15th Mar 2007 07:00
Premier Farnell plc 15 March 2007 RESULTS FOR THE FOURTH QUARTER AND FINANCIAL YEAR ENDED 28th JANUARY 2007 Key Financials ‚£m Q4 06/7 Q4 05/6 Q4 FY 06/7 FY 05/6 FY (restated) growth (restated) growth Continuing operations(a) ‚£m ‚£m
‚£m at CER ‚£m at CER (Unaudited) (b) (b) Sales 194.2 197.5 4%¢â‚¬ 823.1 773.5 8%¢â‚¬ Operating profit 20.0 8.3 174% 82.3 58.2 44% Underlying operating 20.0 18.8 16% 82.3 70.1 20% profit(c) Profit before taxation 15.4 2.5 670% 61.5 36.0 73% Underlying profit before 15.4 13.0 28% 61.5 47.9 31% taxation(c) Earnings per share * total 2.9p 1.2p 164% 14.4p 8.6p 69% * continuing operations 2.9p 1.1p 190% 11.5p 8.3p 40% Underlying earnings per share(c) * total 2.9p 3.1p - 14.4p 10.8p 36%
* continuing operations 2.9p 3.0p 4% 11.5p 10.5p 12%
Notes:
(a) Continuing operations exclude the Kent business, part of the IndustrialProducts Division, which was sold on 31st July 2006. The results of thisdiscontinued operation are shown as a single number on the face of the incomestatement below profit after tax and are thus excluded from the trading resultsdiscussed in this statement, including comparative information. Further detailsare given in note 5 to the financial information.
(b) CER - constant exchange rates
(c) Before one-off items charged in 2005/6 relating to RoHS inventory provision (Q4: ‚£6.6m) and reorganisation costs (Q3: ‚£1.4m, Q4: ‚£3.9m).
Financial Highlights
* Full year sales growth 8.1% and underlying profit before taxation up 31.1%.
* Fourth quarter gross margin of 38.5%, fifth consecutive quarter of incremental improvement*. * Full year operational gearing at 22.3%**. * Working capital remains tightly controlled with cash generated from
continuing operations up 21.4% in the fourth quarter and 18.1% in the full
year.
* Recommended final dividend of 5.0p, to give a full year dividend of 9.0p
(2005/6: 9.0p). Business Strategy
* Business strategy implementation making good progress with ongoing
development of our EDE proposition.
* New web front end across USA and being introduced in to Europe to support
web proposition and multi-channel approach.
* Internationalisation of our high service model in to China - new business
system implemented, Mandarin catalogue produced and in country stocking underway. * 16 critical new franchises added.
Commenting on the results, Harriet Green, Chief Executive, said:
"This year has been one of significant improvement and revival for Premier Farnell. With renewed focus and the implementation of our strategic review, the evolution of our business continues, providing a strong platform for future profitable growth.
"We have carried the momentum of the fourth quarter into the new financial year and anticipate continued growth in line with our expectations. We have now commenced the detailed implementation of the business strategy and remain committed to building a business capable of providing a first class differentiated service for customers and our supply partners, central to creating value for shareholders."
* Underlying gross margin is stated before the impact of the RoHS inventory provision taken in the fourth quarter of 2005/6
** Operational gearing represents the year on year increase in underlying operating profit compared to the increase in sales, both at constant exchange rates.
¢â‚¬ percentage changes in sales Comparison of sales for specific periods is affected by three variables:
1. Changes in exchange rates used to translate the overseas sales in different
currencies into sterling; 2. Differences in the number of working days; 3. Disposal or acquisition of businesses.
Throughout this statement, in order to reflect underlying business performance, percentage changes in sales are based on sales per day for continuing
businesses at constant exchange rates and for like periods, unless otherwise stated.
For further information, contact:
Harriet Green, Group Chief Premier Farnell plc +44 (0) 20 7851 4100 Executive Mark Whiteling, Group Finance Director Richard Mountain Financial Dynamics +44 (0) 20 7269 7291 (UK)
The Company's announcements and presentations are published at www. premierfarnell.com , together with business information, Annual Report and Accounts, and links to all other Group web sites.
The Company's results for the First Quarter of the financial year ending 3rd February 2008 are expected to be published in the week beginning 28th May 2007.
Premier Farnell plc STATEMENT ON FOURTH QUARTER AND FINANCIAL YEAR ENDED 28th JANUARY 2007
Premier Farnell, a leading high service distributor providing essential products and services to engineers and purchasing professionals globally, announces its results for the fourth quarter and financial year ended 28th January 2007.
Note: percentage changes in sales
Comparison of sales for specific periods is affected by three variables:
1. Changes in exchange rates used to translate the overseas sales in different
currencies into sterling;
2. Differences in the number of working days;
3. Disposal or acquisition of businesses.
Throughout this statement, in order to reflect underlying business performance,percentage changes in sales are based on sales per day for continuingbusinesses at constant exchange rates and for like periods, unless otherwisestated.
Chief Executive's Operational Overview
A solid fourth quarter has concluded a year of strong performance across theGroup with continued progress against last year. Sales growth was 3.9% in thequarter, despite a particularly strong quarter last year for comparison, andthe Group achieved its fifth consecutive quarter of incremental improvement inunderlying gross margin percentage. Full year sales growth of 8.1% and ourgross margin stability contributed towards full year operational gearing at22.3%.The plan developed as part of our strategic review to focus on profitablegrowth through our Electronic Design Engineer (EDE) customer base, utilisationof our web capability and the internationalisation of our business model as weexpand into new territories, is well underway. Key new appointments have beenmade to support the strategic direction and plans for our Chinese operation areprogressing well, with everything on track for an early April launch of ourimproved and expanded capabilities. These include a newly implemented Chineselanguage core transactional system, our Mandarin catalogue, the initialstocking of over 20,000 lines of RoHS compliant product, and a new websitelaunching soon - all backed up by strong logistics, resources andknowledgeable, local teams.Our strategic plans also included the launch of a new web front end to improveour ability to service customers through this significant channel. Our weboffering is now much enhanced by the new state of the art web platform alreadydeployed in North America and being introduced in to Europe in the firstquarter with plans on track for launch on time in Asia. We have seen animmediate benefit as a consequence of the introduction of the new website,customer feedback is positive and web sales are continuing to grow. eCommercesales in our Marketing & Distribution Division (MDD) increased 21% in thefourth quarter over the prior year and now account for 25% of our MDD sales,with some businesses now achieving over 50% of sales via the web.Plans to target the fast growing EDE segment globally continue to develop andwill benefit significantly from the advances in our web capability. The signingof significant franchises will continue to drive and support this sector and weare starting to see benefits from the franchise wins during the year whichinclude Analog Devices, Cypress Semi-conductor and STMicroelectronics. Ourworld class supplier partnerships, when combined with our "Technology First"campaigns and additional stocked items, are all key to our drive to support thedistinct needs of this customer group in a differentiated way.During the fourth quarter we received much external recognition in the form ofkey industry awards. In November, Newark was recognised by the NationalElectronic Distributors Association (NEDA) for the effectiveness of its RoHSawareness campaigns and tools to support customers. Farnell was recognised withthe significant European Elektra award for "Online Business of the Year", forexcellence in strategic business activity in the online world. In addition,Farnell was also awarded the prestigious Elektra award for Company of the Year.The restructuring programme at BuckHickman is now substantially complete. Saleswere down in the quarter, though much of the shortfall was anticipated and canbe attributed to the lower volumes from a major automotive customer. Ourcommitment to strengthen BuckHickman whilst seeking a new owner continues.
The combined businesses of our Industrial Products Division (IPD) continue to grow, with full year sales up 12.9%. Both Akron and TPC benefited from diversifying into new markets and, despite raw material price increases, operating margins were maintained through efficiencies and cost control.
In conclusion, another quarter of strong performance rounding out a year ofsignificant improvement and revival under the leadership of a new managementteam. With renewed focus and the implementation of our strategic review, theevolution of our business continues, providing a strong platform for growth aswe start our new financial year.
Financial Results
Note: Continuing operations exclude the Kent business, part of the IndustrialProducts Division, which was sold on 31st July 2006. The results of thisdiscontinued operation are shown as a single number on the face of the incomestatement below profit after tax and are thus excluded from the trading resultsdiscussed in this statement, including comparative information. Further detailsare given in note 5 to the financial information.
Sales
Full Year
Sales in the year from continuing operations were ‚£823.1 million (2005/6: ‚£773.5 million or ‚£761.6 million at constant exchange rates). Sales per day fromcontinuing businesses increased 8.1% on the prior year, or 7.4% excluding theimpact of acquisitions made in the prior year.
Fourth Quarter
Sales in the fourth quarter from continuing operations, the quarter with thelowest number of working days, were ‚£194.2 million (2005/6: ‚£197.5 million, or‚£185.6 million at constant exchange rates). Sales per day from continuingoperations increased 3.9% on the prior year, compared with 7.5% year on yeargrowth in the third quarter, reflecting an increasingly stronger comparator
inthe second half of last year.Margins and Operating ProfitFull YearGross margin from continuing operations for the full year was 38.4% (2005/6:37.3% or 38.2% before the RoHS inventory provision of ‚£6.6 million). Operatingprofit in the year from continuing operations was ‚£82.3 million (2005/6: ‚£58.2million, or underlying of ‚£70.1 million before the RoHS inventory provision of‚£6.6 million and reorganisation costs of ‚£5.3 million), producing an operatingmargin of 10.0% (2005/6: 7.5% or 9.1% based on underlying operating profit).
Fourth Quarter
The gross margin from continuing operations in the fourth quarter was 38.5%,(2005/6: 34.6% or 38.0% before the RoHS inventory provision of ‚£6.6 million)marking the fifth consecutive quarter of underlying gross margin improvement.Operating profit from continuing operations was ‚£20.0 million, producing anoperating margin of 10.3%. This compares with an operating profit in 2005/6 of‚£8.3 million (operating margin: 4.2%) and an underlying operating profit in2005/6 of ‚£18.8 million (operating margin: 9.5%), before the RoHS inventoryprovision of ‚£6.6 million and fourth quarter reorganisation costs of ‚£3.9million.There was an adverse impact on operating profit from the translation ofoverseas results compared with prior year of ‚£1.0 million and an underlyingoperating profit impact of ‚£1.5 million, principally as a result of theweakness of the US dollar. At constant exchange rates, the increase inunderlying operating profit compared with the prior year was 15.6%. A one centmovement in the exchange rate between the US dollar on sterling impacts theGroup's operating profit by approximately ‚£250,000 per annum.
Finance Costs
Net finance costs in the year were ‚£20.8 million (2005/6: ‚£22.2 million). Thiscomprises net interest payable of ‚£13.0 million (2005/6: ‚£14.0 million), whichwas covered 6.3 times by operating profit, and a charge of ‚£8.1 million (2005/6: ‚£8.2 million) in respect of the Company's convertible preference shares.During the fourth quarter, the Company purchased and cancelled 565,000 of itspreference shares for a total consideration of ‚£8.4 million. This resulted in abenefit to finance costs in the quarter of ‚£0.3 million, being the differencebetween the book value and fair value of the debt element of the preferenceshares at the date of purchase.
Profit Before Tax and Tax Charge
Reported profit before tax from continuing operations in the year was ‚£ 61.5 million (2005/6: ‚£36.0 million, or underlying of ‚£47.9 million). Underlying profit before tax increased 31.1% at constant exchange rates.
Reported profit before tax from continuing operations in the fourth quarter was‚£15.4 million (2005/6: ‚£2.5 million or underlying of ‚£13.0 million). Underlyingprofit before tax increased 28.3% at constant exchange rates, remainingsignificantly ahead of the rate of sales growth achieved.The current taxation charge from continuing operations was at an effective rateof 29.0% of profit before tax and preference dividends (2005/6: 14.1%). The loweffective tax rate in 2005/6 reflected significant benefits realised from theGroup's efficient financing structure, together with favourable prior yearadjustments.
Disposal of Kent
On 31st July 2006, the Group disposed of its Kent business, part of theIndustrial Products Division, to Barnes Group Inc. The pre-tax profit ondisposal was ‚£12.2 million and the cash consideration received, net of disposalcosts and tax paid, was ‚£20.4 million. Kent is a specialist automotiveconsumables business with sales in 2005/6 of ‚£40.5 million and an operatingprofit of ‚£2.1 million.
Return on Net Operating Assets
Return on net operating assets for the year was 26.1% (2005/6: 22.1% based on underlying operating profit).
Earnings per Share
Earnings per share from continuing operations in the year were 11.5 pence (2005 /6: underlying of 10.5 pence).
Earnings per share from continuing operations in the fourth quarter were 2.9pence (2005/6: underlying earnings per share of 3.0 pence or 2.8 pence atconstant exchange rates). The prior year earnings per share benefited from anet tax credit in the fourth quarter.
Dividend
The Board is recommending a final dividend of 5.0 pence (2005/6: 5.0 pence) making a total for the year of 9.0 pence (2005/6: 9.0 pence). The final dividend, subject to approval at the Annual General Meeting on 12th June 2007, is payable on 20th June 2007 to shareholders on the register at 25th May 2007.
Balance Sheet and Cash Flow
Net cash generated from continuing operations in the fourth quarter was ‚£26.7million, 21.4% up on the prior year, with working capital continuing to betightly controlled. Net cash inflow during the year was ‚£23.1 million.Excluding the net proceeds from the disposal of the Kent business (‚£20.4million) and the cost of purchasing the Company's preference shares (‚£8.4million), net cash inflow was ‚£11.1 million (2005/6: net cash inflow of ‚£1.2million before the cost of businesses acquired). Net financial liabilities atthe end of the year were ‚£281.3 million (29th January 2006: ‚£330.1 million),including ‚£103.1 million attributable to the Company's remaining preferenceshares.
Marketing and Distribution Division (MDD)
MDD comprises: Newark; Farnell; BuckHickman; MCM and CPC.
Q4 06/7 Q4 05/6 Q4 FY 06/7 FY 05/6 FY growth growth ‚£m ‚£m ‚£m ‚£m at CER* at CER* Sales 176.7 179.4 3.4% 749.7 706.4 7.6% Operating profit 19.1 7.5 176.8% 78.8 56.9 40.0% Underlying operating 19.1 18.0 13.0% 78.8 68.6 16.7% profit ** Operating margin % 10.8% 4.2% 10.5% 8.1% Underlying operating 10.8% 10.0% 10.5% 9.7% margin % **
*Constant exchange rates ** Before RoHS inventory provision and reorganisation costs in 2005/6.
Fourth quarter sales grew 3.4% on the prior year measured against a strongercomparative, with full year sales growth of 7.6%. Underlying operating profitincreased 13.0% in the fourth quarter and 16.7% in the full year at constantexchange rates. Operational gearing in the fourth quarter, being the year onyear increase in underlying operating profit compared to the increase in sales,both at constant exchange rates, remained strong, resulting in full yearoperational gearing at 21.3%. The adverse impact on fourth quarter and fullyear underlying operating profit from the translation of overseas results was ‚£1.1 million, due principally to the relatively weak US dollar.
eCommerce sales during the quarter were up 21% on the prior year and accounted for 25% of total MDD sales.
MDD AmericasNewark and MCM. Q4 06/7 Q4 05/6 Q4 FY 06/7 FY 05/6 FY ‚£m ‚£m growth ‚£m ‚£m growth at CER* at CER* Sales 73.8 80.5 1.5% 329.3 310.0 9.1% Operating profit 7.1 3.0 173.1% 30.5 22.2 39.3% Underlying operating 7.1 7.2 12.7% 30.5 27.1 16.0% profit ** Operating margin % 9.6% 3.7% 9.3% 7.2% Underlying operating 9.6% 8.9% 9.3% 8.7% margin % **
*Constant exchange rates ** Before RoHS inventory provision and reorganisation costs in 2005/6
Fourth quarter sales were up 1.5% on the prior year reflecting the toughercomparator, with full year sales growth of 9.1%. Gross margin in the fourthquarter showed further improvement and was 0.4 percentage points above thelevel achieved in the fourth quarter of the prior year, reflecting thecontinued benefit from focusing on core EDE and Maintenance, Repair andOperations (MRO) markets, and the increase in the proportion of sales to newand smaller customers. The fourth quarter operating margin of 9.6% compareswith an underlying operating margin of 8.9% achieved in the prior year.Operational gearing was strong for the second consecutive quarter with secondhalf operational gearing at 26.4%.Web sales in the Americas were up 13% in the year. In December, Newark releasedits new, state of the art web platform. Initial customer feedback has been verypositive with improvements already seen in key customer and sales performanceindicators.Regular customer surveys continue to show improvement in satisfaction ratingsat Newark. Recent investments to improve customer service include enhancedtelephony systems in major branches providing better customer response times,and improvements in product data enabling a significantly increased offering ofaccessories and associated products through both the web and call centres.Improvements have also been made throughout the year in all aspects of service,from order acceptance through to dispatch, with record performance measuresbeing achieved in the fourth quarter. We ended the quarter with an improvedorder book over the prior year.MCM continued to grow sales in the quarter, reflecting the ongoing focus andtargeted marketing of core customers and channels. Web sales in the fourthquarter grew 36% year on year and were up 20% on the third quarter. eCommercesales now account for 42% of MCM's total sales.
MDD Europe and Asia Pacific
Farnell, BuckHickman and CPC.
Q4 06/7 Q4 05/6 Q4 FY 06/7 FY 05/6 FY growth growth ‚£m ‚£m ‚£m ‚£m at CER* at CER* Sales 102.9 98.9 4.9% 420.4 396.4 6.4% Operating profit 12.0 4.5 179.1% 48.3 34.7 40.4% Underlying operating 12.0 10.8 13.2% 48.3 41.5 17.2% profit ** Operating margin % 11.7% 4.6% 11.5% 8.8% Underlying operating 11.7% 10.9% 11.5% 10.5% margin % **
* Constant Exchange Rates ** Before RoHS inventory provision and reorganisation costs in 2005/6
Sales were up 4.9% in the quarter and 6.4% for the full year. The trends seenin the first nine months of the year continued in the fourth quarter, withstrong performances from Farnell and CPC, offset by an anticipated salesdecline from BuckHickman. Excluding BuckHickman, sales for MDD Europe and AsiaPacific were up 8.5% in the fourth quarter and 10.2% in the full year. Theoperating margin of 11.7% was well ahead of the prior year, reflecting animproved gross margin and tight control of costs. Operational gearing in thefourth quarter remained strong at 27.5%.Sales by region Q4 06/7 Q4 05/6 Sales FY 06/7 FY 05/6 Sales growth growth ‚£m ‚£m ‚£m ‚£m UK (including exports) 66.4 64.6 1.9% 272.1 262.6 3.4% Mainland Europe 29.9 27.4 13.4% 118.1 104.7 14.2% Asia Pacific 6.6 6.9 1.5% 30.2 29.1 6.0% The division's UK sales overall (including exports) increased 1.9% in thefourth quarter, reflecting continued strong sales at Farnell and CPC, offset bythe anticipated sales decline at BuckHickman. Sales through the Farnell brandin the UK increased 4.1% in the fourth quarter. During the quarter the businessimplemented a number of targeted marketing activities to drive active customernumbers.Sales per day through the BuckHickman brand were down 5.0% during the quarterand down 3.9% in the full year, mainly due to lower order volumes from a majorautomotive customer. The implementation of the restructuring programme forBuckHickman, which puts in place a new service and logistics model for thebusiness, continued on plan during the quarter and is now substantiallycomplete.CPC's sales rose 9.1% in the fourth quarter, with initiatives in marketing,including direct mailings and eMarketing activity, continuing to deliversuccess. Increased web marketing resulted in fourth quarter web sales growing39% compared with the prior year, to a level which now represents 23% of totalsales.In mainland Europe, Farnell continued to perform strongly, with fourth quarteryear on year growth of 13.4%. Sales in significant mainland European marketsdelivered double digit sales growth throughout the year, supported by ourmulti-channel approach, web performance, and enhanced marketing activity.The focus on China continues with the introduction of a new Mandarin Chinesecatalogue containing 35,000 products, all of which will be available on the webtogether with an extended range of over 100,000 additional products, investmentin a Mandarin language Enterprise Resource Planning (ERP) system and ensuringour products and services required by our EDE customers are compliant with thefirst phase of the China RoHS legislation.Sales in Asia were up 8.6% in the quarter, with strong performances from allterritories. During the quarter, the business issued a Thai Baht pricedcatalogue and export catalogues were produced for the Japanese, Korean andTaiwanese markets, all of which have supported sales growth. Sales in Australiawere down slightly in the fourth quarter, although less than the market whichis continuing to be impacted by the exposure to global competition.
The Europe and Asia Pacific web infrastructure upgrade last August, which significantly enhanced speed and reliability to all three trading brands, has helped fourth quarter web sales to increase 42% year on year, with total eCommerce sales now representing 31% of total sales.
Industrial Products Division (IPD)
Continuing Q4 06/7 Q4 05/6 Q4 growth FY 06/7 FY 05/6 FY growthbusinesses at CER* ‚£m (restated) ‚£m (restated) at CER* ‚£m ‚£m Sales 17.5 18.1 8.9% 73.4 67.1 12.9% Operating profit 3.8 3.6 18.8% 13.7 12.0 18.1% Operating margin 21.7% 19.9% 18.7% 17.9%
*Constant exchange rates
Sales grew 8.9% in the fourth quarter. In the full year, sales grew 12.9%, or5.6% excluding the effect of the acquisition of Weldon by Akron Brass in June2005. At constant exchange rates, operating profit in the full year was 18.1%ahead of last year, helped by the contribution from Weldon.
Akron Brass
Akron Brass sales grew by 17.5% in the fourth quarter, with increased ordersfor Weldon's lighting devices, new product offerings, and further growth fromthe traditional fire apparatus manufacturers and municipal fire departments.The business also benefited from an acceleration of orders from firedepartments due to changes in regulatory requirements. Akron continues toexpand in the international and industrial markets with international salesincreasing by 20% year on year. Cost control and improved efficiencies haveensured margins were maintained despite raw material cost pressures.
TPC Wire & Cable
TPC's fourth quarter sales were flat year on year, with the successfuldiversification in to other markets, including mining, utilities andgovernment, offsetting the decline in the depressed North American automotivesector. In the full year, sales grew 10.9%. Despite the continuing raw materialcost pressures, the business continues to successfully maintain margin throughits pricing strategies and effective management of the supply chain.
Outlook
This year has been one of significant improvement and revival for Premier Farnell. With renewed focus and the implementation of our strategic review, the evolution of our business continues, providing a strong platform for future profitable growth.
We have carried the momentum of the fourth quarter into the new financial year and anticipate continued growth in line with our expectations. We have now commenced the detailed implementation of the business strategy and remain committed to building a business capable of providing a first class differentiated service for customers and our supply partners, central to creating value for shareholders.
This press release contains certain forward-looking statements relating to thebusiness of the Group and certain of its plans and objectives, including, butnot limited to, future capital expenditures, future ordinary expenditures andfuture actions to be taken by the Group in connection with such capital andordinary expenditures, the expected benefits and future actions to be taken bythe Group in respect of certain sales and marketing initiatives, operatingefficiencies and economies of scale. By their nature forward-looking statementsinvolve risk and uncertainty because they relate to events and depend oncircumstances that will occur in the future. Actual expenditures made andactions taken may differ materially from the Group's expectations contained inthe forward-looking statements as a result of various factors, many of whichare beyond the control of the Group. These factors include, but are not limitedto, actions taken in response to enactment of RoHS and similar legislation, theresults of, and implementation of initiatives arising from, the Group'sstrategic business review, the implementation of cost-saving initiatives tooffset current market conditions, continued use and acceptance of e-commerceprograms and systems and the impact on other distribution systems, the abilityto expand into new markets and territories, the implementation of new sales andmarketing initiatives, changes in demand for electronic, electrical,electromagnetic and industrial products, rapid changes in distribution ofproducts and customer expectations, the ability to introduce and customers'acceptance of new services, products and product lines, product availability,the impact of competitive pricing, fluctuations in foreign currencies, andchanges in interest rates and overall market conditions, particularly theimpact of changes in world-wide and national economies.Consolidated Income StatementFor the fourth quarter and financial year ended 28th January 2007 2006/7 2005/6 2006/7 2005/6 Fourth Fourth Full Full quarter quarter year year unaudited unaudited unaudited audited (restated) (restated) Notes ‚£m ‚£m ‚£m ‚£m Continuing operations Revenue 2 194.2 197.5 823.1 773.5 Cost of sales - before RoHS inventory (119.4) (122.5) (507.4) (478.2)provision - RoHS inventory - (6.6) - (6.6)provision Total cost of sales (119.4) (129.1) (507.4) (484.8) Gross profit 74.8 68.4 315.7 288.7 Net operating expenses - before reorganisation (54.8) (56.2) (233.4) (225.2)costs - reorganisation costs - (3.9) - (5.3) Total net operating (54.8) (60.1) (233.4) (230.5)expenses Operating profit - before RoHS inventory 20.0 18.8 82.3 70.1provision and reorganisation costs - RoHS inventory - (6.6) - (6.6)provision - reorganisation costs - (3.9) - (5.3) Total operating profit 2 20.0 8.3 82.3 58.2 Finance income (interest 0.2 0.2 0.6 0.4receivable) Finance costs - interest payable (3.1) (3.9) (13.6) (14.4) - preference dividends (1.6) (1.7) (6.7) (6.7) - premium on redemption (0.4) (0.4) (1.4) (1.5)of preference shares - gain on purchase of 11 0.3 - 0.3 -preference shares Total finance costs (4.8) (6.0) (21.4) (22.6) Profit before taxation 3 15.4 2.5 61.5 36.0 Taxation 4 (5.0) 1.4 (19.8) (6.0) Profit after taxation 10.4 3.9 41.7 30.0from continuing operations Profit after taxation 5 - 0.4 10.7 1.1from discontinued operations Profit for the period 10.4 4.3 52.4 31.1(attributable to ordinary shareholders) Earnings per share 6 Basic 2.9p 1.2p 14.4p 8.6p Diluted 2.9p 1.2p 14.4p 8.6p Earnings per share from 6 continuing operations Basic 2.9p 1.1p 11.5p 8.3p Diluted 2.9p 1.1p 11.4p 8.3p Ordinary dividends Interim - proposed 4.0p 4.0p Final - proposed 5.0p 5.0p Paid 9.0p 9.0p Impact on shareholders' 32.6 32.6funds (‚£m) Prior year figures have been restated to reflect the reclassification of theKent business as a discontinued operation following its disposal on 31st July2006. Further details are given in note 5.
Consolidated Statement of Recognised Income and Expense For the fourth quarter and financial year ended 28th January 2007
2006/7 2005/6 2006/7 2005/6 Fourth Fourth Full Full quarter quarter year year unaudited unaudited unaudited audited Notes ‚£m ‚£m ‚£m ‚£m Profit for the period 10.4 4.3 52.4 31.1 Net exchange adjustments 1.2 0.6 (0.6) (4.5) Actuarial gains/(losses) on 12.2 (8.2) 12.2 (8.2)pensions and other post-retirement obligations Deferred tax on actuarial (4.4) 2.4 (4.4) 2.4gains/(losses) Deferred tax arising on 11 0.3 - 0.3 -
purchase of preference shares
Net gains/(losses) not 10 9.3 (5.2) 7.5 (10.3)recognised in the income statement Total recognised income/ 19.7 (0.9) 59.9 20.8(expense) for the period CONSOLIDATED BALANCE SHEETAS AT 28TH JANUARY 2007 28th 29th January January 2007 2006 unaudited audited Notes ‚£m ‚£m ASSETS Non-current assets Goodwill 49.6 50.0 Other intangible assets 22.2 27.5 Property, plant and 58.8 67.3equipment Retirement benefit asset 56.8 52.0 Deferred tax assets 0.2 0.3 Total non-current assets 187.6 197.1 Current assets Inventories 162.7 163.2 Trade and other receivables 127.9 142.8 Cash and cash equivalents 8 32.2 40.5 Total current assets 322.8 346.5 LIABILITIES Current liabilities Financial liabilities 8 (11.1) (92.8) Trade and other payables (94.9) (93.9) Current tax payable (28.0) (29.5) Short-term provisions 9 (0.8) (3.2) Total current liabilities (134.8) (219.4) Net current assets 188.0 127.1 Non-current liabilities Financial liabilities 8 (302.4) (277.8) Retirement and other (29.6) (38.5)post-employment benefits Deferred tax liabilities (30.7) (25.2) Other provisions 9 (0.9) (1.1) Total non-current (363.6) (342.6)liabilities NET ASSETS/(LIABILITIES) 12.0 (18.4) EQUITY Ordinary shares 18.2 18.1 Equity element of preference 18.4 19.9shares Share premium 21.6 20.5 Capital redemption reserve 1.4 0.8 Hedging reserve (0.1) (0.2) Cumulative translation (2.9) (2.3)reserve Retained earnings (44.6) (75.2) SHAREHOLDERS' FUNDS/ 10 12.0 (18.4)(DEFICIT) CONSOLIDATED CASH FLOW STATEMENTFOR THE FOURTH QUARTER AND FINANCIAL YEAR ENDED 28TH JANUARY 2007 2006/7 2005/6 2006/7 2005/6 Fourth Fourth Full Full quarter quarter year year unaudited unaudited unaudited audited (restated) (restated) Notes ‚£m ‚£m ‚£m ‚£m Cash flows from operating activities Operating profit from 20.0 8.3 82.3 58.2continuing operations Exceptional items: - income statement impact - 10.5 - 11.9 - cash impact (0.7) (0.6) (2.7) (2.0) Net impact of exceptional (0.7) 9.9 (2.7) 9.9items Depreciation and 5.0 5.0 20.0 20.8amortisation Changes in working 5.7 0.2 (4.7) (11.1)capital (before exceptional items) Additional pension scheme (0.8) (0.1) (2.4) (0.2)funding (UK defined benefit plan) Other non-cash movements (2.5) (1.3) (1.8) (0.8)(before exceptional items) Cash generated from 26.7 22.0 90.7 76.8continuing operations Cash generated from - 0.9 (0.1) 2.5discontinued operations Total cash generated from 7 26.7 22.9 90.6 79.3operations Interest received 0.1 0.2 0.6 0.4 Interest paid (4.7) (7.0) (14.1) (14.3) Dividends paid on (3.3) (3.3) (6.7) (6.7)preference shares Taxation paid (5.4) (3.0) (18.7) (14.3) Net cash generated from 13.4 9.8 51.7 44.4operating activities Cash flows from investing activities Purchase of business - - - (7.6) Disposal of business 5 (0.4) - 20.4 - Proceeds from sale of 3.0 - 5.1 1.1property, plant and equipment Purchase of property, (2.6) (1.7) (7.4) (5.8)plant and equipment Purchase of intangible (2.8) (2.2) (7.0) (5.7)assets (computer software) Net cash (used in)/ (2.8) (3.9) 11.1 (18.0)generated from investing activities Cash flows from financing activities SEC de-registration costs - - - (0.3) Issue of ordinary shares 0.1 - 1.3 0.1 Purchase of preference 11 (8.4) - (8.4) -shares New bank loans - - 78.9 22.7 Repayment of bank loans (9.5) (8.3) (115.1) (8.3) Dividends paid to - - (32.6) (32.6)ordinary shareholders Net cash used in (17.8) (8.3) (75.9) (18.4)financing activities Net (decrease)/increase (7.2) (2.4) (13.1) 8.0in cash, cash equivalents and bank overdrafts Cash, cash equivalents 28.9 38.9 35.6 27.2and bank overdrafts at beginning of period Exchange (losses)/gains (0.4) (0.9) (1.2) 0.4 Cash, cash equivalents 21.3 35.6 21.3 35.6and bank overdrafts at end of period Reconciliation of net financial liabilities Net financial liabilities (330.1) (307.0)at beginning of year Net (decrease)/increase (13.1) 8.0in cash, cash equivalents and bank overdrafts Decrease/(increase) in 36.2 (14.4)debt Decrease in preference 8.4 -shares Premium on redemption of (1.4) (1.5)preference shares Derivative financial 0.1 (0.2)instruments Exchange movement 18.6 (15.0) Net financial liabilities 8 (281.3) (330.1)at end of year Prior year figures have been restated to reflect the reclassification of theKent business as a discontinued operation following its disposal on 31st July2006. Further details are given in note 5.
NOTES
1. BASIS OF PREPARATION
The unaudited consolidated financial information for the year ended 28th January 2007, has been prepared in accordance with International Financial Reporting Standards (IFRS) and applying the accounting policies disclosed in the Group's 2006 Annual Report and Accounts on pages 33 to 36.
2. SEGMENT INFORMATION (CONTINUING OPERATIONS)
2006/7 2005/6 2006/7 2005/6 Fourth Fourth Full Full quarter quarter year year unaudited unaudited unaudited audited (restated) (restated) ‚£m ‚£m ‚£m ‚£m Revenue
Marketing and Distribution Division
Americas 73.8 80.5 329.3 310.0 Europe and Asia Pacific 102.9 98.9 420.4 396.4
Total Marketing and Distribution 176.7 179.4 749.7
706.4Division Industrial Products Division 17.5 18.1 73.4 67.1 194.2 197.5 823.1 773.5 Operating profit
Marketing and Distribution Division
Americas
- before RoHS inventory provision 7.1 7.2 30.5
27.1and reorganisation costs - RoHS inventory provision - (4.2) - (4.2) - reorganisation costs - - - (0.7) 7.1 3.0 30.5 22.2 Europe and Asia Pacific
- before RoHS inventory provision 12.0 10.8 48.3
41.5and reorganisation costs - RoHS inventory provision - (2.4) - (2.4) - reorganisation costs - (3.9) - (4.4) 12.0 4.5 48.3 34.7
Total Marketing and Distribution 19.1 7.5 78.8
56.9Division Industrial Products Division 3.8 3.6 13.7 12.0 Head Office costs - before reorganisation costs (2.9) (2.8) (10.2) (10.5) - reorganisation costs - - - (0.2) (2.9) (2.8) (10.2) (10.7) 20.0 8.3 82.3 58.2 Prior year figures have been restated to reflect the reclassification of theKent business, part of the Industrial Products Division, as a discontinuedoperation following its disposal on 31st July 2006. Further details are givenin note 5.
3. PROFIT BEFORE TAXATION (CONTINUING OPERATIONS)
Profit before taxation is stated
after charging/(crediting): 2006/7 2005/6 2006/7 2005/6 Fourth Fourth Full Full quarter quarter year year unaudited unaudited unaudited audited (restated) (restated) ‚£m ‚£m ‚£m ‚£m Share-based payments 0.2 0.5 2.1 2.1
Defined benefit pension schemes (0.7) (1.4) (2.1)
(2.4)(net)
Severance costs (former Group Chief - - -
0.5Executive) RoHS inventory provision - 6.6 - 6.6 Reorganisation costs - 3.9 - 5.3
As announced in the second quarter, the negotiations with regard to the former Group Chief Executive's pension entitlement referred to in the 2006 Annual Report were concluded in that quarter and a payment of ‚£0.3 million was made.
In the year ended 29th January 2006, a provision of ‚£6.6 million was made inthe fourth quarter for obsolete and slow moving non-compliant inventory as aresult of the European Union's Directive relating to the Restriction of the useof certain Hazardous Substances (RoHS).
Reorganisation costs in the year ended 29th January 2006, comprised ‚£1.4 million charged in the third quarter for severance costs relating to the Group's redundancy programme, and ‚£3.9 million charged in the fourth quarter relating to the restructuring of the BuckHickman InOne business.
4. TAXATION (CONTINUING OPERATIONS)
The taxation charge for continuing operations represents an effective tax rate of 29.0% (2005/6: 14.1%) based on profit before tax and preference dividends.
5. DISCONTINUED OPERATIONS
On 31st July 2006, the Group disposed of Kent, a specialist automotive consumables business and part of the Industrial Products Division. Consequently, the Kent business has been reclassified as a discontinued operation and its trading results are included in the income statement as a single line below profit after taxation from continuing operations, with comparatives restated accordingly. The impact of this discontinued operation on the income statement is as follows:
2006/7 2005/6 2006/7 2005/6 Fourth Fourth Full Full quarter quarter year year unaudited unaudited unaudited audited ‚£m ‚£m ‚£m ‚£m Post tax result Revenue - 10.9 21.3 40.5 Gross margin - 7.3 14.5 27.8 Net operating expenses - (6.5) (13.6) (25.7) Operating profit - 0.8 0.9 2.1 Taxation - (0.4) (0.3) (1.0) Profit after taxation - 0.4 0.6 1.1 Gain on disposal
Consideration received (net of costs) - - 20.9
-
Net assets disposed (see below) - - (8.7)
-
Gain on disposal of net assets - - 12.2
- Taxation - - (2.1) - Net gain on disposal - - 10.1 -
Total income statement impact - 0.4 10.7
1.1
Net assets disposed comprises: Intangible assets (computer software) 0.1
Property, plant and equipment 1.0 Inventories 3.5 Receivables 10.3 Payables (6.2) 8.7
Cash flows from the discontinued operation included in the consolidated statement of cash flows are as follows:
2006/7 2005/6 Full Full year year unaudited audited ‚£m ‚£m
Net cash flows from operating (0.3)
1.8activities Net cash flows from investing 20.4
(0.1)
activities (including net proceeds on
disposal) The net cash inflow from the disposal of this business during the year of ‚£20.4million comprises the cash consideration, net of disposal costs paid, of ‚£21.6million, less tax paid of ‚£1.2 million. Cash generated from discontinuedoperations is analysed in note 7.
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 of ordinaryshares in issue during the period, excluding those shares held by the PremierFarnell Executive Trust. For diluted earnings per share, the weighted averagenumber of ordinary shares in issue is adjusted to assume issue of all dilutivepotential ordinary shares, being those share options granted to employees wherethe exercise price is less than the average market price of the Company'sordinary shares during the period. At 28th January 2007 and 29th January 2006,the performance criteria for the vesting of the awards under the Company's LongTerm Incentive Scheme had not been met and, consequently, the shares inquestion are excluded from the diluted earnings per share calculation.
Reconciliations of earnings and the weighted average number of ordinary shares used in the calculations are set out below.
Basic Diluted Basic Diluted per per per per share share share share Earnings amount amount Earnings amount amount 2006/7 2006/7 2006/7 2005/6 2005/6 2005/6 unaudited unaudited unaudited audited audited audited ‚£m pence pence ‚£m pence pence Earnings per share Profit 52.4 14.4 14.4 31.1 8.6 8.6attributable to ordinary shareholders RoHS inventory - - - 6.6 1.8 1.8provision Tax - - - (2.2) (0.6) (0.6)attributable to RoHS inventory provision Reorganisation - - - 5.3 1.5 1.5costs Tax - - - (1.6) (0.5) (0.5)attributable to reorganisation costs Profit attributable to ordinary shareholders before RoHS inventory 52.4 14.4 14.4 39.2 10.8 10.8provision and reorganisation costs Earnings per share from continuing operations Profit after 41.7 11.5 11.4 30.0 8.3 8.3taxation from continuing operations RoHS inventory - - - 6.6 1.8 1.8provision Tax - - - (2.2) (0.6) (0.6)attributable to RoHS inventory provision Reorganisation - - - 5.3 1.5 1.5costs Tax - - - (1.6) (0.5) (0.5)attributable to reorganisation costs Profit after taxation from continuing operations before RoHS inventory 41.7 11.5 11.4 38.1 10.5 10.5provision and reorganisation costs 2006/7 2005/6 Number Number Weighted 363,328,421 362,729,711average number of shares Dilutive 1,293,627 376,557effect of share options Diluted 364,622,048 363,106,268weighted average number of shares
Earnings per share before the RoHS inventory provision and reorganisation costs have been provided in order to facilitate year on year comparison.
7. CASH GENERATED FROM OPERATONS
2006/7 2005/6 Full Full year year unaudited audited ‚£m ‚£m Continuing operations
Profit after tax from continuing operations 41.7
30.0 Adjustment for: - tax 19.8 6.0 - depreciation 9.3 9.6
- amortisation of intangible assets 10.7
11.2
- profit on sales of property, plant and equipment (1.4) (0.1) - preference dividends 6.7 6.7 - interest income (0.6) (0.4) - interest expense 13.6 14.4
- premium on redemption of preference shares 1.4
1.5
- gain on purchase of preference shares (0.3)
-
- additional pension scheme funding (UK defined (2.4) (0.2)benefit plan) - decrease in net pension asset (other defined benefit (2.7) (2.9)plans)
- increase in other post-retirement obligations 0.2
0.1
- (decrease)/increase in reorganisation provision (2.7)
3.3 - share-based payments 2.1 2.1
Changes in working capital (excluding the effect of disposals/acquisitions):
- (increase)/decrease in inventories - before RoHS inventory provision (11.6) (5.9) - RoHS inventory provision - 6.6
- total (increase)/decrease in inventories (11.6)
0.7
- increase in trade and other receivables (2.6)
(5.4)
- increase in trade and other payables 9.5
0.2
Cash generated from continuing operations 90.7
76.8
Discontinued operations Profit after tax from discontinued operation 10.7
1.1 Adjustment for: - gain on disposal (10.1) - - tax 0.3 1.0 - depreciation 0.1 0.1
- amortisation of intangible assets -
0.1
Changes in working capital: - (increase)/decrease in inventories (0.5)
0.5
- increase in trade and other receivables -
(0.6)
- (decrease)/increase in trade and other payables (0.6)
0.3
Cash generated from discontinued operations (0.1)
2.5
Total cash generated from operations 90.6
79.3 8. NET FINANCIAL LIABILITIES 28th 29th January January 2007 2006 unaudited audited ‚£m ‚£m Cash and cash equivalents 32.2 40.5 Unsecured loans and overdrafts (210.3)
(260.2)
Net financial liabilities before preference shares (178.1) (219.7)and derivatives Preference shares (103.1) (110.2) Derivative financial instruments (0.1) (0.2) Net financial liabilities (281.3) (330.1)
Net financial liabilities are analysed in the
balance sheet as follows: Current assets Cash and cash equivalents 32.2 40.5 Current liabilities Bank overdrafts (10.9) (4.9) 7.2% US dollar Guaranteed Senior Notes payable 2006 - (87.6) Other loans (0.1) (0.1) Derivative financial instruments (0.1) (0.2) (11.1) (92.8) Non-current liabilities Bank loans (82.0) (37.9) 5.3% US dollar Guaranteed Senior Notes payable 2010 (33.7)
(37.3)
5.9% US dollar Guaranteed Senior Notes payable 2013 (81.1) (89.8) Other loans (2.5) (2.6) Preference shares (103.1) (110.2) (302.4) (277.8)9. PROVISIONS 28th January 29th January 2007 2006 unaudited audited ‚£m ‚£m Current: - reorganisation costs 0.6 3.1 - dilapidation costs 0.2 0.1 Non-current: - reorganisation costs - 0.2 - dilapidation costs 0.9 0.9 1.7 4.3
10. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
2006/7 2005/6 Full Full year year unaudited audited ‚£m ‚£m
Shareholders' deficit at beginning of year (18.4) (8.5) Profit for the year 52.4 31.1 Net gains and losses recognised directly in equity 7.5 (10.3)
Ordinary dividends declared (32.6) (32.6) Ordinary shares issued 1.2 0.3
Purchase of preference shares (note 11): - reduction in equity element (1.5) - - gain arising on equity element 1.2 - Share-based payments 2.1 2.1 Derivative financial instruments 0.1 (0.2) SEC de-registration costs - (0.3) Shareholders' funds/(deficit) at end of year 12.0 (18.4)
11. PURCHASE OF PREFERENCE SHARES
During the fourth quarter the Company purchased and cancelled 565,000 of itspreference shares at a total cash cost of ‚£8.4million. Based on the book valueand fair value of the instrument at the date of purchase, the financialliability element of the preference shares was reduced by ‚£8.4 million and theequity element by ‚£1.5 million. A gain of ‚£0.3 million was recognised in theincome statement being the difference between the book value and fair value ofthe financial liability element at the date of purchase. The gain arising fromthe difference between the book value and fair value of the equity element of ‚£1.2 million was recognised as a movement in retained earnings. A deferred taxcredit of ‚£0.3 million arose which is recognised through the ConsolidatedStatement of Recognised Income and Expense. A transfer from retained earningsof ‚£0.6 million to non-distributable reserves was made in order to maintain thelegal nominal value of share capital.
12. EXCHANGE RATES
The principal average exchange rates used to translate the Group's overseas profits were as follows:
2006/7 2005/6 2006/7 2005/6 Fourth Fourth Full Full quarter quarter year year US dollar 1.95 1.74 1.86 1.80 Euro 1.49 1.46 1.47 1.4613. ORDINARY DIVIDENDThe directors are proposing a final dividend in respect of the year ended 28thJanuary 2007, of 5.0p per share which will absorb ‚£18.2 million ofshareholders' funds. As the final dividend is subject to approval at the AnnualGeneral Meeting of the Company, to be held on 12th June 2007, it has not beenprovided for at 28th January 2007. Once approved, the final dividend will bepaid on 20th June 2007 to shareholders on the register of members on 25th May2007.
14. ANNUAL REPORT AND ACCOUNTS
This financial information does not constitute the Group's 2007 statutory accounts within the meaning of the Companies Act 1985. The Group's 2006 statutory accounts have been filed with the Registrar of Companies. The auditors report on these accounts was unqualified and did not include a statement under Section 237(2) or (3) of the Companies Act 1985.
Copies of the Group's Annual Report and Accounts will be posted to all shareholders no later than 8th May 2007. Additional copies will be available from Premier Farnell plc, 150 Armley Road, Leeds, LS12 2QQ.
PREMIER FARNELL PLCRelated Shares:
PFL.L