Premier Farnell plc
17 September 2015
Results for the first half of the financial year ending 31 January 2016
Key Financials
Continuing operations
(unaudited)
£m except for per share
Total revenue
Sales per day growth
479.3
4.0%
2.9%
45.5
(2.9)
(2.4)
38.1
43.1
-11.6%
33.5
38.8
-13.7%
Total profit before taxation
30.6
36.4
-15.9%
Adjusted earnings per share (b)
6.4p
7.2p
-11.1%
Basic earnings per share
5.8p
6.8p
-14.7%
41.8
13.8
202.9%
2.6p
4.4p
-40.9%
(b)
Total operating profit
Adjusted profit before tax
Free cash flow
(b)
(c)
Interim ordinary dividend per share
(c)
498.6
Change
41.0
Adjusting items
(b)
H1 14/15
(26 weeks)
(a)
Adjusted operating profit (b)
(a)
H1 15/16
(26 weeks)
-9.9%
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, unless otherwise stated.
Current year net adjusting items comprise restructuring costs of £3.8m, Brazil closure costs of £1.0m and a benefit from a legal
provision release of £1.9m. In the prior year, adjusting items comprise restructuring costs of £2.3m and acquisition costs of
£0.1m.
Free cash flow comprises total cash generated from operations, excluding cash flows related to adjusting items, less net
capital expenditure, interest, preference dividends and tax payments.
FINANCIAL PERFORMANCE






Underlying sales growth of 2.9% year on year
Adjusted operating profit of £41.0m down 9.9% year on year
Adjusted operating profit margin of 8.2% (2014/15: 9.5%)
Adjusted free cash flow at 8.4% of sales driven by strong working capital management
Adjusted earnings per share of 6.4p down 11.1% on the prior period
Full year adjusted operating profit now expected to be in the range £73m to £77m
STRATEGY REFOCUS AND OPERATIONAL REVIEW





We will refocus on the fundamentals of distribution: product, pricing and proposition
The Board has taken the decision to sell Akron Brass
The Group will cease direct operations in Brazil due to sub-optimal returns and high costs of operation
The Board’s operational review announced in July is progressing well and is targeted on the following areas:
trading, operations, support and working capital
Our ongoing global drive for efficiency is set to deliver £4m in annualised benefit for the current year
DIVIDEND


Interim dividend of 2.6p per share, a reduction of 40.9% on the prior year interim
The Group will target a sustainable and progressive dividend with cover of 1.5x to 2.0x
1
Val Gooding, Chairman, commented:
“The review announced in July is progressing rapidly. One of the key early decisions is to dispose of Akron Brass
which, although an excellent business, does not fit strategically within the portfolio given the Group’s refocus on its
core distribution activities. The Board has also given careful consideration to the current shape and capacity of the
Group’s balance sheet and we have concluded that it is appropriate to rebase our dividend. The Board recognises the
significance of the dividend to our shareholders, but also the importance of it being sustainable and progressive and
we will therefore target dividend cover in the range 1.5x to 2.0x going forward.
The review has highlighted the extent of change in the business that is necessary to allow it to compete effectively in
an increasingly digital market. Further work is required to determine the scale, timing, benefits and costs involved,
and the Board expects to be in a position to provide this information at the time of its Q3 trading update in December
2015.”
Mark Whiteling, Interim Chief Executive Officer, commented:
“As stated in our trading update on 29 July, the Group was affected by a slowdown and more difficult trading
conditions in the second quarter of the year, particularly in the core markets of North America and the UK. As
anticipated at that time these conditions, combined with the impact of exchange rates, have resulted in adjusted
operating profit for the first half of the year that is approximately 10% lower than the first half of last year. The
slowing momentum seen in the second quarter has continued in the start of the seasonally weaker second half.
Accordingly, we now anticipate second half operating profit performance to be lower than previous expectations,
with full year adjusted operating profit now expected to be in the range of £73m to £77m.
To improve our performance, we must refocus on our core distribution business. We must ensure that we deliver
what our customers and suppliers demand by consistently focusing on the fundamentals of distribution - product,
pricing and proposition. The operational review referred to in our July statement is ongoing and making good
progress. We believe that implementing the results of this work will improve the operational and financial
performance of the Group.”
For further information, contact:
Mark Whiteling, Interim Chief Executive
Officer
Premier Farnell plc
+44 (0) 20 7851 4107
FTI Consulting
+44 (0) 20 3727 1374
Helen Willis, Interim Chief Financial Officer
Nicole Nordwall, Investor Relations
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.
An interim management statement will be announced on 17 December 2015.
A presentation will be held at 8:30am this morning 17 September 2015.
Dial in details if joining by conference call
Dial-in: 44(0)20 3427 0503
Confirmation Code: 2632548
The call will be available as a live and on demand webcast on the Investor Relations section of Premier Farnell website
at :
http://edge.media-server.com/m/p/uo3hazob
2
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, the implementation of initiatives supporting the Group’s strategy, the effect of
legislation and regulatory enactments, recruitment and integration of new personnel, the implementation of cost saving
initiatives, continued use and acceptance of e-commerce programs and systems, implementation of new IT systems, the ability
to expand into new arkets 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 worldwide and national economies. The Group does not intend to
update the forward-looking statements made herein.
Premier Farnell plc
3
Segmental Analysis
Revenue
H1 15/16
£m
H1 14/15
£m
Underlying
growth (a)
Europe
Americas
Asia Pacific
element14
178.1
177.4
44.5
400.0
183.4
164.3
39.1
386.8
3.8%
0.7%
12.0%
3.3%
CPC & MCM
61.3
56.6
5.8%
Akron Brass
37.3
35.9
-5.3%
498.6
479.3
2.9%
H1 15/16
H1 14/15
32.9
8.2%
6.3
10.3%
6.6
17.7%
39.3
10.2%
5.6
9.9%
6.8
18.9%
Central costs
(4.8)
(6.2)
Group
41.0
8.2%
45.5
9.5%
Group
Adjusted Operating Profit (b) £m
Operating Margin %
element14
CPC & MCM
Akron Brass
(a)
(b)
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, unless otherwise stated.
Current year adjusted operating profit excludes restructuring costs of £3.8m, Brazil closure costs of £1.0m and a legal
provision release of £1.9m (element14). Prior year adjusted operating profit excludes restructuring costs of £2.3m and
£0.1m of acquisition costs (element14 £2.2m and central costs £0.2m).
4
PREMIER FARNELL OVERVIEW
Premier Farnell plc is a global distributor of technology products and solutions. It has over 4,500 employees,
operates in 36 countries, and consists of three business units, element14, CPC & MCM and Akron Brass, that focus
on specific market segments.
REFOCUSING OUR STRATEGY AND THE OPERATIONAL REVIEW
Focus on fundamentals
While the markets in which we operate continue to evolve, the fundamentals of distribution – product, pricing and
proposition – remain at the heart of what we do. The Board is therefore taking steps to refocus the business on
these fundamentals. Being clear about the value of our customer proposition into all markets and to all customers
is critical as we migrate towards a global rather than a regional operating model in order to more consistently
deliver what our customers demand.
We offer three types of products and services:
1.
Distribution of electronic components and related products.
2.
Design services – the design, prototyping and manufacturing of development boards and single board
computers and accessories for these products. These services are delivered principally through our Embest and
Avid businesses, which continue to grow profitably.
3.
Finished products – the sale of finished products (some of which we also design), including single board
computers such as the Raspberry Pi, that are used by industry or consumers. This part of our business is also
growing profitably.
By concentrating on the fundamentals of distribution – product, pricing and proposition, we can improve our
financial and operational performance, particularly in our core distribution business.
1.
Product – We will maximise the product range available to all customers globally, consistent with their service
requirements. Achieving this requires inventory visibility, availability and consistency of delivery. We have
completed a review of our inventory range, our recent new product performance and conducted a network
study looking at what inventory we hold and where. This work will enable us to make better investments in
new products and reduce duplicate inventory across geographies that is not required to meet customer service
levels.
2.
Pricing – Aligning our pricing position to our competitors in the market in which we compete is a core business
process. While we have increased our focus on our price positioning, we have not been quick enough in
adapting to the dynamics of changing customer trends. Accordingly, we will look to realign our pricing
strategy so that we target those customers who we can serve more profitably.
3.
Proposition – We need a clear and consistent service proposition for our customers that is understood;
differentiated by channel; and managed in the most cost effective way. We have a significant opportunity to
improve the consistency and quality of the customer experience, while lowering the cost to serve the
customer.
Operational review
In July the Board initiated an operational review of the Group. This review is focused on the global electronics
distribution business (element14) and is being supported by Alvarez and Marsal (A&M), a global firm specialising in
corporate performance improvement. A&M were engaged to assist management in addressing some of the
5
challenges the business faces, as well as exploiting its opportunities, with a focus on the fundamentals of
distribution referred to earlier.
The scope of the work covers all aspects of the business including:




Trading – customer proposition, customer experience, cost to serve, customer experience by channel
Operations – product acquisition cost, product range, network design
Support – the cost of support functions and overheads
Working capital – targeted improvements
Opportunities which require further investigation have been identified and management will continue to examine
these to confirm their scale and achievability. We expect to update the market on the final outcome of the
operational review at the time of the third quarter trading update in December.
On the basis of its performance and the cost to serve customers, we have taken the decision to cease operating
directly in Brazil. We will continue to support customers in that market with direct shipment from North America
and Europe. The anticipated reduction in revenue is £3m per year.
To enable us to create focus and invest in the core of our business, the Board has decided that it is no longer
appropriate to retain Akron Brass within the Group. The Board expects that the business, which has consistently
delivered strong revenue growth with an attractive margin profile, will be of substantial value to buyers able to
capitalise on better synergistic potential. A sale process has therefore been initiated.
KPIs
In light of the strategy refocus (including the decision to sell Akron Brass) and the operational review we intend to
reconsider the KPIs that we have been targeting over the last three years. Whilst we remain committed to driving
growth, efficiency, profitability and cash, the future targets will need to reflect the revised shape of the Group. We
intend to update these post the disposal of Akron Brass and completion of the operational review.
FIRST HALF SALES REVIEW
Group sales per day growth was 2.9% year on year in the first half. Sales momentum slowed in the second quarter,
particularly in our UK and North American markets, where our sales performance has been affected by the lack of
focus referred to earlier. Excluding Raspberry Pi, Group sales per day declined -0.4% in Q2, compared with growth
of 1.9% in Q1. In the first half, Group sales per day excluding Raspberry Pi was 0.8% versus 3.3% in the prior year.
Sales growth
Europe
Americas
APAC
element14
CPC & MCM
Akron Brass
Group
H1
Q2
Q1
3.8%
0.7%
12.0%
3.3%
5.8%
-5.3%
2.9%
1.6%
-0.8%
8.2%
1.2%
-1.9%
-4.6%
0.4%
5.9%
2.2%
16.2%
5.3%
13.9%
-6.1%
5.4%
Europe benefited from strong growth of 9.3% year on year in Continental Europe, with Germany, Austria, Spain,
Italy and the Nordics all achieving double digit growth in spite of the mixed economic backdrop and soft GDP data
across some of the Eurozone. This strong performance was offset by weakness in the UK, where conditions remain
challenging, with a first half sales decline of -7.6%. UK performance is a key focus for our management team.
6
Americas sales per day growth slowed over the first half. While this was consistent with weaker US manufacturing
PMIs in the second quarter, we have initiated a product-led repositioning of the business that focuses on industrial
electronics.
Within Asia Pacific, India sales momentum continued with first half sales growth of 27.6%, and our more
established markets of Australia and Singapore delivered strong growth of 7.7% and 9.1% respectively. Greater
China growth remained steady across the first half at 10.0%, despite the heightened economic uncertainty in the
region, reflected in the significant weakening of PMI data.
CPC & MCM first quarter sales growth benefited significantly from the launch of Raspberry Pi 2, whilst continued
weakness in the UK market affected the second quarter result.
We are the leader in the production and sale of the Raspberry Pi board, our biggest selling single board computer
(SBC), and sales grew 67% in the first half following the launch of the Raspberry Pi 2. Sales of the BeagleBone Black,
our second best selling SBC, have also shown an increase year on year and now represent about 7% of total sales of
single board computers.
Akron Brass sales declined -5.3% in the first half, against challenging 2014 comparators. Export sales this year were
affected by the strong US$ throughout much of the first half, together with a weak oil and gas sector which resulted
in the postponement and cancellation of orders.
FIRST HALF FINANCIAL COMMENTARY
Despite higher revenue year on year, Group gross profit fell £3.8m to £175.6m. Gross margin declined by 2.2
percentage points to 35.2%. The decline primarily reflects continued downward pressure from price positioning
(0.8% impact), product mix given significant Raspberry Pi growth (0.4% impact), and from unfavourable foreign
exchange rates, which impacted total Group gross margin % by an estimated 0.9 percentage points year on year.
In the first half, operating costs of £134.6m were 0.9 percentage points lower as a % of sales than the prior year at
27.0%, despite higher depreciation costs associated with strategic IT investments (most notably our new web
platform implementation completed in 2014/15). We continue to tactically control our cost base in response to
sales volumes and the gross profit generated, whilst strategically reducing costs as we move to implement a more
efficient global operating model. Within element14, since the end of the third quarter last financial year when we
began to transition the organisation to a global operating model, we have reduced global headcount by circa 150
and generated annualised run-rate savings of £4m. In addition to headcount reductions across global functions, this
has included moving the Group’s US eChannel processing operations to Mexico and the re-organisation of the
Group’s European inbound and outbound service centre to increase efficiency and align operations more closely to
end markets.
Adjusted operating profit for the first half was £41.0m (2014/15: £45.5m), representing a decline of 9.9% year on
year, with operating margin of 8.2% (adjusted) reflecting the decline in gross margin %, partially offset by the
reduction achieved in operating costs as a percentage of sales.
Adjusting items include £3.8m of restructuring costs related to our global business re-organisation programme and
£1.0m of costs following the decision to close our operations in Brazil. Offsetting these costs is a £1.9m provision
release relating to the successful conclusion of a potential legal action. As a result, total operating profit for the first
half was £38.1m, reflecting a net cost from adjusting items of £2.9m (2014/15: £43.1m, after reflecting a net cost
from adjusting items of £2.4m), resulting in a year on year decline of 11.6%.
Adjusted free cash flow as a percentage of sales of 8.4% for the half year reflected improved inventory turns and
strong working capital management. Net cash inflow from working capital was £12.9m (2014/15: £14.4m outflow),
resulting in adjusted cash conversion of 151.0% (2014/15: 84.4%). Inventory is expected to decrease further in the
second half as we continue to rebalance globally, while maintaining the depth and breadth of our product
proposition to support our customers’ requirements.
7
Net financial liabilities (including preference shares) decreased to £235.3m from £256.6m at the end of the prior
financial year. The impact of exchange rates in the period was to decrease net financial liabilities by £5.3m,
principally in relation to our US$ denominated private placement notes. Net debt to adjusted EBITDA of 2.3x was in
line with the first half last year.
At the end of the first half, headroom on bank borrowings was £187.9m under facilities in place until September
2019. The Group’s net cash position was £51.3m. In combination this will facilitate repayment of the preference
shares on their maturity in 2016.
Net finance costs in the first half were £7.5m (2014/15: £6.7m). This comprises net interest payable of £5.7m
(2014/15: £4.9m), which was covered 7.2 times by adjusted operating profit, and a net charge of £1.8m (2014/15:
£1.8m) in respect of the Company’s convertible preference shares.
Adjusted profit before tax for the first half was £33.5m (2014/15: £38.8), a decrease of 13.7% on the previous year.
Total profit before tax was £30.6m (2014/15: £36.4m), a decline of 15.9% on the previous year.
The taxation charge for the first half represents an effective tax rate of 28.8% (2014/15: 30.0%) on profit before tax
and preference dividends. This lower effective rate principally reflects the continuing reduction in the UK tax rate.
We anticipate an effective tax rate at broadly similar levels going forward.
Adjusted basic earnings per share for the first half are 6.4p (2014/15: 7.2p). Basic earnings per share after the net
impact of adjusting items are 5.8p (2014/15: 6.8p).
The Board has declared an interim dividend of 2.6p per share (2014/15: 4.4p per share). The interim dividend is
payable on 22 October 2015 to shareholders on the register at 25 September 2015.
Board changes
Laurence Bain stepped down as Chief Executive Officer on 14 August 2015 and Mark Whiteling, previously Chief
Financial Officer, was appointed as Interim Chief Executive Officer. His CFO responsibilities were initially transferred
to a team led by Steven Webb, General Counsel and Company Secretary. Steven will now lead on the Akron Brass
sale process and, as a consequence of this, interim leadership of the finance function will be taken over by Helen
Willis, Global Director of Commercial Finance. The search to identify a permanent CEO is actively ongoing with both
internal and external candidates being considered.
Risks and uncertainties
The principal risks and uncertainties facing the Group and the ways in which they are mitigated are described on
pages 24 and 25 of the Company’s 2014/15 Annual Report and Accounts.
8
Condensed Consolidated Income Statement
For the half year ended 2 August 2015
Notes
Continuing operations
Revenue
Cost of sales
Gross profit
Net operating expenses
- adjusted operating expenses
- adjusting items
Total net operating expenses
Operating profit
- adjusted operating profit
- adjusting items
Total operating profit
Finance income
Finance costs
- interest payable
- preference dividends
- premium on redemption of preference shares
Total finance costs
Total profit before taxation
Taxation
Profit for the period attributable to owners of the parent
Earnings per share
Basic
Diluted
2
3
2
3
2
4
5
Ordinary dividends
Interim - proposed
Final - proposed
Paid
Impact on shareholders' funds (£m)
2015/16
Half
year
unaudited
2014/15
Half
year
unaudited
2014/15
Full
year
audited
£m
£m
£m
498.6
(323.0)
175.6
479.3
(299.9)
179.4
960.1
(606.9)
353.2
(134.6)
(2.9)
(137.5)
(133.9)
(2.4)
(136.3)
(265.2)
(4.9)
(270.1)
41.0
(2.9)
38.1
0.3
45.5
(2.4)
43.1
0.3
88.0
(4.9)
83.1
0.7
(6.0)
(1.4)
(0.4)
(7.8)
30.6
(9.2)
21.4
(5.2)
(1.4)
(0.4)
(7.0)
36.4
(11.3)
25.1
(11.2)
(2.9)
(0.6)
(14.7)
69.1
(21.6)
47.5
5.8p
5.8p
6.8p
6.7p
12.9p
12.8p
2.6p
4.4p
6.0p
22.1
6.0p
22.0
4.4p
6.0p
10.4p
38.2
2015/16
Half
year
unaudited
2014/15
Half
year
unaudited
2014/15
Full
year
audited
£m
£m
£m
Condensed Consolidated Statement of Comprehensive Income
For the half year ended 2 August 2015
Profit for the period
21.4
25.1
47.5
Items that will not be reclassified to profit or loss
Remeasurements of post employment benefit obligations
Deferred tax (charge)/credit on remeasurements of post employment benefit obligations
Total items that will not be reclassified to profit or loss
11.5
(3.1)
8.4
(2.1)
0.6
(1.5)
(26.7)
7.8
(18.9)
Items that may be reclassified subsequently to profit or loss
Net exchange adjustments
Net fair value (losses)/gains on cash flow hedges
Total items that may be reclassified subsequently to profit or loss
(3.9)
(0.4)
(4.3)
(1.2)
(0.7)
(1.9)
0.3
0.2
0.5
Total other comprehensive income/(expense) for the period
4.1
(3.4)
(18.4)
Total comprehensive income for the period attributable to owners of the parent
25.5
21.7
29.1
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Condensed Consolidated Balance Sheet
As at 2 August 2015
Notes
ASSETS
Non-current assets
Goodwill
Other intangible assets
Investment held at fair value
Property, plant and equipment
Deferred tax assets
Total non-current assets
2 August
2015
unaudited
3 August
2014
unaudited
1 February
2015
audited
£m
£m
£m
46.5
39.5
1.3
49.1
0.4
136.8
45.6
34.5
1.0
49.1
8.6
138.8
47.1
40.4
1.0
52.3
3.5
144.3
249.0
1.9
136.7
0.5
51.3
439.4
247.3
1.3
136.1
3.8
39.5
428.0
260.9
2.4
142.5
0.5
43.8
450.1
(59.0)
(0.1)
(133.6)
(16.7)
(209.4)
(1.7)
(125.7)
(22.4)
(149.8)
(6.3)
(0.2)
(130.7)
(12.7)
(149.9)
230.0
278.2
300.2
(229.4)
(55.4)
(0.3)
(285.1)
(279.9)
(44.9)
(6.2)
(331.0)
(296.3)
(70.7)
(0.3)
(367.3)
NET ASSETS
81.7
86.0
77.2
EQUITY
Ordinary shares
Equity element of preference shares
Share premium
Capital redemption reserve
Hedging reserve
Cumulative translation reserve
Retained earnings
TOTAL EQUITY
18.6
8.5
33.1
5.2
1.8
13.4
1.1
81.7
18.6
8.5
32.8
5.2
1.3
15.8
3.8
86.0
18.6
8.5
32.8
5.2
2.2
17.3
(7.4)
77.2
Current assets
Inventories
Derivative financial instruments
Trade and other receivables
Current tax receivable
Cash and cash equivalents
Total current assets
LIABILITIES
Current liabilities
Financial liabilities
Derivative financial instruments
Trade and other payables
Current tax payable
Total current liabilities
6
6
6
6
Net current assets
Non-current liabilities
Financial liabilities
Retirement and other post-employment benefits
Deferred tax liabilities
Total non-current liabilities
6
Consolidated Statement of Changes in Equity
For the half year ended 2 August 2015
2015/16
Half
year
unaudited
2014/15
Half
year
unaudited
2014/15
Full
year
audited
£m
£m
£m
Total equity at beginning of period
77.2
84.7
84.7
Profit for the period
Other comprehensive income/(expense)
Total comprehensive income
21.4
4.1
25.5
25.1
(3.4)
21.7
47.5
(18.4)
29.1
(22.1)
0.3
0.8
(21.0)
(22.0)
0.1
1.5
(20.4)
(38.2)
0.1
1.5
(36.6)
81.7
86.0
77.2
Transactions with owners:
Ordinary dividends paid
Ordinary share capital subscribed
Share-based payments
Total transactions with owners
Total equity at end of period
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Condensed Consolidated Statement of Cash Flows
For the half year ended 2 August 2015
Notes
Cash flows from operating activities
Operating profit
Adjusting items:
- net income statement impact
- cash impact
Non cash impact of adjusting items
Depreciation and amortisation
Changes in working capital
Additional funding for post retirement defined benefit plans
Other non-cash movements
Total cash generated from operations
Interest received
Interest paid
Dividends paid on preference shares
Taxation paid
Net cash generated from operating activities
2014/15
Half
year
unaudited
£m
2014/15
Full
year
audited
£m
2
38.1
43.1
83.1
3
2.9
(2.9)
9.2
12.9
(2.0)
0.8
59.0
0.3
(5.8)
(1.4)
(5.0)
47.1
2.4
(2.7)
(0.3)
7.4
(14.4)
(1.9)
1.8
35.7
0.3
(5.0)
(1.4)
(8.4)
21.2
4.9
(7.0)
(2.1)
15.3
(15.1)
(3.9)
1.5
78.8
0.7
(10.3)
(2.9)
(17.4)
48.9
(7.8)
(7.8)
(2.5)
(5.7)
(8.2)
(3.8)
(6.3)
(17.9)
(0.6)
(6.2)
(14.5)
(29.1)
0.3
7.5
(13.0)
(22.1)
(27.3)
0.1
(11.5)
27.5
(22.0)
(5.9)
0.1
(11.5)
63.3
(35.1)
(38.2)
(21.4)
11.6
43.8
(4.1)
51.3
(2.6)
42.8
(0.7)
39.5
(1.6)
42.8
2.6
43.8
(256.6)
11.6
5.5
(0.4)
(0.4)
(0.3)
5.3
(235.3)
(225.8)
(2.6)
(27.5)
11.5
(0.4)
(0.7)
(0.2)
4.9
(240.8)
(225.8)
(1.6)
(28.2)
11.5
(0.6)
0.2
(0.6)
(11.5)
(256.6)
Cash flows from investing activities
Net outflow from purchase of business
Adjusting items:
- cash impact of US property disposal
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Purchase of intangible assets
Net cash used in investing activities
-
Cash flows from financing activities
Issue of ordinary shares
Purchase of preference shares
Proceeds from bank loans
Repayment of bank loans
Dividends paid to ordinary shareholders
Net cash used in financing activities
Net increase/(decrease) in cash, cash equivalents and bank overdrafts
Cash, cash equivalents and bank overdrafts at beginning of period
Exchange (losses)/gains
Cash, cash equivalents and bank overdrafts at end of period
Reconciliation of net financial liabilities
Net financial liabilities at beginning of period
Net increase/(decrease) in cash, cash equivalents and bank overdrafts
Decrease/(increase) in debt
Purchase of preference shares
Premium on redemption of preference shares
Derivative financial instruments
Amortisation of arrangement fees
Exchange movement
Net financial liabilities at end of period
2015/16
Half
year
unaudited
£m
6
The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Notes
1
Basis of preparation
The unaudited condensed consolidated financial information in this report 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 2014/15 Annual Report and Accounts on pages 97 to 103 except as described below.
There are no new IFRS's or IFRIC's that are effective for the first time in the current year which have had a significant impact on the Group.
This condensed consolidated financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the financial year
ended 1 February 2015, were approved by the Board of Directors on 24 April 2015 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 498 of the Companies Act 2006. 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.
Going concern basis
Having reassessed the principal risks, the directors considered it appropriate to adopt the going concern basis of accounting in preparing the interim financial information.
Estimates
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of
assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed financial statements, the significant judgements made by management in
applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 1 February
2015.
2
Segment information
To facilitate the effective execution of the Group’s strategy, the organisational structure of the Group’s marketing and distribution activities has been reshaped. An integrated global structure has
been implemented to form the element14 business segment, which replaces the former regional business units in the Americas and Europe/APAC. This simplified global structure will enable the
element14 business to better leverage its expertise and resources around the globe, and deliver operating efficiencies and economies of scale. The Group’s other business segments, CPC &
MCM (formerly ‘MDD Other’) and Akron Brass (formerly ‘Industrial Products Division’), are unaffected by these organisational changes. The Group therefore comprises three distinct operating
segments, each focussed on specific market sectors. These segments are consistent with the summary management information presented to the Board of Directors, who are identified as the
Group’s Chief Operating Decision Maker, responsible for allocating resources and assessing performance of the three operating segments. Following the changes above the prior year balances
have been restated.
2015/16 Half year unaudited
Before
Adjusting items
After
adjusting items
(Note 3)
adjusting items
£m
£m
£m
2014/15 Half year unaudited (restated)
Before
Adjusting items
After
adjusting items
(Note 3)
adjusting items
£m
£m
£m
Revenue
Europe
Americas
Asia Pacific
element14
CPC & MCM
Akron Brass
178.1
177.4
44.5
400.0
61.3
37.3
498.6
-
178.1
177.4
44.5
400.0
61.3
37.3
498.6
183.4
164.3
39.1
386.8
56.6
35.9
479.3
-
183.4
164.3
39.1
386.8
56.6
35.9
479.3
Operating profit
element14
CPC & MCM
Akron Brass
Central costs
32.9
6.3
6.6
(4.8)
41.0
(2.9)
(2.9)
30.0
6.3
6.6
(4.8)
38.1
39.3
5.6
6.8
(6.2)
45.5
(2.2)
(0.2)
(2.4)
37.1
5.6
6.8
(6.4)
43.1
2014/15 Full year audited (restated)
Before
Adjusting items
After
adjusting items
(Note 3)
adjusting items
£m
£m
£m
Revenue
Europe
Americas
Asia Pacific
element14
CPC & MCM
Akron Brass
357.1
333.1
79.3
769.5
117.1
73.5
960.1
-
357.1
333.1
79.3
769.5
117.1
73.5
960.1
Operating profit
element14
CPC & MCM
Akron Brass
Central costs
73.5
11.7
13.7
(10.9)
88.0
(4.4)
(0.5)
(4.9)
69.1
11.7
13.7
(11.4)
83.1
3
Operating profit
Statutory operating profit is stated after (charging)/crediting the following:
2015/16
Half
year
unaudited
- Restructuring costs
- Brazil closure costs
- Legal provision release
- Acquisition costs
- Net gain on US property disposal
2014/15
Half
year
unaudited
2014/15
Full
year
audited
£m
£m
£m
(3.8)
(1.0)
1.9
(2.9)
(2.3)
(0.1)
(2.4)
(5.1)
(0.1)
0.3
(4.9)
Due to their significance and nature, adjusted operating expenses and adjusted operating profit have been disclosed on the face of the income statement which exclude the items above.
Restructuring costs incurred in the period relate to the Group’s global business re-organisation programme and comprise the cost of redundancies completed in the period and change
programme costs.
Brazil closure costs result from the Group’s decision to close its local operations in Brazil.
Legal provision release relates to the successful outcome of a potential legal action.
In the prior year, acquisition costs of £0.1 million related to the purchase of AVID Technologies. Restructuring costs incurred in the prior year related to the Group’s global business reorganisation. The £0.3 million net gain on US property disposal related to savings on expenses incurred in the relocation of our Americas Head Office.
4
Taxation
The taxation charge represents an effective tax rate for the 2015/16 financial year on profit before tax and preference dividends of 28.8% (2014/15: 30.0%). After excluding adjusting items, the
effective rate is 28.9% (2014/15: 30.0%).
5
Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the parent 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.
Reconciliations of earnings and the weighted average number of ordinary shares used in the calculations are set out below.
2015/16
Half year unaudited
Earnings per share
Profit attributable to owners of the parent
Restructuring costs
Tax attributable to restructuring costs
Brazil closure costs
Tax attributable to Brazil closure costs
Legal provision release
Tax attributable to legal provision release
Acquisition costs
Tax attributable to acquisition costs
Adjusted profit attributable to owners of the parent
2014/15
Half year unaudited
Earnings
£m
Basic per
share amount
pence
Diluted per
share amount
pence
Earnings
£m
Basic per
share amount
pence
Diluted per
share amount
pence
21.4
3.8
(0.9)
1.0
(1.9)
23.4
5.8
1.0
(0.2)
0.3
(0.5)
6.4
5.8
1.0
(0.2)
0.3
(0.5)
6.4
25.1
2.3
(0.7)
0.1
26.8
6.8
0.6
(0.2)
7.2
6.7
0.6
(0.2)
7.1
Weighted average number of shares
Dilutive effect of share options
Diluted weighted average number of shares
Number
Number
367,726,496
1,064,339
368,790,835
367,312,884
2,328,674
369,641,558
2014/15
Full year audited
Earnings per share
Profit attributable to owners of the parent
Restructuring costs
Tax attributable to restructuring costs
Net gain on US property disposal
Tax attributable to net gain on US property disposal
Acquisition costs
Tax attributable to acquisition costs
Adjusted profit attributable to owners of the parent
Earnings
£m
Basic per
share amount
pence
Diluted per
share amount
pence
47.5
5.1
(1.5)
(0.3)
0.1
0.1
51.0
12.9
1.4
(0.4)
(0.1)
13.8
12.8
1.4
(0.4)
(0.1)
13.7
Number
Weighted average number of shares
Dilutive effect of share options
Diluted weighted average number of shares
Adjusted earnings per share has been provided in order to facilitate year on year comparison.
367,511,796
1,498,900
369,010,696
6
Net financial liabilities
Cash and cash equivalents
Unsecured loans and overdrafts
Net financial liabilities before preference shares and derivatives
Preference shares
Derivative financial instruments
Net financial liabilities
2 August
2015
unaudited
£m
3 August
2014
unaudited
£m
1 February
2015
audited
£m
51.3
(235.5)
(184.2)
(52.9)
1.8
(235.3)
39.5
(229.3)
(189.8)
(52.3)
1.3
(240.8)
43.8
(250.1)
(206.3)
(52.5)
2.2
(256.6)
51.3
1.9
53.2
39.5
1.3
40.8
43.8
2.4
46.2
(6.1)
(0.1)
(52.9)
(59.1)
(1.7)
(1.7)
(6.3)
(0.2)
(6.5)
(60.0)
(19.1)
(37.1)
(58.0)
(53.9)
(1.3)
(229.4)
(66.4)
(17.7)
(34.4)
(53.8)
(50.2)
(5.1)
(52.3)
(279.9)
(66.4)
(20.0)
(38.8)
(60.7)
(56.5)
(1.4)
(52.5)
(296.3)
Net financial liabilities are analysed in the balance sheet as follows:
Current assets
Cash and cash equivalents
Derivative financial instruments
Current liabilities
Other loans
Derivative financial instruments
Preference shares
Non-current liabilities
Bank loans
5.2% US dollar Guaranteed Senior Notes payable 2017
4.4% US dollar Guaranteed Senior Notes payable 2018
4.8% US dollar Guaranteed Senior Notes payable 2021
4.0% US dollar Guaranteed Senior Notes payable 2024
Other loans
Preference shares
At 2 August 2015, the Group's syndicate bank facilities totalled £250 million expiring in September 2019. Based on these facilities, the headroom on bank borrowings at 2 August 2015 was £187.9
million.
Fair value estimation
The valuation methods for Group financial instruments held at fair value are defined by the following fair value measurement hierarchy:
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
- Inputs other than quoted prices included within Level 1 that are observed for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2);
- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).
The following table presents the Group’s assets and liabilities that are measured at fair value.
At 2 August 2015
Level 1
£m
Assets
Investments held at fair value
Derivatives used for cash flow hedges
Liabilities
Derivatives used for cash flow hedges
Contingent consideration
Net assets/(liabilities)
At 1 February 2015
1.3
1.3
Level 1
£m
Assets
Investments held at fair value
Derivatives used for cash flow hedges
Liabilities
Derivatives used for cash flow hedges
Contingent consideration
Net assets/(liabilities)
1.0
1.0
Level 2
£m
1.9
Level 3
£m
-
Total
balance
1.3
1.9
(0.1)
1.8
(0.8)
(0.8)
(0.1)
(0.8)
2.3
Level 2
£m
Level 3
£m
Total
balance
2.4
(0.2)
2.2
(0.8)
(0.8)
1.0
2.4
(0.2)
(0.8)
2.4
Fair value of financial assets and liabilities measured at amortised cost
The book value and fair value of the Group's borrowings and preference shares are as follows:
At 2 August 2015 the fair value of short term borrowings was £6.1m (1 February 2015: £6.3m) compared to a book value of £6.1m (1 February 2015: £6.3m). At 2 August 2015 the fair value of
long term borrowings was £235.4m (1 February 2015: £252.1m) compared to a book value of £229.4m (1 February 2015: £243.8m). At 2 August 2015 the fair value of preference shares was
£53.4m (1 February 2015: £52.0m) compared to a book value of £52.9m (1 February 2015: £52.5m).
The fair value of other financial assets and liabilities is approximate to their carrying amount.
7
Retirement benefit obligations
The valuation of the Group's defined benefit pension schemes in the UK and the US has been updated at 2 August 2015 on an actuarial basis, applying current discount and inflation rate
assumptions and incorporating the market value of assets at 2 August 2015. Remeasurements of post employment benefit obligations in the year of £11.5 million (£8.4 million net of associated
deferred tax) have been taken through the Consolidated Statement of Comprehensive Income.
8
Exchange rates
The principal average exchange rates used to translate the Group's overseas profits were as follows:
US dollar
Euro
2015/16
Half
year
2014/15
Half
year
2014/15
Full
year
1.54
1.39
1.68
1.23
1.64
1.26
9
Ordinary dividend
An interim dividend of 2.6p pence per share (2014/15: 4.4 pence per share) will be paid on 22 October 2015 to ordinary shareholders on the register at close of business on 25 September 2015,
absorbing £9.6 million of shareholders' funds (2014/15 £16.2 million).
10
Related party transactions
The Group has not entered into any material transactions with related parties in the first six months of the period.
11
Events occurring after the reporting period
The Group has taken the decision to sell Akron Brass.
Premier Farnell plc company financial statements
Adoption of Financial Reporting Standard (FRS) 101 – Reduced Disclosure Framework
Following the publication of ‘FRS 100 Application of Financial Reporting Requirements’ by the Financial Reporting Council, Premier Farnell plc (the Company) is required to change its accounting
framework for its entity financial statements (which is currently UK GAAP) for its financial year commencing 2 February 2015. The Board considers that it is in the best interests of the Company to
adopt the ‘FRS 101 Reduced Disclosure Framework’. Any shareholder or shareholders holding in aggregate 5% or more of the total allotted shares in Premier Farnell plc may serve objections to
the use of the disclosure exemptions on Premier Farnell plc, in writing, to its registered office (Farnell House, Forge Lane, Leeds, LS12 2NE) not later than 30 November 2015.
Statement of Directors' Responsibilities
The directors' confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by
the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
• An indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
• Material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
A list of current directors is maintained on the Premier Farnell plc website: www.premierfarnell.com.
By order of the Board
Mark Whiteling
Interim Chief Executive Officer
17 September 2015