Source - RNS
RNS Number : 8787J
Premier Farnell PLC
15 September 2016
 

15 September 2016

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

 

PREMIER FARNELL RESULTS FOR THE FIRST HALF OF THE FINANCIAL YEAR ENDING 29 JANUARY 2017

 

Financial Summary

Continuing Operations(c)

 (£m except for per share) ( unaudited - 26 weeks)

H1 16/17

H1 15/16

Total revenue

489.3

461.3

Sales per day growth (a)

-0.4%

3.6%

Gross profit

160.6

160.8

Gross margin

32.8%

34.9%

Adjusted operating profit (b)

29.7

33.7

Total operating profit

36.1

30.8

Adjusted profit before tax (b)

23.3

26.2

Adjusted earnings per share (b)

4.6p

5.1p

Basic earnings per share

6.8p

4.5p

Net debt

126.0

235.3

 

 

Sales performance H1 2016/17 Continuing Operations (excluding Akron Brass):

·      Continuing Operations revenue of £489.3m (H1 2015/16: £461.3m), an increase of 6.1% year on year, primarily reflecting positive FX movements.

·      element14 sales per day (SPD) growth of 2.6% in Europe year on year, comprising UK SPD decline of -4.2% and Continental Europe SPD growth of 5.3%. UK Q2 2016/17 SPD declined -0.9% year on year, an improvement on Q1 2016/17 year on year decline of -7.2%.

·      Americas SPD decline of -9.1% year on year, excluding Brazil (operations discontinued in 2015), or -10.0% including Brazil, reflecting continued challenging US manufacturing conditions and competitive pressures.

·      Strong growth in Asia Pacific with 28.1% SPD growth year on year, reflecting strong SPD growth in China of 28.7% and India of 26.2% year on year.

Operational and financial momentum:

·      Gross margin H1 2016/17 of 32.8% (H1 2015/16: 34.9%) in line with management expectations (H2 2015/16: 33.1%).

·      On track to deliver expected annualised costs savings of £19m in 2017/18.

Recommended Cash Offer for Premier Farnell from Avnet Bidco Limited:

·      Shareholders approved the scheme of arrangement between Premier Farnell and its shareholders in relation to the proposed acquisition by Avnet Bidco Limited ("Bidco"), an indirect wholly-owned subsidiary of Avnet, Inc. ("Avnet") on 12 September 2016.

·      Transaction expected to complete in the fourth quarter of 2016, subject to the satisfaction of relevant merger control requirements in Israel and the EU.

 

Jos Opdeweegh, Chief Executive Officer, commented:

"For the first half of 2016/17, we saw good growth in Continental Europe and strong growth in Asia Pacific, and while trading conditions in North America remained challenging, our UK market demonstrated encouraging signs of stabilisation during the second quarter.

 

"Importantly, our gross margin is broadly unchanged with respect to the second half of 2015/16. We remain on track to make good progress in this financial year as we increase our operational efficiency and relevance to customers, and implement the outcomes of our operational review.

 

"Our shareholders approved the scheme of arrangement between Premier Farnell and its shareholders in relation to the proposed acquisition by Avnet Bidco Limited on 12 September 2016 and we expect the deal to close in the fourth quarter of 2016. We share very similar strategic values and our businesses are highly complementary in terms of product range, distribution channels and geographic footprint. Through the combination of the two companies, our customers will benefit from an enhanced breadth and depth of products, and greater support throughout their design to production processes."

 

There will not be a conference call or webcast in conjunction with these results.

 

For further information, contact:

Jos Opdeweegh, Chief Executive Officer

Helen Willis, Chief Financial Officer

Paul Sharma, Investor Relations

Premier Farnell plc

+44 (0) 20 7851 4107

Richard Mountain/Andrew Lorenz

FTI Consulting

+44 (0) 20 3727 1340

 

Premier Farnell's announcements and presentations are published at www.premierfarnell.com together with business information and links to all other Group web sites.

(a) Throughout this statement, in order to reflect underlying business performance, sales growth is based on sales per day for continuing operations at constant exchange rates, unless otherwise stated.

(b) Adjusted items are outlined below in relevant section. Adjusted 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.

(c)  Akron Brass sale completed 16 March 2016 and is viewed as a discontinued operation. CadSoft sale completed on 27 June 2016 and is classified as a continued operation.

 

Company Overview

Premier Farnell plc is a global distributor of technology products and solutions. It has approximately 3,700 employees (excluding Akron Brass) and consists of two continuing business units: element14; and CPC/MCM. The sale of Akron Brass was announced in September 2015 and was approved by shareholders on 16 March 2016 and completed on the same day. Given the disposal, Akron Brass is viewed as a discontinued operation and is presented accordingly in the financial statements. We sold CadSoft Computer GmbH ("CadSoft") and the assets used in connection with the sale of CadSoft products in the US to a subsidiary of Autodesk Inc. on 27 June 2016.

 

Offer for Premier Farnell

Our shareholders approved the scheme of arrangement between Premier Farnell and its shareholders in relation to the proposed acquisition by Bidco, an indirect wholly-owned subsidiary of Avnet, on 12 September 2016 and we expect the deal to complete in the fourth quarter of 2016, subject to the satisfaction of relevant merger control requirements in Israel and the EU. See www.premierfarnell.com for further details.

 

FINANCIAL AND OPERATING REVIEW

 

Revenue

Revenue for continuing operations increased 6.1% year on year in H1 2016/17 from £461.3m to £489.3m, including positive foreign exchange movements, due primarily to the decline of sterling during the first half.

 

Revenue (£m)

H1 16/17

H1 15/16

 

element14

427.1

400.0

 

CPC/MCM

62.2

61.3

 

Group

489.3

461.3

 

 

Revenue for element14 for H1 2016/17 was £427.1m (2015/16: £400.0m), a 6.8% increase on the prior year and revenue for CPC/MCM during H1 2016/17 was £62.2m (2015/16: £61.3m), a 1.5% increase on the prior year.

 

Sales per day

 

 Sales growth(*)

 

Q1 15/16

Q2 15/16

Q3 15/16

Q4 15/16

Q1 16/17

Q2 16/17

H1 16/17

5.9%

1.6%

(0.5%)

1.1%

1.5%

3.9%

2.6%

2.2%

(0.8%)

(6.9%)

(5.1%)

(9.9%)

(10.2%)

(10.0%)

16.2%

8.2%

14.9%

19.4%

25.7%

30.5%

28.1%

element14

 

5.3%

1.2%

(1.9%)

0.3%

(0.9%)

0.5%

(0.2%)

13.9%

(1.9%)

7.7%

1.0%

(4.5%)

1.4%

(1.7%)

Continuing Operations

 

6.3%

0.8%

(0.6%)

0.4%

(1.4%)

0.6%

(0.4%)

Excluding Raspberry Pi

2.6%

0.0%

(3.7%)

(2.0%)

(2.6%)

(2.8%)

(2.7%)

*Throughout this statement, in order to reflect underlying business performance, sales growth is based on sales per day for continuing operations at constant exchange rates, unless otherwise stated. For reference, in the first half, the average exchange rates for sterling against the US dollar and the Euro were, respectively, £1 = US$1.40 (H1 2015/16: £1 = US$1.54) and £1 = €1.26 (H1 2015/16: £1 = €1.39).

 

Continuing Operations sales per day declined -0.4% year on year in H1 2016/17. Sales momentum increased slightly overall in the second quarter, due to growth in Continental Europe and APAC.

 

element14 sales per day grew 2.6% in Europe year on year. Continental Europe benefited from good sales per day growth of 5.3% year on year, in spite of the mixed economic backdrop across some of the Eurozone. There have been stable PMIs in mainland Europe and we experienced strong growth in these markets. Our UK performance started to stabilise during Q2 2016/17, with a small SPD decline of -0.9% (Q1 2016/17: -7.2%), consistent with broadly stable Purchasing Managers' Indices (PMI), with the exception of July, where the PMI was impacted by the Brexit vote.

 

Sales per day in the Americas declined -10.0% in the first half compared to the prior year and sales per day declined -9.1% year on year excluding Brazil (operations discontinued in 2015). While this was consistent with weaker US manufacturing PMIs in the first half, we have initiated a repositioning of the business focused on industrial electronics. The decline also reflected continued competitive pressures in this market.

 

We saw strong growth in APAC, ahead of regional GDP growth, with sales per day growth of 28.1% in APAC for H1 2015/2016.

 

Excluding Raspberry Pi, in H1 2016/17 continuing operations sales per day declined -2.7% year on year. In February 2016, we launched the latest version of the Raspberry Pi, the Raspberry Pi 3.

 

CPC/MCM SPD declined -1.7% year on year in H1 2016/17, mainly due to actions taken in Q1 2016/17 by competitors in the UK and US.

 

Gross margin and gross profit

Gross margin for continuing operations fell from 34.9% in H1 2015/16 to 32.8% in H1 2016/17, driven mainly by the continuing impact of foreign exchange of -0.5% percentage point, -0.5% percentage points of price positioning and -0.9% percentage points of product mix.

 

Gross margin in H1 2016/17 was a small decline on the H2 2015/16 gross margin of 33.1%, reflecting ongoing actions undertaken as we implement the outcome of our recent operating review.

 

Adjusted operating profit

 

Adjusted Operating Profit(a) (£m)

Operating Margin %

H1 16/17

H1 15/16(b)

 

FY 15/16

element14

29.4

6.9%

32.9

8.2%

 

56.5

7.3%

CPC/MCM

6.1

9.9%

6.3

10.3%

 

11.8

9.4%

Central costs

(5.8)

(5.5)

 

(10.9)

Continuing Operations

29.7

6.1%

33.7

7.3%

 

57.4

6.4%

(a) 2016/17 and 2015/16 adjusting items are outlined below  (b) Restated to reflect Akron Brass disposal

 

Adjusted operating profit for H1 2016/17 was £29.7m (H1 2015/16: £33.7m), representing a decline of -11.9% year on year. Adjusted operating margin of 6.1% (H1 2015/16: 7.3%) reflected the decline in gross margin percentage and the impact of exchange rates on operating expenses.

 

Adjusting items

In H1 2016/17, we credited a net £6.4m of adjusting items to the income statement which includes a £14.3m gain on disposal of CadSoft.

 

The £6.2m costs associated with the Group's operational review and global business reorganisation programme consist of £4.6m of severance payments and £1.6m associated with the incremental resource requirements to design and plan the execution of the programmes.

 

£1.7m of transaction expenses relating to the acquisition offers from Bidco and Datwyler Technical Components UK Limited have been incurred in the first half.

 

Total operating profit from continuing operations was £36.1m for the half year, reflecting a net credit from adjusting items of £6.4m (H1 2015/16 £30.8m, after reflecting a net cost from adjusting items of £2.9m), representing an increase of 17.2% year on year.

 

Cash Flow

Adjusted free cash flow in H1 2016/17 was a £10.7m outflow (H1 2015/16: £41.8m inflow), reflecting a net cash outflow from working capital of £33.0m. After adjusting items, disposal proceeds and ordinary dividends, cash generated in the period was £129.0m.

 

Net debt

Net financial liabilities decreased to £126.0m from £235.3m at the end of the prior financial year. Net financial liabilities fell in H1 2016/17 following the sale of Akron Brass and CadSoft, with the proceeds used to part repay the Group's borrowings and fund the redemption of preference shares.

 

At the end of H1 2016/17, net debt to adjusted EBITDA was 1.5 times and headroom on bank borrowings was £250m under facilities in place until September 2019.

 

Finance Costs

Net finance costs in H1 2016/17 were £6.4m (H1 2015/16: £7.5m). This comprises net interest payable of £5.4m (H1 2015/16: £5.7m), which was covered 5.5 times by adjusted operating profit, and a net charge of £1.0m (H1 2015/16: £1.8m) in respect of the Company's convertible preference shares, which were redeemed in full in accordance with their terms on 29 April 2016.

 

Adjusted profit before tax

Adjusted profit before tax from continuing operations for H1 2016/17 was £23.3m (H1 2015/16: £26.2m), a decline of -11.1% on the previous year. Total profit before tax from continuing operations for H1 2016/17 was £29.7m (H1 2015/16: £23.3m), an increase of 27.5% on the previous year.

 

Tax

The taxation charge represents an effective tax rate on H1 2016/17 profit before tax and preference dividends of 15.7% (H1 2015/16: 27.1%) for continuing operations. After excluding adjusting items, the effective rate is 27.0% (H1 2015/16: 27.5%).

 

Earnings per share

Adjusted basic earnings per share for continuing operations are 4.6p (H1 2015/16: 5.1p). Basic earnings per share for continuing operations after the net impact of adjusting items are 6.8p (H1 2015/16: 4.5p). Basic earnings per share for total operations (including the gain on disposal of Akron Brass) are 31.6p (H1 2015/16: 5.8p).

 

Dividend

Given the terms and the current expected timing of the offer from Bidco, the Company does not currently intend to pay an interim dividend.

 

Risks and uncertainties

The principal risks and uncertainties facing the Group and the ways in which they are mitigated are described on pages 16 and 17 of the Company's 2015/16 Annual Report and Accounts. There have been no material changes during this period.

 

 

This 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 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 worldwide and national economies. The Group does not intend to update the forward-looking statements made herein.

 

 

Condensed Consolidated Income Statement

For the half year ended 31 July 2016

 

 

 

2016/17

2015/16

 

2015/16

 

 

Half

Half

 

Full

 

 

year

year

 

year

 

 

unaudited

unaudited

 

audited

 

 

 

restated

 

 

 

Notes

£m

£m

 

£m

 

 

 

 

 

 

Continuing operations

 

 

 

 

 

Revenue

2

489.3

461.3

 

903.9

Cost of sales

 

(328.7)

(300.5)

 

(596.7)

Gross profit

 

160.6

160.8

 

307.2

Net operating expenses

 

 

 

 

 

-adjusted operating expenses

 

(130.9)

(127.1)

 

(249.8)

-adjusting items

4

6.4

(2.9)

 

(12.5)

Total net operating expenses

 

(124.5)

(130.0)

 

(262.3)

Operating profit

 

 

 

 

 

-adjusted operating profit

2

29.7

33.7

 

57.4

-adjusting items

4

6.4

(2.9)

 

(12.5)

Total operating profit

2

36.1

30.8

 

44.9

Finance income

 

0.7

0.3

 

0.8

Finance costs

 

 

 

 

 

-interest payable

 

(6.1)

(6.0)

 

(12.8)

-preference dividends

 

(0.8)

(1.4)

 

(2.9)

-premium on redemption of preference shares

 

(0.2)

(0.4)

 

(0.8)

Total finance costs

 

(7.1)

(7.8)

 

(16.5)

Total profit before taxation

 

29.7

23.3

 

29.2

Taxation

5

(4.8)

(6.7)

 

(8.4)

Profit for the period from continuing operations

 

24.9

16.6

 

20.8

Discontinued operations

 

 

 

 

 

Profit for the period from discontinued operations

3

91.4

4.8

 

9.1

Profit for the period attributable to owners of the parent

 

116.3

21.4

 

29.9

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

-Basic

6

31.6p

5.8p

 

8.1p

-Diluted

 

31.3p

5.8p

 

8.1p

 

 

 

 

 

 

Earnings per share (continuing operations)

 

 

 

 

 

-Basic

6

6.8p

4.5p

 

5.6p

-Diluted

 

6.7p

4.5p

 

5.6p

 

 

 

 

 

 

Ordinary dividends

 

 

 

 

 

-Interim - proposed

 

-

2.6p

 

2.6p

-Final - proposed

 

 

 

 

3.6p

-Paid

 

3.6p

6.0p

 

8.6p

-Impact on shareholders' funds (£m)

 

13.3

22.1

 

31.6

 

The accompanying notes form an integral part of this unaudited condensed consolidated financial information.

 

 

Condensed Consolidated Statement of Comprehensive Income

For the half year ended 31 July 2016

 

 

 

2016/17

2015/16

 

2015/16

 

 

Half

Half

 

Full

 

 

year

year

 

year

 

 

unaudited

unaudited

 

audited

 

 

 

restated

 

 

 

 

£m

£m

 

£m

 

 

 

 

 

 

Profit for the period

 

116.3

21.4

 

29.9

 

 

 

 

 

 

Items that will not be reclassified to profit or loss

 

 

 

 

 

Remeasurements of post employment benefit obligations

 

(14.2)

11.5

 

8.0

Deferred tax credit/(charge) on remeasurements of post employment benefit obligations

 

3.0

(3.1)

 

(2.1)

Total items that will not be reclassified to profit or loss

 

(11.2)

8.4

 

5.9

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

 

 

Net exchange adjustments

 

5.1

(3.9)

 

(1.6)

Net fair value gains/(losses) on cash flow hedges

 

0.6

(0.4)

 

(2.4)

Total items that may be reclassified subsequently to profit or loss

 

5.7

(4.3)

 

(4.0)

 

 

 

 

 

 

Total other comprehensive (expense)/income for the period

 

(5.5)

4.1

 

1.9

 

 

 

 

 

 

Total comprehensive income for the period attributable to owners of the parent

 

110.8

25.5

 

31.8

 

 

 

 

 

 

Total comprehensive income for the period attributable to owners of the parent arises from:

 

 

 

 

 

Continuing operations

 

19.4

20.7

 

22.5

Discontinued operations

 

91.4

4.8

 

9.3

 

 

110.8

25.5

 

31.8

 

The accompanying notes form an integral part of this unaudited condensed consolidated financial information.

 

 

Condensed Consolidated Balance Sheet

As at 31 July 2016

 

 

31 July

 

2  August

 

31 January

 

 

2016

 

2015

 

2016

 

 

unaudited

 

unaudited

 

audited

 

 

 

 

 

 

 

 

Notes

£m

 

£m

 

£m

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

-Goodwill

 

40.3

 

46.5

 

42.6

-Other intangible assets

 

35.0

 

39.5

 

36.9

-Investment held at fair value

 

1.3

 

1.3

 

1.3

-Property, plant and equipment

 

42.9

 

49.1

 

43.3

-Deferred tax assets

 

3.6

 

0.4

 

0.6

Total non-current assets

 

123.1

 

136.8

 

124.7

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

-Inventories

 

268.8

 

249.0

 

247.7

-Derivative financial instruments

7

1.5

 

1.9

 

2.9

-Trade and other receivables

 

142.7

 

136.7

 

126.6

-Current tax receivable

 

1.2

 

0.5

 

1.2

-Cash and cash equivalents

7

37.5

 

51.3

 

28.5

 

 

451.7

 

439.4

 

406.9

-Assets classified as held for sale

3

-

 

-

 

45.6

Total current assets

 

451.7

 

439.4

 

452.5

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

-Financial liabilities

7

(24.0)

 

(59.0)

 

(54.1)

-Derivative financial instruments

7

(1.1)

 

(0.1)

 

(3.1)

-Trade and other payables

 

(129.1)

 

(133.6)

 

(142.7)

-Current tax payable

 

(28.0)

 

(16.7)

 

(9.9)

 

 

(182.2)

 

(209.4)

 

(209.8)

-Liabilities classified as held for sale

3

-

 

-

 

(11.9)

Total current liabilities

 

(182.2)

 

(209.4)

 

(221.7)

 

 

 

 

 

 

 

Net current assets

 

269.5

 

230.0

 

230.8

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

-Financial liabilities

7

(139.9)

 

(229.4)

 

(217.7)

-Retirement and other post-employment benefits

 

(74.9)

 

(55.4)

 

(58.2)

-Deferred tax liabilities

 

(1.1)

 

(0.3)

 

(1.1)

Total non-current liabilities

 

(215.9)

 

(285.1)

 

(277.0)

 

 

 

 

 

 

 

NET ASSETS

 

176.7

 

81.7

 

78.5

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

-Ordinary shares

 

18.6

 

18.6

 

18.6

-Equity element of preference shares

 

-

 

8.5

 

8.5

-Share premium

 

33.1

 

33.1

 

33.1

-Capital redemption reserve

 

8.4

 

5.2

 

5.2

-Hedging reserve

 

0.4

 

1.8

 

(0.2)

-Cumulative translation reserve

 

20.8

 

13.4

 

15.7

-Retained earnings

 

95.4

 

1.1

 

(2.4)

TOTAL EQUITY

 

176.7

 

81.7

 

78.5

The accompanying notes form an integral part of this unaudited condensed consolidated financial information.

 

 

Consolidated Statement of Changes in Equity

For the half year ended 31 July 2016

 

 

 

2016/17

 

2015/16

 

2015/16

 

 

Half

 

Half

 

Full

 

 

year

 

year

 

year

 

 

unaudited

 

unaudited

 

audited

 

 

 

 

 

 

 

 

 

£m

 

£m

 

£m

 

 

 

 

 

 

 

Total equity at beginning of period

 

78.5

 

77.2

 

77.2

 

 

 

 

 

 

 

Profit for the period

 

116.3

 

21.4

 

29.9

Other comprehensive (expense)/ income

 

(5.5)

 

4.1

 

1.9

Total comprehensive income

 

110.8

 

25.5

 

31.8

 

 

 

 

 

 

 

Transactions with owners:

 

 

 

 

 

 

-Ordinary dividends paid

 

(13.3)

 

(22.1)

 

(31.6)

-Ordinary share capital subscribed

 

-

 

0.3

 

0.3

-Share-based payments

 

0.7

 

0.8

 

0.8

Total transactions with owners

 

(12.6)

 

(21.0)

 

(30.5)

 

 

 

 

 

 

 

Total equity at end of period

 

176.7

 

81.7

 

78.5

 

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 31 July 2016

 

 

2016/17

2015/16

 

2015/16

 

 

Half

Half

 

Full

 

 

year

year

 

year

 

 

unaudited

unaudited

 

audited

 

 

 

restated

 

 

 

Notes

£m

£m

 

£m

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

Operating profit

 

 

 

 

 

-from continuing operations

2

36.1

30.8

 

44.9

-from discontinued operations

3

1.4

7.3

 

13.7

Total operating profit

 

37.5

38.1

 

58.6

Adjusting items:

 

 

 

 

 

-net income statement impact

4

(6.4)

2.9

 

14.4

-cash impact

 

(7.0)

(2.9)

 

(9.3)

Non cash impact of adjusting items

 

(13.4)

-

 

5.1

Depreciation and amortisation

 

9.9

9.2

 

18.9

Changes in working capital

 

(33.0)

12.9

 

18.8

Additional funding for post retirement defined benefit plans

 

(1.2)

(2.0)

 

(2.7)

Other non-cash movements

 

0.7

0.8

 

0.8

Total cash generated from operations

 

0.5

59.0

 

99.5

Interest received

 

0.7

0.3

 

0.8

Interest paid

 

(5.9)

(5.8)

 

(12.0)

Dividends paid on preference shares

 

(0.7)

(1.4)

 

(2.9)

Taxation paid

 

(5.7)

(5.0)

 

(11.3)

Net cash (used in)/ generated from operating activities

 

(11.1)

47.1

 

74.1

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Disposal of Akron Brass

 

140.7

-

 

(0.2)

Disposal of Cadsoft

 

19.3

-

 

-

Purchase of property, plant and equipment

 

(1.7)

(2.5)

 

(5.6)

Purchase of intangible assets

 

(4.9)

(5.7)

 

(11.1)

Net cash generated/(used in) investing activities

 

153.4

(8.2)

 

(16.9)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Issue of ordinary shares

 

-

0.3

 

0.3

Redemption of preference shares

 

(53.5)

-

 

-

Proceeds from bank loans

 

-

7.5

 

15.0

Repayment of bank loans

 

(68.5)

(13.0)

 

(55.0)

Dividends paid to ordinary shareholders

 

(13.3)

(22.1)

 

(31.6)

Net cash used in financing activities

 

(135.3)

(27.3)

 

(71.3)

 

 

 

 

 

 

Net increase/(decrease) in cash, cash equivalents and bank overdrafts

 

7.0

11.6

 

(14.1)

Cash, cash equivalents and bank overdrafts at beginning of period

 

28.7

43.8

 

43.8

Exchange gains/(losses)

 

1.8

(4.1)

 

(1.0)

Cash, cash equivalents and bank overdrafts at end of period

 

37.5

51.3

 

28.7

 

 

 

 

 

 

Reconciliation of net financial liabilities

 

 

 

 

 

Net financial liabilities at beginning of period

 

(243.3)

(256.6)

 

(256.6)

Net increase/(decrease) in cash, cash equivalents and bank overdrafts

 

7.0

11.6

 

(14.1)

Decrease in debt

 

68.5

5.5

 

40.0

Redemption of preference shares

 

53.5

-

 

-

Premium on redemption of preference shares

 

(0.2)

(0.4)

 

(0.8)

Derivative financial instruments

 

0.6

(0.4)

 

(2.4)

Amortisation of arrangement fees

 

(0.4)

(0.3)

 

(0.7)

Exchange movement

 

(11.7)

5.3

 

(8.7)

Net financial liabilities at end of period

7

(126.0)

(235.3)

 

(243.3)

 

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 2015/16 Annual Report and Accounts on pages 93 to 99 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 31 January 2016, were approved by the Board of Directors on 25 April 2016 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 financial statements.

 

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 31 January 2016.

 

2.   Segment information

The Group comprises two business segments element14 and CPC/MCM.

element14 trades as Farnell element14 in Europe, Newark element14 in North America and element14 across Asia Pacific, and distributes electronic components and related products to three main groups of customers: engineering; manufacturing; and component manufacturers.

CPC/MCM supplies mainly finished electrical products to customers in the UK and North America.

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 two operating segments.

 

 

2016/17 Half year unaudited

 

2015/16 Half year unaudited (restated)

 

Before

 

Adjusting

 

After

 

Before

 

Adjusting

 

After

 

adjusting

 

items

 

adjusting

 

adjusting

 

items

 

adjusting

 

items

 

(Note 4)

 

items

 

items

 

(Note 4)

 

items

 

 

 

 

 

 

 

 

 

 

 

 

 

£m

 

£m

 

£m

 

£m

 

£m

 

£m

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe

194.8

 

-

 

194.8

 

178.0

 

-

 

178.0

Americas

173.0

 

-

 

173.0

 

177.5

 

-

 

177.5

Asia Pacific

59.3

 

-

 

59.3

 

44.5

 

-

 

44.5

element14

427.1

 

-

 

427.1

 

400.0

 

-

 

400.0

CPC & MCM

62.2

 

-

 

62.2

 

61.3

 

-

 

61.3

 

489.3

 

-

 

489.3

 

461.3

 

-

 

461.3

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

element14

29.4

 

10.9

 

40.3

 

32.9

 

(2.9)

 

30.0

CPC & MCM

6.1

 

(0.2)

 

5.9

 

6.3

 

-

 

6.3

Central costs

(5.8)

 

(4.3)

 

(10.1)

 

(5.5)

 

-

 

(5.5)

 

29.7

 

6.4

 

36.1

 

33.7

 

(2.9)

 

30.8

 

 

 

 

 

2015/16 Full year audited

 

 

 

 

 

 

 

Before

 

Adjusting

 

After

 

 

 

 

 

 

 

adjusting

 

items

 

adjusting

 

 

 

 

 

 

 

items

 

(Note 4)

 

items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

£m

 

£m

 

£m

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe

 

 

 

 

 

 

347.9

 

-

 

347.9

Americas

 

 

 

 

 

 

341.0

 

-

 

341.0

Asia Pacific

 

 

 

 

 

 

89.6

 

-

 

89.6

element14

 

 

 

 

 

 

778.5

 

-

 

778.5

CPC & MCM

 

 

 

 

 

 

125.4

 

-

 

125.4

 

 

 

 

 

 

 

903.9

 

-

 

903.9

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

element14

 

 

 

 

 

 

56.5

 

(11.2)

 

45.3

CPC & MCM

 

 

 

 

 

 

11.8

 

(0.2)

 

11.6

Central costs

 

 

 

 

 

 

(10.9)

 

(1.1)

 

(12.0)

 

 

 

 

 

 

 

57.4

 

(12.5)

 

44.9

 

3.   Discontinued operations

On 16 March 2016 the Group completed the sale of Akron Brass Holding Corp and its subsidiary ("Akron Brass") to IDEX Corporation. The financial performance of Akron Brass is presented within discontinued operations and assets and liabilities at 31 January 2016 classified as held for sale. The financial performance and cash flow information presented are for the period from 1 February 2016 to 16 March 2016.

 

Income Statement for discontinued operations    

2016/17

 

2015/16

 

2015/16

 

Half

 

Half

 

Full

 

year

 

year

 

year

 

unaudited

 

unaudited

 

audited

 

£m

 

£m

 

£m

 

 

 

 

 

 

Revenue

9.0

 

37.3

 

78.8

Adjusted expenses

(7.6)

 

(30.0)

 

(63.2)

- adjusting items (disposal costs)

-

 

-

 

(1.9)

Total expenses

(7.6)

 

(30.0)

 

(65.1)

Operating profit

 

 

 

 

 

- adjusted operating profit

1.4

 

7.3

 

15.6

- adjusting items (disposal costs)

-

 

-

 

(1.9)

Total operating profit

1.4

 

7.3

 

13.7

Taxation

-

 

(2.5)

 

(4.6)

Profit from discontinued operations

1.4

 

4.8

 

9.1

Gain after tax on disposal of Akron Brass

90.0

 

-

 

-

Total profit from discontinued operations

91.4

 

4.8

 

9.1

 

 

 

 

 

 

Disposal of Akron Brass

 

 

 

 

 

Consideration received

 

 

 

 

 

- cash

155.5

 

 

 

 

Carrying amount of net assets sold

(37.9)

 

 

 

 

Directly attributable costs

(3.2)

 

 

 

 

Gain on disposal before tax

114.4

 

 

 

 

Tax expense on gain

(24.4)

 

 

 

 

Gain on disposal after tax

90.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets and liabilities of Akron Brass classified as held for sale

 

 

 

 

 

Assets classified as held for sale

 

 

 

 

 

   Goodwill

-

 

-

 

5.2

   Other intangible assets

-

 

-

 

3.0

   Property, plant and equipment

-

 

-

 

7.0

   Inventories

-

 

-

 

18.4

   Trade and other receivables

-

 

-

 

11.8

   Cash and cash equivalents

-

 

-

 

0.2

 

-

 

-

 

45.6

Liabilities classified as held for sale

 

 

 

 

 

   Trade and other payables

-

 

-

 

(4.8)

   Current tax payable

-

 

-

 

(2.6)

   Deferred tax liability

-

 

-

 

(0.6)

   Retirement and other post-employment benefits

-

 

-

 

(3.9)

 

-

 

-

 

(11.9)

 

 

 

 

 

 

Net assets

-

 

-

 

33.7

 

Cash flow statement

 

 

 

 

 

Net cash flows from operating activities

0.6

 

7.8

 

16.6

Net cash flows from investing activities (including net cash flows from disposal of Akron Brass)

140.7

 

(0.7)

 

(1.4)

Net cash flows from financing activities

-

 

-

 

-

Net cash flows from discontinued operations

141.3

 

7.1

 

15.2

 

4.   Operating profit

 

2016/17

 

2015/16

 

2015/16

 

Half

 

Half

 

Full

 

year

 

year

 

year

 

unaudited

 

unaudited

 

audited

 

 

 

 

 

 

 

£m

 

£m

 

£m

 

 

 

 

 

 

Statutory operating profit is stated after (charging)/ crediting the following:

 

 

 

 

 

- Gain on Cadsoft disposal

14.3

 

-

 

-

- Acquisition costs

(1.7)

 

-

 

-

- Restructuring costs

(6.2)

 

(3.8)

 

(13.3)

- Brazil closure costs

-

 

(1.0)

 

(1.1)

- Legal provision release

-

 

1.9

 

1.9

 

6.4

 

(2.9)

 

(12.5)

 

Due to their significance and nature, adjusted operating expenses and adjusted operating profit have been disclosed on the face of the income statement excluding the items above.

 

On the 27 June Group sold its subsidiary CadSoft Computer GmbH to Autodesk Inc, resulting in a £14.3m gain on disposal.

 

£1.7m of transaction expenses relating to the acquisition offers from Avnet and Datwyler have been incurred in the first half.

 

Restructuring costs of £6.2m incurred in the year relate to the Group's operational review and global business reorganisation programme with £4.6m of severance payments and £1.6m associated with the additional resource requirements to design and plan the programmes.

 

In the prior year, restructuring costs of £13.3m related to Group's operational review and global business reorganisation programme and senior management exit costs, £1.1m was incurred from the closure of local operations in Brazil, and a £1.9m legal provision was released.

 

5.   Taxation

The taxation charge represents an effective tax rate for the 2016/17 financial year on profit before tax and preference dividends of 15.7% (2015/16: 27.1%). After excluding adjusting items, the effective rate is 27.0% (2015/16: 27.5%).

 

6.   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.

 

 

 

2016/17

 

2015/16

 

Half year unaudited

 

Half year unaudited

 

 

 

 

 

 

 

Basic per

 

Diluted per

 

 

 

Basic per

 

Diluted

per

 

 

 

share

 

share

 

 

 

share

 

share

 

Earnings

 

amount

 

amount

 

Earnings

 

amount

 

amount

 

£m

 

pence

 

pence

 

£m

 

pence

 

pence

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

Profit attributable to owners of the parent

 

 

 

 

 

 

 

 

 

 

 

Continuing

24.9

 

6.8

 

6.7

 

16.6

 

4.5

 

4.5

Discontinued

91.4

 

24.8

 

24.6

 

4.8

 

1.3

 

1.3

Total

116.3

 

31.6

 

31.3

 

21.4

 

5.8

 

5.8

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations earnings per share

24.9

 

6.8

 

6.7

 

16.6

 

4.5

 

4.5

Cadsoft gain on disposal

(14.3)

 

(3.9)

 

(3.8)

 

-

 

-

 

-

Tax attributable to Cadsoft gain

-

 

-

 

-

 

-

 

-

 

-

Acquisition costs

1.7

 

0.5

 

0.5

 

-

 

-

 

-

Tax attributable to acquisition costs

-

 

-

 

-

 

-

 

-

 

-

Restructuring costs

6.2

 

1.7

 

1.7

 

3.8

 

1.0

 

1.0

Tax attributable to restructuring costs

(1.7)

 

(0.5)

 

(0.5)

 

(0.9)

 

(0.2)

 

(0.2)

Brazil closure costs

-

 

   -

 

-

 

1.0

 

0.3

 

0.3

Tax attributable to Brazil closure costs

-

 

   -

 

-

 

-

 

-

 

-

Legal provision release

-

 

   -

 

-

 

(1.9)

 

(0.5)

 

(0.5)

Tax attributable to legal provision release

-

 

   -

 

-

 

-

 

-

 

-

Adjusted continuing operations earnings per share

16.8

 

4.6

 

4.6

 

18.6

 

5.1

 

5.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number

 

 

 

 

 

Number

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares

 

 

 

 

368,236,091

 

 

 

 

 

367,726,496

 

Dilutive effect of share options

 

 

 

 

3,318,482

 

 

 

 

 

1,064,339

 

Diluted weighted average number of shares

 

 

 

 

371,554,573

 

 

 

 

 

368,790,835

 

 

 

 

 

2015/16

 

 

 

 

Full year audited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic per

 

Diluted per

 

 

 

 

 

 

 

 

 

 

share

 

share

 

 

 

 

 

 

 

 

Earnings

 

amount

 

amount

 

 

 

 

 

 

 

 

£m

 

pence

 

pence

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

Profit attributable to owners of the parent

 

 

 

 

 

 

 

 

 

 

 

 

Continuing

 

 

 

 

 

 

20.8

 

5.6

 

5.6

 

Discontinued

 

 

 

 

 

 

9.1

 

2.5

 

2.5

 

Total

 

 

 

 

 

 

29.9

 

8.1

 

8.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations earnings per share

 

 

 

 

 

 

20.8

 

5.6

 

5.6

 

Restructuring costs

 

 

 

 

 

 

13.3

 

3.6

 

3.6

 

Tax attributable to restructuring costs

 

 

 

 

 

 

(3.1)

 

(0.8)

 

(0.8)

 

Brazil closure costs

 

 

 

 

 

 

1.1

 

0.3

 

0.3

 

Tax attributable to Brazil closure costs

 

 

 

 

 

 

-

 

-

 

-

 

Legal provision release

 

 

 

 

 

 

(1.9)

 

(0.5)

 

(0.5)

 

Tax attributable to legal provision release

 

 

 

 

 

 

-

 

-

 

-

 

Adjusted continuing operations earnings per share

 

 

 

 

 

 

30.2

 

8.2

 

8.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares

 

 

 

 

 

 

 

 

 

 

367,921,735

 

Dilutive effect of share options

 

 

 

 

 

 

 

 

 

 

1,099,218

 

Diluted weighted average number of shares

 

 

 

 

 

 

 

 

 

 

369,020,953

 

                                               

Adjusted earnings per share has been provided in order to facilitate year on year comparison.

 

7.   Net financial liabilities

 

 

31 July

 

2 August

 

31 January

 

2016

 

2015

 

2016

 

unaudited

 

unaudited

 

audited

 

£m

 

£m

 

£m

 

 

 

 

 

 

Cash and cash equivalents

37.5

 

51.3

 

28.5

Unsecured loans and overdrafts

(163.9)

 

(235.5)

 

(218.5)

Net financial liabilities before preference shares and derivatives

(126.4)

 

(184.2)

 

(190.0)

Preference shares

-

 

(52.9)

 

(53.3)

Derivative financial instruments

0.4

 

1.8

 

(0.2)

Net financial liabilities

(126.0)

 

(235.3)

 

(243.5)

 

 

 

 

 

 

Net financial liabilities are analysed in the balance sheet as follows:

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

37.5

 

51.3

 

28.5

Derivative financial instruments

1.5

 

1.9

 

2.9

 

39.0

 

53.2

 

31.4

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Other loans

(1.1)

 

(6.1)

 

(0.8)

Derivative financial instruments

(1.1)

 

(0.1)

 

(3.1)

5.2% US dollar Guaranteed Senior Notes payable 2017

(22.9)

 

-

 

-

Preference shares

-

 

(52.9)

 

(53.3)

 

(25.1)

 

(59.1)

 

(57.2)

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Bank loans

1.8

 

(60.0)

 

(31.8)

5.2% US dollar Guaranteed Senior Notes payable 2017

-

 

(19.1)

 

(20.9)

4.4% US dollar Guaranteed Senior Notes payable 2018

(36.3)

 

(37.1)

 

(40.7)

4.8% US dollar Guaranteed Senior Notes payable 2021

(54.5)

 

(58.0)

 

(63.6)

4.0% US dollar Guaranteed Senior Notes payable 2024

(49.5)

 

(53.9)

 

(59.2)

Other loans

(1.4)

 

(1.3)

 

(1.5)

 

(139.9)

 

(229.4)

 

(217.7)

 

At 31 July 2016, the Group's syndicate bank facilities totalled £250 million expiring in September 2019. Based on these facilities, the headroom on bank borrowings at 31 July 2016 was £250 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 31 July 2016

 

Level 1

 

Level 2

 

Level 3

 

Total

 

£m

£m

£m

balance

Assets

 

 

 

 

Investments held at fair value

1.3

-

-

1.3

Derivatives used for cash flow hedges

-

1.5

-

1.5

Liabilities

 

 

 

 

Derivatives used for cash flow hedges

-

(1.1)

-

(1.1)

Net assets

1.3

0.4

-

1.7

 

 

 

 

 

At 31 January 2016

Level 1

Level 2

Level 3

Total

 

£m

£m

£m

balance

Assets

 

 

 

 

Investments held at fair value

1.3

-

-

1.3

Derivatives used for cash flow hedges

-

2.9

-

2.9

Liabilities

 

 

 

 

Derivatives used for cash flow hedges

-

(3.1)

-

(3.1)

Net assets/(liabilities)

1.3

(0.2)

-

1.1

 

Fair value of financial assets and liabilities measured at amortised cost

 

The book value and fair value of the Group's borrowings are as follows:

 

At 31 July 2016 the fair value of short term borrowings was £24.6m (31 January 2016: £0.8m) compared to a book value of £24.0m (31 January 2016: £0.8m). 

At 31 July 2016 the fair value of long term borrowings was £150.3m (31 January 2016: £222.2m) compared to a book value of £140.0m (31 January 2016: £217.7m). 

 

The fair value of other financial assets and liabilities is approximate to their carrying amount.

 

8.   Retirement benefit obligations

The valuation of the Group's defined benefit pension schemes in the UK and the US has been updated at 31 July 2016 on an actuarial basis, applying current discount and inflation rate assumptions and incorporating the market value of assets at 31 July 2016. Remeasurements of post employment benefit obligations in the year of £14.2 million (£11.2 million net of associated deferred tax) have been taken through the Consolidated Statement of Comprehensive Income.

 

9.   Exchange rates

The principal average exchange rates used to translate the Group's overseas profits were as follows:

 

 

2016/17

2015/16

2015/16

 

 

Half

Half

Full

 

 

year

year

year

 

 

 

 

 

US dollar

 

1.40

1.54

1.52

Euro

 

1.26

1.39

1.38

 

10. Ordinary dividend

The directors recommends that there will not be an interim dividend due to the proposed offer for the company.

 

11. Related party transactions

The Group has not entered into any material transactions with related parties in the year.

 

12. Events occurring after the reporting period

Shareholders approved the scheme of arrangement between Premier Farnell and its shareholders in relation to the proposed acquisition by Avnet Bidco Limited, an indirect wholly-owned subsidiary of Avnet, Inc. on 12 September 2016.

 

 

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

 

 

Jos Opdeweegh

Chief Executive Officer

15 September 2016

 

 

Helen Willis

Chief Financial Officer

15 September 2016

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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