19th Mar 2009 07:00
Premier Farnell plc
19 March 2009
Results for the Fourth Quarter and Financial Year ended 1 February 2009Key Financials £m Q4 08/9 Q4 07/8 Q4 growth FY 08/9 FY 07/8 FY growthContinuing operations (13 weeks) (14 weeks) (52 weeks) (53 weeks)(unaudited) £m £m £m £mRevenue 200.2 197.7 -8%(a) 804.4 744.7 +1%(a)Total operating profit 17.1 23.8 -41%(a) 85.4 88.0 -13%(a)Underlying operating 20.5 23.8 -30%(a) 88.8 88.0 -9%(a)profit (b)Total profit before 13.0 20.3 -36% 72.8 71.2 +2%taxationUnderlying profit before 16.4 19.6 -16% 72.5 70.3 +3%tax (c)Basic earnings per share - total 2.5p 4.2p -40% 14.3p 10.0p +43%- continuing operations 2.5p 4.2p -40% 14.3p 13.7p +4%Underlying earnings per share (c)- total 3.1p 4.0p -23% 13.9p 9.7p +43%- continuing operations 3.1p 4.0p -23% 13.9p 13.4p +4%Ordinary dividend 5.2p(d) 5.2p - 9.4p(d) 9.2p 2%Notes:
(a) Throughout this statement, in order to reflect underlying business performance, sales growth is based on sales per day for continuing businesses at constant exchange rates and for like periods, and growth in operating profit is calculated at constant exchange rates, unless otherwise stated.
(b) Underlying operating profit excludes restructuring costs of £3.4 million incurred in the fourth quarter (2007/8: nil).
(c) Underlying profit before taxation and earnings per shareexcludes restructuring costs of £3.4 million incurred in the fourth quarter(2007/8: nil) and excludes gains on the purchase and cancellation ofpreference shares in the first nine months of £3.7 million (2007/8: first ninemonth £0.2 million, fourth quarter £0.7 million).
(d) Proposed final dividend for approval by shareholders at the Company's Annual General Meeting on 16 June 2009.
Strategic Highlights
- We have outperformed difficult markets as we maintain focus on our strategic direction - Electronic Design Engineering (EDE) sales outperformed Maintenance, Repair and Operations (MRO) sales, web sales have continued to grow and internationalisation plans continue to deliver sales growth.
- Marketing and Distribution Division (MDD) fourth quarter web sales grew by 13% with eCommerce sales now accounting for a total of 35% of MDD revenue and Farnell Europe achieving 51% as we remain on track to meet our strategic target of driving the web as our primary channel.
- We have now announced further restructuring actions to move ustowards a permanent 2% reduction in operating expenses as percentage of sales.These actions, which result from the growing operational efficiencies that weare able to achieve from our web transition, will deliver an annualisedbenefit of £6 million. We anticipate the cost of these actions in Q1 of FY10to be £4 million.
- Developing international markets continue to provide strong sales growth with fourth quarter sales in Eastern Europe and China up 58% and 15%, respectively, and India up 24% sequentially.
- Acquisition of our Eastern European distributor completed in the quarter, extending our customer reach into Poland, Hungary and the Czech Republic.
Financial Highlights
- Gross margin for the full year was 39.6% (2007/8: 39.7%) with stability having now been maintained for over 3 consecutive years, despite the more challenging conditions.
- Restructuring actions announced in December 2008 executed as planned and will deliver an annualised benefit of £12 million with the one-off associated cost of £3.4 million recognised in the Q4 results.
- Cash performance strong with cash generated from continuingoperations in the fourth quarter, excluding restructuring, representing 168%(2007/8: 129%) of underlying operating profit and 117% in the full year(2007/8: 111%). This reflects the balancing of our working capital componentsto match activity levels and investing to support our inventory proposition.Free cash flow for the year of £54.4 million, excluding restructuring costs,up 31% (2007/8: £41.4 million).
- Refinancing agreed in the fourth quarter with £150 million bank facilities secured until January 2013.
- Full year underlying profit before tax of £72.5 million (2007/8: £70.3 million) an increase of 3% on the prior year with underlying earnings per share from continuing operations up 4% to 13.9 pence. Full year profit before tax of £72.8 million (2007/8: £71.2 million).
- The board recommends a final ordinary dividend of 5.2 pence per share to give a full year dividend of 9.4 pence per share (2007/8: 9.2 pence per share).
Commenting on the results, Harriet Green, Chief Executive Officer, said:
We are continuing to drive our strategy despite the morechallenging markets. Whilst we are encouraged by our strategic progress andour outperformance of these markets, we are dissatisfied with our businessresults. With our strategy, the strength of the Premier Farnell team and ourability to capitalise on the opportunities in the supply chain, we can performbetter; all supported by our strong cash generation and further investments inour proposition and inventory position.Internationalisation continues to provide ongoing growth, the EDEsegment is performing better than the MRO segment and our web performancefurther underpins the actions we are taking to accelerate our transformation.The Board believes that the continuing implementation of the strategy and theongoing restructuring will strengthen the business both to withstand thecurrent more challenging markets and for future growth through an enhancedfocus on our customers.
For further information, contact:
Harriet Green, Chief Executive Officer Premier Farnell plc +44 (0) 20 7851 4100 Mark Whiteling, Chief Financial Officer
Richard Mountain, Financial Dynamics (UK) +44 (0) 20 7269
7121
Premier Farnell's announcements and presentations are published at www.premierfarnell.com, together with business information, the 2008 Annual Report and Accounts, and links to all other Group web sites.
The 2009 Annual Report and Accounts will beavailable online from 7 May 2009.
The results for the first quarter of the financial year to 31 January 2010 will be announced on Thursday, 11 June 2009.
Premier Farnell plc
STATEMENT ON FOURTH QUARTER AND
FINANCIAL YEAR ENDED 1 FEBRUARY 2009
Premier Farnell plc, the leading multi-channel, high service distributor supporting millions of engineers and purchasing professionals globally, announces its results for the fourth quarter and financial year ended 1 February 2009.
Note: 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.
In addition, underlying operating profit excludes restructuring costs of £3.4million incurred in the fourth quarter (2007/8: nil), and underlying profitbefore taxation and earnings per share excludes restructuring costs of £3.4million incurred in the fourth quarter (2007/8: nil) and excludes gains on thepurchase and cancellation of preference shares in the first nine months of£3.7 million (2007/8: first nine month £0.2 million, fourth quarter £0.7million).
Chief Executive's Operational Overview
Our results for the full year reflect the benefits of the continuedfocus on our strategic transformation and the acceleration of thattransformation in increasingly challenging global markets. We have continuedto outperform our markets and the strategic assumptions we made two years agocontinue to be validated - the Electronic Design Engineer (EDE) market isoutperforming Maintenance, Repair and Operations (MRO), the web is continuingto deliver growth and attract new customers, and our developing internationalmarkets, specifically China, India and Eastern Europe remain our fastestgrowing markets. We have the right strategy for the times, and we are pleasedby the progress we've made.In common with many other companies and reflecting both the monthsof December and January in our fourth quarter, our performance has beenimpacted by the rapidly changing global economy, with our Marketing andDistribution Division (MDD) sales declining 8.2%, which is an outperformanceof our markets. In North America the Semiconductor Industry Association (SIA)reported a decline of 25.9% for the quarter ended 31 January 2009 and theNational Electronic Distributors Association (NEDA) reported a decline of16.5% for the months of November and December combined. In the UK theAssociation of Franchised Distributors of Electronic Components (AFDEC)reported a decline of 12.7%, excluding Farnell, for the months of December andJanuary. In MDD Europe and Asia Pacific, where our strategic transformation ismost advanced, we continued to see strong sales growth in our developingmarkets: Eastern Europe and China grew 57.7% and 14.8%, respectively, whileIndia, which completed its first year as part of the Group, was up 23.8%sequentially. Our focus on growing our footprint and sales in these regionspositions us well in current market conditions. The web has also continued toattract new customers and in Farnell Europe we are now achieving 51% of salesvia eCommerce channels, surpassing the low end of our target range well aheadof schedule.Gross margin for the full year was 39.6%, compared to 39.7% in theprior year, representing over three full years of gross margin stability; thisis one of the pillars of our strategic transformation and a differentiator inour market. Our commitment to margin stability is ongoing and we will continueto manage this effectively. Despite the significant challenges we face, wecontinue to support our strategic opportunities and during the year weinvested approximately £8.0 million of incremental revenue spend to supportfurther growth and transformation in EDE, the web and developing internationalmarkets.Managing our ShapeWe continue to transition our MDD business to transact 50-70% ofsales via the web and are embracing its transformative power within ouroperations. Through greater alignment of our rich web environment with ourback office systems, we are able to permanently affect changes to our costbase and improve our structure to ensure we are well positioned to capitaliseon opportunities in our target markets and constantly meet the changing needsof our customers.We anticipate that over the course of the next two years our webtransition will enable us to reduce operating expenses as a percentage ofsales by 2 percentage points, which currently amounts to approximately £16million. We have already started this work, and in the fourth quarter wereduced our global employee headcount by nearly 300 positions. The annualisedbenefit of the actions already taken is approximately £12 million, of which £4million was achieved through the benefit of our web transition.Subsequent to quarter end we have taken further action torestructure our branch network in North America and rationalise our structurein Europe. We anticipate that the benefit of these further actions willdeliver further savings on an annualised basis of £6 million, and result in aone-off cost in the first quarter of £4 million. Therefore, since November2008 we have taken actions that in total will have reduced our cost base by£18 million.
In North America, detailed customer transition plans are in place to support a move to our expanded contact centre where we have invested in additional headcount in order to ensure that our important one-to-one customer support continues and to our rich web environment.
Web
Web sales grew another 12.8% during the quarter and total eCommercesales now represent 35% of total MDD sales. We are delighted by theperformance of Farnell Europe which is now achieving 51% of total sales viaeCommerce channels, exceeding our original 50% target one year early. Towardsthe end of the quarter we had a record day with more than 100,000 uniquevisitors working within our European web environments, demonstrating the powerof this channel particularly in these challenging times. Continued progresswas made in North America with web sales up 8.4% in the quarter.Progress has continued in all of our regions on the web, as thetools we introduced throughout the year have continued to add traction for ourEDE and profitable MRO customers. iBuy continues to be attractive forcustomers across Europe, with more than 1,000 now using this self-serviceeProcurement solution. The simplicity of iBuy has resulted in strengthenedcustomer loyalty and increased frequency of orders. We have received lots offeedback from customers about this application and will be launching anupgrade in the coming months to further improve its usability. eQuotes whichwas launched in North America in the third quarter, continues to attract newcustomers and drive new business as customers respond to this innovativesolution to receiving quotes and converting them into an order. New websitesin Latvia, Lithuania and Estonia were also launched in the quarter as wecontinue to target expansion across Eastern Europe. During the quarter we alsoadded a `Customers also bought' tool to our global websites and introduced newsearch functionality to support our EDE customers who are hungry for our richproduct data.
Refinement and testing of our eCommunity is ongoing as we ensure that the programmes we have put in place create valuable networking and collaborative relationships between the global EDE customer and supplier communities. We have also integrated valuable design tools, calculators and unit converters as well as detailed datasheets including block diagrams and application notes. During the quarter we continued to expand the number of engineers and suppliers who have access to the site and their feedback and enthusiasm for it is encouraging. We are looking forward to launching the full suite of interactive Web 2.0 tools during the second quarter.
EDE
EDE continues to outperform MRO and grew 1.8% in the year. We have continued to develop our offering to ensure that we are able to grow sales to this customer segment and attract new customers to our global proposition.
Many companies are responding to the global economic slowdown byliquidating inventory, which will result in an even greater need for our highservice, high stock proposition as customers must continue to meet their timesensitive demands. With a broad range of products from over 3,500 suppliers,we are well positioned to meet customer needs caused by this shortage ofinventory. Our strong cash generation enabled us to add the `sticky' productsthat EDEs want and during the quarter we added 11,000 new EDE centricproducts, expanded our sales and technical capabilities to better meet theneeds of these customers. We also signed agreements with nine new suppliers,including some important additions in lighting and communication whoseproducts are in high demand, supporting fast growing segments.We have also improved our marketing initiatives to EDE customers,working together with our suppliers to attract new customers to our highservice proposition. During the quarter we launched our very own virtual tradeshow, ecoSphere, where we hosted a conference on high brightness LEDs, a fastgrowing EDE market. The event was attended by customers, suppliers andindustry experts, providing a unique environment for networking andcollaboration. Suppliers supported the event by designing their own boothswithin the ecoSphere to promote their products and interact with customers. Wealso created a microsite, a product specific catalogue and a technical journalall dedicated to the topic of solid state lighting, ensuring customersreceived access to a broad range of information and establishing our positionas a leader in the market.InternationalisationGrowth in our developing international markets has continued duringthe quarter. We were confident that these markets were the right ones for ourstrategic focus and investment two years ago, and their performance duringthese unprecedented times has reinforced the future potential available to us.Eastern Europe and China grew 57.7% and 14.8%, respectively, in the quarter,and India was up 23.8% sequentially. In Eastern Europe, where we continue tosee many opportunities, we completed our acquisition of part of the tradingrights and assets of Microdis, an authorised distributor for Farnell for manyyears, giving us expanded customer reach into Poland, Hungary and the CzechRepublic. Farnell India has now completed its first year as part of the Groupand their proposition for local customers is developing rapidly. We lookforward to continued growth going forward.
Industrial Products Division (IPD)
The fourth quarter was again challenging for IPD. Combined salesfor the two main businesses, Akron Brass and TPC Wire and Cable, declined 8.9%year on year, reflecting the continuing challenges faced in the US industrialsegment. Both businesses have continued to seek opportunities outside theirtraditional markets. Akron Brass has seen its orders from internationalmarkets increase 25.7%, whilst TPC has seen revenue from mining up 24%. Wewere not able to find a suitable buyer for Cadillac Electric (whichrepresented less than 1 per cent of group turnover). As a consequence we madethe decision to close this business at the end of the quarter at nosignificant cost to the Group.
Outlook
We are continuing to drive our strategy despite the morechallenging markets. Whilst we are encouraged by our strategic progress andour outperformance of these markets, we are dissatisfied with our businessresults. With our strategy, the strength of the Premier Farnell team and ourability to capitalise on the opportunities in the supply chain, we can performbetter; all supported by our strong cash generation and further investments inour proposition and inventory position.Internationalisation continues to provide ongoing growth, the EDEsegment is performing better than the MRO segment and our web performancefurther underpins the actions we are taking to accelerate our transformation.The Board believes that the continuing implementation of the strategy and theongoing restructuring will strengthen the business both to withstand thecurrent more challenging markets and for future growth through an enhancedfocus on our customers.
Financial Results
Note: The fourth quarter was a 13 week accounting period (Q4 2007/8: 14 weeks) and the full year was a 52 week accounting period (full year 2007/8: 53 weeks).
RevenueFull YearSales for the full financial year from continuing operations were£804.4 million (2007/8: £744.7 million or £818.8 million at constant exchangerates). Sales per day from continuing businesses increased 1.0% on the prioryear driven by our continued focus on the EDE customer segment, the web andthe internationalisation of our business, and was achieved despite the broadbased and severe economic slowdown seen in the final quarter of the year. Theaverage exchange rate for the US dollar against sterling was $1.79 (2007/8:$2.00) and the average exchange rate for the Euro against sterling was Euro1.24 (2007/8: Euro 1.44).
Fourth Quarter
Sales for the fourth quarter from continuing operations were £200.2million (2007/8: £197.7 million or £239.6 million at constant exchange rates).Sales per day from continuing operations decreased by 8.4% although ourstrategic direction has ensured we continue to outperform the market in whatis clearly a challenging economic climate. The average exchange rate for theUS dollar against sterling was $1.47 (2007/8: $2.00) and the average exchangerate for the Euro against sterling was Euro 1.13 (2007/8: Euro 1.36).
Margins and Operating Profit
Full Year
The gross margin from continuing operations in the full financialyear was 39.6% (2007/8: 39.7%) reflecting over three full years of grossmargin stability and demonstrating the ongoing achievement of one of ourfundamental strategic commitments. Underlying operating profit (i.e. beforerestructuring costs of £3.4 million incurred in the fourth quarter to reshapethe business for the future) was £88.8 million (2007/8: £88.0 million) withunderlying operating margin at 11.0% (2007/8: 11.8%) reflecting continuedrevenue investment in our strategic initiatives, which increased by £8 millionon the prior year. Total operating profit from continuing operations was £85.4million (2007/8: £88.0 million) and total operating margin was 10.6% (2007/8:11.8%). There was a benefit to operating profit of £9.8 million from thetranslation of overseas results compared with the prior year, reflecting therelative strength of the US dollar and the Euro when compared to sterling. Atconstant exchange rates underlying operating profit decreased 9.2% comparedwith the prior year, or 7.5% after adjusting for the extra week in the prioryear.Fourth QuarterThe gross margin from continuing operations in the fourth quarterwas 39.3%. This compares with 39.7% in the prior year or 39.5% at constantexchange rates. Underlying operating profit was £20.5 million (2007/8: £23.8million), producing an operating margin of 10.2% (2007/8: 12.0%), whichreflects the impact of our continued investment in the strategy whilst stayingabove our current year target of 10%. Total operating profit from continuingoperations was £17.1 million (2007/8: £23.8 million). Despite the economicslowdown, we continued our strategic revenue investment, which increased inthe quarter by £1.7 million on the prior year to support our EDE and webpropositions, together with our international expansion. There was abeneficial impact on operating profit of £5.4 million from the translation ofoverseas results compared with the prior year, reflecting the weakness ofsterling. At constant exchange rates, the decrease in underlying operatingprofit compared with the prior year was 29.8%, or 24.4% excluding the extraweek in the prior year.
Foreign Currency Impact
A one cent movement in the exchange rate between the US dollar andsterling impacts the Group's operating profit by approximately £200,000 perannum, and a one cent movement in the exchange rate between the Euro andsterling impacts the Group's operating profit by approximately £200,000 perannum.Finance CostsNet finance costs in the financial year were £12.6 million (2007/8:£16.8 million). This comprises net interest payable of £11.9 million (2007/8:£10.8 million), which was covered 7.5 times by underlying operating profit,and a net charge of £0.7 million (2007/8: £6.0 million) in respect of theCompany's convertible preference shares. The increase in net interest payablereflects the negative impact of exchange rates with the benefit of lowerinterest rates on the Group's bilateral banking facilities, which carry aLIBOR based floating rate of interest, offsetting the interest cost ofadditional borrowings to fund the Group's purchase and cancellation ofpreference shares.During the year, the Company purchased and cancelled 1,824,302 ofits preference shares for a total cash consideration of £23.6 million. Thisresulted in a one-time benefit to finance costs in the year of £3.7 million(first quarter: £3.6 million, third quarter: £0.1 million), being thedifference between the book value and fair value of the debt element of thepreference shares at the date of purchase. In the prior year, a gain of £0.9million (second quarter: £0.2 million, fourth quarter: £0.7 million) wasrecognised from the purchase and cancellation of preference shares. Excludingthese gains, the charge in respect of preference shares for the year was £4.4million (2007/8: £6.9 million), reflecting the benefit of lower preferencedividends and a lower redemption premium as a result of the reduction in thenumber of preference shares in issue over the year.
Profit Before Tax
Full Year
Total profit before tax from continuing operations in the financialyear was £72.8 million (2007/8: £71.2 million). Underlying profit before tax(i.e. before restructuring costs of £3.4 million incurred in the fourthquarter (2007/8: nil) and excluding gains on the purchase and cancellation ofpreference shares in the first nine months of £3.7 million (2007/8: first ninemonths £0.2 million, fourth quarter: £0.7 million)) from continuing operationsin the financial year was £72.5 million (2007/8: £70.3 million), an increaseof 3.1% on the prior year, or 5.1% excluding the extra week in the prior year.
Fourth Quarter
Total profit before tax from continuing operations in the fourth quarter was £13.0 million (2007/8: £20.3 million). Underlying profit before tax from continuing operations in the fourth quarter was £16.4 million (2007/8: £19.6 million), a decrease of 16.3% on the prior year, or 9.9% excluding the extra week in the prior year.
Taxation Charge
The taxation charge from continuing operations for the financial year was at an effective rate of 29.0% (2007/8: 28.2%) of profit before tax, preference dividends and the gain on the purchase and cancellation of preference shares.
Acquisition of Microdis
On 16 December 2008, the Group acquired part of the assets andtrading rights of Microdis Electronics, part of Microdis Holding AG, used incarrying on its business as an existing authorised distributor of Farnellproducts in Poland, the Czech Republic and Hungary, for a total cashconsideration, including costs, of £1.0 million. The fair value of theintangible assets acquired was £1.0 million which is being amortised over aperiod of 10 years.
Return on Net Operating Assets and Balance Sheet
The return on net operating assets for the year, based on continuingoperations, was 29.6% before restructuring costs (2007/8: 30.2%), compared toour strategic target of 30% and reflects the impact of the relative strengthof the US$ and Euro on our overseas net assets.The consolidated year end balance sheet has been significantlyimpacted by the relative strength of currencies compared to sterling with theyear end US$ exchange rate at US$ 1.44 (3 February 2008: US$ 1.97) and theEuro rate at Euro 1.13 (3 February 2008: Euro 1.33). The most significantimpacts of exchange rate movements on the year end balance sheet compared tothe prior year end has been to increase the reported value of inventory by £32million, trade and other receivables by £22 million, and to increase netfinancial liabilities by £59 million.
Earnings per Share
Full Year
Total earnings per share for the year were 14.3 pence (2007/8: 10.0 pence) andtotal earnings per share from continuing operations were 14.3 pence (2007/8:13.7 pence). Underlying earnings per share from continuing operations were13.9 pence (2007/8: 13.4 pence), an increase of 3.7%.
Fourth Quarter
Total earnings per share for the fourth quarter were 2.5 pence (2007/8: 4.2 pence). Underlying earnings per share were 3.1 pence (2007/8: 4.0 pence), a decrease of 22.5%.
Cash Flow and Net Financial Liabilities
Net cash generated from continuing operations in the fourth quarterwas £32.4 million (2007/8: £30.6 million) or £34.4 million excluding theimpact of restructuring costs (2007/8: £30.6 million), representing 189% ofoperating profit or 168% excluding the impact of restructuring costs, comparedto 129% in the prior year. Working capital reduced by £12.3 million in thequarter reflecting a combination of our management of inventory to the saleslevels we are experiencing and the impact of lower sales on receivablebalances.Net cash generated from continuing operations for the full year was£102.3 million or £104.3 million excluding restructuring costs (2007/8: £97.8million) representing 120% of operating profit or 117% excluding the impact ofrestructuring costs (2007/8: 111%). Full year working capital decreased by£2.7 million as we continue to ensure that our investment in inventory to meetthe needs of the EDE is achieved through well controlled working capitalmanagement. Free cash flow for the full year, being cash generated fromcontinuing operations less net capital expenditure, interest, preferencedividends and tax payments, was £52.4 million, or £54.4 million excluding therestructuring costs, (2007/8: £41.4 million) and includes proceeds from thesale of surplus property of £3.3 million (2007/8: £1.9 million). During thefull year, £23.6 million (2007/8: £17.7 million) was spent on purchasing andcancelling the Company's preference shares, and £2.9 million (2007/8: £2.5million) was spent on purchasing ordinary shares for the Premier FarnellExecutive Trust. Proceeds received from prior year business disposals amountedto £0.7 million (2007/8: £24.4 million) and £1.1 million was spent on businessacquisitions (2007/8: £0.6 million).Net financial liabilities at the end of the year were £295.9million (3 February 2008: £254.1 million), including £59.4 million (3 February2008: £85.9 million) attributable to the Company's preference shares. Theimpact of exchange rates in the year was to increase net financial liabilitiesby £59.2 million, principally in relation to our US$ denominated privateplacement loan notes.
Dividend
The Board is recommending a final dividend of 5.2 pence per share (2007/8: 5.2pence per share), making a total for the year of 9.4 pence per share (2007/8:9.2 pence per share), an increase of 2%. The final dividend, subject toapproval at the Annual General Meeting on 16 June 2009, is payable on 24 June2009 to shareholders on the register at 29 May 2009. The Board believes thatthe growth in earnings and increase in free cashflow support the level ofdividend proposed. It recognizes the value of the dividend to shareholders andwill continue to assess the appropriate level of dividend, taking intoconsideration the earnings and cash requirements of the Group.
Financial Position
Premier Farnell's financial position remains robust with good liquidity andstrong free cash flow. In addition, on 28 January 2009, we announced that wehad reached agreement to replace our £200 million bilateral facilities whichwere due to expire in May 2010, with £150 million syndicate bank facilities.These new facilities expire in January 2013 and, together with the Group'scontinuing strong cash generation, provide the necessary level of operationaland financial flexibility to meet the Group's funding requirements. Based onthese new facilities, our headroom on bank borrowings at the financial yearend would have been £37 million, which together with our net cash position of£39 million, gives us a healthy funding position.
The Group anticipates that the combination of free cashflow, existing cash resources and available bank facilities will enable it to meet the repayment of the US$66 million Senior Notes which become due in May 2010.
Pensions
An actuarial loss of £85.1 million (£53.8 million net of associated deferredtax) has been recognised in the year through the Statement of RecognisedIncome and Expense relating primarily to the decline in the market value ofinvestments of the US Pension Plan. This plan had a small accounting deficit 1February 2009 of £2.8 million (3 February 2008: surplus of £53.4 million). Thedecrease in the pension asset recorded in the balance sheet reflects theactuarial loss, partly offset by the translation benefit from the movement inthe US$ exchange rate. During the fourth quarter we reduced our exposure tothe equity markets in the North American plan. The impact of the year endvaluations on our defined benefit pension plans will result in an estimatednet charge to the income statement in the year ending 31 January 2010 of £4.8million, compared to net income of £2.2 million in 2008/9.
Operations
Marketing and Distribution Division (MDD)
MDD comprises: Newark, Farnell, Premier Electronics, MCM and CPC.
Continuing businesses Q4 08/9 Q4 07/8 Q4 growth FY 08/9 FY 07/8 FY growth (13 weeks) (14 weeks) (52 weeks) (53 weeks) £m £m £m £mRevenue 179.8 179.0 -8.2% 727.1 670.9 +1.6%Total operating profit 16.8 22.8 -37.3% 82.8 84.4 -10.0% Underlying operating 19.7 22.8 -26.5% 85.7 84.4 -6.8%profit*Operating margin % 9.3% 12.7% 11.4% 12.6%
Underlying operating margin %* 11.0% 12.7% 11.8%
12.6%
*excluding fourth quarter restructuring costs of £2.9 million (2007/8:nil)
The Division remains focused on its strategic initiatives and hascontinued to target growth opportunities. EDE continues to outperform MRO, theweb continues to attract new customers and our investments in internationalmarkets continue to realise strong positive sales growth in those territories.This focus has ensured that we have continued to outperform in our majormarkets in the fourth quarter despite the global economic recession. Full yearsales for the division grew 1.6% with the fourth quarter showing a decline of8.2%. The market has changed very rapidly and we have responded through theacceleration of our strategic transformation to ensure that we have theappropriate level of resource committed to our growth initiatives. Theunderlying operating margin reflects the impact of the sales decline and therevenue investment we are making to accelerate our transformation.The market conditions, although challenging, are creating newopportunities for us, as many of our customers have begun liquidating theirinventory in response to the challenges they face. This is beginning to makeour high service model, with 99.6% of all orders delivered the same day ornext day, even more valuable as customers are faced with tight deadlines andan immediate need for product.The results for the 2007/8 financial year covered a 53 weekaccounting period, compared to the current financial year of 52 weeks, withthe fourth quarter last year having the extra week. Excluding the extra weekin the prior year, fourth quarter underlying operating profit declined 20.8%and full year declined 5.1%.There was a beneficial impact on operating profit in the fourthquarter from the translation of overseas results of £4.0 million, reflectingthe relative strength of the US dollar (£2.9 million) and the Euro (£1.1million). For the full financial year, the beneficial impact on operatingprofit from the translation of overseas results was £7.6 million, reflectingthe relative strength of the US dollar (£4.6 million) and the Euro (£3.0million).As we continue to accelerate our transition to the web, attract newcustomers to this content rich channel and improve our operating efficiencies,fourth quarter web sales increased by 12.8% and total eCommerce salesaccounted for 34.8% of total sales in the quarter with Farnell Europe at50.8%, demonstrating our progress towards achieving between 50% and 70% ofsales via eCommerce.The AmericasNewark and MCM. Q4 08/9 Q4 07/8 Q4 growth FY 08/9 FY 07/8 FY growth (13 weeks) (14 weeks) (52 weeks) (53 weeks) £m £m £m £mRevenue 91.6 84.9 -11.4% 359.6 326.7 +0.3%Operating profit 7.0 8.3 -37.5% 32.6 31.0 -8.4% Underlying operating profit* 7.9 8.3 -29.5% 33.5 31.0 -5.9%Operating margin % 7.6% 9.8% 9.1% 9.5%
Underlying operating margin %* 8.6% 9.8% 9.3%
9.5%
*excluding fourth quarter restructuring costs of £0.9 million (2007/8:nil)
The latest available statistics from the Semiconductor Industry Association(SIA) show a year on year decline in billings in the Americas for the threemonths ended 31January 2009 of 25.9%. Sales in MDD Americas for the full yeargrew 0.3% with the fourth quarter declining 11.4% reflecting the broad basedslowing in US markets. We have continued to accelerate the transformation ofour Americas business - focusing on the EDE customer segment, the web andinternationalisation - to ensure we are appropriately shaped for the future.Underlying operating margin was 8.6% in the fourth quarter and 9.3% for thefull year as we manage our strategic investments as appropriate.We continue to expand our multi-channel offering across NorthAmerica and subsequent to quarter end we have announced that we have begun torestructure Newark's branch sales network, resulting in the closure of ninebranches. A number of employees from these branches will form a part of a newteam that will continue supporting customers and maintain our strong presencein these markets. We have invested significantly in our contact centre toensure that we are able to continue the important one-to-one customerrelationships already established, and will continue investing in our webenvironment to further attract customers to this content rich channel.During the fourth quarter, Newark's sales declined 11.4% reflectingthe challenging market conditions. Despite these results, Newark's sales andmarketing model continues to attract EDE customers to our high serviceproposition. We have continued to strengthen our EDE proposition through theaddition of another 5,400 EDE products in the quarter, bringing the total ofnew EDE products for the year to 27,700. The lighting market, which continuesto be one of the fastest growing EDE markets, has provided strong growth andin response to the high demand in this sector, Newark leveraged its technicalknowledge and expertise to deliver a global virtual conference on the topicattended by thousands of customers, suppliers and industry leaders. Thebusiness also launched a technology journal, a product specific catalogue anda micro-site all dedicated to the subject of solid state lighting. Thesecombined initiatives have helped support a 4.6% fourth quarter sales growth inour small and emerging customer segment.Web sales in the Americas delivered continued growth in the quarter, up 8.4%on the prior year. During the year we have launched a number of web tools thatcontinue to attract customers. Newark achieved strong daily eCommercepenetration during the quarter, and eCommerce sales now accounting for 21% oftotal sales for the Division. The continued progress on the web allows us toremove cost associated with some of our other less profitable channels ascustomers switch to this content rich channel.
MCM's fourth quarter revenue declined 10.9%, reflecting the continued slowdown in home audio/visual equipment and demand from regional consumer electronics retailers in North America. For the year, MCM's sales declined 3.2%. Web sales grew 6.5% and strong progress on the web front has continued with eCommerce sales now represent 51% of total sales. Improvements in online marketing have driven a 49% improvement in web traffic during the quarter and have attracted 30,500 new customers throughout the year.
Europe and Asia Pacific
Farnell, Premier Electronics and CPC.
Continuing businesses Q4 08/9 Q4 07/8 Q4 growth FY 08/9 FY 07/8 FY growth (13 weeks) (14 weeks) (52 weeks) (53 weeks) £m £m £m £mRevenue 88.2 94.1 -5.3% 367.5 344.2 +2.8%Operating profit 9.8 14.5 -37.2% 50.2 53.4 -11.0% Underlying operating profit* 11.8 14.5 -24.4% 52.2 53.4 -7.4%Operating margin % 11.1% 15.4% 13.7% 15.5%
Underlying operating margin %* 13.4% 15.4% 14.2%
15.5%
* excluding fourth quarter restructuring costs of £2.0 million (2007/8: nil)
Sales were down 5.3% in the fourth quarter with the underlyingoperating margin of 13.4%, reflecting the impact of the sales decline and theinvestments we are making for the future. The reshaping actions announced inDecember had a one-off cost of £2.0 million in the quarter with the benefitsbeing realized in the 2009/10 financial year.Revenue by region Q4 08/9 Q4 07/8 Revenue FY 08/9 FY 07/8 RevenueContinuing growth growthbusinesses (13 (14 (52 (53 weeks) weeks) weeks) weeks) £m £m £m £mUK (including 41.7 47.6 -5.2% 176.9 179.1 +0.8%exports)Mainland Europe 38.3 38.3 -5.7% 155.0 134.4 +4.5%Asia Pacific 8.2 8.2 -4.8% 35.6 30.7 +6.7%Mainland Europe continues to be the region in the most advancedstage of our strategic transformation. EDE continued to grow faster than MROduring the fourth quarter, and the business added nearly 6,000 new EDEproducts to its portfolio to strengthen its proposition to these higher growthcustomers. Eastern Europe continues to deliver significant opportunities forgrowth, with sales up 57.7% in the quarter and 68.4% for the full year. Theacquisition of part of the assets and trading rights of Microdis Electronicswill improve our reach into the Polish, Hungarian and Czech EDE markets. Salesfor the Mainland Europe region declined 5.7% in the fourth quarter but grew4.5% in the full year.Farnell sales in the UK declined 8.4% in the fourth quarter. Themost recent data from the Association of Franchised Distributors of ElectronicComponents (AFDEC) shows that Farnell has continued to outperform the market,which reported a sales decline for the combined months of December and Januaryof 12.7%, excluding Farnell. CPC's sales declined 3.9% in the quarter withstrong growth in lighting and private label products and increased demand forenergy efficient replacements, partly offsetting the impact of the challengingwholesale and retail market conditions in the UK. CPC's active customer basecontinues to grow and the web remains the primary order channel, with webtraffic rising by 31% in the quarter. CPC's full year sales were flat year onyear, a significant achievement in an overall market which has declined.In the Asia Pacific region, China and India both continue to drivestrong sales growth. In Greater China sales grew 14.8% during the quarter and39.4% in the full year, reflecting continued strong growth in EDE productsales. Sales in India increased 23.8% sequentially as the business completedits first year as part of the Premier Farnell group. We continue to evaluateopportunities in these regions and invest as appropriate as we driveinternational opportunities for the group. Whilst sales in Australia and NewZealand were negative 6.1% in the year, the business has benefited from therestructuring in the fourth quarter, as part of the group wide programme, andis now strategically aligned with the opportunities in the local market..Web sales for MDD Europe and Asia Pacific grew 14.1% in the fourthquarter and eCommerce now represents 46.4% of total sales, and in FarnellEurope they now account for 51% of total sales, surpassing the lower end ofour target range. Web tools such as iBuy and new local language websites inLatvia, Lithuania and Estonia continue to attract new customers. In mainlandEurope we saw a record day for web visits in January with more than 100,000people visiting our local language websites across the region. Our broadproduct offering, the richness of our web environment and the strength of thecustomer experience continues to attract new customers to this channel, and assuch they buy more lines per order on the web than any other channel. In orderto support continued expansion of the lines per order a new `Customers alsobought' feature has been added to our global websites.
Industrial Products Division (IPD)
IPD comprises: Akron Brass, TPC Wire & Cable and Cadillac Electric
Q4 08/9 Q4 07/8 Q4 growth FY 08/9 FY 07/8 FY (13 weeks) (14 weeks) (52 weeks) (53 weeks) growth £m £m £m £mRevenue 20.4 18.7 -12.4% 77.3 73.8 -5.0%Operating profit 3.0 4.0 -44.4% 14.1 14.8 -17.1% Underlying operating profit* 3.2 4.0 -40.7% 14.3 14.8 -15.9%Operating margin % 14.7% 21.4% 18.2% 20.1%
Underlying operating margin %* 15.7% 21.4% 18.5%
20.1%
* excluding fourth quarter restructuring costs of £0.2million (2007/8: nil)
Combined fourth quarter and full year sales for Akron Brass and TPC Wire &Cable, which together represent 93% of the IPD Division, declined 8.9% and2.5%, respectively. Both these businesses are focussing on their successfulinitiatives to diversify from their traditional North American markets to newproduct segments and international markets, given the difficult conditions intheir domestic markets. Cadillac Electric sales, which represent 7% of totalIPD sales and 0.6% of Group sales, declined in the quarter to £0.9 million,reflecting the planned wind down of specific trading activity.
Akron Brass
Fourth quarter sales for Akron Brass were down 3.6% on the prioryear but flat year on year, reflecting the slowing demand for fire trucks andschool buses in North America, particularly in the fourth quarter.Internationalisation continues at pace, with orders from international marketsincreasing 25.7%% in the quarter, and now representing 21.1% of the business.In addition to international expansion, Akron Brass continues to identify newopportunities in industrial markets and create new products to support areaswhere the market is growing. New product development for industrial marketshas been instrumental in Akron Brass being awarded several large contracts,including an agreement to supply Northrop Grummond with safety systems for
anew US Navy Ship.TPC Wire & CableTPC's fourth quarter sales declined 26.9% and were down 8.0% in thefull year, reflecting the dramatic slowdown of North America's automobilemanufacturing and industrial segments. In order to offset the slowing in itstraditional markets, TPC has continued to diversify into new markets includingindustrial lifting equipment and mining, where revenues are up 177% and 24%,respectively, on the prior year. TPC has also sought to expand into newinternational markets.
Cadillac Electric
Cadillac Electric's sales in the quarter were £0.9 million, halfthat of the prior year, reflecting the continued planned wind down of specifictrading activity. As we have not found a suitable buyer for this business, wehave closed the business and successfully transferred customers and product ofthe "Hoffman" range to our TPC Wire & Cable business. The closure will becompleted by the end of the first quarter of 2009/10 at no significantadditional cost to the Group.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, the implementation of initiativessupporting the Group's strategy, recruitment and integration of new personnel,the implementation of cost-saving initiatives to offset current marketconditions, continued use and acceptance of e-commerce programs and systems,the ability to expand into new markets and territories, the implementation ofnew sales and marketing initiatives, changes in demand for electronic,electrical, electromagnetic and industrial products, rapid changes indistribution of products and customer expectations, the ability to introduceand customers' acceptance of new services, products and product lines, productavailability, the impact of competitive pricing, fluctuations in foreigncurrencies, and changes in interest rates and overall market conditions,particularly the impact of changes in world-wide and national economies. TheGroup does not intend to update the forward-looking statements made herein.
Condensed Consolidated Income Statement
For the fourth quarter and financial year ended 1st February 2009
2008/9 2007/8 2008/9 2007/8 Fourth Fourth Full Full quarter quarter year year (13 weeks) (14 weeks) (52 weeks) (53 weeks) unaudited unaudited unaudited audited Notes £m £m £m £m Continuing operationsRevenue 2 200.2 197.7 804.4 744.7Cost of sales (121.6) (119.3) (485.6) (449.2)Gross profit 78.6 78.4 318.8 295.5Net operating expenses- before restructuring costs (58.1) (54.6) (230.0) (207.5)- restructuring costs 3 (3.4) - (3.4) -Total net operating expenses (61.5) (54.6) (233.4) (207.5)Operating profit- before restructuring costs 20.5 23.8 88.8 88.0- restructuring costs 3 (3.4) - (3.4) -Total operating profit 2 17.1 23.8 85.4 88.0
Finance income (interest receivable) 0.2 0.5
0.7 0.9Finance costs- interest payable (3.2) (3.3) (12.6) (11.7)- preference dividends (0.8) (1.0) (3.5) (5.6)- premium on redemptionof preference shares (0.3) (0.4) (0.9) (1.3)- gain on purchase ofpreference shares - 0.7 3.7 0.9Total finance costs (4.3) (4.0) (13.3) (17.7)Profit before taxation 3 13.0 20.3 72.8 71.2Taxation 4 (4.0) (5.0) (21.1) (21.4)Profit after taxationfrom continuing operations 9.0 15.3 51.7 49.8Loss after taxation fromdiscontinued operations - - - (13.5)Profit for the period(attributable to ordinaryshareholders) 9.0 15.3 51.7 36.3 Earnings per share 6Basic 2.5p 4.2p 14.3p 10.0pDiluted 2.5p 4.2p 14.2p 9.9p Earnings per sharefrom continuing operations 6Basic 2.5p 4.2p 14.3p 13.7pDiluted 2.5p 4.2p 14.2p 13.6p Ordinary dividendsInterim - proposed 4.2p 4.0pFinal - proposed 5.2p 5.2pPaid 9.4p 9.0pImpact on shareholders'funds (£m) 34.0 32.7
Condensed Consolidated Statement of Recognised Income and Expense
For the fourth quarter and financial year ended 1st February 2009
2008/9 2007/8 2008/9 2007/8 Fourth Fourth Full Full quarter quarter year year (13 weeks) (14 weeks) (52 weeks) (53 weeks) unaudited unaudited unaudited audited Notes £m £m £m £m Profit for the period 9.0 15.3 51.7 36.3 Net exchange adjustments 16.2 5.2 11.6 6.6Actuarial losses on pensions
and other post-retirement obligations 11 (47.4) (1.8)
(85.1) (1.8)Deferred tax credit onactuarial losses 16.9 0.8 31.3 0.8Net (losses)/gains not
recognised in the income statement 9 (14.3) 4.2 (42.2) 5.6 Total recognised (loss)/incomefor the period (5.3) 19.5
9.5 41.9
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Condensed Consolidated Balance Sheet
As at 1st February 2009 1st February 3rd February 2009 2008 unaudited audited Notes £m £mASSETSNon-current assetsGoodwill 32.5 31.1Other intangible assets 25.0 20.1Property, plant and equipment 58.1 55.2Retirement benefit assets - 53.4Deferred tax assets 5.0 0.2Total non-current assets 120.6 160.0 Current assetsInventories 194.3 154.5Trade and other receivables 128.8 121.2Cash and cash equivalents 8 39.6 37.6Total current assets 362.7 313.3 LIABILITIESCurrent liabilitiesFinancial liabilities 8 (5.1) (3.0)Trade and other payables (94.5) (84.3)Current tax payable (17.4) (22.2)Total current liabilities (117.0) (109.5) Net current assets 245.7 203.8 Non-current liabilitiesFinancial liabilities 8 (330.4) (288.7)Retirement and otherpost-employment benefits (35.3) (22.0)Deferred tax liabilities (6.2) (33.0)Total non-current liabilities (371.9) (343.7) NET (LIABILITIES)/ASSETS (5.6) 20.1 EQUITYOrdinary shares 18.3 18.2Equity element of preference shares 10.4 15.2Share premium 23.8 23.0Capital redemption reserve 4.4 2.6Hedging reserve (3.7) (2.9)Cumulative translation reserve 15.3 3.7Retained earnings (74.1) (39.7)SHAREHOLDERS' (DEFICIT)/FUNDS 9 (5.6) 20.1
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Condensed Consolidated Cash Flow Statement
For the fourth quarter and financial year ended 1st February 2009
2008/9 2007/8 2008/9 2007/8 Fourth Fourth Full Full quarter quarter year year (13 weeks) (14 weeks) (52 weeks) (53 weeks) unaudited unaudited unaudited audited Notes £m £m £m £m Cash flows from operating activitiesOperating profit fromcontinuing operations 17.1 23.8 85.4 88.0Restructuring costs:- income statement impact 3.4 - 3.4 -- cash impact (2.0) - (2.0) -
Non-cash impact of restructuring costs 1.4 -
1.4 -Depreciation and amortisation 5.0 4.5 18.0 19.1Changes in working capital 12.3 5.2 2.7 (4.7)Additional pension scheme
funding (UK defined benefit plan) (0.7) (0.8)
(2.9) (3.1)Other non-cash movements (2.7) (2.1) (2.3) (1.5)Cash generated fromcontinuing operations 7 32.4 30.6 102.3 97.8Cash generated fromdiscontinued operations 7 - (0.1) - (1.2)Total cash generatedfrom operations 7 32.4 30.5 102.3 96.6Interest received 0.2 0.5 0.7 0.9Interest paid (5.0) (4.9) (12.4) (11.8)Dividends paid onpreference shares (1.7) (2.5) (3.5) (5.6)Taxation paid (3.9) (4.7) (21.9) (23.1)Net cash generated fromoperating activities 22.0 18.9 65.2 57.0 Cash flows frominvesting activitiesAcquisition of business 5 (1.1) (0.6) (1.1) (0.6)Disposal of business 5 - - 0.7 24.4Proceeds from sale of property,plant and equipment - 1.8 3.3 1.9Purchase of property, plantand equipment (3.1) (2.1) (7.0) (7.1)Purchase of intangible assets(computer software) (2.0) (4.0) (9.1) (10.4)Net cash (used in)/generatedfrom investing activities (6.2) (4.9) (13.2) 8.2 Cash flows fromfinancing activitiesIssue of ordinary shares - - 0.9 1.4Purchase of ordinary shares 9 - - (2.9) (2.5)Purchase of preference shares 10 - (14.1) (23.6) (17.7)New bank loans 2.8 10.7 29.5 32.1Repayment of bank loans (15.5) - (22.8) (29.3)Dividends paid toordinary shareholders - - (34.0) (32.7)Net cash used infinancing activities (12.7) (3.4) (52.9) (48.7) Net increase/(decrease) in cash,cash equivalents andbank overdrafts 3.1 10.6 (0.9) 16.5Cash, cash equivalents andbank overdrafts at beginningof period 34.6 26.5 37.6 21.3Exchange gains/(losses) 1.3 0.5 2.3 (0.2)Cash, cash equivalents and bankoverdrafts at end of period 39.0 37.6 39.0 37.6 Reconciliation of netfinancial liabilitiesNet financial liabilities atbeginning of period (254.1) (281.3)Net (decrease)/increase in cash,cash equivalents and bank overdrafts
(0.9) 16.5Increase in debt (6.7) (2.8)Decrease in preference shares 27.4 18.5Premium on redemption ofpreference shares (0.9) (1.3)
Derivative financial instruments
(1.5) (2.8)Exchange movement (59.2) (0.9)Net financial liabilities atend of period 8 (295.9) (254.1)
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Notes 1. Basis of preparationThe unaudited condensed consolidated financial information in this report has beenprepared in accordance with International Financial Reporting Standards (IFRSs) andapplying the accounting policies disclosed in the Group's 2008 Annual Report andAccounts on pages 74 to 77.The financial year ended 1st February 2009 was a 52 week period (financial year ended3rd February 2008: 53 week period) with the fourth quarter being a 13 week period(fourth quarter ended 3rd February 2008: 14 week period). This financial information does not constitute the Group's 2009 statutory accountswithin the meaning of the Companies Act 1985. The Group's 2008 statutory accounts havebeen filed with the Registrar of Companies. The auditors' report on these accounts wasunqualified and did not include a statement under Section 237(2) or (3) of the CompaniesAct 1985. Copies of the Group's Annual Report and Accounts will be posted to allshareholders no later than 7th May 2009. Additional copies will be available fromPremier Farnell plc, 150 Armley Road, Leeds, LS12 2QQ, or from the Company's website atwww.premierfarnell.com. 2. Segment information 2008/9 Fourth Quarter (13 weeks) 2007/8 Before After Fourth restructuring Restructuring restructuring quarter costs costs costs (14 weeks) unaudited unaudited unaudited unaudited £m £m £m £m Revenue
Marketing and Distribution Division
Americas 91.6 - 91.6 84.9 Europe and Asia Pacific 88.2 - 88.2 94.1Total Marketing and Distribution Division 179.8
- 179.8 179.0Industrial Products Division 20.4 - 20.4 18.7 200.2 - 200.2 197.7 Operating profitMarketing and Distribution Division Americas 7.9 (0.9) 7.0 8.3 Europe and Asia Pacific 11.8 (2.0) 9.8 14.5Total Marketing and Distribution Division 19.7 (2.9) 16.8 22.8Industrial Products Division 3.2 (0.2) 3.0 4.0Head Office costs (2.4) (0.3) (2.7) (3.0) 20.5 (3.4) 17.1 23.8 2008/9 Full Year (52 weeks) 2007/8 Before After Full restructuring Restructuring restructuring Year costs costs costs (53 weeks) unaudited unaudited unaudited audited £m £m £m £m Revenue
Marketing and Distribution Division
Americas 359.6
- 359.6 326.7
Europe and Asia Pacific 367.5 - 367.5 344.2Total Marketing and Distribution Division 727.1
- 727.1 670.9Industrial Products Division 77.3 - 77.3 73.8 804.4 - 804.4 744.7 Operating profitMarketing and Distribution Division Americas 33.5 (0.9) 32.6 31.0 Europe and Asia Pacific 52.2 (2.0) 50.2 53.4Total Marketing and Distribution Division 85.7 (2.9) 82.8 84.4Industrial Products Division 14.3 (0.2) 14.1 14.8Head Office costs (11.2) (0.3) (11.5) (11.2) 88.8 (3.4) 85.4 88.0
3. Profit before taxation (continuing operations)
Profit before taxation is stated after charging/(crediting):
2008/9 2007/8 Full Full year year (52 weeks) (53 weeks) unaudited unaudited £m £m Restructuring costs 3.4 -Share-based payments 0.8 2.3Defined benefit pension schemes (net)
(2.2) (2.5)
As noted in its third quarter results announcement on 11th December 2008, the Group hascommenced actions to accelerate its strategic transformation to the web. To ensure theGroup is appropriately structured for the future, the group has reduced its globalemployee base during the fourth quarter by approximately 300. The one-off cost relatedto these headcount reductions was £3.4 million with the annualised benefit of theseactions being approximately £12 million.
4. Taxation
The taxation charge represents an effective tax rate for the full year on profit beforetax, preference dividends and gain on purchase of preference shares of 29.0% (2007/8:28.2%).
5. Acquisition/disposal of businesses
On 16th December 2008, the Group acquired the assets and business of MicrodisElectronics, the Group's current distributor in Poland, the Czech Republic and Hungary,for a total consideration including costs of £1.0 million of which £0.2 million ispayable in 2009. The fair value of the intangible assets acquired was £1.0 million whichis being amortised over a period of ten years. The historic trading results and cashflows of this business are not significant.During the year the Group received £0.7 million following finalisation and agreement ofthe completion accounts relating to a prior year disposal. There was no income statementimpact from this receipt. In addition, during the year the Group paid £0.3 million asplanned in respect of prior year acquisitions.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to ordinaryshareholders for the period by the weighted average number of ordinary shares in issueduring 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 issueis adjusted to assume issue of all dilutive potential ordinary shares, being those shareoptions and awards with a non-market based performance condition granted to employeeswhere the exercise price is less than the average market price of the Company's ordinaryshares during the year, and those shares with a market based performance condition basedon the current estimate of the number of shares that will vest under the performancecriteria.
Reconciliations of earnings and the weighted average number of ordinary shares used in the calculations are set out below.
2008/9 2007/8 Full year (52 weeks, unaudited) Full
year (53 weeks, audited)
Basic per Diluted per Basic per Diluted per Earnings share amount share amount Earnings share amount share amount £m pence pence £m pence penceEarnings per shareProfit attributable toordinary shareholders 51.7 14.3 14.2 36.3 10.0 9.9Gain on purchase ofpreference shares (3.7) (1.0) (1.0) (0.9) (0.3) (0.3)Restructuringcosts 3.4 0.9 0.9 - - -Tax attributable torestructuring costs (1.0) (0.3) (0.3) - - -Profit attributable toordinary shareholdersbefore gain on purchase ofpreferenceshares and excludingrestructuring costs 50.4 13.9 13.8 35.4 9.7 9.6 Earnings per share fromcontinuing operationsProfit after taxation fromcontinuing operations 51.7 14.3 14.2 49.8 13.7 13.6Gain on purchase ofpreference shares (3.7) (1.0) (1.0) (0.9) (0.3) (0.3)Restructuring costs 3.4 0.9 0.9 - - -Tax attributableto restructuringcosts (1.0) (0.3) (0.3) - - -Profit attributable toordinary shareholdersbefore gain on purchase ofpreference shares andexcluding restructuringcosts 50.4 13.9 13.8 48.9 13.4 13.3 Number Number Weighted average numberof shares 362,412,369 363,476,320Dilutive effect ofshare options 2,678,546 1,913,997Diluted weightedaverage numberof shares 365,090,915 365,390,317
Earnings per share before the gain on purchase of preference shares and excluding restructuring costs have been provided in order to facilitate year on year comparison.
7. Cash generated from operations
2008/9 2007/8 Full Full year year (52 weeks) (53 weeks) unaudited unaudited £m £mContinuing operationsProfit after tax fromcontinuing operations 51.7 49.8Adjustment for:- tax 21.1 21.4- depreciation 9.0 7.9
- amortisation of intangible assets 9.0
11.2- profit on sale of property,plant and equipment (0.4) (0.8)- preference dividends 3.5 5.6- interest income (0.7) (0.9)- interest expense 12.6 11.7- premium on redemption ofpreference shares 0.9 1.3
- gain on purchase of preference shares (3.7)
(0.9)
- additional pension schemefunding (UK defined benefit plan) (2.9)
(3.1)
- decrease in net pension asset(other defined benefit plans) (2.8)
(3.0)
- increase in other post-retirementobligations 0.1
-
- share-based payments 0.8
2.3
- non-cash impact of restructuring costs 1.4
- Changes in working capital(excluding the effect ofdisposals/acquisitions):- increase in inventories (7.8) (2.2)- decrease/(increase) in trade andother receivables 14.1
(6.7)
- (decrease)/increase in trade andother payables (3.6)
4.2
Cash generated from continuing operations 102.3
97.8
Discontinued operations(Loss)/profit after tax fromdiscontinued operation - (13.5)Adjustment for:- loss/(gain) on disposal - 13.6- tax - 0.1- depreciation - 0.1
- amortisation of intangible assets -
0.1
- decrease in reorganisation provision -
(0.1)
Changes in working capital:- (increase)/decrease in inventories -
(0.1)
- decrease in trade and other receivables -
1.1
- decrease in trade and other payables -
(2.5)Cash generated fromdiscontinued operations - (1.2)
Total cash generated from operations 102.3
96.6 8. Net financial liabilities 1st February 3rd February 2009 2008 unaudited audited £m £m Cash and cash equivalents 39.6 37.6Unsecured loans and overdrafts (271.7)
(202.9)
Net financial liabilities beforepreference shares and derivatives (232.1)
(165.3)
Preference shares (59.4)
(85.9)
Derivative financial instruments (net) (4.4)
(2.9)
Net financial liabilities (295.9)
(254.1)
Net financial liabilities are analysedin the balance sheet as follows: Current assetsCash and cash equivalents 39.6 37.6 Current liabilitiesBank overdrafts (0.6) -Other loans (0.1) (0.1)
Derivative financial instruments (4.4)
(2.9) (5.1) (3.0) Non-current liabilitiesBank loans (109.8) (85.7)5.3% US dollar GuaranteedSenior Notes payable 2010 (45.8) (33.5)5.9% US dollar GuaranteedSenior Notes payable 2013 (110.4) (80.7)Other loans (5.0) (2.9)Preference shares (59.4) (85.9) (330.4) (288.7) On 28 January 2009, the Group reached agreement to replace its existing £200 millionbilateral facilities which were set to expire in May 2010 with £150 million syndicatebank facilities. These new facilities expire in January 2013. Based on these newfacilities, the headroom on bank borrowings at the financial year end would have been£37 million.
9. Consolidated statement of changes in shareholders' equity
2008/9 2007/8 Full Full year year (52 weeks) (53 weeks) unaudited unaudited £m £m Shareholders' funds at beginning of year 20.1
12.0
Profit for the year 51.7
36.3
Net gains and losses recognised directly in equity (42.2) 5.6Ordinary dividends paid (34.0) (32.7)Ordinary shares issued 0.9 1.4Purchase of ordinary shares (2.9) (2.5)Purchase of preference shares (note 10):- reduction in equity element (4.8)
(3.2)
- gain arising on equity element 4.8
3.1- deferred tax 0.8 0.6Share-based payments 0.8 2.3Derivative financial instruments (0.8)
(2.8)
Shareholders' (deficit)/funds at end of year (5.6)
20.1
During the financial year, the Premier Farnell Executive Trust acquired 1,532,806 of theCompany's ordinary shares, through purchases on the London Stock Exchange for a totalcash consideration of £2.9 million (2007/8: 1,153,693 ordinary shares for a total cashconsideration of £2.5 million), in order to meet future obligations under the Company'sperformance share plan. This amount has been deducted from shareholders' equity.
10. Purchase of preference shares
During the financial year the Company purchased and cancelled 1,824,302 of itspreference shares at a total cash cost of £23.6 million. Based on the book value andfair value of the instrument at the date of purchase, the financial liability element ofthe preference shares was reduced by £27.4 million and the equity element by £4.8million. A gain of £3.7 million (£3.6 million in the first quarter and £0.1 million inthe third quarter) was recognised in the income statement being the difference betweenthe book value and fair value of the financial liability element at the date ofpurchase. The gain arising from the difference between the book value and fair value ofthe equity element of £4.8 million was recognised as a movement in retained earnings. Adeferred tax credit of £0.8 million arose which is recognised as a movement in retainedearnings. A transfer from retained earnings of £1.8 million to non-distributablereserves was made in order to maintain the legal nominal value of share capital.In the prior year, the Company purchased and cancelled 1,236,500 of its preferenceshares at a total cash cost of £17.7 million, resulting in a gain of £0.9 million (£0.2million in the second quarter and £0.7 million in the fourth quarter) being recognisedin the income statement.At 1st February 2009, the Company had 3,949,419 preference shares in issue
(3rd February2008: 5,773,721). 11. Post-retirement benefitsAn actuarial loss of £85.1 million (£53.8 million net of associated deferred tax) hasbeen recognised in the year through the Consolidated Statement of Recognised Income andExpense relating to the Group's pension and post retirement obligations. Of this total,£74.8 million (£46.4 million net of associated deferred tax) relates to the Group's USpension plan reflecting the decline in the market value of assets during the year. TheUS plan had a deficit on the balance sheet at the year end of £2.8 million (3rd February2008: asset of £53.4 million). The decrease in the US pension asset recorded in thebalance sheet reflects the actuarial loss, partly offset by the translation benefit fromthe movement in the US$ exchange rate.
12. Exchange rates
The principal average exchange rates used to translate the Group's overseas profits wereas follows: 2008/9 2007/8 2008/9 2007/8 Fourth Fourth Full Full quarter quarter year year (13 weeks) (14 weeks) (52 weeks) (53 weeks) US dollar 1.47 2.00 1.79 2.00Euro 1.13 1.36 1.24 1.44 13. Ordinary dividendThe directors are proposing a final dividend in respect of the year ended 1st February2009, of 5.2p per share which will absorb £18.8 million of shareholders' funds. As thefinal dividend is subject to approval at the Annual General Meeting of the Company, tobe held on 16th June 2009, it has not been provided for at 1st February 2009. Onceapproved, the final dividend will be paid on 24th June 2009 to shareholders on theregister of members on 29th May 2009.
vendorRelated Shares:
PFL.L