15th Mar 2012 07:00
Premier Farnell plc 15 March 2012
Results for the Fourth Quarter and Financial Year Ended 29 January 2012
Key Financials £m Q4 11/12 Q4 10/11 Q4 growth FY 11/12 FY 10/11 FY growthContinuing operations £m £m (a) £m £m (a)(Unaudited)Adjusted revenue (b) 233.4 237.1 -1.9% 973.1 970.1 1.6%Total revenue 233.4 242.5 -4.1% 973.1 990.8 -0.5%Adjusted operating 25.5 27.4 -8.2% 107.3 108.5 0%profit (b)Total operating profit 25.5 28.3 -11.2% 123.4 112.1 11.4%Adjusted profit before 20.3 22.8 -11.0% 88.5 89.7 -1.3%tax (b)Total profit before 20.3 23.7 -14.3% 104.6 93.3 12.1%taxationAdjusted earnings per 4.0p 4.4p -9.1% 17.4p 17.7p -1.7%share (b)Basic earnings per 4.0p 4.6p -13.0% 21.2p 18.3p 15.8%shareFree cash flow (c) 23.0 4.6 400% 47.2 38.0 24.2%Ordinary dividend (d) 6.0p 6.0p - 10.4p 10.4p - Profit in line with expectations and continuing to deliver industry leading return on sales
Financial highlights
- Continued delivery of industry leading return on sales with full year at 11.0% (2010/11: 11.2%), and adjusted operating profit for the year of £107.3m in line with prior year at constant exchange rates (`CER').
- Full year sales grew by 1.6% with sales per day momentum for Q4 continuingin line with Q3, down 1.9% year on year. Q4 performance reflects a 1.2%increase on the third quarter and was against record sales in 2010/11 when wegrew 14% in the fourth quarter and by 21% for the full year.
- This performance compares favourably to the latest Semiconductor Industry Association (SIA) data for the three months to January showing a global year on year sales decline of 8.8% and a quarter on quarter decline of 10.2%.
- Planned overhead costs for the full year were reduced by more than thetargeted £17m announced in July. Actual costs reduced by £9.1m year on year(£6.3m at CER) as we remained responsive to the environment and shaped ourbusiness to maximise the efficiency benefits of the web. Costs as a percentageof sales reduced by 1.1 percentage points in the full year.
- Full year margin was 39.6%, in line with our cross cycle average with the Q4 gross margin improving 0.5 percentage points on Q3 to 39.1%. January and February's margin were both above our cross cycle average.
- Operating cash flow conversion in the quarter was strong at 157%(e) as our inventory was realigned with sales. Free cash flow in the year was £47.2m (c).
- The balance sheet was significantly strengthened with net debt reduced by£25.8m to £237.1m after the sale of TPC earlier in the year, the refinancingof our 5 year £200m revolving credit facility in November and the issuance of$235m 5-10 year US Private Placement notes in the second half.
- The board recommend a final dividend of 6.0p per share (2010/11: 6.0p). This will result in a proposed full year dividend of 10.4p per share (2010/11: 10.4p).
Strategic highlights
- Global MDD web sales continued to show strong growth, up 5.5% in Q4 and 16.2% in the year with total eCommerce penetration in the quarter at 55.3%, up 4.2 percentage points year on year.
- As a digital enterprise, Premier Farnell continues to build its reputationas the reference site for engineers with 3.8 million visits to the element14community and 73.1 million visits to our transactional websites in the lasttwelve months. This position in the market place helped support the increasein our core MDD active customer base by 2.7%.- Fourth quarter sales to our emerging markets increased by 13.9% year on yearwith full year sales up by 27.3%. This gives a three year compound growth of54.3%, highlighting the market growth and share gain opportunities in thesemarkets.
- Strategic focus on both EDE and strategic MRO segments now provides resilience through the cycle. At this stage MRO is stronger, delivering growth of 5.4% in the fourth quarter, resulting in EDE penetration of 50%.
- With the business moving increasingly towards providing end to end servicesolutions for its customers, the latest version of CadSoft EAGLE v6, ourdesign engineering software, was launched in December with CadSoft's salesincreasing by 148% in the fourth quarter. CadSoft growth combined with theproposed acquisition of Embest and other value added service additions leaveour services offering to EDE engineers demonstrably strengthened inanticipation of growth returning.- With 75% of our European business now transacted through the web, we areproposing to combine the outbound telesales and telemarketing activities fromour European operations into a consolidated multi-lingual, best practice callcentre in Krakow, Poland. If the proposal proceeds as expected followingconsultation with employees, it would result in the recognition of £7m to £8mexceptional costs in the first quarter, which will be recovered over 3-4years. Our strategy has now delivered industry leading return on sales acrossthe economic cycle of the last four years with an adjusted return on sales of10.8% in 2008/09, 9.1% in 2009/10, despite a sales decline of 10%, 11.2% in2010/11 and 11.0% this year.Commenting on the results, Harriet Green, GroupChief Executive, said:`Despite the sharp contraction last year inglobal industrial and technology markets, we continued to demonstrate theresilience of our balanced strategy and operating model. We increased salesdespite the previous year's record levels, we maintained full-year operatingprofit and we achieved an industry-leading return on sales for the fourthsuccessive year. The successful execution of our strategy generated strongcash flow. As a result of this performance, we were able to maintain returnsfor our shareholders.We remain cautious on the economic outlook as themarket continues to be uncertain and the nature of our business gives uslimited forward visibility. However, as comparators become easier from themiddle of the year and we benefit from a 53rd week, we expect growth to returnthis year. As such we will continue to invest in support of our strategy andour people.'
For further information, contact:
Harriet Green, Chief Premier Farnell plc +44 (0) 20 7851 4100Executive OfficerNicholas Cadbury, ChiefFinancial OfficerThomas Churchill, InvestorRelationsAndrew Lorenz FTI Consulting +44 (0) 20 7269 7291Premier Farnell's announcements and presentationsare published at www.premierfarnell.com together with business information andlinks to all other Group web sites.
The 2012 Annual Report and Accounts will be available online on 9 May 2012. The results for the first quarter of the 53 week financial year ending 3 February 2013 will be announced on 14 June 2012.
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) The disposal of the TPC Wire & Cable (TPC) business, part ofthe Industrial Products Division, at the start of the first quarter (31January 2011), does not qualify for accounting treatment as a discontinuedoperation. Accordingly, the Group's 2010/11 results have not been restated.However, to aid comparison, when referring to the performance of the Group,within the financial highlights, strategic highlights, Chief Executive'scomment, the Chief Executive's Operational Overview and the outlook section ofthis statement, all prior year comparators have been adjusted to exclude thetrading results of TPC. In addition, adjusted revenue, operating profit,profit before tax, and earnings per share in the table above, exclude thetrading results of TPC in the prior year and the gain on sale in the currentyear (pre-tax gain of £17.8m). Current year adjusted numbers also excluderestructuring costs of £2.8m and the gain on sale of Newark's calibrationservices business of £1.1m, both of which occurred in the third quarter.
(c) Free cash flow comprises total cash generated from operations, excluding cash flows related to restructuring, less net capital expenditure, interest, preference dividends and tax payments. Free cash flow also excludes net proceeds from the sale of businesses.
(d) Proposed final dividend for approval byshareholders at the company's Annual General Meeting on 12 June 2012.(e) Operating cash flow conversion representsadjusted operating cash flow (before capital expenditure) as a percentage ofadjusted operating profit.
(f) SIA data from Semiconductor Industry Association publication, PMI data from relevant published source in each market.
Premier Farnell plc
FOURTH QUARTER STATEMENT
Results for the Fourth Quarter and Financial Year Ended 29 January 2012
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 29 January 2012.
Chief Executive's Operational Overview
In market conditions that continue to reflect thecontraction in the global industrial and technology markets that we serve, asshown by the latest SIA data, the Group has demonstrated the resilience of ouroperating model. We delivered sales growth in the year despite last year'srecord levels and maintained our industry leading return on sales - nowdelivered for the last four years. As global economic indicators continue tobe mixed, this leadership in return on sales across each phase of the cycle,our strong counter cyclical cash generation, continued growth in our activecustomer base, strategic progress in eCommerce penetration, our ongoinginvestment in the strategy, and our robust balance sheet continue to give usconfidence going forward.SalesFourth quarter sales declined by 1.9% from lastyear's record levels and increased 1.2% on the third quarter. This wasfavourable to the SIA data for the three months to January which showed globalsales down 8.8% year on year and down 10.2% on the prior quarter. The Group'ssales were up 11.9% on two years. Full year Group sales grew by 1.6% from theprior year and 23.5% on two years.As our most strategically advanced region, Europecontinues to significantly outperform its markets, even in increasinglyuncertain times. Within Europe, the UK performed strongly with fourth quartergrowth of 3.3% and full year growth of 7.6%, reflecting the benefits of theexecution of our strategy in this market, with 74.5% of fourth quarter salesgoing through eCommerce channels. The industrial and technology markets ofmainland Europe continue to be influenced by macroeconomic concerns, reflectedby Eurozone PMI's having now been below 50 for seven consecutive months andEuropean SIA data down 16% year on year for the three months to January anddown 10.3% on the prior quarter. Despite this our European business' fourthquarter sales were down only 1.4% on last year's record sales performance andwere up 3.4% on the third quarter. Full year sales for Europe were up 5.3% onthe prior year.Throughout the year, MDD Americas continued itsstrategic transformation from a commodity MRO focused business to one focusedon the web, EDE and strategic MRO segments, with lower targeted growth in lowmargin commoditised MRO segments. MDD Americas fourth quarter sales trendimproved marginally on a year on year basis with Q4 declining 4.0% compared toQ3's decline of 4.6%. This decline compares to SIA data reflecting an 8.0%year on year decline in the three months to January and a 7.6% decline quarteron quarter. Full year MDD Americas sales were down 1.5% on the prior year andup 18.4% over two years.Asia Pacific's fourth quarter sales, down 2.8%year on year, were an improvement compared to Q3's decline of 3.6% and aheadof the 7.1% year on year and 10.7% quarter on quarter declines reported by SIAfor the same period. Adjusting for the impact of Chinese New Year being in thefourth quarter, sales declined approximately 2.3%. Unadjusted sales growth inthe fourth quarter was 8.0% and 46.7% up on a two and three year basis,respectively. Full year sales were down 3.0% year on year but up 28.7% and37.0% on a two and three year basis, respectively.
Gross margin
Whilst continuing to be influenced by the mix ofEDE and MRO inherent in this phase of the economic cycle, Group gross marginincreased sequentially in the fourth quarter by 0.5 percentage points leavingfull year gross margin of 39.6% in line with our cross cycle average. The yearon year movement from 40.7% reflects the impact of product mix at this stagein the cycle combined with very strong demand in 2010/11. We remain focused onachieving our objective of margin stability and both January and February'smargin have been above our cross cycle average.
Costs
Throughout the year the Group has demonstratedthe ability to manage its cost base to reflect market conditions. Total costsfor the year were down £9.1m year on year or £6.3m at CER. Through acombination of the cost flexibility inherent in our digital business model,the gradual evolution of our structural base towards a web focused footprint,and performance related costs reflecting the tougher sales environment in thesecond half, the Group has exceeded the £17m reduction of planned costsannounced in the first half of the year.
In the fourth quarter, overheads were reduced by 6.9% year on year at CER representing a 1.6 percentage point reduction to 28.1% of sales. In the full year overheads were reduced by 2.2% at CER from the prior year representing a 1.1% reduction to 28.5% of full year sales.
For the year to come we will continue to take outcosts as we transition to the web and shape our business to the environment.However, we will also continue to invest in our strategy, particularly in ourcustomers' web experience, with the launch of a new web platform later in theyear, and in our people. Subsequent to the year end, and with 75% of ourEuropean business now transacted through the web, we are proposing to combinethe outbound telesales and telemarketing activities from our Europeanoperations into a consolidated multi-lingual, best practice call centre inKrakow, Poland. We are currently in a consultation process with our employeeson how these plans may affect them. Our field sales teams are not impacted andremain an important part of our multi-channel offering. If the proposalproceeds as expected, it would result in the recognition of £7m to £8mexceptional costs in the first quarter, which will be recovered over 3-4years. It is intended that implementation of the proposal will be complete byend of the third quarter of 2012/13.
Return on Sales
Through relentless focus on the strategy, grossmargin and cost management, the Group has continued to deliver an industryleading return on sales (ROS). Group ROS was 10.9% for the quarter and 11.0%for the full year - down only 0.2 percentage points on the prior year and 1.9%above 2009/10. This continues the leadership in ROS that has been evidentthroughout the period since our strategy began. Our MDD division has nowdelivered ROS of 11.8%, 9.7%, 12.5% and 12.2%, sequentially, over the last 4years.Continued strategic progress in North America hasdelivered an increased ROS for the year to 8.5% (2010/11: 7.5%) despite lowersales and the cyclical strength of lower margin MRO segments relative to EDE.The strength of MRO early in the fourth quarter combined with higher thanaverage gross margins in Q4 last year resulted in a short term reduction in Q4ROS of 0.9% from the prior year, to 8.1%.Europe and Asia Pacific ROS improved sequentiallyfrom the third quarter by 1.3% to 16.3% giving a return of 16.0% for the fullyear (2010/11: 17.6%). Whilst returns have been influenced by economicconditions in both regions the strategic positioning in these regionscontinues to progress and with our significant infrastructural investments inAsia Pacific now in place, there is confidence that we will benefit frommarket improvements and market share growth.
Cash Flow / Balance Sheet
Cash generation continues to be at the forefrontof focus and as our inventory levels have adjusted to reflect lower thananticipated levels of sales growth, we have delivered a very strong operatingprofit cash conversion of 157.3% for the quarter giving 102.7%(2010/11: 91.7%)for the year. This has delivered net cash inflow for the year, after dividendsbut before disposal income, of £4.1m (2010/11: £6.9m inflow).This cash performance reinforces thecountercyclical nature of our working capital and, combined with our robustbalance sheet, gives comfort over our ability to maintain dividend coverage inmore challenging markets whilst maintaining progress in the gradual reductionof our net debt position.In the full year net debt has reduced by £25.8mto £237.1m giving a net debt to EBITDA ratio of 1.9 improved from 2.0 at theprior year end.The Group's funding position is secure with therefinancing of £200m 5 year banking facilities in November and the issuance of$235m 5-10 year US Private Placement Notes in the second half.
Strategy
During challenging economic and market conditions we remain focusedon the continued strategic transformation of the Group. At this stage in theeconomic cycle, with reduced economic confidence, EDE growth is constrained.However, at the same time economic uncertainty results in reluctance to investin capital expenditure - giving rise to a surge in MRO activity as the life ofassets is prolonged. These factors combine to demonstrate the resiliency ofour strategy as the reduction in EDE sales from the last year's record levelswas partially offset by increased sales in our targeted strategic MROsegments.By continuing to focus on the fundamentals of high servicedistribution whilst further developing our global proposition to EDE andstrategic MRO customers, we increased our active customer base by a further2.7%, demonstrating continued market share gains in our targeted marketsegments. This focus on meeting our customers' needs contributed to themaintenance of our gross margin within each market segment although the switchof segmental growth from EDE to MRO brought our overall gross margin for theyear down from the prior year's high to be in line with our cross cycleaverage.The current economic conditions have demonstrated that we can makefurther progress towards our goal of being a digital enterprise utilising theweb and eCommerce even in the current MRO growth environment. We exited theyear with global eCommerce penetration in the fourth quarter of 55.3% (Q42010/11: 51.1%). In the quarter, our global MDD web sales increased by 5.5 %on the prior year - and increased by 16.2% for the full year - driven by over73.1 million visits to our transactional websites in the last twelve months.The continuing development of our EDE solutions proposition throughour Services Beyond Product (SBP) offering continues to develop rapidly withthe launch of the significantly upgraded CadSoft EAGLE v6 CAD software inDecember, delivering growth in CadSoft sales of 147.6% in the fourth quarter.Our element 14 Community has now had over 3.8 million visits in the lasttwelve months.
In the fourth quarter sales to our emerging markets increased by 13.9%. Full year sales from emerging markets were up by 27.3%, giving three year compound growth of 54.3%, and highlights the growth opportunity from both market growth and share gains in these markets.
Other Distribution Businesses
Fourth quarter sales at CPC grew 5.7% year onyear giving full year growth of 5.3%, representing a very strong performancein highly challenging market conditions. Growth continues to be driven by webfocused customer acquisition and the introduction of new products sourcedglobally. Web sales grew by 14.1% in the quarter and by 14.6% for the fullyear whilst the active customer base grew by 13.1%.Although continuing to experience challengingmarket conditions MCM has benefitted from increased collaboration with CPC.MCM's increased focus on the web, targeted product segments and new productintroductions saw sequential quarterly growth of 9.3% and left Q4 sales at thehighest level of the year.
Industrial Products Division (IPD)
Akron Brass has a significant share of the still very challengingNorth American market and is continuing to give focus to the development ofinternational markets whilst broadening its product range and reaching intonew industrial markets at home and abroad. Sales per day increasedsequentially on the third quarter by 2.8% while falling by 0.8% year on yearagainst a very high comparator figure. This strategy has reduced reliance onthe traditional US markets and international sales in the fourth quarterrepresented 27.7% of all sales with significant progression in China, theMiddle East and South America during the year. Full year sales growth of 2.2%represents a strong foundation for further progress as US markets recover andinternational sales continue to grow.
Dividend
Although market conditions were difficultthroughout most of the financial year the Group delivered sales growth andboth a strong return on sales and operating profit. This profitabilitycombined with working capital focus allowed operating cash flow to reduce netdebt before the contribution of net exceptional income. Net debt to EBITDA forthe year of 1.9 (including Preference Shares) reduced from 2.0 in the prioryear. Our strategy has again delivered industry leading return on sales which,when combined with strong cash generation and our strengthened balance sheetgive the Board confidence to recommend maintaining the final dividend at 6.0pence per share (2010/11: 6.0 pence per share). Combined with the previouslycommunicated interim dividend, the Group's total dividend for the year will be10.4 pence per share (2010/11: 10.4 pence per share), subject to approval atthe Annual General Meeting. This dividend is covered 1.7 times on an adjustedearnings per share basis (2.0 times on an unadjusted basis). The Group's finaldividend is payable on 20 June 2012.
Outlook
Despite the sharp contraction last year in globalindustrial and technology markets, we continued to demonstrate the resilienceof our balanced strategy and operating model. We increased sales despite theprevious year's record levels, we maintained full-year operating profit and weachieved an industry-leading return on sales for the fourth successive year.The successful execution of our strategy generated strong cash flow. As aresult of this performance, we were able to maintain returns for ourshareholders.We remain cautious on the economic outlook as themarket continues to be uncertain and the nature of our business gives uslimited forward visibility. However, as comparators become easier from themiddle of the year and we benefit from a 53rd week, we expect growth to returnthis year. As such we will continue to invest in support of our strategy andour people.Three Year Success MetricsOur performance against our three year successmetrics is as follows:Key Performance Indicators Goal Achieved in Q4 Achieved in FYSales per day growth 6-8% -1.9% 1.6%Gross margin % Stability 39.1% 39.6% 11.0% (MDDReturn on sales % 12%-15% 10.9% (MDD 12.3%) 12.2%)Return on net operatingassets % >30% 37.1% 37.1%Working capital as a % ofsales
Financial Results
Note: The disposal of the TPC Wire & Cable (TPC)business, part of the Industrial Products Division, at the start of thefinancial year (31 January 2011), does not qualify for accounting treatment asa discontinued operation. References below, including the Operations Review,to adjusted sales, gross margin, operating profit, cash and ratios exclude theresults of TPC in respect of previous periods and the gain on sale in thecurrent period. In addition, references below to adjusted numbers also excludecurrent year, third quarter, reorganisation costs of £2.8m and the gain byNewark from the strategic sale of its three calibration laboratories of £1.1m.RevenueFull YearSales for the full financial year were £973.1m(2010/11 adjusted sales: £970.1m). At constant exchange rates, adjusted salesin the prior year were £959.7m, resulting in growth this year of 1.6%.Total sales (including TPC in prior year)declined by 0.5 % on the prior year at constant exchange rates reflecting thedisposal of TPC at the beginning of the year.The average exchange rate for the US dollaragainst sterling was $1.60 (2010/11: $1.54) and the average exchange rate forthe Euro against sterling was Euro 1.15 (2010/11: Euro 1.17).
Fourth Quarter
Sales for the fourth quarter were £233.4m(2010/11 adjusted sales: £237.1m). At constant exchange rates, adjusted salesin the prior year were £237.6m, resulting in a fourth quarter decline thisyear of 1.9%.
Total sales per day decreased by 4.1% on the same quarter in the prior year, at constant exchange rates, again reflecting the disposal of TPC at the beginning of the year.
The average exchange rate for the US dollaragainst sterling was $1.56 (2010/11: $1.56) and the average exchange rate forthe Euro against sterling was Euro 1.18 (2010/11: Euro 1.17).
Margins and Operating Profit
Full Year
The gross margin for the full financial year was39.6%, in line with our cross cycle average gross margin percentage andcompares with adjusted gross margin of 40.7% in the prior year. Adjusted netoperating expenses were down £9.1m on the prior year, or £6.3m at CER, withcosts as a percentage of sales reducing by 1.1 percentage points.Adjusted operating profit was £107.3m (2010/11:£108.5m or £107.3m at CER) producing an operating margin of 11.0% (2010/11:11.2%). Total operating profit for the full financial year was £123.4m(2010/11: £112.1m), reflecting the gain on sale of businesses and one-offrestructuring costs, an increase of 11.4% year on year.
Fourth Quarter
The gross margin in the fourth quarter was 39.1%compared with adjusted gross margin of 41.4% in the fourth quarter last year.This reflects a 0.5% improvement on the previous quarter.Adjusted net operating expenses in the fourthquarter were 28.1% of sales compared with 29.9% in the fourth quarter of theprior year. Adjusted operating profit was £25.5m (2010/11: £27.4m), producingan operating margin of 10.9% compared with 11.5% in the fourth quarter of theprior year. At constant exchange rates, adjusted operating profit decreased by8.2% compared with the fourth quarter of the prior year.Total operating profit in the quarter, was£25.5m, (2010/11: £28.3m), a decrease of 11.2% year on year.
Foreign Currency Impact
A one cent movement in the exchange rate betweenthe US dollar and sterling impacts the Group's operating profit byapproximately £250,000 per annum, and a one cent movement in the exchange ratebetween the Euro and sterling impacts the Group's operating profit byapproximately £500,000 per annum.
Finance Costs
Net finance costs in the financial year were £18.8m (2010/11: £18.8m). Thiscomprises net interest payable of £14.5m (2010/11: £14.5m), which was covered8.5 times by total operating profit, and a net charge of £4.3m (2010/11:£4.3m) in respect of the Company's convertible preference shares. Net financecosts in the fourth quarter of £5.2m (2010/11: £4.6m) include a one-off chargeof £0.4m relating to the refinancing of the Group's bank facilities.
Profit Before Tax
Adjusted profit before tax in the full financialyear was £88.5m (2010/11: £89.7m), a decrease of 1.3% on the prior year. Totalprofit before tax for the financial year was £104.6m (2010/11: £93.3m),including gains from the disposal of businesses of £18.9m and reorganisationcosts of £2.8m.
Adjusted profit before tax in the fourth quarter was £20.3m (2010/11: £22.8m), a decrease of 11.0% on the prior year. Total profit before tax in the fourth quarter was £20.3m (2010/11: £23.7m).
Taxation Charge
The taxation charge for the financial year is atan effective rate of 27.5% (2010/11: 28.0%) of profit before tax andpreference dividends. In addition, the taxation charge arising on the disposalof businesses is £3.2m.Disposal of businessesOn 31 January 2011, the Group completed the saleof the entire issued share capital of TPC Wire & Cable Corp. ("TPC") toPfingsten Partners LLC for a total cash consideration of $43m. The sale ofTPC, a leading US distributor of industrial wire and cable and part of theIndustrial Products Division, is part of the Group's core strategy to focus onthe EDE and profitable MRO markets.The sale of TPC does not qualify for accountingtreatment as a discontinued operation. The pre-tax gain on the sale amountedto £17.8m, and is included in net operating expenses, and the estimated taxcharge arising on the gain is £2.8m. The trading results of TPC in 2010/11were not material to the Group, with full year sales of £20.7m and a full yearoperating profit of £3.6m.On 7 September, the Group entered into astrategic agreement with Transcat Inc to provide calibration services to ourcustomers in Canada and the USA. Under the terms of the agreement, Transcatpurchased the assets of Newark's three existing calibration laboratories for agross consideration of $3m, resulting in a net gain of £1.1m.
Return on Net Operating Assets
Return on net operating assets for the financialyear was 37.1% (2010/11: 42.5%), compared to our strategic target of greaterthan 30%.Earnings per Share
Adjusted earnings per share for the financial year were 17.4 pence (2010/11 17.7 pence). Basic earnings per share for the year were 21.2 pence (2010/11: 18.3 pence).
Adjusted earnings per share for the fourthquarter were 4.0 pence (2010/11 4.4 pence). Basic earnings per share for thequarter were 4.0 pence (2010/11: 4.6 pence).
Cash Flow and Net Financial Liabilities
Full year conversion of operating profit intooperating cash flow at 102.7% (2010/11: 91.7%) represented a strongperformance, with improvement in working capital in the fourth quarter as ourinventory reduces to reflect the lower growth environment. Operating cashflowconversion for the fourth quarter was strong at 157.3% generating freecashflow of £23.0m.Total cash generated from operations for the fullyear was £108.0m (2010/11: £102.0m) or £110.2m (2010/11: £102.8m) excludingthe impact of restructuring costs. Free cash flow for the full year, beingtotal cash generated from operations, excluding cash flows related torestructuring, less net capital expenditure, interest, preference dividendsand tax payments, was £47.2m (2010/11: £38.0m).Net financial liabilities at the end of thefinancial year were £237.1m (30 January 2011: £262.9m), including £61.8m (30January 2011: £61.0m) attributable to the Company's preference shares. Thisrepresents a ratio of net debt to EBITDA of 1.9.
Financial Position
Premier Farnell's financial position remainsrobust with good liquidity and strong free cash flow. During the quarter, theCompany successfully refinanced with a 5 year £200m revolving bank facility.The Company has further strengthened its balance sheet by issuing $235m of 5to 10 year US Private Placement notes. The funding put in place is lessexpensive than the existing facilities and provides the Company withflexibility and options to repay short term debt and reduce the longer termcost of borrowing.At 29 January 2012, our headroom on bankborrowings was £179.0m under facilities in place until October 2016. Thisheadroom, combined with our cash position of £116.9m, gives us a securefunding position. In addition, the Group also has unused facilities of $45.0mas part of its US Private Placement Shelf Facility agreement.
Operations
Marketing and Distribution Division (MDD)(including Newark, Farnell, element14, CPC and MCM) Q4 11/12 Q4 10/11 Q4 FY 11/12 FY 10/11 FY £m £m growth £m £m growthRevenue 218.3 221.9 -2.0% 911.6 907.8 1.5%Adjusted operating 26.8 29.1 -9.1% 111.6 113.1 -0.3%profitAdjusted operating 12.3% 13.1% 12.2% 12.5%margin %MDD division delivered sales growth of 1.5% forthe full year, performing well against strong prior year comparators wheresales grew 23.1%.In the fourth quarter sales in the MDD divisiongrew 1.0% on the prior quarter and declined by 2.0% year on year, compared tostrong comparatives last year when sales grew by 14.6%. This performancecompares favourably to current market data where the Semiconductor IndustryAssociation reported a year on year decline globally of 8.8% for the threemonths to January and a 10.2% decline quarter on quarter.February's global manufacturing PMI of 51.1indicates uncertain market conditions for 2012. However, with our activecustomer base continuing to grow, up 2.7%, our only forward looking metric, weare well positioned to maximise the available opportunity when marketsrecover.We continue to maintain our strategic focus onEDE, and profitable MRO and have managed our growth and profitability byparticipating only in activities that match our strategic criteria. As webalance the late cycle opportunity in MRO with our strategic focus on EDE andthe profitable MRO segments our EDE penetration in the quarter was 50.0%.Our global software business, CadSoft, saw salesgrow 147.6% in the fourth quarter, with the successful launch of EAGLE v6software in December 2011, clearly demonstrating the future potential of ourstrategic drive in "services beyond product".
The division has continued to drive growth via the web, with MDD web sales growing 5.5% in the quarter and eCommerce now accounting for 55.3% of total MDD sales.
MDD Europe and Asia Pacific
(Farnell and element14)
Q4 11/12 Q4 10/11 Q4 growth FY 11/12 FY 10/11 FY growth £m £m £m £mRevenue 104.8 105.7 -1.5% 443.1 423.5 4.0%Adjusted operating 17.1 18.5 -9.3% 71.0 74.7 -4.8%profitAdjusted operating 16.3% 17.5% 16.0% 17.6%margin %MDD Europe and Asia Pacific delivered salesgrowth of 4.0% for the full year and declined 1.5% for the quarter, althoughthis reflects a 2.0% increase on the third quarter. The success of ourinternationalisation plans continue to deliver strong long term growth withcombined sales growth of 13.9% in the fourth quarter in the key emergingmarkets of China, India and Eastern Europe together with sales from our newweb-based markets of Taiwan, Thailand and South Korea.eCommerce in the year accounted for 70.8% of MDD Europe and AsiaPacific sales, exiting the year at 72.1% of sales, with our European businessachieving 74.5%.Revenue by region Q4 11/12 Q4 10/11 Revenue FY 11/12 FY 10/11 Revenue £m £m growth £m £m growthUK 28.1 27.2 3.3% 120.4 112.3 7.6%
Rest of Europe 62.0 63.1 -3.5% 259.3 246.8 4.2% (incl exports) Asia Pacific 14.7 15.4 -2.8% 63.4 64.4 -3.0% Note: sales analysis has been revised to reflect export sales in Rest of Europe in order to give a more appropriate geographic split. Comparatives have been restated accordingly.
The UK continued to outperform the marketthroughout the year with full year sales growing 7.6%. Fourth quarter UK salesgrowth of 3.3% compares to the most recent data from the Association ofFranchised Distributors of Electronic Components (AFDEC) who reported a salesdecline of 11.5% for the calendar fourth quarter.In the Rest of Europe full year sales grew 4.2%but declined 3.5% in the quarter. The quarter performance was compared tostrong prior year sales growth of 24.8%. Overall, our growth in Europeoutperformed the growth seen by the wider European semiconductor market, whereSIA reported that sales declined 16.2% for the three months to January and theDistributors' and Manufacturers' Association of Semiconductor Specialists(DMASS) reported a calendar fourth quarter decline in Europe of 9.1%. Thisreflects the benefits of our well embedded strategy in this region, with 74.5%of European sales now through the eCommerce channel.Market conditions in Asia Pacific remainedchallenging with sales declining 2.8% in the quarter, although improving fromthe 3.6% decline seen in Q3. This compares to the SIA reported sales declinefor the quarter of 7.1% and a quarter on quarter decline of 10.7%. Fourthquarter web sales grew 8.2%, with eCommerce penetration of 56.2% and we sawour active customer base grow 5.5%.MDD Americas(Newark) Q4 11/12 Q4 10/11 Q4 growth FY 11/12 FY 10/11 FY growth £m £m £m £mRevenue 87.7 91.4 -4.0% 369.1 386.3 -1.5%Adjusted operating 7.1 8.2 -13.8% 31.3 29.1 11.0%profitAdjusted operating 8.1% 9.0% 8.5% 7.5%margin %
Testing market conditions combined with the ongoing strategic transformation away from low margin commoditised MRO, saw full year sales decline 1.5%. Fourth quarter sales fell 4.0% on the prior year (where sales had grown 11.0%), a small improvement on quarter three year on year sales growth, and outperforms the SIA reported data showing an 8.0% decline year on year and a 7.6% decline quarter on quarter.
As our strategy increasingly transforms MDD Americas, return onsales for the year increased by 1.0 percentage point to 8.5% and compares to4.0% achieved two years ago. Fourth quarter operating margin was 8.1% comparedto 9.0% in the previous year, a temporary decline reflecting lower sales andfluctuations in mix arising from lower EDE sales and variation across MROsegments.
As we balance the late cycle opportunity in MRO with our strategic focus on EDE and the profitable MRO segments, our EDE penetration in the quarter reduced slightly to 38.5%. eCommerce sales continued to progress and were 38.2% of full year sales.
Other Distribution Businesses
(CPC and MCM) Q4 11/12 Q4 10/11 Q4 growth FY 11/12 FY 10/11 FY growth £m £m £m £mRevenue 25.8 24.8 3.7% 99.4 98.0 2.6%Adjusted operating 2.6 2.4 8.3% 9.3 9.3 0.7%profitAdjusted operating 10.1% 9.7% 9.4% 9.5%margin %
Combined full year sales for CPC and MCM, our Other Distribution Businesses, grew 2.6%, driven by strong customer acquisition and an increasingly successful online proposition. eCommerce accounted for 45.4% of full year sales with web sales growing 14.5%.
In the fourth quarter CPC continued its strong performance withsales growth of 5.7% and increasing on the third quarter by 2.6%. This wasdriven by an increase of 13.1% in the active customer base, powered throughdigital marketing activities. Although MCM sales declined 1.6% in the fourthquarter versus the prior year in challenging market conditions, thisperformance reflected a 9.3% sales improvement over the third quarter as thebusiness benefits from its collaboration with CPC. With the enhancements madeto the MCM website in Q3, web sales grew by 19.2% in Q4 and eCommercepenetration increased to 46.5% of sales.
Industrial Products Division
(Akron Brass) Q4 11/12 Q4 10/11 Q4 growth FY 11/12 FY 10/11 FY growth £m £m £m £mRevenue 15.1 15.2 -0.8% 61.5 62.3 2.2%Adjusted operating 2.4 3.0 -19.2% 9.5 10.6 -6.6%profitAdjusted operating 15.9% 19.7% 15.4% 17.0%marginFull year sales for Akron Brass grew 2.2%, mitigating thechallenging conditions in the US fire truck market, which declined 12.1%, bysuccessful strategic focus into international markets and new productinitiatives. Sales in the fourth quarter declined by 0.8% on the prior yearbut grew 2.8% on the previous quarter. Akron's successful strategic drive intointernational markets meant that overall sales from these markets in thefourth quarter were 27.7% of total sales. New product development furtherenhanced the performance with 22% sales coming from new product sales in thequarter.Risk and uncertainties
The principal risks and uncertainties facing the Group for the year and the ways in which they are mitigated are largely unchanged since they were described in the Company's 2011 Annual Report and Accounts on pages 47 to 49 with the exception of the addition noted below.
In the year the risk arising from fiscal andeconomic uncertainty in the Eurozone is considered to have increased. We haveimplemented risk mitigation actions in respect of cash, profits andobligations relating to this increased risk.Full details of the principal risks anduncertainties facing the Group and the ways in which they are mitigated willbe given in the 2012 Annual Report and Accounts.This press release contains certainforward-looking statements relating to the business of the Group and certainof its plans and objectives, including, but not limited to, future capitalexpenditures, future ordinary expenditures and future actions to be taken bythe Group in connection with such capital and ordinary expenditures, theexpected benefits and future actions to be taken by the Group in respect ofcertain sales and marketing initiatives, operating efficiencies and economiesof scale. By their nature forward-looking statements involve risk anduncertainty because they relate to events and depend on circumstances thatwill occur in the future. Actual expenditures made and actions taken maydiffer materially from the Group's expectations contained in theforward-looking statements as a result of various factors, many of which arebeyond the control of the Group. These factors include, but are not limitedto, the implementation of initiatives supporting the Group's strategy, theeffect of legislation and regulatory enactments, recruitment and integrationof new personnel, the implementation of cost-saving initiatives, continued useand acceptance of e-commerce programs and systems, implementation of new ITsystems, the ability to expand into new markets and territories, theimplementation of new sales and marketing initiatives, changes in demand forelectronic, electrical, electromagnetic and industrial products, rapid changesin distribution of products and customer expectations, the ability tointroduce and customers' acceptance of new services, products and productlines, product availability, the impact of competitive pricing, fluctuationsin foreign currencies, and changes in interest rates and overall marketconditions, particularly the impact of changes in world-wide and nationaleconomies. The Group does not intend to update the forward-looking statementsmade herein.
Condensed Consolidated Income Statement
For the fourth quarter and year ended 29 January 2012
2011/12 2010/11 2011/12 2010/11 Fourth Fourth Full Full quarter quarter year year
unaudited unaudited unaudited audited
Notes £m £m £m £m Continuing operationsRevenue 2 233.4 242.5 973.1 990.8Cost of sales (142.2) (141.2) (588.1) (583.3)Gross profit 91.2 101.3 385.0 407.5Net operating expenses- before restructuring costs and gains on disposal of businesses (65.7) (73.0) (277.7) (295.4)- restructuring costs 3 - - (2.8) -- gains on disposal of businesses 3 - - 18.9 -Total net operating expenses (65.7) (73.0) (261.6) (295.4)Operating profit- before restructuring costs and gains on disposal of businesses 2 25.5 28.3 107.3 112.1- restructuring costs 3 - - (2.8) -- gains on disposal of businesses 3 - - 18.9 -Total operating profit 2 25.5 28.3 123.4 112.1Finance income (interest receivable) 0.1 - 0.1 0.1Finance costs- interest payable (4.3) (3.6) (14.6) (14.6)- preference dividends (0.8) (0.8) (3.5) (3.5)- premium on redemption of preference shares (0.2) (0.2) (0.8) (0.8)Total finance costs (5.3) (4.6) (18.9) (18.9)Profit before taxation 3 20.3 23.7 104.6 93.3Taxation 5 (5.8) (6.9) (27.7) (27.1)Profit for the period (attributable to ordinary shareholders)
14.5 16.8 76.9 66.2 Earnings per share 6Basic 4.0p 4.6p 21.2p 18.3pDiluted 3.9p 4.5p 20.9p 18.0p Ordinary dividendsInterim - proposed 4.4p 4.4pFinal - proposed 10 6.0p 6.0pPaid 10.4p 9.6p
Impact on shareholders' funds (£m) 37.8 34.7
Condensed Consolidated Statement of Comprehensive Income
For the fourth quarter and year ended 29 January 2012
2011/12 2010/11 2011/12 2010/11 Fourth Fourth Full Full quarter quarter year year
unaudited unaudited unaudited audited
£m £m £m £m
Profit for the period 14.5 16.8 76.9 66.2 Net exchange adjustments
0.5 2.0 0.4 3.6 Recycling of cumulative translation adjustments on disposal of subsidiary undertaking
- - (0.8) -Actuarial losses on pensions and other post-retirement obligations (1.6) (0.7) (10.0) (0.7)Deferred tax credit on actuarial losses on pensions and other postretirement obligations - 0.3 2.5 0.3Deferred tax (charge)/credit on share based payments (2.3) 2.3 (2.3) 2.3Net fair value gains/(losses) on cash flow hedges 2.6 0.6 2.2 (1.2)Other comprehensive (expense)/income for the period
(0.8) 4.5 (8.0) 4.3
Total comprehensive income for the period (attributable to ordinary shareholders)
13.7 21.3 68.9 70.5
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Condensed Consolidated Balance Sheet
As at 29 January 2012
29th January 30th January 2012 2011 unaudited audited Notes £m £mASSETSNon-current assetsGoodwill 34.3 34.8
Other intangible assets 26.9 24.3Property, plant and equipment
57.4 54.4Deferred tax assets 10.5 13.9Total non-current assets 129.1 127.4 Current assetsInventories 214.5 214.7Financial assets 8 2.3 -
Trade and other receivables
139.5 141.4Current tax receivable 1.0 -Cash and cash equivalents 8 116.9 33.4
Total current assets (excluding assets of disposal group classified as held for sale)
474.2 389.5Assets of disposal group classified as held for sale
- 8.7Total current assets 474.2 398.2 LIABILITIESCurrent liabilitiesFinancial liabilities 8 (1.3) (1.3)Trade and other payables (113.4) (126.6)Current tax payable (15.6) (23.6)
Total current liabilities (excluding liabilities of disposal group classified as held for sale)
(130.3) (151.9) Liabilities of disposal group classified as held for sale - (0.9)Total current liabilities
(130.3) (152.4) Net current assets 343.9 245.8 Non-current liabilitiesFinancial liabilities 8 (355.0) (295.0)
Retirement and other post-employment benefits (43.8) (36.3)Deferred tax liabilities (6.4) (3.5)Total non-current liabilities
(405.2) (334.8) NET ASSETS 67.8 38.4 EQUITYOrdinary shares 18.5 18.4
Equity element of preference shares
10.4 10.4Share premium 31.1 28.5Capital redemption reserve 4.4 4.4Hedging reserve 1.4 (0.8)
Cumulative translation reserve
19.6 20.0Retained earnings (17.6) (42.5)TOTAL EQUITY 67.8 38.4
Consolidated Statement of changes in Equity
For the year ended 29 January 2012
2011/12 2010/11 Full Full year year unaudited audited £m £m
Total equity/(deficit) at beginning of year 38.4 (8.5)
Profit for the period 76.9 66.2Other comprehensive (expense)/income (8.0) 4.3Total comprehensive income 68.9 70.5 Transactions with owners:Ordinary dividends paid (37.8) (34.7)Ordinary share capital subscribed 2.7 4.4Purchase of ordinary shares (5.8) -Share-based payments 1.4 6.7Total transactions with owners (39.5) (23.6) Total equity at end of year 67.8 38.4
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 29 January 2012
2011/12 2010/11 2011/12 2010/11 Fourth Fourth Full Full quarter quarter year year unaudited unaudited unaudited audited Notes £m £m £m £m
Cash flows from operating activities
Operating profit 25.5
28.3 123.4 112.1
Less: gain on disposal of businesses included in arriving atoperating profit - - (18.9) -Restructuring:- net income statement impact - - 2.8 -- cash impact (1.0) (0.1) (2.2) (0.8)Non cash impact of restructuring (1.0) (0.1) 0.6 (0.8)Depreciation and amortisation 4.5 4.9 18.2 19.1Changes in working capital 10.9 (8.5) (13.6) (31.7)Additional funding for post retirement defined benefit plans (1.0) (1.0) (3.4) (3.9)Other non-cash movements 0.2 2.6 1.7 7.2Total cash generated from operations 7 39.1 26.2 108.0 102.0Interest received 0.1 - 0.1 0.1Interest paid (4.0) (4.7) (11.0) (12.7)Dividends paid on preference shares (1.7) (1.7) (3.5) (3.5)Taxation paid (6.5) (8.8) (26.9) (29.6)Net cash generated from operating activities 27.0
11.0 66.7 56.3
Cash flows from investing activitiesNet (outflow)/inflow from disposal of businesses (net of tax paid) (1.4) - 23.2 -Proceeds from sale of property, plant and equipment - - 1.3 -Purchase of property, plant and equipment (3.8) (2.8) (10.4) (8.6)Purchase of intangible assets (computer software) (1.2) (3.7) (12.6) (10.5)Net cash (used in)/generated from investing activities
(6.4) (6.5) 1.5 (19.1)
Cash flows from financing activitiesPurchase of ordinary shares - - (5.8) -Issue of ordinary shares - 0.4 2.7 4.4New borrowings 95.5 - 174.6 67.8Repayment of borrowings (60.7) (24.4) (118.9) (67.8)Dividends paid to ordinary shareholders - - (37.8) (34.7)Net cash generated from/(used in) financing activities 34.8
(24.0) 14.8 (30.3)
Net increase/(decrease) in cash, cash equivalents and bankoverdrafts 55.4 (19.5) 83.0 6.9Cash, cash equivalents and bank overdrafts at beginning of period 62.8 51.5 33.4 25.4Exchange (losses)/gains (1.3) 1.4 0.5 1.1Cash, cash equivalents and bank overdrafts at end of year 116.9
33.4 116.9 33.4
Reconciliation of net financial liabilitiesNet financial liabilities at beginning of year (262.9) (264.2)Net increase in cash, cash equivalents and bank overdrafts 83.0 6.9Increase in debt (55.7) -Premium on redemption of preference shares (0.8) (0.8)Derivative financial instruments 3.2 (1.8)Amortisation of arrangement fees (2.1) (2.0)Exchange movement (1.8) (1.0)Net financial liabilities at end of year 8 (237.1) (262.9)
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Notes 1 Basis of preparation
The unaudited condensed consolidated financial information in this report
has been prepared based on International
Financial Reporting Standards (IFRSs), as adopted by the European Union, and
applying the accounting policies disclosed
in the Group's 2011 Annual Report and Accounts on pages 100 to 103 except as
described below.
There are no new standards or amendments to standards that are mandatory for
the first time in the financial year 2011/12 which have had a significant
impact upon the Group. This condensed consolidated financial information does not comprise statutory accounts within the meaning of Section 434
of the Companies Act 2006. Statutory accounts for the financial year ended
30 January 2011 have been delivered to the
Registrar of Companies. The report of the auditors on those accounts was
unqualifiied and did not contain any statement
under Section 498 of the Companies Act 2006. Copies of the Company's 2011
Annual Report and Accounts are available
from Premier Farnell plc, 150 Armley Road, Leeds, LS12 2QQ, England or from
the Company's website at www.premierfarnell.com.
2 Segment information 2011/12 Fourth quarter unaudited 2010/11 Before Restructuing Gains After Fourth restructuring costs on restructuring quarter and gains disposal and gains unaudited on disposal of of businesses on disposal businesses of businesses £m £m £m £m £m Revenue Marketing and Distribution Division Americas 87.7 - - 87.7 91.4 Europe and Asia Pacific 104.8 - - 104.8 105.7 Other Distribution Businesses 25.8 - - 25.8 24.8 Total Marketing and Distribution Division 218.3 - - 218.3 221.9 Industrial Products Division 15.1 - - 15.1 20.6 233.4 - - 233.4 242.5 Operating profit Marketing and Distribution Division Americas 7.1 - - 7.1 8.2 Europe and Asia Pacific 17.1 - - 17.1 18.5 Other Distribution Businesses 2.6 - - 2.6 2.4 Total Marketing and Distribution Division 26.8 - - 26.8 29.1 Industrial Products Division 2.4 - - 2.4 3.9 Head Office costs (3.7) - - (3.7) (4.7) 25.5 - - 25.5 28.3 2011/12 Full year unaudited 2010/11 Before Restructuing Gains After Full year restructuring costs on restructuring audited and gains disposal and gains on disposal of of businesses on disposal businesses of businesses £m £m £m £m £m Revenue Marketing and Distribution Division Americas 369.1 - - 369.1 386.3 Europe and Asia Pacific 443.1 - - 443.1 423.5 Other Distribution Businesses 99.4 - - 99.4 98.0 Total Marketing and Distribution Division 911.6 - - 911.6 907.8 Industrial Products Division 61.5 - - 61.5 83.0 973.1 - - 973.1 990.8 Operating profit Marketing and Distribution Division Americas 31.3 (0.3) 1.1 32.1 29.1 Europe and Asia Pacific 71.0 (2.2) - 68.8 74.7 Other Distribution Businesses 9.3 (0.1) - 9.2 9.3 Total Marketing and Distribution Division 111.6 (2.6) 1.1 110.1 113.1 Industrial Products Division 9.5 - 17.8 27.3 14.2 Head Office costs (13.8) (0.2) - (14.0) (15.2) 107.3 (2.8) 18.9 123.4 112.1 29 January 30 January 2012 2011 unaudited audited £m £m Segment assets Marketing and Distribution Division Americas 149.9 153.0 Europe and Asia Pacific 239.1 235.8 Other Distribution Businesses 42.9 39.5 Total Marketing and Distribution Division 431.9 428.3 Industrial Products Division 39.6 48.1 Head Office 1.1 1.9 Segment assets 472.6 478.3 Unallocated assets: Cash and cash equivalents 116.9 33.4 Deferred tax assets 10.5 13.9 Financial assets 2.3 - Current tax receivable 1.0 - Total assets 603.3 525.6
The segments shown above are the segments for which summary management information is presented to the Board which is
deemed to be the Group's chief operating decision maker.3 Profit before taxation Profit before taxation is stated after the following: 2011/12 2010/11 2011/12 2010/11 Fourth Fourth Full Full quarter quarter year year unaudited unaudited unaudited audited £m £m £m £m One-off (charges)/credits: - Restructuring costs - - (2.8) -
- Gains on disposal of businesses (note 4) - - 18.9 -
- -
16.1
Due to their significance, restructuring costs and the gains on disposal of businesses have been disclosed separately on the face of the income statement.4 Gains on disposal of businesses On 31 January 2011, the Group disposed of TPC Wire & Cable ("TPC"), part of the Industrial Products Division, to Pfingston Partners LLC for a cash consideration payable on completion of $43 million (before costs). The disposal of TPC does not qualify as a discontinued operation under IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations" and consequently the results of TPC for prior periods are shown within continuing operations. The gain on disposal of TPC of £17.8 million before taxation is summarised below. 2011/12 Full year unaudited £m Net sale proceeds 24.6 Net assets disposed of: Goodwill 0.1 Property, plant and equipment 0.5 Inventory 4.9 Trade and other receivables 3.1 Trade and other payables
(1.0)
Total net assets disposed of: 7.6
Gain on disposal before recycling of cumulative translation
adjustments and taxation 17.0 Recycling of cumulative translation adjustments 0.8 Gain on disposal before taxation 17.8 Tax on gain on disposal (note 5) (2.8) Gain on disposal 15.0
The gain on disposal includes the recycling of £0.8 million of net
cumulative currency translation adjustments relating to TPC which were
previously posted directly to reserves. During the prior year, TPC
contributed £20.7 million of sales, £3.6 million of operating profit to the
Group's results and £2.7 million of operating cash flow. During the fourth
quarter of the prior year, TPC contributed £5.4 million of sales , £0.9
million of operating profit and £0.3 million of operating cash flow.
On 7 September 2011 Newark sold the business and assets of three calibration
laboratories as part of a strategic agreement with Transcat Inc. The
disposal consideration was £1.8 million (net of transaction costs) and
resulted in a gain on disposal of £1.1 million. The trading results of this
business were not material to the Group. The taxation charge on the gain on
disposal was £0.4 million.
For the full year the net cash inflow from the disposal of businesses was
£23.2 million (Q4: £1.4 million outflow), comprising TPC net proceeds of
£24.6 million less associated tax paid of £2.8 million, and the net proceeds
from the sale of the calibration laboratories of £1.8 million, less
associated tax paid of £0.4 million. The fourth quarter cash outflow relates
primarily to associated tax paid. 5 Taxation
The taxation charge represents an effective tax rate for the 2011/12 full
financial year on profit before tax, preference dividends and gains on
disposal of businesses of 27.5% (2010/11: 28.0%). In addition, the taxation
charge on the profit on disposal of TPC is £2.8 million and £0.4 million on
the profit on disposal of the three calibration laboratories (note 4).6 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
ordinary shareholders for the period by the weighted average number of
ordinary shares in issue during the period, excluding those shares held by the
Premier Farnell Executive Trust. For diluted earnings per share, the weighted
average number of ordinary shares in issue is adjusted to assume issue of all
dilutive potential ordinary shares, being those share options and awards with
a non-market based performance condition granted to employees where the
exercise price is less than the average market price of the Company's ordinary
shares during the period, and those shares with a market based performance
condition based on the current estimate of the number of shares that will vest
under the performance criteria.
Reconciliations of earnings and the weighted average number of ordinary shares
used in the calculations are set out below. 2011/12 2010/11 Full year unaudited Full year audited Basic Diluted Basic per Diluted per Earnings share amount share amount Earnings share amount share amount £m pence pence £m pence pence
Earnings per share
Profit attributable to ordinary shareholders 76.9 21.2
20.9 66.2 18.3 18.0
Restructuring costs 2.8 0.7 0.7 - - -
Tax attributable to restructuring costs (0.7) (0.2)
(0.2) - - - Gains on disposal of businesses (18.9) (5.2) (5.1) - - - Tax on gains on disposal of businesses 3.2 0.9 0.9 - - -
Profit attributable to ordinary shareholders
before gains on disposal of businesses and
restructuring costs 63.3 17.4 17.2 66.2 18.3 18.0 Number Number
Weighted average number of shares 363,091,496 361,149,321 Dilutive effect of share options 4,952,153 6,670,893 Diluted weighted average number of shares 368,043,649 367,820,214
Earnings per share excluding gains on disposal of businesses and restructuring
costs have been provided in order to facilitate year on year comparison.7 Cash generated from operations 2011/12 2010/11 Full Full year year unaudited audited £m £m Continuing operations Profit after tax 76.9 66.2 Adjustment for: - tax 27.7 27.1 - depreciation 8.7 9.2 - amortisation of intangible assets 9.5 9.9 - gain on sale of property, plant and equipment (0.3) - - preference dividends 3.5 3.5 - interest income (0.1) (0.1) - interest expense 14.6 14.6 - premium on redemption of preference shares 0.8 0.8 - additional funding for post retirement defined benefit plans (3.4) (3.9) - increase in net pension liability (US defined benefit plans) 0.5 0.4 - increase in other post-retirement obligations 0.1 0.1 - share-based payments 1.4 6.7 - non cash impact of restructuring costs 0.6 (0.8) - gains on disposals of businesses (18.9) - Changes in working capital: - decrease/(increase) in inventories 2.2 (41.6) - decrease/(increase) in trade and other receivables 2.0 (15.1) - (decrease)/increase in trade and other payables (17.8) 25.0 Total cash generated from operations 108.0 102.0 8 Net financial liabilities 29 January 30 January 2012 2011 unaudited audited £m £m Cash and cash equivalents 116.9 33.4 Unsecured loans and overdrafts (294.2) (234.1) Net financial liabilities before preference shares and derivatives (177.3) (200.7) Preference shares (61.8) (61.0) Derivative financial instruments (net) 2.0 (1.2) Net financial liabilities (237.1) (262.9) Net financial liabilities are analysed in the balance sheet as follows: Current assets Cash and cash equivalents 116.9 33.4 Derivative financial instruments 2.3 - 119.2 33.4 Current liabilities Other loans (1.0) (0.1) Derivative financial instruments (0.3) (1.2) (1.3) (1.3) Non-current liabilities Bank loans (18.9) (109.9) 5.9% US dollar Guaranteed Senior Notes payable 2013 (100.8) (100.6) 3.0% US dollar Guaranteed Senior Notes payable 2016 (54.0) - 5.2% US dollar Guaranteed Senior Notes payable 2017 (19.1) (19.0) 4.4% US dollar Guaranteed Senior Notes payable 2018 (37.0) - 4.8% US dollar Guaranteed Senior Notes payable 2021 (57.8) - Other loans (5.6) (4.5) Preference shares (61.8) (61.0) (355.0) (295.0) On 18 August 2011 the Group issued US Private Placement Notes of $85 million with an expiry period of up to 5 years bearing an interest coupon of 3% per annum for the first three years and thereafter semi-annual floating interest rate plus a margin of 1.75% until maturity in 2016. On 2 November 2011 the Group's syndicated bank facilities of £185 million were replaced with a new syndicate bank facility of £200 million expiring 28 October 2016. The Group also issued on 15 November US Private Placement Notes of $58.5 million bearing an interest coupon of 4.36% with an expiry period of 7 years and US Private Placement Notes of $91.5 million bearing an interest coupon of 4.83% with an expiry period of 10 years. At 29 January 2012, the Group's syndicate bank facilities totalled £200 million expiring in November 2016. Based on these facilities, the headroom on bank borrowings at 29 January 2012 was £179 million. The Group is also party to a $75 million US Private Placement Shelf Facility. This agreement allows loan notes with an expiry period of up to 10 years to be issued in the period up to 31 March 2012. At 29 January 2012, a total of $30 million had been drawn down on this facility. 9 Exchange rates The principal average exchange rates used to translate the Group's overseas profits were as follows: 2011/12 2010/11 2011/12 2010/11 Fourth Fourth Full Full quarter quarter year year US dollar 1.56 1.56 1.60 1.54 Euro 1.18 1.17 1.15 1.17 10 Ordinary dividend
The directors are proposing a final dividend in respect of the year ended
29 January 2012, of 6.0p per share which will absorb £21.8 million of
shareholders' funds. As the final dividend is subject to approval at the
Annual General Meeting of the Company, to be held on 12 June 2012, it has
not been provided for at 29 January 2012. Once approved, the final dividend
will be paid on 20 June 2012 to shareholders on the register of members on
25 May 2012.
11 Events ocurring after the balance sheet date
Subsequent to the year end, the Group entered into consultation with appropriate European employee representative groups over proposals to establish a single outbound telesales and telemarketing centre of excellence for all European markets in Krakow, Poland. If the proposal proceeds as expected, it would result in the recognition of £7m to £8m exceptional costs in the first quarter, which will be recovered over 3-4 years.
PINXRelated Shares:
PFL.L