18th Mar 2010 07:00
Premier Farnell plc 18 March 2010
Results for the Fourth Quarter and Financial Year ended 31 January 2010
Key Financials £m Q4 09/10 Q4 08/9 Q4 FY 09/10 FY 08/9 FY growth(a) growth(a)Continuing operations (Unaudited) £m £m £m £m
Revenue 207.5 200.2 +6% 795.3 804.4 -10%Underlying operating 21.7 20.5 +3% 72.7 88.8 -27%profit (b)Total operating profit 21.7 17.1 +23% 71.4 85.4 -26%Underlying profit before 17.2 16.4 +5% 54.8 72.5 -24%tax (c)Total profit before 17.2 13.0 +32% 53.5 72.8 -27%taxationUnderlying earnings per 3.5p 3.1p +13% 10.7p 13.9p -23%share (c)Basic earnings per share 3.5p 2.5p +40% 10.4p 14.3p -27%Free cash flow (e) 6.5 18.9 -66% 66.4 54.4 +22%Ordinary Dividend (f) 5.2p 5.2p - 9.4p 9.4p -Financial Highlights
- Both fourth quarter Group sales and underlying operating profit returned to year on year growth of 6.0% and 3.3%, respectively.
- Sales per day gained momentum throughout the quarter, with overall revenue in January up 9.5%. This sales performance accelerated in February where revenue grew over 15% year on year.
- MDD Americas sales per day have now improved for eight consecutive months, with fourth quarter sales flat year on year and sales in February growing 12.0% on the prior year.
- Farnell Europe returned to year on year sales growth, up 11.4% in the quarter. APAC saw strong fourth quarter sales growth of 37.4%.
- Our gross margin for the fourth quarter was 40.3%, up one percentage point on the prior year and representing 17 quarters of gross margin stability, a clear indication that our customers value our proposition which we continue to invest in and evolve.
- Our fourth quarter underlying return on sales improved to 10.5%,a 1.3 percentage point improvement over the third quarter, and 2.3 percentagepoints up on the second quarter, reflecting the improving sales, gross marginstability and the benefit of our cost actions.
- Cash performance has remained strong, with full year underlying cash flow conversion at 145%.
- Net financial liabilities reduced by £31.7 million in the year, including a £14.7 million benefit from exchange rates.
- The board has recommended a final dividend of 5.2 pence per share, unchanged from the prior year, to give a full year dividend of 9.4 pence per share (2008/9: 9.4 pence per share).
Strategic Highlights
- The benefits of the continued execution of our strategy can beseen in the strong return to sales and operating profit growth. For the fullyear, our global EDE sales growth outperformed our global MRO sales growth by12.3 percentage points.
- We accelerated our strategic transformation in the US with the launch of our US element14 store. This new web channel brings together commerce and community to create a workspace where EDEs can access all the products, information, software and technology solutions they need to complete a design.
- Fourth quarter MDD web sales grew 28.9% on the prior year, with eCommerce accounting for 41.5% of total MDD sales. eCommerce in Europe now accounts for 58.8% of sales. In APAC eCommerce accounts for 50.9% of sales and in Newark eCommerce accounts for 25.8% of sales.
- Our decision to expand into the developing international markets of Greater China, India and Eastern Europe continues to be validated as fourth quarter year on year sales grew by 76.4%, 70.3% and 74.6%, respectively in these regions.
- Strategy update - The Next 1,000 days. We will continue to evolve our business by building on the strong foundations of our proven global strategy with new drivers that are focused around the core pillars of our strategy.
Commenting on the results, Harriet Green, Group Chief Executive, said:
"Group sales and underlying Group operating profit both returned toyear on year growth during the fourth quarter. Our return on sales increasedby over one percentage point on the third quarter, the second consecutivequarter of sequential improvement, and January Group sales saw a significantincrease in momentum. As we moved into the first quarter, which is seasonallyour strongest, this performance accelerated, with Group sales growing over 15%in February on the prior year.
"The margin enhancing characteristics of our strategy and the value our customers attribute to our high service proposition has delivered a one percentage point improvement in our gross margin, over the prior year. This reflects the seventeenth consecutive quarter of gross margin stability, a true differentiator in our industry.
"Our performance over the last three years has demonstrated thestrength of the assumptions which underpin our strategy. We will continue tofocus on execution and driving our performance towards reaching the level ofsales we saw before entering the downturn, while recognising the limitedvisibility inherent in our business. With the resilience of our business andthe strength of our strategy, the board remains confident in investing for ourfuture as we capitalise on the opportunities within our markets and grow ourbusiness profitably."
For further information, contact:
Harriet Green, Chief Executive Premier Farnell plc +44 (0) 20 7851 4100 Officer
Mark Whiteling, Chief FinancialOfficerAndrew Lorenz Financial Dynamics +44 (0) 20 7269 7291 (UK)
Premier Farnell's announcements and presentations are published at www.premierfarnell.com together with business information and links to all other Group web sites, including element14 our community website for electronic design engineers.
The 2010 Annual Report and Accounts will be available online from 6 May 2010.
The results for the first quarter of the financial year ending 30 January 2011 will be announced on 10 June 2010.
Notes:
(a) Throughout this statement, in order to reflect underlying business performance, sales growth is based on sales per day for continuing businesses at constant exchange rates and for like periods, and growth in operating profit is calculated at constant exchange rates, unless otherwise stated.
(b) Underlying operating profit excludes restructuring costs of£7.6 million incurred in the year (Q1: £4.0 million, Q2: £0.8 million, Q3:£2.8 million) (2008/9: Q4: £3.4 million) and the one-off non cash gain arisingin the second quarter of £6.3 million from the reorganisation of the Group'sNorth American pension plans (2008/9: £nil).
(c) Underlying profit before taxation and earnings per share excludes restructuring costs of £7.6 million incurred in the year (2008/9: £3.4 million), the one-off non-cash gain of £6.3 million from the reorganisation of the Group's North American pension plans (2008/9: £nil), and excludes gains on the purchase and cancellation of preference shares in the year of £nil (2008/9: £3.7 million).
(d) With effect from 2 February 2009, the Group has adopted IFRS 8,Operating Segments. This has not affected the financial results of the Group,but has resulted in a change to the Group's segmental disclosures. Theprevious two divisions within the Marketing and Distribution Division havebeen split into three distribution divisions within MDD with CPC (previouslyin MDD Europe and Asia Pacific) and MCM (previously in MDD Americas) now bothcategorised in the Other Distribution Division. Comparatives have beenre-presented accordingly.
(e) 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.
(f) Proposed final dividend for approval by shareholders at the company's Annual General Meeting on 15 June 2010.
Premier Farnell plc
FOURTH QUARTER STATEMENT
Results for the Fourth Quarter and Financial Year ended 31 January
2010
Premier Farnell, 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 31 January 2010.
Chief Executive's Operational Overview
The fourth quarter saw Group revenue return to year on year growthof 6.0% and underlying Group operating profit return to year on year growth of3.3%. The resilience of our business and the strength of our strategy havecontinued to be demonstrated throughout the year. This has been most evidentin the performance of our Electronic Design Engineering (EDE) sales which wereslower to decline than our Maintenance Repair and Operations (MRO) sales andhave been quicker to recover, with full year global EDE sales growthoutperforming global MRO sales growth by 12.3 percentage points. As we emergefrom the downturn our sales and profit have recovered faster than the widerhigh service distribution industry. The Group's fourth quarter underlyingreturn on sales increased by 1.3 percentage points over the third quarter to10.5%, with sales per day gaining momentum throughout the quarter and JanuaryGroup sales up 9.5% year on year. This sales performance has accelerated intoFebruary where Group sales grew over 15% on the prior year and we willcontinue to drive this performance forwards as we focus on reaching the levelof sales we saw prior to entering the downturn.Fourth quarter sales in MDD Americas were flat year on year, withsales per day improving for eight consecutive months and sales in Februarygrowing 12.0% year on year. This sustained upwards momentum can also been seenin MDD Americas' EDE sales, web sales, average order value and number of linesper order. MRO sales have also begun to improve although not at the same levelseen in our EDE sales. In the fourth quarter MDD Americas' EDE sales growthoutperformed MRO sales growth by 21.4 percentage points. In Europe fourthquarter revenue returned to strong year on year growth, up 11.4%, with salesper day in January at the highest level the business has ever seen. In EasternEurope eCommerce accounted for over 90% of fourth quarter sales, with overallrevenue growing 74.6% year on year. Sales in Asia Pacific continued to buildon the significant growth seen in the third quarter with revenue up 37.4% onthe prior year. As we accelerate new customer acquisition and deepen ourrelationships within the EDE community, in China we recently signed anagreement to support a small quantity sampling program with Texas Instruments.Sales continued to grow strongly in India and Greater China, with fourthquarter year on year sales up 70.3% and 76.4%, respectively. Our commitment todelivering a proposition that is highly valued by our customers continues tobe recognised in our gross margin which has remained stable for 17 quarters.For the fourth quarter our gross margin increased to 40.3%, representing a onepercentage point increase year on year, a true differentiator in an industrywhere our competitors continue to face gross margin challenges.The strength and growth opportunities inherent in our strategy areclear. EDE sales growth has accelerated in all regions during the quarter,significantly outperforming the MRO segment. The strong revenue growth seen inIndia, China and Eastern Europe has led to sales from developing marketsaccounting for 21.6% of fourth quarter total sales, 1.6 percentage pointsabove our three year target. The web continues to increase its profile as thecustomers' channel of choice with MDD web sales growing 28.9% on the prioryear. eCommerce in Europe and APAC now accounts for 58.8% and 50.9% of totalsales, respectively, with both regions having reached our initial strategictarget. Newark's accelerated transformation to become a web-based business hasseen fourth quarter web sales grow 37.2% year on year and eCommerce in MDDAmericas account for 25.8% of total sales - a significant achievement giventhe division has only had a powerful web front end for just over two years. Aswe continue to accelerate our North American transformation we recentlylaunched a new web channel though the creation of our element14 store -exclusively focused towards meeting the needs of EDEs in the US. The store,which sits seamlessly along side our element14 online community, offers acomprehensive range of esoteric EDE products that are available for same dayshipping right across the US. By bringing together commerce and community wehave pioneered a truly collaborative workspace where design engineers canresearch and converse on their designs. Then, within the same onlineenvironment, EDEs can purchase the electronic components they require to beginprototyping their designs.In the year our total strategic-specific revenue investmentstotalled £15m. Our ability to meet the ever-changing needs of the designengineers is at the heart of our evolving proposition. During the quarter weadded 14,000 esoteric EDE products and saw an 8.4% increase in our EDEcustomer base globally on the prior year. Recently our CadSoft EAGLE softwarewas presented with the award for best product of the year by the Germanmagazine Elektronik, and with our ongoing commitment to develop EAGLE we willshortly launch a freemium version of the software. This version, which hasdesign features and Printed Circuit Board (PCB) layout capabilities similar tothe standard version of EAGLE, will allow EDEs to sample the software on a60-day free trial. Fourth quarter year on year sales from iBuy, our innovativeeProcurement solution, have grown by 145% and 280% in Europe and APAC,respectively. In North America iBuy adoption levels have been strong since itslaunch at the beginning of the quarter. We have further strengthened oureCommerce expertise with the appointment of an industry leading specialist whohas extensive experience in the fields of Web 2.0, social media and theorchestration of truly innovative web solutions. Our element14 community hasbecome increasingly integral to our business. In December we crossed themilestone of one million inbound web-links and achieved a Google page rank of5. This is a measure of the importance and relevance of this industry leadingwebsite which is now attracting up to 24,500 visits from customers each week,as they engage in researching and refining their designs in more than 200collaborative groups. As the mobility of the web becomes ever present intoday's world, close to 1,000 element14 applications have been downloaded byApple iPhone and Google Android mobile phone users. It is clear that ourcustomers' need for remote and immediate access to our services is growingrapidly and recently Farnell Europe also launched an iPhone and Android mobileapplication. The application provides our customers with one touch access toour interactive linecards, call centres, technical support services andindustry leading legislative, design and product information.
Other Distribution Businesses
CPC has continued to build on its strong performance seen in thethird quarter, growing sales 8.1% year on year in the fourth quarter. Thebusiness continued to successfully leverage investments in its productportfolio and new marketing initiatives, with the total number of activecustomers up 10.8% on the prior year and sales via the web growing 25.9% yearon year. Sales at MCM returned to year on year growth in the quarter, up 2.6%on the prior year, driven by strong sales in private label products which grew23.0% year on year.
Industrial Products Division (IPD)
Sales at Akron Brass were flat year on year, a significantimprovement on the third quarter decline of 5.2% and an outperformance of thewider market which declined 10.2% for the equivalent period. Akron Brasscontinues to embrace relevant parts of the Group's core strategy, acceleratingnew product development for high growth markets and increasing its salescapabilities in China and Dubai. Year on year sales at TPC grew 25.4%, in partdriven by the business continuing to develop a multi-channel focus across anumber of end markets outside of the North American steel market. New productlines accounted for 14.9% of overall sales and during the quarter TPC launcheda new website, further enhancing its online proposition.
Board
After seven years as a member of the Company's Board, William Korbwill retire with effect from the end of the Company's Annual General Meetingon 15 June 2010. William has provided wise counsel, valuable guidance andcontinued support to his Board colleagues throughout his tenure. His presencewill be missed and the Board wishes him well for the future. We will look tostrengthen the board with a replacement who has a strong business backgroundas well as knowledge in the areas of eCommerce and Information Services.
Dividend
The Board is recommending a final dividend of 5.2 pence per share(2008/9: 5.2 pence per share), making a total for the year of 9.4 pence pershare (2008/: 9.4 pence per share). The final dividend, subject to approval atthe Annual General Meeting on 15 June 2010, is payable on 23 June 2010 toshareholders on the register at 28 May 2010. The Board has considered both thelevel of earnings and cash requirements of the Group and, although the levelof earnings cover is less than in recent periods, the benefit of the costactions taken in the current year will deliver further benefit in 2010.
Outlook
Group sales and underlying Group operating profit both returned toyear on year growth during the fourth quarter. Our return on sales increasedby over one percentage point on the third quarter, the second consecutivequarter of sequential improvement, and January Group sales saw a significantincrease in momentum. As we moved into the first quarter, which is seasonallyour strongest, this performance accelerated, with Group sales growing over 15%in February on the prior year.
The margin enhancing characteristics of our strategy and the value our customers attribute to our high service proposition has delivered a one percentage point improvement in our gross margin, over the prior year. This reflects the seventeenth consecutive quarter of gross margin stability, a true differentiator in our industry.
Our performance over the last three years has demonstrated thestrength of the assumptions which underpin our strategy. We will continue tofocus on execution and driving our performance towards reaching the level ofsales we saw before entering the downturn, while recognising the limitedvisibility inherent in our business. With the resilience of our business andthe strength of our strategy, the board remains confident in investing for ourfuture as we capitalise on the opportunities within our markets and grow ourbusiness profitably.
Strategy Update - The Next 1,000 Days
In 2006 we began a three year journey to transform Premier Farnell based on a clear and consistent strategy for profitable growth. Over the course of those three years we have continued to execute our strategy, whatever the economic climate, and we have been regular and transparent in the communication of our progress against our strategic objectives and metrics.
For the past three years our operational strategy of focusing on the EDE customer segment, driving sales via the web, internationalising our business model and driving profitable MRO growth has continued to be validated, despite some of the toughest market conditions in recent history.
The assumptions which underpin our strategy, together with thecontinued execution of our strategic priorities, have provided our businesswith a high level of resilience. This resilience is manifest in our stablegross margin and strong profitability which, even this year, still saw anunderlying return on sales of 9.1%, as we have continued to deliver on ourcommitments to ensure we grow our business profitably. Our leaders and theirtalented teams have embraced our strategic goals that we remain focused on andthrough monthly governance forums and quarterly business reviews the fullPremier Farnell Leadership Council (PFLC) continues to assess our strategicprogress and develop new opportunities.January 2010 marked the third year of our journey and the beginningof the next stage of transforming Premier Farnell. In the second half of 2009we completed a business agenda review to evaluate our current strategy and itsrelevance within our changing world. We adopted the same approach andtechnique that we used when we went through a similar review process in 2006.We involved close to 1,000 of our employees from across the globe, spoke toour customers and suppliers, consulted external subject matter experts andtook input from commissioned research on our macro economic environment. Thereview breathed new life into our proven global strategy.The strength of our strategy, the knowledge and experience gainedfrom the previous three years and the review process have resulted in anevolution of our strategy that reflects the changes seen in our markets andour customers' needs. Our core strategy will remain unchanged. We willcontinue to focus on EDE, the web and internationalisation, along withprofitable MRO while also building on the strong foundations that these majorpillars of our strategy provide with the addition of new drivers that include:customer loyalty and lifetime partnerships; design related services that gobeyond just product; a holistic green technology proposition and leveragingthe value of information as an asset.
Building on our proven global strategy and leveraging it to develop new services, like those outlined above, will delineate a truly unique proposition. Developing this proposition in the world's under-penetrated international markets will continue to be a major focus and as we further internationalise our business we will look to increase our exposure and presence in the faster growing electronic component markets in Asia.
EDEs are now more connected than ever, using the web as theirprimary resource and relying on web technology to keep pace with theirevolving needs. The launch of our element14 community in June was our firstresponse to these changing needs. We recently launched a new web distributionchannel with the release of our element14 store in the vital US market and wewill continue to bring our core distribution capabilities together with ourunique community environment, breaking down barriers and building theelement14 name globally. The future of element14 will provide customers with aworkspace that is more than just a website, it will be a place of work whereour customers can access technical information, CAD design software,legislative expertise, detailed product specification, collaboration tools andnetworking opportunities they require to take a design concept through everystage of the design cycle.Throughout the first phase of our transformation we invested todeliver our strategy and drive profitable growth. Our incremental capital andinventory investments during this period totalled approximately £20 million,reflecting our low level of capital intensity. These investments, which havebeen funded through our ability to drive operational efficiencies andimprovements in our working capital requirements, have allowed us to create astrong and talented team who have executed our strategic priorities with paceand agility. Much of this focus has been towards driving our eCommercepenetration, with eCommerce now accounting for 41.5% of total MDD sales and inEurope the channel accounts for 58.8% of total sales. With 99.6% of our ordersshipped same day or next day, our people, our web, our IT systems andinfrastructure are at the heart of our proposition and with the web becomingmore encompassing to our customers, we now plan to invest in our back-endsystems to support our single front-end web platform. In the coming year wewill start the work to plan and prepare for the implementation of a standardenabling system while continuing to capitalise on the operational efficienciesthat the web offers and investing in our EDE and international propositions toaccelerate our profitable growth.During the first year of this transformation we will incurincremental revenue costs of circa £5.0m. Of this, £3.0m are one-off costs,half of which relate to the development of our element14 brand and webpositioning, with the balance relating to incremental system costs. Theremaining £2.0m of incremental costs relate to the launch of our element14store in the North America, which will become earnings enhancing in its secondyear. As well as driving efficiencies in workflows, these investments willprovide the capacity and the capabilities needed to ensure we are able tosupport our customers' future requirements, our suppliers' need to create anddistribute design information on their products and our ability to inform andprovide our suppliers with insightful behavioural information.We are committed to communicating our performance with clarity andconsistency and using the same performance metrics for both our internal andexternal stakeholders. As we move into the new financial year we will continueto share openly our key performance indicators, which reflect how we envisagethe shape of our business will change over the next 1,000 days.Financial ResultsRevenueFourth QuarterSales for the fourth quarter were £207.5 million (2008/9: £200.2million or £194.3 million at constant exchange rates). The fourth quarter sawthe Group return to growth with sales per day increasing by 6.0% on the prioryear, compared with the third quarter year on year decline of 11.0%. MDDAmericas sales improved 8.3% over the third quarter and were flat year onyear. Farnell Europe moved back into positive year on year growth at 11.4% andsales in APAC continued on their strong trajectory reporting positive growthof 37.4%. The average exchange rate for the US dollar against sterling was$1.62 (2008/9: $1.47) and the average exchange rate for the Euro againststerling was Euro 1.13 (2008/9: Euro 1.13).
Full Year
Sales for the full financial year were £795.3 million (2008/9:£804.4 million or £879.2 million at constant exchange rates). Sales per daydecreased 9.7% on the prior year, although the decline in Group salescontinued to abate throughout the second half with the fourth quarter movingback in to positive growth. Despite the economic recession we have continuedto invest in our strategy which has been validated by the outperformance ofEDE sales relative to MRO sales which has accelerated in every regionthroughout the year, the continued growth in web sales, and the strongperformance of our international markets. The average exchange rate for the USdollar against sterling was $1.59 (2008/9: $1.79) and the average exchangerate for the Euro against sterling was Euro 1.13 (2008/9: Euro 1.24).
Margins and Operating Profit
Fourth Quarter
The gross margin in the fourth quarter was 40.3% compared with 39.3% in the fourth quarter last year, or 39.7% at constant exchange rates. This represents the seventeenth consecutive quarter of gross margin stability, demonstrating our ability to effectively manage our business throughout the downturn.
Underlying net operating expenses in the fourth quarter were 29.9%of sales reflecting the impact of increasing sales, higher pension costs andour continued strategic investment, as the benefits from our cost reductionprogrammes and transition to the web continue to be realised. This compares tothe fourth quarter of last year where underlying net operating expenses were29.0% of sales, reflecting the benefits from lower long-term and short-termincentive plan costs.Underlying operating profit was £21.7 million (2008/9: £20.5million) producing an operating margin of 10.5%, compared to 10.2% in thefourth quarter of the prior year, and a 1.3 percentage point increase over thethird quarter, the second consecutive quarter in which we have seen anincrease. Total operating profit for the quarter was £21.7 million (2008/9:£17.1 million), reflecting the one-off cost of the reshaping exercise in thefourth quarter of the prior year. There was a beneficial impact on operatingprofit of £0.5 million from the translation of overseas results compared withthe prior year. At constant exchange rates operating profit increased 3.3%compared with the prior year and compared with the year on year decrease seenin the first nine months of 35.4%.
Full Year
The gross margin for the full financial year was 39.8% compared with 39.6% in the prior year and also 39.6% at constant exchange rates, continuing our long standing record of maintaining margin stability which differentiates us in the industry.
Throughout the year we have continued to invest in our strategicdirection and transformation despite the economic challenges. Our totalrevenue investment to support our EDE and web propositions and theinternationalisation of our high service model, amounted to £15 million. Ourcost reduction plans also remain on track to achieve a permanent twopercentage point reduction in operating expenses as a percentage of sales.Underlying net operating expenses in the year were £4.7 million lower than theprior year at constant exchange rates, despite the impact of increased costsfor defined benefit pension schemes of £5.4 million and our continuingstrategic investments.Underlying operating profit was £72.7 million (2008/9: £88.8million) producing an operating margin of 9.1% (2008/9: 11.0%) which reflectsthe impact of the sales decline in the first half of the year and ourcontinued investments. Total operating profit for the year was £71.4 million(2008/9: £85.4 million), reflecting restructuring costs of £7.6 million(2008/9: £3.4 million) and the second quarter one-off non cash gain from therestructuring of the US pension plans of £6.3 million (2008/9: £nil). Therewas a beneficial impact on operating profit of £11.2 million from thetranslation of overseas results compared with the prior year, primarily as aresult of the relative strengths of both the US dollar and the Euro. Atconstant exchange rates the decrease in underlying operating profit comparedwith the prior year was 27.3%.
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 £17.9 million (2008/9:£12.6 million). This comprises net interest payable of £13.6 million (2008/9:£11.9 million), which was covered 5.3 times by underlying operating profit,and a charge of £4.3 million (2008/9: charge of £4.4 million excluding gainson the purchase and cancellation of preference shares of £3.7 million) inrespect of the Company's convertible preference shares.The increase in interest payable reflects the impact of the amortisation ofarrangement fees on the Group's new borrowing facilities entered into at theend of the prior year. The negative impact of exchange rates from our USborrowings and the interest cost of additional borrowings to fund the Group'spurchase and cancellation of preference shares in the prior year, was offsetby the benefit of lower interest rates on the Group's bilateral bankingfacilities which carry a LIBOR based floating rate of interest.
Profit Before Tax
Underlying profit before tax for the financial year was £54.8 million (2008/9: £72.5 million) and total profit before tax was £53.5 million (2008/9: £72.8 million).
Underlying profit before tax in the fourth quarter was £17.2 million (2008/9: £16.4 million), a 4.9% increase compared with the decline seen in the first nine months of 33.0%, and total profit before tax in the fourth quarter was £17.2 million (2008/9: £13.0 million).
Taxation Charge
The taxation charge for the financial year was at an effective rate of 28.0% (2008/9: 29.0%) of profit before tax, preference dividends and gains on the purchase and cancellation of preference shares.
Return on Net Operating Assets
Return on net operating assets for the financial year was 29.2% (2008/9: 29.6%) before restructuring costs, compared to our strategic target of 30%, reflecting the impact of the decrease in underlying operating profit.
Earnings per ShareFourth Quarter
Underlying earnings per share for the fourth quarter were 3.5 pence (2008/9: 3.1 pence). Total earnings per share for the fourth quarter were 3.5 pence (2008/9: 2.5 pence).
Full Year
Underlying earnings per share for the financial year were 10.7 pence (2008/9: 13.9 pence). Total earnings per share for the financial year were 10.4 pence (2008/9: 14.3 pence).
Cash Flow and Net Financial Liabilities
Total cash generated from operations in the fourth quarter was£20.3 million (2008/9: £32.4 million) or £21.7 million (2008/9: £34.4 million)excluding the impact of restructuring costs, representing 94% (2008/9: 189%)of operating profit, or 100% (2008/9: 168%) excluding the impact ofrestructuring costs. Working capital increased by £3.8 million in the fourthquarter reflecting our sales growth of 6.0% year on year in the same periodand our investment in inventory to support our customers. However, we willcontinue to target working capital to be a reduced percentage of sales.Total cash generated from operations for the full year was £98.3million (2008/9: £102.3 million) or £105.4 million (2008/9: £104.3 million)excluding the impact of restructuring costs, representing 138% (2008/9: 120%)of operating profit, or 145% (2008/9: 117%) excluding the impact ofrestructuring costs. Free cash flow for the full year, being total cashgenerated from operations less net capital expenditure, interest, preferencedividends and tax payments, was £59.3 million, or £66.4 million excludingrestructuring costs, (2008/9: £52.4 million or £54.4 million excludingrestructuring costs).Net financial liabilities at the end of the financial year were£264.2 million (1 February 2009: £295.9 million), including £60.2 million (1February 2009: £59.4 million) attributable to the Company's preference shares.The reduction during the year of £31.7 million reflects the strong cash flowperformance and includes £14.7 million from the benefit of exchange ratemovements.
Financial Position
Premier Farnell's financial position remains robust with goodliquidity and strong free cash flow. At 31 January 2010 our headroom on bankborrowings was £82 million under facilities in place until May 2012 (£20million) and January 2013 (£150 million). This headroom, combined with our netcash position of £25 million, gives us a secure funding position.
The Group expects that the combination of free cash flow, 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 June 2010. However, the Board is considering options with respect to the Senior Notes repayable in June, reflective of the increased activity in the US private placement market.
Pensions
The impact of the prior year end valuations on our defined benefit pension plans resulted in a net charge to operating profit in the financial year of £3.2 million, compared with net income of £2.2 million in 2008/9. This primarily reflects the decline in the market value of investments of the US Pension Plan during 2008/9.
As already reported in the interim statement, in common with manybusinesses, on 31 July 2009 the Group's North American Pension Plans wereclosed to further accrual of defined benefit obligations, with members beingtransferred to a money purchase plan. This resulted in a non cash netaccounting gain in the second quarter of £6.3 million which has beenrecognised through the income statement. These actions reduce the riskassociated with the Group's pension schemes. Actuarial losses of £12.2 million(£8.1 million net of associated deferred tax) were recognised in the financialyear through the Condensed Consolidated Statement of Comprehensive Incomerelating to the Group's defined benefit pension plans. This reflects actuariallosses of £21.5 million (£13.8 million net of deferred tax) recognised in thefirst nine months, offset by actuarial gains of £9.3 million (£5.7 million netof deferred tax) in the fourth quarter, as a result of improvements in themarket value of investments and the market related bond rate used to discountplan liabilities at the period end.
Operations
With effect from 2 February 2009, the Group has adopted IFRS 8,Operating Segments. This has not affected the financial results of the Group,but has resulted in a change to the Group's segmental disclosures. Theprevious two divisions within the Marketing and Distribution Division havebeen split into three distribution divisions within MDD with CPC (previouslyin MDD Europe and Asia Pacific) and MCM (previously in MDD Americas) now bothcategorised in the Other Distribution Division. Comparatives have beenre-presented accordingly.
Marketing and Distribution Division (MDD)
(Newark and Farnell businesses including Premier Electronics, CPC and MCM)
Q4 09/10 Q4 08/9 Q4 growth FY 09/10 FY 08/9 FY growth £m £m £m £mRevenue 189.1 179.8 +6.7% 718.4 727.1 -9.5%Underlying operating 21.4 19.7 +4.4% 69.8 85.7 -26.4%profit*Underlying operating 11.3% 11.0% 9.7% 11.8%margin %*excluding restructuring costs of £7.6 million (Q1: £4.0 million,Q2 £0.8 million, Q3: £2.8 million) (2008/9: Q4 £2.9 million) and the one-offnon cash gain from re-organisation of North American pension plans in Q2 of£5.3 million.The MDD division saw a return to growth during the fourth quarter,with sales up 6.7% year on year, compared to the third quarter year on yeardecline of 10.5%. This reflects a 10.9% sequential increase on third quartersales as some of our end markets began to show signs of improvement. Progressin MDD Americas accelerated during the quarter with sequential sales per dayhaving now shown improvement in the financial year for eight consecutivemonths, reflecting sales growth of 27.3% over this period. In the MDD Europeand Asia Pacific Division, where our strategy is the most advanced, fourthquarter sales grew 14.5% year on year and 14.8% on the third quarter, with ourAsia Pacific region reporting strong year on year growth of 37.4%, as ourinternationalisation plans continue to achieve results. In particular, salesto our EDE customers accelerated in all regions during the quarter as the gapbetween EDE and MRO sales performance widened, clear confirmation that ourstrategy is the right one.This quarter has seen a significant improvement in the electroniccomponent industry statistics. However, the Semiconductor Industry Association(SIA) themselves cited the improvements in their statistics across the globeto be largely driven by heightened demand in PCs and cell phones, whichaccounts for approximately 60% of total semiconductor consumption, andconsumer electronics. Sales growth recently reported in the volume electroniccomponent distribution sector of between 6% and 11%, is a significantimprovement on the declines of between 16% and 20% reported in the thirdquarter. This improvement signifies a marked increase in volume purchasingactivities, which further supports the SIA's comment. Despite this, thepositive trend seen in these statistics remains a relevant indicator of marketactivity.
The acquisition of CadSoft in the third quarter is an important and differentiating addition to our portfolio offering of product, data and services to design engineers globally. Since acquiring the business we have seen positive sales momentum and the business has contributed £0.6m to the division's revenue.
Actions taken in the first half to accelerate our transition to theweb have continued to ensure that our structure, resources and talent are inplace to support profitable growth. In the first nine months this resulted inone-off restructuring costs of £7.6 million which will provide annualisedsavings of £12 million. In addition, as reported at the half year, therestructuring of our North American pension plans has resulted in a netone-off accounting credit in the second quarter of £6.3 million of which £5.0million relates to the MDD Americas business.
The underlying operating margin of 11.3% in the fourth quarter again reflects a 1.4 percentage point increase over the prior quarter. The sequential sales improvement, gross margin performance and effective cost control, resulted in the year on year underlying operating profit improving from a decline of 34.9% in the first nine months to an increase of 4.4% in the fourth quarter.
As we accelerate our transition to the web, our content-rich webenvironment continues to be our customers' channel of choice. Web sales forthe MDD division grew 28.9% in the fourth quarter, and total eCommerce salesreached 41.5% of total sales with Farnell Europe at 58.8%, demonstrating ourprogress towards achieving between 50% and 70% of sales via eCommercechannels.MDD Americas(Newark and Brazil) Q4 09/10 Q4 08/9 Q4 FY 09/10 FY 08/9 FY growth growth £m £m £m £mRevenue 78.8 84.8 0.0% 310.0 335.5 -17.7%
Underlying operating profit* 4.9 7.4 -29.0% 12.3 31.2 -65.0% Underlying operating margin 6.2% 8.7%
4.0% 9.3%%
*excluding restructuring costs of £4.7 million (Q1: £1.1 million, Q2 £0.8 million, Q3: £2.8 million) (2008/9: Q4 £0.9 million) and the one-off non cash gain from re-organisation of North American pension plans in Q2 of £5.0 million.
MDD Americas' sales have seen continued upward momentum over thelast eight months, increasing 27.3% over that period. Sales grew 8.3% on thethird quarter as the business benefitted from its strategic focus andrestructuring earlier in the year, with fourth quarter sales flat year onyear. Our EDE performance saw accelerating sales growth improvement throughthe quarter as we drive the business mix towards this strategic segment. MROsales have again improved on the prior quarter and our focused approachtowards picking the more profitable and higher growth MRO market segments hascontributed to driving Newark's overall sales to the high-point of the salesperformances reported in the US MRO industry. These ranged from low singledigit growth in government and commercial, through to low double digitdeclines in heavy manufacturing and declines in the low teens for industrialcontracting. In contrast to the US MRO markets, the SIA - indicative of theEDE sector - reported North American sales growth of 48.2% for the equivalentperiod.Strategic investments are continuing to realise benefits andincrease our capabilities in the region. Newark's average number of lines perorder and average order values have seen upwards momentum since May whichcontinued through the fourth quarter, driven by customer engagement programmesthat are aligned to an enhanced product offering and increasingly innovativeweb experience. We continue to support the customer switch to our rich webenvironments. Following the branch closure program earlier in the year, weremain committed to offering customers one-to-one relationships through ourcontact centre, work at home teams and design segment managers. This combinedwith our industry leading website and new branch structure ensures thatcustomers right across North America continue to benefit from a value addedexperience. Fourth quarter web sales grew by 37.2% and Newark's proportion ofsales via eCommerce channels increased to 25.8%.Underlying operating margin improved for the second consecutivequarter from 2.0% seen in the second quarter to 6.2% in the fourth quarter asthe business benefits from its strategic actions and restructuring, althoughit continued to be affected by the highly competitive nature of the NorthAmerican MRO market, and our continued investment to restructure the businessfor the future. In addition, incremental costs of £0.9 million relating to theUS defined benefit pension plan were incurred in the fourth quarter relativeto the prior year.MDD Europe and Asia Pacific
(Farnell and Premier Electronics)
Q4 09/10 Q4 08/9 Q4 growth FY 09/10 FY 08/9 FY growth £m £m £m £mRevenue 86.3 71.8 +14.5% 317.0 303.8 -2.9%Underlying operating 14.3 9.9 +27.7% 48.5 44.8 -2.6%profit*Underlying operating 16.6% 13.8% 15.3% 14.7%
margin % *excluding restructuring costs of £2.9 million in the first quarter (2008/9: Q4 £1.8 million).
Sales in the fourth quarter grew an impressive 14.5% compared to the third quarter year on year decline of 2.9%, with sequential growth of 14.8% reflecting the strength of our embedded strategy in these regions and the rapid growth seen in our international regions. Underlying operating margin improved to 16.6%, with underlying operating profit increasing 27.7% year on year at constant exchange rates, reflecting the cost benefits of our transition to the web and the actions taken to restructure our European business in the first quarter, which resulted in a one-off cost of £2.9 million.
Revenue by region Q4 09/10 Q4 08/9 Q4 growth FY 09/10 FY 08/9 FY growth £m £m £m £mUK (including 28.9 25.3 +13.7% 111.8 113.2 -1.2%exports)Mainland Europe 45.1 38.3 +10.4% 161.8 155.0 -6.3%Asia Pacific 12.3 8.2 +37.4% 43.4 35.6 +7.3%The Division's ongoing EDE initiatives including its targetedapproach to customer acquisition have resulted in EDE further outperformingMRO sales. Sales for Farnell Europe, including the UK, grew 11.4% in thequarter, a marked improvement on the third quarter decline of 4.7% with allmajor regions reporting positive growth. This represents an outperformance ofthe European market which declined 10.7% for the calendar fourth quarter,according to Distributors and Manufacturers Association of Semiconductors(DMASS). Fourth quarter sales in Eastern Europe grew 74.6% year on year as thesignificant opportunities for growth in the region continue to be exploited.Over 90% of sales in Eastern Europe are by eChannels, and the introduction ofa new tele-marketing team in the quarter has helped drive customer growth.Farnell UK continued to increase its market share. In the fourthquarter sales grew 6.1% and this positive performance has continued intoFebruary, where sales grew 13.9% on the prior year. The growth seen in thefourth quarter represents a significant improvement on the third quarterdecline of 5.8% and an outperformance of the UK markets which according to themost recent data from AFDEC grew 4.6%, excluding Farnell, for the equivalentperiod.The strength of our strategic drive in the Asia Pacific region isclear with growth in the fourth quarter of 37.4%. This compares to the widerAPAC market where the SIA reported sales had grown 69.2% year on year, for theequivalent period. Sales in Greater China and India are continuing to drivegrowth with strategic investments and a focused approach delivering a strongEDE and web offering. During the quarter we saw sales growth of 76.4% and70.3% in Greater China and India, respectively.
Our broad product offering and the richness of our web environment continued to attract new customers and, supported by our customer focused eCommerce tools including eQuotes and new website enhancements, web sales grew 27.0% during the quarter. eCommerce sales in Farnell Europe now account for 58.8% of total sales.
Other Distribution Businesses(CPC and MCM) Q4 09/10 Q4 08/9 Q4 growth FY 09/10 FY 08/9 FY growth £m £m £m £mRevenue 24.0 23.2 +6.6% 91.4 87.8 +0.9%Underlying operating 2.2 2.4 -8.3% 9.0 9.7 -10.0%profit*Underlying operating 9.2% 10.3% 9.8% 11.0%margin %
*excluding restructuring costs of £nil (2008/9: Q4 £0.2 million) and theone-off non cash gain from re-organisation of North American pension plans inQ2 of £0.3 million.CPC has achieved positive sales growth throughout the year,reporting a strong fourth quarter year on year sales growth of 8.1%, and fullyear growth of 4.1%. The impressive performance of CPC in a highly competitiveand difficult UK market reflects its innovative marketing activities using newadvertisement vehicles, combined with a value added service. The number of newspending customers more than doubled on last year and online visitorsincreased 45% driven by both offline marketing and improvement to its websearch functionality.MCM moved back into positive growth in the fourth quarter, up 2.6%on the prior year and up 7.7% on the third quarter. Whilst market conditionsbegan to show some sign of improvement, the impact of the North Americaneconomic environment continued to be challenging, particularly on thebusiness' larger National Account Customers. MCM's performance was supportedby web promotions and a successful Winter Catalogue.
Industrial Products Division
(Akron Brass and TPC Wire & Cable)
Q4 09/10 Q4 08/9 Q4 growth FY 09/10 FY 08/9 FY growth £m £m £m £mRevenue 18.4 20.4 -0.2% 76.9 77.3 -11.1%Underlying operating 3.2 3.2 +10.3% 13.6 14.3 -16.6%profit*Underlying operating 17.4% 15.7% 17.7% 18.5%margin
*excluding restructuring costs of £nil (2008/9: Q4 £0.2 million) and the one-off non cash gain from re-organisation of North American pension plans in Q2 of £1.0 million.
Excluding Cadillac Electric, which was closed at the end of the prior year,fourth quarter sales grew 4.5%, reflecting the successful focus, by both AkronBrass and TPC Wire & Cable, on targeting international opportunities and newproducts and markets in order to mitigate the impact of the difficultconditions in their domestic markets. As a consequence operating margins haveremained strong.Akron BrassSales at Akron Brass were flat in the fourth quarter compared tothe 2.9% decline seen in the first nine months, a relatively strongperformance as the business continued to increase market share in whatremained difficult core market conditions. This was supported by targetedgrowth internationally, where fourth quarter sales grew 31.0%, including thedispatch of a record order in Poland, and ongoing investments in new productdevelopments and other market sectors including defence and petrochemicalindustries. The business has now recruited a sales team in China and Dubai tosupport its international expansion.
TPC Wire & Cable
Following the restructuring of TPC during the second quarter,designed to develop a multi-channel focus across specific market segments,including refineries, rig and marine fabrication, hoisting equipment,government, utility, mining, food and beverage, the business saw fourthquarter sales increase 25.4% over the prior year and 20.0% over the thirdquarter. This restructuring ensures TPC is less reliant on its traditionalmarkets, including automotive and the steel sector, and that the business isfocused on opportunities for growth. New products accounted for 15% of salesin the quarter and international sales grew 81.0% on the prior year. Increasedactivity was seen in the steel sector in the third quarter as sites began toincrease production levels. The business' recent improvements to its websiteduring the quarter around usability, has seen visitor numbers continue toincrease, supported by marketing initiatives.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, the effect of legislation and regulatoryenactments, recruitment and integration of new personnel, the implementationof cost-saving initiatives to offset current market conditions, continued useand acceptance of e-commerce programs and systems, the ability to expand intonew markets and territories, the implementation of new sales and marketinginitiatives, changes in demand for electronic, electrical, electromagnetic andindustrial products, rapid changes in distribution of products and customerexpectations, the ability to introduce and customers' acceptance of newservices, products and product lines, product availability, the impact ofcompetitive pricing, fluctuations in foreign currencies, and changes ininterest rates and overall market conditions, particularly the impact ofchanges in world-wide and national economies. The Group does not intend toupdate the forward-looking statements made herein.
Condensed Consolidated Income Statement
For the fourth quarter and year ended 31st January 2010
2009/10 2008/9 2009/10 2008/9 Fourth Fourth Full Full quarter quarter year year unaudited unaudited unaudited audited Notes £m £m £m £m Continuing operationsRevenue 3 207.5 200.2 795.3 804.4Cost of sales (123.8) (121.6) (478.9) (485.6)Gross profit 83.7 78.6 316.4 318.8Net operating expenses- before restructuring costs and pension changes (62.0) (58.1) (243.7) (230.0)- restructuring costs 4 - (3.4) (7.6) (3.4)- net one-off income from pension changes 4 - - 6.3 -Total net operating expenses (62.0) (61.5) (245.0) (233.4)Operating profit- before restructuring costs and pension changes 21.7 20.5 72.7 88.8- restructuring costs 4 - (3.4) (7.6) (3.4)- net one-off income from pension changes 4 - - 6.3 -Total operating profit 3 21.7 17.1 71.4 85.4Finance income (interest receivable) 0.2 0.2 0.5 0.7Finance costs- interest payable (3.7) (3.2) (14.1) (12.6)- preference dividends (0.8) (0.8) (3.5) (3.5)- premium on redemption of preference shares (0.2) (0.3) (0.8) (0.9)- gain on purchase of preference shares -
- - 3.7Total finance costs (4.7) (4.3) (18.4) (13.3)Profit before taxation 4 17.2 13.0 53.5 72.8Taxation 5 (4.7) (4.0) (16.0) (21.1)Profit for the period(attributable to ordinary shareholders) 12.5 9.0 37.5 51.7 Earnings per share 6Basic 3.5p 2.5p 10.4p 14.3pDiluted 3.4p 2.5p 10.3p 14.2p Ordinary dividendsInterim - proposed 4.2p 4.2pFinal - proposed 13 5.2p 5.2pPaid 9.4p 9.4p
Impact on shareholders' funds (£m)
34.0 34.0
Condensed Consolidated Statement of Comprehensive Income
For the fourth quarter and year ended 31st January 2010
2009/10 2008/9 2009/10 2008/9 Fourth Fourth Full Full quarter quarter year year unaudited unaudited unaudited audited (re-presented) (re-presented) Notes £m £m £m £m Profit for the period 12.5 9.0 37.5 51.7 Net exchange adjustments 5.2 16.2 1.1 11.6Actuarial gains/(losses) onpensions and other post-retirementobligations 9 9.3 (47.4) (12.2) (85.1)Deferred tax (charge)/crediton actuarial gains/(losses) 9 (3.6) 16.9 4.1 31.3Net fair value gains/(losses)on cash flow hedges 0.4 (4.3) 4.1 (0.8)Other comprehensiveincome for the period 11.3 (18.6) (2.9) (43.0) Total comprehensiveincome/(expense) for the period(attributable to ordinaryshareholders) 23.8 (9.6) 34.6 8.7
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Condensed Consolidated Balance Sheet
As at 31st January 2010 31st January 1st February 2010 2009 unaudited audited Notes £m £mASSETSNon-current assetsGoodwill 34.8 32.5Other intangible assets 24.2 25.0
Property, plant and equipment
53.4 58.1Deferred tax assets 12.2 5.0Total non-current assets 124.6 120.6 Current assetsInventories 175.2 194.3Financial assets 8 1.1 -Trade and other receivables 126.7 128.8Cash and cash equivalents 8 26.6 39.6Total current assets 329.6 362.7 LIABILITIESCurrent liabilitiesFinancial liabilities 8 (43.1) (5.1)Trade and other payables (101.6) (94.5)Current tax payable (27.4) (17.4)Total current liabilities (172.1) (117.0) Net current assets 157.5 245.7 Non-current liabilitiesFinancial liabilities 8 (248.8) (330.4)Retirement and otherpost-employment benefits (38.8) (35.3)Deferred tax liabilities (3.0) (6.2)Total non-current liabilities (290.6) (371.9) NET LIABILITIES (8.5) (5.6) EQUITYOrdinary shares 18.3 18.3
Equity element of preference shares
10.4 10.4Share premium 24.2 23.8Capital redemption reserve 4.4 4.4Hedging reserve 0.4 (3.7)
Cumulative translation reserve
16.4 15.3Retained earnings (82.6) (74.1)TOTAL EQUITY (8.5) (5.6)
Condensed Consolidated Statement of changes in Equity
For the year ended 31st January 2010
2009/10 2008/9 Full Full year year unaudited audited £m £m Total equity at beginning of year (5.6) 20.1 Profit for the year 37.5 51.7Other comprehensive expense (2.9) (43.0)Total comprehensive income 34.6 8.7 Transactions with owners:Ordinary dividends paid (34.0) (34.0)Ordinary shares issued 0.4 0.9Purchase of ordinary shares 10 (5.0) (2.9)Purchase of preference shares: 11- reduction in equity element - (4.8)- gain arising on equity element - 4.8- deferred tax - 0.8Share-based payments 1.1 0.8Total transactions with owners (37.5) (34.4) Total equity at end of year (8.5) (5.6)
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Condensed Consolidated Statement of Cash Flows
For the fourth quarter and year ended 31st January 2010
2009/10 2008/9 2009/10 2008/9 Fourth Fourth Full Full quarter quarter year year unaudited unaudited unaudited audited Notes £m £m £m £m Cash flows from operating activitiesOperating profit 21.7 17.1 71.4 85.4Restructuring/pension changes:- net income statement impact - 3.4 1.3 3.4- cash impact (1.4) (2.0) (7.1) (2.0)Non-cash impact ofrestructuring/pension changes (1.4) 1.4 (5.8) 1.4Depreciation and amortisation 4.7 5.0 19.5 18.0Changes in working capital (3.8) 12.3 12.8 2.7Additional funding for postretirement defined benefit plans (1.2) (0.7) (2.9) (2.9)Other non-cash movements 0.3 (2.7) 3.3 (2.3)Total cash generated from operations 7 20.3 32.4
98.3 102.3Interest received 0.2 0.2 0.5 0.7Interest paid (4.7) (5.0) (12.5) (12.4)
Dividends paid on preference shares (1.7) (1.7)
(3.5) (3.5)Taxation paid (5.2) (3.9) (11.6) (21.9)Net cash generated fromoperating activities 8.9 22.0 71.2 65.2 Cash flows frominvesting activitiesAcquisition of business 2 (0.1) (1.1) (6.2) (1.1)Disposal of business - - - 0.7Proceeds from sale of property,plant and equipment 0.1 - 0.1 3.3Purchase of property,plant and equipment (2.8) (3.1) (5.5) (7.0)Purchase of intangibleassets (computer software) (1.1) (2.0) (6.5) (9.1)
Net cash used in investing activities (3.9) (6.2)
(18.1) (13.2)
Cash flows from financing activitiesIssue of ordinary shares 0.4 - 0.4 0.9Purchase of ordinary shares 10 - - (5.0) (2.9)Purchase of preference shares 11 - - - (23.6)New bank loans - 2.8 144.1 29.5Repayment of bank loans (11.1) (15.5) (169.8) (22.8)
Dividends paid to ordinary shareholders - - (34.0) (34.0)Net cash used in financing activities (10.7) (12.7)
(64.3) (52.9)
Net (decrease)/increase in cash,cash equivalents andbank overdrafts (5.7) 3.1 (11.2) (0.9)Cash, cash equivalents andbank overdrafts at beginningof period 31.7 34.6 39.0 37.6Exchange (losses)/gains (0.6) 1.3 (2.4) 2.3Cash, cash equivalents and
bank overdrafts at end of period 25.4 39.0
25.4 39.0
Reconciliation of net financial liabilitiesNet financial liabilities at beginning of year
(295.9) (254.1)Net decrease in cash,cash equivalents andbank overdrafts (11.2) (0.9)Decrease/(increase) in debt 25.7 (6.7)Decrease in preference shares - 27.4Premium on redemptionof preference shares (0.8) (0.9)
Derivative financial instruments 5.0 (1.5)Amortisation of arrangement fees (1.7) -Exchange movement 14.7 (59.2)Net financial liabilities at end of year 8
(264.2) (295.9)
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Notes1 Basis of preparationThe unaudited condensed consolidated financial information in this report hasbeen prepared based on International Financial Reporting Standards (IFRSs), asadopted by the European Union, and applying the accounting policies disclosedin the Group's 2009 Annual Report and Accounts on pages 81 to 85, except asdescribed below.The following new standards and amendments to standards are mandatory for thefirst time for financial years beginning on or after 1 January 2009, and havebeen adopted by the Group effective from 2nd February 2009.IAS 1 (revised), `Presentation of financial statements'. The revised standardbrings new disclosure requirements regarding `non-owner changes in equity' and'owner changes in equity', which are now required to be shown separately.Under this revised guidance the Group has elected to continue to present twoperformance statements: an income statement and a statement of comprehensiveincome (previously the 'Statement of Recognised Income and Expense'). Thesefinancial statements have been prepared under the revised disclosurerequirements. The requirements under the revised standard have not had asignificant impact on the Group's financial statements. The comparatives inthe Statement of Comprehensive Income have been re-presented to includemovements in the fair value of cash flow hedges which had been previouslyshown separately as a change in equity.IFRS 8, `Operating segments' (replacing IAS 14, `Segment reporting'): IFRS 8requires a `management approach' under which segment information is presentedon the same basis as that used for internal reporting purposes. This has notaffected the financial results of the Group, but has resulted in a change tothe Group's segmental disclosures. The previous two divisions within theMarketing and Distribution Division (MDD) have been split in to threedivisions with CPC (previously in MDD Europe and Asia Pacific) and MCM(previously in MDD Americas) now both categorised as "Other DistributionBusinesses". Comparatives have been re-presented accordingly.This condensed consolidated financial information does not comprise statutoryaccounts within the meaning of Section 434 of the Companies Act 2006.Statutory accounts for the financial year ended 1st February 2009, have beendelivered to the Registrar of Companies. The report of the auditors on thoseaccounts was unqualified and did not contain any statement under Section 237of the Companies Act 1985. Copies of the Company's 2010 Annual Report andAccounts will be available from Premier Farnell plc, 150 Armley Road, Leeds,LS12 2QQ, England, or from the Company's website at www.premierfarnell.com,
nolater than 6 May 2010.2 Acquisition
On 23rd September 2009, the Group acquired the entire issued share capital ofCadSoft Computer GmbH, a leading German-based developer and supplier ofspecialist computer aided design (CAD) software for design engineers, togetherwith the business of Cadsoft Computer Inc., in the US.This transaction has been accounted for by the purchase method of accounting.The consideration and provisional fair values of the net assets acquired wereas follows: Fair value
Book adjustments Fair value
value £m £m £m Intangible assets - 5.3 5.3 Property, plant and equipment 0.1 - 0.1 Trade and other receivables 0.1 - 0.1 Trade and other payables (0.2) - (0.2) Cash and cash equivalents 0.2 - 0.2 0.2 5.3 5.5 Goodwill 2.8 Total cash consideration (including contingent consideration of £1.9m and costs of £0.2m) 8.3 Net cash outflow arising on acquisition comprises: Cash consideration (including costs) 6.4 Cash and cash equivalents acquired (0.2) 6.2
Intangible assets of £5.3 million comprise the software licence, database andbrand and are being amortised over periods of between 4 and 15 years. Goodwillis attributable to the future profitability of the acquired business.Contingent consideration of £1.9 million is dependent on the performance ofthe acquired business over the next three years. Both the trading results ofCadSoft for the period since acquisition, and also for the period since thestart of the financial year had the acquisition taken place on that date, arenot material to the Group's results.
3 Segment information
2009/10 Fourth quarter (unaudited) 2008/2009 Fourth quarter (unaudited) Before After Before Restruct- After Restruct- Restruct- Restruct- Restruct- uring Restruct- uring turing uring uring costs uring costs costs costs costs (note 4) costs (re-presented)
(re-presented) (re-presented)
£m £m £m £m £m £m Revenue Marketing and Distribution Division Americas 78.8 - 78.8 84.8 - 84.8 Europe and Asia Pacific 86.3 - 86.3 71.8 - 71.8 Other Distribution Businesses 24.0 - 24.0 23.2 - 23.2 Total Marketing and Distribution Division 189.1 - 189.1 179.8 - 179.8 Industrial Products Division 18.4 - 18.4 20.4 - 20.4 207.5 - 207.5 200.2 - 200.2 Operating profit Marketing and Distribution Division Americas 4.9 - 4.9 7.4 (0.9) 6.5 Europe and Asia Pacific 14.3 - 14.3 9.9 (1.8) 8.1 Other Distribution Businesses 2.2 - 2.2 2.4 (0.2) 2.2 Total Marketing and Distribution Division 21.4 - 21.4 19.7 (2.9) 16.8 Industrial Products Division 3.2 - 3.2 3.2 (0.2) 3.0 Head Office costs (2.9) - (2.9) (2.4) (0.3) (2.7) 21.7 - 21.7 20.5 (3.4) 17.1 2009/10 Full year (unaudited) 2008/9 Full year (audited) Before Restruct- After restruct- uring restruct- Before After uring costs/ uring restruct- Restruct Restruct- costs/ pension costs/ uring uring uring pension changes pension costs costs costs changes (note 4) changes (re-presented)
(re-presented) (re-presented)
£m £m £m £m £m £m Revenue Marketing and Distribution Division Americas 310.0 - 310.0 335.5 - 335.5 Europe and Asia Pacific 317.0 - 317.0 303.8 - 303.8 Other Distribution Businesses 91.4 - 91.4 87.8 - 87.8 Total Marketing and Distribution Division 718.4 - 718.4 727.1 - 727.1 Industrial Products Division 76.9 - 76.9 77.3 - 77.3 795.3 - 795.3 804.4 - 804.4 Operating profit Marketing and Distribution Division Americas 12.3 0.3 12.6 31.2 (0.9) 30.3 Europe and Asia Pacific 48.5 (2.9) 45.6 44.8 (1.8) 43.0 Other Distribution Businesses 9.0 0.3 9.3 9.7 (0.2) 9.5 Total Marketing and Distribution Division 69.8 (2.3) 67.5 85.7 (2.9) 82.8 Industrial Products Division 13.6 1.0 14.6 14.3 (0.2) 14.1 Head Office costs (10.7) - (10.7) (11.2) (0.3) (11.5) 72.7 (1.3) 71.4 88.8 (3.4) 85.4 31st January 1st February 2010 2009 (re-presented) £m £m Segment assets Marketing and Distribution Division Americas 132.6 159.7 Europe and Asia Pacific 197.4 187.2 Other Distribution Businesses 38.9 36.6 Total Marketing and Distribution Division 368.9 383.5 Industrial Products Division 44.2 53.9 Head Office costs 1.2 1.3 Segment assets 414.3 438.7 Unallocated assets: Cash and cash equivalents 26.6 39.6 Deferred tax assets 12.2 5.0 Financial assets 1.1 - Total assets 454.2 483.3
Segmental information has been re-presented to reflect the adoption of IFRS 8 (note 1).
The segments shown above are the segments for which summary management accountinformation is presented to the Board which is deemed to be the Group's chiefoperating decision maker.
4 Profit before taxation
Profit before taxation is stated after the following:
2009/10 2008/9 2009/10 2008/9 Fourth Fourth Full Full quarter quarter year year unaudited unaudited unaudited audited £m £m £m £m One-off (charges)/credits: - restructuring costs - (3.4) (7.6) (3.4) - net one-off income from pension changes - - 6.3 - - (3.4) (1.3) (3.4) Credit/(charge) for share-based payments - 1.5 (1.1) (0.8) (Charge)/income from defined benefit pension schemes
(0.3) 0.6 (3.2) 2.2
As previously disclosed, the Group has taken action during the first nine months to restructure its branch network in North America and to rationalise its structure in Europe. The one-off cost related to this restructuring, incurred in the first nine months, was £7.6 million.
The impact of the prior year end valuations on the Group's defined benefitpension plans have resulted in a net charge to underlying operating profit inthe year of £3.2 million, compared to net income of £2.2 million in 2008/9.This reflects primarily the decline in the market value of investments of theUS Pension Plan during 2008/9. This year the Group has reduced further itsexposure to the equity markets in its North American plans. In addition, on31st July 2009, the Group's North American pension plans were closed tofurther accrual of defined benefit obligations, with members being transferredto a money purchase plan. This resulted in a net one-off accounting gainincurred in the second quarter of £6.3 million.
Due to their significance, restructuring costs and the net one-off income from pension changes have been disclosed separately on the face of the income statement.
5 Taxation
The taxation charge represents an effective tax rate for the full year on profit before tax, preference dividends and gain on purchase of preference shares of 28.0% (2008/9: 29.0%).
6 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable toordinary shareholders for the period by the weighted average number ofordinary shares in issue during the period, excluding those shares held by thePremier Farnell Executive Trust. For diluted earnings per share, the weightedaverage number of ordinary shares in issue is adjusted to assume issue of alldilutive potential ordinary shares, being those share options and awards witha non-market based performance condition granted to employees where theexercise price is less than the average market price of the Company's ordinaryshares during the period, and those shares with a market based performancecondition based on the current estimate of the number of shares that will vestunder the performance criteria.
Reconciliations of earnings and the weighted average number of ordinary shares used in the calculations are set out below.
2009/10 2008/9 Full year (unaudited) Full Year (audited) 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 37.5 10.4 10.3 51.7 14.3 14.2
Gain on purchase of
preference shares - - - (3.7) (1.0) (1.0) Restructuring costs 7.6 2.1 2.1 3.4 0.9 0.9
Tax attributable to
restructuring costs (2.5) (0.7) (0.7) (1.0) (0.3) (0.3)
Net one-off income
from pension changes (6.3) (1.8) (1.8) - - -
Tax attributable to net
one-off income from
pension changes 2.4 0.7 0.7 - - - Profit attributable to ordinary shareholders before gain on purchase of preference shares, restructuring costs and the net one-off income from pension changes 38.7 10.7 10.6 50.4 13.9 13.8 Number Number Weighted average number of shares 360,456,270 362,412,369 Dilutive effect of share options 2,947,102 2,678,546 Diluted weighted average number of shares 363,403,372 365,090,915
Earnings per share before the gain on purchase of preference shares and excluding restructuring costs and the net one-off income from pension changes have been provided in order to facilitate year on year comparison.
7 Cash generated from operations
2009/10 2008/9 Full Full year year unaudited audited £m £m Continuing operations Profit after tax 37.5 51.7 Adjustment for: - tax 16.0 21.1 - depreciation 9.7 9.0 - amortisation of intangible assets 9.8 9.0 - loss/(profit) on sale of property, plant and equipment 0.2 (0.4) - preference dividends 3.5 3.5 - interest income (0.5) (0.7) - interest expense 14.1 12.6 - premium on redemption of preference shares 0.8 0.9 - gain on purchase of preference shares - (3.7) - additional funding for post retirement defined benefit plans (2.9) (2.9) - increase/(decrease) in net pension liability (US defined benefit plans) 2.0 (2.8) - increase in other post-retirement obligations - 0.1 - share-based payments 1.1 0.8 - non-cash impact of restructuring costs/pension changes (5.8) 1.4 Changes in working capital (excluding the effect of acquisitions): - decrease/(increase) in inventories 9.3 (7.8) - (increase)/decrease in trade and other receivables (3.6) 14.1 - increase/(decrease) in trade and other payables 7.1 (3.6) Total cash generated from operations 98.3 102.3 8 Net financial liabilities 31st January 1st February 2010 2009 unaudited audited £m £m Cash and cash equivalents
26.6 39.6
Unsecured loans and overdrafts
(231.2) (271.7)
Net financial liabilities before
preference shares and derivatives
(204.6) (232.1)
Preference shares
(60.2) (59.4)
Derivative financial instruments (net) 0.6 (4.4) Net financial liabilities
(264.2) (295.9)
Net financial liabilities are
analysed in the balance sheet as follows: Current assets Cash and cash equivalents 26.6 39.6 Derivative financial instruments 1.1 - 27.7 39.6 Current liabilities Bank overdrafts (1.2) (0.6) 5.3% US dollar Guaranteed Senior Notes payable 2010 (41.3) - Other loans (0.1) (0.1) Derivative financial instruments (0.5) (4.4) (43.1) (5.1) Non-current liabilities Bank loans (85.2) (109.8) 5.3% US dollar Guaranteed Senior Notes payable 2010 - (45.8) 5.9% US dollar Guaranteed Senior Notes payable 2013 (99.4) (110.4) Other loans (4.0) (5.0) Preference shares (60.2) (59.4) (248.8) (330.4)
The Group has £150 million syndicate bank facilities agreed at the end of thelast quarter, which expire in January 2013, and a further £20 million bankfacility which expires in May 2012. Based on these new bank facilities of £170million, the Group's headroom on bank borrowings at the end of the year to31st January 2010 was £82 million.
9 Post-retirement benefits
An actuarial loss of £12.2 million (£8.1 million net of associated deferredtax) was recognised in the year through the Condensed Consolidated Statementof Comprehensive Income relating to the Group's pension and post retirementobligations, the majority of which relates to the US pension plan (£8.7million) and the UK pension plan (£2.0 million). As detailed in note 4, on31st July 2009, the Group's North American pension plans were closed tofurther accrual of defined benefit obligations, with members being transferredto a money purchase plan. This resulted in net one-off income in the secondquarter of £6.3 million.
10 Purchase of ordinary shares
During the second quarter, the Premier Farnell Executive Trust acquired 3,829,933 of the Company's ordinary shares, through purchases on the London Stock Exchange, for a total cash consideration of £5.0 million in order to meet future obligations under the Company's performance share plan. This amount has been deducted from shareholders' equity.
11 Purchase of preference shares
There were no purchases of preference shares during the 2009/10 financialyear. During the 2008/9 financial year the Company purchased and cancelled 1.8million of its preference shares at a total cash cost of £23.6 million. Basedon the book value and fair value of the instrument at the date of purchase,the financial liability element of the preference shares was reduced by £27.4million and the equity element by £4.8 million. A gain of £3.7 million wasrecognised in the income statement being the difference between the book valueand fair value of the financial liability element at the date of purchase. Thegain arising from the difference between the book value and fair value of theequity element of £4.8 million was recognised as a movement in retainedearnings. A deferred tax credit of £0.8 million arose which was recognised asa movement in retained earnings. A transfer from retained earnings of £1.8million to non-distributable reserves was made in order to maintain the legalnominal value of share capital.
12 Exchange rates
The principal average exchange rates used to translate the Group's overseasprofits were as follows: 2009/10 2008/9 2009/10 2008/9 Fourth Fourth Full Full quarter quarter year year US dollar 1.62 1.47 1.59 1.79 Euro 1.13 1.13 1.13 1.24 13 Ordinary dividendThe directors are proposing a final dividend in respect of the year ended 31stJanuary 2010, of 5.2p per share which will absorb £18.7 million ofshareholders' funds. As the final dividend is subject to approval at theAnnual General Meeting of the Company, to be held on 15th June 2010, it hasnot been provided for at 31st January 2010. Once approved, the final dividendwill be paid on 23rd June 2010 to shareholders on the register of members on28th May 2010.
vendorRelated Shares:
PFL.L