Premier Farnell plc 6 December
2012
Results for the Third Quarter and Nine Months of the 53 week
financial year ending 3 February 2013
Key Financials £m Q3 12/13 Q3 11/12 Q3 9M 12/13 9M 11/12 9M
Continuing operations £m £m Growth(a) £m £m Growth(a)
(unaudited)
Total revenue 233.5 241.8 -1.6% 712.7 739.7 -2.8%
Adjusted operating 22.0 25.8 -10.4% 72.1 81.8 -9.2%
profit(b) - (1.7) (7.9) 16.1
Adjusting items(b) 22.0 24.1 -3.7% 64.2 97.9 -33.1%
Total operating profit
Adjusted profit before 17.3 21.1 -18.0% 57.0 68.2 -16.4%
tax(b)
Total profit before 17.3 19.4 -10.8% 49.1 84.3 -41.8%
taxation
Adjusted earnings per 3.4p 4.2p -19.0% 11.2p 13.4p -16.4%
share (b)
Basic earnings per 3.4p 3.8p -10.5% 9.6p 17.2p -44.2%
share
Free cash flow(c) 3.5 14.2 -75.4% 36.5 24.2 50.8%
Financial highlights
- Group third quarter year on year sales per day decline of
1.6%, unchanged from the second quarter, reflecting less favourable
market conditions overall in September and October compared with
the slight growth experienced in August.
- Latest market conditions reported by the SIA(d) show declines
of 9.4% in Europe and 0.4% in
Asia Pacific, with the Americas
reporting growth for the first time since June 2011 of 2.6%, and AFDEC(d) reported a
decline of 11.1% in the UK.
- Third quarter gross margin of 38.3% was down 0.2% from the
second quarter as we continue to manage in line with market
conditions.
- Operating expenses in line with prior year, after adjusting
for the impact of the Embest acquisition, as cost actions offset
the impact of cost increases.
- £4m of annualised cost savings were implemented early in the
fourth quarter with a resultant £0.8m saving expected this year. Depending on
our sales trajectory through the fourth quarter, further cost actions will be
taken if momentum does not improve.
- Our return on sales, at 9.4% for the third quarter and 10.1%
for the first nine months, remains industry leading.
- Operating cash generation(e) (excluding impact of adjusting
items) was in line with our expectations at 83.6% of operating
profit for the quarter and 111.5% year to date (2011/12:
85.7%).
Strategic highlights
- Our active customer base exited the third quarter up 2.3% on
the prior year, excluding Raspberry Pi, compared with the second
quarter of 1.0%, giving us confidence in future growth
opportunities.
- Raspberry Pi sales in the quarter of £4.1m increased from
£3.9m in the second quarter.
- MDD eCommerce penetration increased by 1.1 percentage points
from the start of the year to the third quarter at 56.4% and exited
at 57.3%.
- The element14 Community maintained its strong progress, receiving over 1.7
million visits and adding more than 21,000 new registered users in the
quarter, with total registered users now over 138,000. Engagement on the site
increased with over 100,000 interactions per week by the end of the quarter.
- Emerging markets' sales grew 14.2% in the quarter benefitting
from the integration of our Embest acquisition (6.4% growth
excluding Embest), and now represent 9.2% of total MDD sales.
- Our multichannel sales transformation continues with our
Krakow contact centre now officially opened.
Commenting on the results, Laurence
Bain, Group Chief Executive, said:
"After seeing a slightly positive start to the quarter in August,
market conditions remained volatile in September and October and we saw year
on year sales declines in those months. As a result, our third quarter sales
declined 1.6%, in line with that reported in the second quarter. In November,
year on year trends in our MDD Europe and APAC region improved slightly, but
the MDD Americas performance declined, partly as a result of the impact of
Hurricane Sandy. After adjusting for Sandy, Group year on year sales declined
3.2% in November. We continued to manage gross margin as we develop
initiatives to meet customer needs in this challenging environment. Keeping
our cost base flat year on year has enabled us to continue to achieve an
industry leading return on sales, 9.4% for the quarter and 10.1% for the first
nine months. Our cash performance remains strong, demonstrating the resilience
of our business model in challenging markets.
With global conditions continuing to be uncertain, and with very
limited forward order visibility, we have executed cost actions in the fourth
quarter which will deliver annualised savings of £4m. In addition, depending
on our sales trajectory through the fourth quarter, further cost actions will
be taken if momentum does not improve. The continued strength of our balance
sheet, our growing active customer base and the ongoing evolution of our
customer proposition, all give us confidence in our ability to weather the
current market challenges while building for future growth.''
For further information, contact:
Laurence Bain, Chief Executive
Premier Farnell plc +44 (0) 20 7851 4100 Officer
Mark Whiteling, Chief Financial
Officer
Thomas Churchill, Investor
Relations
Andrew Lorenz FTI Consulting +44 (0) 20 7269 7291
Richard Mountain
Premier Farnell's announcements and presentations
are published at www.premierfarnell.com together with business information and
links to all other Group web sites.
The results for the fourth quarter of the 53 week
financial year ending 3 February 2013 will be announced on 21 March 2013.
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, and
earnings per share in the table above exclude restructuring costs of £7.5m (in
the first quarter) and acquisition costs of £0.4m related to the purchase of
the entire share capital of Shenzhen Embest Technology Co Ltd (Embest) (in the
second quarter). In the prior year, adjusted operating profit, profit before
tax, and earnings per share, excluded the gain on sale of TPC Wire & Cable
(pre-tax gain of £17.8m), the gain on sale of Newark's calibration services
business of £1.1m and exclude restructuring costs of £2.8m.
(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 excludes
net proceeds from the sale of businesses.
(d) SIA data from Semiconductor Industry Association
publication, AFDEC data from Association of Franchised Distributors
of Electronic Components, PMI data from relevant Purchasing
Managers Index published source in each market.
(e) Operating cash flow (before capital expenditure) as a
percentage of adjusted operating profit.
Divisional Analysis
Revenue Q3 12/13 Q3 11/12 Q3 9M 12/13 9M 11/12 9M
£m £m Growth £m £m Growth
UK 27.8 30.0 -7.3% 87.8 92.2 -4.8%
Rest of Europe 56.2 61.8 -2.4% 176.1 197.3 -5.1%
APAC (1) 16.8 15.7 8.4% 50.1 48.8 2.1%
MDD Europe & APAC 100.8 107.5 -2.2% 314.0 338.3 -4.0%
MDD Americas 89.6 93.1 -3.6% 269.7 281.4 -5.2%
MDD Other 26.3 25.6 2.5% 77.8 73.6 5.1%
MDD Division 216.7 226.2 -2.3% 661.5 693.3 -3.5%
IPD Division 16.8 15.6 8.1% 51.2 46.4 8.3%
Group 233.5 241.8 -1.6% 712.7 739.7 -2.8%
Adjusted Operating Q3 12/13 Q3 11/12 Q3 9M 12/13 9M 11/12 9M
Profit/Return on Sales £m £m Growth £m £m Growth
MDD Europe & APAC(2) 13.0 16.1 -12.6% 46.4 53.9 -9.0%
12.9% 15.0% 14.8% 15.9%
MDD Americas(3) 6.5 7.9 -17.6% 19.7 24.2 -19.8%
7.3% 8.5% 7.3% 8.6%
MDD Other(4) 2.6 2.5 4.2% 7.5 6.7 11.8%
9.9% 9.8% 9.6% 9.1%
MDD Division(5) 22.1 26.5 -12.5% 73.6 84.8 -10.5%
10.2% 11.7% 11.1% 12.2%
IPD Division(6) 2.9 2.5 16.6% 8.5 7.1 17.3%
17.3% 16.0% 16.6% 15.3%
Head office costs(7) (3.0) (3.2) -6.2% (10.0) (10.1) -1.1%
Group 22.0 25.8 -10.4% 72.1 81.8 -9.2%
9.4% 10.7% 10.1% 11.1%
Notes:
(1) Current year includes the results of Embest post acquisition
on 26 June 2012 (excluding Embest: Q3
-0.5%,
9M -1.5%)
(2) Current year adjusted to exclude impact of £6.9m restructuring costs (Q1)
and £0.4m of acquisition costs (Q2) and prior year adjusted to exclude £2.2m
of restructuring costs
(3) Current year adjusted to exclude impact of £0.6m
restructuring costs (Q1) and prior year adjusted to exclude impact
of gain on sale of Calibration services business £1.1m and £0.3m of
restructuring costs
(4) Prior year adjusted to exclude £0.1m of restructuring
costs
(5) Current year adjusted to exclude impact of £7.5m restructuring costs (Q1)
and £0.4m of acquisition costs (Q2) and prior year adjusted to exclude impact
of gain on sale of Calibration services business £1.1m and £2.6m of
restructuring costs
(6) Prior year adjusted to exclude impact of gain on sale £17.8m
of TPC Wire & Cable
(7) Prior year adjusted to exclude £0.2m of restructuring
costs
Results for the Third Quarter of the 53 week financial year
ending 3
February 2013
Introduction
In the third quarter, year on year sales per day performance
improved compared to the second quarter in our main MDD geographic regions,
other than the UK, despite the impact of the challenging global electronics
market. The Semiconductor Industry Association (SIA), an indicator for
electronics growth trends, saw the global industry contract by 2.3% year on
year in the three months to October with Europe and Asia Pacific down 9.4% and
0.4%, respectively, and with the Americas reporting growth for the first time
since June 2011 of 2.6% compared with the 3.9% decline reported for the three
months to September.
Our continued gross margin management and cost control has
enabled us to achieve industry leading return on sales, 9.4% for
the quarter and 10.1% for the nine month period.
Sales
Third quarter Group year on year sales per day declined 1.6%,
unchanged from the second quarter. The stable sales per day we had seen in the
prior four quarters was impacted this quarter by normal seasonality due to the
Summer holiday period, although sales per day improved through the quarter.
Within our MDD Division the Americas' sales per day was flat
sequentially on Q2, a strong performance given the expected seasonal decline.
Sales per day declined 3.6% compared to the prior year, an improvement of 0.5
percentage points against the year on year decline in the second quarter.
On a year on year basis sales per day for Europe as a whole performed similarly to the
second quarter, with a year on year reduction of 4.0%,
outperforming the challenging electronics market and growing market
share. This compares to the overall European market reported by
DMASS (Distributors and Manufacturers Association of Semiconductor
Specialists) which reported a decline of 6.0% for the calendar
third quarter. Europe outside the
UK improved from a 5.2% decline in the second quarter to a 2.4%
decline in the third quarter.
In the third quarter UK sales per day fell 7.3% year on year.
This compares to the most recent data from the Association of
Franchised Distributors of Electronic Components (AFDEC) which
reported a decline of 11.1% for the equivalent period.
Against the backdrop of PMI manufacturing readings below 50 in all
our Asia Pacific markets except for India and Indonesia, sales per day for the
region reduced by only 0.5% in the quarter (excluding Embest), an improvement
of 3.7 percentage points on the equivalent 4.2% decline experienced in the
second quarter. The acquisition of Embest in the second quarter helped drive
total APAC sales growth in the third quarter to +8.4% as we embed this
business and begin to benefit from its strategic significance.
Third quarter sales per day from our emerging markets grew 14.2%
in the period (6.4% excluding Embest) and now represent 9.2% of
global MDD sales.
Our Other Distribution Businesses again performed strongly, with
CPC again delivering year on year growth, at 1.9% in the third quarter,
despite seeing a sequential sales decline, having benefited from the run up to
the Olympics. CPC's growth is being driven by web-focused customer acquisition
and the introduction of new products sourced globally.
Encouragingly, given the weak US consumer electronics market, MCM
returned to 4.5% year on year sales growth in the third quarter in part driven
by the release of its enhanced new catalogue. MCM is now benefiting from
increased collaboration with CPC and its initiatives to increase focus on the
web, targeted product segments and new product introductions.
In the Industrial Products Division, Akron Brass continued to
perform strongly, with sales up 8.1% versus the prior year. Akron Brass has
enefited from the ongoing development of its strategic focus on International
markets and new product areas, whilst early signs of stabilisation in home US
markets give cause for optimism over the longer term.
Gross margin
Third quarter gross margin of 38.3% was down 0.2% from the
second quarter as we develop initiatives that support our customer
needs in the current environment. Year on year gross margin
performance improved from the second quarter with the year on year
reduction down from 1.3% in the second quarter to 0.3% in the third
quarter. The successful launch in the second quarter of our lower
margin, but strategic, Raspberry Pi product again impacted gross
margin by 0.3 percentage points. Gross margin management remains a
key area of focus for all of our businesses across the economic
cycle.
Costs
The Group continues to manage its cost base both strategically,
taking advantage of the globalisation of our business model and
efficiencies arising from increased eCommerce activity, and
tactically, in response to sales volumes.
At constant exchange rates, third quarter net operating expenses
were flat year on year, after excluding the impact of the Embest acquisition
which incurred £0.5m of net operating expenses in the quarter. This resulted
in net operating expenses at 28.9% of sales compared with 28.4% in the second
quarter, reflecting the slightly lower sales. This performance reflects the
cost actions put in place over recent quarters as the impact of inflationary
increases is absorbed.
As the market environment continues to be challenging and in
anticipation of continuing inflationary pressures, early in the fourth quarter
we took actions to reduce costs by £4m pa, through the reduction of 41 heads.
These actions will reduce this year's operating expenses by £0.8m with one-off
costs of £1.3m recognised in the fourth quarter.
Return On Sales/Profitability
Focus on the implementation of our strategy, gross margin, and cost
management, has allowed the Group to deliver industry leading return on sales
throughout the period since our strategy began. Despite the ongoing weakness
in our markets, we delivered third quarter return on sales of 9.4%. The 0.7
percentage point reduction from the second quarter return on sales reflects
the 0.2% decline in gross margin and the impact of operational leverage on the
sequentially lower sales in the quarter. Year to date, the Group's return on
sales was 10.1%.
Actions across the Group to drive strategic cost efficiencies,
alongside continued focus on maximising gross margin relative to
market conditions, will protect profitability in the short term and
position the business to leverage our significant long term
profitable growth opportunities.
Despite sales per day growth being unchanged sequentially, in
the third quarter return on sales from MDD Americas improved by 0.3
percentage points over the second quarter indicating positive
strategic progress. Our North American business continues to show
improvements to its customer focussed strategic metrics and, with
focus on gross margin and costs, and whilst its markets remain very
challenging, it is well positioned to optimise the impact of
recovery in its underlying markets.
Primarily as a consequence of the impact of operational leverage on
the sequentially lower sales in the third quarter the return on sales from our
European and APAC businesses reduced sequentially from 14.7% in the second
quarter to 12.9%. The regions continue to make strategic progress and market
share gains across the quarter which, combined with growth in the active
customer base and the strategic cost actions we are taking, gives confidence
in the recovery of returns from these markets as conditions improve.
Cash Flow/Balance Sheet
Third quarter cash conversion of 83.6% (2011/12: 103.1%) was in
line with our expectations. The year to date conversion at 111.5% (2011/12:
85.7%) reflects ongoing focus on the management of working capital. In the
third quarter the Group's inventory levels decreased by £2.5m (at constant
exchange rates), despite investment of £5.5m in new products across the
technology spectrum, as we rebalance our inventory profile through the
reduction of slower moving items following our £12.2m investment in the second
quarter. We anticipate that by the year end our inventory levels will be back
to those seen at the start of the second quarter.
In the third quarter, after payment of the interim dividend, net
financial liabilities (including preference shares) increased to £243.6m from
£234.3m in the prior quarter. The impact of exchange rates in the period was
to reduce net financial liabilities by £6.1m, principally in relation to our
US$ denominated private placement notes.
Net debt to EBITDA of 2.1 at the end of the third quarter
increased from 2.0 in the prior quarter primarily as a result of
the timing of the interim dividend payment.
Premier Farnell's financial position remains robust with good
liquidity and strong free cash flow. At the quarter end, our headroom on bank
borrowings was £180m under facilities in place until October 2016. This
headroom, combined with our net cash position of £108.8m, gives us a secure
funding position.
In the third quarter the Group explored the possibility of early
repayment of its $159m 2013 USPP
notes at terms attractive to the Group. Debt market conditions make
settlement on these terms unattractive to the note-holders and as
such the notes will remain in issue until planned repayment in
June 2013.
Foreign Currency Impact
A one cent movement in the exchange rate between the US dollar and
sterling impacts the Group's operating profit by approximately £250,000 per
annum, and a one cent movement in the exchange rate between the Euro and
sterling impacts the Group's operating profit by approximately £500,000 per
annum. There was a detrimental impact on adjusted operating profit for the
quarter of £1.2m from the translation of overseas results compared with the
prior year.
Finance Costs
Net finance costs in the third quarter were £4.7m (2011/12:
£4.7m). This comprises net interest payable of £3.6m (2011/12:
£3.6m), which was covered 6.1 times by adjusted operating profit,
and a net charge of £1.1m (2011/12: £1.1m) in respect of the
Company's convertible preference shares.
Profit Before Tax
Total profit before tax in the third quarter was £17.3m (2011/12:
£19.4m), a decrease of 10.8% on the previous year and a decrease of 18.0% on
an adjusted basis. No adjusting items occurred in the third quarter this year
but restructuring costs of £2.8m and the gain on sale of Newark's calibration
services business of £1.1m occurred in the comparable prior year period.
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 basic earnings per share for the third quarter are 3.4p
(2011/12: 4.2p). Basic earnings per share after the net impact of
one-off items are 3.4p (2011/12: 3.8p).
Pensions
As a consequence of offering to buy out the pension rights of
deferred members of the Group's US defined benefit pension plan, the Group is
expected to reduce its US net pension liability by approximately £3.7m in the
fourth quarter, which will be recorded as a one-off gain through the income
statement. In addition, this option will help reduce the future risk of the
US
Plan.
Strategy
Whilst global economic and market conditions remain uncertain and
challenging we remain focused on managing the implementation of our strategic
transformation. Our strategy has delivered industry leading returns throughout
its implementation and, as we continue to increase our focus on meeting our
customers' requirements and delivering our multi channel sales strategy, we
also target further progression in growth and share relative to the market and
our competitors.
Through the third quarter we delivered a year on year increase in
our active customer base of 2.3%, excluding Raspberry Pi, demonstrating the
ability of our proposition to attract new customers whatever the market
environment. We continue to see progress in our customer service metrics with
our Net Promoter Score (our internal customer satisfaction metric) increasing
through the year.
The strength of our customer proposition was increased further
in the third quarter with the signing of a new global franchise
agreement with the Lattice Semiconductor Corporation, the leading
provider of innovative, low cost, low power, programmable
semiconductors and power management design solutions.
Our global multi channel sales strategy continues to strengthen.
Our European contact centre in Krakow has now formally opened and
is fully operational and is already delivering the expected
benefits in customer service and marketing. At the end of the
financial year we will commence the phased roll out of our new web
platform which will deliver significant benefits to our customers
and further improve operational efficiency. This will accelerate
progress towards our goal of being a digitally focussed enterprise
from our current eCommerce penetration in the third quarter of
56.4%, up 1.1 percentage points since the start of the year and
exiting the quarter at 57.3%.
The element14 community remains a vibrant and differentiating
source for electronic design engineers as they collaborate and source the
essential information they require in their work. In the third quarter the
Community received over 1.7 million visits, maintaining the strong progress
seen since the launch of Raspberry Pi, as it saw over 95,000 community
interactions each week, reaching over 100,000 by the end of the quarter, and
added more than 21,000 registered users, with total registered users now over
138,000. The Community's innovative approach to customer interaction was
rewarded with awards from Forrester Research Inc. and JiveWorld.
Raspberry Pi continues to attract a large number of relevant new
customers to our proposition, helped by the launch of the new double memory
512MB board, with sales strengthening further from the second quarter to
£4.1m, and demand exceeding supply. Sales of this revolutionary, credit-card
sized computer have to date attracted 197,000 new customers and contributed to
the significant increase in activity of our community websites, helping
Premier Farnell win the Makey award for "best education/outreach program"
against competition including Intel, NASA and Autodesk. The lower margin
impact of Raspberry Pi will diminish as we add a range of higher margin
associated products such as the Gertboard and Pi-Face.
Following our second quarter acquisition, Embest, a provider of
embedded development tools based in China, has integrated well into the Group
and has already shown strategic value as part of our services beyond product
work with suppliers such as STMicroelectronics and NXP. In addition, the
launch of the Freescale Freedom Development Platform earlier this year has
further enhanced the product offering we can provide to the design engineering
community. The success of this launch saw Premier Farnell receive four awards
from Freescale at the recent Electronica 2012 Fair in Munich. We continue to
work closely with Freescale, leveraging Embest's expertise in the embedded
space. Embest will also be a key supplier of Raspberry Pi associated products.
This, together with our element14 community, our unique on line engineer
design portal, the Knode, and our 40+ transactional sites now provide true
solution partner support to our customers and our suppliers.
Board Changes
On 5 November, Mark Whiteling rejoined the Company and Board as
Chief Financial Officer. Nicholas Cadbury left the company on 13 November and
the Group would like to thank Nicholas for his contribution whilst at Premier
Farnell.
Outlook
After seeing a slightly positive start to the quarter in August,
market conditions remained volatile in September and October and we saw year
on year sales declines in those months. As a result, our third quarter sales
declined 1.6%, in line with that reported in the second quarter. In November,
year on year trends in our MDD Europe and APAC region improved slightly, but
the MDD Americas performance declined, partly as a result of the impact of
Hurricane Sandy. After adjusting for Sandy, Group year on year sales declined
3.2% in November. We continued to manage gross margin as we develop
initiatives to meet customer needs in this challenging environment. Keeping
our cost base flat year on year has enabled us to continue to achieve an
industry leading return on sales, 9.4% for the quarter and 10.1% for the first
nine months. Our cash performance remains strong, demonstrating the resilience
of our business model in challenging markets.
With global conditions continuing to be uncertain, and with very
limited forward order visibility, we have executed cost actions in the fourth
quarter which will deliver annualised savings of £4m. In addition, depending
on our sales trajectory through the fourth quarter, further cost actions will
be taken if momentum does not improve. The continued strength of our balance
sheet, our growing active customer base and the ongoing evolution of our
customer proposition, all give us confidence in our ability to weather the
current market challenges while building for future growth.
Key Performance Indicators Long-term Goal Achieved in Q3
Sales per day growth 6-8% -1.6%
Gross margin % Stability 38.3%
Return on sales % 12%-15% 9.4%
Return on net operating assets % >30% 34.6%
Working capital as a % of sales <22% 25.4%
Free cash flow as a % of sales 6% 1.5%
% of MDD sales from eCommerce 70% 56.4%
% of MDD sales from EDE 50%-70% 49%
% all sales from international
growth markets 30% 22.5%
MDD active customer growth 6% 2.3%
Condensed Consolidated
Income Statement
For the third quarter and nine months
ended 28 October 2012
2012/13 2011/12 2012/13 2011/12 2011/12
Third Third Nine Nine Full
quarter quarter months months year
unaudited unaudited unaudited unaudited audited
Notes £m £m £m £m £m
Continuing operations
Revenue 3 233.5 241.8 712.7 739.7 973.1
Cost of sales (144.1) (148.5) (435.5) (445.9) (588.1)
Gross profit 89.4 93.3 277.2 293.8 385.0
Net operating expenses
- adjusted operating expenses (67.4) (67.5) (205.1) (212.0) (277.7)
- adjusting items 4 - (1.7) (7.9) 16.1 16.1
Total net operating expenses (67.4) (69.2) (213.0) (195.9) (261.6)
Operating profit
- adjusted operating profit 3 22.0 25.8 72.1
81.8 107.3
- adjusting items 4 - (1.7) (7.9) 16.1 16.1
Total operating profit 3 22.0 24.1 64.2 97.9 123.4
Finance income 0.1 - 0.4 - 0.1
Finance costs
- interest payable (3.7) (3.6) (12.2) (10.3) (14.6)
- preference dividends (0.9) (0.9) (2.7) (2.7) (3.5)
- premium on redemption of
preference shares (0.2) (0.2) (0.6) (0.6) (0.8)
Total finance costs (4.8) (4.7) (15.5) (13.6) (18.9)
Profit before taxation 17.3 19.4 49.1 84.3 104.6
Taxation 5 (5.0) (5.7) (14.2) (21.9) (27.7)
Profit for the period attributable
to ordinary shareholders 12.3 13.7 34.9 62.4 76.9
Earnings per share 6
Basic 3.4p 3.8p 9.6p 17.2p 21.2p
Diluted 3.3p 3.7p 9.5p 16.9p 20.9p
Ordinary dividends
Interim - proposed 4.4p 4.4p 4.4p
Final - proposed 6.0p
Paid 10.4p 10.4p 10.4p
Impact on shareholders' funds (£m) 37.9
37.8 37.8
Condensed Consolidated Statement
of Comprehensive Income
For the third quarter and nine months
ended 28 October 2012
2012/13 2011/12 2012/13 2011/12 2011/12
Third Third Nine Nine Full
quarter quarter months months year
unaudited unaudited unaudited unaudited audited
£m £m £m £m £m
Profit for the period attributable to ordinary shareholders
12.3 13.7 34.9 62.4 76.9
Net exchange adjustments
1.2 (0.2) (0.6) (0.1) 0.4 Recycling of cumulative translation
adjustments on disposal of subsidiary undertaking
- - - (0.8) (0.8)
Actuarial gains/(losses) on pensions and other
post-retirement obligations
2.0 (3.9) (12.7) (8.4) (10.0) Deferred tax (charge)/credit on
actuarial gains/(losses) on pensions and other post retirement
obligations
(0.7) 1.2 3.8 2.5 2.5
Deferred tax charge on share based payments - - - - (2.3)
Net fair value (losses)/gains on hedges (1.5) - (2.0) (0.4) 2.2
Other comprehensive income/(expense) for the period
1.0 (2.9) (11.5) (7.2) (8.0)
Total comprehensive income for the period
attributable to ordinary shareholders
13.3 10.8 23.4 55.2 68.9 The accompanying notes form an integral
part of this unaudited condensed consolidated financial
information.
Condensed Consolidated Balance Sheet
As at 28 October 2012
28 October 30 October 29 January
2012 2011 2012
unaudited unaudited audited
Notes £m £m £m
ASSETS
Non-current assets
Goodwill 37.4 34.3 34.3
Other intangible assets 30.2 28.7 26.9
Property, plant and equipment 54.6 52.6
57.4
Deferred tax assets 11.8 15.0 10.5
Total non-current assets 134.0 130.6 129.1
Current assets
Inventories 224.9 224.4 214.5
Financial assets 7 0.4 - 2.3
Trade and other receivables 137.6 148.5 139.5
Current tax receivable 1.0 - 1.0
Cash and cash equivalents 7 108.8 62.8 116.9
Total current assets 472.7 435.7 474.2
LIABILITIES
Current liabilities
Financial liabilities 7 (101.7) (1.8) (1.3)
Trade and other payables (125.6) (123.6) (113.4)
Current tax payable (14.6) (22.9) (15.6)
Total current liabilities (241.9) (148.3) (130.3)
Net current assets 230.8 287.4 343.9
Non-current liabilities
Financial liabilities 7 (251.1) (317.8) (355.0)
Retirement and other post-employment benefits (53.9) (42.6)
(43.8)
Deferred tax liabilities (3.9) (3.5) (6.4)
Total non-current liabilities (308.9) (363.9) (405.2)
NET ASSETS 55.9 54.1 67.8
EQUITY
Ordinary shares 18.5 18.5 18.5
Equity element of preference shares 10.4 10.4
10.4
Share premium 31.9 31.1 31.1
Capital redemption reserve 4.4 4.4 4.4
Hedging reserve (0.6) (1.2) 1.4
Cumulative translation reserve 19.0 19.1
19.6
Retained earnings (27.7) (28.2) (17.6)
TOTAL EQUITY 55.9 54.1 67.8
Consolidated Statement of changes in Equity
For nine months ended 28 October
2012
2012/13 2011/12 2011/12
Nine Nine Full
months months year
unaudited unaudited audited
£m £m £m
Total equity at beginning of period 67.8 38.4 38.4
Profit for the period 34.9 62.4 76.9
Other comprehensive expense (11.5) (7.2) (8.0)
Total comprehensive income 23.4 55.2 68.9
Transactions with owners:
Ordinary dividends paid (37.9) (37.8) (37.8)
Ordinary share capital subscribed 0.8 2.7 2.7
Purchase of ordinary shares - (5.8) (5.8)
Share-based payments 1.8 1.4 1.4
Total transactions with owners (35.3) (39.5)
(39.5)
Total equity at end of period 55.9 54.1
67.8
The accompanying notes form an integral part of this unaudited
condensed consolidated financial information.
Condensed Consolidated Statement
of Cash Flows
For the third quarter and nine months
ended 28 October 2012
2012/13 2011/12 2012/13 2011/12 2011/12
Third Third Nine Nine Full
quarter quarter months months year
unaudited unaudited unaudited unaudited audited
Notes
£m £m £m £m £m
Cash flows from operating activities
Operating profit 3 22.0 24.1 64.2 97.9 123.4
Adjusting items:
- net income statement impact 4 - 1.7 7.9 (16.1) (16.1)
- cash impact (1.6) (1.2) (4.7) (1.2) (2.2)
Non cash impact of adjusting items (1.6) 0.5 3.2 (17.3) (18.3)
Depreciation and amortisation 4.5 5.0 13.7 13.7 18.2
Changes in working capital (8.0) (4.0) (5.3) (24.5) (13.6)
Additional funding for post retirement
defined benefit plans (0.8) (0.9) (2.3) (2.4) (3.4)
Other non-cash movements 0.7 0.7 2.2 1.5 1.7
Total cash generated from operations 16.8 25.4 75.7 68.9 108.0
Interest received 0.1 - 0.4 - 0.1
Interest paid (1.2) (1.1) (9.0) (7.0) (11.0)
Dividends paid on preference shares - - (1.8) (1.8) (3.5)
Taxation paid (7.6) (5.6) (17.0) (20.4) (26.9)
Net cash generated from operating activities
8.1 18.7 48.3 39.7 66.7
Cash flows from investing activities
Net (outflow) / inflow from disposal of
businesses (net of tax paid) - (0.3) - 24.6 23.2
Net outflow from purchase of business (0.1) - (2.8) - -
Purchase of property, plant and equipment (2.1) (2.8) (5.1) (5.3) (9.1)
Purchase of intangible assets (computer software) (4.1) (2.9) (11.4) (11.4) (12.6)
Net cash (used in)/generated from investing activities
(6.3) (6.0) (19.3) 7.9 1.5
Cash flows from financing activities
Purchase of ordinary shares - - - (5.8) (5.8)
Issue of ordinary shares 0.2 - 0.8 2.7 2.7
New borrowings 0.5 51.8 0.7 79.1 174.6
Repayment of borrowings - (39.5) - (58.2) (118.9)
Dividends paid to ordinary shareholders (16.1) (16.0) (37.9) (37.8) (37.8)
Net cash (used in)/generated from
financing activities
(15.4) (3.7) (36.4) (20.0) 14.8
Net (decrease)/increase in cash, cash
equivalents and bank overdrafts (13.6) 9.0 (7.4) 27.6 83.0
Cash, cash equivalents and bank overdrafts
at beginning of period 123.7 50.6 116.9 33.4 33.4
Exchange gains/(losses) (1.3) 3.2 (0.7) 1.8 0.5
Cash, cash equivalents and bank
overdrafts at end of period
108.8 62.8 108.8 62.8 116.9
Reconciliation of net financial liabilities
Net financial liabilities at beginning of period (237.1) (262.9) (262.9)
Net (decrease)/increase in cash, cash
equivalents and bank overdrafts (7.4) 27.6 83.0
Increase in debt (0.7) (20.9) (55.7)
Premium on redemption of preference shares (0.6) (0.6) (0.8)
Derivative financial instruments (1.6) - 3.2
Amortisation of arrangement fees (0.8) (1.4) (2.1)
Exchange movement 4.6 1.4 (1.8)
Net financial liabilities at end of period 7 (243.6) (256.8) (237.1)
The accompanying notes form an integral part of this unaudited
condensed consolidated financial information.
Notes
1 Basis of preparation
The unaudited condensed consolidated financial information in
this report has been prepared based on International
Financial Reporting Standards (IFRSs), as adopted by the
European Union,
and applying the accounting policies disclosed in the Group's
2012 Annual Report and Accounts on pages 122 to 125
except as described below.
There are no new standards or amendments to standards that are
mandatory for the first time in the current financial
year which have had a significant impact upon the Group.
This condensed consolidated financial information does not
comprise statutory accounts within the meaning of Section
498 of the Companies Act 2006. Statutory accounts for the
financial year
ended 29 January 2012, were
approved by the board of directors on 19
April 2012 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was
unqualified
and did not contain any statement under Section 237 of the
Companies 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. 2 Acquisition
On 26 June 2012, the Group
completed its acquisition of the entire issued share capital of
Shenzhen Embest Technology
Co Ltd (Embest), a leading provider of embedded system
development boards and tools, as well as design engineering
services.
Of the total consideration of £3.4 million, £0.2 million relates
to the provisional fair value of net assets acquired
and £3.2 million relates to goodwill attributable to the future
profitability of the business. The total consideration
includes deferred consideration of £0.8 million dependent on the
performance of the acquired business over the next
two years.
In accordance with IFRS 3 Business Combinations, acquisition
costs of £0.4 million have been charged to administrative
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 of the
financial year had the acquisition taken place on that date, are
not material to the Group's results. 3 Segment information
2012/13 Third quarter unaudited
2011/12 Third quarter unaudited
Adjusting Adjusting
Before items After Before items After
adjusting adjusting adjusting adjusting
items (Note 4) items items (Note 4) items
£m £m £m £m £m £m
Revenue
Marketing and Distribution Division
Americas 89.6 - 89.6
93.1 - 93.1
Europe and Asia Pacific 100.8 - 100.8
107.5 - 107.5
Other Distribution Businesses 26.3 - 26.3
25.6 - 25.6
Total Marketing and Distribution Division 216.7 - 216.7
226.2 - 226.2
Industrial Products Division 16.8 - 16.8 15.6 - 15.6
233.5 - 233.5 241.8 - 241.8
Operating profit
Marketing and Distribution Division
Americas 6.5 - 6.5
7.9 0.8 8.7
Europe and Asia Pacific 13.0 - 13.0
16.1 (2.2) 13.9
Other Distribution Businesses 2.6 - 2.6
2.5 (0.1) 2.4
Total Marketing and Distribution Division 22.1 - 22.1
26.5 (1.5) 25.0
Industrial Products Division 2.9 - 2.9
2.5 - 2.5
Head Office costs (3.0) - (3.0) (3.2) (0.2) (3.4)
22.0 - 22.0 25.8 (1.7) 24.1
2012/13 Nine months unaudited
2011/12 Nine months unaudited
Adjusting Adjusting
Before items After Before items After
adjusting adjusting adjusting adjusting
items (Note 4) items items (Note 4) items
£m £m £m £m £m £m
Revenue
Marketing and Distribution Division
Americas 269.7 - 269.7
281.4 - 281.4
Europe and Asia Pacific 314.0 - 314.0
338.3 - 338.3
Other Distribution Businesses 77.8 - 77.8
73.6 - 73.6
Total Marketing and Distribution Division 661.5 - 661.5
693.3 - 693.3
Industrial Products Division 51.2 - 51.2 46.4 - 46.4
712.7 - 712.7 739.7 - 739.7
Operating profit
Marketing and Distribution Division
Americas 19.7 (0.6) 19.1
24.2 0.8 25.0
Europe and Asia Pacific 46.4 (7.3) 39.1
53.9 (2.2) 51.7
Other Distribution Businesses 7.5 - 7.5
6.7 (0.1) 6.6
Total Marketing and Distribution Division 73.6 (7.9) 65.7
84.8 (1.5) 83.3
Industrial Products Division 8.5 - 8.5 7.1 17.8 24.9
Head Office costs (10.0) - (10.0) (10.1) (0.2) (10.3)
72.1 (7.9) 64.2 81.8 16.1 97.9
3 Segment information (continued)
2011/12 Full year audited
Adjusting
Before items After
adjusting adjusting
items (Note 4) items
£m £m £m
Revenue
Marketing and Distribution Division
Americas 369.1 - 369.1
Europe and Asia Pacific 443.1 - 443.1
Other Distribution Businesses 99.4 - 99.4
Total Marketing and Distribution Division 911.6 - 911.6
Industrial Products Division 61.5 - 61.5
973.1 - 973.1
Operating profit
Marketing and Distribution 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) 9.2
Total Marketing and Distribution Division 111.6 (1.5) 110.1
Industrial Products Division 9.5 17.8 27.3
Head Office costs (13.8) (0.2) (14.0)
107.3 16.1 123.4
4 Operating profit 2012/13 2011/12 2012/13 2011/12 2011/12
Statutory operating profit is stated after
(charging)/crediting the following: Third Third Nine Nine Full
quarter quarter months months year
unaudited unaudited unaudited unaudited audited
£m £m £m £m £m
- Restructuring costs - (2.8) (7.5) (2.8) (2.8)
- Acquisition costs - - (0.4) - -
- Gains on disposal of businesses - 1.1 - 18.9 18.9
- (1.7) (7.9) 16.1 16.1
Due to their significance and nature, adjusted operating
expenses and adjusted operating profit has been disclosed on
the face of the income statement which exclude these items
above. 5 Taxation
The taxation charge represents an effective tax rate for the
2012/13 financial year on profit before tax and
preference dividends of 27.5% (2011/12: 27.5% before tax on
gains from business disposals). 6 Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to ordinary shareholders for the period by
the weighted average number of ordinary shares in issue during
the period, excluding those shares held by the Premier
Farnell Executive Trust. For diluted earnings per share, the
weighted average number of ordinary shares in issue is
adjusted to assume issue of all dilutive potential ordinary
shares, being those share options and awards with a
non-market based performance condition granted to employees
where the exercise price is less than the average market
price of the Company's ordinary shares during the period, and
those shares with a market based performance condition
based on the current estimate of the number of shares that will
vest under the performance criteria.
Reconciliations of earnings and the weighted average number of
ordinary shares used in the calculations are set out
below.
2012/13 2011/12
Nine months unaudited Nine months unaudited
Basic Diluted Basic Diluted
per per per per
share share share share
Earnings amount amount Earnings amount amount
£m pence pence £m pence pence
Earnings per share
Profit attributable to ordinary shareholders 34.9 9.6
9.5 62.4 17.2 16.9
Restructuring costs 7.5 2.1
2.1 2.8 0.7 0.8
Tax attributable to restructuring costs (2.1) (0.6)
(0.6) (0.7) (0.2) (0.2)
Acquisition costs 0.4 0.1 0.1 - - -
Tax attributable to acquisition costs (0.1) - - - - -
Gains on disposal of businesses - -
- (18.9) (5.2) (5.1)
Tax on gains on disposal of businesses - -
- 3.2 0.9 0.9
Adjusted profit attributable to ordinary shareholders 40.6
11.2
11.1 48.8 13.4 13.3
Number Number
Weighted average number of shares 364,122,334 363,000,958
Dilutive effect of share options 3,069,651 5,230,907
Diluted weighted average number of shares 367,191,985 368,231,865
6 Earnings per share (continued) 2011/12
Full year audited
Basic Diluted
per per
share share
Earnings amount amount
£m pence pence
Earnings per share
Profit attributable to ordinary shareholders 76.9 21.2
20.9
Restructuring costs 2.8 0.7
0.7
Tax attributable to restructuring costs (0.7) (0.2)
(0.2)
Gains on disposal of businesses (18.9) (5.2)
(5.1)
Tax on gains on disposal of businesses 3.2 0.9
0.9
Adjusted profit attributable to ordinary
shareholders 63.3 17.4 17.2
Number
Weighted average number of shares
363,091,496
Dilutive effect of share options
4,952,153
Diluted weighted average number of shares
368,043,649
Adjusted Earnings per share has been provided in order to facilitate year on year comparison.
7 Net financial liabilities
28 October 30 October 29 January
2012 2011 2012
unaudited unaudited audited
£m £m £m
Cash and cash equivalents 108.8 62.8 116.9
Unsecured loans and overdrafts (289.6) (256.8) (294.2)
Net financial liabilities before preference
shares and derivatives (180.8) (194.0) (177.3)
Preference shares (62.4) (61.6) (61.8)
Derivative financial instruments (net) (0.4) (1.2) 2.0
Net financial liabilities (243.6) (256.8) (237.1)
Net financial liabilities are analysed in
the balance sheet as follows:
Current assets
Cash and cash equivalents 108.8 62.8 116.9
Derivative financial instruments 0.4 - 2.3
109.2 62.8 119.2
Current liabilities
Other loans (1.7) (0.6) (1.0)
5.9% US dollar Guaranteed Senior
Notes payable 2013 (99.2) - -
Derivative financial instruments (0.8) (1.2) (0.3)
(101.7) (1.8) (1.3)
Non-current liabilities
Bank loans (18.5) (78.9) (18.9)
5.9% US dollar Guaranteed Senior
Notes payable 2013 - (99.3) (100.8)
3.0% US dollar Guaranteed Senior
Notes payable 2016 (53.0) (53.5) (54.0)
5.2% US dollar Guaranteed Senior
Notes payable 2017 (18.8) (18.9) (19.1)
4.4% US dollar Guaranteed Senior
Notes payable 2018 (36.3) - (37.0)
4.8% US dollar Guaranteed Senior
Notes payable 2021 (56.7) - (57.8)
Other loans (5.4) (5.6) (5.6)
Preference shares (62.4) (61.6) (61.8)
(251.1) (317.8) (355.0)
At 28 October 2012, the Group's
syndicate bank facilities totalled £200 million expiring in
October 2016. Based on
these facilities, the headroom on bank borrowings at
28 October 2012 was £180 million.
8 Pension commitments
The valuation of the Group's defined benefit pension schemes in
the UK and the US has been updated at 28
October 2012
on an actuarial basis, applying current discount and inflation
rate assumptions and incorporating the market value of
assets at 28 O ctober 2012. The actuarial losses in the nine
months of £12.7 million (£8.9 million net of associated
deferred tax) has been taken through the statement of other
comprehensive income. 9 Exchange rates
The 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
Third Third Nine Nine Full
quarter quarter months months year
US dollar 1.60 1.60 1.58 1.61 1.60
Euro 1.26 1.15 1.24 1.14 1.15