PREMIER FARNELL PLC
Premier Farnell plc 18 September 2014
Results for the first half of the financial year ending 1 February 2015
Key Financials H1 14/15 H1 13/14 Change Underlying Growth
(a)
Continuing operations (26 (26
weeks) weeks)
(unaudited)
£m except for per share
Total revenue 479.3 498.2 -3.8% 3.3%
Adjusted operating profit (b) 45.5 47.5 -4.2% 3.1%
Adjusting items (b) (2.4) 0.2
Total operating profit 43.1 47.7 -9.6% -2.5%
Adjusted profit before tax (b) 38.8 37.9 2.4%
Total profit before taxation 36.4 38.1 -4.5%
Adjusted earnings per share 7.2p 7.1p 1.4%
(b)
Basic earnings per share 6.8p 7.1p -4.2%
Free cash flow (c) 13.8 8.3 66.3%
Interim ordinary dividend per 4.4p 4.4p -
share
(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 growth in operating profit is calculated at constant
exchange rates, unless otherwise stated.
(b) Current year adjusting items comprise restructuring costs of £2.3m, and
acquisition costs of £0.1m. In the prior year, adjusting items comprise
restructuring costs of £1.3m and a net gain on US property disposal of £1.5m.
(c) 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.
HIGHLIGHTS
First half sales growth of 3.3%, accelerating to 4.7% in the second quarter.
Positive momentum reflects the execution of our strategic priorities and
gradual improvement in the market backdrop.
Adjusted operating margin was 9.5%, in line with our expectations and unchanged
from the prior year despite planned investments.
Adjusted profit before tax up 2.4% year on year, despite currency movements,
benefiting from reduced finance costs.
Business reorganisation on track to achieve planned £6m-£8m annual cost
benefits in 2015/16. New executive team in place to lead the simplified
organisation as we seek to leverage our global resources.
Continued strategic progress, especially in developing leadership at the front
end of electronics cycle:
Integration of AVID Technologies enhances Group's offering to components
manufacturers.
Development kit sales to engineering customers up 13.5%.
Phase one of element14 Design Center launched. Phase two will provide
industry's first online software store.
Global contract signed with ARM to support mbed online tools platform for
development of the Internet of Things.
Emerging markets sales growth up 14.4%, ahead of target.
Free cash flow at 2.9% of sales following inventory investments; inventory
expected to remain at similar level in second half.
The Board has approved an unchanged interim dividend of 4.4p per share (2013/
14: 4.4p).
Laurence Bain, Chief Executive Officer, commented:
"The Group made progress in the first half of 2015 towards achieving its sales
growth target of 6%, whilst maintaining stable gross margin. We are on track
with our planned investments to develop our design services business and to
further enhance our innovative eCommerce channels and, in June, we commenced
the reorganisation of our business into a more efficient, global enterprise.
The successful execution of these initiatives will position the Group to
become the global destination for electronics customers and deliver its
strategy for profitable growth.
We continue to expect a year of further progress in achieving the Group's
strategic goals with our full year expectations remaining unchanged. Following
the completion of the planned strategic investments over the remainder of this
year, we believe that the Group will be well positioned to accelerate its
top-line growth and deliver profitability in line with our target."
For further information, contact:
Laurence Bain, Chief Executive Officer Premier Farnell plc +44 (0) 20 7851 4107
Mark Whiteling, Chief Financial Officer
Thomas Churchill, Investor Relations
Richard Mountain FTI Consulting +44 (0) 20 3727 1374
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 14 November 2014.
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 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.
Premier Farnell plc
Divisional Analysis
Revenue
Underlying
H1 14/15 H1 13/14
MDD Division £m £m growth(a)
Europe 183.4 188.0 1.1%
APAC 39.1 37.0 18.7%
Europe & APAC 222.5 225.0 3.8%
Americas 164.3 181.5 0.9%
MDD Other 56.6 54.5 6.7%
Total MDD 443.4 461.0 3.0%
IPD 35.9 37.2 6.8%
Group 479.3 498.2 3.3%
Adjusted Operating Profit (Operating margin %)
Underlying
H1 14/15 H1 13/14
MDD Division £m £m growth(a)
Europe & APAC 30.8 31.4 3.2%
13.8% 14.0%
Americas 9.9 10.5 6.0%
6.0% 5.8%
MDD Other 5.6 5.5 3.0%
9.9% 10.1%
Total MDD 46.3 47.4 3.8%
10.4% 10.3%
IPD 6.8 7.0 7.7%
18.9% 18.8%
Head office (7.6) (6.9)
Group 45.5 47.5 3.1%
9.5% 9.5%
Note: Current year adjusted operating profit excludes restructuring costs of
£2.3m (MDD Europe and APAC £0.9m, MDD Americas £0.2m, Head office £1.2m) and
acquisition costs of £0.1m (MDD Americas).
PREMIER FARNELL OVERVIEW
Premier Farnell plc is one of the world's leading high service distributors of
technology products and solutions.
The Marketing and Distribution Division (MDD) supports customers around the
world who range from engineers to purchasing professionals and electronics
enthusiasts.
Our Industrial Products Division is an innovator in life safety and the world
leader in the manufacture of high-performance components for fire-fighting.
FIRST HALF STRATEGIC REVIEW
Building our future as the global destination for electronics customers
We believe that by providing a superior customer offer we will become the
global destination for electronics customers. Providing a customer proposition
that meets the requirements of different groups of customers in the electronics
industry will help us capture a greater share of the long term underlying
growth in electronics.
We have identified three high-level customer segments, two of which go beyond
our historic target and provide us with significant opportunity to grow our
business profitably. The core proposition to each of these complementary
segments is as follows:
1. Components manufacturers: design services and manufacturing of development
boards
2. Engineering customers: low volume, time critical distribution of electronic
components, tools and software
3. Manufacturing customers: medium volume, scheduled distribution of electronic
components
Historically, Premier Farnell has been focused on servicing the low volume,
time critical requirement for electronics from engineering customers and this
still makes up the core of our business today. More recently, we have taken
steps to extend our business model. We can now support components manufacturers
with the launch of new technologies through design services and manufacturing
of development kits and are seeking to grow share with manufacturing customers
as we follow customers' designs through to production.
Clearly defined strategic priorities
The execution of our strategic vision of becoming the global destination for
electronics customers will create sustainable shareholder value by growing our
business, delivering efficiencies, optimising profitability and delivering
strong free cash flow. We are focused on delivering seven strategic
priorities, listed below, to achieve our objectives and deliver the financial
success defined by our through-the-cycle key performance indicators.
Objective Strategic priority KPI
Growth Become the recognised technology experts for design 6% sales
services and manufacturing of development kits growth
for global components manufacturers
4% active
Build and leverage technical expertise to attract customer
engineering customers at cutting edge of technology growth
Grow our business with engineering and manufacturing 10% emerging
customer base, especially in the emerging markets markets growth
Efficiency Evolve our operating model into a more efficient >30% RONA
and effective global, function based structure
Develop attractive eCommerce channels 70% of MDD
that enable automation of processes sales from
eCommerce
Profitability Optimise our business through effective 10%-12% ROS%
management of gross margin and costs
Cash Optimise use of cash in the business and distribution 6% FCF to
of funds to shareholders through-the-cycle sales
As described below, we have made progress against each of these strategic
priorities through the first half of our 2015 financial year as we seek to
deliver our key performance indicators.
Strategic objective 1: Growth
By becoming the global destination for electronics customers, we believe that
Premier Farnell will deliver 6% sales growth through-the-cycle. Through the
first half, the Group grew sales by 3.3% with positive momentum in all our
divisions. Whilst growth rates are currently below our targeted level, we have
made significant progress in enhancing our customer proposition for each of our
three targeted customer segments. As such, the Group is well positioned to
deliver sales growth at levels consistent with our through-the-cycle target.
Become the recognised technology experts for design services and manufacturing
of development kits for global components manufacturers.
Over the past three years, we have taken steps to extend our business model at
the front end of electronics as we endeavour to become the recognised
technology experts for design services and new product introduction for global
components manufacturers. Most notably, we acquired Embest and AVID
Technologies, businesses with significant technical expertise that allow us to
provide design services to our key semiconductor components manufacturers.
Specifically, our engineers at Embest and AVID are working with these strategic
partners to design and manufacture the development kits that support the
release of their latest components. The market for the manufacture of
development kits is estimated to be worth approximately £350 million globally.
In the first half, we further extended our partnership with ARM in a move that
increases our value to many of our supplier partners. By signing a global
contract that allows Embest to support the ARM mbed online tools platform, we
are now enabling the development of connected embedded devices in the Internet
of Things (IoT). We also designed and manufactured a number of influential
development boards during the period including the Texas Instruments CC3200
Launchpad development board, a product which is targeted at the IoT, and the
Freescale MagniV MINIBRD development platform which targets the automotive
sector. In addition, we have extended the distribution franchise for NXP's NFC
Explore development board into North America following a successful launch in
Europe and Asia Pacific. This product provides engineering customers with a new
development platform to innovate in the near field communications technology
space.
Build and leverage technical expertise to attract engineering customers at the
cutting edge of technology.
Access to the latest technologies, as well as the technical expertise to
utilise them effectively, is attractive for many small volume engineering
customers. Development boards are key products used by engineering customers to
test the attributes of the semiconductor as they make their product selection
in the early stages of product design. The size of the total global market for
the distribution of development boards to design engineers is estimated to be
at least £350 million. Following last year's inventory investment to enhance
our range in this key product group, we have delivered accelerated growth in
development kit sales, up 13.5% year on year in the first half.
In addition, we launched phase one of our new online Design Center during the
first half. The Design Center is a hub on the element14 community which
provides design engineering customers with access and information to a broad
range of development kits and tools. Engineers are increasingly using software
as the key point of differentiation in their products. Through phase two, which
will go live early next year, the Design Center will incorporate a software
store where customers can buy licences for embedded systems development tools
from brands such as ARM, Timesys, Atollic and CadSoft.
Grow our business with our engineering and manufacturing customer base,
especially in the emerging markets.
From around the globe, engineering customers with low volume, time critical
requirements come to Premier Farnell for access to a broad range of products,
information and support to make their product selection, as well as the fast,
reliable fulfilment of orders. The products they require will include
components and tools, such as test and measurement equipment. We have an
extensive proposition for customers in this space with over 600,000 products
stocked from over 3,000 suppliers available for immediate shipment. We are
committed to continuing to develop this offering in order to attract and retain
this core customer segment globally. Last year, we invested in inventory to
increase our product linefill to targeted levels, especially in our MRO product
range in North America. As a consequence of the re-organisation of our business
to a global structure, we will be better positioned to leverage our resources
globally in order to grow our business with engineering and manufacturing
customers.
Electronics distribution is a marketplace that is changing rapidly. As product
lifecycles have become shorter, the need for new innovations has increased and
our customers' desire to offer personalised product solutions has proliferated.
This is expanding the small run production market - mid-sized volume
opportunities that were previously closed to us - as the lines blur between
high and low volume distribution.
We have focused on developing our offering to allow us to grow our business
with mid volume, manufacturing customers, particularly as we work with design
engineering customers to follow their product development through to
production. The enhancements that we have already made include: expanding the
depth of key electronic products held in our inventory; providing greater
product traceability; and holding a range of production packaging options. As
outlined at the beginning of the year, we are making investments to enhance our
online channels which will benefit customers in this segment as well as our low
volume customer base.
Although our active customer base declined 2.7% year on year, it increased 0.3%
over the prior year end. The year on year decline reflects the activity
instigated in the second half of last year to de-emphasise non-profitable
customers in segments not core to our strategic objectives and the tougher
comparators in the first half of this year. We believe that the developments
outlined above position Premier Farnell to grow business with our engineering
and manufacturing customer base. We have made some significant progress against
this priority. Most notably, we have seen sales in emerging markets grow above
our strategic target, up 14.4% year on year with China and India especially
strong.
Strategic objective 2: Efficiency
The effective and efficient investment of our shareholders' funds is a primary
aim of our strategy. We continue to measure our success in the optimisation of
our global resources against a return on net operating assets (RONA) target of
>30%. In the first half, the Group's RONA exceeded this goal at 30.6%.
Evolve our operating model into a more efficient and effective global, function
based structure.
In June, we reported that we had begun an important programme to move to an
integrated, global organisational structure in our element14 marketing and
distribution businesses. By moving to a function based structure, the business
can better leverage its expertise and resources around the globe. As well as
enabling the accelerated execution of our strategy, the simplified global
structure will deliver operating efficiencies and enable the Group to benefit
from economies of scale.
As previously indicated, we anticipate that the cost to achieve this
reorganisation will be approximately £8m and we are on track to deliver
annualised cost benefits, once fully implemented, of £6m to £8m.
Develop attractive eCommerce channels that enable automation of processes.
Our multichannel sales and marketing approach leverages transactional eCommerce
capability to make it simple for engineering customers to buy from Premier
Farnell, wherever in the world they are based. In addition to its convergence
with the market leading online community, element14, which now has over 250,000
members, our eCommerce sales and marketing channels are supported by 24/5
technical support, regional contact centres and, for larger accounts, field
sales resources. As well as supporting customers' requirement for detailed
information amongst many other benefits, eCommerce channels are typically the
most efficient as they allow greater automation of processes.
eCommerce penetration was 49.5% in the first half, reflecting the decommission
of optical character recognition for the fully automated processing of faxes
and the shift in our customer base as we extend our model towards the medium
volume manufacturing customer market. Whilst we have typically served the
manufacturing customer segment through offline channels, web enhancements
targeted at these customers are scheduled to go live in the second half. This
will enable the Group to continue to drive towards our objective of 70% sales
via eCommerce.
These investments continue on track, with the roll out of our upgraded web
platform now complete across three European markets following its successful
implementation in North America at the end of last year. The programme will be
completed across the rest of Europe and Asia Pacific over the course of the
second half of the year. Having a single global web platform will allow the
business to benefit from operating efficiencies, such as the capability to
implement sales and marketing activity more quickly and consistently around the
globe, as well as providing a better online experience for our customers.
Strategic objective 3: Profitability
Optimise our business through effective management of gross margin and costs.
The Group targets an operating margin that optimises profitability
through-the-cycle by seeking to balance gross margin and costs.First half
operating margin of 9.5% (on an adjusted basis) was in line with our
expectations given our planned strategic investments to enhance our customer
proposition.
Gross margin for the first half of the financial year was 37.4%, sequentially
stable with the second half of the prior year. We continue to remain focused on
managing gross margin appropriately, in line with market conditions and
reflecting the value we create for customers and suppliers.
We remain focused on the tight management of costs. First half net operating
expenses as a percentage of sales reduced to 27.9%, down 0.4 percentage points
on the prior year (at constant exchange rates). The Group will continue to
manage its cost base both strategically, as we further simplify the
organisation and take advantage of the efficiencies arising from increased
eCommerce activity, and tactically, in response to sales volumes as we focus on
optimising business performance.
Strategic objective 4: Cash
Optimise use of cash in the business and distribution of funds to shareholders
through-the-cycle.
We aim to optimise the use of cash in the business to take advantage of the
opportunities that we see and enable distribution of funds to shareholders
through-the-cycle.
Adjusted free cash flow as a percentage of sales of 2.9% was below our
through-the-cycle target of 6%, following further inventory investments to
enrich our product offering for engineering and manufacturing customers. Net
cash outflow from investment in working capital was £14.4m, resulting in
adjusted cash conversion at 84.4% (2013/14: 71.6%). Second half inventory
levels are expected to remain at similar levels overall as we optimise our
product portfolio, whilst continuing to ensure that our inventory breadth and
depth supports our targeted customers' requirements.
With our ability to manage working capital in response to market conditions and
our commitment to maintaining the quality of earnings through this period of
investment, the Board has approved an unchanged interim dividend of 4.4p per
share.
FIRST HALF BUSINESS REVIEW
Positive Group sales momentum continues
Group sales grew 3.3% year on year in the first half. Sales momentum improved
in all our divisions through the course of the first half, reflecting the
execution of our strategic initiatives and a gradual improvement in the market
backdrop. Excluding Raspberry Pi, Group sales in the first half grew 3.3% year
on year.
Underlying sales growth Underlying sales growth
(including Raspberry Pi) (excluding Raspberry Pi)
Q1 Q2 H1 Q1 Q2 H1
Europe 0.8% 1.4% 1.1% 0.9% 1.7% 1.3%
APAC 20.5% 17.1% 18.7% 18.8% 15.6% 17.1%
Americas -0.5% 2.3% 0.9% 0.8% 3.5% 2.1%
CPC & MCM (MDD Other) 0.8% 13.0% 6.7% -1.4% 6.9% 2.6%
Akron Brass (IPD) 5.2% 8.4% 6.8% 5.2% 8.4% 6.8%
Group 2.0% 4.7% 3.3% 2.2% 4.4% 3.3%
Europe and Asia Pacific
Europe and Asia Pacific's element14 business delivered first half sales growth
of 3.8% year on year.
The European economic environment remains mixed. In the first half, Europe
sales grew 1.1% year on year with positive momentum from Q1 to Q2.
Despite strong manufacturing PMIs, market conditions in the United Kingdom
remain challenging and are characterised by heightened competition. Against
this backdrop, UK sales declined 1.2% in the first half. However, the UK is
well positioned to benefit from investments in our customer proposition,
including our online enhancements. Continental Europe performed more strongly
in the first half, growing sales 2.1% year on year as small declines in France
and Scandinavia were more than offset by sales growth in Spain, Italy, Germany
and Eastern Europe.
Asia Pacific provides the Group with a significant long-term growth
opportunity. First half sales grew 18.7% year on year, with every market
delivering positive growth as we expanded our market share in the region.
Sales in the key emerging markets of China and India grew 23.8% and 21.5%,
respectively, whilst Australia also delivered first half sales growth of 6.6%
over the prior year.
Americas
Americas' sales grew 0.9% in the first half, as we implemented sales plans and
integrated AVID Technologies into the Group. Excluding Avid Technologies,
Americas grew sales by 0.1% year on year in the first half. Focus on our
strategic priorities has resulted in improving sales momentum across the half,
with Q2 sales up 2.3% compared to a decline of 0.5% in the first quarter.
We continue to make investments to strengthen the Americas business and enhance
the value of its offering by leveraging our global resources, whilst also
taking action to implement cost efficiencies and improve its operating model.
Over the medium term, we expect the execution of our strategy to develop our
Americas business into a digital enterprise and capitalise on the significant
opportunities in the region.
CPC and MCM
CPC and MCM performed strongly in the first half overall, despite a challenging
market backdrop, to deliver combined sales growth of 6.7%. The businesses
delivered a significantly stronger performance in the second quarter when sales
grew 13.0% year on year. This follows the publication of CPC's new catalogue
and as the division leveraged its product range to 'maker' and hobbyist
customers with the launch of the Raspberry Pi B+ board.
Raspberry Pi
Raspberry Pi sales grew 4.8% year on year in the first half as demand continued
for this disruptive technology launched in May 2012. In the second quarter, we
were instrumental in the launch of the Raspberry Pi B+ board, which resulted in
our element14 brand achieving market leading coverage across both traditional
press and social media as we seek to grow our brand awareness.
Akron Brass
Following a standout year in 2013/14, Akron Brass continued to deliver a strong
performance in the first half of 2014/15. First half sales grew 6.8% year on
year as the business expands further into international markets and
increasingly innovates to build on its market leading position in North
America. Akron Brass' sales growth rate accelerated to 8.4% in the second
quarter. The progress made so far this year is encouraging and positions Akron
Brass for continued strong financial performance.
FIRST HALF FINANCIAL COMMENTARY
Operating Profit
As explained in the strategic review, the Group targets an operating margin
that optimises profitability through-the-cycle by seeking to balance gross
margin and costs. First half operating margin of 9.5% (on an adjusted basis)
was in line with our expectations given the planned strategic investments to
enhance our customer proposition.
Adjusting itemsinclude £2.3m of restructuring costs related to our global
business re-organisation and acquisition costs of £0.1m related to the purchase
of AVID Technologies. We continue to anticipate that the total cost to achieve
the business re-organisation will be approximately £8m. In the prior year,
adjusting items excluded restructuring costs of £1.3m and a net gain on US
property disposal of £1.5m.
Adjusted operating profit for the first half was £45.5m (2013/14: £47.5m),
representing growth of 3.1% year on year at constant exchange rates.
Total operating profit for the first half was £43.1m, reflecting a net cost
from adjusting items of £2.4m (2013/14: £47.7m, after reflecting a net gain
from adjusting items of £0.2m), resulting in a year on year decline of 2.5% at
constant exchange rates.
Cash flow and balance sheet
As described in the strategic review, adjusted free cash flow as a percentage
of sales of 2.9% was below our through-the-cycle target of 6%, following
further inventory investments to enrich our product offering for engineering
and manufacturing customers. Net cash outflow from investment in working
capital was £14.4m, resulting in adjusted cash conversion at 84.4% (2013/14:
71.6%). Second half inventory levels are expected to remain at similar levels
overall as we optimise our product portfolio whilst continuing to ensure that
our inventory breadth and depth supports our targeted customers' requirements.
During the period the Group purchased and cancelled 712,948 of its preference
shares at a total cash cost of £11.5 million. Based on the book value and fair
value of the instrument at the date of purchase, the financial liability
element of the preference shares was reduced by £11.5 million and the equity
element by £1.9 million.
Total consideration payable for the acquisition of AVID Technologies was £7.7
million, with additional acquisition costs of £0.1 million shown as an
adjusting item. Of the total consideration of £7.7 million, £0.3 million
relates to the fair value of net assets acquired and £7.4 million relates to
goodwill.
Net financial liabilities (including preference shares) increased to £240.8m
from £225.8m at the end of the prior financial year. The impact of exchange
rates in the period was to decrease net financial liabilities by £4.9m,
principally in relation to our US$ denominated private placement notes. Net
debt to adjusted EBITDA of 2.3x at the end of the first half was in line with
our expectations following the acquisition of AVID Technologies.
Premier Farnell's financial position remains robust, with good liquidity and
strong free cash flow. At the end of the first half, headroom on bank
borrowings was £132.7m under facilities in place until October 2016. This
headroom, combined with our net cash position of £39.5m, continues to give us a
secure funding position. Since the half year end, the Group successfully
refinanced its US Private Placement due August 2016 until 2024.
Foreign currency
In the first half of 2014/15, the average exchange rates for sterling against
the US dollar and the Euro were, respectively, £1 = US$1.68 (H1 2013/14: £1 =
US$1.52) and £1 = €1.23 (H1 2013/14: £1 = €1.17). Prior year comparatives for
revenues and adjusted operating profit benefited by £33.9m and £3.4m,
respectively, as a result of the foreign exchange rates compared to the first
half 2014/15.
At the beginning of the second half of last year, sterling strengthened against
both the US dollar and the Euro and this should result in less challenging
comparatives in the second half of 2014/15. For reference, the average exchange
rates in the second half last year for sterling against the US dollar and the
Euro were, respectively, £1 = US$1.62 and £1 = €1.19.
A one cent movement in the exchange rate between the US dollar and sterling
impacts the translation of the Group's operating profit by approximately £0.2m
per annum, and a one cent movement in the exchange rate between the Euro and
sterling impacts the translation of the Group's operating profit by
approximately £0.5m per annum.
Finance costs
Net finance costs in the first half were £6.7m (2013/14: £9.6m). This comprises
net interest payable of £4.9m (2013/14: £7.4m), which was covered 9.3 times by
adjusted operating profit, and a net charge of £1.8m (2013/14: £2.2m) in
respect of the Company's convertible preference shares. The reduction in net
finance costs reflects the repayment of the US$159m Private Placement notes in
June 2013, combined with the retranslation of US$ interest charges on the
Group's US$ Private Placement notes, as well as the benefit of the repurchase
and cancellation of 0.7m preference shares.
Profit before tax
Adjusted profit before tax for the first half was £38.8m (2013/14: £37.9m), an
increase of 2.4% on the previous year. Total profit before tax was £36.4m (2013
/14: £38.1m), a decline of 4.5% on the previous year.
Tax
The taxation charge for the first half represents an effective tax rate of
30.0% (2013/14: 30.0%) on profit before tax, preference dividends and adjusting
items. We anticipate an effective tax rate at broadly similar levels going
forward.
Earnings per share
Adjusted basic earnings per share for the first half are 7.2p (2013/14: 7.1p).
Basic earnings per share after the net impact of adjusting items are 6.8p (2013
/14: 7.1p).
Dividend
The Board has recommended that the interim dividend is maintained at 4.4p per
share (2013/14: 4.4p per share). The interim dividend is payable on 23 October
2014 to shareholders on the register at 26 September 2014.
Board changes
As announced separately today, we are pleased to welcome Gary Hughes to the
Board as one of our non-executive directors, with effect from 1 November 2014.
Mr Hughes is currently a senior member of the Operational Excellence team at
Apax Partners LLP and a non-executive director of J Sainsbury plc, Matomy Media
Group plc, Smart Technologies Inc, and SECC Limited. His former roles include
Chief Financial Officer of Gala Coral Group, Chief Executive Officer of the
largest operating division of United Business Media plc and Group Finance
Director of Emap plc. Mr Hughes qualified as a Chartered Accountant with Ernst
& Whinney. His extensive experience in finance and operational roles in a
number of industries will provide a valuable addition to Premier Farnell as we
continue to develop our business.
Dennis Millard, who has been a member of the Board since 2007 and chairs its
Audit Committee, will stand down from the Board at the end of January 2015. At
that time, Mr Hughes will become Chairman of the Audit Committee and Paul
Withers will take over as the Senior Independent Director.
Outlook
The Group made progress in the first half of 2015 towards achieving its sales
growth target of 6%, whilst maintaining stable gross margin. We are on track
with our planned investments to develop our design services business and to
further enhance our innovative eCommerce channels and, in June, we commenced
the reorganisation of our business into a more efficient, global enterprise.
The successful execution of these initiatives will position the Group to
become the global destination for electronics customers and deliver its
strategy for profitable growth.
We continue to expect a year of further progress in achieving the Group's
strategic goals with our full year expectations remaining unchanged. Following
the completion of the planned strategic investments over the remainder of this
year, we believe that the Group will be well positioned to accelerate its
top-line growth and deliver profitability in line with our target.
Risks and uncertainties
The principal risks and uncertainties facing the Group and the ways in which
they are mitigated are described on pages 26 and 27 of the Company's 2013/14
Annual Report and Accounts. In addition, we have recognised that evolving our
business model will require rigorous management of the risks arising from this
change to safeguard current operating performance and ensure the move to global
based structures is effective.
Risks and Mitigating actions Opportunity
uncertainties
Business The CEO, CFO and CPO are Our new global structure will
reorganisation directly involved in managing facilitate better sharing of
as we evolve this model change, supported expertise and resources across the
our business by both experienced programme business globally. It will allow
model managers and high performing us to enhance the service we
employees from across the provide to meet the needs of
business. customers and suppliers across
regional boundaries.
Condensed Consolidated Income Statement
For the half year ended 3 August 2014
2014/15 2013/14 2013/14
Half Half Full
year year year
unaudited unaudited audited
Notes £m £m £m
Continuing operations
Revenue 2 479.3 498.2 968.0
Cost of sales (299.9) (310.5) (605.1)
Gross profit 179.4 187.7 362.9
Net operating expenses
- adjusted operating expenses (133.9) (140.2) (269.9)
- adjusting items 3 (2.4) 0.2 (1.5)
Total net operating expenses (136.3) (140.0) (271.4)
Operating profit
- adjusted operating profit 2 45.5 47.5 93.0
- adjusting items 3 (2.4) 0.2 (1.5)
Total operating profit 2 43.1 47.7 91.5
Finance income 0.3 0.2 0.4
Finance costs
- interest payable (5.2) (7.6) (12.8)
- preference dividends (1.4) (1.8) (3.5)
- premium on redemption of preference shares (0.4) (0.4) (0.8)
Total finance costs (7.0) (9.8) (17.1)
Total profit before taxation 36.4 38.1 74.8
Taxation 4 (11.3) (12.1) (23.4)
Profit for the period attributable
toowners of the parent 25.1 26.0 51.4
Earnings per share
Basic 5 6.8p 7.1p 14.0p
Diluted 6.7p 7.0p 13.9p
Ordinary dividends
Interim - proposed 4.4p 4.4p 4.4p
Final - proposed 6.0p
Paid 6.0p 6.0p 10.4p
Impact on shareholders' funds (£m) 22.0 22.0 38.1
Condensed Consolidated Statement of Comprehensive Income
For the half year ended 3 August 2014
2014/15 2013/14 2013/14
Half Half Full
year year year
unaudited unaudited audited
£m £m £m
Profit for the period 25.1 26.0 51.4
Items that will not be reclassified to profit or loss
Remeasurements of post
employment benefit obligations (2.1) 1.2 (4.0)
Deferred tax credit/(charge) on remeasurements
of post employment benefit obligations 0.6 (0.6) 0.7
Total items that will not be reclassified to profit or loss (1.5) 0.6 (3.3)
Items that may be reclassified to profit or loss
Net exchange adjustments (1.2) 1.9 (5.9)
Net fair value (losses)/gains on cash flow hedges (0.7) 4.0 6.0
Total items that may be reclassified
subsequently to profit or loss (1.9) 5.9 0.1
Other comprehensive (expense)/income for the period (3.4) 6.5 (3.2)
Total comprehensive income for the period
attributable to owners of the parent 21.7 32.5 48.2
The accompanying notes form an integral part of this unaudited condensed
consolidated financial information.
Condensed Consolidated Balance Sheet
As at 3 August 2014
3 August 4 August 2 February
2014 2013 2014
unaudited unaudited 1 audited
Notes £m £m £m
ASSETS
Non-current assets
Goodwill 45.6 38.0 38.3
Other intangible assets 34.5 31.5 32.6
Property, plant and equipment 49.1 52.3 49.5
Deferred tax assets 8.6 7.9 4.9
Total non-current assets 137.8 129.7 125.3
Current assets
Inventories 247.3 250.2 236.0
Derivative financial instruments 6 1.3 0.3 2.0
Trade and other receivables 136.1 137.3 128.9
Current tax receivable 3.8 3.8 2.1
Cash and cash equivalents 6 39.5 46.1 42.8
Total current assets 428.0 437.7 411.8
LIABILITIES
Current liabilities
Financial liabilities 6 (1.7) (1.9) (1.8)
Derivative financial instruments 6 - (0.3) -
Trade and other payables (125.5) (130.4) (118.0)
Current tax payable (22.4) (11.7) (12.4)
Total current liabilities (149.6) (144.3) (132.2)
Net current assets 278.4 293.4 279.6
Non-current liabilities
Financial liabilities 6 (279.9) (289.8) (268.8)
Retirement and other post-employment benefits (44.1) (41.7) (44.7)
Deferred tax liabilities (6.2) (7.3) (6.7)
Total non-current liabilities (330.2) (338.8) (320.2)
NET ASSETS 86.0 84.3 84.7
EQUITY
Ordinary shares 18.6 18.6 18.6
Equity element of preference shares 8.5 10.4 10.4
Share premium 32.8 32.4 32.7
Capital redemption reserve 5.2 4.4 4.4
Hedging reserve 1.3 - 2.0
Cumulative translation reserve 15.8 24.8 17.0
Retained earnings 3.8 (6.3) (0.4)
TOTAL EQUITY 86.0 84.3 84.7
Consolidated Statement of Changes in Equity
For the half year ended 3 August 2014
2014/15 2013/14 2013/14
Half Half Full
year year year
unaudited unaudited audited
£m £m £m
Total equity at beginning of period 84.7 72.2 72.2
Profit for the period 25.1 26.0 51.4
Other comprehensive (expense)/income (3.4) 6.5 (3.2)
Total comprehensive income 21.7 32.5 48.2
Transactions with owners:
Ordinary dividends paid (22.0) (22.0) (38.1)
Ordinary share capital subscribed 0.1 0.5 0.8
Share-based payments 1.5 1.1 1.6
Total transactions with owners (20.4) (20.4) (35.7)
Total equity at end of period 86.0 84.3 84.7
The accompanying notes form an integral part of this unaudited condensed
consolidated financial information.
1 Comparative information has been restated due to the revision of IAS19. This
has reduced the Group's brought forward post-employment liabilities by £6.2
million, with associated deferred tax assets being reduced by £0.7 million and
deferred tax liabilities by £1.1 million.
Condensed Consolidated Statement of Cash Flows
For the half year ended 3 August 2014
2014/15 2013/14 2013/14
Half Half Full
year year year
unaudited unaudited audited
Notes £m £m £m
Cash flows from operating activities
Operating profit 2 43.1 47.7 91.5
Adjusting items:
- net income statement impact 3 2.4 (0.2) 1.5
- cash impact (2.7) (4.0) (6.2)
Non cash impact of adjusting items (0.3) (4.2) (4.7)
Depreciation and amortisation 7.4 9.2 17.7
Changes in working capital (14.4) (22.3) (23.7)
Additional funding for post
retirement defined benefit plans (1.9) (1.7) (2.6)
Other non-cash movements 1.8 1.3 2.2
Total cash generated from operations 35.7 30.0 80.4
Interest received 0.3 0.2 0.4
Interest paid (5.0) (7.4) (12.4)
Dividends paid on preference shares (1.4) (1.8) (3.5)
Taxation paid (8.4) (8.8) (17.5)
Net cash generated from operating activities 21.2 12.2 47.4
Cash flows from investing activities
Net outflow from purchase of business (7.8) (2.2) (2.2)
Adjusting items:
- cash impact of US property disposal - 4.0 4.2
Purchase of property, plant and equipment (3.8) (2.1) (5.1)
Purchase of intangible assets (6.3) (5.8) (12.7)
Net cash used in investing activities (17.9) (6.1) (15.8)
Cash flows from financing activities
Issue of ordinary shares 0.1 0.5 0.8
Purchase of preference shares (11.5) - -
Proceeds from bank loans 27.5 27.3 27.3
Repayment of bank loans - (101.5) (108.6)
Dividends paid to ordinary shareholders (22.0) (22.0) (38.1)
Net cash used in financing activities (5.9) (95.7) (118.6)
Net decrease in cash, cash equivalents
and bank overdrafts (2.6) (89.6) (87.0)
Cash, cash equivalents and bank
overdrafts at beginning of period 42.8 131.6 131.6
Exchange (losses)/ gains (0.7) 4.1 (1.8)
Cash, cash equivalents and bank
overdrafts at end of period 39.5 46.1 42.8
Reconciliation of net financial liabilities
Net financial liabilities at beginning of period (225.8) (229.6) (229.6)
Net decrease in cash, cash
equivalents and bank overdrafts (2.6) (89.6) (87.0)
(Increase)/ decrease in debt (27.5) 74.2 81.3
Purchase of preference shares 11.5 - -
Premium on redemption of preference shares (0.4) (0.4) (0.8)
Derivative financial instruments (0.7) 2.2 4.2
Amortisation of arrangement fees (0.2) (0.3) (0.5)
Exchange movement 4.9 (2.1) 6.6
Net financial liabilities at end of period 6 (240.8) (245.6) (225.8)
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 2013/14 Annual Report and Accounts on pages 82 to 86 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 498 of the Companies Act 2006. Statutory
accounts for the financial year ended 2 February 2014, were approved by the
Board of Directors on 17 April 2014 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
After making enquiries, the directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future. The Group therefore continues to adopt the going concern
basis in preparing its interim financial statements.
Estimates
The preparation of interim 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 interim 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 2 February 2014.
2 Segment information
2014/15 Half year unaudited 2013/14 Half year unaudited
Adjusting Adjusting
Before items After Before items After
Adjusting Adjusting Adjusting adjusting
items (Note 3) items items (Note 3) tems
£m £m £m £m £m £m
Revenue
Marketing and Distribution Division
Americas 164.3 - 164.3 181.5 - 181.5
Europe and Asia Pacific 222.5 - 222.5 225.0 - 225.0
Other Distribution Businesses 56.6 - 56.6 54.5 - 54.5
Total Marketing and Distribution Division 443.4 - 443.4 461.0 - 461.0
Industrial Products Division 35.9 - 35.9 37.2 - 37.2
479.3 - 479.3 498.2 - 498.2
Operating profit
Marketing and Distribution Division
Americas 9.9 (0.3) 9.6 10.5 1.3 11.8
Europe and Asia Pacific 30.8 (0.9) 29.9 31.4 (0.5) 30.9
Other Distribution Businesses 5.6 - 5.6 5.5 - 5.5
Total Marketing and Distribution Division 46.3 (1.2) 45.1 47.4 0.8 48.2
Industrial Products Division 6.8 - 6.8 7.0 - 7.0
Head Office costs (7.6) (1.2) (8.8) (6.9) (0.6) (7.5)
45.5 (2.4) 43.1 47.5 0.2 47.7
2013/14 Full year audited
Adjusting
Before items After
Adjusting Adjusting
items (Note 3) items
£m £m £m
Revenue
Marketing and Distribution Division
Americas 347.1 - 347.1
Europe and Asia Pacific 435.9 - 435.9
Other Distribution Businesses 109.7 - 109.7
Total Marketing and Distribution Division 892.7 - 892.7
Industrial Products Division 75.3 - 75.3
968.0 - 968.0
Operating profit
Marketing and Distribution Division
Americas 19.7 0.6 20.3
Europe and Asia Pacific 60.3 0.2 60.5
Other Distribution Businesses 12.1 - 12.1
Total Marketing and Distribution Division 92.1 0.8 92.9
Industrial Products Division 14.0 - 14.0
Head Office costs (13.1) (2.3) (15.4)
93.0 (1.5) 91.5
3 Operating profit 2014/15 2013/14 2013/14
Statutory operating profit is stated
after (charging)/crediting the following: Half Half Full
year year year
unaudited unaudited audited
£m £m £m
- Restructuring costs (2.3) (1.3) (3.9)
- Acquisition costs (0.1) - -
- Net gain on US property disposal - 1.5 1.6
- Remeasurement of the fair value
of contingent consideration - - 0.8
(2.4) 0.2 (1.5)
Due to their significance and nature, adjusted operating expenses and adjusted
operating profit have been disclosed on the face of the income statement which
excludes the items above.
Adjusting items in the period include £2.3 million of restructuring costs
related to the Group's global business re-organisation and acquisition costs of
£0.1 million due to the purchase of AVID Technologies (see note 12).
The net gain on US property disposal in prior year relates to the sale and
relocation of the MDD Americas Head Office. Restructuring costs incurred in
the prior year primarily relate to decisions taken to reflect re-alignment of
focus on areas of greatest opportunity, drive efficiency of global operations
and optimise financial performance. In addition, there was one-off gain in
prior year related to a re-measurement of the fair value of contingent
consideration payable in respect of the acquisition of Shenzhen Embest
Technology Co Ltd.
4 Taxation
The taxation charge represents an effective tax rate for the 2014/15 financial
year on profit before tax and preference dividends of 30.0% (2013/14: 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.
2014/15 2013/14
Half Year unaudited Half Year unaudited
Basic Diluted Basic Diluted
per per per per
share share share share
Earnings amount amount Earnings amount amount
£m pence pence £m pence pence
Earnings per share
Profit attributable to owners of the parent 25.1 6.8 6.7 26.0 7.1 7.0
Restructuring costs 2.3 0.6 0.6 1.3 0.4 0.4
Tax attributable to restructuring costs (0.7) (0.2) (0.2) (0.4) (0.1) (0.1)
Net gain on US property disposal - - - (1.5) (0.4) (0.4)
Tax attributable to gain on US property disposal - - - 0.6 0.1 0.1
Acquisition costs 0.1 - - - - -
Tax attributable to acquisition costs - - - - - -
Adjusted profit attributable to owners of the parent 26.8 7.2 7.1 26.0 7.1 7.0
Number Number
Weighted average number of shares 367,312,884 366,453,668
Dilutive effect of share options 2,328,674 2,853,364
Diluted weighted average number of shares 369,641,558 369,307,032
2013/14
Full Year audited
Basic per Diluted per
Earnings share amount share amount
£m pence pence
Earnings per share
Profit attributable to owners of the parent 51.4 14.0 13.9
Restructuring costs 3.9 1.1 1.1
Tax attributable to restructuring costs (1.1) (0.3) (0.3)
Net gain on US property disposal (1.6) (0.4) (0.4)
Tax attributable to net gain on US property disposal 0.6 0.1 0.1
Remeasurement of contingent consideration (0.8) (0.2) (0.2)
Adjusted profit attributable to owners of the parent 52.4 14.3 14.2
Number
Weighted average number of shares 367,069,378
Dilutive effect of share options 2,763,398
Diluted weighted average number of shares 369,832,776
Adjusted earnings per share has been provided
in order to facilitate year on year comparison.
6 Net financial liabilities
3 August 4 August 2 February
2014 2013 2014
unaudited unaudited audited
£m £m £m
Cash and cash equivalents 39.5 46.1 42.8
Unsecured loans and overdrafts (229.3) (228.7) (207.2)
Net financial liabilities before
preference shares and derivatives (189.8) (182.6) (164.4)
Preference shares (52.3) (63.0) (63.4)
Derivative financial instruments (net) 1.3 - 2.0
Net financial liabilities (240.8) (245.6) (225.8)
Net financial liabilities are analysed in the balance sheet as follows:
Current assets
Cash and cash equivalents 39.5 46.1 42.8
Derivative financial instruments 1.3 0.3 2.0
40.8 46.4 44.8
Current liabilities
Other loans (1.7) (1.9) (1.8)
Derivative financial instruments - (0.3) -
(1.7) (2.2) (1.8)
Non-current liabilities
Bank loans (66.4) (47.5) (39.2)
3.0% US dollar Guaranteed Senior Notes payable 2016 (50.2) (55.8) (51.8)
5.2% US dollar Guaranteed Senior Notes payable 2017 (17.7) (19.7) (18.3)
4.4% US dollar Guaranteed Senior Notes payable 2018 (34.4) (38.3) (35.5)
4.8% US dollar Guaranteed Senior Notes payable 2021 (53.8) (59.8) (55.4)
Other loans (5.1) (5.7) (5.2)
Preference shares (52.3) (63.0) (63.4)
(279.9) (289.8) (268.8)
At 3 August 2014, the Group's syndicate bank facilities totalled £200 million
expiring in October 2016. Based on these facilities, the headroom on bank
borrowings at 3 August 2014 was £132.7 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 3 August 2014 Level 1 Level 2 Level 3 Total
£m £m £m balance
Assets
Derivative financial instruments used for cash flow hedges - 1.3 - 1.3
Liabilities
Contingent consideration - - (0.7) (0.7)
Net assets/ (liabilities) - 1.3 (0.7) 0.6
At 2 February 2014 Level 1 Level 2 Level 3 Total
£m £m £m balance
Assets
Derivative financial instruments used for cash flow hedges - 2.0 - 2.0
Liabilities
Contingent consideration - - (0.7) (0.7)
Net assets/ (liabilities) - 2.0 (0.7) 1.3
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 3 August 2014 the fair value of short term borrowings was £1.7m (2 February
2014: £1.8m) compared to a book value of £1.7m (2 February 2014: £1.8m). At 3
August 2014 the fair value of long term borrowings was £233.4m (2 February
2014: £209.4m) compared to a book value of £227.6m (2 February 2014: £205.4m).
At 3 August 2014 the fair value of preference shares was £51.7m (2 February
2014: £63.1m) compared to a book value of £60.8m (2 February 2014: £73.8m).
The fair value of other financial assets and liabilities is approximate to
their carrying amount.
7 Purchase of preference shares
During the period the Group purchased and cancelled 712,948 of its preference
shares at a total cash cost of £11.5 million. Based on the book value and fair
value of the instrument at the date of purchase, the financial liability
element of the preference shares was reduced by £11.5 million and the equity
element by £1.9 million. There was no difference between the book value and
fair value of the financial liability element at the date of purchase thus nil
gain/loss was recognised. A transfer from retained earnings of £0.8 million to
non-distributable reserves was made in order to maintain the legal nominal
value of share capital.
8 Retirement benefit obligations
The valuation of the Group's defined benefit pension schemes in the UK and the
US has been updated at 3 August 2014 on an actuarial basis, applying current
discount and inflation rate assumptions and incorporating the market value of
assets at 3 August 2014. Remeasurements of post employment benefit obligations
in the half year of £2.1 million (£1.5 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:
2014/15 2013/14 2013/14
Half Half Full
year year year
US dollar 1.68 1.52 1.57
Euro 1.23 1.17 1.18
10 Ordinary dividend
An interim dividend of 4.4p pence per share (2013/14: 4.4 pence per share) will
be paid on 23 October 2014 to ordinary shareholders on the register at close of
business on 26 September 2014, absorbing £16.2 million of shareholders' funds
(2013/14 £16.1 million).
11 Related party transactions
The Group has not entered into any material transactions with related parties
in the first six months of the period.
12 Acquisitions
On 17th April 2014 the Group completed its acquisition of the trade and assets
of AVID Technologies Inc (AVID). This acquisition enhances the Group's
technology capability at the front end of the electronics design cycle,
supporting suppliers' new product introduction strategies and extending our
business model.
Total consideration payable was £7.7 million, with additional acquisition costs
of £0.1 million charged to administrative expenses and shown as an adjusting
item in the consolidated income statement for the period. Of the total
consideration of £7.7 million, £0.3 million relates to the fair value of net
assets acquired and £7.4 million relates to goodwill which cannot be directly
attributed to identifiable assets and liabilities acquired. This goodwill is
underpinned by a number of elements, including the strategic premium attributed
to the existing, well-positioned business, highly skilled workforce and
established reputation in the innovation-driven electronics design and product
development service sector. Other important elements of this goodwill include
the strengthening and expansion of our strategic customer and supplier
proposition in new technologies, the opportunity to leverage the insights from
AVID's design opportunities to support our strategic programmes within our
distribution businesses and the scope to develop AVID's customer base through
the existing Service Agreement relationships we have with certain suppliers.
Both the trading results of AVID for the period since acquisition, and also for
the period since the start of the financial year had the acquisition taken
place on that date, are not material to the Group's results.
All of the goodwill is expected to be deductible for tax purposes.
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.
The directors of Premier Farnell plc are listed in the Premier Farnell plc
Annual Report for 2 February 2014. A list of current directors is maintained on
the Premier Farnell plc website: www.premierfarnell.com.
By order of the Board
Laurence Bain
Chief Executive Officer
18 September 2014
Mark Whiteling
Chief Financial Officer
18 September 2014PREMIER FARNELL : Half-yearly Report
September 18, 2014 at 02:01 am EDT
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