13th Sep 2012 07:00
Premier Farnell plc 13 September 2012
Results for the Second Quarter and First Half of the 53 week
financial year ending 3 February 2013Key Financials £m Q2 12/13 Q2 11/12 Q2 H1 12/13 H1 11/12 H1 Continuing operations £m £m Growth(a) £m £m Growth(a) (unaudited)Total revenue 238.2 245.4 -1.6% 479.2 497.9 -3.3%Adjusted operating 24.1 27.5 -8.9% 50.1 56.0 -8.7%profit (b) (0.4) - - (7.9) 17.8 - 23.7 27.5 -10.4% 42.2 73.8 -42.1%Adjusting items (b) Total operating profitAdjusted profit before 18.8 23.0 -18.3% 39.7 47.1 -15.7%tax (b)Total profit before 18.4 23.0 -20.0% 31.8 64.9 -51.0%taxationAdjusted earnings per 3.7p 4.5p -17.8% 7.9p 9.3p -15.1%share (b)Basic earnings per 3.6p 4.5p -20.0% 6.2p 13.4p -53.7%shareInterim ordinary 4.4p 4.4p - 4.4p 4.4p -dividendFree cash flow (c) 11.2 3.4 33.0 10.0
Fourth consecutive quarter of stable sales per day in contracting
markets
Financial highlights
- Robust sales per day, stable for the fourth consecutive quarter, up 0.5% sequentially, outperforming a contracting market and down only 1.6% year on year. The stronger second quarter improves year on year sales decline from 5.0% in the first quarter to 3.3% for the first half.
- SIA data indicates industry contraction of 10.4% and 10.0% year on year in the 3 months to July for the Americas and Europe (respectively) with APAC at 1.4% growth.
- Second quarter gross margin of 38.5% was impacted by actions we took to outperform the market, cyclical pricing pressures and foreign exchange. First half gross margin was 39.2%.
- Adjusted second quarter overhead costs reduced to 28.4% of sales from 29.0% in Q1, giving second quarter and first half year on year reductions of £2.1m and £6.6m (respectively) at constant exchange rates.
- Second quarter adjusted operating profit was £24.1m, with the year on year percentage decline in line with that achieved in the first quarter, giving first half adjusted operating profit of £50.1m. Foreign exchange movements reduced second quarter adjusted operating profit by £1.1m compared with the prior year.
- Operating cash generation in the first half of 131.5% (e) of operating profit, up from 94.9% in the prior year.
- Board have approved an interim dividend of 4.4p per share (2011/12: 4.4p).
Strategic highlights
- Our active customer base exited the second quarter up 1% on the prior year,excluding Raspberry Pi, with both EDE and MRO customer segments growing at asimilar rate.
- Global MDD eCommerce penetration increased by 1.4 percentage points from Q4 2011/12 to the second quarter at 56.7% and exited at 57.7%.
- element14 Community received 1.7 million visits in the quarter maintaining strong progress following the peak arising from the Q1 launch of Raspberry Pi, with registered users increasing by more than 4,000 per month and now approximately 80,000 community interactions each week.
- Sales to international growth markets represented 22.5% of second quarter MDD sales with emerging markets increasing to 8.6% of the total.
- Raspberry Pi sales in the quarter of £3.9m, ahead of expectation, 90% of which was to 118,000 new customers.
- Our multi channel sales transformation continues with our Krakow contact centre on track and on budget.
- Embest acquisition in the quarter extends our service offering through embedded system design capabilities.
Commenting on the results, Laurence Bain, GroupChief Executive, said:`'In very challenging global markets we continue to show resilience and makestrategic progress. At a global level we have now had four consecutivequarters of stable sales per day within a market that continued to decline.With our customer base increasing further in the second quarter and our yearon year sales performance improving from Q1 to Q2 in Europe and the Americas -the business continues to perform well on a comparative basis. The secondquarter gross margin percentage was consistent with actions we have taken tooutperform the market and the current market circumstances. As markets recoverwe anticipate our gross margin returning to our longer term average range. Inchallenging markets we once again demonstrated our ability to manage our coststo maintain overall return on sales above 10%.Despite the global markets remaining uncertain and with very limited forwardorder visibility, I am confident that the Group is well positioned to leverageopportunities in our target markets. In August we were encouraged by thereturn to year on year growth of 0.4%. We remain cautious, but by providingour customers with unparalleled service and with continued focus on optimisingshare gains, gross margin, costs and cash, and with easier comparators inaddition to the benefit of a 53rd week we continue to expect growth to returnin the second half.''
For further information, contact:
Laurence Bain, Chief Executive Premier Farnell plc +44 (0) 20 7851 4100Officer Nicholas Cadbury, ChiefFinancial Officer Thomas Churchill, InvestorRelationsRichard Mountain FTI Consulting +44 (0) 20 7269 7291 Premier Farnell's announcements and presentationsare published at www.premierfarnell.com together with business information andlinks to all other Group web sites.The results for the third quarter of the 53 weekfinancial year ending 3 February 2013 will be announced on 6 December 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) Current year adjusted operating profit, profit before tax, andearnings per share in the table above exclude restructuring costs of £7.5m (inthe first quarter) and acquisition costs of £0.4m related to the purchase ofthe entire share capital of Shenzhen Embest Technology Co Ltd (Embest) (in thesecond quarter). In the prior year, adjusted operating profit, profit beforetax, and earnings per share, excluded the gain on sale of TPC Wire & Cable(pre-tax gain of £17.8m).(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 excludesnet proceeds from the sale of businesses.
(d) SIA data from Semiconductor Industry Association publication, PMI data from relevant published source in each market.
(e) Operating cash flow (before capital expenditure) as a percentage of adjusted operating profit.
Premier Farnell plcDivisional AnalysisRevenue Q2 12/13 Q2 11/12 H1 12/13 H1 11/12 £m £m Q2 growth £m £m H1
growth
MDD Division UK 29.8 30.4 -0.1% 60.0 62.3 -3.6% Rest of Europe 57.0 65.4 -5.2% 119.9 135.4 -6.4% APAC(1) 16.8 17.3 -1.6% 33.3 33.1 -0.7% Europe & APAC 103.6 113.1 -3.3% 213.2 230.8 -4.8% Americas 90.1 92.0 -4.1% 180.1 188.3 -5.9% MDD Other 26.3 24.5 7.7% 51.5 48.0 6.5%MDD Total 220.0 229.6 -2.5% 444.8 467.1 -4.1% 18.2 15.8 11.2% 34.4 30.8 8.4%IPD 238.2 245.4 -1.6% 479.2 497.9 -3.3%Group
Adjusted Operating Profit (ROS)
Q2 12/13 Q2 11/12 H1 12/13 H1 11/12 £m £m Q2 growth £m £m H1
growth
MDD DivisionEurope & APAC (2) 15.2 18.4 -10.6% 33.4 37.8 -7.6% 14.7% 16.3% 15.7% 16.4% Americas(3) 6.3 7.5 -18.6% 13.2 16.3 -20.8% 7.0% 8.2% 7.3% 8.7% MDD Other 2.8 2.3 21.5% 4.9 4.2 16.4% 10.6% 9.4% 9.5% 8.8%MDD Total(4) 24.3 28.2 -10.1% 51.5 58.3 -9.7% 11.0% 12.3% 11.6% 12.5%IPD (5) 3.2 2.4 27.5% 5.6 4.6 17.7% 17.6% 15.2% 16.3% 14.9%
Head office -3.4 -3.1 9.5% -7.0 -6.9 1.2%
Group 24.1 27.5 -8.9% 50.1 56.0 -8.7% 10.1% 11.2% 10.5% 11.2%Notes:
(1) Current year includes results of Embest post acquisition on 26 June 2012
(2) Current year adjusted to exclude impact of £6.9m restructuring costs (Q1) and £0.4m of acquisition costs (Q2)
(3) Current year adjusted to exclude impact of £0.6m restructuring costs (Q1)
(4) Current year adjusted to exclude impact of £7.5m restructuring costs (Q1) and £0.4m of acquisition costs (Q2)
(5) Prior year adjusted to exclude impact of gain on sale £17.8m of TPC Wire &Cable Results for the Second Quarter and First Half of the 53 week financial year ending 3 February 2013Premier Farnell, the leading multi-channel, highservice distributor supporting millions of engineers and purchasingprofessionals globally, announces its results for the second quarter of the 53week financial year ending 3 February 2013.
Introduction
In very challenging global markets we continue toshow resilience and make strategic progress through increased focus on thecustomer and through investment in, and delivery of the benefits from, ourmulti-channel sales proposition. With year on year and sequential GDP growthand manufacturing PMIs on a downward trend from the first quarter of 2012 intothe second quarter in most global markets, the underlying economic environmentin which we are operating remains difficult. In our largest markets thesemiconductor industry is contracting at a greater pace than the underlyingeconomies with SIA data showing a decline of 10.4% in the Americas for the 3months to July and a decline of 10.0% in Europe for the same period. Despitethe more challenging environment our adjusted operating profit decline in thesecond quarter of 8.9% year on year is stable compared with the 8.6% declinein the first quarter. We continue to be focused on meeting our customers'needs, taking market share, developing our customer base, controlling ourcosts and margin, generating cash to maintain dividends and ensuring we arepositioned optimally for market recovery. Through this focus we havemaintained global sales per day for four quarters and we will continue tofocus on the delivery of each quarter's results as well as our longer termstrategy.
Sales
At Group level second quarter sales per day werestable from the first quarter with a sequential year on year improvement from-5.0% in the first quarter to -1.6% in the quarter at constant exchange rates.The average exchange rate for the US dollaragainst sterling was $1.56 (2011/12: $1.62) and the average exchange rate forthe Euro against sterling was Euro 1.26 (2011/12: Euro 1.14).Within our MDD Division, against European SIA andDMASS data showing a year on year decline of 10.0% and 14.7%, respectively,and Eurozone manufacturing PMIs falling further to 44.0 in July, Europe, asour most strategically advanced region, has again significantly outperformedits markets with year on year sales decline halving from 7.3% in the firstquarter to 3.6% in the second.Despite GDP growth in the US remaining positivein the second quarter SIA data for the Americas has worsened significantlyfrom a decline of 0.4% for the three months to April to a decline of 10.4% forthe three months to July. Against this volatile background our MDD Americasbusiness has maintained sales per day sequentially from the first quarter andhas improved on a year on year basis from a first quarter decline of 7.6% to4.1% in the second quarter.Asia Pacific's second quarter sales per day werestable sequentially from the first quarter although down by 1.6% on a strongsecond quarter last year. Each market within APAC was stable against the firstquarter against a backdrop of falling PMIs that are below 50 in every marketexcept India and Indonesia.
Following the completion of the formal acquisition process on 26 June, Embest contributed £0.4m of sales in the second quarter.
Second quarter sales per day from Emerging Markets were stable year on year and sequentially and now represent 8.6% of global MDD sales, up from 8.3% in the second quarter last year.
Within Other Distribution Businesses secondquarter sales at CPC grew by 11.2% year on year, an increase from 5.8% in thefirst quarter, maintaining the strong performance of last year. Growthcontinues to be driven by web focused customer acquisition and theintroduction of new products sourced globally. Web sales grew by 13.8% in thequarter.In challenging market conditions MCM maintainedstable sales per day from the first quarter although this represented a yearon year decline of 2.2%. Longer term development is being enhanced throughincreased collaboration with CPC. This is being achieved through increasedfocus on the web, targeted product segments and new product introductions.In the Industrial Products Division domestic market conditions havecontinued to be challenging for Akron Brass but are showing early signs ofstabilising. It has a significant share of its home market in North Americaand is continuing to give focus to the development of international marketswhilst broadening its product range and reaching into new industrial marketsat home and abroad. Sales per day increased by 11.2% year on year, up from5.5% in the first quarter. International growth and continued increase indomestic US market share provide a strong foundation for further progress asUS markets recover and international sales continue to grow.
Gross margin
The gross margin achieved by our core MDDbusinesses continues to reflect the value our customers obtain from ourproposition. In the second quarter our gross margin at Group level was 38.5%compared to our long term average of 39.6%. Margin was impacted by decisionswe took to outperform the market by not walking away from strategic salesopportunities that did not meet our normal margin expectations, and bycyclical pricing pressures. In addition the successful launch of the lowermargin but strategic Raspberry Pi product (-0.3% vs. Q1), the relativestrength of sales on our MDD Other businesses (-0.1% vs. Q1) and FX movements(-0.2% vs. Q1) impacted gross margin. First half gross margin at 39.2% waswithin 0.4% of our long term average.The maintenance of gross margin stability withina range around our long term average that will optimize overall performanceacross the economic cycle continues to be an area of focus and commitment. Weanticipate our gross margin returning to within our longer term range asmarkets recover.
Costs
In uncertain sales markets the Group continues to actively manage its cost base both strategically, as the achievement of key metrics progresses, particularly progress to the web, and tactically, in response to sales volumes.
Adjusted net operating expenses reduced by £2.5m(£2.1m at constant exchange rates) compared to the prior year and reduced to28.4% of sales from 29.0% in the first quarter.We will continue to manage costs as we transitionto the web and shape our business to the market environment. We will invest inour strategy, particularly in our customers' web experience, with the launchof a new web platform which is on track for a phased launch to commence laterin the year, and in our people. Whilst our focus on cost efficiency remainsabsolute, we anticipate that costs will increase in the second half of theyear as growth driven incentives return and expenditure on our web platformand data management solutions increase.In the quarter we concluded the previouslyannounced acquisition of Embest resulting in one-off costs associated with theacquisition of £0.4m being charged to the income statement. These costs,combined with the £7.5m of one-off costs arising primarily from theestablishment of our Krakow contact centre that were charged in the firstquarter, result in exceptional costs of £7.9m in the first half.In the prior year, first half total net operatingexpenses included the pre-tax gain in the first quarter on the sale of the
TPCbusiness of £17.8m.Return on SalesFocus on the implementation of our strategy,gross margin and cost management has allowed the Group to deliver strongreturn on sales throughout the period since our strategy began. In the secondquarter, active management of costs has continued and has contributed to thedelivery of a stable second quarter year on year decline in adjusted operatingprofit of 8.9%, despite markets worsening from the first quarter.Adjusted operating profit in the quarter was£24.1m (2011/12: £27.5m), producing an operating margin of 10.1% compared with11.2% in the second quarter of the prior year, and 10.8% in the previousquarter. £1.1m of the reduction in operating profit from the prior yearresulted from exchange rate movement.In a declining sales environment our MDD Americasbusiness saw a reduced year on year decline in return on sales of 1.2% givinga return for the quarter of 7.0%. The strategic metrics of our North Americanbusiness continue to progress and the business is now well positioned torespond to recovery in its underlying markets.With continued focus on costs and customeracquisition Europe and Asia Pacific achieved a return on sales in the secondquarter of 14.7% despite being impacted by GBP/ Euro currency movements andthe launch of Raspberry Pi. Whilst short term returns have been influenced byeconomic conditions and longer term strategic initiatives in both regions, thestrategic positioning in these regions continues to progress and with oursignificant infrastructure investments in Asia Pacific in recent years, thereis confidence that we will benefit from market improvements and market sharegrowth.Cash Flow/Balance SheetSecond quarter cash conversion of adjustedoperating profit into adjusted operating cash flow increased to 131.5%(2011/12: 94.9%) giving 123.8% for the first half. This effective managementof working capital allowed first half positive net cash flow (after dividends,reorganisation costs and acquisition purchase) of £6.0m reducing net financialliabilities (including preference shares) to £234.3m. This represents a ratioof net debt to EBITDA of 1.95. The impact of exchange rates in the period wasto increase net financial liabilities by £1.5m in the first half, principallyin relation to our US$ denominated private placement loan notes.In the second quarter the Group's inventorylevels increased by £12.2m (at constant exchange rates) as we took action toalign our inventory with the profile of our sales and to increase focus onfaster moving items. This increase will reverse over the remainder of the yearas slower moving items are removed. This inventory investment and the timingof the period end in relation to our standard payment cycle resulted in anincrease in trade payables of £10.8m (£9.7m at constant exchange rates).In the quarter movement in discount ratesimpacted on the actuarial valuation of the Group's US defined benefit pensionscheme resulting in an increase in the valuation of retirement and otherpost-employment benefits net obligations to £57.6m from £47.3m at the end ofthe first quarter.Premier Farnell's financial position remainsrobust with good liquidity and strong free cash flow. At the quarter end, ourheadroom on bank borrowings was £180m under facilities in place until October2016. This headroom, combined with our net cash position of £123.7m, gives
usa secure funding position.Foreign Currency ImpactA 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.There was a detrimental impact on adjustedoperating profit of £1.1m from the translation of overseas results comparedwith the prior year.Finance CostsNet finance costs in the second quarter were£5.3m (2011/12: £4.5m). This comprises net interest payable of £4.2m (2011/12:£3.4m), which was covered 5.7 times by adjusted operating profit, and a netcharge of £1.1m (2011/12: £1.1m) in respect of the Company's convertiblepreference shares.Finance costs (including preference shares) would be expected toreduce by approximately £1.0m per quarter from Q2 levels on repayment of theGroup's 2013 USPP Notes. These notes are due for repayment in July 2013. Earlyrepayment this year would attract a one-off charge that would offset theongoing benefit in the current year.
Profit Before Tax
Adjusted profit before tax in the second quarterwas £18.8m (2011/12: £23.0m), a decrease of 18.3% on the previous year, and£39.7m for the first half. (2011/12: £47.1m)Total profit before tax (including one-off items)in the quarter was £18.4m (2011/12: £23.0m) and £31.8m for the first half.(2011/12: £64.9m)Tax
The effective tax rate of the Group is 27.5% of profit before tax after adding back preference dividends charged within finance costs. The underlying effective tax rate of 27.5% is unchanged from the prior year.
Earnings Per Share
Adjusted earnings per share for the secondquarter are 3.7p (Q1 2011/12: 4.5p). Basic earnings per share (after the netimpact of one-off items) are 3.6p (Q1 2011/12: 4.5p). Adjusted earnings pershare for the first half are 7.9p (H1 2011/12: 9.3p). Basic earnings per share(after the net impact of one-off items) are 6.2p (H1 2011/12: 13.4p).
Dividend
The Board recommend payment of an interimdividend of 4.4p (2011/12: 4.4p).
Strategy
Whilst global economic and market conditions remain uncertain andchallenging we remain focused on managing the implementation of our strategictransformation. Our strategy has delivered industry leading returns throughoutits implementation - and as we increase focus on meeting the needs of ourcustomers and investing in and delivering the benefits from our multi channelsales strategy we expect this to continue.We are driving the implementation of our strategy aggressively inorder to deliver the strongest possible position to optimise our performanceonce markets recover. Through focus on delivery of a product proposition thatprovides customers in our targeted segments with an end to end service thatthey know can meet all of their requirements we are targeting increased marketshare gains and growth.The strengthening of our global multi channel sales strategycontinues with our European contact centre in Krakow on plan and alreadydelivering the expected benefits in customer service and marketing. Later inthe year we will commence the phased roll out of our new web platform whichwill deliver benefits to our customers and improve operational efficiencyfurther. We continue to make progress towards our goal of being a digitalenterprise with eCommerce penetration in the second quarter of 56.7%, up 0.6%on the first quarter and exiting the quarter at 57.7%.In the first quarter we participated in the launch of Raspberry Pi.The first significant sales of this product were in the second quarter andexceeded our expectations at £3.9m. Whilst this had the expected impact on ourgross margin this product attracted 118,000 new customers and contributed to afurther 1.7m visits to our community websites in the second quarter on top ofthe 2.7m visits in the first quarter. The lower margin impact of Raspberry Piwill diminish as we continue to add a range of higher margin associatedproducts.In the quarter the company completed the acquisition of Embest, aprovider of embedded development tools. This together with our element14community, our unique on line engineer design portal, the Knode, and our 40+transactional sites now provide true solution partner support to our customersand our suppliers.
Through a focus on the fundamentals of high service distribution whilst further developing our global proposition to EDE and strategic MRO customers, we further increased our active customer base by 1% excluding Raspberry Pi overall in the quarter demonstrating continued market share gains in our targeted market segments.
Outlook
In very challenging global markets we continue to show resilience and makestrategic progress. At a global level we have now had four consecutivequarters of stable sales per day within a market that continued to decline.With our customer base increasing further in the second quarter and our yearon year sales performance improving from Q1 to Q2 in Europe and the Americas -the business continues to perform well on a comparative basis. The secondquarter gross margin percentage was consistent with actions we have taken tooutperform the market and the current market circumstances. As markets recoverwe anticipate our gross margin returning to our longer term average range. Inchallenging markets we once again demonstrated our ability to manage our coststo maintain overall return on sales above 10%.Despite the global markets remaining uncertain and with very limited forwardorder visibility, I am confident that the Group is well positioned to leverageopportunities in our target markets. In August we were encouraged by thereturn to year on year growth of 0.4%. We remain cautious, but by providingour customers with unparalleled service and with continued focus on optimisingshare gains, gross margin, costs and cash, and with easier comparators inaddition to the benefit of a 53rd week we continue to expect growth to returnin the second half.Risk and Uncertainties
The principal risks and uncertainties facing the Group for the remaining six months of the year and the ways in which they are mitigated are unchanged since they were described in the Company's 2012 Annual Report and Accounts on pages 62 to 64. This includes the risks associated with uncertainty over the Eurozone economy and the currency and other risks associated.
.
Three Year Success Metrics - Our performance against our success metrics is as follows:
Key Performance Indicators Goal Achieved in Q2 Sales per day growth
6-8% -1.6%Gross margin % Stability 38.5%Return on sales % 12%-15% 10.1% (MDD 11.0%)Return on net operating assets % >30% 35.6%Working capital as a % of sales
Condensed Consolidated Income Statement
For the second quarter and half year ended 29 July 2012
2012/13 2011/12 2012/13 2011/12 2011/12 Second Second First First Full quarter quarter half half year unaudited
unaudited unaudited unaudited audited
Notes £m £m £m £m £m Continuing operationsRevenue 4 238.2 245.4 479.2 497.9 973.1Cost of sales (146.4) (147.7) (291.4) (297.4) (588.1)Gross profit 91.8 97.7 187.8 200.5 385.0Net operating expenses- adjusted operating expenses (67.7) (70.2) (137.7) (144.5) (277.7)- adjusting items 5 (0.4) - (7.9) 17.8 16.1Total net operating expenses (68.1) (70.2) (145.6) (126.7) (261.6)Operating profit- adjusted operating profit 5 24.1 27.5 50.1 56.0 107.3- adjusting items 5 (0.4) - (7.9) 17.8 16.1Total operating profit 5 23.7
27.5 42.2 73.8 123.4Finance income 0.2 - 0.3 - 0.1Finance costs- interest payable (4.4) (3.4) (8.5) (6.7) (14.6)
- preference dividends (0.9) (0.9) (1.8) (1.8) (3.5)- premium on redemption of preference shares (0.2) (0.2) (0.4) (0.4) (0.8)Total finance costs (5.5) (4.5) (10.7) (8.9) (18.9)Profit before taxation 18.4 23.0 31.8 64.9 104.6Taxation 6 (5.3) (6.5) (9.2) (16.2) (27.7)Profit for the period attributable toordinary shareholders 13.1 16.5 22.6 48.7 76.9 Earnings per share 7Basic 3.6p 4.5p 6.2p 13.4p 21.2pDiluted 3.6p 4.5p 6.2p 13.2p 20.9p Ordinary dividendsInterim - proposed 11 4.4p 4.4p 4.4pFinal - proposed 6.0pPaid 6.0p 6.0p 10.4p
Impact on shareholders' funds (£m) 21.8 21.8 37.8
Condensed Consolidated Statement of Comprehensive Income
For the second quarter and half year ended 29 July 2012
2012/13 2011/12 2012/13 2011/12 2011/12 Second Second First First Full quarter quarter half half year unaudited
unaudited unaudited unaudited audited
£m
£m £m £m £m
Profit for the period attributable toordinary shareholders 13.1 16.5 22.6 48.7 76.9 Net exchange adjustments (0.8) 0.9 (1.8) 0.1 0.4Recycling of cumulative translation adjustmentson disposal of subsidiary undertaking - - - (0.8) (0.8)Actuarial losses on pensions and otherpost-retirement obligations (10.0) (4.5) (14.7) (4.5) (10.0)Deferred tax credit on actuarial losses onpensions and other post retirement obligations 3.3 1.3 4.5 1.3 2.5Deferred tax charge on share based payments - - - - (2.3)Net fair value gains/(losses) on cash flow hedges 1.1 1.4 (0.5) (0.4) 2.2Other comprehensive income/(expense) for the period (6.4)
(0.9) (12.5) (4.3) (8.0)
Total comprehensive income for the periodattributable to ordinary shareholders 6.7
15.6 10.1 44.4 68.9
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Condensed Consolidated Balance Sheet
As at 29 July 2012 29 July 31 July 29 January 2012 2011 2012 unaudited unaudited audited Notes £m £m £mASSETSNon-current assetsGoodwill 37.4 34.6 34.3Other intangible assets 28.2 27.9 26.9
Property, plant and equipment 56.1
52.5 57.4Deferred tax assets 11.8 15.2 10.5Total non-current assets 133.5 130.2 129.1 Current assetsInventories 231.0 225.2 214.5Financial assets 8 1.3 - 2.3Trade and other receivables 140.3 143.6 139.5Current tax receivable 1.0 - 1.0Cash and cash equivalents 8 123.7 50.6 116.9Total current assets 497.3 419.4 474.2 LIABILITIESCurrent liabilitiesFinancial liabilities 8 (103.6) (1.8) (1.3)Trade and other payables (137.6) (120.4) (113.4)Current tax payable (15.1) (26.2) (15.6)Total current liabilities (256.3) (148.4) (130.3) Net current assets 241.0 271.0 343.9 Non-current liabilitiesFinancial liabilities 8 (255.7) (300.1) (355.0)
Retirement and other post-employment benefits (57.6)
(38.9) (43.8)Deferred tax liabilities (3.2) (3.5) (6.4)Total non-current liabilities (316.5) (342.5) (405.2) NET ASSETS 58.0 58.7 67.8 EQUITYOrdinary shares 18.5 18.5 18.5
Equity element of preference shares 10.4
10.4 10.4Share premium 31.7 31.1 31.1Capital redemption reserve 4.4 4.4 4.4Hedging reserve 0.9 (1.2) 1.4
Cumulative translation reserve 17.8
19.3 19.6Retained earnings (25.7) (23.8) (17.6)TOTAL EQUITY 58.0 58.7 67.8
Consolidated Statement of changes in Equity
For the second quarter and half year ended 29 July 2012
2012/13 2011/12 2011/12 First First Full half half year unaudited unaudited audited £m £m £m
Total equity at beginning of period 67.8
38.4 38.4 Profit for the period 22.6 48.7 76.9Other comprehensive expense (12.5) (4.3) (8.0)Total comprehensive income 10.1 44.4 68.9 Transactions with owners:Ordinary dividends paid (21.8) (21.8) (37.8)
Ordinary share capital subscribed 0.6
2.7 2.7Purchase of ordinary shares - (5.8) (5.8)Share-based payments 1.3 0.8 1.4
Total transactions with owners (19.9)
(24.1) (39.5)
Total equity at end of period 58.0
58.7 67.8
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Condensed Consolidated Statement of Cash Flows
For the second quarter and half year ended 29 July 2012
2012/13 2011/12 2012/13 2011/12 2011/12 Second Second First First Full quarter quarter half half year
unaudited unaudited unaudited unaudited audited
Notes
£m £m £m £m £m
Cash flows from operating activitiesOperating profit 5 23.7 27.5 42.2 73.8 123.4Adjusting items:- net income statement impact 5 0.4 - 7.9 (17.8) (16.1)- cash impact (2.2) - (3.1) - (2.2)Non cash impact of adjusting items (1.8) - 4.8 (17.8) (18.3)Depreciation and amortisation 4.6 4.1 9.2 8.7 18.2Changes in working capital 3.2 (4.3) 2.7 (20.5) (13.6)Additional funding for post retirementdefined benefit plans (0.7) (0.7) (1.5) (1.5) (3.4)Other non-cash movements 0.5 (0.5) 1.5 0.8 1.7Total cash generated from operations
29.5 26.1 58.9 43.5 108.0Interest received 0.2 - 0.3 - 0.1Interest paid (6.4) (4.5) (7.8) (5.9) (11.0)Dividends paid on preference shares (1.8) (1.8) (1.8) (1.8) (3.5)Taxation paid (7.1) (10.8) (9.4) (14.8) (26.9)Net cash generated fromoperating activities 14.4 9.0 40.2 21.0 66.7 Cash flows from investing activitiesNet inflow from disposal of businesses(net of tax paid) - (0.6) - 24.9 23.2Net outflow from purchase of business (2.7) - (2.7) - -(Purchase of)/proceeds from disposalof property, plant and equipment (1.9) 0.7 (3.0) (2.5) (9.1)Purchase of intangible assets(computer software) (3.5) (6.3) (7.3) (8.5) (12.6)Net cash (used in)/generatedfrom investing activities
(8.1) (6.2) (13.0) 13.9 1.5
Cash flows from financing activitiesPurchase of ordinary shares
- (5.8) - (5.8) (5.8)Issue of ordinary shares 0.5 2.2 0.6 2.7 2.7New borrowings - 27.3 0.2 27.3 174.6Repayment of borrowings - (6.7) - (18.7) (118.9)Dividends paid to ordinary shareholders (21.8) (21.8) (21.8) (21.8) (37.8)Net cash (used in)/generated fromfinancing activities
(21.3) (4.8) (21.0) (16.3) 14.8
Net (decrease)/increase in cash, cashequivalents and bank overdrafts (15.0) (2.0) 6.2 18.6 83.0Cash, cash equivalents and bankoverdrafts at beginning of period 136.7 53.7 116.9 33.4 33.4Exchange gains/(losses) 2.0 (1.1) 0.6 (1.4) 0.5Cash, cash equivalents and bankoverdrafts at end of period
123.7 50.6 123.7 50.6 116.9
Reconciliation of net financial liabilitiesNet financial liabilities at beginning of period (237.1) (262.9) (262.9)Net increase in cash, cash equivalentsand bank overdrafts 6.2 18.6 83.0Increase in debt (0.2) (8.6) (55.7)Premium on redemption of preference shares (0.4) (0.4) (0.8)Derivative financial instruments (0.8) (0.2) 3.2Amortisation of arrangement fees (0.5) (1.0) (2.1)Exchange movement (1.5) 3.2 (1.8)Net financial liabilities at end of period 8 (234.3) (251.3) (237.1) The accompanying notes form an integral part of this unaudited condensed consolidatedfinancial information.Notes General information
Premier Farnell plc (the "Company") is a company incorporated and domiciled in the UK and is listed on the LondonStock Exchange. The address of the Company's registered office is Farnell House, Forge Lane, Leeds, LS12 2NE,England. The Company's registered number is 876412.
This condensed consolidated financial information was approved for issue on 13 September 2012.
This condensed consolidated financial information does not comprise statutory accounts within the meaning ofSection 498 of the Companies Act 2006. Statutory accounts for the financial year ended 29 January 2012, wereapproved by the board of directors on 19 April 2012 and delivered to the Registrar of Companies. The report ofthe auditors on those accounts was unqualified and did not contain any statement under Section 237 of theCompanies Act 1985. Copies of the Company's 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. Basis of preparationThis condensed consolidated financial information for the second quarter and half year ended 29 July 2012, hasbeen prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority andwith IAS 34, Interim Financial Reporting, as adopted by the European Union. The condensed consolidated financialinformation in this report has been prepared in accordance with International Financial Reporting Standards(IFRSs) as adopted by the European Union, and applying the accounting policies disclosed in the Group's 2012Annual Report and Accounts on pages 122 to 125. The significant judgements made by management in applying theGroup's accounting policies and the key sources of estimation uncertainty were the same as those that applied tothe consolidated financial statements for the year ended 29 January 2012.
The interim financial information has not been audited or reviewed by auditors pursuant to the Auditing Practices Board's guidance on Review of Interim Financial Information.
There are no new IFRSs or IFRICs that are effective for the first time in the current financial year which havehad a significant impact upon the Group.Going concernThe Group meets its day-to-day working capital requirements through its banking facilities (see note 8 for thecurrent funding position). The Group's business activities and financial position, the factors likely to affectits future development and performance, and its objectives and policies in managing financial risks to which itis exposed are disclosed in the Group's 2012 Annual Report and Accounts on pages 62 to 64. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources tocontinue in operational existence for the foreseeable future. The Group therefore continues to adopt the goingconcern basis in preparing its condensed interim financial statements.AcquisitionOn 26 June 2012, the Group completed its acquisition of the entire issued share capital of Shenzhen EmbestTechnology Co Ltd (Embest), a leading provider of embedded system development boards and tools, as well as designengineering services.Of the total consideration of £3.4 million, £0.2 million relates to the provisional fair value of net assetsacquired and £3.2 million relates to goodwill attributable to the future profitability of the business. The totalconsideration includes deferred consideration of £0.8 million dependent on the performance of the acquiredbusiness over the next two years.In accordance with IFRS 3 Business Combinations, acquisition costs of £0.4 million have been charged toadministrative expenses and shown as an adjusting item in the consolidated income statement for the period.Both the trading results of Embest for the period since acquisition, and also for the period since the start ofthe financial year had the acquisition taken place on that date, are not material to the Group's results. Segment information 2012/13 Second 2011/12 Second quarter unaudited quarter unaudited Adjusting Adjusting Before items After Before items After adjusting adjusting adjusting adjusting items (note 5) items items (note 5) items £m £m £m £m £m £m RevenueMarketing andDistribution Division Americas 90.1 - 90.1 92.0 - 92.0 Europe and Asia Pacific 103.6 - 103.6 113.1 - 113.1 Other Distribution Businesses 26.3 - 26.3 24.5 - 24.5Total Marketing andDistribution Division 220.0 - 220.0 229.6 - 229.6Industrial ProductsDivision 18.2 - 18.2 15.8 - 15.8 238.2 - 238.2 245.4 - 245.4 Operating profitMarketing andDistribution Division Americas 6.3 - 6.3 7.5 - 7.5 Europe and Asia Pacific 15.2 (0.4) 14.8 18.4 - 18.4 Other Distribution Businesses 2.8 - 2.8 2.3 - 2.3Total Marketing andDistribution Division 24.3 (0.4) 23.9 28.2 - 28.2Industrial ProductsDivision 3.2 - 3.2 2.4 - 2.4Head Officecosts (3.4) - (3.4) (3.1) - (3.1) 24.1 (0.4) 23.7 27.5 - 27.5 2012/13 First 2011/12 First half unaudited half unaudited Adjusting Adjusting Before items After Before items After adjusting adjusting adjusting adjusting items (note 5) items items (note 5) items £m £m £m £m £m £m RevenueMarketing andDistribution Division Americas 180.1 - 180.1 188.3 - 188.3 Europe and Asia Pacific 213.2 - 213.2 230.8 - 230.8 Other Distribution Businesses 51.5 - 51.5 48.0 - 48.0Total Marketing andDistribution Division 444.8 - 444.8 467.1 - 467.1Industrial ProductsDivision 34.4 - 34.4 30.8 - 30.8 479.2 - 479.2 497.9 - 497.9 Operating profitMarketing andDistribution Division Americas 13.2 (0.6) 12.6 16.3 - 16.3 Europe and Asia Pacific 33.4 (7.3) 26.1 37.8 - 37.8 Other Distribution Businesses 4.9 - 4.9 4.2 - 4.2Total Marketing andDistribution Division 51.5 (7.9) 43.6 58.3 - 58.3Industrial ProductsDivision 5.6 - 5.6 4.6 17.8 22.4Head Office costs (7.0) - (7.0) (6.9) - (6.9) 50.1 (7.9) 42.2 56.0 17.8 73.8
Segment information (continued) 2011/12 Full year audited Adjusting Before items After adjusting adjusting items (note 5) items £m £m £m RevenueMarketing andDistribution Division Americas 369.1 - 369.1 Europe and Asia Pacific 443.1 - 443.1 Other Distribution Businesses 99.4 - 99.4Total Marketing andDistribution Division 911.6 - 911.6Industrial ProductsDivision 61.5 - 61.5 973.1 - 973.1 Operating profitMarketing andDistribution Division Americas 31.3 0.8 32.1 Europe and Asia Pacific 71.0 (2.2) 68.8 Other Distribution Businesses 9.3 (0.1) 9.2Total Marketing andDistribution Division 111.6 (1.5) 110.1Industrial ProductsDivision 9.5 17.8 27.3Head Office costs (13.8) (0.2) (14.0) 107.3 16.1 123.4 29 July 31 July 29 January 2012 2011 2012 unaudited unaudited audited £m £m £mSegment assetsMarketing andDistribution Division Americas 157.6 153.6 149.9 Europe and Asia Pacific 247.7 250.4 239.1 Other Distribution Businesses 44.5 40.5 42.9Total Marketing andDistribution Division
449.8 444.5 431.9Industrial ProductsDivision 41.6 38.1 39.6Head Office 1.6 1.2 1.1Segment assets 493.0 483.8 472.6Unallocated assets:Cash and cashequivalents 123.7 50.6 116.9Deferred tax assets 11.8 15.2 10.5Financial assets 1.3 - 2.3Current tax receivable 1.0 - 1.0Total assets 630.8 549.6 603.3 Operating profit 2012/13 2011/12 2012/13 2011/12 2011/12Statutory operating profitis stated after (charging)/crediting the following: Second Second
First First Full
quarter quarter
half half year
unaudited unaudited
unaudited unaudited audited
£m £m £m £m £m - Restructuring costs - - (7.5) - (2.8)- Acquisition costs (0.4) - (0.4) - -- Gains on disposal ofbusinesses - - - 17.8 18.9 (0.4) - (7.9) 17.8 16.1 Due to their significance and nature, adjusted operating expenses and adjusted operating profit has been disclosed onthe face of the income statement which exclude these items above.TaxationThe taxation charge represents an effective tax rate for the 2012/13 financial year on profit before tax and preferencedividends of 27.5% (2011/12: 27.5% before tax on gains from business disposals). Earnings per shareBasic earnings per share is calculated by dividing the profit attributable to ordinary shareholders for the period bythe weighted average number of ordinary shares in issue during the period, excluding those shares held by the PremierFarnell Executive Trust. For diluted earnings per share, the weighted average number of ordinary shares in issue isadjusted to assume issue of all dilutive potential ordinary shares, being those share options and awards with anon-market based performance condition granted to employees where the exercise price is less than the average marketprice of the Company's ordinary shares during the period, and those shares with a market based performance conditionbased 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 outbelow. 2012/13 2011/12 First half unaudited First half unaudited Basic Diluted Basic Diluted per per per per share share share share Earnings amount amount Earnings amount amount £m pence pence £m pence penceEarnings per shareProfit attributable toordinary shareholders 22.6 6.2 6.2 48.7 13.4 13.2Restructuring costs 7.9 2.2 2.1 - - -Tax attributable torestructuring costs (2.1) (0.6) (0.6) - - -Acquisition costs 0.4 0.1 0.1 - - -Tax attributable toacquisition costs (0.1) - - - - -Gains on disposal ofbusinesses - - - (17.8) (4.9) (4.9)Tax on gains on disposalof businesses - - - 2.8 0.8 0.8Adjusted profit attributableto ordinary shareholders 28.7 7.9 7.8 33.7 9.3 9.1 Number Number Weighted averagenumber of shares 363,932,701 362,830,794Dilutive effect ofshare options 3,317,041 7,109,034Diluted weighted averagenumber of shares 367,249,742 369,939,828 Earnings per share(continued) 2011/12 Full year audited Basic Diluted per per share share Earnings amount amount £m pence penceEarnings per shareProfit attributable toordinary shareholders 76.9 21.2 20.9Restructuring costs 2.8 0.7 0.7Tax attributable torestructuring costs (0.7) (0.2) (0.2)Gains on disposalof businesses (18.9) (5.2) (5.1)Tax on gains on disposalof businesses 3.2 0.9 0.9Adjusted profit attributableto ordinary shareholders 63.3 17.4 17.2 Number Weighted averagenumber of shares 363,091,496Dilutive effect ofshare options 4,952,153Diluted weighted averagenumber of shares 368,043,649
Adjusted Earnings per share has been provided in order to facilitate year on year comparison.
Net financial liabilities
29 July 31 July 29 January 2012 2011 2012 unaudited unaudited audited £m £m £m Cash and cashequivalents 123.7 50.6 116.9Unsecured loansand overdrafts (297.0) (239.1) (294.2)Net financial liabilitiesbefore preference sharesand derivatives (173.3) (188.5) (177.3)Preference shares (62.2) (61.4) (61.8)Derivative financialinstruments (net) 1.2 (1.4) 2.0Net financial liabilities (234.3) (251.3) (237.1) Net financial liabilitiesare analysed in thebalance sheet as follows: Current assetsCash and cashequivalents 123.7 50.6 116.9Derivative financialinstruments 1.3 - 2.3 125.0 50.6 119.2 Current liabilitiesOther loans (1.2) (0.4) (1.0)5.9% US dollarGuaranteed SeniorNotes payable 2013 (102.3) - -Derivative financialinstruments (0.1) (1.4) (0.3) (103.6) (1.8) (1.3) Non-current liabilitiesBank loans (17.7) (118.2) (18.9)5.9% US dollarGuaranteed SeniorNotes payable 2013 - (96.8) (100.8)3.0% US dollarGuaranteed SeniorNotes payable 2016 (54.7) - (54.0)5.2% US dollarGuaranteed SeniorNotes payable 2017 (19.4) (18.4) (19.1)4.4% US dollarGuaranteed SeniorNotes payable 2018 (37.5) - (37.0)4.8% US dollarGuaranteed SeniorNotes payable 2021 (58.6) - (57.8)Other loans (5.6) (5.3) (5.6)Preference shares (62.2) (61.4) (61.8) (255.7) (300.1) (355.0)
At 29 July 2012, the Group's syndicate bank facilities totalled £200 million expiring in October 2016. Based on these facilities, the headroom on bank borrowings at 29 July 2012 was £180 million.
Pension commitmentsThe valuation of the Group's defined benefit pension schemes in the UK and the US has been updated at 29 July 2012 onan actuarial basis, applying current discount and inflation rate assumptions and incorporating the market value ofassets at 29 July 2012. The actuarial losses in the first half of £14.7 million (£10.2 million net of associateddeferred tax) has been taken through the statement of other comprehensive income. Exchange ratesThe principal average exchange rates used to translate the Group's overseas profits were as follows: 2012/13 2011/12 2012/13 2011/12 2011/12 Second Second First First Full quarter quarter half half year US dollar 1.56 1.62 1.58 1.62 1.60Euro 1.26 1.14 1.23 1.14 1.15 Ordinary dividendAn interim dividend of 4.4 pence per share (2011/12: 4.4 pence per share) will be paid on 17 October 2012 to ordinaryshareholders on the register at close of business on 21 September 2012, absorbing £16.0 million of shareholders' funds(2011/12: £16.0 million). Statement of Directors' ResponsibilitiesThe directors named below confirm that, to the best of their knowledge and belief, this condensed consolidated interimfinancial information has been prepared in accordance with IAS 34 as adopted by the European Union, and that theinterim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8. By order of the Board Laurence Bain Nicholas CadburyChief Executive Officer Chief Financial Officer13 September 2012 13 September 2012
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