Results for the Third Quarter and Nine Months of the 53 week financial year ending 3 February 2013

Results for the Third Quarter and Nine Months of the 53 week financial year ending 3 February 2013

Key Financials £m
Continuing operations
(Unaudited)
Q3 12/11
£m
Q3 11/12
£m
Q3 growth (a)
9M 12/13
£m
9M 11/12
£m
9M growth (a)
Total revenue
233.5
241.8
-1.6%
712.7
739.7
-2.8%
Adjusted operating profit(b)
22.00
25.8
-10.4%
72.1
81.8
-9.2%
Adjusted items(b) - (1.7)   (7.9) 16.1  
Total operating profit 22.0 24.1 -3.7% 64.2 97.9 -33.1%
Adjusted profit before tax(b)
17.3
21.1
-18.0%
57.0
68.2
-16.4%
Total profit before taxation 17.3 19.4 -10.8% 49.1 84.3 -41.8%
Adjusted earnings per share(b) 3.4p 4.2p -19.0% 11.2p 13.4p -16.4%
Basic earnings per share 3.4p 3.8p -10.5% 9.6p 17.2p -44.2%
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 Officer Premier Farnell plc +44 (0) 20 7851 4100
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.

 

Thursday, 6 December 2012