Premier Farnell plc
7 December 2006
RESULTS FOR THE THIRD QUARTER AND NINE MONTHS
for the period ended 29th October 2006
of the Financial Year ending 28th January 2007
Key Financials £m Q3 06/7 Q3 05/6 Q3 growth 9M 06/7 9M 05/6 9M growth
Continuing (restated) at CER(b) (restated) at CER(b)
operations(a) £m £m £m £m
(Unaudited)
Revenue 207.6 198.5 7.5%" 628.9 576.0 9.5%"
Operating 20.5 16.4 30.6% 62.3 49.9 24.8%
profit(c)
Operating profit 20.5 17.8 19.9% 62.3 51.3 21.4%
before
reorganisation
costs
Profit before 15.4 10.8 49.5% 46.1 33.5 37.6%
taxation(c)
Profit before
taxation and 15.4 12.2 31.6% 46.1 34.9 32.1%
reorganisation
costs
Earnings per
share(c)
- total 5.7p 2.8p 111.1% 11.6p 7.4p 56.8%
- continuing 2.9p 2.6p 16.0% 8.6p 7.2p 19.4%
operations
Notes:
(a) Continuing operations exclude the Kent business, part of the
Industrial Products Division, which was sold on 31st July 2006. The results of
this discontinued operation are shown as a single number on the face of the
income statement below profit after tax and are thus excluded from the trading
results discussed in this statement, including comparative information.
Further details are given in note 5 to the financial information.
(b) CER - constant exchange rates
(c) The third quarter and nine month results for the prior year are
stated after reorganisation costs of £1.4m relating to the Group's 2005/6
redundancy programme.
Highlights
- Continued sales growth with third quarter sales per day up 7.5%
on the prior year.
- Fourth consecutive quarter of incremental improvement in
underlying gross margin percentage.*
- Third quarter operating profit up 30.6% at constant exchange
rates (19.9% before prior year reorganisation costs).
- Third quarter operating margin of 9.9% (2005/6: 9.0% before
reorganisation costs), demonstrating continued cost control whilst continuing
to grow our business.
- Strong operational gearing** across the Group in the third
quarter of 23.4% (excluding prior year reorganisation costs and at constant
exchange rates), with all areas of the business achieving operational gearing
in excess of 20%.
- Profit before taxation for the third quarter up 49.5% at constant
exchange rates (31.6% before prior year reorganisation costs).
- Cash generated from continuing operations up 38.1% in the third
quarter on the prior year as working capital remains under tight control.
- Announced our strategic review plans and now moving into the
implementation phase.
Commenting on the Q3 results, Harriet Green, Group Chief Executive,
said:
"Q3 was an exciting period for Premier Farnell which saw us
announce our strategic review plans and deliver another quarter of good
financial results, with strong operational gearing right across the Group.
This outcome provides a platform for further growth in the fourth quarter
against last year and to deliver our full year expectations. Looking forward,
I believe Premier Farnell is well placed to provide first class differentiated
service for customers and supplier partners, as well as deliver value for
shareholders."
* Underlying gross margin is stated before the impact of the RoHS
inventory provision taken in the fourth quarter of 2005/6
** Operational gearing represents the year on year increase in
adjusted operating profit compared to the increase in sales, both at constant
exchange rates.
" percentage changes in sales
Comparison of sales for specific periods is affected by three variables:
1. Changes in exchange rates used to translate the overseas sales in different
currencies into sterling;
2. Differences in the number of working days;
3. Disposal or acquisition of businesses.
Throughout this statement, in order to reflect underlying business
performance, percentage changes in sales are based on sales per day for
continuing businesses at constant exchange rates and for like periods, unless
otherwise stated.
For further information, contact:
Harriet Green, Group Chief Premier Farnell plc +44 (0) 20 7851 4100
Executive
Mark Whiteling, Group Finance
Director
Andrew Lewis, Group Financial
Controller
Richard Mountain Financial Dynamics +44 (0) 20 7269 7291
(UK)
A conference call for investors and analysts with Harriet Green and
Mark Whiteling will take place on 7th December 2006 at 08:30am. To obtain
dial-in details please call Elaine Ryman at Financial Dynamics on +44 (0) 207
269 7121. The conference call will be recorded and available on the Group web
site later that day.
The Company's announcements and presentations are published at
www.premierfarnell.com, together with business information, the 2006 Annual
Report and Accounts, and links to all other Group web sites.
The Company's Preliminary Results for the year ending 28th January
2007 are expected to be published in the week beginning 12th March 2007.
Premier Farnell plc
STATEMENT ON THIRD QUARTER AND NINE MONTHS RESULTS
for the period ended 29th October 2006
Premier Farnell, a leading high service distributor providing
essential products and services to engineers and purchasing professionals
globally, today announces its results for the third quarter and nine months
ended 29th October 2006.
Note: percentage changes in sales
Comparison of sales for specific periods is affected by three
variables:
1. Changes in exchange rates used to translate the overseas sales
in different currencies into sterling;
2. Differences in the number of working days;
3. Disposal or acquisition of businesses.
Throughout this statement, in order to reflect underlying business
performance, percentage changes in sales are based on sales per day for
continuing businesses at constant exchange rates and for like periods, unless
otherwise stated.
Chief Executive's Operational Overview
Q3 was an exciting quarter for the Group in which we saw strong
performance in key areas and announced our strategic review plans. We have now
moved into the implementation phase.
Our strategic review highlighted the need to continue to build on
the core fundamentals of distribution that the Group already does so well, but
with an increased focus through the significant market differentiating
initiatives identified. We believe these will maximise the opportunity for
continued profitable growth and increase our global reach and opportunity. We
have received extremely positive feedback already from both our customers and
our supplier partners.
We will develop a market leading position globally through our
focus on the fast growing electronic design market - a new state of the art
web platform offering speed and simplicity to customers and increased
investment in the developing regions of China and Eastern Europe. We will also
continue to drive enhanced regional focus on our core maintenance, repair and
operations (MRO) business and maintain our focus on the profitability of
BuckHickman InOne, although its long-term future is unlikely to be within the
Group.
The Q3 results have built further upon our strong first half and we
approach the end of the year in a positive position. We have seen continued
sales growth, with third quarter sales per day from continuing operations up
7.5% on the prior year and in line with the second quarter. Sales have
continued to grow well across the Group and in Europe and the UK we have grown
above market rates and continue to take share. Particularly satisfying is our
gross margin performance which has now delivered four consecutive quarters of
incremental improvement, with the third quarter up 0.5 percentage points over
the prior year. Commitment to gross margin maintenance is a critical component
of our future plans, and fundamental to a successful distribution business.
We continue to drive business efficiencies and control costs
effectively and have seen strong operational gearing across all regions, with
North Americaat 22.9% in the third quarter. These factors are reflected in our
pre-tax profit for the nine months, which was up 37.6% on the prior year. Our
cash performance also remains strong, with the increase in working capital
significantly less than the underlying sales growth. We expect to fund our
strategic changes from ongoing business performance.
Our expansion into China continues to make excellent progress with
our new Mandarin Chinese catalogue, with prices in local currency, now in
production. Work on our enhanced, fully transactional Chinese website with
Mandarin search engine is also making good progress. Our offering in the
region is strongly focused on the products and services required by the
rapidly growing body of electronic design engineers (EDE) and will be
compliant with the first phase of the China RoHS legislation. With the Chinese
government's deadline for compliance by 1st March 2007, our 20,000 compliant
stock keeping units (skus) and in-depth knowledge and experience gained from
implementation across Europe will enable us to support our Chinese customers
well through this complex change. In addition, our logistics plans are well
advanced with a major logistic provider agreeing to stock our products to
ensure delivery to all major regions of China within 1-2 days. Further
investments are planned and an independent Mandarin language Enterprise
Resource Planning (ERP) system is also now being implemented.
There continues to be strong US demand for our market leading RoHS
proposition. Within Europe, with the compliance deadline having passed in
July, RoHS is now having less incremental impact on sales.
Our new web platform, which is being deployed globally, offers
customers a greatly superior service - it is simpler and significantly faster
with improved data quality, search capability and enhanced functionality. The
content and design has been driven by customer feedback and early indications
show an increase in traffic through the new platform. As we continue to build
our multi-channel capability, eCommerce sales continue to grow. This changing
balance of sales transactions is having a positive impact on cost efficiencies
and margins as we drive to achieve our strategic goals.
Ongoing investment in products and services to meet the needs of
our growing EDE customer base is critical and we have made a number of key
franchise additions during the quarter, including, significantly, the
extension of our Analog Devices franchise into North America, and global
developments with Cypress Semi-conductor and ZMD. We are adding over 70,000
skus targeted at the design needs of the EDE customer group with a further
500,000 lines to be available on demand - a powerful offering. We believe that
the Group's broad portfolio now includes the majority of the world's leading
semiconductor, passive and electromechanical brands, offering a compelling
proposition to electronic design engineers globally.
We continue to believe that we will see growth opportunities in our
markets and that we will benefit from the focus on new and emerging markets.
Our strategic review has been thorough, and considered in detail all aspects
of the business. I am confident that the combination of our new strategy, well
planned and executed, and our continued focus on those things we do well will
provide a first class differentiated service offering to our customers, make
us a partner of choice for suppliers and employees and deliver increased
shareholder value.
Financial Results
Note: Continuing operations exclude the Kent business, part of the
Industrial Products Division, which was sold on 31st July 2006. The results of
this discontinued operation are shown as a single number on the face of the
income statement below profit after tax and are thus excluded from the trading
results discussed in this statement, including comparative information.
Further details are given in note 5 to the financial information.
Revenue
Third Quarter results
Sales in the third quarter from continuing operations were £207.6
million (2005/6: £198.5 million). Sales per day from continuing businesses
increased 7.5% on the prior year, compared to 10.5% year on year growth in the
first half, reflecting the stronger comparator in the second half of last
year.
Nine Months results
Sales in the first nine months from continuing operations were
£628.9 million (2005/6: £576.0 million). Sales per day from continuing
businesses increased 9.5% on the prior year, or 8.7% excluding the impact of
acquisitions made in the prior year.
Margins and Operating Profit
Third Quarter results
The gross margin from continuing operations in the third quarter
was 38.4%, up from 37.9% in the same period last year, and also marking the
fourth consecutive quarter of underlying gross margin improvement. Operating
profit from continuing operations was £20.5 million (2005/6: £16.4 million,
after reorganisation costs of £1.4 million), producing an operating margin of
9.9% (2005/6: 8.3% or 9.0% before reorganisation costs). There was a negative
impact on operating profit from the translation of overseas results compared
to prior year of £0.7 million, principally as a result of the weakness of the
US dollar. At constant exchange rates, the increase in operating profit
compared to the prior year was 30.6% or 19.9% before reorganisation costs in
2005/6.
Nine Months results
Gross margin from continuing operations in the first nine months
was 38.3% (2005/6: 38.2%). Operating profit in the first nine months from
continuing businesses was £62.3 million (2005/6: £49.9 million after
reorganisation costs of £1.4 million), producing an operating margin of 9.9%
(2005/6: 8.7% or 8.9% before reorganisation costs) and reflecting the
operational gearing achieved in the period.
Finance Costs
Net finance costs in the first nine months were £16.2 million. This
comprises net interest payable of £10.1 million (2005/6: £10.3 million) which
was covered 6.2 times by operating profit, and a charge of £6.1 million
(2005/6: £6.1 million) in respect of the Company's convertible preference
shares.
Profit Before Tax and Taxation Charge
Reported profit before tax from continuing operations in the first
nine months was £46.1million (2005/6: £33.5 million after reorganisation costs
of £1.4 million). Profit before tax increased 37.6% year-on-year or 32.1%
before reorganisation costs, remaining significantly ahead of the rate of
sales growth achieved.
The taxation charge for the first nine months was at an effective
rate of 29.0% of profit before tax and preference dividends (2005/6: 19.2%).
Disposal of Kent
On 31st July 2006, the Group disposed of its Kent business, part of
the Industrial Products Division, to Barnes Group Inc. The cash consideration
received in the third quarter, net of disposal costs and tax paid, was £20.8
million. The pre-tax profit on disposal recognised in the third quarter
results was £12.2 million. Kent is a specialist automotive consumables
business with sales in 2005/6 of £40.5 million and an operating profit of £2.1
million.
Return on Net Operating Assets
Return on net operating assets in the nine months was 26.3%
(2005/6: 21.6%).
Earnings per Share
Total earnings per share in the nine months were 11.6 pence
(2005/6: 7.4 pence). Earnings per share from continuing operations in the
first nine months were 8.6 pence (2005/6: 7.2 pence).
Balance Sheet and Cash Flow
Net cash generated from continuing operations in the third quarter
was £21.4 million, 38.1% up on the prior year. Working capital continued to be
tightly controlled with the increase of £2.7 million in the quarter relating
to the normal seasonal increase in receivables. On a year to date basis, the
growth in working capital is significantly less than the growth in underlying
sales. Net cash inflow during the first nine months was £20.8 million,
reflecting the net proceeds from the disposal of the Kent business (2005/6:
net cash outflow of £4.7 million before the cost of businesses acquired). Net
financial liabilities at the end of the quarter were £296.5 million (29th
January 2006: £330.1 million), including £111.2 million attributable to the
Company's preference shares.
Marketing and Distribution Division (MDD)
MDD comprises: Newark InOne; Farnell InOne; BuckHickman InOne; MCM,
an InOne Company, and CPC.
Q3 06/7 Q3 05/6 Q3 growth 9M 06/7 9M 05/6 9M growth
at CER* at CER*
£m £m £m £m
Revenue 189.0 180.2 7.6% 573.0 527.0 9.0%
Operating profit 19.7 15.9 28.8% 59.7 49.4 20.9%
19.7 17.1 19.4% 59.7 50.6 18.0%
Adjusted operating
profit **
Operating margin % 10.4% 8.8% 10.4% 9.4%
Adjusted operating 10.4% 9.5% 10.4% 9.6%
margin % **
*Constant exchange rates ** Before reorganisation costs in 2005/6 of £1.2m
Third quarter sales grew 7.6% on the prior year, and at constant
exchange rates adjusted operating profit increased 19.4%. Operational gearing
in the third quarter, being the year on year increase in adjusted operating
profit compared to the increase in sales, both at constant exchange rates, was
strong at 23.9%. Although the impact of foreign exchange has been neutral over
the nine months to date, we saw a much weaker US dollar in the third quarter
this year compared to the prior year. The negative impact on third quarter
operating profit from the translation of overseas results was £0.6 million,
due principally to the weak US dollar, and we would anticipate, if similar
exchange rates prevail for the balance of the year, to be similarly impacted
in the fourth quarter.
eCommerce sales during the quarter were up 23% on the prior year
and accounted for 24% of total MDD sales.
MDD Americas
Newark InOne and MCM, an InOne Company.
Q3 06/7 Q3 05/6 Q3 growth 9M 06/7 9M 05/6 9M growth
at CER* at CER*
£m £m £m £m
Revenue 84.0 81.0 9.0% 255.5 229.5 11.7%
Operating profit 7.9 6.0 41.1% 23.4 19.2 21.2%
Adjusted operating 7.9 6.7 25.4% 23.4 19.9 17.0%
profit **
Operating margin % 9.4% 7.4% 9.2% 8.4%
Adjusted operating 9.4% 8.3% 9.2% 8.7%
margin % **
*Constant exchange rates ** Before reorganisation costs in 2005/6 of £0.7m
Third quarter sales were up 9.0% on the prior year representing a
continued strong performance measured against the stronger comparative in the
third quarter of last year. Gross margin was maintained at the level achieved
in the first half and was 0.4 percentage points above the third quarter of the
prior year, reflecting the continued benefit from focusing on core markets and
accounts, and the increase in the proportion of sales to new and smaller
customers. The third quarter operating margin of 9.4% compares to 8.3%
achieved in the prior year (before reorganisation costs) with operational
gearing strong at 22.9%.
Web sales in the Americas in the first nine months were up 15%. Our
new web platform, which is being deployed globally, will significantly enhance
our web offering in the US.
Newark InOne has maintained its leadership position relating to
RoHS. Some 550,000 copies of the September catalogue have been delivered,
which has been reformatted to show products by product category and also
highlight the RoHS status of products.
MCM continued to grow sales, reflecting the targeted marketing of
core customers and channels, and the further enhancements to the new web-site
launched at the end of last year, with web sales increasing 38% in the third
quarter over the prior year.
Sales from operations in Mexico continued to grow strongly
following the transfer of all sales support activities to the expanded
facility in Guadalajara.
MDD Europe and Asia Pacific
Farnell InOne, BuckHickman InOne and CPC.
Q3 06/7 Q3 05/6 Q3 growth 9M 06/7 9M 05/6 9M growth
at CER* at CER*
£m £m £m £m
Revenue 105.0 99.2 6.4% 317.5 297.5 6.9%
Operating profit 11.8 9.9 21.6% 36.3 30.2 20.6%
Adjusted operating 11.8 10.4 15.7% 36.3 30.7 18.6%
profit **
Operating margin % 11.2% 10.0% 11.4% 10.2%
Adjusted operating 11.2% 10.5% 11.4% 10.3%
margin %
* Constant Exchange Rates ** Before reorganisation costs in 2005/6 of £0.5m
Sales were up 6.4% in the quarter. Overall market conditions
continue to show year on year improvement, albeit at a slowing rate in the UK,
evidencing strong market share performance of our Farnell InOne UK business as
it maintained its sales growth rate. The operating margin of 11.2% was ahead
of the prior year, reflecting an improved gross margin and tight control of
costs. Operational gearing in the third quarter was strong at 25.0%.
Revenue by region Q3 06/7 Q3 05/6 Sales 9M 06/7 9M 05/6 Sales
£m £m growth £m £m growth
UK (including exports) 68.5 66.6 2.8% 205.7 198.0 3.9%
Mainland Europe 28.9 25.0 16.1% 88.2 77.3 14.5%
Asia Pacific 7.6 7.6 5.8% 23.6 22.2 7.4%
The division's UK sales overall (including exports) increased 2.8%
in the third quarter, reflecting continued strong sales at Farnell InOne and
CPC, offset by the anticipated sales decline at BuckHickman InOne. Sales
through the Farnell InOne brand in the UK increased 8.2% in the third quarter,
following a strong first half performance.
Sales per day through the BuckHickman InOne brand were down 6.4%
during the quarter which was largely due to lower order volumes from a major
automotive customer. The implementation of the restructuring programme for
BuckHickman InOne, which puts in place a new service and logistics model for
the business, continued on plan during the quarter.
CPC's sales rose 6.4% in the third quarter with new initiatives in
marketing continuing to deliver success, including the launch of the new
catalogue in August, customer acquisition drives into new segments and an
enhanced focus on web, supported by improved service levels and the new web
infrastructure. CPC achieved record web sales in the third quarter, up 31% on
the prior year.
In mainland Europe, Farnell InOne continued to deliver a very
strong performance, with third quarter year-on-year growth of 16.1%. Sales in
all significant mainland European markets continued to deliver double digit
growth over the prior year with our multi-channel approach and web growth
driving performance.
Sales growth in Asia was up 12.1% in the third quarter, driven by
strong growth in active customer numbers in Singapore, Malaysia and Hong Kong.
In Australia, the performance of the business continues to show improvement
with positive year on year sales growth for the second consecutive quarter.
In August, the Europe and Asia Pacific region successfully upgraded
its web infrastructure to deliver enhanced speed and reliability to all three
trading brands. Performance improvements have exceeded expectations and all
key web metrics are improving. Driven by this improved platform, third quarter
web sales for the region were up 52% on the prior year.
Industrial Products Division (IPD)
Continuing businesses Q3 06/7 Q3 05/6 Q3 growth 9M 06/7 9M 05/6 9M growth
(restated) at CER* (restated) at CER*
£m £m £m £m
Revenue 18.6 18.3 6.9% 55.9 49.0 14.3%
Operating profit 3.3 3.1 10.0% 9.9 8.4 17.9%
Operating margin 17.7% 16.9% 17.7% 17.1%
*Constant exchange rates
Sales grew 6.9% in the third quarter and operational gearing was
27.3%. In the nine months, sales grew 14.3%, or 5.7% excluding the effect of
the acquisition of Weldon by Akron Brass in June 2005. At constant exchange
rates, operating profit in the nine months was £1.5 million ahead of last
year, helped by the contribution from Weldon.
Akron Brass
Akron Brass grew sales by 10.5% in the third quarter, with
increased orders from the traditional fire apparatus manufacturers and
municipal fire departments and strong performances from the international and
industrial markets where sales grew by over 20% year on year. Large orders
were also received by Weldon for its lighting devices and electrical control
solutions.
TPC Wire & Cable
TPC achieved sales growth of 9.0% in the third quarter, with the
business continuing to benefit from its successful diversification from the US
automotive sector, which continues to face difficult trading conditions, into
other markets including mining, utilities and government. Despite the
continuing raw material cost pressures, the business continues to successfully
maintain margin through pricing strategies and effective management of the
supply chain.
Outlook
Q3 was an exciting period for Premier Farnell which saw us announce
our strategic review plans and deliver another quarter of good financial
results, with strong operational gearing right across the Group. This outcome
provides a platform for further growth in the fourth quarter against last year
and to deliver our full year expectations. Looking forward, I believe Premier
Farnell is well placed to provide first class differentiated service for
customers and supplier partners, as well as deliver value for shareholders.
This press release contains certain forward-looking statements
relating to the business of the Group and certain of its plans and objectives,
including, but not limited to, future capital expenditures, future ordinary
expenditures and future actions to be taken by the Group in connection with
such capital and ordinary expenditures, the expected benefits and future
actions to be taken by the Group in respect of certain sales and marketing
initiatives, operating efficiencies and economies of scale. By their nature
forward-looking statements involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future. Actual
expenditures made and actions taken may differ materially from the Group's
expectations contained in the forward-looking statements as a result of
various factors, many of which are beyond the control of the Group. These
factors include, but are not limited to, actions taken in response to
enactment of RoHS and similar legislation, the results of, and implementation
of initiatives arising from, the Group's strategic business review, the
implementation of cost-saving initiatives to offset current market conditions,
continued use and acceptance of e-commerce programs and systems and the impact
on other distribution systems, the ability to expand into new markets and
territories, the implementation of new sales and marketing initiatives,
changes in demand for electronic, electrical, electromagnetic and industrial
products, rapid changes in distribution of products and customer expectations,
the ability to introduce and customers' acceptance of new services, products
and product lines, product availability, the impact of competitive pricing,
fluctuations in foreign currencies, and changes in interest rates and overall
market conditions, particularly the impact of changes in world-wide and
national economies.
CONSOLIDATED INCOME STATEMENT
For the third quarter and nine months ended 29th October 2006
2005/6 2005/6
2006/7 Third 2006/7 Nine 2005/6
Third quarter Nine months Full year
quarter unaudited months unaudited audited
unaudited (restated) unaudited (restated) (restated)
Notes £m £m £m £m £m
Continuing operations
Revenue 2 207.6 198.5 628.9 576.0 773.5
Cost of sales
- before RoHS inventory provision (127.8) (123.3) (388.0) (355.7) (478.2)
- RoHS inventory provision - - - - (6.6)
Total cost of sales (127.8) (123.3) (388.0) (355.7) (484.8)
Gross profit 79.8 75.2 240.9 220.3 288.7
Net operating expenses
- before reorganisation costs (59.3) (57.4) (178.6) (169.0) (225.2)
- reorganisation costs - (1.4) - (1.4) (5.3)
Total net operating expenses (59.3) (58.8) (178.6) (170.4) (230.5)
Operating profit
- before RoHS inventory provision
and reorganisation costs 20.5 17.8 62.3 51.3 70.1
- RoHS inventory provision - - - - (6.6)
- reorganisation costs - (1.4) - (1.4) (5.3)
Total operating profit 2 20.5 16.4 62.3 49.9 58.2
Finance income (interest receivable) 0.1 0.1 0.4 0.2 0.4
Finance costs
- interest payable (3.1) (3.7) (10.5) (10.5) (14.4)
- preference dividends (1.7) (1.6) (5.1) (5.0) (6.7)
- premium on redemption
of preference shares (0.4) (0.4) (1.0) (1.1) (1.5)
Total finance costs (5.2) (5.7) (16.6) (16.6) (22.6)
Profit before taxation 3 15.4 10.8 46.1 33.5 36.0
Taxation 4 (4.9) (1.2) (14.8) (7.4) (6.0)
Profit after taxation from
continuing operations 10.5 9.6 31.3 26.1 30.0
Profit after taxation from
discontinued operation 5 10.1 0.4 10.7 0.7 1.1
Profit for the period (attributable
to ordinary shareholders) 20.6 10.0 42.0 26.8 31.1
Earnings per share 6
Basic 5.7p 2.8p 11.6p 7.4p 8.6p
Diluted 5.7p 2.8p 11.5p 7.4p 8.6p
Earnings per share from
continuing operations 6
Basic 2.9p 2.6p 8.6p 7.2p 8.3p
Diluted 2.9p 2.6p 8.6p 7.2p 8.3p
Ordinary dividends
Interim - proposed 4.0p 4.0p 4.0p
Final - proposed 5.0p
Paid 9.0p 9.0p 9.0p
Impact on shareholders'
funds (£m) 32.6 32.6 32.6
Prior year figures have been restated to reflect the reclassification of the
Kent business as a discontinued operation following its disposal on 31st July
2006. Further details are given in note 5.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the third quarter and nine months ended 29th October 2006
2006/7 2005/6 2006/7 2005/6 2005/6
Third Third Nine Nine Full
quarter quarter months months year
unaudited unaudited unaudited unaudited audited
Notes £m £m £m £m £m
Profit for the period 20.6 10.0 42.0 26.8 31.1
Net exchange adjustments (1.1) (0.5) (1.8) (5.1) (4.5)
Actuarial losses on pensions and
other post-retirement obligations - - - - (8.2)
Deferred tax on actuarial losses - - - - 2.4
Net losses not recognised
in the income statement 9 (1.1) (0.5) (1.8) (5.1) (10.3)
Total recognised income for the period 19.5 9.5 40.2 21.7 20.8
Effect of change in accounting
for preference shares (including
deferred tax of £4.7m) 9 (111.0) (111.0)
Total recognised expense
since prior year (89.3) (90.2)
CONSOLIDATED BALANCE SHEET
As at 29th October 2006
29th 30th
October October 29th
2006 2005 January
2006
unaudited unaudited audited
Notes £m £m £m
ASSETS
Non-current assets
Goodwill 49.7 49.8 50.0
Other intangible assets 21.1 28.3 27.5
Property, plant and equipment 61.2 67.0 67.3
Retirement benefit asset 50.5 48.6 52.0
Deferred tax assets 0.6 0.5 0.3
Total non-current assets 183.1 194.2 197.1
Current assets
Inventories 168.3 168.6 163.2
Trade and other receivables 138.2 146.5 142.8
Cash and cash equivalents 7 31.8 40.0 40.5
Total current assets 338.3 355.1 346.5
LIABILITIES
Current liabilities
Financial liabilities 7 (3.0) (88.4) (92.8)
Trade and other payables (103.1) (103.5) (93.9)
Current tax payable (36.6) (35.7) (29.5)
Short-term provisions 8 (1.4) (0.1) (3.2)
Total current liabilities (144.1) (227.7) (219.4)
Net current assets 194.2 127.4 127.1
Non-current liabilities
Financial liabilities 7 (325.3) (284.5) (277.8)
Retirement and other
post-employment benefits (36.1) (25.3) (38.5)
Deferred tax liabilities (22.6) (29.0) (25.2)
Other provisions 8 (1.0) (0.9) (1.1)
Total non-current liabilities (385.0) (339.7) (342.6)
NET LIABILITIES (7.7) (18.1) (18.4)
EQUITY
Ordinary shares 18.2 18.1 18.1
Equity element of
preference shares 19.9 19.9 19.9
Share premium 21.4 20.3 20.5
Capital redemption reserve 0.8 0.8 0.8
Hedging reserve - (0.1) (0.2)
Cumulative translation reserve (4.1) (2.9) (2.3)
Retained earnings (63.9) (74.2) (75.2)
TOTAL EQUITY 9 (7.7) (18.1) (18.4)
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
For the third quarter and nine months ended 29th October 2006
2005/6 2006/7 2005/6 2005/6
2006/7 Third Nine
Third quarter Nine months Full year
quarter unaudited months unaudited audited
unaudited (restated) unaudited (restated) (restated)
Notes £m £m £m £m £m
Cash flows from operating activities
Operating profit from continuing operations 20.5 16.4 62.3 49.9 58.2
Exceptional items:
- income statement impact - 1.4 - 1.4 11.9
- cash impact (0.8) (1.4) (2.0) (1.4) (2.0)
Net impact of exceptional items (0.8) - (2.0) - 9.9
Depreciation and amortisation 5.0 5.7 15.0 15.8 20.8
Changes in working capital
(before exceptional items) (2.7) (6.8) (10.4) (11.3) (11.1)
Other non-cash movements
(before exceptional items) (0.6) 0.2 (0.9) 0.4 (1.0)
Cash generated from
continuing operations 21.4 15.5 64.0 54.8 76.8
Discontinued operations - 1.4 (0.1) 1.6 2.5
Interest received 0.1 0.1 0.5 0.2 0.4
Interest paid (1.5) (0.3) (9.4) (7.3) (14.3)
Dividends paid on
preference shares - - (3.4) (3.4) (6.7)
Taxation paid (5.1) (3.1) (13.3) (11.3) (14.3)
Net cash generated
from operating activities 14.9 13.6 38.3 34.6 44.4
Cash flows from
investing activities
Purchase of businesses - - - (7.6) (7.6)
Disposal of businesses 5 20.8 - 20.8 - -
Proceeds from sale of
property, plant and equipment - 0.1 2.1 1.1 1.1
Purchase of property,
plant and equipment (1.8) (1.9) (4.8) (4.1) (5.8)
Purchase of intangible
assets (computer software) (1.5) (1.2) (4.2) (3.5) (5.7)
Net cash generated from/
(used in) investing activities 17.5 (3.0) 13.9 (14.1) (18.0)
Cash flows from
financing activities
SEC de-registration costs - - - (0.3) (0.3)
Issue of ordinary shares 0.1 - 1.2 0.1 0.1
New bank loans - 10.6 78.9 22.7 22.7
Repayment of bank loans (19.8) - (105.6) - (8.3)
Dividends paid to shareholders (14.5) (14.5) (32.6) (32.6) (32.6)
Net cash used in
financing activities (34.2) (3.9) (58.1) (10.1) (18.4)
Net (decrease)/increase in cash,
cash equivalents and
bank overdrafts (1.8) 6.7 (5.9) 10.4 8.0
Cash, cash equivalents
and bank overdrafts at
beginning of period 31.6 32.0 35.6 27.2 27.2
Exchange (losses)/gains (0.9) 0.2 (0.8) 1.3 0.4
Cash, cash equivalents
and bank overdrafts
at end of period 28.9 38.9 28.9 38.9 35.6
Reconciliation of net
financial liabilities
Net financial liabilities
at beginning of period,
as previously reported (330.1) (200.7) (200.7)
Implementation of accounting
for financial instruments
in accordance with IAS 39:
- reclassification of preference shares - (106.3) (106.3)
Net financial liabilities
at beginning of period,
as restated (330.1) (307.0) (307.0)
Net (decrease)/increase in cash,
cash equivalents
and bank overdrafts (5.9) 10.4 8.0
Decrease/(increase) in debt 26.7 (22.7) (14.4)
Premium on redemption
of preference shares (1.0) (1.1) (1.5)
Derivative financial instruments 0.2 (0.1) (0.2)
Exchange movement 13.6 (12.4) (15.0)
Net financial liabilities
at end of period 7 (296.5) (332.9) (330.1)
Prior year figures have been restated to reflect the reclassification of the
Kent business as a discontinued operation following its disposal on 31st July
2006. Further details are given in note 5.
Notes
1. Basis of preparation
The unaudited consolidated financial information in this report has been
prepared applying the accounting policies disclosed in the Group's 2006 Annual
Report and Accounts on pages 33 to 36. The Group's 2006 Annual Report and
Accounts, on which the Company's auditors, PricewaterhouseCoopers LLP, have
given an unqualified opinion in accordance with Section 235 of the Companies
Act 2005, is available on the Company's website at www.premierfarnell.com or
from 150 Armley Road, Leeds, LS12 2QQ.
2. Segment information (continuing
operations)
2005/6 2005/6
2006/7 Third 2006/7 Nine 2005/6
Third quarter Nine months Full year
quarter unaudited months unaudited audited
unaudited (restated) unaudited (restated) (restated)
£m £m £m £m £m
Revenue
Marketing and
Distribution Division
Americas 84.0 81.0 255.5 229.5 310.0
Europe and Asia Pacific 105.0 99.2 317.5 297.5 396.4
Total Marketing and
Distribution Division 189.0 180.2 573.0 527.0 706.4
Industrial Products Division 18.6 18.3 55.9 49.0 67.1
207.6 198.5 628.9 576.0 773.5
Operating profit
Marketing and
Distribution Division
Americas
- before RoHS inventory
provision and
reorganisation costs 7.9 6.7 23.4 19.9 27.1
- RoHS inventory provision - - - - (4.2)
- reorganisation costs - (0.7) - (0.7) (0.7)
7.9 6.0 23.4 19.2 22.2
Europe and Asia Pacific
- before RoHS inventory
provision and
reorganisation costs 11.8 10.4 36.3 30.7 41.5
- RoHS inventory provision - - - - (2.4)
- reorganisation costs - (0.5) - (0.5) (4.4)
11.8 9.9 36.3 30.2 34.7
Total Marketing and
Distribution Division 19.7 15.9 59.7 49.4 56.9
Industrial Products Division 3.3 3.1 9.9 8.4 12.0
Head Office costs
- before reorganisation costs (2.5) (2.4) (7.3) (7.7) (10.5)
- reorganisation costs - (0.2) - (0.2) (0.2)
(2.5) (2.6) (7.3) (7.9) (10.7)
20.5 16.4 62.3 49.9 58.2
Prior year figures have been restated to reflect the reclassification of the
Kent business, part of the Industrial Products Division, as a discontinued
operation following its disposal on 31st July 2006. Further details are given
in note 5.
3. Profit before taxation
(continuing operations)
Profit before taxation is
stated after charging/(crediting):
2006/7 2005/6 2006/7 2005/6
Third Third Nine Nine 2005/6
quarter quarter months months Full year
unaudited unaudited unaudited unaudited audited
£m £m £m £m £m
Share-based payments 0.6 0.6 1.9 1.6 2.1
Defined benefit
pension schemes (net) (0.6) (0.3) (1.4) (1.0) (2.4)
Severance costs
(former Group Chief Executive) - - - 0.5 0.5
RoHS inventory provision - - - - 6.6
Reorganisation costs - 1.4 - 1.4 5.3
The negotiations with regard to the former Group Chief Executive's pension
entitlement referred to in the 2006 Annual Report were concluded in the second
quarter and a payment of £0.3 million was made.
In the year ended 29th January 2006, a provision of £6.6 million was made in
the fourth quarter for obsolete and slow moving non-compliant inventory as a
result of the European Union's Directive relating to the Restriction of the
use of certain Hazardous Substances (RoHS).
Reorganisation costs in the year ended 29th January 2006, comprised £1.4
million charged in the third quarter for severance costs relating to the
Group's redundancy programme, and £3.9 million charged in the fourth quarter
relating to the restructuring of the BuckHickman InOne business.
4. Taxation
The taxation charge includes provision at an effective rate for the nine
months on profit before tax from continuing operations and preference
dividends of 29.0% (2005/6: 19.2%), being the estimated effective rate of
taxation for the year ending 28th January 2007.
5. Discontinued operation
On 31st July 2006, the Group disposed of Kent, a specialist automotive
consumables business and part of the Industrial Products Division.
Consequently, the Kent business has been reclassified as a discontinued
operation and its trading results are included in the income statement as a
single line below profit after taxation from continuing operations, with
comparatives restated accordingly. The impact of this discontinued operation
on the income statement is as follows:
2006/7 2005/6 2006/7 2005/6 2005/6
Third Third Nine Nine Full
quarter quarter months months year
unaudited unaudited unaudited unaudited audited
£m £m £m £m £m
Post tax results
Revenue - 10.1 21.3 29.6 40.5
Gross margin - 6.9 14.5 20.5 27.8
Net operating expenses - (6.1) (13.6) (19.2) (25.7)
Operating profit - 0.8 0.9 1.3 2.1
Taxation - (0.4) (0.3) (0.6) (1.0)
Profit after taxation - 0.4 0.6 0.7 1.1
Gain on disposal
Gain on disposal of net assets 12.2 - 12.2 - -
Taxation (2.1) - (2.1) - -
Net gain on disposal 10.1 - 10.1 - -
Total income statement impact 10.1 0.4 10.7 0.7 1.1
The net cash inflow from the disposal of this business during the third
quarter comprises the cash consideration, net of disposal costs paid, of £21.7
million, less tax paid of £0.9 million. The operational cash flows from this
business were not significant to the Group.
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 granted to
employees where the exercise price is less than the average market price of
the Company's ordinary shares during the period.
Earnings and the weighted average number of ordinary shares used in the
calculations of earnings per share are set out below.
2006/7 Nine 2005/6 Nine
months months 2005/6 Full
unaudited unaudited year audited
£m £m £m
Profit attributable to
ordinary shareholders 42.0 26.8 31.1
Number Number Number
Weighted average
number of shares 363,258,777 362,721,889 362,729,711
Dilutive effect of share options 1,326,090 174,179 376,557
Diluted weighted
average number of shares 364,584,867 362,896,068 363,106,268
7. Net financial liabilities
29th October 30th October 29th January
2006 2005 2006
unaudited unaudited audited
£m £m £m
Cash and cash equivalents 31.8 40.0 40.5
Unsecured loans and overdrafts (217.1) (263.0) (260.2)
Net financial liabilities
before preference
shares and derivatives (185.3) (223.0) (219.7)
Preference shares (111.2) (109.8) (110.2)
Derivative financial instruments - (0.1) (0.2)
Net financial liabilities (296.5) (332.9) (330.1)
Net financial liabilities are
analysed in the balance
sheet as follows:
Current assets
Cash and cash equivalents 31.8 40.0 40.5
Current liabilities
Bank overdrafts (2.9) (1.1) (4.9)
7.2% US dollar
Guaranteed Senior Notes
payable 2006 - (87.1) (87.6)
Other loans (0.1) (0.1) (0.1)
Derivative financial instruments - (0.1) (0.2)
(3.0) (88.4) (92.8)
Non-current liabilities
Bank loans (93.1) (45.7) (37.9)
5.3% US dollar Guaranteed
Senior Notes payable 2010 (34.7) (37.1) (37.3)
5.9% US dollar Guaranteed
Senior Notes payable 2013 (83.7) (89.3) (89.8)
Other loans (2.6) (2.6) (2.6)
Preference shares (111.2) (109.8) (110.2)
(325.3) (284.5) (277.8)
8. Provisions
29th October 30th October
2006 2005 29th January
unaudited unaudited 2006 audited
£m £m £m
Current:
- reorganisation costs 1.3 - 3.1
- dilapidation costs 0.1 0.1 0.1
Non-current:
- reorganisation costs - - 0.2
- dilapidation costs 1.0 0.9 0.9
2.4 1.0 4.3
9. Consolidated statement of changes in shareholders' equity
2006/7 Nine 2005/6 Nine 2005/6 Full
months months year
unaudited unaudited audited
£m £m £m
Total equity at
beginning of year,
as previously reported (18.4) 102.5 102.5
Implementation of accounting
for financial instruments in
accordance with IAS 32 and IAS 39:
- reclassification of preference
shares as debt - (106.3) (106.3)
- associated deferred tax - (4.7) (4.7)
Total equity at beginning of year,
as restated (18.4) (8.5) (8.5)
Profit for the period 42.0 26.8 31.1
Net gains and losses
recognised directly in equity (1.8) (5.1) (10.3)
Ordinary dividends declared (32.6) (32.6) (32.6)
Ordinary shares issued 1.0 0.1 0.3
Share-based payments 1.9 1.6 2.1
Derivative financial instruments 0.2 (0.1) (0.2)
SEC de-registration costs - (0.3) (0.3)
Total equity at end of year (7.7) (18.1) (18.4)
10.Exchange rates
The principal average exchange rates used to translate the Group's overseas
profits were as follows:
2006/7 2005/6
Third Third 2006/7 Nine 2005/6 Nine 2005/6 Full
quarter quarter months months year
US dollar 1.89 1.79 1.83 1.83 1.80
Euro 1.48 1.47 1.46 1.46 1.46
11. Dividend
The preference share dividend for the six months ending 26th January 2007 will
be paid on 26th January 2007 to preference shareholders on the register at
close of business on 29th December 2006.
END
© 2006 PR Newswire
