Half-yearly Report

Premier Farnell plc 19 September 2013 Results for the first half of the financial year ending 2 February 2014 Key Financials H1 13/14 H1 12/13 H1 Growth (a) Continuing operations (26 weeks) (26 weeks)(unaudited) £m except for per shareTotal revenue 498.2 479.2 0.9%Adjusted operating profit (b) 47.5 50.1 -8.6% Adjusting items (b) 0.2 (7.9) - Total operating profit 47.7 42.2 8.2%Adjusted profit before tax (b) 37.9 39.7 -4.5%Total profit before taxation 38.1 31.8 19.8%Adjusted earnings per share (b) 7.1p 7.8p -9.0%Basic earnings per share 7.1p 6.2p 14.5%Free cash flow (c) 8.3 33.0 -74.8%Interim ordinary dividend per 4.4p 4.4p -share FIRST HALF HIGHLIGHTS - Group H1 sales per day up 0.9% versus prior year. Sales excluding RaspberryPi declined 1.4% as overall market conditions remain subdued. - Excluding Raspberry Pi, year on year sales growth was stable through theperiod in our main MDD business as Continental Europe, Asia Pacific andEmerging Markets offset weakness in North America and the UK. - Year on year sales growth trajectory in MDD Other and Industrial Productsdivisions slowed, primarily due to strong comparators last year. - Activity levels across the period reflected normal seasonality. - Operating margin improved through the period to 9.5% from adjusted Q4 levelsof 9.2% reflecting initiatives to optimise business performance towards ourtargeted range. - Gross margin of 37.7% was down 0.3 percentage points from the fourth quarterbut stabilised through the period. - Operating margin improvement came from management of costs and the benefitof the strategic efficiency actions taken at the end of the prior year. - The Group has made further progress with key initiatives that underpin thethree pillars of our strategy. - Active customer base grew 2.7% (excluding benefit of Raspberry Pi). - New web platform implemented in Canada with roll-out across North Americaunderway. - Investment in inventory continued in line with plans. - Sales of development tools and kits which are critical to early stages ofdesign grew 42.0% year on year. - element14 Community now has 200,000 registered users globally. - Cash performance reflected our planned investment in inventory to furthersupport customers' requirements as well as investments in Raspberry Pi andinventory for Akron Brass following a major contract win in India. - The Board has approved an interim dividend of 4.4p per share (2012/13: 4.4p). Commenting on the results, Laurence Bain, Chief Executive Officer, said: "Our core business has delivered a stable performance overalldespite the mixed conditions that have impacted some developed markets such asNorth America and the UK. Focus on optimising performance saw the Group'sindustry leading operating margin improve from the levels experienced at theend of the prior year, making progress towards our targeted range. Our customer-centric strategy has attracted more customers to ourbusiness and provides the Group with greater opportunity as market conditionsimprove. Progress in the Emerging Markets, where sales growth outpaced ourtarget, exemplifies this approach. We continue to enrich our customerproposition through investments in inventory and our new web platform, makinggood progress through the first half this year in the execution of these planswhich are driving record levels of customer satisfaction and serviceperformance. We remain confident in our ability to implement our strategicvision. Looking ahead to the second half, we continue to have limitedforward order visibility and current market conditions remain variable.However, with our proposition benefitting from the first half inventoryinvestments and initiatives taken to optimise business performance, we expectto continue to grow our active customer base, gain market share and drivefinancial performance." For further information, contact: Laurence Bain, Chief Executive Officer Premier Farnell plc +44 (0) 20 7851 4100Mark Whiteling, Chief Financial OfficerThomas Churchill, Investor Relations Richard Mountain FTI Consulting +44 (0) 20 7269 7291 Premier Farnell's announcements and presentations are published at www.premierfarnell.comtogether with business information and links to all other Group web sites. An interim management statement for the 52 week financial year ending 2 February 2014will be announced on 12 November 2013. Notes: (a) Throughout this statement, in order to reflect underlyingbusiness performance, sales growth is based on sales per day for continuingbusinesses at constant exchange rates and for like periods, and growth inoperating profit is calculated at constant exchange rates, unless otherwisestated. (b) Current year adjusted operating profit, profit before tax, andearnings per share in the table above exclude restructuring costs of £1.3m anda net gain on US property disposal of £1.5m. In the prior year, adjustedoperating profit, profit before tax, and earnings per share excludedrestructuring costs of £7.5m and acquisition costs of £0.4m related to thepurchase of Embest. (c) Free cash flow comprises total cash generated from operations,excluding cash flows related to adjusting items, less net capital expenditure,interest, preference dividends and tax payments. Free cash flow also excludesnet proceeds from the US property disposal. Premier Farnell plc Divisional Analysis Revenue H1 13/14 H1 12/13 £m £m H1 growthMDD Division Europe 188.0 179.9 0.9% APAC 37.0 33.3 10.0%Europe & APAC 225.0 213.2 2.3% Americas 181.5 180.1 -2.4% MDD Other 54.5 51.5 4.3%Total MDD 461.0 444.8 0.6% 37.2 34.4 4.8%IPD 498.2 479.2 0.9%Group Adjusted Operating Profit (Operating margin) H1 13/14 H1 12/13 £m £m H1 growthMDD DivisionEurope & APAC 31.4 33.4 -9.2% 14.0% 15.7% Americas 10.5 13.2 -23.5% 5.8% 7.3% MDD Other 5.5 4.9 11.6% 10.1% 9.5%Total MDD 47.4 51.5 -11.0% 10.3% 11.6%IPD 7.0 5.6 20.5% 18.8% 16.3% Head office -6.9 -7.0 -2.7% Group 47.5 50.1 -8.6% 9.5% 10.5% Note: Current year adjusted operating profit excludes restructuring costs of£1.3m (MDD Europe and APAC £0.5m, MDD Americas £0.2m, Head office £0.6m) andthe net gain on a US property disposal of £1.5m (MDD Americas). PREMIER FARNELL OVERVIEW Premier Farnell plc is a global, high servicetechnology company, predominantly engaged in the marketing and distribution ofproducts and services in the time-critical and innovation-focused electroniccomponents distribution sector. The Marketing and Distribution Division (MDD)supports 2 million customers globally, who range from engineers to purchasingprofessionals and electronics enthusiasts. Customers benefit from ourextensive product proposition with over 500,000 products from 3,500 leadingsuppliers, including the latest technologies which we help suppliers seed tothe market. This product portfolio is made available through ourdifferentiating multichannel sales strategy with a highly efficient regionalwarehouse model underpinning the delivery of high service to our customers. Our Industrial Products Division is an innovatorin life safety and the world leader in the manufacture of high-performancecomponents for fire-fighting. INTRODUCTION Group sales per day grew by 0.9% year on year in the first half of2013/14 with sales growth in our main MDD business (excluding Raspberry Pi)stable across the period. Excluding Raspberry Pi and associated products,sales per day declined 1.4% year on year. Activity levels through the firsthalf were in line with normal seasonality which typically decline sequentiallyby 1% to 3%, on average, from the first to second quarter. Whilst recent PMI Manufacturing surveys and market data reported bythe Semiconductor Industry Association (SIA) have been encouraging, ourmarkets remain variable and customers continue to act cautiously, especiallyin certain segments of developed economies. CUSTOMER-FOCUSED STRATEGIC PROGRESS POSITIONS THE GROUP FOR GROWTH Our strategy is founded on three key pillars which aim to maximise PremierFarnell's significant opportunities for profitable growth: 1. Customer-centric to deliver a differentiating high service proposition 2. A multichannel environment combining traditional and online channels 3. Expanding our business model internationally, especially in EmergingMarkets We have made considerable progress as we implement this strategic visionwhilst seeking to optimise Premier Farnell's financial performance through theeconomic cycles. Underpinning our strategy is our capability to provide a differentiating, highservice proposition to meet customer needs as this provides the foundation togrow our active customer base and increase share in the fragmented globalmarkets. 1. Customer-centric to deliver a differentiating high service proposition We continue to see progress in customer service metrics with the global NetPromoter Score, our customer satisfaction measure, reaching a new record highat the end of the period. Having the right inventory in stock is critical tocustomer satisfaction and following the investments in inventory announced atour full year results, line-fill improved towards our 97% targeted level. Inthe first half we have added more than 44,000 SKUs globally, an investmentthat enriches the product offering and will enable us to support a greaternumber of customers in the high service electronics space. Through thedelivery of our high service proposition, we have grown our active customerbase 2.7% year on year. Continued growth of our active customer base indicatesthat we are gaining market share and provides the foundation for future salesgrowth as we drive towards achievement of our key performance targets. Having the latest technologies is highly attractive to customers, particularlythose engaged in electronic systems design. To meet this need, we havedeveloped expertise in new product introductions at the earliest stages of theelectronics design cycle. This strategic focus has resulted in sales ofdevelopment tools and kits, which are critical to electronics research anddevelopment, increasing by 42.0% year on year, helped by the acquisition lastyear of Embest, an embedded systems design business specialised in ARMtechnology with over 85 engineers based in China. This acquisition providesthe Group with an enhanced capability in the early stages of design. Whencombined with Premier Farnell's extensive multichannel marketing anddistribution resources, including the element14 community, this providessuppliers with a truly differentiated partner as they look to seed theirlatest products to market whilst helping us to better meet customer demandsfor the latest technologies. 2. A multichannel environment combining traditional and online channels Through our multichannel model we are developing a tailored relationship witheach of our two million customer contacts. Customers can connect with usthrough traditional channels such as field sales, technical support and ourcontact centres but are increasingly choosing eCommerce channels such aseProcurement solutions, our 48 transactional websites or the industry leadingelement14 community. The Community continues to grow and now has 200,000registered members, having received more than 5 million visits in calendar2013. Although the Group already conducts over 56% of its MDD business througheCommerce channels, we are further developing our online offering to supportcustomer needs and to enable operational efficiencies as customers choose tobuy online. Our new web platform - now successfully implemented in Canada and currentlybeing rolled-out in the United States - provides customers with an enhancedonline experience and includes several features that make their transactionalprocesses easier. Furthermore, it creates opportunities to improve efficiencyand marketing effectiveness whilst providing a foundation for the accelerationof the Group's global expansion and our future web innovations. Following theroll-out in North America, the new platform will be implemented across ourEurope and Asia Pacific businesses. 3. Expanding our business model internationally, especially in EmergingMarkets Over the longer term, the world's Emerging Markets present the Group with thegreatest opportunity for accelerated sales growth. Developing our business in Asia Pacific is critical to achieving thisstrategic objective. China and India grew 18.7% and 20.0%, respectively,whilst Asia Pacific's active customer base grew 8.9% year on year as customersbenefitted from our enhanced product proposition. We continue to develop ouroffering to customers in Emerging Markets through our multichannel salesstrategy. Once we have completed the roll-out of our new global web platform,customers in these markets will be principal beneficiaries of the enhancementsto our web experience, providing further differentiation to the local marketparticipants. We are focused on growing our presence in the Emerging Markets in line withour through-the-cycle key performance indicator of 10% sales growth. In thefirst half, Emerging Markets outperformed this metric, delivering sales growthof 14.8% year on year. SUMMARY OF FINANCIAL PERFORMANCE IMPROVED MARKET CONDITIONS IN CONTINENTAL EUROPE AND EMERGINGMARKETS; INITIATIVES IMPLEMENTED TO IMPROVE UK PERFORMANCE MDD Europe and Asia Pacific reported sales per day growth of 2.3%year on year and 7.3% sequentially over the second half last year. Europe delivered sales growth of 0.9% year on year. The Europeanbusiness was a principal beneficiary of the success of Raspberry Pi andtherefore sales excluding this product declined 0.8%, reflecting the continuedsubdued conditions in its markets. On a sequential basis, Europe's first halfsales grew 6.9%, as the region continues to make strategic progress and growits active customer base. Continental Europe grew 3.8% year on year as core Eurozone marketsbenefited from a more stable economic environment with Eastern Europecontinuing to deliver double digit growth. Conditions in the UK were morechallenging however with sales to certain large customers operating in sectorsexposed to public spending cuts being especially weak. The UK's year on yeardecline of 5.0% largely offset the rest of the region's improved performance.We have implemented a series of sales and marketing initiatives to driveimproved performance in the UK. Asia Pacific continued to build on its return to growth with salesper day up 10.0% in the first half. Our focus on Emerging Markets was a keydriver of this performance with China and India delivering year on year growthof 18.7% and 20.0%, respectively. Asia Pacific also benefitted from theacquisition of Embest last year, which extends the Group's capability in theearly stages of the design process which helped deliver a 42% increase insales of development tools and kits across the Group. Australia remains achallenging market, although first half sales grew 8.1% sequentially over thesecond half last year. Excluding the benefit from the acquisition of Embest inthe prior year, Asia Pacific sales grew 6.7% year on year. CONTINUED INVESTMENT TO STRENGTHEN AMERICAS BUSINESS MDD Americas sales per day declined 2.4% year on year in the firsthalf of 2013/14 in market conditions that remain uncertain. Although they havebeen more encouraging lately, US ISM Manufacturing PMIs and SemiconductorIndustry Association (SIA) sales data have been volatile through the periodand the recent results of the electronics volume distributors highlighted theongoing cautiousness of customers in our sector. In addition, we continued tosee the impact of reduced US Federal Government spending, with sales to thissegment down 23% year on year. Despite this, initiatives to improveperformance, including the implementation of targeted sales plans and onlinemarketing campaigns, have delivered sequential growth of 1.1% in the firsthalf and growth in our active customer base of 0.8%. We are investing in our MDD Americas business to better support ourcustomers' requirements and position the business for profitable growth. Thesuccessful implementation of our new web platform in Canada was a significantfirst step in upgrading the region's online proposition with roll-out acrossNorth America ongoing. In addition, we have enriched our product propositionin the region with the investments in inventory adding a total of 21,420 SKUsin the first half of the year. We are focused on leveraging the benefits ofthe enhanced online resources and our incremental inventory investments todrive our strategic sales and marketing initiatives. Over the medium term, our opportunity in the Americas is highlyattractive as the business develops into a digital enterprise. OTHER DISTRIBUTION BUSINESSES ACHIEVE GROWTH DESPITE TOUGH OLYMPICSCOMPARATOR Our Other Distribution Businesses have performed strongly over thepast year and both CPC and MCM delivered year on year sales per day growth inthe first half, up 2.8% and 8.7%, respectively. As a consequence, the combinedOther Distribution Businesses delivered sales per day growth of 4.3% year onyear, despite a strong comparator last year due to the London Olympics.Activity related to the London Olympics, which was predominantly weighted tothe second quarter last year, impacted year on year sales growth rates by 1.6percentage points. Sequentially, Other Distribution Businesses declined 0.4%over the second half of the prior year. RASPBERRY PI SALES OF £15M IN FIRST HALF Raspberry Pi delivered sales of £15.0m in the first half (2012/13:£4.0m) as we extended our offering of exclusive ancillary products to bothdesign engineering customers, who are using the boards for specificapplications, and to the engineers of tomorrow through the moreconsumer-focused, CPC and MCM businesses. Through the first half, sales ofRaspberry Pi have moderated as anticipated in the normal lifecycle ofelectronics products. AKRON BRASS WINS LARGE CONTRACT IN INDIA; ACQUIRES ASSETS OF REACHENGINEERING LLC Our Industrial Products Division (IPD), Akron Brass, continued toperform well, with sales up 4.8% year on year and 5.3% sequentially in thefirst half. Akron Brass has now achieved growth in six consecutive quartersdespite many governments continuing to restrict spending. The business has benefitted from the ongoing development of itsstrategic focus on international markets and new product areas, with 28% offirst half sales from overseas markets. Exemplifying this approach, AkronBrass signed an agreement with Hindustan Petroleum Corporation Limited toprovide a new stainless steel monitor, specifically designed for the Indianmarket. Today, we announced that Akron Brass has acquired the assets ofReach Engineering LLC for a consideration of approximately £0.5m, to be paidover a four year period. Reach Engineering LLC is a privately owned companyheadquartered in Ocala, Florida that provides specialised electronic systemsto the emergency and industrial vehicle markets. This strategic acquisitionenhances Akron Brass' capability to offer highly customised life-safetytechnology to customers, positioning the business to drive further growththrough its range of market leading engineering solutions. This strategic progress, combined with signs of stabilisation inhome US markets, gives cause for optimism over the longer term. CONTINUED FOCUS ON OPTIMISING FINANCIAL PERFORMANCE Gross margin for the first half of the financial year was 37.7%,down 1.5 percentage points over the prior year. This gross margin performancewas 0.3 percentage points lower than the fourth quarter as we continued tomanage the business in line with market conditions and developed initiativesto support customer needs. Customer behaviour continues to be cautious,resulting in lower average order values and, subsequently, higher freightcharges as a percentage of sales. However, gross margin trends stabilisedthrough the first half as a result of the moderating impact of Raspberry Piand the implementation of strategic pricing initiatives. Net operating expenses reduced by 0.5 percentage points (atconstant exchange rates) to 28.1% of sales as our recent cost actions absorbedinflationary pressures. The Group will continue to manage its cost base both strategically,as we simplify the organisation by taking advantage of the regional resourceswithin our global model and the efficiencies arising from increased eCommerceactivity, and tactically, in response to sales volumes as we focus onoptimising business performance. Adjusting items include a net gain of £1.5m arising from theproperty disposal of our Newark element14 Americas head office, less costsassociated with relocating to new premises. This relocation will enhance theworking environment which will enable us to attract and retain key talent,develop our culture and accelerate our strategic objectives. Offsetting thisis £1.3m of restructuring costs as we continue to re-align our focus on areasof greatest opportunity, drive efficiency of global operations and optimiseperformance. Adjusted operating profit was £47.5m (2012/13: £50.1m), a year onyear decline of 8.6%. Total operating profit was £47.7m, reflecting a net gainfrom adjusting items of £0.2m (2012/13: £42.2m, after reflecting a net costfrom adjusting items of £7.9m), resulting in year on year growth of 8.2%. Our industry leading operating margin of 9.5% on an adjusted basisimproved through the period as we drive towards our targeted 10%-12% range,optimising financial performance. MDD Americas' weaker sales performance resulted in operationalleverage impacting the business' profitability in the first half.Consequently, operating margin declined by 1.5 percentage points year on year,to 5.8%. Our Europe and Asia Pacific segment has continued to deliver anoperating margin above the Group average at 14.0%, although the impact oflower gross margin, partly as a consequence of geographic mix, resulted in areduction of 1.7 percentage points year on year. Sales growth in the OtherDistribution Businesses helped deliver operating profit growth of 11.6% yearon year, with operating margin improving by 0.6 percentage points. As aresult, Total MDD operating margin for the first half of 2013/14 was down 1.3percentage points year on year to 10.3%. The Industrial Products segment benefitted from the effectiveimplementation of its strategy to achieve operating profit growth of 20.5%year on year, with its operating margin up 2.5 percentage points against thecomparable period. CASH FLOW/BALANCE SHEET Cash conversion at 71.6% (2012/13: 123.8%) reflected an increase inworking capital of £22.3m in the first half which included our plannedincremental inventory investments to enrich our product offering and support agreater number of customers in the high service space, focus on developing ouroffering in new product introductions at the front end of the design cycle,and investments to improve line fill. In addition, Raspberry Pi inventoryincreased as we are now able to manage inventory levels and avoid shortages,and Akron built inventory to support the Hindustan Petroleum CorporationLimited contract. Inventory is expected to decrease slightly in the secondhalf, though we remain committed to maintaining our product proposition tosupport our customers' high service requirements. Net financial liabilities (including preference shares) increasedto £245.6m from £229.6m at the end of the prior financial year. The impact ofexchange rates in the period was to increase net financial liabilities by£2.1m, principally in relation to our US$ denominated private placement notes. Net debt to EBITDA of 2.2 at the end of the first half was in linewith our targets and reflects the first half inventory investments discussedabove. Premier Farnell's financial position remains robust, with goodliquidity and strong free cash flow. At the half year, headroom on bankborrowings was £151.1m under facilities in place until October 2016. Thisheadroom, combined with our net cash position of £46.1m, continues to gives usa secure funding position. In June 2013, the Group repaid its $159m 2013 USPPnotes as planned, reducing our future finance costs. FOREIGN CURRENCY IMPACT A one cent movement in the exchange rate between the US dollar andsterling impacts the Group's operating profit by approximately £250,000 perannum, and a one cent movement in the exchange rate between the Euro andsterling impacts the Group's operating profit by approximately £500,000 perannum. There was a beneficial impact on adjusted operating profit for thefirst half of £1.9m from the translation of overseas results compared with theprior year. FINANCE COSTS Net finance costs were £9.6m (2012/13: £10.4m). This comprises netinterest payable of £7.4m (2012/13: £8.2m), which was covered 6.4 times byadjusted operating profit, and a net charge of £2.2m (2012/13: £2.2m) inrespect of the Company's convertible preference shares. PROFIT BEFORE TAX Adjusted profit before tax for the first half was £37.9m (2012/13:£39.7m), a decline of 4.5% on the previous year. Total profit before tax was£38.1m (2012/13: £31.8m), up 19.8% on the previous year. TAX The taxation charge for the first half represents an effective taxrate of 30.0% (2012/13: 27.5%) on profit before tax, preference dividends andadjusting items. This increased rate year on year is due to a reassessment ofour current position based on prevailing tax rates, remaining tax provisionsand utilisation of tax losses across the Group. EARNINGS PER SHARE Adjusted basic earnings per share for the first half are 7.1p(2012/13: 7.8p). Basic earnings per share after the net impact of adjustingitems are 7.1p (2012/13: 6.2p). DIVIDEND The Board recommends an interim dividend of 4.4 pence per share (2012/13: 4.4pence per share). BOARD CHANGES: APPOINTMENT OF NON-EXECUTIVE DIRECTOR As announced separately today, we are pleased to welcome Peter Ventress to theBoard as one of our non-executive directors, with effect from 1 October 2013.Mr Ventress is currently the Chief Executive Officer of Berendsen plc. Priorto joining Berendsen in 2010, he was International President of Staples Inc.and, formerly, Chief Executive of Corporate Express NV. In his roles atCorporate Express and Staples he was also a non-executive director ofCorporate Express Australia Ltd. His broad international experience inbusiness to business environments is expected to be of particular value to thecompany. MEASURING OUR PERFORMANCE Reporting our performance to the financial market in a regular wayand against suitable, transparent key performance indicators (KPIs) that allowstakeholders to measure performance and take a long term view is of paramountimportance to the Group. Together, these KPIs underpin our commitment to deliver profitablegrowth and total shareholder returns. Our KPIs and first half performanceagainst these through-the-cycle metrics are listed below. Metric KPI Achieved in H1 2013/14 Growth Active customer growth 4% 2.7% Sales per day growth* 6% 0.9% Emerging Market growth 10% 14.8%Efficiency % of MDD sales from 70% 56.6% eCommerce Return on net operating >30% 33.2% assetsProfitability Operating margin 10%-12% 9.5%Cash flow Free cash flow as a % of 6% 1.7% sales* \* Through the cycle RISKS AND UNCERTAINTIES The principal risks and uncertainties facing the Group aredescribed on pages 30 and 31 of the Company's 2012/13 Annual Report andAccounts. In addition, we have included very long term sustainability ofdistribution model (outlined below), reflecting the potential impact of thepace of technological and environmental trends. We have also removeddeterioration in the Eurozone economy from our principal risks, recognisingthe stabilising actions taken by the government bodies and central banksacross these markets. Risks and Mitigating actions OpportunityUncertaintiesLong term -Software and services is -Environmental andevolution of the increasingly part of our technology trends areelectronic offering to product sources of electronicscomponent development customers. innovation which underpindistribution This increases the value sales to our productmodel that they extract from our development customers. proposition while diversifying our business -Through ongoing focus on model away from pure reducing the environmental distribution. impact of doing business, we are introducing more -The Group takes actions efficient processes and can to reduce the impact of offer further complementary its business on the services to our customers. environment through carbon emissions and by encouraging recycling, especially of packaging. -Regional warehouse model reduces impact of carbon emissions compared to alternatives Condensed Consolidated Income StatementFor the half year ended 4 August 2013 2013/14 2012/13 2012/13 Half Half Full year year year unaudited unaudited audited Notes £m £m £m Continuing operations Revenue 2 498.2 479.2 952.0 Cost of sales (310.5) (291.4) (583.8) Gross profit 187.7 187.8 368.2 Net operating expenses - adjusted operating expenses (140.2) (137.7) (272.2) - adjusting items (net) 3 0.2 (7.9) (5.1) Total net operating expenses (140.0) (145.6) (277.3) Operating profit - adjusted operating profit 2 47.5 50.1 96.0 - adjusting items (net) 3 0.2 (7.9) (5.1) Total operating profit 2 47.7 42.2 90.9 Finance income 0.2 0.3 0.5 Finance costs - interest payable (7.6) (8.5) (16.5) - preference dividends (1.8) (1.8) (3.5) - premium on redemption of preference shares (0.4) (0.4) (0.8) Total finance costs (9.8) (10.7) (20.8) Total profit before taxation 38.1 31.8 70.6 Taxation 4 (12.1) (9.2) (21.0) Profit for the period attributable to owners of the parent 26.0 22.6 49.6 Earnings per share 5 Basic 7.1p 6.2p 13.6p Diluted 7.0p 6.2p 13.5p Ordinary dividends Interim - proposed 4.4p 4.4p 4.4p Final - proposed 6.0p Paid 6.0p 6.0p 10.4p Impact on shareholders' funds (£m) 22.0 21.8 37.9 Condensed Consolidated Statement of Comprehensive IncomeFor the half year ended 4 August 2013 2013/14 2012/13 2012/13 Half Half Full year year year unaudited unaudited audited £m £m £m Profit for the period 26.0 22.6 49.6 Items that will not be reclassified to profit or loss Remeasurements of post employment benefit obligations 1.2 (14.7) (16.8) Deferred tax (charge)/credit on remeasurements of post employment benefit obligations (0.6) 4.5 4.9 Total items that will not be reclassified to profit or loss 0.6 (10.2) (11.9) Items that may be reclassified to profit or loss Net exchange adjustments 1.9 (1.8) 3.3 Net fair value gains/(losses) on cash flow hedges 4.0 (0.5) (5.4) Total items that may be reclassified subsequently to profit or loss 5.9 (2.3) (2.1) Other comprehensive income/(expense) for the period 6.5 (12.5) (14.0) Total comprehensive income for the period attributable to owners of the parent 32.5 10.1 35.6 The accompanying notes form an integral part of this unaudited condensed consolidated financial information. Condensed Consolidated Balance SheetAs at 4 August 2013 4 August 29 July 3 February 2013 2012 2013 unaudited unaudited audited Notes £m £m £mASSETSNon-current assetsGoodwill 38.0 37.4 37.9Other intangible assets 31.5 28.2 31.0Property, plant and equipment 52.3 56.1 55.1Deferred tax assets 8.6 11.8 8.4Total non-current assets 130.4 133.5 132.4 Current assetsInventories 250.2 231.0 216.4Financial assets 6 0.3 1.3 2.2Trade and other receivables 137.3 140.3 131.0Current tax receivable 3.8 1.0 3.8Cash and cash equivalents 6 46.1 123.7 131.6Total current assets 437.7 497.3 485.0 LIABILITIESCurrent liabilitiesFinancial liabilities 6 (2.2) (103.6) (107.2)Trade and other payables (130.4) (137.6) (120.5)Current tax payable (11.7) (15.1) (10.4)Total current liabilities (144.3) (256.3) (238.1) Net current assets 293.4 241.0 246.9 Non-current liabilitiesFinancial liabilities 6 (289.8) (255.7) (256.2)Retirement and other post-employment benefits (47.9) (57.6) (49.9)Deferred tax liabilities (6.2) (3.2) (5.4)Total non-current liabilities (343.9) (316.5) (311.5) NET ASSETS 79.9 58.0 67.8 EQUITYOrdinary shares 18.6 18.5 18.5Equity element of preference shares 10.4 10.4 10.4Share premium 32.4 31.7 32.0Capital redemption reserve 4.4 4.4 4.4Hedging reserve - 0.9 (4.0)Cumulative translation reserve 24.8 17.8 22.9Retained earnings (10.7) (25.7) (16.4)TOTAL EQUITY 79.9 58.0 67.8 Consolidated Statement of Changes in EquityFor the half year ended 4 August 2013 2013/14 2012/13 2012/13 Half Half Full year year year unaudited unaudited audited £m £m £m Total equity at beginning of period 67.8 67.8 67.8 Profit for the period 26.0 22.6 49.6Other comprehensive income/(expense) 6.5 (12.5) (14.0)Total comprehensive income 32.5 10.1 35.6 Transactions with owners:Ordinary dividends paid (22.0) (21.8) (37.9)Ordinary share capital subscribed 0.5 0.6 0.9Share-based payments 1.1 1.3 1.4Total transactions with owners (20.4) (19.9) (35.6) Total equity at end of period 79.9 58.0 67.8 The accompanying notes form an integral part of this unaudited condensed consolidated financial information. Condensed Consolidated Statement of Cash FlowsFor the half year ended 4 August 2013 2013/14 2012/13 2012/13 Half Half Full year year year unaudited unaudited audited Notes £m £m £m Cash flows from operating activities Operating profit 2 47.7 42.2 90.9 Adjusting items: - net income statement impact 3 (0.2) 7.9 5.1 - cash impact excluding US property disposal (4.0) (3.1) (7.0) Non cash impact of adjusting items (4.2) 4.8 (1.9) Depreciation and amortisation 9.2 9.2 18.4 Changes in working capital (22.3) 2.7 6.6 Additional funding for post retirement defined benefit plans (1.7) (1.5) (2.6) Other non-cash movements 1.3 1.5 1.9 Total cash generated from operations 30.0 58.9 113.3 Interest received 0.2 0.3 0.5 Interest paid (7.4) (7.8) (15.0) Dividends paid on preference shares (1.8) (1.8) (3.5) Taxation paid (8.8) (9.4) (22.4) Net cash generated from operating activities 12.2 40.2 72.9 Cash flows from investing activities Net outflow from deferred consideration on prior year acquisitions/purchase of business (2.2) (2.7) (2.8) Adjusting items: - cash impact of US property disposal 4.0 - - Purchase of property, plant and equipment (2.1) (3.0) (8.5) Purchase of intangible assets (5.8) (7.3) (13.3) Net cash used in investing activities (6.1) (13.0) (24.6) Cash flows from financing activities Issue of ordinary shares 0.5 0.6 0.9 New borrowings 27.3 0.2 0.7 Repayment of borrowings (101.5) - - Dividends paid to ordinary shareholders (22.0) (21.8) (37.9) Net cash used in financing activities (95.7) (21.0) (36.3) Net (decrease)/increase in cash, cash equivalents and bank overdrafts (89.6) 6.2 12.0 Cash, cash equivalents and bank overdrafts at beginning of period 131.6 116.9 116.9 Exchange gains 4.1 0.6 2.7 Cash, cash equivalents and bank overdrafts at end of period 46.1 123.7 131.6 Reconciliation of net financial liabilities Net financial liabilities at beginning of period (229.6) (237.1) (237.1) Net (decrease)/increase in cash, cash equivalents and bank overdrafts (89.6) 6.2 12.0 Decrease/(increase) in debt 74.2 (0.2) (0.7) Premium on redemption of preference shares (0.4) (0.4) (0.8) Derivative financial instruments 2.2 (0.8) (4.2) Amortisation of arrangement fees (0.3) (0.5) (0.9) Exchange movement (2.1) (1.5) 2.1 Net financial liabilities at end of period 6 (245.6) (234.3) (229.6) 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 hasbeen prepared based on International Financial Reporting Standards (IFRSs), asadopted by the European Union, and applying the accounting policies disclosedin the Group's 2012/13 Annual Report and Accounts on pages 76 to 79 except asdescribed below. The following new standards are mandatory for the first time in the currentfinancial year which apply to the Group. IAS 19 (revised) amends the accounting for employment benefits. The revisionto IAS 19 does not have a material impact on the financial statements. Therevision has been adopted in the current period and will result in a definedbenefit pension cost increase of £0.4 million for the full financial year. Asthe impact of this revision is not material in both the current and priorperiod, no restatement of the comparative information has been made. IFRS 13 `Fair value measurement'. IFRS 13 measurement and disclosurerequirements are applicable for the year ended 2 February 2014. The group hasincluded the disclosures required by IAS 34 paragraph 16A(j). See Note 6. This condensed consolidated financial information does not comprise statutoryaccounts within the meaning of Section 498 of the Companies Act 2006.Statutory accounts for the financial year ended 3 February 2013, were approvedby the Board of Directors on 22 April 2013 and delivered to the Registrar ofCompanies. The report of the auditors on those accounts was unqualified anddid not contain any statement under Section 498 of the Companies Act 2006.Copies of the Company's Annual Report and Accounts are available from PremierFarnell plc, 150 Armley Road, Leeds, LS12 2QQ, England, or from the Company'swebsite at www.premierfarnell.com. Going concern basisAfter making enquiries, the directors have a reasonable expectation that theGroup has adequate resources to continue in operational existence for theforeseeable future. The Group therefore continues to adopt the going concernbasis in preparing its interim financial statements. EstimatesThe preparation of interim financial statements requires management to makejudgements, estimates and assumptions that affect the application ofaccounting policies and the reported amounts of assets and liabilities, incomeand expense. Actual results may differ from these estimates. In preparingthese condensed interim financial statements, the significant judgements madeby management in applying the group's accounting policies and the key sourcesof estimation uncertainty were the same as those that applied to theconsolidated financial statements for the year ended 3 February 2013. 2 Segment information 2013/14 Half year unaudited 2012/13 Half year unaudited Adjusting Adjusting Before items After Before items After adjusting adjusting adjusting adjusting items (Note 3) items items (Note 3) items £m £m £m £m £m £m Revenue Marketing and Distribution Division Americas 181.5 - 181.5 180.1 - 180.1 Europe and Asia Pacific 225.0 - 225.0 213.2 - 213.2 Other Distribution Businesses 54.5 - 54.5 51.5 - 51.5 Total Marketing and Distribution Division 461.0 - 461.0 444.8 - 444.8 Industrial Products Division 37.2 - 37.2 34.4 - 34.4 498.2 - 498.2 479.2 - 479.2 Operating profit Marketing and Distribution Division Americas 10.5 1.3 11.8 13.2 (0.6) 12.6 Europe and Asia Pacific 31.4 (0.5) 30.9 33.4 (7.3) 26.1 Other Distribution Businesses 5.5 - 5.5 4.9 - 4.9 Total Marketing and Distribution Division 47.4 0.8 48.2 51.5 (7.9) 43.6 Industrial Products Division 7.0 - 7.0 5.6 - 5.6 Head Office costs (6.9) (0.6) (7.5) (7.0) - (7.0) 47.5 0.2 47.7 50.1 (7.9) 42.2 2012/13 Full year audited Adjusting Before items After adjusting adjusting items (Note 3) items £m £m £m Revenue Marketing and Distribution Division Americas 353.8 - 353.8 Europe and Asia Pacific 422.6 - 422.6 Other Distribution Businesses 107.2 - 107.2 Total Marketing and Distribution Division 883.6 - 883.6 Industrial Products Division 68.4 - 68.4 952.0 - 952.0 Operating profit Marketing and Distribution Division Americas 25.2 5.3 30.5 Europe and Asia Pacific 62.3 (11.1) 51.2 Other Distribution Businesses 10.6 0.5 11.1 Total Marketing and Distribution Division 98.1 (5.3) 92.8 Industrial Products Division 11.3 0.8 12.1 Head Office costs (13.4) (0.6) (14.0) 96.0 (5.1) 90.9 3 Operating profit 2013/14 2012/13 2012/13 Statutory operating profit is stated after crediting/(charging) the following: Half Half Full year year year unaudited unaudited audited £m £m £m - Restructuring costs (1.3) (7.5) (13.9) - Acquisition costs - (0.4) (0.4) - Net gain on US property disposal 1.5 - - - One-off pension gain - - 9.2 0.2 (7.9) (5.1) Due to their significance and nature, adjusted operating expenses and adjustedoperating profit have been disclosed on the face of the income statement whichexclude the items above. The net gain on US property disposal relates to the sale and relocation of theMDD North American Head Office. Restructuring costs incurred in the period primarily relate to decisions takento reflect re-alignment of focus on areas of greatest opportunity, driveefficiency of global operations and optimise performance. 4 Taxation The taxation charge represents an effective tax rate for the 2013/14 financialyear on profit before tax, preference dividends and adjusting items of 30.0%(2012/13: 27.5%). Including adjusting items, the effective rate of tax is30.3%, reflecting the impact of the net gain on the US property disposal. 5 Earnings per share Basic earnings per share is calculated by dividing the profit attributable toowners of the parent 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 and awards with anon-market based performance condition granted to employees where the exerciseprice is less than the average market price of the Company's ordinary sharesduring the period, and those shares with a market based performance conditionbased on the current estimate of the number of shares that will vest under theperformance criteria. Reconciliations of earnings and the weighted average number of ordinary sharesused in the calculations are set out below. 2013/14 2012/13 Half year unaudited Half year unaudited Diluted Basic Diluted Basic per per per per share share share share Earnings amount amount Earnings amount amount £m pence pence £m pence pence Earnings per share Profit attributable to owners of the parent 26.0 7.1 7.0 22.6 6.2 6.2 Restructuring costs 1.3 0.4 0.4 7.5 2.1 2.0 Tax attributable to restructuring costs (0.4) (0.1) (0.1) (2.1) (0.6) (0.6) Net gain on US property disposal (1.5) (0.4) (0.4) - - - Tax attributable to gain on US property disposal 0.6 0.1 0.1 - - - Acquisition costs - - - 0.4 0.1 0.1 Tax attributable to acquisition costs - - - (0.1) - - Adjusted profit attributable to owners of the parent 26.0 7.1 7.0 28.3 7.8 7.7 Number Number Weighted average number of shares 366,453,668 363,932,701 Dilutive effect of share options 2,853,364 3,317,041 Diluted weighted average number of shares 369,307,032 367,249,742 2012/13 Full year audited Basic Diluted per per share share Earnings amount amount £m pence pence Earnings per share Profit attributable to owners of the parent 49.6 13.6 13.5 Restructuring costs 13.9 3.8 3.8 Tax attributable to restructuring costs (3.9) (1.1) (1.1) Acquisition costs 0.4 0.1 0.1 Tax attributable to acquisition costs (0.1) - - One-off pension gain (9.2) (2.5) (2.5) Tax attributable to one-off pension gain 3.2 0.9 0.9 Adjusted profit attributable to owners of the parent 53.9 14.8 14.7 Number Weighted average number of shares 364,463,224 Dilutive effect of share options 3,019,704 Diluted weighted average number of shares 367,482,928 Adjusted earnings per share has been provided in order to facilitate year on year comparison. 6 Net financial liabilities 2013/14 2012/13 2012/13 4 August 29 July 3 February 2013 2013 2013 unaudited unaudited audited £m £m £m Cash and cash equivalents 46.1 123.7 131.6 Unsecured loans and overdrafts (228.7) (297.0) (296.4) Net financial liabilities before preference shares and derivatives (182.6) (173.3) (164.8) Preference shares (63.0) (62.2) (62.6) Derivative financial instruments (net) - 1.2 (2.2) Net financial liabilities (245.6) (234.3) (229.6) Net financial liabilities are analysed in the balance sheet as follows: Current assets Cash and cash equivalents 46.1 123.7 131.6 Derivative financial instruments 0.3 1.3 2.2 46.4 125.0 133.8 Current liabilities Other loans (1.9) (1.2) (1.7) 5.9% US dollar Guaranteed Senior Notes payable 2013 - (102.3) (101.1) Derivative financial instruments (0.3) (0.1) (4.4) (2.2) (103.6) (107.2) Non-current liabilities Bank loans (47.5) (17.7) (20.1) 3.0% US dollar Guaranteed Senior Notes payable 2016 (55.8) (54.7) (54.0) 5.2% US dollar Guaranteed Senior Notes payable 2017 (19.7) (19.4) (19.1) 4.4% US dollar Guaranteed Senior Notes payable 2018 (38.3) (37.5) (37.0) 4.8% US dollar Guaranteed Senior Notes payable 2021 (59.8) (58.6) (57.9) Other loans (5.7) (5.6) (5.5) Preference shares (63.0) (62.2) (62.6) (289.8) (255.7) (256.2) At 4 August 2013, the Group's syndicate bank facilities totalled £200 millionexpiring in October 2016. Based on these facilities, the headroom on bankborrowings at 4 August 2013 was £151.1 million. Fair value estimation The Group financial instruments are measured in the balance sheet at fairvalue. This requires disclosure of fair value measurements by level of thefollowing fair value measurement hierarchy: - Quoted prices (unadjusted) in active markets for identical assets orliabilities (Level 1); - Inputs other than quoted prices included within level 1 that are observedfor the asset or liability, either directly (that is, as prices) or indirectly(that is, derived from prices) (Level 2); - Inputs for the asset or liability that are not based on observable marketdata (that is, unobservable inputs) (Level 3). The following table presents the Group's assets and liabilities that aremeasured at fair value. At 4 August 2013 Level 1 Level 2 Level 3 Total £m £m £m balance Assets Derivatives used for hedging - 0.3 - 0.3 Liabilities Derivatives used for hedging - (0.3) - (0.3) Net liabilities - - - - At 3 February 2013 Level 1 Level 2 Level 3 Total £m £m £m balance Assets Derivatives used for hedging - 2.2 - 2.2 Liabilities Derivatives used for hedging - (4.4) - (4.4) Net liabilities - (2.2) - (2.2) Fair value of financial assets and liabilities The book value and fair value of the Group's borrowings and preference sharesare as follows: At 4 August 2013 the fair value of short term borrowings was £1.9 million (3February 2013: £105.1 million) compared to a book value of £1.9 million (3February 2013: £102.8 million). At 4 August 2013 the fair value of long termborrowings was £234.1 million (3 February 2013: £202.8 million) compared to abook value of £226.8 million (3 February 2013: £193.6 million). At 4 August2013 the fair value of preference shares was £62.0 million (3 February 2013:£59.2 million) compared to a book value of £73.4 million (3 February 2013:£73.0 million). The fair value of other financial assets and liabilities is approximate totheir carrying amount. 7 Pension commitments The valuation of the Group's defined benefit pension schemes in the UK and theUS has been updated at 4 August 2013 on an actuarial basis, applying currentdiscount and inflation rate assumptions and incorporating the market value ofassets at 4 August 2013. Remeasurements of post employment benefit obligationsin the half year of £1.2 million (£0.6 million net of associated deferred tax)have been taken through the Consolidated Statement of Comprehensive Income. 8 Exchange rates The principal average exchange rates used to translate the Group's overseasprofits were as follows: 2013/14 2012/13 2012/13 Half Half Full year year year US dollar 1.52 1.58 1.59 Euro 1.17 1.23 1.23 9 Ordinary dividend An interim dividend of 4.4p pence per share (2012/13: 4.4 pence per share)will be paid on 24 October 2013 to ordinary shareholders on the register atclose of business on 27 September 2013, absorbing £16.1 million ofshareholders' funds (2012/13 £16.1 million). 10 Related party transactions The Group has not entered into any material transactions with related partiesin the first six months of the period. Statement of Directors' Responsibilities The directors confirm that these condensed interim financial statements havebeen prepared in accordance with International Accounting Standard 34,`Interim Financial Reporting', as adopted by the European Union and that theinterim management report includes a fair review of the information requiredby DTR 4.2.7 and DTR 4.2.8, namely: - An indication of important events that have occurred during the first sixmonths and their impact on the condensed set of financial statements, and adescription of the principal risks and uncertainties for the remaining sixmonths of the financial year; and - Material related-party transactions in the first six months and any materialchanges in the related-party transactions described in the last annual report. The directors of Premier Farnell plc are listed in the Premier Farnell plcAnnual Report for 3 February 2013. A list of current directors is maintainedon the Premier Farnell plc website: www.premierfarnell.com. By order of the Board Laurence Bain Chief Executive Officer 19 September 2013 Mark Whiteling Chief Financial Officer 19 September 2013