Division 661.5 - 661.5
693.3 - 693.3 Industrial Products Division 51.2 - 51.2 46.4 - 46.4 712.7 - 712.7 739.7 - 739.7 Operating profit
Marketing and Distribution Division
Americas 19.7 (0.6) 19.1
24.2 0.8 25.0
Europe and Asia Pacific 46.4 (7.3) 39.1
53.9 (2.2) 51.7
Other Distribution Businesses 7.5 - 7.5
6.7 (0.1) 6.6
Total Marketing and Distribution Division 73.6 (7.9) 65.7
84.8 (1.5) 83.3 Industrial Products Division 8.5 - 8.5 7.1 17.8 24.9 Head Office costs (10.0) - (10.0) (10.1) (0.2) (10.3) 72.1 (7.9) 64.2 81.8 16.1 97.9
3 Segment information (continued)
2011/12 Full year audited Adjusting Before items After adjusting adjusting items (Note 4) items £m £m £m
Revenue
Marketing and Distribution Division
Americas 369.1 - 369.1 Europe and Asia Pacific 443.1 - 443.1 Other Distribution Businesses 99.4 - 99.4 Total Marketing and Distribution Division 911.6 - 911.6 Industrial Products Division 61.5 - 61.5 973.1 - 973.1 Operating profit
Marketing and Distribution Division
Americas 31.3 0.8 32.1 Europe and Asia Pacific 71.0 (2.2) 68.8 Other Distribution Businesses 9.3 (0.1) 9.2 Total Marketing and Distribution Division 111.6 (1.5) 110.1 Industrial Products Division 9.5 17.8 27.3 Head Office costs (13.8) (0.2) (14.0) 107.3 16.1 123.4 4 Operating profit 2012/13 2011/12 2012/13 2011/12 2011/12
Statutory operating profit is stated after
(charging)/crediting the following: Third Third Nine Nine Full quarter quarter months months year unaudited unaudited unaudited unaudited audited £m £m £m £m £m - Restructuring costs - (2.8) (7.5) (2.8) (2.8) - Acquisition costs - - (0.4) - - - Gains on disposal of businesses - 1.1 - 18.9 18.9 - (1.7) (7.9) 16.1 16.1
Due to their significance and nature, adjusted operating expenses and adjusted operating profit has been disclosed on
the face of the income statement which exclude these items above. 5 Taxation
The taxation charge represents an effective tax rate for the 2012/13 financial year on profit before tax and
preference dividends of 27.5% (2011/12: 27.5% before tax on gains from business disposals). 6 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders for the period by
the weighted average number of ordinary shares in issue during the period, excluding those shares held by the Premier
Farnell Executive Trust. For diluted earnings per share, the weighted average number of ordinary shares in issue is
adjusted to assume issue of all dilutive potential ordinary shares, being those share options and awards with a
non-market based performance condition granted to employees where the exercise price is less than the average market
price of the Company's ordinary shares during the period, and those shares with a market based performance condition
based on the current estimate of the number of shares that will vest under the performance criteria.
Reconciliations of earnings and the weighted average number of ordinary shares used in the calculations are set out
below. 2012/13 2011/12 Nine months unaudited Nine months unaudited Basic Diluted Basic Diluted per per per per share share share share Earnings amount amount Earnings amount amount £m pence pence £m pence pence
Earnings per share
Profit attributable to ordinary shareholders 34.9 9.6
9.5 62.4 17.2 16.9
Restructuring costs 7.5 2.1
2.1 2.8 0.7 0.8
Tax attributable to restructuring costs (2.1) (0.6)
(0.6) (0.7) (0.2) (0.2)
Acquisition costs 0.4 0.1 0.1 - - - Tax attributable to acquisition costs (0.1) - - - - - Gains on disposal of businesses - -
- (18.9) (5.2) (5.1)
Tax on gains on disposal of businesses - -
- 3.2 0.9 0.9
Adjusted profit attributable to ordinary shareholders 40.6 11.2
11.1 48.8 13.4 13.3 Number Number Weighted average number of shares 364,122,334 363,000,958 Dilutive effect of share options 3,069,651 5,230,907 Diluted weighted average number of shares 367,191,985 368,231,865 6 Earnings per share (continued) 2011/12 Full year audited Basic Diluted per per share share Earnings amount amount £m pence pence Earnings per share
Profit attributable to ordinary shareholders 76.9 21.2
20.9
Restructuring costs 2.8 0.7
0.7
Tax attributable to restructuring costs (0.7) (0.2)
(0.2)
Gains on disposal of businesses (18.9) (5.2)
(5.1)
Tax on gains on disposal of businesses 3.2 0.9
0.9
Adjusted profit attributable to ordinary
shareholders 63.3 17.4 17.2 Number Weighted average number of shares
363,091,496
Dilutive effect of share options
4,952,153
Diluted weighted average number of shares
368,043,649
Adjusted Earnings per share has been provided in order to facilitate year on year comparison.7 Net financial liabilities 28 October 30 October 29 January 2012 2011 2012 unaudited unaudited audited £m £m £m Cash and cash equivalents 108.8 62.8 116.9 Unsecured loans and overdrafts (289.6) (256.8) (294.2) Net financial liabilities before preference shares and derivatives (180.8) (194.0) (177.3) Preference shares (62.4) (61.6) (61.8) Derivative financial instruments (net) (0.4) (1.2) 2.0 Net financial liabilities (243.6) (256.8) (237.1) Net financial liabilities are analysed in the balance sheet as follows: Current assets Cash and cash equivalents 108.8 62.8 116.9 Derivative financial instruments 0.4 - 2.3 109.2 62.8 119.2 Current liabilities Other loans (1.7) (0.6) (1.0) 5.9% US dollar Guaranteed Senior Notes payable 2013 (99.2) - - Derivative financial instruments (0.8) (1.2) (0.3) (101.7) (1.8) (1.3) Non-current liabilities Bank loans (18.5) (78.9) (18.9) 5.9% US dollar Guaranteed Senior Notes payable 2013 - (99.3) (100.8) 3.0% US dollar Guaranteed Senior Notes payable 2016 (53.0) (53.5) (54.0) 5.2% US dollar Guaranteed Senior Notes payable 2017 (18.8) (18.9) (19.1) 4.4% US dollar Guaranteed Senior Notes payable 2018 (36.3) - (37.0) 4.8% US dollar Guaranteed Senior Notes payable 2021 (56.7) - (57.8) Other loans (5.4) (5.6) (5.6) Preference shares (62.4) (61.6) (61.8) (251.1) (317.8) (355.0)
At 28 October 2012, the Group's syndicate bank facilities totalled £200 million expiring in October 2016. Based on
these facilities, the headroom on bank borrowings at 28 October 2012 was £180 million.
8 Pension commitments
The valuation of the Group's defined benefit pension schemes in the UK and the US has been updated at 28 October 2012
on an actuarial basis, applying current discount and inflation rate assumptions and incorporating the market value of
assets at 28 O ctober 2012. The actuarial losses in the nine months of £12.7 million (£8.9 million net of associated
deferred tax) has been taken through the statement of other comprehensive income. 9 Exchange rates
The principal average exchange rates used to translate the Group's overseas profits were as follows:
2012/13 2011/12 2012/13 2011/12 2011/12 Third Third Nine Nine Full quarter quarter months months year US dollar 1.60 1.60 1.58 1.61 1.60 Euro 1.26 1.15 1.24 1.14 1.15
PINXRelated Shares:
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