Annual Report and Accounts.

Transcription

1 Annual Report and Accounts

2 Premier Farnell at a glance Premier Farnell plc is a global, high service technology company, predominantly engaged in the marketing and distribution of products and services in the time-critical and innovation-focused electronic components distribution sector. With over 4,500 employees, operating in 36 countries, the Group is comprised of three distinct business units that focus on specific market segments. The element14 and CPC & MCM (MDD Other) businesses together comprise our Marketing and Distribution Division (MDD). Akron Brass is our Industrial Products Division (IPD). 2014/15 at a glance Group sales growth (2013/14: +2.6%) Group adjusted operating margin (2013/14: 9.6%) Adjusted earnings per share +3.3 % 9.2 % 13.8p 10.4p (2013/14: 14.3p) (2013/14: 10.4p) Throughout this Annual Report, unless otherwise stated, sales growth is based on sales per day for continuing businesses at constant exchange rates and like for like periods. Dividend per share element14 80% 357.1M 46.4% Europe 117.1M CPC & MCM 12% element14 element14 comprises both our Americas, Europe and Asia distribution business, selling electronic components and tools to engineers and manufacturing customers globally and our rapidly growing technology offering from Embest and AVID Technologies to component manufacturers. CPC & MCM CPC & MCM are also distribution businesses. Focused on the sale of electronic products, the division serves a complementary marketplace to our main element14 business in the UK and North America. Akron Brass Akron Brass is a global leader in the sale and manufacture of high performance fire-fighting and emergency response equipment M 43.3% 79.3M 10.3% Americas Asia Pacific 960.1M 73.5M 8% Akron Brass Global reorganisation of element14 businesses New global web platform rollout complete More technical expertise acquired through AVID Technologies Market leader in Raspberry Pi CPC & MCM working closer together New CPC catalogue launched Integration of REACH Engineering Over 30% sales outside US Developed Tailored Customer Applications

3 Annual Report and Accounts 2014/15 1 In this report, we ll discuss how Premier Farnell is supporting its customers and suppliers evolving needs, explain our strategy to deliver improved future financial performance and provide detail on how the Group operates and is governed. Visit our online community here: Contents Strategic Report 02. Chief Executive s Overview Premier Farnell Business and Markets 04. element CPC & MCM 10. Akron Brass Our Strategic Vision 13. Building the Global Destination 14. Strategic Focus 1: Engineering Customers 18. Strategic Focus 2: Manufacturing Customers 20. Strategic Focus 3: Component manufacturers Performance and Risks 22. Measuring our performance 24. Principal risks, uncertainties and opportunities 26. Financial and operational review 33. Sustainability report 38. Employees Governance Report 40. Corporate Governance Report 40. Chairman s Overview 44. The Board of Directors 52. Nominations Committee Report 54. Audit Committee Report 58. Directors Report 62. Remuneration Report Financial Statements 86. Independent Auditors Report 92. Consolidated Financial Statements 104. Notes to the Consolidated Financial Statements 139. Company Financial Statements 142. Notes to the Company Financial Statements Further Information 149. Glossary 150. Shareholder Information 151. Historic Record

4 2 Premier Farnell Welcome to our 2014/15 Annual Report and Accounts Laurence Bain Chief Executive We have outlined our vision to become the global destination for electronics customers and set out the clear strategic priorities we will deliver to reach this goal. Through the investments we have made this year, along with the global reorganisation of our element14 business, Premier Farnell is positioned to improve its future financial performance. 2014/15 performance The past financial year has been a challenging period for Premier Farnell as we transform the business and position ourselves for future profitable growth. Group sales grew by 3.3% in 2014/15, up from 2.6% in the prior financial year, with growth supported by our strategic initiatives. During the year, we have evolved our strategy to focus on three complementary target customer segments. The first segment comprises the design and maintenance engineers who have historically made up the core of our business. We are building and leveraging our technical experience to attract customers at the cutting edge of technology. The second segment is manufacturing customers with small to medium production volume requirements. The third segment is the component manufacturers who have long been our key supplier partners. It is our intent to become the recognised technology experts for design services and the manufacturing of development kits. We have made significant investments in developing our proposition to each of these segments which has helped to improve the top line sales momentum. As we invest to grow revenues, we remain focused on managing gross margin in line with market conditions but recognise that progress in each customer segment and the resulting customer and product mix will most likely lead to dilution of our gross margin over time. Our focus is on growing gross profit year on year whilst improving the overall efficiency of our model. Whilst this transition has led to a 0.7 percentage point decline in gross margin to 36.8%, we have delivered growth in gross profits, on a constant currency basis, up 1.4% year on year. Focused cost control and improving the efficiency of our model are constant priorities for our business. The effective management of our cost profile has enabled us to offset the majority of the gross margin decline, delivering SG&A as a percentage of sales at 27.6%, a reduction of 0.4 percentage points at constant exchange rates. Through the management of sales, gross margin and costs our full year adjusted operating profit was maintained at broadly flat levels at constant currency compared to the prior year. A detailed review of our 2014/15 performance is set out from pages 26 to 32.

5 Annual Report and Accounts 2014/15 3 Figure 01: Our Seven Strategic Priorities Objective Strategic priority KPI 2014/15 Growth Become the recognised technology experts for design services and manufacturing of development kits for global component manufacturers Build and leverage technical expertise to attract engineering customers at the cutting edge of technology Grow our business with engineering and manufacturing customers, especially in the emerging markets 6% sales growth 3.3% 4% ACB growth -2.1% 10% emerging markets growth Efficiency Evolve our operating model into a more efficient and effective global, function based structure >30% RONA 29.6% Develop attractive ecommerce channels that enable automation of processes 70% ecommerce 49.3% Profitability Optimise our business through effective management of gross margin and costs 10%-12% ROS% 9.2% Cash Optimise use of cash in the business and distribution of funds to shareholders through-the-cycle Further detail on 2014/15 performance against the KPIs is outlined on pages 22 and % 6% FCF to sales 3.7% Strategic priorities As shown in figure 01, we have outlined seven strategic priorities and the metrics by which we will measure our progress across the economic cycles in executing our strategy. In doing so, we will create sustainable shareholder value by growing our business, delivering efficiencies, optimising profitability and delivering free cash flow. We are on a journey to transform Premier Farnell and have made some positive strides this year. The investments planned and implemented this year have enhanced our customer proposition for all three of our target customer segments, thereby supporting our ambitions to improve sales growth. The global rollout of our new web platform is now complete and performing as expected. The new web platform provides us with the foundation on which to drive our ecommerce agenda and attain our ecommerce and Active Customer Base targets. And we have now embarked on the rationalisation of our operating model as we transform the regional element14 businesses into a new globally aligned organisation. In June 2014, we announced our move to become one element14 team. A new executive team was appointed with functional leaders for Sales and Marketing, Product and Suppliers, Supply Chain, and Technology, as well as global leaders for support functions including Finance, Human Resources and Legal. The leadership structures for Akron Brass and MDD, the other distribution businesses (CPC & MCM) remain unchanged. Since then, we have completed the design of a proposed new integrated, global organisational structure which involved over 70 functional experts from around the business. As well as better enabling the execution of our strategy, the simplified global structure will deliver operating efficiencies, economies of scale and our ability to better leverage our global assets in serving all our customers. Through this rigorous design process, we have identified efficiency savings beyond those initially anticipated. We are now targeting total annual cost benefits of 10m to 12m, once the new structure is fully implemented, with approximately 3m to 4m of benefit in 2015/16 and the further 7m to 8m of benefit in 2016/17. Whilst our 2014/15 performance in comparison to our targets reflects our journey to transform Premier Farnell, the investments made will enable us to deliver improving future financial performance. We are now focused on driving profitable growth, reducing costs and improving the efficiency of our model as we position the business for the future. With the transformation of the Group underway, the Board recommends that the full year dividend is maintained at 10.4p, reflecting our commitment to shareholder returns. Outlook As we look to the future, the investments we have made will enable us to accelerate the execution of our strategic growth initiatives as we strive to become the global destination for electronics customers. By delivering this vision, remaining focused on costs and completing the global transformation of element14, we believe that Premier Farnell will be well positioned to deliver enhanced medium term financial performance.

6 4 Premier Farnell element14 Building the global destination for electronics To support our ambition of becoming the trusted experts that link suppliers and the innovators of technology, we have begun to evolve and extend our business model. Beyond the distribution of small quantities of components, delivered to meet very short lead times, we now also provide a range of value-add services, such as the online community for design engineers which was enhanced during the year by the implementation of a state of the art design centre; the build out of our software offering; as well as the introduction of and investment in a higher volume production proposition. In addition, we now provide turnkey design, manufacturing and distribution solutions to our suppliers as we support their new product introductions. Through our multichannel sales and marketing approach, we seek to enhance the relationships with our core engineering customer base, especially online. By investing in extensive and innovative multichannel sales and marketing resources, we have developed an online ecosystem that combines technology expertise, 24 hours five days a week support, an online engineering community and local multichannel sales support for customers all around the globe. element /15 snapshot Full year sales growth up 2.8% year on year Price positioning actions taken to ensure the competitiveness of our proposition given the impact of currency fluctuations on local markets Progress to enhance proposition for our three target customer segments: -- Engineering customers: development kit sales up over 20% year on year -- Manufacturing customers: investments completed to build small production proposition -- Component manufacturers: over 90 projects for 20 semiconductor manufacturers completed The design of a global, functional organisation completed with a new Executive team appointed Roll-out of new global web platform completed globally to enable growth of the ecommerce channel

7 Annual Report and Accounts 2014/15 5 Marketplace The global electronic components marketplace has historically been comprised of three broad segments: high service distribution; volume distribution; and mass volume, which is typically serviced by the component manufacturers directly. These segments reflect the volume of products needed at each stage of the product lifecycle (see figure 02). The entire electronics market is worth approximately 300 billion globally. The entire global electronics market is worth 300 billion The element14 business is one of the leaders in the global high service distribution marketplace, which is estimated to be worth approximately 20 billion globally. Here we sell relatively small quantities of components and tools to our many engineering customers, either directly or through purchasing professionals. These engineers are engaged at either the front end of the product lifecycle where they are conceptualising, designing and prototyping new electronic innovations or are involved in servicing, maintaining and repairing existing technology products. 2014/15 saw significant currency fluctuations which contributed to a more competitive global marketplace. Over the longer term, we expect customer behaviour to continue to evolve as more business is conducted online and as the distinction between high service and volume distribution blurs further. Against this backdrop, we have taken steps to ensure that our price positioning is appropriate and during the last year built a small volume production proposition for manufacturing customers that will enable us to compete more effectively in this market. element14 has entered a new market in design services and the manufacturing of development kits, developing a leading solution for a market that we estimate to be worth approximately 350 million globally. This is a fragmented marketplace typically served by a combination of independent design houses and contract equipment manufacturers. Through the services offered by our recent acquisitions of Embest and AVID Technologies, we now support component manufacturers through their innovative processes as they design new technology ahead of it being launched through our distribution channels, thereby turning these key suppliers into customers. Figure 02 Design Services 350mn global market Electronics Market > 300bn global market; > 20bn addressable Volume Component Manufacturing Direct Volume distribution Manufacturing Customers Component Manufacturer High services Maker R&D Prototype Pilot Production (OEM/CEM) Service Repair Maintenance

8 6 Premier Farnell Resources Our global infrastructure and resources include innovative online resources, regional contact centres, back office systems and a network of distribution centres. The reorganisation of our element14 business towards a global structure, which is being undertaken in the new financial year, will enable us to leverage these resources more effectively and efficiently as we support customer and supplier partners around the world. Leeds Liège Shanghai South Carolina Mexico Singapore Sydney 100 engineers at Embest & AVID Technologies 1.1m sq ft warehouse space in our nine element14 distribution centres 1 element14 online community including the Design Center 1 new global web platform, supporting 48 websites in 35 languages 600,000 in stock products available 1,270 customer facing staff globally

9 Annual Report and Accounts 2014/15 7 Business model Value-add component distribution As outlined in figure 02, our core business is the distribution of products to engineering and manufacturing customers. We continue to evolve our proposition as we seek to add value at every stage of customers innovation, design and manufacturing processes. Further information on how we seek to add value to our three targeted and complementary customer segments is outlined in the strategic focus section beginning on page 13. How we create value: Stock Support Sell Ship We identify and stock the products and services our customers require, benefiting from web analytics and insights from the element14 community. In total, we stock over 600,000 products to help meet customers need for access to a vast range of technologies. Engineering customers require detailed information to ensure purchases meet their technical specifications. The element14 community allows engineers to collaborate as well as access technical insights. Customers interact and purchase from us in the way they prefer through our multichannel sales and marketing resources. Our innovative online presence combines with extensive telesales capability and 620 field sales resources as well as significant technical resources to make it easy for customers to do business with us. Fast and reliable distribution of locally stocked products is at the core of our customer proposition. Our distribution centres located around the globe ship 30,000 packages each day. How we will sustain and grow this value: Product lifecycle management processes, including rigorous stocking criteria, mitigate inventory risk. Where appropriate, we agree terms with suppliers to manage the risk posed by new product introductions including sale or return. Insights from data resources used to enhance stocking processes. Services offered to component manufacturers provide leadership at the early stages of the product lifecycle. We continue to develop and enhance our web capabilities as part of our multichannel sales strategy in order to maintain our competitive advantage digitally. We are partnering increasingly closer with key suppliers to provide the technical specifications and legislative information that customers need. Digital Advisory Board provides insights on enhancing our online channels from external subject matter experts. By leveraging our supplier relationships to enhance our online channels. Data and analytics allow us to personalise our customer proposition. We maintain business continuity plans which are kept under review for all our locations and have ongoing reviews and testing of our IT infrastructure. Investment in systems and focus on workflow improvements will deliver operational efficiencies and allow us to meet a higher future demand. We remain focused on reducing the environmental impact of doing business. Enabling new technology & supporting business continuity By connecting suppliers to customers around the world, we play a role in enabling innovation in technologies and extending the life of existing products across a broad number of industry segments, from manufacturing to healthcare, renewable energy to marine technology. Through our business model, we aim to connect customers and suppliers while creating value for other stakeholders, including employees and shareholders.

10 8 Premier Farnell CPC & MCM Electrical & electronic product range for businesses and enthusiasts CPC and MCM supply electrical and electronic and associated products, such as audio visual, lamps and lighting, security, test equipment, tools, computing, mains electrical accessories and PA equipment to a huge range of customers in the United Kingdom and North America. CPC and MCM s customer base complements our core brands as it includes major wholesalers, education, government, utility companies, IT companies, broadcasters, internet resellers and hobbyists. Following the lifecycle of a customer is central to the development of these businesses. Structured to optimise distribution efficiency within the North American and UK regions, CPC and MCM resources aim to provide a customer centric experience. This is supported by a multichannel strategy which leverages our extensive reach through online, print, contact centre and trade counter sales & marketing capabilities. All products are stocked onsite, ready for fast same day despatch to support the needs of our customers. CPC & MCM 2014/15 snapshot Full year sales growth up 7.9% year on year Transfer to CPC & MCM of some Raspberry Pi business MCM continues to benefit from operating ever closer with CPC Rollout of new web platform completed Harmonisation of the product offering is ongoing

11 Annual Report and Accounts 2014/15 9 Marketplace The gradual return of business investment and productivity in the UK and North American markets has generated increased demand in related market sectors, stimulating growth in the core MCM and CPC electrical, installation and tools product segments. This has led to the growth seen in CPC and MCM s associated ranges for retail customers, including makers and electronics enthusiasts. Increased output in manufacturing and construction industries, underpinned by an upturn in the domestic and commercial real estate sector has helped to increase sales growth in our wholesale customer segment. Through new product strategy and a highly competitive Private Label offering, CPC and MCM have further enhanced the depth and relevance of our core MRO offering. This has resulted in accelerated new customer acquisition and a greater share of this market. Customer facing sales resources: +80 Warehouse staff: +250 Business model As broad line distributors with a diverse customer base, these businesses compete effectively by operating a low cost, fast paced model. By listening to customers and developing solutions that customers value, the businesses are highly appreciated by suppliers and customers alike. As a distribution business, CPC and MCM s business model is similar to the core element14 business with four key stages of value creation: stock, support, sell and ship. We outline below how CPC and MCM add value at each point in the chain. How we create value: Stock Support Sell Ship CPC and MCM stock over 150,000 diverse products to help us meet customers needs for a one-stop shop of electronic products and supplies. How we will sustain and grow this value: Extensive product information available online and through our catalogues as well as customer support via our call centres. CPC and MCM s range of customer channels make it easy to do business with them. Customers value the broad offering and our competitive product pricing. Fast and reliable distribution of locally stocked products is at the core of our customer proposition. We offer free shipping for online orders over 10 in the UK. Product lifecycle management processes, including rigorous stocking criteria, mitigate our inventory risk. We use data resources and market feedback to enhance the insights used in stocking processes. We continue to develop and enhance our web capabilities. Continue to build business in growing customer segments such as the Maker space. We have ongoing reviews and testing of our IT infrastructure. Continuous focus on workflow improvements will deliver operational efficiencies and allow us to meet increased future demand. We remain focused on reducing the environmental impact of doing business.

12 10 Premier Farnell Akron Brass Global leader in high performance fire-fighting and emergency response equipment Since its inception in 1918, Akron Brass has been an industry leader in fire-fighting equipment including handheld nozzles, monitors and valves. The business continues to add more products to its core water-flow categories while extending its portfolio with specialised electronics and lighting solutions. The business has invested in new product developments such as unique high-power LED lighting products for global applications and custom designed monitors and nozzles addressing specialised needs of customers in emerging markets. Akron Brass offers customers a balanced product portfolio within our five core categories: valves, monitors, nozzles, electronics and lighting. Each category is analysed for product evolution (investments to sustain business), category expansion (closing product line gaps, taking competitive share), and category revolution (all new products that expand and/or create categories). Headquartered in Wooster, Ohio, in the United States, Akron Brass has manufacturing facilities in Columbus, Ohio, Washington, Illinois and sales offices in Beijing, China, Dubai and UAE. With over 30% of 2014/15 sales coming from outside the United States, Akron Brass continues to expand its market reach and build a global brand. Akron Brass 2014/15 snapshot Full year sales growth up 1.3% year on year Robust financial performance given strong prior year comparators Reach Engineering fully integrated following prior year acquisition Long term supply contract win for private label vehicle controls for primary US emergency vehicle builder International project wins in China, India and Thailand

13 Annual Report and Accounts 2014/15 11 Marketplace The strengthening US economy is boosting demand in the fire apparatus, ambulance, bus and commercial truck markets. Akron Brass s share of the US fire apparatus market achieved a 9% growth rate, supported by its sales and distribution partners. Our Weldon business drove 38% growth in ambulance and 37% in commercial truck related sales fuelled by new products, strategic business agreements, and increasing vehicle demand. Overall concerns on exports by US manufacturers have not significantly slowed vehicle build rates; 2015 indicators for the US specialty markets are positive for Akron and will be further supported by differentiated product introductions planned within each segment. Customers in over 100 countries Akron Brass s fire protection and mitigation solutions for industrial markets saw sales growth of 11% as project momentum continued in petro-chemical systems for fixed-site and marine based segments. Lower global oil prices have resulted in oil producers reducing capital spending plans and this is expected to have a moderate impact on business with these customers which Akron Brass will mitigate through a solid project pipeline, regional focus, and downstream activities in oil tanking, transportation and refining. Excluding the large India contracts, Akron s International sales were flat year on year despite increasing headwinds on US$ strength and a challenging economic environment in Europe. North American municipal equipment had similar results. While department funds are improving, cyclical spending for personal protective gear and breathing apparatus which are not part of the Akron Brass product proposition was a focus this past year. Municipal sales rebounded in the fourth quarter and momentum is forecast into the new financial year as spending shifts back towards Akron s core product lines and several new products targeted at this segment are launched. Business model Akron Brass designs and develops products and systems, delivering value by manufacturing innovative and reliable, high performance solutions that improve the safety and efficiency of our customers personnel and equipment. The business creates value through a three step process encompassing innovating new solutions, high quality product manufacture and its global sales and marketing capability. How Akron creates value: Innovate Manufacture Sell Customer needs are at the centre of new product development at Akron Brass. Through customer insight and outcome-driven processes, Akron strives to deliver innovative products and services. Revenue from newly released products exceeds 20% of total sales. Akron seeks to deliver continuous improvement of processes, capabilities, capacity and quality through its advanced manufacturing facilities and use of lean production techniques and the latest technologies. Customers benefit from access to highly customised, short lot parts with exceptional quality and short lead times. Akron Brass sells through a global network of distributors and original equipment manufacturers (OEMs). Close collaboration and joint development efforts from end user to distributor to OEM ensure tight control of specification, delivery, installation and servicing of its products. Akron employs the largest factory-direct sales team of the industry.

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15 13 Our Strategic Vision: Building the Global Destination for electronics customers The following pages describe the opportunities, investments and progress that we have made in meeting the requirements of the three customer segments that we have identified Engineering customers: our traditional targeted customer base of design engineers and maintenance engineers Manufacturing customers: supporting customers for longer through their production process Component manufacturers: turning our traditional supplier base into customers by supporting their new product innovations Each customer segment is complementary to the others. Our insight into new and coming soon technology from working with component manufacturers enhances our offering to engineers. We can follow the signs of activity with engineering customers to open up small production opportunities with manufacturing customers. The larger volume sales completed with manufacturing customers reinforces the value provided through demand generation to our component manufacturing customers.

16 14 Premier Farnell 0.1 Engineering customers Meeting the needs of engineers is at the core of our business proposition, making up the majority of element14 sales through the high service distribution of electronic components in relatively small quantities, as well as related equipment, tools, software and services. Partnering with engineering customers globally Engineers from all over the world, serving a wide range of industries, choose to partner with element14. These customers range from electronics design engineers to those engaged in maintenance and repair of existing electronics. At the core of this relationship is our capability to meet engineering customers five key service requirements: 1. Availability of an extensive range of products 2. Real time product data and information 3. Competitive Price positioning 4. Ease of doing business and 5. Reliable and timely shipment We are enriching our capabilities and the customer experience in each of the five areas. Our aim to partner more closely with a greater number of engineers is central to us delivering profitable growth.

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18 16 Premier Farnell 0.1 Engineering customers continued Enhancing our product range Providing easy access to a wide range of in-stock products is at the heart of our role as a high service electronics distributor. We offer over 600,000 in stock products, available for same day shipment. These products range from semiconductors and passive components, too small to count individually, through to larger items such as tools and testing equipment. We aim to carry everything that our targeted engineering customers require. In 2014/15, we achieved our product linefill target of 97%. This means that 97% of the time we have the products in stock and available for same day shipment that our customers are looking to buy. Over the past two years, we have made incremental inventory investments to enhance our product range, of which over 20m is targeted at engineering customers. With this inventory investment complete, we are focused on driving turns on this enhanced product offering. As part of the inventory investment, we added over 2,000 development kits and evaluation boards. These products are strategically important to us as their sales signal the commencement of design activity and flag an opportunity for us to partner with customers from the outset of their design process all the way through prototyping and into production. In addition, our work with component manufacturers, described on page 20 and 21, is seeing us become a significant partner in the launch of their latest technologies. Access to the latest products is differentiating for engineering customers, especially for electronics design engineers, as they look to benefit from the added capability and efficiency that new technology frequently brings. Trusted, technical expertise The technical nature of the products that we sell and the applications for which they are used makes product information highly valuable to our customers. The information that customers require includes the product s key features and capabilities, sensitivity to different environments and also any relevant legislative information. The adoption by the European Union of the Restriction of Hazardous Substances (RoHS) directive in 2003 acted as a catalyst for the Group to enhance the data provided to customers, especially through its online resources, and we are now viewed as a trusted source of information. On our transactional websites, we have over 260,000 unique product datasheets, providing key technical information, which receive more than 550,000 downloads per week. Our product experts update more than 18,000 product datasheets per month, working in partnership with our suppliers so that our engineering customers have access to complete and up-to-date information. This resource is supplemented by 24/5 live chat online technical support and dedicated field application engineers who work closely with customers to bring new products to market. The element14 community is another important source of information for engineers. With over 300,000 registered members, the Community is a place where engineers from around the globe can come together to discuss solutions to their technical problems, share ideas and experiences of different products and interact with suppliers and experts. During the course of 2014/15, we have further improved this resource with the launch of the element14 Design Center. The Design Center is an online workspace where engineers can access the latest development kits and tools. Since the Design Center was launched in June 2014, it has received over 40,000 visits per week. Beyond physical products, we see the distribution of engineering software as an area of increasing importance to our customers and, for us, an opportunity for profitable growth. Having acquired CadSoft in 2009, a business which produces printed circuit board layout software, we are now focused on the launch of an online software licensing store by evolving the element14 Design Center launched this year. The software store will offer products for download from a range of software vendors. During 2014/15, we have signed a number of franchise agreements with key software partners, including ARM and Altium. A personalised customer experience Benefiting from the insights of a dedicated in-house customer and market research capability, we are developing a personalised experience which considers the requirements of engineering customers varying job roles, industries and environments, as well as the differences across geographic regions. An important aspect is the way that we interact with customers through our range of sales and marketing channels as we see that customers often choose to interact with us through multiple channels depending on what they are looking to achieve. For example, a large customer account might have a regular review with a field sales person, a dedicated contact at one of our call centres and an integrated eprocurement system for day-to-day order processing by the engineering team. This combination of channels makes it easier for our customers to do business, a key source of differentiation for element14.

19 Annual Report and Accounts 2014/15 17 Our multichannel sales and marketing approach is centred on the web with sales via ecommerce channels contributing to 49.3% of total MDD revenues. Our online resources include transactional websites in over 30 languages, eprocurement solutions and the industry leading element14 Community. Many engineering customers prefer ordering online as they benefit from the information resources that can be provided through this channel. Over the past year, we have increased the number of images with 360 degree visualisations on technical products such as development kits and test equipment. In addition to contributing to the customer experience, the increased data provided on products helps to optimise online search engine performance and attract new customers. This year, we completed the single largest IT systems development ever undertaken at Premier Farnell by implementing our new global web platform across the element14 business. By moving to a single global web platform, we now benefit from more efficient and faster processes as we rollout global marketing programmes and tailor our offering to the individual needs of customers. Additionally, we can now specify, develop and implement future enhancements far more quickly, such as the better mobile experience which is planned to go-live in 2015/16, and the new web platform also helps to provide better protection against cyber security risk. Customer reaction to the new web platform has been positive and the performance of our transactional sites has met our expectations through this transitional period. The web provides a digital shop window that plays an important role in attracting new customers as well as helping us to personalise the user experience. Growing the business transacted online also enables us to eliminate inefficient manual practices, reduce the opportunity for error, and free up resource to focus on value-add activities for customers and suppliers. Pricing to market A typical order placed with us comprises about three to four lines and has an average order value of approximately 170 in Europe and Asia or $430 in North America. Despite the relatively small order size, pricing does remain one of the factors considered by engineering customers before placing an order. With more business conducted online and in an economic environment characterised by slow growth, price perception has become more important to customers over recent years. In response to this changing market circumstance, we have been developing our approach to pricing that sees us maintaining a price competitive solution, whilst seeking to extract the value-add that our high service proposition provides in each market. Through the course of 2014/15, we used our ecommerce tools, data and analytics to dynamically adjust our pricing to the prevailing market levels. Given the considerable fluctuations in currency seen in the period, especially in relation to the US dollar and the Euro, we have aimed to ensure that our European and Asia propositions maintained their price competitiveness. As part of our engineering customer proposition, we offer a range of private label brands of more than 70,000 products, providing customers with a value range for commodity products which frequently form part of their order. These are high quality and high margin products that represent good value for money alternatives for customers. Delivering to promise Every day, we receive in the region of 30,000 orders through our sales teams and global websites which equates to over 75,000 lines of product globally. These orders are then processed by one of our 11 distribution centres, with the principal sites in the UK, Belgium and North Carolina, USA. Efficient processes mean that 99.95% of the time the order is shipped same day. Our regional distribution model enables us to deliver to promise time and again. Yet there remains scope to further enhance the effectiveness of our supply chain as we leverage our regional resources globally, share best practice and enable greater inventory visibility for our customers. This is an opportunity that we will continue to address through the transformation of the element14 business in 2015/16. Building our business with engineering customers By providing a competitive proposition that meets customers changing behaviour, we expect that the engineering customer base will remain the core of our business and a future growth opportunity. Through the investments made to enhance our offering this year, especially in developing considerable technical expertise, element14 is now better positioned to benefit from a number of growth drivers in electronics including our early visibility of coming soon technologies, the developing internet of things, shortening product lifecycles and growth in emerging markets. In addition, actions taken to transform element14 into a global business, as well as the completed rollout of the new global web platform will allow for greater leveraging of our regional resources and a superior customer experience.

20 18 Premier Farnell 0.2 Manufacturing customers Manufacturing customers, are engaged in the production phase of electronics manufacturing and require components as part of their scheduled production run. As described on page 5, the total electronics marketplace is worth over 300 billion annually. The vast majority of this marketplace is in the production phase of electronics manufacturing, a market which has historically been supported either directly by the component manufacturers or through volume distribution. With increasingly shortening production runs, and greater technical support and knowledge widely available due to the rise of the internet, the lines between volume and high service distribution are increasingly blurring. Our strategy opens an estimated 20 billion incremental addressable market to the element14 business as we target small production runs by supporting innovation from design into prototyping then production. Manufacturing customers are not new to us and account for approximately 20% of our element14 sales. Whilst we have long supported these customers at the early prototyping phase, especially in the UK and North America, we have not focused heavily on this area in the past. We are confident that with a more competitive proposition, we can successfully and profitably grow our business with these customers. Manufacturing customers largely benefit from our proposition to meet the needs of engineers. In addition, we have made substantial progress in 2014/15 to meet manufacturing customers specific product requirements and preferred ways to do business.

21 Annual Report and Accounts 2014/15 19 Investments in production inventory Manufacturing customers typically want to purchase board components in the packaging options that enable them to be loaded directly onto the automated assembly equipment on their production lines. This contrasts with our engineering customers who are looking to order products in small quantities for design, testing or repair purposes. Over the past two years, we have invested over 15m in incremental inventory targeted at the production space. Today, we have a compelling range of production inventory in stock featuring over 40,000 full reel products. Enabling product traceability Having full traceability of the product source is another key requirement for many of our manufacturing customers. Traceability of the product date and lot code is particularly important for customers in industries such as aerospace, defence and certain government related sectors. We have implemented systems and processes to allow us to trace certain date and lot codes on over 300,000 products while our South Carolina warehouse has been operating the AS9120 standard for the past six years. This means that it provides the high level of product traceability required by the aerospace industry. We are now looking to take the AS9120 standard to Europe as we see this as increasingly important to customers in other regions too. Further best practice is coming soon to the industry in terms of new anti-counterfeiting standards. We will be looking to be a leader in implementing such standards across the globe as we build on our position as a trusted source for electronics. Enhancing the buyer experience The relationship with manufacturing customers will typically be with a purchasing professional, especially when they are conducting small production runs. With many of the critical enhancements to the production proposition completed behind the scenes, we are now focused on delivering a leading experience for our buyer customers and communicating what we now offer. Achieving a competitive price is critical to winning larger orders. We made a substantial change to our pricing proposition this year by introducing additional price breaks in Europe for customers looking to purchase stock in higher volumes. These additional price breaks have increased the competitiveness of our offer and price perception for production customers coming to us via online channels. Having completed the rollout of our new web platform, we will now begin to implement upgrades to our websites targeted at production customers. For example, we will implement a bill of material upload function which will allow customers to automatically cross-check their shopping list against our inventory and receive an immediate quote. We will also provide customers with real-time stocking information, such as packaging options, availability of date and lot traceability and product lead times. Buyers will also soon be able to schedule and reschedule orders online, providing the flexibility needed to ensure their order is delivered just-in-time for their planned production runs. Building our business with manufacturing customers Over the past two years, we have made substantial investments to build a compelling production proposition for manufacturing customers. As we focus on attracting new manufacturing customers to our offering and drive improved turns on the incremental inventory, we expect to achieve a return on these investments over the medium term.

22 20 Premier Farnell 0.3 Component manufacturers Amplifying our role in electronics Component manufacturers have long partnered with us to launch their new product introductions, valuing the access that we provide to design engineering customers around the world. Suppliers view our distribution capabilities as essential for them to seed their new products with engineers early in the product lifecycle, creating the opportunity for the amplifying effect, shown in figure 3, to take hold. For the suppliers of those products, a successful product launch underpins their future growth. An engineer incorporating this latest technology into their design will potentially result in the significant volume sales growth in the production stage. Figure 03 Component Manufacturer Engineering Customers Manufacturing Customers Technology Launch Design Prototype Small Production Volume Production Mass Volume

23 Annual Report and Accounts 2014/15 21 New product introductions Development kits play an important role in the success of new technologies as they are used by engineers to evaluate the attributes of the core semiconductor chip that is being considered for a design. As such they are used at the very outset of the product design process. Engineers frequently regard the development kit as a reference design for their product. Our research shows that in almost 50% of cases, a design engineer will re-use part of the development kit design in their prototype. Semiconductor manufacturers recognise the important role these products play in product selection and future demand generation, especially in ensuring the success of new technologies. As such, they will typically launch a development kit alongside their latest new products and will look to distributors to help them to ensure its success. The element14 community is viewed by many of our suppliers as an important tool in the product launch process. Engineering customers often come to the Community at the outset of their design process when they are researching possible solutions for their products. Through the Community, we can partner with suppliers to conduct social marketing, such as new product roadtests by influential members. In addition to creating customer engagement around the product, such activity allows for third party product endorsement and real-time feedback. In 2014/15, we enhanced the element14 community with the launch of the Design Center, an online hub for information on development kits and tools. Embest and AVID provide design services and manufacturing of development kits to a substantial number of the major semiconductor manufacturers including Freescale, NXP and AMD. Beyond the growth opportunity for element14 represented by this activity, the total available market is highly fragmented and estimated to be worth approximately 400m annually. Working on the design of the development kit means that we are partnering before the launch of the new technology. The insights that we gain from the coming-to-market technology can help us to enhance our proposition to our core engineering customers and drive leadership in the introduction of new technology products. Turning suppliers into customers The acquisition of Embest in 2012, a technology business based in China, saw us begin to evolve our business model beyond the distribution of products from suppliers to customers by providing design services and outsourced manufacturing solutions. The capability that we acquired through Embest means that we now provide turnkey solutions to our component manufacturer partners in the launch of their new technologies. As a result, we are working with our suppliers as they develop their technology from the design and manufacturing of their development kits all the way through to the launch of the product, supported by our established distribution business. We can now support component manufacturers across a number of key technology areas. Embest has embedded technology expertise designs based on the popular ARM embedded architecture by the British technology leader, ARM. With Embest growing strongly, we required further resource to support demand. In April 2014, the Group acquired AVID Technologies, a design house based in Ohio, USA. AVID has enhanced our offering through its specialisation in wireless, connectivity, power and analog technologies. With over 200 engineers across the business, the technical capability we can provide is unparalleled in our space. We are now unique amongst distributors in influencing electronics at the outset of the amplifying effect. This is seeing us turn these key supplier partners into new customers and enhancing the value-add that we provide to them. In addition, we have the opportunity to enhance the value provided to auxiliary component manufacturer partners in technology areas such as connectors, as the development kit plays a critical role in their own demand generation. Given our existing relationships in distributing such products to engineering customers, we are uniquely positioned to work closely with these partners compared with the incumbent players in design services and manufacturing of development kits. Building our business with component manufacturers In 2014/15, Embest and AVID completed over 90 projects for more than 20 semiconductor manufacturers. The value of the projects has increased as component manufacturers confidence in us has grown and the future pipeline appears healthy as we look to 2015/16. While the total business conducted by Embest and AVID is still a relatively small part of the Group, with combined revenues of 9.4m in 2014/15, we anticipate that this business area will provide an incremental growth opportunity that will benefit our larger distribution activities.

24 22 Premier Farnell Measuring our performance We measure the Group s performance and progress of our strategic priorities against seven key performance indicators (KPIs) as we aim to deliver growth, efficiency, profitability and cash. Our 2014/15 performance in comparison to our targets reflects our journey to transform Premier Farnell, with investments made that will enable us to deliver improving future financial performance. As we execute our strategic priorities and continue our journey to build our strategic vision of becoming the global destination for electronics customers, we will create sustainable shareholder value by growing our business, delivering efficiencies, optimising profitability and delivering free cash flow. Strategic Objective 1: Growth Strategic Priorities Become the recognised technology experts for design services and manufacturing of development kits for global component manufacturers Build and leverage technical expertise to attract engineering customers at the cutting edge of technology Grow our business with our engineering and manufacturing customer base, especially in the emerging markets of China, India and Eastern Europe KPI Definition Trend Commentary 6% sales growth Across the economic cycles, we target accelerated sales growth through the execution of our strategic growth priorities. We measure sales per day on a constant exchange rate basis. 2014/15 3.3% 2013/14 2.6% 2012/13-2.8% Full year underlying sales growth of 3.3%, up from 2.6% in 2013/14. The improved sales growth was driven by focus on our three targeted customer segments and reflecting conditions in our end markets. The execution of strategic growth supports our aim of achieving our target of 6% sales growth through the cycle. 4% active customer growth Increasing the active customer base demonstrates the attractiveness of our customer proposition and indicates market share gains. Active customers are those who have transacted with us within the past six months (excluding sales of Raspberry Pi and associated products). 2014/15-2.1% 2013/14-0.3% 2012/13 1.3% Active customer base exited the year 2.1% lower compared to the prior year. The active customer base has been impacted by initiatives to de emphasise non-profitable customers in non-core customer segments. Investments made to enhance our customer proposition, particularly online, are expected to improve our future performance against this metric. 10% emerging markets growth We continue to develop our business internationally, focusing on the fastest growing territories such as China, India and Eastern Europe. 2014/ % 2013/ % 2012/13-2.8% 7.5% 2014/ /14 2.6% Sales growth in the emerging markets remains ahead of our strategic target. This year s growth was driven by China and India, up 18.1% and 20.3%, respectively. We remain focused in realising the opportunity for growth in the emerging markets.

25 Annual Report and Accounts 2014/15 23 Strategic Objective 2: Efficiency Strategic Priorities Evolve our operating model into a more efficient and effective global, function based structure Develop attractive ecommerce channels that enable automation of processes KPI Definition Trend Commentary >30% RONA The effective and efficient investment of our shareholders funds is a critical overall measure of the success of our strategy. RONA is defined as operating profit expressed as a percentage of net assets excluding cash, financial liabilities, taxation and goodwill. 2014/ % 2013/ % 2012/ % Return on Net Assets of 29.6% was marginally below our KPI of >30%. As we move to a more efficient global operating model and drive increased inventory turns, we expect to improve our future performance against this metric. 70% of distribution sales from ecommerce ecommerce is a highly efficient route to market and an enabler of further efficiencies in our business model. Our target of 70% of sales in MDD via ecommerce means that the processing of transactions must be completed entirely through fully-automated processes. 2014/ % 2013/ % 2012/ % ecommerce penetration was 49.3%, down 5.8 percentage points from the prior year. The decline principally reflects the decommissioning of optical character recognition for the fully automated processing of faxes, which took place at the end of the prior year. With the rollout of the new web platform complete, we expect to make progress towards our medium term target in the year ahead. Strategic Objective 3: Profitability Strategic Priorities Optimise our business through effective management of gross profit and costs KPI Definition Trend Commentary 10%-12% ROS Through the ongoing management of gross profit and costs, the Group targets an operating margin in the range of 10% to 12% through the economic cycles. 2014/15 9.2% 2013/14 9.6% 2012/ % Strategic Objective 4: Cash Strategic Priorities Optimise use of cash in the business and distribution of funds to shareholders through-the-cycle KPI Definition Trend Commentary 6% FCF to sales We remain committed to generating cash flow performance through the economic cycles. 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. 2014/15 3.7% 2013/14 3.7% 2012/13 6.1% Full year operating margin of 9.2% reflected a decline in gross margin, combined with the planned strategic investments to enhance our customer proposition as we transform our business and ongoing stringent management of costs. We continue to execute transformational programmes that drive the efficiency in our business model and focus on executing our profitable growth strategy. Adjusted free cash flow as a percentage of sales of 3.7% was below our through-the-cycle target of 6%, following further inventory investments to enrich our product offering for engineering and manufacturing customers. These strategic incremental inventory investments are now completed and we remain selective on our capital investments. We expect the investments made to deliver improved future cash performance.

26 24 Premier Farnell Principal risks, uncertainties and opportunities The Principal Risks and Uncertainties facing the Group are summarised below. The disclosure of risks and uncertainties in the table below reflects the approach of the Company to also look for the opportunities presented when addressing significant risks. The Principal Risks are formally reviewed twice per year by the Board. Updates in terms of emerging risks or significant actions undertaken are addressed as and when required at Board meetings. The Principal Risks are determined through an evaluation of likelihood of occurrence and potential impact, with a full review also undertaken by the Senior Executive Team (SET). Management also reviews specific strategic, operational, and financial and compliance risks in regular focused forums during the year; SET meetings; quarterly business reviews with each of the businesses; major programmes and project reviews; and at other key executive management meetings. Further details on our risk management and internal control procedures are included on page 42. Risks and uncertainties Business Risks Relative increase / decrease compared to prior year Mitigating actions Opportunities Competitive pressures increase S O We continue to build our high service proposition by adding new technologies and a broad range of products, working closely with suppliers as we provide end-to-end solutions throughout their product development process. We are rationalising our element14 organisation by globalising our operating model and leveraging the efficiencies of the web. We continue to implement strategic initiatives to build customer loyalty and provide a differentiated proposition for our customer base. Our proposition is increasingly personalised to meet the needs of customers in targeted segments. We are partnering more closely with suppliers as we look to support the introduction of their new technology and drive market share gains in key market segments. Insufficient progress with improving performance in the Americas S O R We have a fully integrated multichannel sales and marketing plan that is aligned with the wider element14 strategy and the evolution of our global proposition. This plan is aimed at addressing the needs of our customers, including a focus on specific segmentation by type of customers and vertical industries. By enhancing and better targeting our offering, and developing the customer proposition by leveraging our global resources, we can significantly improve operating performance in the Americas. Failure to leverage our technology expertise and partnerships with key suppliers S new Embest and AVID s engineers are working together to optimise performance of specific projects. Investments have been made to develop the leadership teams and back office systems at Embest. Leveraging our technology expertise offers significant opportunities in meeting the needs of our component manufacturer customers but also in our core engineering customer base. Long term evolution of the electronic component distribution model S Software and services are increasingly part of our offering to product development customers. This increases the value that they extract from our proposition while diversifying our business model away from pure distribution. The Group takes actions to reduce the impact of its business on the environment through carbon emissions and by encouraging recycling, especially of packaging. Our regional warehouse model reduces the impact of carbon emissions compared to alternatives. Environmental and technology trends are sources of electronics innovation which underpin sales to our product development customers. Through ongoing focus on reducing the environmental impact of doing business, we are introducing more efficient processes and can offer further complementary services to our customers.

27 Annual Report and Accounts 2014/15 25 Risks and uncertainties People Relative increase / decrease compared to prior year Mitigating actions Opportunities Business reorganisation as we evolve our business model S O new The CEO, CFO and CPO are directly involved in managing this model change, supported by both experienced programme managers and high performing employees from across the business. Our new global structure will facilitate better sharing of expertise and resources across the business globally. It will allow us to enhance the service we provide to meet the needs of customers and suppliers across regional boundaries. Recruitment, development or retention of talented people S O Systems, data and infrastructure We actively measure the retention of talent within our organisation which provides us with the ability to track trends and act with the appropriate and necessary actions. Reward schemes are continuously evaluated to drive and reward performance and ensure retention of key talent. We seek to actively engage employees by focusing on training and development, customer relationships, leadership, social responsibility and communications. New global structure will provide key people with better ways of working and development opportunities. Data and content quality inhibit effectiveness of our ecommerce strategy S O A dedicated data function has been established to ensure compliance with internal processes and external regulations. A data strategy and governance framework has been developed to support the information requirements of our strategic programmes. Increased planned investment in global systems, data and data management processes to provide our customers with high quality product information and suppliers with rich insights into customer behaviour as well as enabling greater operating efficiencies. Significant failure or inefficiencies in our systems and infrastructure O Business continuity plans are kept under review for all our locations. Our IT infrastructure is subject to ongoing review and we conduct regular testing of our systems. We continually improve workflows and operational efficiencies and provide increased capacity and investment in capability. Cyber security failure leading to revenue or reputational loss O new Sophisticated cyber security tools are employed to block external threats and attacks including enhanced, integrated security in the new global web platform. A computer incident response team has been established alongside enhanced internal training and review processes. Providing a safe and secure online experience to customers is potentially differentiating compared with smaller, less established competitors. Legal Legal and regulatory risks O We have exposure to a number of countries and their respective legal compliance requirements are addressed through a variety of controls. The increase in environmental legislation for electronics, such as the introduction of REACH, allows us to provide real value to our customers through our legislative expertise. Key S Strategic Requires a strategic response O Operational Requires an operational response R Regional Specific to one region

28 26 Premier Farnell Financial and operational review Mark Whiteling Chief Financial Officer 2014/15 has been a challenging but important year in Premier Farnell s development. As we seek to improve our future financial performance, we are focused on improving our growth trajectory, reducing costs and transforming our business through the proposed global reorganisation of element14. Sales Group sales for the financial year were million (2013/14: million) representing growth of 3.3%, based on sales per day for continuing businesses at constant exchange rates, reflecting the market conditions seen through the period and the execution of our strategic growth initiatives. Divisional performance The following commentary sets out the performance achieved by each of our business units. element14 Against a mixed economic backdrop, Europe delivered full year sales growth of 1.9% year on year. Excluding Raspberry Pi, Europe sales increased 2.5% year on year. Market conditions in the United Kingdom remain challenging, despite some encouraging manufacturing PMIs, with our business reporting a year on year sales decline of 2.2%. Continental Europe continued to perform more strongly, growing sales by 3.8% year on year. This performance was driven by above average sales growth in Germany, Italy, Spain, Benelux and Eastern Europe. Asia Pacific continues to provide the Group with long-term growth opportunities. We have continued to grow market share in the region, with full year sales up 16.1% over the prior year. Every market in the region delivered positive growth throughout the year with sales growth in the key emerging markets of China and India at 18.1% and 20.3%, respectively, whilst Australia delivered sales growth of 5.6% over the prior year. The total Europe and Asia Pacific s MDD business delivered combined full year sales growth of 4.2% year on year. Americas element14 business delivered full year sales growth of 1.1% year on year as we began to implement plans to transform the region s performance and integrated AVID Technologies into the Group. Excluding AVID Technologies, Americas full year sales were flat year on year. We anticipate that the Americas will benefit from our proposed global organisational structure as this will enable us to better leverage our global resources to enhance the customer proposition and sales effectiveness. CPC and MCM CPC and MCM delivered combined full year sales growth of 7.9% in 2014/15, despite a challenging market backdrop, benefitting from sales of the Raspberry Pi. This follows the transfer of some Raspberry Pi business from element14 to CPC and MCM in the first half of the year, as well as the launch of the CPC catalogue at the end of the first quarter.

29 Annual Report and Accounts 2014/15 27 Key financials 2014/15 (52 weeks) 2013/14 (52 weeks) Growth (a) Total revenue % Adjusted operating profit (b) % Total operating profit % Adjusted profit before tax (b) % Total profit before tax % Adjusted earnings per share 13.8p 14.3p -3.5% Basic earnings per share 12.9p 14.0p -7.9% Free cash flow (c) % Divisional analysis Revenue 2014/15 (52 weeks) 2013/14 (52 weeks) Growth (a) element14 Europe % APAC % Europe & APAC % Americas % % CPC & MCM % Total MDD % Akron Brass % Group % Adjusted operating profit/operating margin 2014/15 (52 weeks) 2013/14 (52 weeks) Growth (a) Europe & APAC % 13.1% 13.8% Americas % 5.9% 5.7% CPC & MCM % 10.0% 11.0% Total MDD % 10.0% 10.3% Akron Brass % 18.6% 18.6% Head office (14.1) (13.1) Group % 9.2% 9.6% Notes (a) In order to reflect underlying business performance, sales growth is based on sales per day for continuing businesses at constant exchange rates and like for like periods, and growth in operating profit is stated on a constant currency basis, consistent with the way that performance is measured by the business. References to financial results refer to adjusted numbers unless otherwise stated (see note (b) below). (b) In 2014/15, adjusted operating profit, profit before tax and earnings per share exclude restructuring costs of 5.1m, net gain on US property disposal of 0.3m related to savings on expenses incurred in the prior year relocation of the MDD Americas Head Office and acquisition costs of 0.1m. In the prior year, adjusting items comprise restructuring costs of 3.9m, net gain on US property disposal of 1.6m and gain on remeasurement of contingent consideration of 0.8m. (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. Notes: The current year results have been adjusted to exclude the following items: 1. Restructuring costs of 5.1m (MDD Europe & APAC 1.1m, MDD Americas 0.2m, Head Office 3.8m). 2. Net gain on US property disposal of 0.3m related to savings on expenses incurred in the prior year relocation of MDD Americas Head Office. 3. Acquisition costs of 0.1m. In the prior year, adjusting items comprise: 1. Restructuring costs of 3.9m (MDD Europe & APAC 0.6m, MDD Americas 1.0m, Head Office 2.3m). 2. Net gain on US property disposal of 1.6m. 3. Gain on remeasurement of contingent consideration of 0.8m.

30 28 Premier Farnell Financial and operational review continued Akron Brass Following a standout year in 2013/14, Akron Brass performed in line with our expectations with full year sales up 1.3% year on year. The comparators from last year s contract win with the Hindustan Petroleum Company Limited were especially strong in the second half and Akron Brass sales declined 3.8% year on year in the period. The business is well positioned to continue its expansion into international markets and build on its market leading position in North America. Profitability As outlined in the KPIs on page 23, the Group targets an operating margin that optimises profitability through-the-cycle by seeking to maximise gross profit and managing costs both strategically, as we transform our business, and tactically in line with market conditions. Full year operating margin of 9.2% (adjusted) reflected a decline in gross margin, our planned strategic investments to enhance our customer proposition as we transform our business and ongoing focus on cost management. As a consequence of our focus on costs, adjusted operating profit reduced by only 0.1% at constant currency compared to the prior year. Gross profit A core objective of our strategy is that we will provide a customer proposition that delivers growth in sales and gross profits. We remain focused on managing gross margin in line with market conditions but we also anticipate that certain aspects of our strategy namely the evolving customer and product mix will result in further dilution to gross margin over time. Figure 4 illustrates the key drivers that are likely to impact gross margin resulting from the execution of our strategy. Figure 04: Gross margin vs. historic levels Customer mix Product mix Geog. mix Key Engineering distribution Manufacturing distribution Component manufacturers Development kits Semiconductors Raspberry Pi Electronic components Test & measurement Americas APAC Europe is accretive is neutral is dilutive In line with this objective, we have realigned our pricing to reflect the current competitive environment in an increasingly global marketplace and also continued to grow faster in strategically important products such as development kits and semiconductors, as well as in higher volume business and establishing our leadership in the embryonic single board computing space. Whilst this approach has led to a 0.7 percentage point decline in gross margin to 36.8%, we have delivered growth in gross profits, on a constant currency basis, up 1.4% year on year. Costs Focused cost control and improving the efficiency of our model are constant priorities for our business. Adjusted net operating expenses were reduced by 4.7 million on the prior year. The effective management of our cost profile has enabled us to offset the majority of the gross margin decline, delivering SG&A as a percentage of sales at 27.6%, a reduction of 0.4 percentage points at constant exchange rates. Adjusting items Adjusting items include 5.1m of restructuring costs related to our global business re-organisation, of which 2.8m were recognised in the second half. Total cost to achieve the business re-organisation is expected to be approximately 10m with the remainder recognised in 2015/16. Prior year adjusting items included restructuring costs of 3.9m, a net gain on US property disposal of 1.6m and a one-off 0.8m gain following remeasurement of the expected contingent consideration payable in respect of the Embest acquisition. Operating profit Adjusted operating profit was 88.0 million (2013/14: 93.0 million) representing a year on year decline of 0.1% at constant exchange rates. Total operating profit was 83.1m for the full year, reflecting a net cost from adjusting items of 4.9m (2013/14: 91.5m, after reflecting a net cost from adjusting items of 1.5m), resulting in a year on year decline of 4.0% at constant exchange rates. Return on net assets Return on net operating assets (operating profit expressed as a percentage of net assets excluding cash, financial liabilities, taxation and goodwill) for the year was 29.6% (2013/14: 32.3%), slightly below our target of greater than 30%. As we move to a more efficient global operating model, the Group will be able to better leverage its assets. Foreign currency In 2014/15, the average exchange rates for sterling against the US dollar and the Euro were, respectively, 1 = US$1.64 (2013/14: 1 = US$1.57) and 1 = 1.26 (2013/14: 1 = 1.18). Prior year comparatives for revenues and adjusted operating profit benefited by 38.9m and 4.9m, respectively, as a result of the foreign exchange rates compared to 2014/15.

31 Annual Report and Accounts 2014/15 29 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 0.4m per annum. Finance costs Net finance costs in the financial year were 14.0 million (2013/14: 16.7 million). This comprises net interest payable of 10.5 million (2013/14: 12.4 million), which was covered 8.4 times by adjusted operating profit, and a net charge of 3.5 million (2013/14: 4.3 million) in respect of the Company s convertible preference shares. The net cost in respect of the Company s convertible preference shares included the preference dividend for the year of 2.9 million (2013/14: 3.5 million), together with a 0.6 million (2013/14: 0.8 million) charge for the amortisation of the implied redemption premium on 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 712,948 preference shares. Profit before tax Adjusted profit before taxation was 74.0 million compared to the prior year adjusted profit before taxation of 76.3 million. Total profit before taxation was 69.1 million (2013/14: 74.8 million). Profit attributable to ordinary shareholders after taxation was 47.5 million (2013/14: 51.4 million). Earnings per share Adjusted earnings per share for the financial year are 13.8 pence (2013/14: 14.3 pence). Basic earnings per share after the net impact of adjusting items are 12.9 pence (2013/14: 14.0 pence). Ordinary dividend The Board is recommending a final dividend of 6.0 pence per share (2013/14: 6.0 pence per share), amounting to a total dividend for the year of 10.4 pence per share (2013/14: 10.4 pence per share) and with a total impact in shareholders funds of 38.2 million. The final dividend, subject to approval at the Annual General Meeting on 16 June 2015, is payable on 25 June 2015 to shareholders on the register at 29 May Business acquisition In the first half, the Group acquired the business and assets of AVID Technologies, Inc. for a total consideration of 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. This acquisition enhances our offering to component manufacturer customers. Further information on our offering to component manufacturers is outlined on pages 20 to 21. Tax 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: 29.9%). After including adjusting items the effective rate is 29.9% (2013/14: 30.0%). We expect that the effective tax rate should fall in 2015/16 by approximately 1% reflecting the continuing reduction in the UK tax rate.

32 30 Premier Farnell Financial and operational review continued The Group s adjusted effective tax charge for continuing operations can be analysed as follows: 2014/ /14 Profit before tax Tax charge % Profit before tax Tax charge % Total profit before tax Add back preference dividends Adjust for: Restructuring costs Net gain on disposal of US property (0.3) (0.1) (1.6) (0.6) Gain on remeasurement of contingent consideration (0.8) Acquisition costs Post-retirement benefits The Group accounts for pensions and other post-retirement benefits in accordance with IAS 19 (revised). The net charge for post-retirement benefits was 8.2 million (2013/14: 8.0 million) and can be analysed as follows: Charge 2014/ /14 Defined benefit pension plans Defined contribution pension plans Other post-retirement benefits The Group s two principal defined benefit pension plans are in the US and the UK. The movement in the balance sheet liability of these plans during the year was as follows: US Plan UK Plan Liability at beginning of year (11.6) (18.1) Expense (0.9) (1.2) Actuarial losses (12.7) (10.3) Contributions 5.7 Currency translation (1.3) Liability at end of year (26.5) (23.9) The contributions expected to be paid during the 2015/16 financial year amount to 4.8 million in respect of the UK plan and nil million in respect of the US plan. Post-employment benefits liabilities increased to 70.7m from 45.1m at the end of the previous financial year principally due to actuarial remeasurements. The main driver of these remeasurements was the significant fall in discount rates at the end of 2014/15, as a result of weak corporate bond yields.

33 Annual Report and Accounts 2014/15 31 Cash flow and net debt Adjusted free cash flow to sales was 3.7%, unchanged versus the prior year and reflects further inventory investments made to enhance the customer proposition. Free cash flow attributable to ordinary shareholders is summarised below: 2014/ /14 Adjusted operating profit Depreciation and amortisation Changes in working capital (15.1) (23.7) Additional funding for post-retirement defined benefit plans (3.9) (2.6) Other non-cash movements Total cash generated from operations Capital expenditure (20.7) (17.8) Proceeds from sale of property, plant and equipment 0.3 Interest and preference dividends (12.5) (15.5) Taxation (17.4) (17.5) Free cash flow before impact of adjusting items Cash flow impact of restructuring costs (7.0) (6.2) Cash flow impact of US property disposal (0.6) 3.9 Free cash flow after impact of adjusting items Total cash generated from operations represented 97.5% of operating profit (2013/14: 93.2%). Net working capital increased by 15.1 million over the year reflecting strategic inventory investments made to enhance our customer proposition, particularly for our manufacturing customers. Capital expenditure of 20.7 million included 14.5 million of software development costs, principally to upgrade our customer web experience and enhance existing systems. The change in net financial liabilities is summarised below: UK Plan Opening net financial liabilities (225.8) Free cash flow after impact of adjusting items 27.6 Acquisition of businesses (deferred consideration) (7.8) Ordinary dividends (38.2) Issue of ordinary shares 0.1 Preference shares (0.6) Derivative financial instruments 0.2 Amortisation of arrangement fees (0.6) Exchange movement (11.5) Closing net financial liabilities (256.6) At 1 February 2015, the Group s net financial liabilities comprised the following: 2014/ /14 Cash in bank and in hand Bank loans and overdrafts (66.4) (39.2) US$ Senior Notes (176.0) (161.0) Other loans (7.7) (7.0) Preference shares (52.5) (63.4) Derivative financial instruments (256.6) (225.8) The US$ Senior Notes comprise: $30.0 million due 2017 $58.5 million due 2018 $91.5 million due 2021 $85.0 million due 2024

34 32 Premier Farnell Financial and operational review continued The maturity of the Group s gross financial liabilities at 1 February 2015, excluding derivative financial instruments, is as follows: 2014/ /14 Due within one year Between one and two years Between two and five years After five years Net financial liabilities (including preference shares) increased to 256.6m from 225.8m at the end of the prior financial year. The impact of exchange rates in the period was to increase net financial liabilities by 11.5m, principally in relation to our US$ denominated private placement notes. Net debt to adjusted EBITDA was 2.5x following the acquisition of AVID Technologies and reflecting the impact of foreign exchange movements in the year. The Group has 250 million bank facilities, expiring in September 2019, which together with the Group s continuing cash generation provide the operational and financial flexibility to meet the Group s funding requirements. Based on these facilities, the Group s headroom on bank borrowings at the end of the financial year was million which, together with the net cash position of 43.8 million, gives us a secure funding position and will facilitate repayment of the preference shares on their maturity in In addition, the Group successfully refinanced $85m US private placement notes due August 2016 until Treasury activities are monitored by the Tax and Treasury Committee which meets at least twice a year with major decisions and the overall treasury policy being approved by the Board. Group policy prohibits speculative arrangements in that transactions in financial instruments are matched to an underlying business requirement, such as forecast debt and interest repayments and expected foreign currency revenues. The Group uses derivatives only to manage its foreign currency and interest rate risks arising from underlying business activities. The Group treasury function is subject to periodic independent reviews by the Internal Audit Department. Controls over interest rate and foreign exchange exposures and transaction authenticity are in place and dealings are restricted to those banks with the relevant combination of geographic presence and suitable credit rating. The Group monitors the credit ratings of its counterparties and credit exposure for each of its counterparties. The Group typically hedges transactions primarily related to the purchase and sale of inventories denominated in foreign currencies through foreign exchange forward contracts. These contracts reduce currency risk from exchange rate movements with respect to these transactions and cash flows. The Group does not hedge profit translation exposure, unless there is a corresponding cash flow, since such hedges provide only a temporary deferral of the effect of movements in exchange rates. Similarly, while a significant proportion of the Group s borrowings are denominated in US dollars, the Group does not specifically hedge all of its long term investments in overseas assets. Treasury operations The Group is exposed to a number of different market risks, including movement in interest rates and foreign currency exchange rates. The Group has established policies and procedures within the treasury function to monitor and manage the exposures arising from volatility in these markets, with derivative instruments being entered into when considered appropriate by management. The Group treasury function is responsible for sourcing and structuring borrowing requirements, managing interest rate and foreign exchange exposure and managing any surplus funds, which are invested mainly in short term deposits with financial institutions that meet the credit criteria approved by the Board. Specifically, counterparty creditworthiness is determined by reference to credit ratings as defined by the global rating agency, Fitch. In addition, monthly reports are produced by the Group treasury function, which are used to report treasury activities.

35 Annual Report and Accounts 2014/15 33 Sustainability report Principles The Principles element of our sustainability strategy centres on those activities which we believe will deliver competitive advantage or financial benefit to the Group. We don t report on compliance activities, which we are required to fulfil (and that would not set us apart from other corporate good citizens ) in favour of initiatives that we believe drive internal or external business value. Code of Conduct All employees are required to re-read and commit to the Premier Farnell Code of Conduct during their annual performance review. This gives them the opportunity to ask questions and raise concerns with their line manager. In FY15, 91% of employees confirmed that they had read and understood the Code of Conduct. The remaining 9% consists of employees who did not complete a year-end review and therefore did not submit their confirmation. 94% of new employees required to read the Code of Conduct as part of their induction confirmed that they had done so via the Group s Online Learning Centre. The Trust Line Premier Farnell provides an anonymous telephone hotline for employees to report concerns about corporate ethics in their workplace. In FY15, nine issues were reported and investigated by the hotline. All issues raised were resolved within the year and none remain outstanding. Planet As a distributor with no owned logistics or freight, we have focused our environmental reporting on the direct impacts of our operations at our own facilities. The environmental impacts of the transport of products are managed by third-party carriers through their own procedures. Greenhouse gas (GHG) statement for the Group Summary of GHG emissions for the year ended 31 December 2014: Tonnes Carbon Dioxide equivalent (CO 2 e) Scope 1 3,964 4,351 Scope 2 15,831 16,278 Total 19,795 20,629 Intensity metric Tonnes Carbon Dioxide equivalent per thousand square metres (CO 2 e/ 000m 2 ) Scope Scope Total The decrease in tonnes CO 2 e emitted by the Group compared with the prior year is mainly due to the relocation of some office sites to smaller and more energy efficient buildings, in particular the movement of the MDD Americas head office to a LEED certified energy efficient building in downtown Chicago. Each region has developed plans to reduce absolute energy use and associated GHG emissions against the 2013 baseline. Efficiency investments will primarily target owned facility upgrades to reduce the consumption of electricity and natural gas and the resultant Scope 1 and Scope 2 emissions. We have appointed PricewaterhouseCoopers LLP to provide independent assurance on selected information in the GHG statement. Their assurance is performed in accordance with the International Standards on Assurance Engagements ISAE3410 and 3000, against a clear and public set of criteria which can be found online at sustainability. Their assurance report can be found on page 36 of this report. Resource use Waste generated (tonnes) 4,381 4,488 4,409 Waste sent to landfill (tonnes) Waste recycled (tonnes) 3,639 3,585 3,488 Waste recycled (%) 83% 80% 79% Our overall performance on waste recycling has increased by 3% since In addition to segregating and recycling our own waste on site, our Distribution Centres offer a returns service for production reels and waffle trays. This scheme allows customers to return unwanted production packaging free-of-charge to be cleaned, sorted and re-used. People The success of our business is dependent on the skills and commitment of our people. It is vital to our sustainability strategy that we attract, develop and retain the right people to ensure our profitability continues in the long term. Our focus on developing a high performance culture with our employees is outlined on pages 38 and 39.

36 34 Premier Farnell Sustainability report continued Human rights Premier Farnell supports the fundamental human rights of all of its employees and stakeholders. Our policies and procedures are aligned with the principles of the United Nations Global Compact and we implement a Code of Conduct in our internal and external dealings to protect the integrity of the people with whom we interact. Our Private Label suppliers are subject to our Workplace Standards policy, setting out the expectation that human rights will be upheld by those companies with which we contract, including the elimination of forced and child labour, and we assess those suppliers performance to ensure that their commitment is being kept. Health and safety We monitor the injury rates at all facilities and our global performance is reported below. We target injury rates that are not higher than 50% of the average injury rate for our industry, based on the OSHA performance figures for industries in the US. Recordable injuries 1 per 100,000 hours worked DAW injuries 2 per 100,000 hours worked FY15 Target (50% computed OSHA average) FY15 Performance FY14 Performance Notes: 1 Recordable injuries are those which require medical treatment beyond the application of on-site first aid. 2 Days Away from Work (DAW) injuries are those which result in an employee taking medical leave from work, or being assigned to restricted duties outside of their normal contract. In Europe, DAW injury rates have increased primarily as a result of short term absences following minor injuries becoming more commonplace. A significant proportion of this is driven by legislation affecting sick pay entitlements at our Liege Distribution Centre. However, we have also seen minor injuries occurring in our European office locations that were unrelated to work processes. Both Recordable and DAW rates remain below the computed OSHA industry average for the business types operated by Premier Farnell. Absenteeism We measure the sickness and injury-related absence rates of employees at our contact centres and distribution centres worldwide. As a high service business, the engagement and commitment of our staff is paramount to fulfilling our customer promise. Location Business type Absence rate 1 Leeds, UK Distribution Centre 5.3% Business Contact Centre 9.0% Preston, UK Distribution Centre 5.5% Business Contact Centre 4.1% Gaffney, US Distribution Centre 2.2% Richfield, US Business Contact Centre 2.0% Dayton, US Distribution Centre 1.8% Singapore Distribution Centre 3.0% Business Contact Centre 8.0% Note: 1 Absence rates are calculated by the number of working days not attended by employees as a percentage of planned and agreed working days for the year. The UK Business Contact Centre experienced higher absences than usual as a result of concentrated long-term sickness absence, unrelated to working activities.

37 Annual Report and Accounts 2014/15 35 Supplier workplace standards We have continued our audit programme for Private Label Suppliers that are based in Asia. We have concluded that these are our highest-risk suppliers in terms of potential human rights violations. To date, 90% of Private Label suppliers (by spend) have been audited by a member of our Strategic Sourcing Team and the percentage of suppliers surveyed (by spend) has increased to 97%. No audits have identified any concerns for the welfare of suppliers employees. This accounts for all significant Private Label suppliers. Approximately 10% of suppliers are inactive, being used significantly less regularly to purchase products. We have continued to focus the audit programme on regularly used suppliers. This ensures that the significant majority of work for which we are responsible in the Asia Pacific region with subcontractors is conducted in high-standard environments. Community investment We focus our community investment activities on two key areas: STEM education and Assistive Technologies; as this directly supports our business in the longer term, developing a pool of both potential employees and potential customers. We continue to support the Make the Grade programme in the UK, which provides business support to local schools. Our support is focused on Swallow Hill Community College in Leeds, providing science and engineering support to technology departments, as well as broader mentoring and workplace skills sessions for students. Our online community, element14, is host to Project Nocturne an international collaborative design project in partnership with DesignAbility. The project brings together electronic design engineers from across the globe to provide pro-bono development of a product to support sufferers of dementia and their carers. The Project Nocturne group on the element14 community website has attracted more than 30,000 page views since launch in 2012 (10,800 in FY15 alone) as it brings key stakeholders together across geographical boundaries to find an innovative solution to an important problem.

38 36 Premier Farnell Independent Limited Assurance Report to the Directors of Premier Farnell plc The Directors of Premier Farnell plc engaged us to provide limited assurance on the information described below and set out in Premier Farnell plc s Greenhouse Gas (GHG) Statement for the Group within the 2014 Sustainability Report and the Annual Report and Accounts for the year ended 1 February Our conclusion Based on the procedures we have performed and the evidence we have obtained, nothing has come to our attention that causes us to believe the Selected Information for the year ended 31 December 2014 has not been prepared, in all material respects, in accordance with the Reporting Criteria. This conclusion is to be read in the context of what we say in the remainder of this report. Selected Information We assured the information for the year ended 31 December 2014 presented in the Greenhouse Gas Statement for the Group (the Selected Information ), com/sustainability. The Selected Information and the Reporting Criteria are summarised in the table below. Our assurance does not extend to information in respect of earlier periods or to any other information included in the Annual Report and Accounts for the year ended 1 February Selected Information Reporting Criteria 1 Scope 1 emissions Scope 2 emissions Carbon intensity sustainability 1 The maintenance and integrity of Premier Farnell plc s website is the responsibility of the Directors; the work carried out by us does not involve consideration of these matters and, accordingly, we accept no responsibility for any changes that may have occurred to the reported Selected Information or Reporting Criteria when presented on Premier Farnell plc s website Professional standards applied and level of assurance We have performed a limited assurance engagement in accordance with International Standard on Assurance Engagements 3410 Assurance engagements on greenhouse gas statements (ISAE 3410) and, in respect of intensity measures information, in accordance with the International Standard on Assurance Engagements 3000 Assurance Engagements other than Audits and Reviews of Historical Financial information (ISAE 3000) issued by the International Auditing and Assurance Standards Board. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement in relation to both the risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks. Our Independence and Quality Control We have complied with the Institute of Chartered Accountants in England and Wales (ICAEW) Code of Ethics, which includes independence and other requirements founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. We apply International Standard on Quality Control (UK&I) and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Our work was carried out by a team of sustainability and assurance specialists, independent of management. Understanding reporting and measurement methodologies Non-financial information needs to be read and understood in conjunction with the Reporting Criteria, given the characteristics of the subject matter and the methods used in determining such information. The absence of a significant body of established practice on which to draw allows for selection of different but acceptable measurement techniques which can result in materially different measurements and can affect comparability. The precision of different measurement techniques may also vary. Furthermore, the nature and methods used to determine such information, as well as measurement criteria and precision thereof, may change over time. The Reporting Criteria used as the basis of Premier Farnell plc s reporting are as at 24 April 2015 and should therefore be read in conjunction with the Selected Information and associated statements as at 24 April 2015 reported on Premier Farnell plc s website.

39 Annual Report and Accounts 2014/15 37 Work done Considering the risk of material misstatement of the Selected Information, we: made enquiries of relevant management; interviewed personnel; performed analytical procedures; considered the structure and basis of data management systems and controls; and performed limited testing, on a selective basis, of supporting documentation to the Selected Information disclosed in the GHG Statement for the Group. Premier Farnell plc s responsibilities The Directors of Premier Farnell plc are responsible for: designing, implementing and maintaining internal controls over information relevant to the preparation of the Selected Information that is free from material misstatement, whether due to fraud or error; establishing objective Reporting Criteria for preparing the Selected Information; measuring and reporting the Selected Information based on the Reporting Criteria; and the content of the Greenhouse Gas Statement for the Group and the Annual Report and Accounts for the year ended 1 February Our responsibilities We are responsible for: planning and performing the engagement to obtain limited assurance about whether the Selected Information is free from material misstatement, whether due to fraud or error; forming an independent conclusion, based on the procedures we have performed and the evidence we have obtained; and reporting our conclusion to the Directors of Premier Farnell plc. This report, including our conclusions, has been prepared solely for the Directors of Premier Farnell plc as a body in accordance with the agreement between us, to assist the Directors in reporting Premier Farnell plc s performance and activities. We permit this report to be disclosed in the Annual Report and Accounts for the year ended 1 February 2015, to enable the Directors to show they have addressed their governance responsibilities by obtaining an independent assurance report in connection with the Selected Information. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Directors as a body and Premier Farnell plc for our work or this report except where terms are expressly agreed between us in writing. PricewaterhouseCoopers LLP, Chartered Accountants, Leeds 24 April 2015

40 38 Premier Farnell Employees Sustainable, profitable growth in line with our strategic objectives can only be achieved by a high performing, engaged workforce with the right knowledge and skills. As we have evolved from catalogue distributor to a global multichannel business focused on supporting customers requirements, we have acquired and developed critical new skills within our employee base including ecommerce expertise and technical capability. Today, the Group has over 4,500 employees based in 38 countries with 100 ecommerce specialists and 300 technical engineers amongst its ranks. Through its range of employee initiatives, described below, the Group seeks to attract and develop its people around the globe. Performance management Effective performance management plays an important role in enabling all of our employees to understand how they contribute to the success of the organisation. Our Group-wide performance review process has been instrumental in shaping our journey towards a high performance culture. All employees within our core businesses participate in our annual performance review process, which links each individual s work with the Company s strategic and operational objectives. The performance review process also incorporates development planning, providing an opportunity for individuals to focus on their ongoing professional and personal development. In addition to structured reviews, ongoing performance discussions throughout the year provide an ideal platform for engaging and motivating employees. In line with our continuous improvement philosophy, we also ensure that we equip our people managers with the necessary skills, such as coaching, to bring out the best in their teams. We reward and recognise employees based on their performance and contribution to the success of the business and provide both competitive and fair remuneration in every country and region in which we operate. Learning and development To respond to our strategic ambitions, we have redefined the behaviours we need from all colleagues in the business. Our Leadership Standards will also allow us to review our learning and development options and make sure we support colleagues to have the skills to effectively deliver in their roles as well as developing capability for the longer term. Local, functional and global learning programmes are available for all levels of employees and are available through a blend of classroom training, e-learning, coaching, mentoring and direct on-the-job learning. We review needs at all levels on a regular basis and proactively look for solutions to ensure that optimal learning is achieved in every region of the world. We are also conducting a detailed review of our talent pipeline and building tailored executive assessment and development solutions. Diversity and inclusion With thousands of customers around the world, Premier Farnell is an organisation which values both diversity and inclusion. The Group is committed to employment policies which follow best practice and provide equal opportunities for all employees. We are fully supportive of the benefits of a diverse workforce and our employee base proudly reflects the diversity of the various countries in which we operate. We believe that this ensures richness in both business and culture and an organisation that truly reflects our global business presence. We continually seek to recruit, develop and employ throughout the organisation suitably qualified, capable and experienced people irrespective of age, race, ethnicity, gender, religion or sexual orientation. By ensuring diversity within our talent and leadership pool, we are also ensuring we build a future team that best reflects our client, investor and global employee base. Full and fair consideration is given to applications for employment for disabled persons, having regard to their particular aptitudes and abilities. Appropriate arrangements are made for the continued employment and training, career development and promotion of disabled persons employed by the Group. If members of staff become disabled, the Group continues employment, either in the same or an alternative position, with appropriate retraining being given if necessary. Mentoring We continue to provide a platform to connect high potential colleagues with mentors across every function and geography, ensuring the nurturing of a global culture. Mentoring continues to be a powerful tool for the development of our key and emerging talent pool with the senior team including internal, external and Board mentors. Employee communications and involvement The Group provides employees with relevant information, consulting them or their representatives regularly, so that their views can be taken into account when making decisions that are likely to affect their interests. Within the group of operating companies, employee involvement and engagement is encouraged at all times, to ensure that employees are informed on matters relating to our business performance. Our people have access to information about our business, strategy and operational performance through various internal communication channels. These include our global intranet, weekly newsletters, regular video broadcasts and various town halls, with local business context, content and translation where appropriate. Our ongoing business updates, through regular, consistent and open communication, are essential to

41 Annual Report and Accounts 2014/15 39 Gender diversity (as at 1 February 2015) % Board employees (8 members) SET (12 employees) Senior Management (177 employees) Entire organisation (4,554 employees) Male 87% 92% 76% 56% Female 13% 8% 24% 44% engaging our people by keeping them informed. Further communications resources have been added to support employee engagement throughout our proposed global reorganisation programme. Great place to work We are starting to re-energise our employment brand investing to ensure that we can attract and retain the best possible talent for our global business. We continue to encourage culturally specific events that resonate with the local population. Share option scheme Our share option reward schemes extend across the business in all regions, motivating employees through share price growth. We strongly believe in including employees for participation in the Group s performance by providing a stake in our future together. Our values Core values are central to the long term success of any organisation and bind it together with an operating framework for employees. At Premier Farnell we believe: Customers and suppliers are at the heart of everything we do. Only by working together can we deliver results. We must innovate; learning and adapting faster than anyone else. Developing our people is crucial to our success. Integrity and Trust are fundamental to our culture. New Executive Teams Premier Farnell is constantly evolving to become a highly efficient, global business. The proposed reorganisation of the element14 businesses to an integrated global structure is a critical step on this journey. In June 2014, we appointed a new Executive team to lead the simplified organisation. Led by Laurence Bain, the Group s Chief Executive, the new team includes Mark Whiteling, the Group s Chief Financial Officer, global functional leaders for Sales and Marketing, Product and Suppliers, Supply Chains, and Technology, as well as global leaders for support functions including Human Resources and Legal. The new team holds one face-to-face meeting every month. Subject matter experts attend where relevant to the meeting agenda. The previous leadership structures for Akron Brass and the Other Distribution businesses (CPC & MCM) remain in place and report to the Chief Executive directly. Making a Difference Awards People throughout Premier Farnell embrace our values every day. As part of the Group s commitment to encourage high performance, outstanding contributions made by our employees are recognised and rewarded during the year through our Making a Difference Awards. These awards are categorised, with winners recognised for their dedication to focusing on our customers and suppliers, innovation at work, collaborating with each other, and a People s Choice award, voted for by colleagues around the business, to find an individual who exemplifies coaching in action. Employees and managers are encouraged to submit details of an individual or team that they feel has gone above and beyond their required duties. All these nominations are then reviewed by the regional senior management team who select which of their regional nominations they believe has delivered exceptional service to the organisation. Those selected in this regional process are then sent to the members of the senior leadership team from around the Group for review. All of the global winners receive special recognition and an award presented by the CEO. This year, Premier Farnell recognised 93 colleagues from around the globe through the Making a Difference Awards. Strategic Report The Strategic Report was approved by a duly authorised Committee of the Board of Directors on 24 April 2015 and signed on its behalf by: Mark Whiteling Chief Financial Officer 24 April 2015

42 40 Premier Farnell Corporate Governance Report Val Gooding, CBE Chairman The 2014/15 financial year has been a challenging period for Premier Farnell but one in which we took steps to position the Company for improved future financial performance. As Laurence outlined in the Strategic Report, we have begun our transformation to become the global destination for electronics customers. During the year we made investments to support this evolution, including acquiring AVID Technologies and completing the rollout globally of our new web platform. We also commenced the process to transform our regional element14 businesses to one global business, a move that will deliver a more efficient and effective organisational structure. The Board has been actively involved in overseeing this transformation, developing the Group s strategy and assessing the Group s performance. The Group s financial progress this year against its key performance indicators reflected the transitional nature of the past year. The focus on strategic priorities to deliver growth, reduce costs and optimise performance gives the Board confidence that the Company will deliver improved performance in the future.

43 Annual Report and Accounts 2014/15 41 The Board has also undergone a number of significant changes during the year. First, in its composition, as valued Board members have come to the end of their tenure and new talent has been brought in. Secondly, through actions taken to enhance how the Board can best fulfil its role of providing leadership within a framework of prudent and effective controls. The new element14 operating model The executive team began discussing the next stage of Premier Farnell s evolution during the first half of the financial year. As Laurence outlined in his CEO statement (page 2), the Board is confident that moving the element14 business to a global model where duplication is removed and a consistent strategy can be executed world-wide is the right approach to deliver the next phase of Premier Farnell s journey. Led by the executive team, the operational structure will move away from regional delivery to one in which defined global functions concentrate on Group-wide implementation to improve efficiencies and provide a clear and cohesive proposition. During the financial year 2015/16, the Board will continue to monitor carefully the implementation of the operating model to ensure that it is capable of delivering the expected levels of performance and long-term value for shareholders. Premier Farnell employees Change brings opportunity but also uncertainty. For some, this engenders excitement but in others discomfort. As the Group drives forward in its transformation, I continue to be sincerely impressed by the commitment, professionalism and passion of Premier Farnell s employees, many of whom I and other members of the Board have had the pleasure to meet personally during our time spent in the business. These Board visits are highly appreciated by the Non-Executives, giving them the chance to spend time with local personnel and find out more about market conditions and culture and the pressing issues for the business on the ground. Particular highlights from the year include Paul Withers spending time with staff at our distribution centre in Leeds and Andrew Dougal visiting the new Chicago offices where he received positive feedback from employees about the improved working environment there. In October 2014 I had the opportunity to go to our business in India where I was impressed with the dedication and enthusiasm of our team and encouraged by the results they are achieving. The quality of our people is a regular theme in the updates provided by Board members after each visit. On behalf of the Board, I would like to thank each of Premier Farnell s 4,500 employees globally for all their hard work and commitment. Board developments The Board s evolution is consistent with the UK Governance Code 1 (the Code), and its own performance evaluation. As the Group s strategic transformation gains pace, the Board calendar has been expanded to include an additional Board meeting in each year. The Board also held an offsite strategy day in June 2014, set to be an annual event. We focused on market trends, the competitive landscape and stakeholder expectations as well as the Group s proposed strategy and early proposals for the element14 business reorganisation. A joint Board and Digital Advisory Board meeting took place in October Attended by all members of both Boards, the meeting provided a unique forum in which the Digital Advisory Board members provided updates on the latest trends in the digital environment and discussed with the Board where growth and market opportunities could be embraced. 1 Known as the Code in this report. For reference, a copy of the Code can be found on the FRC website (

44 42 Premier Farnell Corporate Governance Report continued Board appointments During the year several changes were made to the composition of the Board and another is anticipated in the year ahead. We welcomed one new Director to the Board while one of our longstanding and highly valued Board members stepped down as an independent Non-Executive Director and another will step down following our AGM in June. On 1 November 2014 Gary Hughes joined us as a Non-Executive Director. Gary was appointed because of his considerable business experience and his financial expertise. A qualified and experienced chartered accountant, with a background in corporate finance, Gary also has the credentials required to take on the appointment of chairing the Audit Committee, following Dennis Millard s retirement from the Board at the end of January Dennis Millard joined the Board as a Non-Executive Director in 2007 and during his time with the Board acted as the Group s Senior Independent Director and Chairman of its Audit Committee. With his financial expertise and wealth of experience, Dennis has been invaluable as a member of the Premier Farnell Board. Paul Withers has significant experience with the Board and considerable knowledge of the Company and, as Chair of our Remuneration Committee, has forged good working relationships with a number of the Group s shareholders. He was accordingly nominated and agreed to take on the role of Senior Independent Director from 1 February After serving as a Non-Executive Director for nine years, Andrew Dougal will also be standing down from the Board immediately after the Annual General Meeting in June Andrew has been a substantial contributor to the Board throughout his tenure. He and Dennis will be greatly missed and we thank them for their dedication and commitment and wish both every success for the future. Risk and governance Good leadership and effective governance are critical at all times, but never more so than during times of change. The Board, under my direction, is responsible for delivering the longterm success of the Company. It has overseen the development of the Company s new operating model and will maintain this oversight of its implementation throughout 2015/16, ensuring that the Company remains vigilant against risk. The effectiveness of the Board, its composition and skills continue to be regularly reviewed in order to meet these demands. Premier Farnell is committed to good corporate governance across the Group and the Board is accountable for this. The report which follows describes how, throughout the year ended 1 February 2015, the Group complied with the principles and provisions of the Code. There is more on the Company s principal risks on pages 24 and 25 and its system of internal controls on pages 56 and 57.

45 Annual Report and Accounts 2014/15 43 Relations with shareholders As Chairman, it is my responsibility to ensure the Board is accessible to our major shareholders and aware of any concerns they may have. In this I am supported by the significant work of the Senior Independent Director and the Chairman of the Remuneration Committee (on matters relating to executive remuneration) and the regular dialogue that Laurence and Mark have with our institutional shareholders. During the financial year 2014/15, Paul Withers and I held individual meetings, in person and by phone, with shareholders at which issues such as strategy, succession planning and executive remuneration were discussed. We undertook extensive consultation on certain of our proposals on executive remuneration which are explored in more detail in the Remuneration Report on pages 63 and 64. The Company also held a capital markets day in October 2014 where investors were updated on our strategy. 2015/16 Priority The Board s priority in 2015/16 is to focus on improving the Company s financial performance by achieving better sales growth, reducing costs and transforming our business through the global reorganisation of element14. Val Gooding, CBE Chairman I consider this engagement with our shareholders as essential. By maintaining a good dialogue with shareholders, we ensure that our objectives are understood and receive feedback on our strategy, performance and governance. It also enables the shareholders to build confidence in the Board s ability to oversee the implementation of the strategy and to know with whom to raise any concerns they might have. The feedback we have received from shareholders during the year under review reflects that the year has been one of challenge but that we have started on a journey which presents significant opportunity to the Company. I look forward to continuing this dialogue in 2015/16 at our AGM, as well as in other forums.

46 44 Premier Farnell The Board of Directors Val Gooding* CBE Aged 64 Non-Executive Chairman since 15 June Laurence Bain CA Aged 61 Chief Executive Officer since 12 June Mark Whiteling M.COMM (HONS) Aged 52 Chief Financial Officer since 5 November Paul Withers* MA Aged 58 Non-Executive Director since September Chairman of the Remuneration Committee and, from 1 February 2015, Senior Independent Director. Gary Hughes* Aged 52 Non-Executive Director since 1 November Chairman of the Audit Committee from 1 February Experience brought to the Board Val has a wealth of international business and leadership experience, having held senior strategic and operational roles in a variety of businesses focused on customer service and served on the boards of a number of global quoted companies, charities and governmental organisations. Val was CEO of BUPA during a 10-year period of strong growth and global expansion and was a senior manager at British Airways, serving latterly as Director for Asia Pacific. Val has also served as a Non- Executive Director of Standard Chartered plc, J Sainsbury plc, the BBC, the Lawn Tennis Association, the Home Office, Compass Group plc, BAA plc and CWC Communications plc. Laurence joined the Board as Chief Operating Officer on 1 July Laurence has extensive leadership experience in electronics manufacturing and distribution. Before joining Premier Farnell in July 2002 as Chief Operating Officer, Laurence was Vice President and Director of Operations for Motorola in Europe, Middle East and Africa. He was Chief Operating Officer of Premier Farnell from July 2002 until his appointment as CEO. Mark has considerable financial and commercial experience in the global distribution and electronics industries. Mark was Premier Farnell s Chief Financial Officer and a member of the Board from 2006 to 2011, re-joining the Company in November 2012 in an expanded role. From August 2011 to November 2012 he was Chief Financial Officer of Autobar Limited. Before joining Premier Farnell in 2006 Mark was Group Finance Director of Communisis plc and, prior to that, of Tibbett & Britten plc. Mark formerly held the position of Non-Executive Director and chairman of the Audit Committee at Future plc. Mark is a chartered accountant. Paul has considerable experience of business expansion and operations in developing markets, particularly Asia, which is valuable to the Company as it continues its international expansion. Paul was formerly Group Managing Director of BPB plc, where he led their Emerging Markets operations. Paul s extensive Board experience and the interaction he has with the Company s shareholders in his role as chair of the Remuneration Committee made him the ideal candidate to take over from Dennis Millard as Senior Independent Director. Gary is a chartered accountant with extensive experience in financial and operational roles. Gary was formerly 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. Gary s background in finance and global business experience made him ideally placed to take over from Dennis Millard as Chairman of the Audit Committee on Dennis s retirement. Committees Nominations (Chairman). Nominations. Committees: Remuneration (Chairman), Audit and Nominations. Audit (Chairman from 1 February 2015), Remuneration and Nominations. Other appointments Non-Executive Director of Vodafone Group Plc and TUI Travel plc, Trustee of Historic Royal Palaces, The Royal Botanic Gardens, Kew and the English National Ballet. Non-Executive Director of Hogg Robinson Group plc. Non-Executive Director of Devro plc and Senior Independent Director of Keller Group plc. 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, The People s Operator Plc and SECC Limited * Denotes Non-Executive Director Recent Board retirements: Dennis Millard (31 January 2015)

47 Annual Report and Accounts 2014/15 45 Thomas Reddin* BSc, MBA Aged 54 Non-Executive Director from September 2010 and chair of the Digital Advisory Board. Peter Ventress* Aged 54 Appointed as a Non-Executive Director with effect from 1 October Andrew Dougal* B Acc, CA Aged 63 Non-Executive Director from September Steven Webb LLB Solicitor Aged 52 Appointed as Company Secretary and General Counsel in December Tom s primary areas of expertise are in marketing, branding and digital innovation. Tom s extensive experience in these areas makes him well-placed to chair the Digital Advisory Board. Tom was formerly Vice President of Consumer Marketing at Coca-Cola USA and President, COO, and ultimately CEO, of LendingTree LLC, a market leader in webbased lending. Peter has broad international experience in the B2B environment. Prior to joining Berendsen in 2010, he was International President of Staples Inc and also spent 10 years in senior management positions with Corporate Express N.V., becoming Chief Executive in During his roles at Corporate Express and Staples, Peter was also a Non- Executive Director of Corporate Express Australia Ltd. Having served on the Board for nine years, Andrew is standing down in June Andrew has significant leadership experience in finance, operational and strategic roles. Formerly he served as Chief Executive Officer of Hanson plc, the international building materials company, following its demerger from Hanson plc, the Anglo American diversified industrial company where he had been Group Finance Director. Previously Andrew was a Non- Executive Director of Taylor Wimpey plc, Taylor Woodrow plc and BPB plc. Steven is a qualified lawyer with a specialism in company law and has served the boards in a number of regulated and non-regulated business and consumer industries. Before joining Premier Farnell, he was the Company Secretary and General Counsel of Kelda Group plc (formerly Yorkshire Water) and Company Secretary of Kalon Group plc. During the year under review Steven served as acting Chair of the Board of Governors of Leeds Beckett University. Nominations. Audit, Remuneration and, from 17 March 2015, Nominations. Audit, Remuneration and Nominations. Non-Executive Director of Asbury Automotive Group Inc., Deluxe Corporation and Tanger Factory Outlet Centers Inc. He is a Managing Partner of Red Dog Ventures, LLC, a venture capital and advisory firm in the digital arena, and also publisher of MortgageRates.us. Chief Executive Officer of Berendsen plc. Non-Executive Director and Chair of the Audit Committee of Carillion plc, Senior Independent Director and Chair of the Audit Committee of Creston Plc and Council Member of the Institute of Chartered Accountants of Scotland (ICAS). Andrew joined the Board of Victrex plc as a Non- Executive Director in March Member of the Board of Governors and Audit Committee of Leeds Beckett University.

48 46 Premier Farnell The Board of Directors continued Non-Executives (6) Executives (2) Fulfilled by Role/Remit Whose responsibilities are divided as follows: Val Gooding Chairman of the Board Paul Withers SID* Andrew Dougal Non-Executive Director Gary Hughes Non-Executive Director Tom Reddin Non-Executive Director Peter Ventress Non-Executive Director Laurence Bain CEO Mark Whiteling CFO leading the Board to ensure effectiveness in all aspects of its role acting as deputy to the Chair of the Board constructively challenging and helping develop proposals on strategy operational execution of the strategy execution of financial deliverables ensure the membership of the Board is appropriate to meet business needs oversee that the Board Committees carry out their duties establish appropriate personal objectives for the Chief Executive promote an open culture of debate, and develop and maintain effective communication with shareholders provide a line of communication to the Company for shareholders lead the resolution of any significant Board issues that are not appropriate for the Chair or the CEO to handle act as a sounding board for the Chairman, and lead the other Non-Executive Directors in their annual appraisal of the Chairman s performance scrutinise performance of management in meeting goals and objectives satisfy themselves on the integrity of financial information and that financial controls and systems are robust and defensible determine appropriate levels of remuneration for Executive Directors, and lead the process to appoint and remove Executive Directors and ensure adequate succession plans are in place run the day-to-day business and operations of the Group lead the development and delivery of strategy to enable the Group to meet the requirements of its shareholders lead and oversee the executive management of the Group meet the Group s budget and strategic plans, and provide the appropriate environment to recruit, engage, retain and develop the personnel needed to deliver the strategy support the CEO in developing and delivering the strategy and in driving financial and operational performance Board support Steven Webb Company Secretary supporting the Chairman, the Board and its Committees ensure good information flows within the Board and its Committees and between senior management and Non-Executive Directors facilitate Director inductions and professional development as requested, arrange independent professional advice for Directors at the Company s expense, and advise the Board through the Chairman on governance matters * Paul Withers appointed as SID from 1 February Dennis Millard held the role of SID throughout the year under review.

49 Annual Report and Accounts 2014/15 47 How is the Board made up? Board of Premier Farnell plc Val Gooding Chairman of the Board Nominations Committee* Chairman: Val Gooding Andrew Dougal, Gary Hughes, Thomas Reddin, Paul Withers, Peter Ventress, Laurence Bain Nominations Committee report p52 Audit Committee* Chairman: Gary Hughes Andrew Dougal, Peter Ventress, Paul Withers Audit Committee report p54 Remuneration Committee* Chairman: Paul Withers Andrew Dougal, Peter Ventress, Gary Hughes Remuneration Committee report p62 Digital Advisory Board** Chairman: Tom Reddin Objective: to offer counsel to the Board and the Chief Executive Officer on matters relating to the web, ecommerce and the digital arena Disclosure Committee** Chairman: Steven Webb Objective: to assist the Board in ensuring disclosures are fair, accurate and complete Tax and Treasury Committee** Chairman: Mark Whiteling Objective: to make recommendations to the Board on tax and treasury strategy and policy * A committee of the Board ** Not a formal committee of the Board but provides advice and/or information to the Board What are its responsibilities? It is collectively responsible for the long-term success of the Group and delivering sustainable shareholder value. It reviews strategic issues and sets strategy. It exercises control over the performance of the Company by agreeing budgetary targets and monitoring performance against those targets. It is responsible for internal controls and risk management. It sets values and standards, including good governance, sustainability, integrity and ethical conduct for adoption throughout the Group as a whole. What does it not do? Led by Laurence Bain, the executive team are responsible for presenting to the Board proposals on strategic direction and business development. The Board reviews and challenges these proposals so that informed decisions are reached. The executive team are responsible for implementing these decisions and for day to day operations and performance.

50 48 Premier Farnell The Board of Directors continued How did it work in 2014/15? There is a formal schedule of matters reserved for Board approval which covers items that are significant to the Group as a whole due to their strategic, financial or reputational implications. There is also a rolling schedule of agenda items to be brought to the Board in each year. The matters reserved are reviewed annually and the rolling agenda at each meeting to ensure they remain up to date and appropriate. In 2014/15 there were nine Board meetings of which six were formal scheduled meetings, two were to review market conditions and business performance and approve the release of the Group s interim management statements and one was to deal with ad hoc matters arising. At each scheduled meeting the Board receives a report from the CEO and CFO on business performance and market conditions and, at most scheduled meetings, a presentation and question and answer session with a business or functional leader on their business or function. In addition to these reports and other matters arising for review by the Board, the following matters were dealt with at Board or Committee meetings in the year: Matter Strategy and Management Corporate Governance and Communication Board membership and committees Financial and Contracts Policies and Procedures Actions undertaken during the year Set the Group s strategic plans including the approval of the element14 operating model and the annual business plans for all business units Kept under review management and business performance Received feedback on and discussed with the Company s brokers the market perception of the Company Reviewed HR strategy and leadership succession planning Received inputs on the digital arena in which the Company operates Reviewed the Company s sustainability and health and safety record and practices Reviewed compliance with the principles and provisions of UK Corporate Governance Code and good governance practice generally Resolved on the Company s approach to a number of changes in corporate reporting requirements Ensured the maintenance of a sound system of internal control and risk management (further information included in the Audit Committee update on page 57) Kept under review the Group s high level risks Approved resolutions to be put to shareholders at general meeting Approved appointments to and removals from the Board and its Committees including the appointment of Gary Hughes (for further details see page 53 of the Nominations Committee report) Approved the terms of reference of Board Committees ( Undertook a formal and rigorous performance evaluation and received updates on the outcome of previous reviews (page 49) Reviewed and approved all financial announcements Reviewed and approved various elements of the Group s banking and finance arrangements, including the refinancing of the Group s banking and private loan facilities Reviewed and approved (as appropriate) various capital projects, investments and contracts of material value Responsible for the approval of business acquisitions and disposals including the acquisition of AVID Technologies Inc (for further details about the AVID Technologies Inc acquisition see page 21 of the Strategic Report) Considered and reported on the position of the Group as a going concern Set the Group s insurance strategy Reviewed and approved the Group s tax management and planning Considered and approved the Company s share dealing code Approved procedures for the detection of fraud and the prevention of bribery Approved the Group s treasury policies Approved the Company s policies on non-audit services Reviewed and approved the Directors expenses and travel policy

51 Annual Report and Accounts 2014/15 49 How well were the meetings attended? Name of Director Board meetings Audit Committee meetings Remuneration Committee meetings Nominations Committee meetings Chairman: Val Gooding 9/9 2/2 Executive Directors: Laurence Bain 9/9 2/2 Mark Whiteling 9/9 Non-Executive Directors: Andrew Dougal 9/9 4/4 5/5 2/2 Gary Hughes 1 3/3 1/1 1/1 Dennis Millard 2 9/9 4/4 4/5 2/2 Thomas Reddin 9/9 2/2 Paul Withers 9/9 4/4 5/5 2/2 Peter Ventress 3 9/9 4/4 5/5 Not a member of the Committee (or not a member at the date of the relevent meetings). 1 Gary Hughes joined the Board on 1 November 2014 and attended all Board and Committee meetings convened following his appointment to the Board and the relevant Committees. 2 Dennis Millard was unavoidably absent from the December Remuneration Committee meeting due to a prior commitment. He provided feedback on the papers, points for discussion and questions prior to the meeting, with apologies for his inability to attend. 3 Peter Ventress was appointed to the Nominations Committee on 17 March What does the Board think it can do better? A rigorous evaluation of the effectiveness of the Board, its Committees and each individual Director is conducted every year. In line with the Code, this process is externally facilitated in every third year, the last being 2012/13. In 2013/14 the evaluation determined the following: 2013/14 Performance review Outcome Board and Committee agendas to be revised to enable increased focus on strategic issues and reduce time spent on routine matters Each Board paper to include an executive summary and clearly identify key issues. Length of papers to be reviewed to ensure appropriate focus maintained A full day meeting to be held each year to specifically review strategy More frequent feedback on the functioning of the Board Action taken during the year The Chairman of the Board and the Company Secretary set agenda items to align with strategic priorities and financial events The Company Secretary issued revised Board paper guidelines to contributors to clarify management s view of key issues for Board consideration The annual strategy day for 2014/15 was held in June 2014 Each Board meeting was ended with an informal discussion of what worked well and areas for improvement

52 50 Premier Farnell The Board of Directors continued In June 2014, for the financial year 2014/15, an internal Board evaluation took place led by Val Gooding. All Board members contributed to the appraisal of the performance of individual Directors, by way of a questionnaire, and the Chairman met each Director in order to provide him with feedback on his performance from the rest of the Board, discuss contribution and personal development requirements and consider wider approaches to enhance or refresh Board processes. The SID took feedback from the other Board members on the performance of the Chairman and discussed this with her. The recommendations made by each Board member were discussed in an open forum by the Board at the January 2015 meeting and the outcomes of the evaluation and resulting actions agreed. These were (in summary): 2014/15 Performance review Outcome Further refinement of Board papers is required. Papers should be concise and focus on strategic rather than tactical issues The Board should consider holding NED only sessions at the end, rather than the start, of Audit Committee meetings The 2015/16 Board evaluation is to be externally facilitated The Board should hold a full strategy day off-site each year to focus on strategic issues, shareholder value and business performance Refreshing of the Board is to continue as vacancies arise The Board requires greater insight into the Group s technology function Action planned and taken during the year The Chairman of the Board and Chief Executive Officer agreed that papers will focus on strategic matters for discussion and decision The ordering of Audit Committee agendas has been revised by the Chairman of the Audit Committee and the Company Secretary The Chairman of the Board is to appoint an external facilitator ahead of the 2015/16 Board evaluation A strategy day is scheduled for 17 June 2015 The Chairman of the Board and Nominations Committee will continue to develop role specifications and as required search for prospective candidates to be recommended to the Board The Executive Directors are to provide the Board with regular updates on the Group s technology function In addition to this rigorous evaluation process, the Board also takes time after each scheduled Board meeting to consider less formally what went well and whether the way the Board operates could be improved in any way. Do the Directors commit enough time to the Company? Any Director is obliged to seek authorisation before taking up any position that conflicts, or may possibly conflict, with the interests of the Company. The Board is empowered to authorise situations of potential conflict of interest, where it sees fit, so that a Director is not in breach of his or her duty. All existing external appointments and other such situational conflicts of each Director have been reviewed and authorised by the Board and are recorded on a register which is reviewed annually and noted at each Board meeting. All Directors must ensure that their external appointments do not involve a time commitment that would adversely affect their responsibilities to Premier Farnell. If a conflict were to arise in relation to a transaction or other arrangement proposed between the Company and a party in which any Director had an interest, that Director would be obliged to declare the interest, would not receive Board papers and would take no part in any discussions or decisions on the matter. Premier Farnell recognises that there are significant advantages to both individuals and to the Board when our Directors serve on the boards of other companies. In line with the Code, the Company s policy is that Executive Directors are permitted to hold one non-executive directorship with another company, with all external appointments being approved by the Board. On 30 November 2014, Mark Whiteling stood down from his position as Non-Executive Director and Chairman of the Audit Committee at Future plc in order to accept an appointment as a Non-Executive Director of Hogg Robinson Group plc on 1 December 2014, with the Board s approval. Details of the remuneration for these external appointments are in the Remuneration Report on page 82. Val Gooding stepped down from her role as Non-Executive Director of the Home Office on 30 April 2014 and was appointed as a Trustee of The Royal Botanic Gardens, Kew on 1 October In 2014/15, all Directors committed an appropriate amount of time to fulfil their duties and responsibilities to the Board. Are the Non-Executive Directors independent? The Board considers each Non-Executive Director s independence on an annual basis as part of his or her performance evaluation. In its 2014/15 review, the Board concluded that all the Non-Executive Directors who had served during the year were independent in accordance with the provisions set out in the Code. The Chairman met the independence criteria defined by the Code as at the date of her appointment.

53 Annual Report and Accounts 2014/15 51 In compliance with the Code, all of our Directors will retire at our Annual General Meeting in June 2015 and offer themselves for re-election (save for Gary Hughes who will seek election as this is his first year as a Non-Executive Director with the Company). Non-Executive Directors are appointed for specified terms, subject to re-election, and terms beyond six years are subject to rigorous review. Accordingly, Non-Executive Directors are appointed for a maximum of two terms of three years and thereafter annually subject to satisfactory performance and commitment. The respective periods of service of our Non-Executive Directors (including the Board Chairman) during 2014/2015 are: Name Appointed on Start date for current term Andrew Dougal 01/09/ /06/2014 (one year) Dennis Millard* 01/09/ /06/2014 (one year) Paul Withers 01/09/ /06/2014 (one year) Thomas Reddin 30/09/ /06/2013 (three years) Val Gooding 15/06/ /06/2014 (three years) Peter Ventress 01/10/ /10/2013 (three years) Gary Hughes 01/11/ /11/2014 (three years) * Dennis Millard stood down on 31 January How do they get to know and keep up to date with the business? All Directors receive a comprehensive induction. On his appointment in November 2014, Gary Hughes commenced a tailored induction programme which includes: an overview of the Group, its functions and governance; briefings on Directors regulatory and compliance responsibilities; site visits to Group locations (with Leeds and Chicago planned for 2015); detailed reviews of the strategic projects and initiatives underway; and one-to-one meetings with the executive management team and other key personnel. The Board held its December meetings at CPC in Preston, UK enabling Non-Executive Directors to meet the management team there and review business performance. Each scheduled Board meeting includes a review and discussion of the Group s businesses and the majority of scheduled meetings include a presentation by a business or functional leader of his or her area of responsibility. The Board also spends time and has regular correspondence with the executive management team; in 2014/15, this included at the joint Board and DAB meeting. The Board s annual performance evaluation is used by the Chairman to assess the time commitment and the training and development needs of each Director. To further their understanding of the Group and enhance constructive challenge, Non-Executive Directors are encouraged to visit Group locations and spend time with local personnel. During the year under review, visits have taken place to our facilities in Cleveland (USA), Chicago (USA), Ohio (USA), Bangalore (India) and Leeds (UK).

54 52 Premier Farnell Nominations Committee Report Nominations Committee Report Val Gooding Nominations Committee Chairman Who else is on the Committee? -- Andrew Dougal -- Laurence Bain -- Gary Hughes (from 1 February 2015) -- Dennis Millard (to 31 January 2015) -- Thomas Reddin -- Peter Ventress (from 17 March 2015) -- Paul Withers Committee Secretary: Steven Webb As recommended by the Code, the Committee comprises a majority of independent Non-Executive Directors. The Chief Executive Officer is also a permanent member. While only members of the Committee have the right to attend meetings, the Chief People Officer and external advisors may also be invited to contribute on specified agenda items. If the Committee is convened to discuss the Board Chairman s position, the Senior Independent Director chairs the meeting. What does it do? Key objective: To lead a formal, rigorous and transparent process for the appointment of new Directors to the Board and its Committees. Responsibilities: To review the composition of the Board including its balance of skills and experience To lead the process for Board appointments and recommend the appointment of new Directors To review the re-appointment of Non-Executive Directors To make recommendations on the composition of the Board s Committees To consider succession for senior executive positions The Committee s terms of reference are reviewed annually and are available on the Governance section of our website at

55 Annual Report and Accounts 2014/15 53 What did the Committee do during the year under review? The Committee meets when necessary and was convened twice during the financial year to consider Board, Committee and Executive appointments, Directors tenure, succession and Board composition. Directors re-appointment and re-election In 2014, the Committee met to consider the re-appointment of Andrew Dougal, Paul Withers and Dennis Millard as Non-Executive Directors and Val Gooding as Non-Executive Chairman of the Board. Following a rigorous review, the Committee recommended to the Board that all three Non-Executive Directors each be reappointed for a term of one year from June 2014, and that the Chairman of the Board be reappointed for an additional three year term 1. Dennis Millard has since retired and Andrew Dougal announced his intention to retire at the end of his current term. All Directors will continue to be considered for annual re-election or appointment at every AGM provided they demonstrate commitment and effective performance. Review of diversity The Nominations Committee recognises the benefits to the Group of diversity in the workforce and in the composition of the Board itself. It is the Company s policy (whether it be at employee or Board level) to make all appointments based on the best candidate for the role regardless of gender or other diversity. In recognition of the benefit of greater female representation at all levels, the Group targets women to make up 30% of management grade employees. Women currently make up 24% of senior management positions and 8% of the senior executive team, while female membership of the Board stands at 13%. The proportion of women at both the executive team and Board level is below target and will continue to be a factor in future appointments. Succession planning Succession planning is a key remit of the Committee and is reviewed regularly for the Board as a whole, the Board Committees and the wider leadership of the organisation. Membership of the Board and Committees was considered as part of the annual evaluation and re-election process in 2014/15. Laurence Bain presents annually to the Board on succession planning for the executive team, ensuring that there is a pipeline of prospective candidates for all senior executive positions. Appointment of Gary Hughes During the year the Nominations Committee recommended the appointment of Gary Hughes as an additional Non- Executive Director. Before starting the search for a new member, the Nominations Committee evaluated the desired qualities for the appointment by reviewing the balance of skills, experience, independence and knowledge of the Board. Given Dennis Millard s stated intention to retire in January 2015, it was agreed that candidates must have the requisite experience (including recent and relevant financial experience) necessary to chair the Audit Committee. Catalyst Advisors (an agency with no connection to the Company) was appointed to help with the search and put forward candidates for interview by Val Gooding and Laurence Bain. Candidates also had the opportunity to meet Paul Withers and other Board members. From the shortlist of interviewed candidates, Gary Hughes was chosen for appointment due to his extensive business and broad non-executive board experience and for his financial acumen. Gary formally joined the Board on 1 November 2014 and attended his first face to face Board meeting in December There is further information on the Company s policy and practices on diversity on page 38 of the Strategic Report. 1 Subject to re-election at the Annual General Meeting in each year.

56 54 Premier Farnell Audit Committee Report Audit Committee Report Gary Hughes (from 1 November 2014, Chairman from 1 February 2015) Who else is on the Committee? -- Dennis Millard (Chairman) to 31 January Andrew Dougal -- Peter Ventress -- Paul Withers Committee Secretary: Steven Webb Gary Hughes is a qualified chartered accountant, with a background in corporate finance, who brings to the role of Chairman of the Committee recent and relevant financial expertise from both his executive and non-executive appointments. Gary is supported by three independent Non-Executive Directors, all of whom have considerable recent financial experience. Further details on the Committee members experience can be found on pages 44 and 45. Other regular attendees at scheduled meetings include the Chief Executive, the Board Chairman, the other Non- Executive Directors, Chief Financial Officer, Head of Internal Audit and lead external audit partner. Committee members regularly take time before or after a meeting, without any Executive Directors or senior management present, to raise any questions and discuss issues with the external auditor or Head of Internal Audit. The Chairman of the Audit Committee meets each of the CFO, Head of Internal Audit and the external auditor separately to review current issues and developments prior to each meeting of the Audit Committee. The Head of Internal Audit reports directly to the Chief Financial Officer for line management purposes and functionally to the Chairman of the Audit Committee. What does it do? Key objective: To ensure that the interests of shareholders are properly protected in relation to financial reporting and internal controls. Responsibilities: To review accounting policies and the integrity and content of the financial statements To monitor disclosure controls and procedures and the Group s internal controls To consider the adequacy and scope of external and internal audits To oversee the appointment and ongoing relationship with the external auditor At the Board s request, to provide advice on whether the Annual Report and Accounts, taken as a whole, is fair balanced and understandable To monitor the objectivity, independence and effectiveness of the external auditor, particularly with regard to the scope and expenditure on non-audit work To review and approve the statements to be included in the Annual Report on internal control and risk management To review and report on the significant issues considered in relation to the financial statements and how these have been addressed

57 Annual Report and Accounts 2014/15 55 The Committee s terms of reference are reviewed annually and are available on the Governance section of our website at What did the Committee do during the year under review? The key activities for the Committee in 2014/15 were: Assessed and approved the audit process In accordance with the Code, the Committee monitored the effectiveness of both the internal audit and external audit functions including the performance of the lead audit partner and Head of Internal Audit. The Committee reviewed and commented on the internal and external audit plans before they were approved. It considered progress during the year, assessing the auditor s principal findings and taking feedback from management involved in the audit process. Having concluded their review in 2014/15, the Committee considers the external auditor to be independent, objective and effective in its role. Accordingly, the Committee intends to recommend to the Board that PricewaterhouseCoopers LLP are proposed for reappointment as the Company s external auditor at the June 2015 Annual General Meeting. The Committee also considers internal audit to be effective in appraising the implementation and monitoring of internal controls and risk management. The Committee plans to put the Group s requirement for audit services out to tender once in each ten year period, in accordance with the Code, FRC guidance and relevant EU legislation requiring mandatory audit tenders for all listed companies. The tender will coincide with the rotation of the lead audit partner which takes place every five years. The next rotation and audit tender is scheduled for 2017/2018. PricewaterhouseCoopers LLP were first appointed as the Group s auditor in Monitored non-audit services The independence and objectivity of the external auditor was also considered by the Committee, as it is each year, with particular regard given to the level of non-audit fees. A formal policy is maintained on the provision of non-audit services which prohibits the provision of services such as financial information systems design and implementation, internal audit outsourcing or legal services and permits tax compliance services and certain audit-related services within defined monetary limits. All other permitted non-audit services are considered on a case by case basis by the Chair of the Audit Committee on behalf of the Committee. The full non-audit services policy is available in the Board Committees section of our website. At each meeting, the Audit Committee received a report on all non-audit services provided and the estimated cost since the last meeting. The Audit Committee monitors these costs in the context of the audit fee for the year, to ensure that the potential to affect auditor independence and objectivity does not arise. The split between audit and non-audit fees for 2014/15 and information on the nature of the non-audit fees incurred is detailed on page 107 of the Consolidated Financial Statements. The Audit Committee has adopted and implemented a Group-wide policy restricting the employment by the Group of former employees of the external auditor. Reviewed the integrity of financial statements In addition to the Committee s responsibility to review the Annual Report at the request of the Board, the Committee also monitors the integrity of all financial statements in the Annual Report and half year results statement and the significant financial reporting judgements contained in them. The Company Secretary reports to the Committee on the proceedings of each Disclosure Committee meeting which reviews the interim and preliminary results announcements following management verification, seeks assurance on management sign-offs and assesses the principal risks and uncertainties facing the business. Further details of the Committee s processes to review the effectiveness of the Group s systems of internal control during the year can be found in Risk management and internal control below. Determined the significant issues affecting the Group The Committee recognises that all financial statements include estimates and judgements by management. The key audit areas are agreed with management and the external auditor as part of the year-end audit planning process. This includes an assessment by management at both a business unit and Group level of the significant areas requiring management judgement. These areas are reviewed with the auditors to ensure that appropriate levels of audit work are completed and the results of this work are reviewed by the Committee. In 2014/15 these areas were: 1. Inventory and inventory valuation Consolidated Group inventories as at the year end were 260.9m. The accounting policy in respect of inventory and the valuation of inventory, is set out in the Accounting Policies note to the Group s financial statements on page 102. The Group s provisioning policy is generally applied on a consistent, systematic basis recognising the level of sales and level of inventory at the period end. The review of this calculation, its accuracy and the appropriateness of the end result with respect to the requirement to provide against slow moving and obsolete inventory was reviewed in detail. The history of inventory write-offs beyond the provision made at the year end is very low, reflecting the operating procedures of the Group and the commercial relationships in place with its supplier partners and, as such, management continues to believe that the systematic application provides a result which is consistent with its judgement on the provision required. The Audit Committee agrees with this assessment and considered, as part of this assessment, the potential impact of a move to a more global operating model and the changing inventory profile for the Group.

58 56 Premier Farnell Audit Committee Report continued 2. Adjusted items and profit and loss treatment In the first and second half the Group reported adjusting items. The details of these adjusted items are set out in note 2 of the financial statements. Management believe that this presentation is consistent with the fair, balanced and understandable requirement and, as such, have presented these items in this way. The Audit Committee agree with this assessment. 3. Tax accounting The Audit Committee has reviewed the tax position of the Group with both management and the auditor. The time lag between the Company s financial statements and the finalisation of tax matters inevitably requires management judgement. The provision made reflects the latest view of the anticipated outcome, as well as the best estimate of the probable outcome, following filing of the tax returns for the relevant financial periods. 4. Going concern The Audit Committee has considered the Going Concern basis assumed within the financial statements. The underlying assumptions, the reasonableness of those assumptions and the comparison of those assumptions versus previous years were all considered as part of the Going Concern review. In addition, this review encompasses a sensitivity analysis to exchange rate fluctuations, among other risks, as well as ranges of potential outcomes versus planned budgetary performance. In forming its view, the Committee considered the range of potential actions available to the Group to improve the cash generation over the coming period. This included an assessment of the robustness of working capital improvement plans, scale of planned capital expenditure and, more broadly, the efficiency of the Group s balance sheet. The year-end position for net debt as well as known funding facilities at year end also impacts this assessment. The Committee agrees with these assumptions and the adoption of the Going Concern basis for the preparation of the financial statements. Although there has been no change in the significant accounting issues affecting the Group this year compared to the prior year, the Committee reviewed other areas of judgement as part of its normal review process. The Committee is satisfied with the judgements in these areas and that sufficient audit work has been undertaken to support management s position in other areas of the financial statements. Reviewed the effectiveness of risk management and internal controls One of the Board s key responsibilities is to satisfy itself that management maintains a system of internal control which provides assurance of effective and efficient operations, internal financial controls and compliance with law and regulation. The Board s consideration of the materiality of financial and other risks to the Group s business and reputation ensures that appropriate controls are in place. Consideration is also given to the relative costs and benefits of implementing specific controls. A full overview of the Group s principal risks, uncertainties and opportunities can be found on pages 24 and 25 of the Strategic Report. Assurance On behalf of the Board, the Audit Committee examines the effectiveness of: the Group s systems of internal control, primarily through approving the internal audit plan and reviewing its findings, reviews of the financial controls for financial reporting of the annual, preliminary and half yearly financial statements and a review of the nature, scope and reports of external audit; the management of risk by reviewing evidence of risk assessment activity and internal audit reports on the process; and any action taken to manage critical risks or to remedy any control failings or weaknesses identified, ensuring these are managed through to closure. The Audit Committee has completed its review of the effectiveness of the Group s systems of internal control for the year under review, which is in compliance with the Turnbull Guidance on Internal Control published by the FRC. It confirms that the necessary action plans to remedy identified weaknesses in internal control are in place and have been throughout the year. Where appropriate, the Board also ensures that necessary actions have been, or are being, taken to remedy or mitigate significant failings or weaknesses identified from the review of effectiveness of internal controls. The Audit Committee confirms that no significant failings or

59 Annual Report and Accounts 2014/15 57 weaknesses were identified as part of the review process. The Group s internal controls over the financial reporting and consolidation processes are designed under the supervision of the Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of the Group s published financial statements for external reporting purposes in accordance with IFRS. Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance and may not prevent or detect all misstatements whether caused by error or fraud. The Group s internal controls over financial reporting and the preparation of consolidated financial information include policies and procedures that provide reasonable assurance that transactions have been recorded and presented accurately. Finance officers of subsidiary businesses of the Group are required to certify that the financial information they have provided as part of the annual consolidation process has been properly prepared and reviewed in accordance with instructions from the Group Finance Department. Management regularly conducts reviews of the internal controls in place in respect of the processes of preparing consolidated financial information and financial reporting. During the year ended 1 February 2015, there were no changes to the internal controls over these processes that have affected, or are reasonably likely to materially affect the level of assurance provided over the reliability of the financial statements. Risk management and internal control system features Risk management system As well as the risks that management identify through the ongoing processes of reporting and performance analysis, the Audit Committee has additional risk identification processes, which include: Risk and control process for identifying, evaluating and managing major business risks. Coordinated by the Head of Internal Audit Internal and external audit reports which comment on controls to manage identified risks and identify new ones A confidential whistle-blowing helpline and an address available for employees to contact the CEO in confidence A quarterly compilation of all contingent liabilities identified by the business. The report is reviewed by the Disclosure Committee and then by the Audit Committee The Tax and Treasury Committee which identifies and manages the Group s risks for tax and treasury and provides implementation updates to the Audit Committee Internal control system The internal controls which provide assurance to the Committee of effective and efficient operations, internal financial controls and compliance with law and regulation include: Formal authorisation process for investments An organisational structure with clearly defined authorities for financial management and maintenance of financial controls The Code of Conduct which outlines the expected standards of business compliance and behaviour. This Code is a formal part of the employee induction process The anti-bribery and corruption ( AB&C ) policies and procedures and dedicated employee The comprehensive financial review cycle where the annual budget is approved by the Board and monthly variances are reviewed against detailed financial and operating plans The Disclosure Committee where senior management review and sign off business unit internal controls, including financial, compliance and operational controls A process of internal control self-assessment coordinated by the Internal Audit team The statement of Directors responsibilities in relation to the preparation of the Annual Report and Accounts is on pages 60 and 61 of the Directors Report.

60 58 Premier Farnell Directors Report The Directors of Premier Farnell plc present their report and the audited financial statements of the Group and Company for the year ended 1 February The Directors Report comprises these pages (58 to 61) and the other sections and pages of the Annual Report crossreferred below which are incorporated by reference. As permitted by legislation, certain disclosures normally included in the Directors Report have instead been integrated into the Strategic Report (pages 2 to 39). These disclosures include information relating to future business developments (references throughout the Strategic Report) and the Group s principal risks and uncertainties (pages 24 and 25). What profit was made during the year? The Group s total operating profit for the financial year was 83.1 million (2013/14: 91.5 million) and its adjusted operating profit was 88.0 million (2013/14: 93.0 million). Current year adjusting items comprise restructuring costs of 5.1 million, a net gain on the disposal of certain US property of 0.3 million and acquisition costs of 0.1 million. Profit attributable to owners of Premier Farnell plc for the financial year to 1 February 2015 was 47.5 million (2013/14: 51.4 million). What final dividend are the Directors recommending? The Directors recommend that a final dividend equivalent to 6.0 pence per ordinary share be paid on 25 June 2015 to those shareholders on the register of members at the close of business on 29 May If this is approved, this will result in a dividend on the ordinary shares for FY14/15 of: Ordinary shares Interim dividend of 4.4p per share paid on 23 October 2014 (2013/14: 4.4p per share) Proposed final dividend of 6.0p per share (2013/14: 6.0p per share) Total ordinary dividend of 10.4p per share (2013/14: 10.4p per share) The Premier Farnell Executive Trust (EBT or Trust) holds ordinary shares in the Company (acquired in the market) in order to meet obligations under the Company s executive share plans. Throughout the year under review, a waiver by the Trust s right to receive dividends on ordinary shares held by it was in place (further details are set out in note 20 (page 126) to the consolidated financial statements). The Trustees of the EBT may vote or abstain from voting shares held in the Trust in any way they see fit. Who are the members of the Board? The names and biographical details of the Directors who are standing for election or re-election at the June 2015 AGM appear on pages 44 and 45. Information relating to Directors interests in the Company s shares is included in the Remuneration Report on page 82. The Directors who held office during the year under review were: Val Gooding Laurence Bain Mark Whiteling Andrew Dougal Gary Hughes (appointed 1 November 2014) Dennis Millard (stood down 31 January 2015) Tom Reddin Peter Ventress Paul Withers Are the Directors indemnified? The Company provided indemnities to each of its Directors during the year ending 1 February 2015 in accordance with the provisions of the Company s Articles of Association, allowing the indemnification of Directors out of the assets of the Company to the extent permitted by law. These indemnities constitute qualifying indemnities for the purposes of the Companies Act 2006 and remain in force at the date of approval of this report without any payment having been made under them. Have the Directors disclosed information to the Company s Auditors? Each of the Directors confirms that, so far as he or she is aware, there is no relevant audit information of which the Company s auditors are unaware and that he or she has taken all steps that he or she ought to have taken as a Director in order to make himself or herself aware of any relevant audit information and to establish that the Company s auditor is aware of that information. Resolutions to reappoint PricewaterhouseCoopers LLP as auditor and to authorise the Directors to determine the auditor s remuneration will be proposed at the forthcoming Annual General Meeting of the Company.

61 Annual Report and Accounts 2014/15 59 What classes of shares does the Company have and do they have any rights or restrictions? The Company s authorised share capital comprises ordinary shares of five pence each in nominal value and cumulative convertible redeemable preference shares of 1 each in nominal value. As at 1 February 2015, the ordinary shares and preference shares represented 85.16% and 14.84% respectively of the Company s total share capital. Details of the Company s issued share capital, including any changes which have taken place during the year under review, are set out in notes 16 (page 115) and 20 (page 123) to the consolidated financial statements. The rights attached to the Company s ordinary shares and its preference shares, in addition to those conferred on their holders by law, are set out in the Company s Articles of Association (the Articles), a copy of which can be obtained on request from the Company Secretary. A summary of the rights attached to the preference shares appears in note 16 to the consolidated financial statements. The Articles contain certain restrictions on the transfer of ordinary and preference shares and on the exercise of voting rights attached to them, including where the Company has exercised its right to prohibit transfer following the omission of their holder or any person interested in them to provide the Company with information requested by it in accordance with Part 22 of the Companies Act Holders of preference shares are entitled to receive notice of but not attend or vote at general meetings of the Company other than in limited circumstances. The preference shares are not classed as equity for the purposes of financial reporting. Does the Company have powers to buy back its own shares? At the forthcoming Annual General Meeting of the Company on 16 June 2015, the Company will seek authority from its shareholders to purchase its ordinary and preference shares. Authorities were previously granted at the Annual General Meeting in 2014 and expire at the close of the forthcoming meeting. The authorities sought will, if granted, empower the Directors to exercise them on behalf of the Company. During the year ended 1 February 2015 the Company did not purchase, acquire or dispose of any ordinary shares. The Company exercised its authority to acquire and subsequently cancel 712,948 cumulative convertible preference shares for a total consideration of 11,442,815. These shares had a nominal value of 712,948 and represented 18.1% of the cumulative convertible redeemable preference shares in issue prior to the purchase. The purchase was considered to be beneficial to the ongoing earnings and cash flow profile of the Group. Further details are set out in note 16 (page 115) to the consolidated financial statements. Are there any significant agreements or agreements to provide compensation upon takeover? There are no agreements between any Group company and any of its employees or any Director of the Company that provide for compensation to be paid to the employee or Director for termination of employment or for loss of office as a consequence of a takeover of the Company, other than provisions that would apply on any termination of employment. The Company s multi-currency bank facilities and its private note placements are subject to provisions allowing the lenders to terminate the facilities and demand repayment following a change of control. Who are the major shareholders and what are their interests in the Company? The table below shows the notifiable voting rights in the Company s ordinary share capital disclosed in accordance with the Financial Conduct Authority s Disclosure and Transparency Rules (DTR5) at 1 February 2015 and any changes up to and including 15 April Company % holding as at 01/02/2015 % holding as at 15/4/2015 M&G 9.21% 9.21% UBS Global Asset 5.13% 5.13% Management J O Hambro Capital 5.08% 5.08% Management Harris Associates Ltd 5.04% 5.04% Baillie Gifford & Co Below 5% Below 5% BlackRock Inc Below 5% Below 5% Newton Investment 4.97% 4.97% Fidelity International (FIL) 4.90% 4.90% Artemis Investment 4.86% 4.86% Schroders plc 4.84% 4.84% Standard Life Investments Limited 4.76% (3.05% Direct and 1.71% Indirect) 4.76% (3.05% Direct and 1.71% Indirect) Old Mutual Global 4.60% 4.60% Investors (UK) Limited Legal & General 4.03% 4.03% Norges Bank 3.92% 3.92%

62 60 Premier Farnell Directors Report continued Is there anything else we should know? Greenhouse gas emissions disclosures on greenhouse gas emissions and environmental matters can be found in the Sustainability Report on page 33. Employees and diversity information about the Company s employees and the Group s policy on diversity can be found on pages 38 to 39 of the Strategic Report. Political donations the Group s policy is not to make contributions to political parties and no donations were made during FY14/15. Group subsidiaries details of the Group s principal trading subsidiaries can be found on page 143 (note D) to the Company s financial statements. Research and development the Group s expenditure on product research and development activities is included on page 106 (note 2) to the consolidated financial statements. Financial Instruments information on the Group s financial risk management objectives and policies and on the exposure of the Group to relevant risks in respect of financial instruments is set out on page 118 (note 19) to the consolidated financial statements. Disclosure of information under Listing Rule information on allotments of shares for cash pursuant to the Group s employee share schemes can be found on page 123 (note 20) to the consolidated financial statements. Publication of unaudited financial information the Company published two Interim Management Statements (15 May 2014 and 14 November 2014) and a trading statement (5 February 2015) containing unaudited financial information relating to the financial year ended 1 February The actual audited figures for the same period are included in the consolidated financial statements pages 92 to 138. Directors Statements Statement of Directors responsibilities The Directors are responsible for preparing the Annual Report, the Directors Remuneration Report and the financial statements in accordance with applicable law and regulations. Under that law the Directors have prepared the consolidated financial statements and Annual Report in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and parent company financial statements in accordance with UK Generally Accepted Accounting Practice (UK GAAP). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period. In preparing these financial statements the Directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state that the consolidated financial statements comply with IFRSs as adopted by the European Union and the parent company financial statements comply with UK GAAP; and prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Group will continue in business. The Directors confirm that they have complied with the above requirements in preparing the financial statements. The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements and the Directors Remuneration Report comply with the Companies Act 2006 and, as regards the consolidated financial statements, article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company s position and performance, business model and strategy.

63 Annual Report and Accounts 2014/15 61 Directors responsibility statement pursuant to DTR 4 Each of the Directors, as listed on pages 44 and 45, confirms that, to the best of his or her knowledge: a. the consolidated financial statements in this report, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU, IFRIC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS, and the Company financial statements in this report which have been prepared in accordance with UK GAAP give a true and fair view of the assets, liabilities, financial position and profit of the Group taken as a whole; and b. the management report (Strategic Report) contained in this Annual Report includes a fair review of the development and performance of the business and the position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties that they face. Going concern The Directors have assessed, in the light of current and anticipated economic conditions, the Group s ability to continue as a going concern, including its solvency and liquidity. The Directors confirm they are satisfied that the Company and the Group have adequate resources to continue in business for the foreseeable future. For this reason, they continue to adopt the going concern basis for preparing the financial statements. By order of the Board Steven Webb Company Secretary Premier Farnell plc Farnell House, Forge Lane Leeds LS12 2NE 24 April 2015

64 62 Premier Farnell Remuneration Report Annual message to shareholders from the Chairman of the Remuneration Committee Dear shareholder In 2014 the Remuneration Committee put its Directors Remuneration Policy (Policy) to a binding shareholder vote at the Company s Annual General Meeting (AGM) for the first time. We were very pleased that the Policy was well received and approved by shareholders and we thank our shareholders for their feedback and support. One year on, the Committee remains satisfied that the Policy continues to fulfil its principal objectives of providing a clear link between performance and reward and attracting, retaining and motivating high-calibre executives with the skills and experience to manage the business and deliver the strategy. We are not, therefore, proposing any changes to the Policy for the coming year. There are, however, a number of changes to practice planned for 2015/16, primarily resulting from the drive to ensure that, in implementing the Policy, we maximise alignment of reward with the achievement of our strategic priorities, while keeping our pay structures as clear and simple as possible. The changes will not increase the Executive Directors remuneration opportunity or expected level of payout and are within our Policy. In this annual statement, I will focus first on what the Committee did in 2014/15 before going on to outline the changes proposed for the year ahead. For ease of reference, a full copy of the Policy approved last year is included with this report (from page 66). Our annual report on the implementation of that Policy during the year under review starts at page 75. What happened to the Directors remuneration in 2014/15? Executives salaries We reviewed the Executives salaries in June 2014 and, in line with the rest of the workforce, increased these by 2.5%. Non-Executives fees These were also reviewed at our June 2014 meeting. Base fees for the Non-Executive Directors were subject to a 2.5% increase, commensurate with changes to salaries across the Group. The fees payable to the Chairman of the Board, our Senior Independent Director and the Chairman of each of the Audit and Remuneration Committees were found to be significantly below median when they were benchmarked across the FTSE250 using a number of data sources. They were increased, accordingly, to bring them in line with market practice, as shown on page 76. Annual bonus payout The primary measure for payments under the FY15 annual bonus plan was operating profit, against which up to 60% of the annual bonus opportunity was measured, with the remaining 40% determined by reference to the achievement of strategic targets for cash-flow, growth in the Group s customer base and gross margin. The Group exceeded the scheme s cut-in for operating profit and cash but did not hit the measures for growth in customer base or gross margin. The payouts under the scheme, in cash and deferred shares, to the Executive Directors were: