Premier Farnell PLC Annual Report 2012/13. Innovation Delivered

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1 Premier Farnell PLC Annual Report 2012/13 Innovation Delivered

2 Key facts INSIDE THIS REPORT: Premier Farnell: Our values 1 Business Model 2 Industry Megatrends 4 Proposition: customers, suppliers 5 Other MDD businesses: CPC & MCM 6 Industrial products division: Akron Brass 7 Chairman s Statement 8 Chief Executive s Statement 10 Operating performance 13 Key Performance Indicators 14 Strategic Focus 1: Enhancing our customer proposition 16 Strategic Focus 2: Our differentiating multichannel proposition 18 Strategic Focus 3: Internationalisation 22 Business Review 24 Risks and uncertainties 30 Annual sustainability report 32 Employees 35 Leadership forums 37 Board of Directors 38 Corporate governance report 40 Directors report 52 Remuneration report 55 Consolidated financial statements 72 Independent Auditors report (consolidated financial statements) 100 Company financial statements 101 Independent Auditors report (Company financial statements) 108 Glossary 109 Shareholder information 110 Historic record Operations in 35 different countries 2m Over 2 million customer contacts 500,000 Products stocked across our regional warehouses >150 Supplying over 150 global Industries 4,400+ Employees Global leader in legislation RoHS, WEEE, REACH

3 Premier Farnell PREMIER FARNELL Our values At Premier Farnell, we believe that our success will be driven by our values: > 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 and > Integrity and trust are fundamental to our culture These values are integral to all that we do and guide and shape our actions as we look to lead in our space within global high service electronics distribution. 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. We support millions of customers, ranging from engineers to purchasing professionals and electronics enthusiasts, through our Marketing and Distribution Division (MDD) while our Industrial Products Division is an innovator in life safety and the world leader in the sale and manufacture of high-performance fire-fighting equipment. Our MDD products range from electronic components to industrial products from over 3,500 leading suppliers, while our innovative new product introduction capability allows us to work closely with key supplier partners to seed the latest technology in the global marketplace quickly through our comprehensive product, marketing and online solutions. This extensive product portfolio combines with our range of services and development software to create a leading offering in our industry, all easily accessible through our differentiating multichannel sales strategy. By interacting with customers in their preferred way, we ensure that we can support their personal needs through our global network of local language transactional websites, our award-winning element14 Community and our more traditional contact centres and local field sales representatives. Whether researching a new technology, designing and producing an electronic product, or looking for parts to repair an existing system, Premier Farnell adds value across the lifecycle of electronic products and makes it easier than ever for customers to do business. 1 Overview Strategic focus Business review Governance Financial statements

4 2 Premier Farnell Business model In our Marketing and Distribution Division (MDD) businesses, we purchase electronic components and related products from leading suppliers around the world. Our customers buy small quantities of components and other related products as well as software and services, attributing significant value to the high level of service and support we provide. 3,500 Trusted suppliers Offering over 500,000 stocked products. How we add value 1: Stock Working with our suppliers and benefitting from our use of sophisticated web analytics and insights from our element14 Community, we identify the broad range of components including niche technology, and other products and services that our customers require. 2: Support Customers require detailed information to ensure purchases meet their technical specifications. Our element14 Community allows engineers to share ideas while its online workspace, the Knode, provides information and access to additional services and solutions. We further support our customers by providing 24/5 technical support from our 200 technical support engineers. Mexico South Carolina 3: Sell Our multichannel approach allows customers to buy through the channel they prefer. Premier Farnell has led the industry through ecommerce innovations like our element14 Community, the Knode and our eprocurement tools such as ibuy which combine with our 48 transactional websites. Through this differentiating ecommerce offering, together with our telesales capability and 620 field sales resources, we make it easy for customers to do business with us. 4: Deliver At the core of our customer proposition is fast and reliable distribution of locally stocked products. Our seven distribution centres located around the globe ship 35,000 packages each day. With the support of our global logistics partners, such as UPS, this allows us to achieve same or next day shipping for 99.9% of the products we sell. AMERICAS Newark element14, MCM 4 countries 5 websites 3 warehouses 260 sales staff 290 call centre staff >2 million Valued customers Together with our linecard of leading supplier partners we bring together the latest products, services and development solutions, which are all connected to our innovative online engineering community, element14. Through our community, purchasers and engineers can access peers and experts, a wide range of independent technical information and proprietary tools. See more here:

5 Premier Farnell 3 How we add value to our suppliers By meeting our customers needs for the latest technologies, we can offer suppliers the opportunity to seed new products to an extensive, global customer base across a wide range of industry segments. Our multichannel sales strategy, including the award-winning element14 Community, provides suppliers with a differentiating route to market and access to unparalleled Leeds Liège customer insights. Combining with our increasing capability in the early stages of the design lifecycle and new product introduction, such as through Embest Technology, our design services business, and CadSoft, our software design business, we are a valued partner to key suppliers in the global electronics market. Shanghai Resource 4,400 Group employees 620 MDD field sales staff 600 MDD Contact Centre staff 48 transactional websites, 33 in local languages Technical Support Tier 1 centres in each region Live chat 24/5 200 global technical support engineers Overview Strategic focus Business review Governance Financial statements Singapore EUROPE Farnell element14, CPC 23 countries 32 websites 3 warehouses 250 sales staff 250 call centre staff Asia Pacific Element 14 9 countries 11 websites including Mandarin language 3 warehouses 110 sales staff 70 contact centre staff Sydney Our customers Our customers, from over 150 industries, range from design engineers at the beginning of the electronics lifecycle to maintenance and repair engineers at its end. Meeting the distinct, high service requirements of customers from engineers to purchasing professionals, educators, students and hobbyists, our proposition adds value through the electronics lifecycle.

6 4 Premier Farnell Industry megatrends The global electronics distribution market includes both high service distribution, where Premier Farnell operates, providing a wide range of products with fast delivery, and high volume distributors which service the scheduled manufacturing of electronic components. The high service distribution market is highly fragmented with around 20% of the total available market served by Premier Farnell and three other global players. The remaining 80% of the high service market is served by small and medium-sized local competitors. 1 The pervasion of electronics leads to structural design engineering market growth Increased innovation More engineers needed Increasing number of graduates 6% long term growth New environmental legislation adds further pressure Pervasion of electronics is driving innovation Increased competitiveness Reduced cost/time to market As users demand greater functionality, improved aesthetics and both new applications and new versions of existing products, the electronics lifecycle is getting shorter, driving market growth across our industry. Increased competition in the marketplace adds to the pressure on design engineers to reduce the time and cost to market of their new products. In addition, new environmental legislation increases the need for greener, lower energy products to replace the products of the past. This presents design engineers with new opportunities for innovation but also drives growth across the market as maintenance and repair engineers and purchasing professionals must ensure compliance with the regulations. Every year more than a million electronics engineers graduate globally, to meet the world s ever evolving need for electronics. But they are not the only new participants fuelling the rate of innovation: enthusiasts and hobbyists are coming together through the web to invent and modify new applications. Together these participants increase the pace of electronics innovation and create a greater number of applications for electronics, ensuring that the accelerating pervasion of electronics continues. Reducing time to market We add value to customers by providing access to a broad range of products available for immediate shipment which accelerates their manufacturing and design processes and reduces their inventory requirements. In addition we provide the technical information and data customers need to make their purchasing decisions faster, further enabled through our element14 Community and the Knode as we strive to meet the personal needs of individual engineers. 2 Electronics design and production is increasingly global with emerging markets playing a greater role Premier Farnell is well positioned to benefit from this trend. Invested in Asia Pacific infrastructure ahead of the sales curve Krakow contact centre increases our focus on Eastern Europe Innovative web capability is attractive to technically minded customers in fast developing economies 3 Suppliers looking to enter the emerging markets do so more efficiently through global distributors Our trusted, high service global customer proposition is a competitive advantage over smaller local competitors globally Consolidation of the supply chain will favour the larger, global high service distributors Premier Farnell s offering uniquely positions us as a trusted source for engineers and a truly global partner for suppliers. Customers want a single source of products and design solutions Customers increasingly need trusted, branded products; more stringent regulation in both established and emerging markets adds to this requirement Suppliers want an efficient channel to high service markets globally Suppliers want access to insights from the global marketplace Suppliers want a distributor that they can rely on to partner with them from pre-launch to production

7 Premier Farnell We have been working very closely with Premier Farnell now for a number of years and in particular to promote our latest product ranges into their existing design engineering customer base and also to find new customers for our products. After franchising Newark element14 for the North American market in December 2012, we now take that mission onto a global framework during I have every confidence that we will build considerably on the good work already achieved. Proposition: Customers Suppliers What makes our customer proposition different? Our infrastructure and customer offering provides a competitive advantage to drive profitable, organic growth through market share gains. With the increasing importance customers place on access to the latest technology, a single source of trusted information and a reliable, global supply chain when selecting their distribution partners, our ability to meet customers key requirements is truly differentiating. What do customers want? How do we meet their needs? What is differentiating about our proposition? Great product availability 500,000 products; 3,500 suppliers World-class global linecard What makes our supplier proposition different? By meeting our customers needs for the latest technologies, we offer suppliers the opportunity to seed new products to an extensive customer base across multiple industry segments with wide geographic reach. Premier Farnell offers suppliers a unique distribution channel which combines multichannel service, including our industry leading element14 Community, alongside our increasing offering of design solutions required at the beginning of the product lifecycle. This unique approach is causing our suppliers to partner with us ever more closely. They value our ability to launch new products to market, ensuring that their components are specified in the earliest phases of design and consequently will be required in large volumes when that design reaches production. Fast delivery 99.9% orders shipped same or next day Strong local presence; global influence Trusted, quality product information Community Knode 24/5 support team Unique element14 Community 5 Support throughout the design process End to End Service concept to production Regional multichannel sales capability Embest CadSoft Eagle element14 Community The Knode As a result, our design engineering expertise is highly attractive to them. Our acquisition of Embest Technology, our design services subsidiary, has enhanced our new product introduction capability and allows us to partner with suppliers even more closely. Our suppliers appreciate our increasing interaction with customers through the web. They benefit from insightful data on emerging technologies, evolving customer trends and our innovative global esupplier strategy that is aligned to engineers needs for rich web-centric content. By supporting the high service needs of customers who often order in relatively small volumes, we offer our suppliers an efficient channel to the global electronics market across a broad range of industry segments. Overview Strategic focus Business review Governance Financial statements Ken Steel Sales Director, Panasonic

8 6 Premier Farnell Other MDD businesses cpc & mcm Our other distribution businesses, CPC and MCM, supply electrical and electronic ranges, such as audio visual and security products, to a broad range of customers in their home markets of the United Kingdom and the United States, respectively. Complementing our core brands, CPC and MCM service customers often working in auxiliary roles in the electronics industry, such as in IT departments, or who are technically-minded consumers such as enthusiasts or hobbyists who develop and modify electronics in their spare time. I have used CPC for about 15 years now. The catalogue of items, from tools to electrical spares, gadgets to office equipment is exactly what I need all in one place. Staff on the phones talk to you as a friend and when I use the website to order, all the information I need is there to make my order simple and worry free. The goods always arrive properly and safely packed. Jeff Bull, CPC customer Based in the UK, CPC is a leading business-to-business and business-to-consumer distributor of electrical and related products. Established in 1967, CPC has over 45 years experience serving a large and diverse customer base. Broad product range: CPC stocks over 90,000 products from more than 2,100 brands, adding in excess of 7,500 new lines in 2012/13. With its focus to provide customers with an outstanding product range combined with exceptional value for money, all delivered by a reliable, efficient and friendly service, CPC customers can satisfy many of their day-to-day requirements from a single source. Value-add service: CPC customers benefit from more than just a wide range of products and fast, reliable and free UK delivery. We provide customers with a multichannel sales and technical support leveraging the Group s online capability, catalogues and contact centre resource. Our products: CPC stock over 100,000 products from over 1,200 leading manufacturers. Adding over 10,000 new lines every year, CPC buyers are constantly searching the globe on our customers behalf to find the latest products at the very best prices available. See more here: MCM had the items I needed and delivered them on time. The website was easy to navigate and searching for the right part was easy. MCM customer feedback Based in the US, MCM Electronics is a broadline distributor of electronic components, equipment and accessories for the consumer electronics industry. MCM stocks over 33,000 products from more than 550 suppliers including computer hardware and peripherals, security and surveillance, wire and cable, audio and video equipment, tools and test equipment. Collaboration with CPC: MCM has benefitted from closer collaboration with CPC, leveraging best working practices and introducing successful new products. Like CPC, a focus on top-quality customer service, including technical support through a range of channels, helps make MCM s proposition a trusted source for customers across its home market. See more here:

9 Premier Farnell Industrial products DIVISION akron Brass 7 Overview Strategic focus Excellent performance, uncompromising reliability and after sales service is why we buy Akron Brass products. Buddy Caldwell Captain/Fleet Manager, Charlotte Fire Department Akron Brass is a life safety business Akron Brass is a life safety business and a global leader in the sale and manufacture and of high-performance fire-fighting equipment. The business designs and develops products and systems that help save lives and protect assets. Akron Brass has further diversified in these market segments: Marine, Petrochemical, Mining, Utility, and Aviation. History: Since its inception in 1918, Akron Brass has been an industry leader in fluid dynamics including handheld nozzles, monitors and valves. The company has invested in Innovation including new products such as LED lighting products for global applications and new monitors and nozzles for specific applications for customers in fast growing China, India and Middle East markets. In addition, the Weldon brand provides a complete offering of lighting devices and customised electrical control solutions for specialty vehicle markets including school buses and ambulances. From warning lights to multiplexing, Akron Brass s Weldon division offers innovative solutions. Global reach: Headquartered in Wooster, Ohio, in the United States, the Akron Brass footprint includes manufacturing facilities in Columbus, Ohio and Washington, Illinois and sales offices in Beijing, China and Dubai, UAE. With customers in 83 countries around the world and over 30% of 2012/13 sales coming from outside the United States, Akron Brass has developed into a truly global organisation. See more here: Business review Governance Financial statements Bus and Pupil Transportation Akron Brass equips buses with state-of-the-art LED lighting and electronic solutions for student safety. Fire and Rescue High-performance fire fighting equipment improves the safety and efficiency of personnel.

10 8 Premier Farnell Chairman s statement Whilst remaining responsive to the challenging conditions in our markets this year, Premier Farnell has been focused on its two principal strategic goals: the continuous improvement of our high service proposition for our customers and suppliers, alongside the ongoing evolution of our business to support the long term interests of all our stakeholders. Financial performance Although there was stabilisation this year from the volatile economic conditions seen in our 2011/12 financial year, short term business confidence remains fragile. Premier Farnell s strategic focus on optimising business performance has allowed us to deliver its financial results this year. The Group managed gross margins in line with the market conditions, while active management of costs provided some protection to the business s profitability. This enabled the Group to achieve an industry leading operating margin of 10.1%. Despite these actions, the weaker sales environment impacted the Group s adjusted operating profit, which declined 7.8% year-on-year. Although market conditions have been challenging, our financial position remains robust. The Group has good liquidity and strong free cash flow, with cash conversion at 125.3% and net debt reducing by 7.5 million in the year to million. The Board is confident that the Group s balance sheet provides a stable and long term funding platform for the business as we enter this new financial year. Valerie Gooding, CBE Non-Executive Chairman Premier Farnell s strategic focus on optimising business performance has allowed us to deliver its financial results this year. In considering this year s performance, together with both the level of earnings and cash requirements of the Group, the Board is recommending a final dividend of 6.0 pence per share. Subject to approval at the Annual General Meeting (AGM) on 18 June 2013, this will bring the full year dividend to 10.4 pence per share, unchanged from last year. Strategic progress Over the past six years, through variable market conditions, Premier Farnell s strategy has allowed the business to make progress for the benefit of its stakeholders. The Board constantly reviews the effectiveness of our strategy and our performance to consider how we can optimise the business to deliver the greatest benefit to our stakeholders. With a new Executive leadership team in place and with the support of the Global Executive Team, the Board has looked to ensure that the strategy has evolved in order to maximise our performance and capitalise on the areas of greatest opportunity in the changing world in which we live. This strategy is centred on three core pillars: First, we will focus on customer centric segments of the electronics market with even greater emphasis on listening to our customers needs and partnering closely with our suppliers as together they are fundamental to all that we do.

11 Premier Farnell Secondly, we will continue to evolve our differentiating multichannel capability to tailor our customer relationships to their needs and continue to enhance the efficiency of our model. Finally, we will continue to internationalise our model with focus on the fastest growing emerging markets. These focus areas, which are described in more detail on pages 16 to 23, will ensure that no matter where our customers are based around the world, design engineers, academics, purchasing professionals or customers conducting maintenance and repair on existing electronics will have even more reasons to choose Premier Farnell. The Board believes that through the implementation of its strategic vision the Group is well placed to leverage its expertise and infrastructure to make further progress in all markets in the years ahead. Measuring our performance As part of the development of our strategy, we have refined the Key Performance Indicators (KPIs) by which we believe the business should be measured through the economic cycles. These metrics underpin our focus on optimising our business s performance to drive growth, efficiency, profitability and cash flow the areas that we believe matter most to all our stakeholders. The Board believes that the success of Premier Farnell s strategy should be measured on a long term view, while managed in relation to market conditions to optimise performance. Following consultation with stakeholders, the Company will move from quarterly to half year reporting, in line with the spirit of the Kay Review and reflecting wider UK market practice. We continue to encourage an open and transparent dialogue with all our stakeholders. In his review, starting on page 10, Laurence Bain, Chief Executive Officer (CEO) explains the changes in more detail while our performance against our Key Performance Indicators (KPIs) is outlined on pages 14 and 15 of this report. Governance and the Board During the course of the year, the Board was pleased to appoint Laurence Bain and Mark Whiteling as CEO and Chief Financial Officer (CFO), respectively. Laurence and Mark bring a wealth of experience of the electronics industry to their roles and their knowledge of Premier Farnell and its stakeholders has enabled an exceptionally smooth transition period. Having joined the Group in 2002 as Chief Operating Officer (COO), Laurence has been a Board member since 2003 while Mark was Premier Farnell s CFO from 2006 to During this time, Laurence and Mark held key roles in developing the Company s strategy and worked closely in its implementation. Together, they are well placed to continue Premier Farnell s strategic evolution to optimise profitable growth. Mark and Laurence are supported by a strong Global Executive Team (GET) which meets regularly and enhances the business s collaborative approach. Members of the GET are mentored by Non-Executive Board members, demonstrating the Group s open and inclusive approach. Further information on the GET is provided on page 37. The Board is grateful to Harriet Green and Nicholas Cadbury, previously CEO and CFO respectively, for the contributions they made to Premier Farnell. 9 As Chairman, it is my role to lead the Board and ensure its effectiveness. The Board has a full schedule of meetings, presentations, training sessions, papers and time spent one to one between the Executives and the Non-Executive Directors to ensure that the Board functions effectively, stays informed and knows the business and its people in depth. The breadth of issues addressed by the Board this year is illustrated on page 42. In addition, Non-Executive Directors have conducted site visits to eight global locations around our businesses, including my visits to Italy, China, Singapore and our Distribution Centres in the US and Belgium. Whilst undertaking these visits, I have continued to be impressed by the culture of innovation that exists across the Group as employees work together to achieve our goal of being a high-performing, customer focused organisation. This year, the Board appointed an independent party to evaluate the Board s effectiveness as a high performing Board, in line with the requirements of the Corporate Governance Code. The insights gained, which are already enriching the Board, are detailed in the Corporate Governance report on page 44. Diversity As a leader in business diversity with two European awards this past year, we continue to recognise the benefits of diversity in the workforce and, while we will continue to make all appointments based on the best candidate for the role, our goal is for women to make up 30% of management grade employees. With women representing 27% of the combined GET and Board population, Premier Farnell is well on its way to achieving this goal. As a global business, we recognise that it is not just gender diversity that supports the strength and future success of the business and we remain focused on achieving the right level of diversity whether related to ethnicity, gender, sexual orientation, creed or culture. Employees This year we have refreshed the core values that underpin our strategy and guide our behaviour and we have embedded them throughout the organisation. The details of our core values are provided on page 1 of this Report. Throughout this challenging year, our 4,400 employees have shown a remarkable focus in driving towards their targets and goals and I would like to thank them for their efforts. Their commitment to putting our core values into action can be seen throughout the business, uniting our teams around the globe and shaping every aspect of how we work together for the benefit of all our stakeholders. Outlook Although the macro-economic outlook continues to be uncertain in the near term, we remain positive on the Group s ability to implement our strategic vision and optimise the business s performance to grow our active customer base and market share and drive our financial performance in the year ahead. Under the guidance of the Board, strong executive leadership and with an enhanced strategic focus, I believe Premier Farnell is well positioned to capitalise on its extensive opportunities throughout the coming economic cycles to the benefit of our shareholders, employees, customers and suppliers. Valerie Gooding, CBE Chairman Overview Strategic focus Business review Governance Financial statements

12 10 Premier Farnell Chief executive s statement Uncertain macroeconomic conditions continued to provide a difficult backdrop to the business landscape in 2012/13. Despite this, Premier Farnell remained focused on optimising business performance through balanced management of sales, gross margin and costs in line with the market conditions, whilst continuing to implement our strategic vision. This resulted in the business delivering an industry leading operating margin of 10.1%, restricting our year-on-year decline in adjusted operating profit to 7.8% and delivering strong cash performance with operating cash flow conversion of 125.3%. Premier Farnell is a business in evolution, well on its way to transforming from a catalogue company to a global multichannel, high service distributor at the forefront of innovation in its industry. In this short interview Q&A session, Laurence Bain, CEO, reflects on Premier Farnell s progress this year and how the business will capitalise on its future opportunities. This is your first report as CEO; what does Premier Farnell mean to you? I am extremely proud to have the opportunity to lead the Group through the next stages in its development. Having already spent ten years here as COO, I know what this business has to offer and what it is capable of delivering in the future. It s why I am so passionate about the business and excited as we implement our strategic vision to maximise the opportunities ahead. Laurence Bain Chief Executive Officer Throughout the organisation and in every region, Premier Farnell has exceptionally talented people working together in a culture of trust, integrity and innovation. By continuing to adhere to these values and putting customers and suppliers at the heart of all we do, I am confident that our business is well positioned to implement its strategy, optimise its performance through the economic cycles and deliver returns for our stakeholders. How would you describe the past year for Premier Farnell? This year was a year of evolution for Premier Farnell and I was appointed CEO in June Since then I have looked to ensure we have a strong global leadership team in place, and a more efficient organisational structure. In November 2012 I was delighted to welcome Mark Whiteling back to the Company as CFO. With a closely aligned Global Executive Team (GET), I now believe the structure is in place to lead the business through the next steps of its evolution and capitalise on the significant opportunities we have. 2012/13 was a challenging year as our business continued to be impacted by the weakness in the global electronic and industrial markets. Throughout much of the year, global manufacturing Purchasing Managers Indices (PMIs) have been in contraction and the electronics segment has been negatively affected, leading to greater competition within our marketplace. Against this backdrop, we have sought to optimise our overall financial

13 Premier Farnell 11 Measuring our performance As our strategy evolves to optimise the performance of our business, we have refined our key performance indicators to enable us to measure our success. In our external metrics we have increased our focus on the areas that matter most for our stakeholders growth, efficiency, profitability and cash flow while internally, we have reviewed our metrics to align them to our objectives and to facilitate optimal operational performance. Key Performance Indicator Achieved in FY13 Growth Active customer growth 4% 1.3% Sales per day growth 6% -2.8% Emerging market growth 10% 7.5% (including Embest) Efficiency % of MDD sales from ecommerce 70% 56.8% Return on net operating assets >30% 34.6% Profitability Operating margin 10%-12% 10.1% Cash flow Free cash flow as a % of sales 6% through the cycle 6.1% More detail on the evolution of our KPIs and our performance against them is contained on pages 14 and 15. performance in line with the current market conditions, while delivering strong cash generation and continuing to make solid progress as we implement our strategic vision. Mark s Business Review starting on page 24 provides more detail. Our customers are at the heart of what we do and central to our vision of the future of high service distribution. We add value to customers by making the achievement of their objectives easier. That means helping them find the right, trusted products and solutions, along with the information and services that they require, and providing fast delivery through our logistics partners. Our customers are at the heart of what we do and central to our vision of the future of high service distribution. Being easy to do business with is critical to that vision. By combining field sales resources, contact centres, technical resources and innovative ecommerce channels, we enable our customers to interact with us in the way they prefer. As described in more detail on page 19, we have continued to develop our multichannel capability this year. Our new telesales and telemarketing centre in Krakow, Poland is yet another important development, providing enhanced, consistent service levels to customers across Europe while also delivering greater operational efficiencies to our business. Meanwhile our award winning element14 Community has gone from strength to strength this year. Receiving more than 8.1 million visits in the past 12 months, it now has over 150,000 registered members, a number that continues to increase by over 5,000 per month. We have also made positive progress towards our vision of being the global source for engineering solutions. Our acquisition of Embest, our design services subsidiary based in China, enhanced our offering of the development tools and development kits which are vital to engineers early in their design process. This acquisition is already providing us with significant benefits as we deliver a differentiating proposition to both our customers and suppliers. But there is much to do and many further opportunities for us to leverage our global talents and resources as we look to optimise our business and lead the high service distribution industry through future economic cycles. Which areas of the Group s strategy have you developed? Over recent years, the business has focused on driving its strategic vision and this has delivered returns for our stakeholders. Our five year total shareholder return is 87%, higher than our FTSE250 benchmark which was 57% over the same period. While this represents solid progress against a volatile and uncertain economic backdrop, we are not satisfied. Together with the Board and the wider management team, we have updated our strategy to position our business for growth, while remaining focused on delivering efficiencies from our model to optimise financial performance across the economic cycles. Our strategy is simple and centred on three core pillars: focus on customer centric segments of the electronics market, providing a differentiating multichannel environment and internationalising our business model, especially in the faster growing emerging markets. Overview Strategic focus Business review Governance Financial statements Innovation remains the lifeblood of Premier Farnell. In the second quarter, the industry leading element14 Community played a vital role as we launched the Raspberry Pi, the revolutionary, credit card-sized single board computer. The launch attracted phenomenal interest from engineers, hobbyists and the media and by the end of the year we had sold 600,000 Raspberry Pi units. The success of this product continues through the next generation 512mb version and as we increase our range of exclusive accessory products.

14 12 Premier Farnell CEO Statement 1. We will look to ensure our proposition enables us to service customers varying requirements and win business across the high service electronics market The foundation of our approach is to get very close and listen to our customers in order to ensure that our proposition meets their requirements and is differentiating. Customer insight will drive our proposition in every way from our product offering through to our interaction with customers and suppliers. This enhanced customer focus enables us to better target and develop our proposition to provide further differentiation and drive active customer base growth, a key measurement of success for our business. The enhancements we have been making are already delivering results. We continue to see progress in our customer service metrics, with our Net Promoter Score (our internal customer satisfaction metric) increasing through the year and our active customer base increased by 1.3% year-on-year, excluding the benefit of more than 200,000 new customers from Raspberry Pi. This progress in our active customer base is encouraging as it represents the attractiveness of our proposition and indicates market share growth. 2. Our business will continue to develop its unique multichannel offering and extend its ecommerce capability to meet the requirements of participants in the electronics space Our ability to tailor our relationship with customers is enabled by our differentiating multichannel capability. We combine commerce and community though extensive and efficient traditional channels such as our 620 field sales and 610 contact centre resources with innovative ecommerce interfaces including the award-winning element14 Community. Being multichannel is more than becoming a web business. While we will seek to benefit from increased efficiencies as transactional processes move online and become automated, we will develop the marketing capability of our channels to optimise customer experience and provide our suppliers with an exceptional route to the global marketplace. We are making good progress in the implementation of this strategy. Following the opening of our new contact centre in Krakow, consolidating our European telesales and telemarketing resources, and with the roll-out of our New Web Platform to be launched in 2013/14, we have the foundation on which to build a truly differentiating multichannel proposition. 3. We will drive growth in markets where our share is small and by entering new emerging geographies Premier Farnell is now a global enterprise with 80% of sales from outside of the UK. But this is just the start. The opportunity to benefit from the growth in electronics in emerging economies and to increase share in the fragmented high service distribution marketplace remains exciting. To go faster, we will focus our resource in emerging markets such as China, India and Eastern Europe where significant structural growth in the electronics markets is expected in the years ahead. Apart from benefitting customers in these territories through our differentiating proposition, our key suppliers will have their products introduced into the electronics lifecycle, providing them with a route to higher growth markets. To date, the business has made progress by growing our emerging markets to 9.3% of our MDD revenues by the fourth quarter of 2012/13. As we leverage our global infrastructure and tailor our service to the local markets, we will expand our model as we seek to deliver our strategic target of 10% annualised sales growth in emerging markets. Together these three pillars of our strategy will help to increase our active customer base by attracting new customers and driving customer retention rates which will allow us to continue to develop our business, increase efficiency and deliver optimal financial performance for our stakeholders in the future. What does the future hold for Premier Farnell? Economic conditions have been unpredictable over the past year and Premier Farnell is a business with limited forward order visibility but, as a result of the strategic progress we have made, the outlook for Premier Farnell is positive. We are well positioned to capitalise on the growth opportunities that exist and will seek to optimise our business performance through the cycles. We will continually assess our strategic progress and look to evolve this where appropriate. Our commitment to meeting the needs of all our targeted customers across the high service electronics space means that we will invest further to support this aim in the year ahead as we look to drive our growth metrics. Over the coming year we will enhance our global proposition through the incremental investment of circa 20 million of inventory, while developing our systems and continuing to enhance our differentiating multichannel sales strategy. Our focus on driving efficiencies in our model remains unchanged, as we seek to benefit from the further simplification of our business structures and leverage our regional capabilities across the globe. As such, I remain confident in our ability to implement our strategic vision whilst optimising our financial performance. This makes us positive for the Group s opportunities in the year ahead and beyond. Laurence Bain Chief Executive Officer

15 Premier Farnell Operating performance Group Sales Total Adjusted (3) Profit before tax 2012/13: 952.0m 2011/12: 973.1m -2.8% (2) 2012/13: 75.7m 2011/12: 88.5m -14.5% Operating profit Adjusted (3) Total 2012/13: 70.6m 2011/12: 104.6m -32.5% Dividend per share 2012/13: 96.0m 2011/12: 107.3m -7.8% (4) 2012/13: 10.4p 2011/12: 10.4p Total 2012/13: 90.9m 2011/12: 123.4m -24.7% (4) Operating margin Adjusted (3) Adjusted (3) Earnings per share 2012/13: 10.1% 2011/12: 11.0% 2012/13: 14.8p 2011/12: 17.4p -14.9% Total 2012/13: 9.5% 2011/12: 12.7% 2012/13: 13.6p 2011/12: 21.2p -35.8% Division Marketing and Distribution Division (MDD) Basic Industrial Products Division (IPD) 13 Overview Strategic focus Business review Governance Financial statements 2012/ / / /12 Sales Operating profit Adjusted Total Sales Operating profit Adjusted Total Our Marketing and Distribution Division operates predominantly in the high service, time critical sector of the electronic components distribution market. Countries of operation: Austria, Australia, Belgium, Brazil, Canada, China, Czech Republic, Denmark, Estonia, Finland, France, Germany, Netherlands, Hong Kong, Hungary, India, Israel, Italy, Malaysia, Mexico, Norway, Poland, Romania, Singapore, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, United Kingdom, United States. Our Industrial Products Division comprises Akron Brass, a market leader in the manufacture and sale of high-performance industrial and fire-fighting equipment. Although predominantly in North America, Akron Brass continues to successfully expand its sales efforts into international markets and develop a focused approach towards new customer sectors in domestic markets. Akron Brass countries of operation: Australia, Canada, China, France, Germany, Singapore, United Arab Emirates, United Kingdom, United States. Notes (1) Unless otherwise stated, 2011/12 refers to the 52 week period ended 29 January 2012, 2012/13 refers to the 53 week period ended 3 February 2013, and 2013/14 refers to the 52 week period ending 2 February (2) Sales growth is based on sales per day for continuing businesses at constant exchange rates and for like periods. (3) In 2012/13, adjusted operating profit, profit before tax, and earnings per share exclude restructuring costs of 13.9m and acquisition costs of 0.4m, partly offset by a one-off net gain of 9.2m arising from the buyout of pension rights relating to the Group s US defined benefit pension plan. In 2011/12, adjusted operating profit, profit before tax and earnings per share, excludes the net pre-tax gain of 18.9m from business disposals and excludes restructuring costs of 2.8m. Adjusted numbers have been given in order to show underlying performance and to facilitate year-on-year comparison. References to financial results refer to adjusted numbers unless otherwise stated. (4) Growth in operating profit is calculated at constant exchange rates, unless otherwise stated.

16 14 Premier Farnell Key performance indicators This year, as we have continued to develop our strategic progress, we have also refined our key performance indicators (KPIs) to reflect our focus. As described in the CEO report on page 11, our KPIs provide a framework that underpins our aim of optimising the business s performance across the economic cycles as we seek to deliver attractive total shareholder returns. These metrics do not represent aspirational goals; instead they reflect how management seek to run the business as we focus on growth, efficiency, profitability and cash flow to optimise operational performance and implement our strategic vision. Optimising our performance in 2012/13 Like many companies, we were not immune to weakness in the industrial and technology markets this year. Consequently our growth metrics finished below our targeted level, although positive growth in our active customer base provides us with confidence as it demonstrates that our proposition remains attractive to our customers and indicates that we continue to win market share. Despite the tough short term growth conditions, our progress against our other metrics demonstrates our focus on optimising our business and implementing our strategy. We delivered year-on-year progress against our ecommerce KPI and achieved our target for return on net operating assets. Our profitability goal of operating margin within a band of 10% 12% was achieved, as we optimise performance through the cycle, while our cash performance was strong, with the Group meeting our free cash flow to sales target of 6%.

17 Premier Farnell 15 Growth Active customer base growth of 4% Efficiency Total 2010/ / / Increasing our number of active customers demonstrates the attractiveness of our proposition and future growth prospects as it determines how well we are growing our business through attracting new customers and taking market share, while also retaining our existing customers. It provides stakeholders with a more accurate short term measure of the health of our business than our sales per day metric across the business cycles. We measure active customers as customers that have transacted with us within the past six months only. 2012/13 Performance Our MDD active customer base has grown 1.3% year-on-year. This performance comes despite the weaker sales growth environment and gives us confidence in the attractiveness of our proposition. This growth in our active customer base excludes the new customers that we have added through sales of Raspberry Pi and associated products as we ensure that the metric remains a transparent short term measure of the health of our business. Sales via ecommerce channels of 70% Total 2008/ / / / / Sales per day growth of 6% Total 2008/ / / / / We target accelerated sales growth over the economic cycles through structural growth in our targeted customer base, market share growth and developing our business in the world s fastest growing territories. We measure sales per day on a constant exchange rate basis. Whilst we recognise that our business is linked to the economic cycles and that our performance will not consistently achieve our targeted level on a short term basis, we believe that our significant growth opportunities make 6% an achievable through-the-cycle aim. 2012/13 Performance Global electronics markets continued to be challenging this year as the economic environment remained uncertain. The Semiconductor Industry Association (SIA) reported year-on-year sales declines in nine out of the twelve months in our financial year, with Europe declining in every month, while Purchasing Managers Indices (PMI) for the manufacturing sector also reported contraction for the majority of the year. Against this backdrop, our sales per day declined 2.8% year-on-year though activity levels remained stable through the year within our seasonally adjusted profile. Profitability Operating margin of 10% to 12% Total 2008/ / / / / Emerging markets growth 10% The Group will continue to develop our business internationally, focusing on the fastest growing territories such as China, India and Eastern Europe. We expect to grow in these countries at rates that exceed our Group growth targets, through the economic cycles. 2012/13 Performance Developing markets were not unscathed from the slowdown in the global electronics markets this year. Despite this, our Emerging Markets businesses continued to demonstrate faster growth than the rest of the Group, up 7.5% year-on-year and accounting for 9.3% of MDD sales by the fourth quarter. Excluding our acquisition of Embest, our Emerging Markets grew by 3.7% in 2012/13. Cash flow Free cash flow to sales ratio of 6% Total 2010/ / / Total 2008/ / / / / Overview Strategic focus Business review Governance Financial statements We will continue to measure the strategic progress that we are making in developing our ecommerce proposition within our differentiating multichannel strategy. As each interaction is increasingly targeted in a way that leverages our marketing relationship, customers choose to transact with us through their preferred, more efficient ecommerce channels. We continue to target 70% of sales in our MDD businesses through online channels. 2012/13 Performance Sales via ecommerce this year accounted for 56.8% of total MDD sales, achieving 58.0% for the fourth quarter as the business continues to develop ecommerce penetration towards the Group s target of 70%. Regionally, ecommerce closed the year representing 75.5% and 46.3% of fourth quarter sales in Europe and Asia Pacific, respectively, and 41.3% of fourth quarter sales in North America. The Group targets an operating margin percentage to ensure that profitability is optimised in line with the market conditions. We have removed our previous target of gross margin stability, instead continuing to manage gross margin line with market conditions. Our operating margin target is reduced to 10% to 12% as we seek to optimise overall performance through the cycle by managing costs and gross margin in tandem and maximising top line growth as we grow share in our targeted markets and segments. 2012/13 Performance The Group demonstrated a resilient, industry leading operating margin performance of 10.1%, in line with our revised targeted range. Despite weaker market conditions and product mix impacting gross margin, operating margin was protected through strategic cost actions. We remain committed to generating cash flow performance and will continue to target 6% free cash flow to sales over the cycle. 2012/13 Performance Full year free cash flow as a percentage of sales was strong at 6.1%, reaching our target, as the Group optimised cash performance in line with the market environment throughout the year. Return on net operating assets >30% Total 2008/ / / / / The effective and efficient investment of our shareholders funds is a critical overall measure of the success of our strategy and we continue to target a return on net operating assets of greater than 30% for the Group. 2012/13 Performance In 2012/13 the Group s return on net operating assets was 34.6%. This achieved our goal of >30% for the third year running and is testament to the optimisation of our business, despite challenging market conditions.

18 16 Premier Farnell Strategic Focus 1 Enhancing OUR customer proposition 99.9% OUR DISTRIBUTION CENTRES SHIP 99.9% OF ORDERS SAME OR NEXT DAY Premier Farnell has established itself as a key partner for many electronic design engineering customers as they develop the next generation of technology and for Maintenance, Repair and Operations (MRO) engineers, especially in our targeted industry segments such as robotics, oil and gas and 24/7 utilities. Now we are enhancing our proposition to meet customers requirements across the electronics lifecycle through continued focus on delivering the three fundamental elements of high service product availability, fast delivery and the information to make the right product selection decision and by enhancing our capabilities as we add value to both customers and suppliers through our expertise, new product introductions, additional services and innovative solutions. Delivering high service 1. Product availability Our customers require a wide range of products from different suppliers to complete their projects. Our linecard is truly world-class with over 500,000 product lines from 3,500 suppliers in our distribution businesses. New suppliers include technology leaders such as ARM which this year chose to expand its partnership with us to encompass Europe, Middle East and Africa following the initiation of our successful partnership in North America last year. We are increasingly working with suppliers at the earliest stages of the design cycle as a strategic partner to launch and seed their latest products. Meanwhile, our range of over 50,000 own brand products offer customers exceptional quality at value prices in key commodity areas. Through effective inventory management and by working closely with our supplier partners, our distribution centres are able to ship 99.9% of orders same or next day. 2. Fast delivery With ever increasing time pressure to deliver their projects, our customers around the world expect fast and reliable delivery of their products. However, as their purchases are often required in small quantities, it is inefficient for our supplier partners to meet their needs. Having an efficient distribution capability is at the heart of the high service model and Premier Farnell s nine distribution centres spread around the regions combine to ship 35,000 packages per day and through logistics partnerships with companies such as UPS, we achieve 99.7% shipping accuracy. 50,000 own BRAND products Our range of over 50,000 own brand products offer customers exceptional quality at value prices in key commodity areas. 3. Trusted product information With hundreds of thousands of products available, customers have a broad range of options so it is critical that they make the right, informed decision in order that their purchases meet the technical specifications in their brief. This aspect of the design decision-making process is becoming even more vital, especially as the regulatory environment develops across our markets. For example the Restriction of Hazardous Substances (RoHs) legislation was extended this year, impacting exporters to European markets.

19 Premier Farnell Premier Farnell has been a market leader in providing information and support to customers through innovations such as the element14 Community, the Knode and technical product information sheets available on the transactional websites, as well as 24/5 technical support from our 200 in-house engineering resources. At the cutting edge of technology We have led the industry with our innovative approach to the design engineering segment. For example, we launched the first community for design engineers, element14, in 2008/09 and this innovation was further enhanced by the launch of the Knode in 2011/12 to provide customers with an online workspace and knowledge centre vital in the very early stages of the design process. From the Knode, customers can access our ever increasing range of solutions for embedded system designs such as our CadSoft EAGLE Computer Aided Design software, a vast array of development tools and kits including those manufactured by our latest acquisition, Embest, or printed circuit boards (PCB) from partners such as Screaming Circuits. These services make us a strategic partner to design engineering customers from the earliest stages of their design cycle, facilitating their product development on every step from research to production. World-class new product introductions RASPBERRY PI The credit card sized computer developed to put computer programming back at the heart of engineers, launched to phenomenal interest from engineers and hobbyists alike Electronic design engineers rely on us to deliver the latest technologies from both established and emerging suppliers. Suppliers and customers alike have benefitted from our innovative approach to online channels and our capability to offer fast, web-based new product introduction initiatives, enabled by our unique, industry leading element14 Community. Our acquisition of Embest in the second quarter this year has strengthened our new product introduction offering, allowing us to partner even more closely with suppliers as they bring the latest technology to market. As suppliers develop their new products, Embest can manufacture the development tools and kits which are critical to the successful product launch while the interest and engagement generated in the element14 Community can ensure its success. This combination of the element14 Community and Embest makes us uniquely positioned as a partner at the earliest stages of the design cycle. One such partnership with Freescale in the launch of its Kinetis L microcontrollers was recognised by the supplier through an award for Global Design Engineering Solutions at the bi-annual Electronica Trade Fair this year. In just the first five months following the launch, over 20,000 customers had viewed the Freedom board content on the element14 Community, leading to over 3,700 sales of the product to customers around the world. 17 Geoff Lees, Senior Vice President and General Manager Microcontrollers at Freescale, said: The launch of the new Kinetis L series microcontrollers has been a huge success with Premier Farnell and its operating companies across the world. When you look for a partner it is more than just straightforward distributions it is all the other add-ons and customer solutions that make Premier Farnell stand out. Raspberry Pi The element14 Community played a key role in another very successful product launch this year. The Raspberry Pi, the credit card sized computer developed to put computer programming back at the heart of engineers, launched to phenomenal interest from engineers and hobbyists alike. In the first 15 minutes after launch our websites received over ½ million hits as customers flocked to order from us and by January 2013, Premier Farnell had sold 600,000 Raspberry Pi units. The Community then provided a nurturing and customer service role over the subsequent months. There were videos from the popular Ben Heck show and Raspberry Pi founder, Ebon Upton, while Community members had over 900 online conversations regarding the product. This gave us the platform to continue to interact with our customers in the face of inventory shortages from the product s unprecedented demand. Hobbyists and educational customers the engineers of tomorrow have really taken the Raspberry Pi to heart and have loved talking about their achievements on the Community and a wider social media sphere. We have supported these customers with the launch of a double-memory version of the Pi, a growing range of accessory products such as the Gertboard, PiFace, WiPi, Pi-View and beyond the Pi with pre-mounting services from Adafruit and open-source technologies from Arduino. With over 200,000 new customers attracted to Premier Farnell s brands through the launch of Raspberry Pi, we have an exciting opportunity to leverage our relationships even further in the years ahead. Overview Strategic focus Business review Governance Financial statements

20 18 Premier Farnell Strategic Focus 2 Our differentiating Multichannel Proposition 48 TRANSACTIONAl websites, 33 local languages Helping simplify our customers purchasing decisions is central to the high service value-add inherent in our model. Our multichannel proposition seamlessly combines traditional field sales and contact centre channels with a leading-edge ecommerce offering. This means that our customers can choose how they want to interact with us at different points in their transactional process as we optimise the customer experience by tailoring our relationship to meet each customers needs. For our suppliers, our multichannel approach allows them to significantly expand the footprint of both new and existing products across the breadth of our customer base, while our online channels provide key suppliers with feedback and data from customers. Our multichannel proposition also has a significant role to play in optimising our operational performance. Being multichannel enables us to realise the benefit from interacting through more efficient online channels and reduce inefficient practices as we increase our focus on activities that add value to our customers. The changing nature of traditional channels Globally, we have over 620 field salespeople who manage relationships with our larger customers and target accounts, providing a local touch point to meet customers needs. They help customers to interact with us in a tailored way, including through more efficient channels such as the contact centres and through ecommerce channels to meet their personal needs. For example, a large customer might have a regular review with a field sales person, a dedicated contact person at a call centre providing ongoing support, and an integrated eprocurement system for day to day orders across the engineering team it s this powerful combination of channels that gives us a competitive advantage over an online-only relationship. Telesales and TElEMARkETINg CENTRE in krakow, PolAND Krakow is geographically positioned where Eastern meets Western Europe and has an excellent reputation for customer service.

21 Premier Farnell Our contact centres play a critical role in optimising efficiency and customer service, providing support for electronics professionals around the world. The centres are based in each region in Cleveland for North America, in Shanghai, Singapore and Sydney in Asia Pacific while our newly established best in class call centre in Krakow, Poland, provides Europe s outbound telesales and telemarketing activity. Beyond providing a cost efficient structure, operating from central call centres enables us to develop best practice and core skills in our customer facing staff. This provides customers with a highly targeted service which is further enhanced as we leverage the expertise of our 200 technical support engineers who provide 24/5 support as well as access to industry experts and key suppliers on our element14 Community. Krakow contact centre Customers across Europe have long benefitted from our commitment to make business easier through our unique multichannel combination of field sales, inbound and outbound contact centre resource and cutting edge ecommerce channels. But this year, our capability took a significant step forward with the opening of our new telesales and telemarketing centre in Krakow, Poland. Though it is our most strategically advanced region, the European market is a significant opportunity for Premier Farnell. The high service electronics distribution market remains very fragmented and this potential for market share growth combines with the exciting structural development of the industrial markets in Eastern Europe. Krakow is geographically positioned where Eastern meets Western Europe and has an excellent reputation for customer service, making it the ideal location to establish a telesales and telemarketing team to reach out to customers across the continent. Formally opened in October 2012, Farnell element14 has built a highly skilled, 120-strong, multi-cultural team representing 24 different European nationalities. As a single centre, Krakow delivers greater operational efficiencies and customer service benefits due to standardised training and development programmes. Yet the team s diversity has meant that we have retained the local touch as customers in all of our markets across Europe still benefit from a relationship with a local language speaker. Today, after a transition period which included an intensive training period to ensure that customers across Europe receive an excellent level of service, the Krakow outbound contact centre is fully operational and delivering the expected benefits to our customer and supplier proposition. 80 million page views Around the world we have a total of 48 transactional websites, 33 of which are in local languages and these websites receive on average 80 million page views each quarter. A unique combination of innovative, ecommerce interfaces 19 We have led the industry with web innovation, providing great information through the combination of the transactional sites, the element14 Community and our online design workspace, the Knode as well as ibuy, a workflow management tool, and integrated eprocurement solutions for our larger customers. Our presence as leading innovator in our industry is an important feature of our supplier proposition. Suppliers value the Community and the opportunity to participate in discussions with customers, and as a way to disseminate relevant, targeted information and a fast route to a global market. This is only achievable through an offering like ours where commerce, content and community converge. With 56.8% of 2012/13 sales coming via ecommerce channels and 75.5% in our most strategically advanced region, Europe, customers are increasingly seeking to benefit from the efficiencies and valued information that these channels provide. Together these elements of our web proposition enable us to provide customers with: Easy access to the most up to date and technically advanced design data, legislative information and product details Sophisticated search results for customers to find what they need, quickly and easily Instant access to discussions with engineering experts and industry peers An expansive array of tools to simplify engineering and buying processes. Around the world we have a total of 48 transactional websites, 33 of which are in local languages and these websites receive on average 80 million page views each quarter. Overview Strategic focus Business review Governance Financial statements

22 20 Premier Farnell Strategic Focus 2 Our Multichannel Proposition 20m ElEMENT14 RECEIvED close TO 20 million PAge views >70 THE COMMUNITY HOSTED over 70 webinars element14 Community: a landmark year Our transactional websites are supported by the element14 Community which itself received close to 20 million page views this year and now has over 150,000 members, with over 5,000 new members joining every month. Engineers from all over the world interact and innovate on the Community. This year participation levels increased by more than 60% year-on-year. The ever popular Ben Heck Expert pages attracted more than 320,000 views, while video content on the Community had over 130,000 views. The Community is also contributing to our commercial success with total orders generated by element14 up by eight times over the prior year. As an authority for new technology and engineering information, the Community hosted over 70 webinars in 2012/13, double last year s number. These sessions covered a range of topics and were often held in partnership with trusted suppliers, including Analog Devices and Honeywell, while suppliers and engineers alike benefitted from the 23 new product roadtests held on the Community this year. 320,000 views of THE BEN HECk show The ever popular Ben Heck Expert pages attracted more than 320,000 views, while video content on the Community had over 130,000 views.

23 Premier Farnell European legislation also saw some significant changes in 2012/13 as RoHS2 came into force. The Community once again acted as a central hub to support our design engineer customers. This included a RoHS2 step by step guide, 12 mini CE New Approach guides and 2 CE videos. The Legislation ask the experts have received and answered over 330 questions via the Community over the year. In addition to this, the Community has supported the updating of key legislation content by funding three new step by step guides (RoHS2, REACH and Conflict Minerals). As a result of its progress, the Community received three prestigious awards in 2012/13 recognising its position as a leader in the social media space. Forrester Research recognised us with the Forrester Groundswell Award for Business-to-Business Supporting and we picked up the Jive Award in the Engage Customers category. Meanwhile, The Make Magazine awards acknowledged the Community s success in launching the Raspberry Pi, presenting us with the Makey Award for Best Education/ Outreach ahead of Intel, Autodesk and NASA. The Knode: an online workspace for design engineers As they work on their new electronic applications, design engineers require technical information to specify the right products for their projects. Launched in June 2011, our knowledge base for design engineers, the Knode, was further improved and integrated into the Community this year. The Knode allows engineers to work, store key information and provides them with access to our range of services beyond products including Computer Aided Design software such as CadSoft EAGLE or the development kits vital in the early stages of an engineer s design cycle made by Embest. eprocurement solutions Design engineering customers are not the only beneficiaries of our online proposition; our eprocurement tools such as ibuy, launched in 2010/11, give purchasing professionals a flexible and customisable way to make purchasing processes more efficient, from product selection through to approval and placement of orders. ibuy s popularity continues to increase in all regions with growth in Asia Pacific of over 90% as customers benefit from workflow management tools and online cost centre and management reporting functionality. For larger customers who require system to system links, our integrated eprocurement solutions offer a seamless experience and the opportunity for real efficiency savings. New global web platform 21 Our innovation on the web continues at pace. We have invested in developing our new single, global web platform which we will implement in the year ahead, the next step change in our online proposition. This platform gives us the foundation to continue to lead on the web, with significant enhancements in user experience and new customer tools which will lead to better conversion rates as customers find the right products quickly and transact more easily. By moving to a single global platform, our implementation of future web enhancements will be more efficient. This foundation will enable us to drive our leadership in online innovation faster, providing customers with a differentiating online experience. In addition, as we roll-out the platform on a global basis, our online customer proposition in emerging markets will be significantly enhanced. Brand journey Our journey to become a single global brand for our core MDD businesses continued to pick up pace this year. In Europe we moved to a dual brand Farnell element14 to build brand recognition before completing our transition. In North America, Newark element14 saw improved awareness and understanding for the brand change among customers and within the market. In Asia Pacific we saw strong improvements in search and awareness for element14. We have also connected our message globally so that all three of our regional brands use a consistent platform to describe our value and our evolution. At its core, the messaging reflects our desire to make doing business easier than ever and drive customer acquisition through the attractiveness of our proposition. Through our truly multichannel approach built on the foundation of an innovative ecommerce offering, we are combining commerce and community to evolve the shape and economics of our business while supporting our customers all over the globe in the way they prefer. Overview Strategic focus Business review Governance Financial statements

24 22 Premier Farnell Strategic Focus 3 Internationalisation In a world of ever greater interconnectivity, where the design and production of a single new electronic product frequently takes place across multiple countries and continents, engineers increasingly expect a global source they can partner with in the high service distribution space. 80% Of sales from OUTSIDE the Uk 9.3% Of q4 mdd sales FROM emerging MARkETS Customers trust us to ship nine million packages each year with shipping accuracy of 99.7% from our nine distribution centres around the world. Meanwhile our multichannel model, combining 620 sales staff regional contact centres and an innovative ecommerce offering, has enabled sales from outside the UK to account for 80% of our global business. Global presence Premier Farnell s distribution business has over two million customers spread across the global electronics markets. The developed economies of Europe and North America remain the global centres of the industrial markets and naturally these remain our most important geographies combining to make up over 85% of our MDD revenues. Yet, even within these developed economies, the marketplace remains fragmented with an estimated 80% of the global market serviced by small, regional competitors with limited customer propositions. We have an exciting opportunity to grow our active customer base and increase share of spend through our proposition across electronics, from design engineers to purchasers to maintenance engineers. Developing markets Electronics today is a global industry. Emerging economies such as Eastern Europe, South East Asia, China, India and Brazil continue to play a greater role in its development from design to production. Over the past six years, Premier Farnell has focused on increasing our position in these markets through organic, entrepreneurial growth, supplemented by small strategic acquisitions such as Hynetics in India in 2007/08 and Microdis in Eastern Europe in 2008/09. Following this year s acquisition of Embest, the manufacturer of development tools and kits based in China, emerging markets made up 9.3% of MDD sales by the fourth quarter. As one of just four global high service distributors, Premier Farnell is positioned to capitalise on the potential structural growth opportunities in these markets. Two megatrends will help us achieve our objectives: First, as global electronic component manufacturers look to enter the market they need a trusted partner and an efficient supply chain and with our exciting supplier proposition they increasingly choose to work with us. Secondly, as economies develop, they place greater emphasis on quality leading to greater regulation. This drives a greater need for a trusted source of branded products which Premier Farnell provides.

25 Premier Farnell Global Business, Local Service Customers want a personal service from a global distributor and through our multichannel model we tailor our offering to the local marketplace. Our new web platform will represent an important step forward in online capability and provides a foundation for the future. The platform will enable faster roll-out of new functionality, capturing our experience on a global basis and inputs from customers and suppliers. In addition, the new platform will simplify the localisation of content to make user experience more tailored to each region s customer base and allow us to roll-out our web proposition faster in targeted emerging markets. Our advanced web capability is fundamental to our differentiated proposition in the developing markets as it enables us to provide customers with a tailored, local language experience in an efficient way. The information that we can supply through the web, including legislative and regulatory details increasingly vital to design success, combined with our element14 Community, helps us to increase our active customer base in our territories and provides a conduit for suppliers to reach out to customers. 240,000 products We stock over 240,000 products in Asia Pacific, in particular in our regional headquarters in Singapore, which is supported by hubs in Sydney and Shanghai. 23 Yet our approach is more than just the web. Customers benefit from our joined up, multichannel approach including field sales and contact centres and we tailor our approach to meet the requirement of customers in the local market. For example, in India, we service customers primarily through field sales and our contact centres, with the support of our technical centre in Bangalore. Focus on Eastern Europe Industrial businesses across Europe are relying to an ever increasing extent on Eastern Europe as a manufacturing hub. The first global, high service distributor to focus on this growth market in 2006, Premier Farnell has benefitted from the growth in electronics across a wide range of end customer segments, resulting in a three year CAGR of 43.9%. This year, we have increased the focus in the region by establishing a best in class contact centre in Krakow, Poland, to run our outbound telesales and telemarketing activity across Europe in 22 local languages, including the Eastern European languages. This centre combined with field sales, customer service support, ecommerce and marketing activity, plus the ability for customers to buy from us in local currency, creates the ideal platform to build market share in the region. Asia Pacific Proposition As a high service distributor, our emphasis is on meeting customers requirements through our product portfolio and distribution capability to make their work easier. Today, we stock over 240,000 products in the region, in particular in our regional headquarters in Singapore, which is supported by hubs in Sydney and Shanghai. Over the past year, we have continued to develop our proposition in the region by adding in excess of 50,000 new lines and customers in Asia also benefit from our wider global product offering. We continue to develop the attractiveness of our proposition and customer experience through our multichannel sales strategy, while taking steps to improve our efficiency in the region which will benefit customers through increased reliability and quality. In China, for example, we are upgrading our systems to bring this territory in line with our other businesses. As our element14 brand name becomes synonymous with high service, we remain confident that our business remains ideally positioned to leverage the extensive growth opportunities in Asia Pacific and across the wider global electronics markets. Overview Strategic focus Business review Governance Financial statements 50,000 new lines Over the past year, we have continued to develop our proposition in the region by adding in excess of 50,000 new lines and customers in Asia also benefit from our wider global product offering.

26 24 Premier Farnell Business review Conditions over the past year have been challenging as the uncertain economic environment impacted our end markets. Throughout much of the year, global manufacturing PMIs have been in contraction with weakness across all regions and the electronics segment has been significantly affected, leading to greater competition within our marketplace. As a consequence, our overall financial performance was weaker than the prior year although the cash performance remained strong while our actions to manage gross margin and costs ensured that our industry leading operating margin was maintained. Our focus on meeting our customers high service requirements remained constant and management actions to drive operational efficiencies, combined with our strategic progress this year, positions the business for future profitable growth. As Laurence describes in his CEO statement on pages 10 to 12, we have developed our strategy to focus on the optimisation of our operating performance through the economic cycles. As part of this process, we have refined our KPIs to target growth, efficiency, profitability and cash flow the areas that matter most to our shareholders. A detailed review of the KPIs is contained on pages 14 and 15. Key Financials Mark Whiteling Chief Financial Officer 2012/13 (a) (53 weeks) 2011/12 (a) (52 weeks) Growth (b) Total revenue % Adjusted operating profit (c) % Total operating profit % Adjusted profit before tax (c) % Total profit before taxation % Adjusted earnings per share (c) 14.8p 17.4p 14.9% Basic earnings per share 13.6p 21.2p 35.8% Free cash flow (d) % Notes: (a) The financial year ended 3 February 2013 (2012/13) was a 53 week accounting period and the financial year ended 29 January 2012 (2011/12) was a 52 week accounting period. (b) In order to reflect underlying business performance, sales growth is based on sales per day for continuing businesses at constant exchange rates and for like periods, and growth in operating profit is calculated at constant exchange rates, unless otherwise stated. References to financial results refer to adjusted numbers unless otherwise stated (see note (c) below). (c) Current year adjusted operating profit, adjusted profit before tax, and adjusted earnings per share in the table above exclude first quarter restructuring costs of 7.5 million, second quarter acquisition costs of 0.4 million related to the purchase of the entire share capital of Shenzhen Embest Technology Co Ltd (Embest), and fourth quarter restructuring costs of 6.4 million offset by a one-off net gain of 9.2 million arising from the buyout of pension rights relating to the Group s US defined benefit pension plan. In the prior year, adjusted operating profit, adjusted profit before tax and adjusted earnings per share, excluded the net pre-tax gain of 18.9 million from business disposals and excluded restructuring costs of 2.8 million. (d) Free cash flow comprises total cash generated from operations, excluding cash flows related to restructuring, less net capital expenditure, interest, preference dividends and tax payments. Free cash flow also excludes net proceeds from the sale of businesses. NOTE: This Business Review is prepared in accordance with the requirements of the Companies Act 2006 and is framed around the principles and guidelines for Operating and Financial Reviews published in the UK by the Accounting Standards Board. Its purpose is to provide information which is significant to understanding the development, performance and position of the Group, the principal risks and uncertainties facing the Group and to include the Key Performance Indicators (KPIs) used by the Group to monitor this development, performance and position. Additionally, the Business Review is intended to highlight trends, where identifiable, in factors which affect the development, performance and position of the Group.

27 Premier Farnell 25 Divisional Analysis Revenue 2012/13 (53 weeks) 2011/12 (52 weeks) Growth UK % Rest of Europe % APAC % MDD Europe & APAC % MDD Americas % MDD Other % MDD Total % IPD Division % Group % Adjusted Operating Profit/Operating Margin 2012/13 (53 weeks) MDD Europe & APAC % MDD Americas % MDD Other % MDD Total % IPD Division % 2011/12 (52 weeks) % % % % % Head office costs (13.4) (13.8) Group % % Growth 7.6% 20.2% 14.0% 9.4% 17.8% 7.8% Notes: The above current year results have been adjusted to exclude the following items: 1. Restructuring costs of 13.9 million ( 10.7 million MDD Europe and Asia Pacific, 1.6 million MDD Americas, 0.1 million IPD, 1.5 million Head Office). 2. Costs relating to the acquisition of Embest of 0.4 million (MDD Europe and Asia Pacific). 3. One-off accounting gain of 9.2 million following the offer to buy out deferred members from the Group s US defined benefit pension scheme (MDD Americas 6.9 million, MDD Other 0.5 million, IPD 0.9 million, Head Office 0.9 million). Group Sales Group sales for the financial year were million (2011/12: million). This reflects a year-on-year sales decline of 2.8%, based on sales per day for continuing businesses at constant exchange rates. Strong performances by our Other Distribution Businesses and the Industrial Products Division were offset by declines in our main MDD businesses as a result of the challenging global electronics market. Marketing and Distribution Division (MDD) Whilst sales grew 1.5% in 2011/12, the slowdown in the electronics markets led to a decline in MDD sales of 3.6% in 2012/13. Yet through focus on the fundamentals of high service distribution, whilst further developing our global proposition to meet our targeted customers changing requirements, our MDD business delivered growth in its active customer base of 1.3%, demonstrating continued market share gains and giving us confidence in our future growth opportunities. The MDD business also saw continued progress in the development of our multichannel sales strategy. In June 2012, we announced the opening of our new pan-european contact centre in Krakow, Poland. This centre provides us with a single hub for our outbound telemarketing and telesales across Europe, enhancing the service we provide to customers in 22 languages. ecommerce continues to play a central role in our multichannel approach and accounted for 56.8% of all our main MDD regions sales this year, up 1.8 percentage points on the prior year, and reached 58.0% by the fourth quarter. We will continue to develop our online proposition to maintain our leadership in ecommerce by implementing a new web platform in the first half of the new financial year. The element14 Community is the largest and most vibrant of its kind in our industry with over 150,000 users and close to 20 million page views in the past 12 months. It had a landmark year, as described on page 20, and continues to play an important role in the development of our online proposition for customers and suppliers alike. The Raspberry Pi minicomputer was a major success in all regions for MDD customers leading to global sales of over 14 million since its launch in the second quarter of the financial year. We continue to extend our offering of exclusive ancillary products both to design engineering customers, who are using the boards for specific applications, and to the engineers of tomorrow through our more consumer-focused, CPC and MCM businesses. We expect strong demand for the Raspberry Pi and our exclusive range of ancillary products to continue across these strategically important customer groups. While this will continue to have an impact on gross margin, it will provide an ongoing source of significant new customer contacts. Market conditions were weak in many Asian economies throughout the year, exemplified by the manufacturing PMIs for China which indicated contraction for 14 of the past 18 months prior to year end. Despite this backdrop, Premier Farnell continued to make strategic progress in the internationalisation of its business model. In June 2012, we completed our acquisition of Shenzhen Embest Technology Co. Ltd (Embest), a technology company focusing on the design, development and marketing of embedded development tools, reference designs and engineering design services based in China a significant strategic addition not just to our Asia Pacific business but to the Group s proposition in the early stages of the design cycle. With the addition of Embest to the Group, emerging markets represented 9.3% of MDD sales by the fourth quarter, and grew 8.1% on the prior year. MDD Europe and Asia Pacific Continued macro-economic uncertainty led to a slowdown in industrial markets in Europe and Asia Pacific throughout the past year. As a consequence, sales in our MDD Europe and Asia Pacific region declined by 3.4%. As market conditions weakened, our markets became more competitive, especially in Europe. This had an impact on sales and gross margin as we managed to market conditions and developed initiatives to support customer needs. As a consequence MDD Europe and Asia Pacific s operating margin declined by 1.3 percentage points to 14.7%. Our performance in the United Kingdom has displayed remarkable resilience in the face of difficult conditions through this economic cycle. Against challenging comparators, UK sales declined by 5.3% to 116.3m. This compares to the data from the Association of Franchised Distributors of Electronic Components (AFDEC) which reported a sales decline of 12.6% for the 12 months to January Overview Strategic focus Business review Governance Financial statements

28 26 Premier Farnell Business review Macroeconomic concerns continued to dominate the European markets throughout the financial year with Eurozone manufacturing PMIs indicating contraction for the 18 consecutive months prior to our year end. Against this backdrop, sales performance in the Rest of Europe has remained resilient, declining just 4.1% against the prior year. Our developing Eastern European business continues to see strong growth, up 2.6% over the prior year, resulting in a three year CAGR of 43.9%, representing considerable success in this element of our internationalisation strategy. Although our most strategically advanced region, Europe continues to make further strategic progress. The opening of our telesales and telemarketing centre in Krakow was a significant step in our multichannel sales strategy, enabling operational efficiencies and enhancements to customer lifecycle management programmes while ecommerce continues to develop even further and exited the year at 75.5% of Europe s business, above our Group target. Asia Pacific remains one of our strategic value driving opportunities due to the combination of the major emerging economies led by China and India with rapidly developing electronics markets and the significant market share opportunities in the region. Over the past year, market conditions have been challenging in Asia Pacific as reflected by manufacturing PMI data for China and Australia which signalled contraction for 9 and 12 months of the year, respectively. Together, these markets account for 60% of our sales in the Asia Pacific region. Despite this backdrop, Asia Pacific delivered growth of 3.2% year-on-year as it benefitted from the acquisition of Embest and strategic initiatives to drive performance implemented by its new leadership team. Excluding Embest, Asia Pacific sales declined slightly by 1.1%. MDD Americas MDD Americas saw a full year sales decline of 6.2% in 2012/13, albeit continuing to make strategic progress in a testing environment characterised by customer cautiousness, particularly in the electronic design segment as businesses restricted capital expenditure in research and development. The reduced sales performance and its impact on operational leverage, combined with lower gross margin as electronics markets became more challenging, led to a decline of 1.4 percentage points in operating margin to 7.1%. Management is intently focused on executing strategic initiatives to improve business performance in the region. This includes enhancements to our proposition to customers in targeted segments of the high service electronics market. The region has taken action to improve marketing and customer experience and is strengthening the management team at the contact centre to improve its performance through better quoting processes and increased telemarketing activity. This combines with the implementation of targeted sales plans, including online marketing campaigns, to drive customer acquisition and better customer lifecycle management. Exiting the year, ecommerce accounted for 41.3% of MDD Americas sales, a material increase from 18.5% four years ago representing continued progression towards our strategic aim of 70%. The region continues to develop its online proposition, which will be enhanced by the roll-out of the new web platform in 2013/14. Other MDD Businesses Both CPC and MCM predominantly serve the consumer electronics markets in the UK and North America, respectively. Against a very challenging market backdrop, the performance for these two businesses demonstrates significant strategic progress, with sales up 5.5% year-onyear with operating margin up 0.5 percentage points to 9.9%. ecommerce accounted for 55.1% of sales in the fourth quarter, with web sales growing 18.8% year-on-year. Market conditions in the UK electrical and electronic equipment and accessories market continued to be challenging throughout the year. Despite this, CPC achieved sales growth of 5.8%. The business s strong value proposition combined with focus on global purchasing opportunities and the development of the web sales channel contributed to the business s growth. During the year, over 7,500 new products were added to the CPC product range, enhancing both its branded and private label product offerings. Marketing continues to focus on a multichannel approach with a combination of ecommerce marketing, direct mail and catalogue production. MCM has continued its transformation to a web focused business reducing reliance on larger account customers and has benefitted from increased collaboration with CPC. Despite market conditions remaining tough, MCM delivered sales growth of 4.7% as its enhanced customer offering with close to 15,000 new products, while the combination of traditional and ecommerce marketing delivered active customer growth of 18.6%. With increased collaboration between CPC and MCM, the businesses have achieved this performance through strong customer acquisition enabled by enhancements to their product propositions, marketing materials and online channels. Industrial Products Division Akron Brass Akron Brass is a life safety business and the market-leader in the manufacture and sale of high performance fire-fighting equipment for fire truck manufacturers, public fire services and industrial facilities. Its products are designed to improve the safety and efficiency of personnel and equipment engaged in the suppression of fire and also includes lighting and electrical control solutions. It sells through its own field sales force and through distributors to customers around the world. Akron Brass has a significant share of the North American market and is continuing to give focus to the development of international markets whilst broadening its product range and reach into new industrial markets at home and abroad. This strategy has reduced reliance on the key US markets and international sales represented 33.7% of all sales by the fourth quarter with significant progression in China, the Middle East and South America. Domestic sales in the US are focused either directly or indirectly on government spending. The economic environment continues to impact significantly on these markets. However, the strength of the Akron Brass brand globally has delivered sales growth of 8.1% in the year and return on sales of 16.5%, as our investment in new products and the development of international markets mitigated the weakness in its US markets.

29 Premier Farnell Profitability Gross margin Managing our gross margin in line with the competitive environment and in a way that best supports our customers requirements is of great importance to our operational execution. In 2012/13 gross margin declined 0.9 percentage points year-on-year to 38.7% as a consequence of heightened competition arising as a result of the challenging economic environment and cautious customer behaviour which resulted in a decline in average order values, increasing freight charges as a percentage of sales. In addition, the success of our strategically important but lower margin Raspberry Pi product, as well as adverse foreign exchange movements, also impacted gross margin for the year. The Group will continue to manage gross margin in line with the market conditions as it seeks to optimise operating performance. Costs and Adjusting Items Adjusted net operating expenses were reduced by 5.5 million on the prior year ( 3.7 million at constant exchange rates) with costs as a percentage of sales reduced by 0.1 percentage points, at constant exchange rates, to 28.6% for the full year. The Group continues to manage its cost base both strategically, as we continue to simplify our organisation by taking advantage of the regional resources within our global model and the efficiencies arising from increased ecommerce activity, and tactically, in response to sales volumes as we focus on optimising business performance. The ecommerce efficiencies that we can benefit from include our implementation of one-touch order processing; whereby orders placed via e-channels are processed automatically until they are ready to be picked in the warehouse. Through the use of technology such as Optical Character Recognition and advanced telephony to automate our transactional processes, we can improve our service efficiency and reduce costs by cutting down the time it takes to get orders picked and packed, giving us further opportunities to remove infrastructure cost. In 2012/13, the Group opened a new centre of excellence in Krakow which consolidated outbound telesales and telemarketing activity across Europe in a single location. As well as facilitating cost efficiencies, this allows us to achieve a consistently high level of service for customers across the region. Restructuring costs of 7.5 million were incurred in the first quarter of the financial year, relating primarily to the establishment of the Krakow centre of excellence. Early in the fourth quarter of 2012/13, the Group took actions to generate annualised cost savings of 4.0 million and this was supplemented by additional cost actions later in the quarter that will generate further annualised savings of 2.4 million. The combination of these cost actions reflected a total reduction in headcount of 90 which, together with other decisions taken as the Group continues to re-align its focus on areas of greatest opportunity, drive efficiency of its global operations and optimise its performance, resulted in a combined restructuring cost in the fourth quarter of 6.4 million, to give total restructuring costs for the financial year of 13.9 million. Offsetting restructuring costs in the year was a one-off gain of 9.2 million arising from the buyout of the pension rights of deferred members of the Group s US defined benefit pension plan, which reduced the Group s US pension liability by a similar amount and which will also reduce the future balance sheet risk from the US Plan. The net of the restructuring costs and one-off pension gain, together with costs of 0.4 million incurred as part of the Embest acquisition, comprising 5.1 million, have been disclosed separately on the face of the income statement as adjusting items due to their size and nature. 27 Operating Profit/Operating Margin Adjusted operating profit was 96.0 million (2011/12: million) representing a year-on-year decline of 7.8% at constant exchange rates or 9.5% after adjusting for the extra week. Total operating profit was 90.9 million, reflecting a net cost from adjusting items of 5.1 million (2011/12: million, after reflecting a net gain from adjusting items of 16.1 million), resulting in a year-on-year decline of 24.7%. The Group has delivered industry leading return on sales throughout the period since our strategy began by focusing on implementing our strategy and managing gross margins and costs effectively. Despite the ongoing market weakness this year, the Group delivered full year return on sales of 10.1%, down 0.9 percentage points on the prior year as a result of this year s lower gross margin and the impact of operational leverage in the slower sales environment. A one cent movement in the exchange rate between the US dollar and sterling impacts the Group s operating profit by approximately 250,000 per annum, and a one cent movement in the exchange rate between the Euro and sterling impacts the Group s operating profit by approximately 500,000 per annum. There was a detrimental impact on adjusted operating profit in 2012/13 of 3.2 million from the translation of overseas results compared with the prior year. 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 34.6% (2011/12: 37.1%) and remained above our strategic target of greater than 30%. Finance Costs Net finance costs in the financial year were 20.3 million (2011/12: 18.8 million). This comprises net interest payable of 16.0 million (2011/12: 14.5 million), which was covered 6.0 times by adjusted operating profit, and a net charge of 4.3 million (2011/12: 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 3.5 million (2011/12: 3.5 million), together with a 0.8 million (2011/12: 0.8 million) charge for the amortisation of the implied redemption premium on preference shares. Profit before Tax Adjusted profit before taxation was 75.7 million compared to the prior year profit before taxation of 88.5 million and total profit before taxation was 70.6 million (2011/12: million). Profit attributable to ordinary shareholders after taxation was 49.6 million (2011/12: 76.9 million). Earnings per share Adjusted earnings per share for the financial year are 14.8 pence (2011/12: 17.4 pence). Basic earnings per share after the net impact of adjusting items are 13.6 pence (2011/12: 21.2 pence). Ordinary dividend The Board is recommending a final dividend of 6.0 pence per share (2011/12: 6.0 pence per share), amounting to a total dividend per share for the year of 10.4 pence per share (2011/12: 10.4 pence per share) and with a total impact on shareholders funds of 38.0 million. The final dividend, subject to approval at the Annual General Meeting on 18 June 2013, is payable on 26 June 2013 to shareholders on the register at 31 May Overview Strategic focus Business review Governance Financial statements

30 28 Premier Farnell Business review Business acquisition On 26 June 2012, the Group acquired the entire issued share capital of Shenzhen Embest Technology Co Ltd (Embest), our design services subsidiary. Of the total consideration of 3.4 million, 3.3 million related to goodwill attributable to the future profitability of the business. Acquisition costs of 0.4 million have been charged to the income statement. Tax The effective tax rate of the Group is 28.4% of profit before tax after adding back preference dividends charged within finance costs. The adjusted effective tax rate of 27.5% is unchanged from the prior year and compares favourably with the weighted average corporate tax rates in our end markets, reflecting the Group s efficient tax structure. The Group s adjusted effective tax charge for continuing operations can be analysed as follows: 2012/ /12 Profit before tax Tax charge % Profit before tax Tax charge % Total profit before tax Add back preference dividends % % Adjust for: Restructuring costs One-off pension gain (9.2) (3.2) Acquisition costs Gain on business disposals (18.9) (3.2) % % Post-retirement benefits The Group accounts for pensions and other post-retirement benefits in accordance with IAS 19. The net credit for post-retirement benefits was 2.3 million including one-off items (2011/12: 6.7 million charge) and can be analysed as follows: (Credit)/Charge 2012/ /12 Defined benefit pension plans Defined contribution pension plans Other post-retirement benefits One-off pension income (US defined benefit pension plan) (9.2) (2.3) 6.7 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 (12.3) (17.6) Expense (0.5) (0.6) One-off income 9.2 Actuarial losses (10.8) (5.1) Contributions 3.1 Liability at end of year (14.4) (20.2) As a consequence of the offer to buyout of the pension rights of deferred members of the Group s US defined benefit pension plan during the year, the Group reduced its US net pension liability by 9.2 million, which has been recorded as a one-off non-cash gain through the income statement. In addition, this will help reduce the future risk of the US Plan. Further details are given in note 25 to the Consolidated Financial Statements. The contributions expected to be paid during the 2013/14 financial year amount to 3.5 million in respect of the UK plan and nil in respect of the US plan. Cash flow and net debt Through the Group s ongoing focus on effective cash generation and management, our cash performance this year was strong, achieving free cash flow to sales of 6.1%, an increase of 1.2 percentage points versus the prior year and in line with our through the cycle target of 6%. Free cash flow attributable to ordinary shareholders is summarised below: 2012/ /12 Adjusted operating profit Depreciation and amortisation Changes in working capital 6.6 (13.6) Additional funding for post-retirement defined benefit plans (2.6) (3.4) Other non-cash movements Total cash generated from operations Capital expenditure (21.9) (23.0) Proceeds from sale of property, plant and equipment Interest and preference dividends (18.0) (14.4) Taxation (22.4) (26.9) Free cash flow before impact of restructuring costs Cash flow impact of restructuring costs (7.0) (2.2) Free cash flow after impact of restructuring costs Total cash generated from operations represented 125.3% of operating profit (2011/12: 102.7%). Net working capital reduced by 6.6 million over the year reflecting ongoing focus of working capital management including inventory which increased by 3.4 million as we continue to drive our customer proposition. Capital expenditure of 21.9 million included 13.3 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: Opening net financial liabilities (237.1) Free cash flow after impact of restructuring costs 51.1 Acquisition of businesses (net of costs) (2.8) Ordinary dividends (37.9) Issue of ordinary shares 0.9 Preference shares (0.8) Derivative financial instruments (4.2) Amortisation of arrangement fees (0.9) Exchange movement 2.1 Closing net financial liabilities (229.6)

31 Premier Farnell At 3 February 2013, the Group s net financial liabilities comprised the following: 2012/ /12 Cash in bank and in hand Bank loans and overdrafts (20.1) (18.9) US$ Senior Notes (269.1) (268.7) Other loans (7.2) (6.6) Preference shares (62.6) (61.8) Derivative financial instruments (2.2) 2.0 (229.6) (237.1) The US$ Senior Notes comprise: $159.0 million due 2013 $85.0 million due 2016 $30.0 million due 2017 $58.5 million due 2018 $91.5 million due 2021 The maturity of the Group s gross financial liabilities at 3 February 2013, excluding derivative financial instruments, is as follows: 2012/ /12 Due within one year Between one and two years Between two and five years After five years The Group has 200 million bank facilities, which expire in October 2016, which together with the Group s continuing strong cash generation, provide a good level of 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 million, gives us a healthy funding position and the confidence to invest in our strategy. In addition, the funding position will allow the Group to repay its US $159 million Senior Notes in June 2013 out of existing facilities as planned, reducing future finance costs. 29 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 counterparty. 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. International Financial Reporting Standards (IFRS) The Group s consolidated financial statements have been reported in accordance with IFRS. The Group has not been required to adopt any other new accounting standards during the year which have had a significant impact on the consolidated financial statements. Details of the impact of other new accounting standards that either do not have a significant impact on the Group s financial statements or are not yet effective are given in the Accounting Policies on pages 76 to 79. The financial statements of the Company for the year ended 3 February 2013 on pages 101 to 107 continue to be prepared in accordance with UK GAAP. Overview Strategic focus Business review Governance Financial statements 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. Treasury activities are monitored by the Tax and Treasury Committee which meets quarterly with major decisions being approved by the Board.

32 30 Premier Farnell RISKS AND UNCERTAINTIES The Principal Risks and Uncertainties facing the Group are summarised below. The disclosure of risks and uncertainties in the table below reflects the ethos 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 GET, comprising the CEO direct reports. Management also review specific strategic, operational, and financial and compliance risks in regular focused forums during the year; GET meetings; quarterly business reviews with each of the businesses; major programmes and project reviews; and at other key executive management meetings. Risks and uncertainties European economy continues to deteriorate Competitive pressures increase Competitive advantage in the web channel is not maintained Relative increase/ decrease compared to prior year Mitigating actions We have embedded processes which drive working capital management and cash flow at Group and across our businesses. We also have proven agility in driving cost reduction and working capital. Our banking facilities and relationships are kept under constant review and action taken when required. The business regularly reviews its Euro cash deposits and collects unutilised cash on a regular basis. We are intently focused on the continual enhancement of our high service customer proposition. 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. Our customers also benefit from our multichannel approach including innovative ecommerce channels. We have business intelligence processes to maintain our awareness of market developments and competitor actions, along with our market share for the Group and at a detailed market level. We are continuously driving improvement to our transactional and Community websites. Our Web Advisory Board includes external subject matter experts, to provide advice and guidance to the Board and ecommerce team on the core areas of our web strategy. Opportunity Our focus on meeting customers requirements through the economic cycles, enhanced by the insights provided from data from our ecommerce channels, means we are able to respond rapidly to economic improvement. We continue to implement strategic initiatives to build customer loyalty and initiatives targeted at vertical market segments, which provide a differentiated proposition for our customer base. The fragmentation of the marketplace allows us opportunities given our strengths of global reach and financial position to win business and create further barriers to entry from smaller competitors. The continued investment in and development of web functionality provides value to customers, meets their requirements for information and provides Premier Farnell with insights to help decision-making processes. The implementation of a new global web platform in 2013/14 will enable the Group to enhance its online proposition faster and more efficiently.

33 Premier Farnell Risks and uncertainties Recruitment, development or retention of talented people Data and content quality inhibit effectiveness of our ecommerce strategy Insufficient progress with improving performance in North America Failure to leverage the investment made in Asia Pacific Significant failure or inefficiencies in our systems and infrastructure Legal and regulatory risks Relative Mitigating actions increase/ decrease compared to prior year Our high potential talent is identified and nurtured through agreed development plans including a comprehensive mentoring programme as well as a focus on succession planning for our key leadership positions. 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. We conduct annual employee engagement surveys to enable progress of our people actions to be monitored and areas of improvement identified and actions put in place. Our reward schemes are continuously evaluated to drive and reward performance and ensure retention of key talent. As we drive significant change throughout the organisation our competency development and evaluation processes are focused on encouraging change agility. Through the strengthening of our diversity and inclusion team, the Group s focus on employee individuality, diversity and creativity has significantly increased. Development of talent through transfer across the business through international assignments. A dedicated data function has been established to ensure compliance with internal processes and external regulations. A data strategy and governance framework has also been developed to support the information requirements of our strategic programmes. We have a fully integrated multichannel sales and marketing plan aimed at addressing the needs of our customers, including a focus on specific segmentation by type of customers and vertical industries. Ongoing focus from senior leadership team on the development of the Asia Pacific markets in accordance with our strategic intent. Best practice and personnel leveraged from around the Group to ensure delivery. Business continuity plans are kept under review for all our locations. As an example of these contingencies, we have the ability to switch order fulfilment in Europe between our Leeds and Liege distribution centres. Contingency plans are in place for our US warehouse and management systems. We have maintained an ongoing review of our IT infrastructure and conduct regular testing of our systems. We will invest in our back-office systems to support our single front-end web platform over the next three to five years. We have exposure to a number of countries and their respective legal compliance requirements are addressed through a variety of controls. Trade compliance is a specific significant requirement which is controlled through an experienced specialist team, automated screening enablers and ongoing training of our sales teams. Compliance review meetings are held with senior management at Group and within the regions. Opportunity 31 The creation of a high performing actively engaged team which will consequently lead to improved business performance. By focusing on training and development, customer relationships, leadership, social responsibility, and communications, the number of employees who are actively engaged at Premier Farnell is 73%. Continued investment in data and data management processes to provide our customers with high quality product information and suppliers with rich insights into customer behaviour. By enhancing and better targeting our offering we have an opportunity to significantly improve operating performance in North America by taking market share and attracting customers to our online environment. We continue to invest and effect structural growth in our key Asia Pacific markets, developing strong customer loyalty and market share growth in all of our Asia Pacific markets. Investments in global inventory and refinement of our proposition to enhance value-add services and solutions will significantly benefit our customers in Asia Pacific. We continually improve workflows and operational efficiencies and provide increased capacity and investment in capability. All of these allow the greater support of customers future requirements, suppliers future needs and the ability to leverage our product and legislative data. 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. Overview Strategic focus Business review Governance Financial statements

34 32 Premier Farnell Annual Sustainability Report The way that we manage sustainability has changed this year, starting to integrate it more closely into the day to day operations of the business. Business and function leaders are now more responsible for behaving in a sustainable way and running their businesses to reduce impacts and lower costs. With the intention of moving our sustainability management and reporting towards a more integrated approach, matching our refreshed way of managing sustainability within the business, we have taken the decision not to publish a separate sustainability report this year. This has required us to decide which elements of sustainability are of material importance to our stakeholders, and our business and that we are capable of affecting in a meaningful way. As a result, many of the indicators that we have measured in previous years have been removed, in order to separate out those that we measure to answer stakeholder questions from those that we really manage for the long term benefit of the business. Where possible, we have included relevant sustainability information in other sections of the report and not repeated it here for example, our work on legislation guidance, RoHS and REACH. We are pleased to report that our approach to sustainability has this year achieved the Platinum Big Tick (formerly Platinum Plus ) level in the Business in the Community CR Index, achieving our three-year target to reach this level. Principles The Principles element of our sustainability strategy now centres on those activities which we believe will deliver competitive advantage or financial benefit to the company. 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. Our Code of Conduct This year, 99% of employees confirmed that they had read and understood our Code of Conduct during their mid-year review process. The Code sets out the behaviours and values expected from our employees. The remaining 1% of employees missed their mid-year reviews for a number of reasons, including sickness absence or maternity leave, or joining the company in the second half of the financial year. We monitor the number of calls made to the TrustLine, our third-party whistleblowing hotline, on an annual basis (although we do not receive the caller s details). This year, 14 cases were reported to the hotline, all of which were investigated and as a result 50% were upheld. Industry bodies As of March 2013, we have resigned our status as a signatory to the United Nations Global Compact. We remain firmly in support of the principles that it espouses however we believe that the now mandatory financial contribution required by the Compact to retain membership can, at this time, be better spent delivering on our sustainability goals. During 2013/14, we will investigate membership of the Electronics Industry Citizenship Coalition, a stakeholder group close to our core market and capabilities. Planet We have focused our attention on the impacts that we are most directly able to control, and that will deliver the most significant benefits to the business and external stakeholders. Our operations are relatively low impact from an environmental perspective and, while some issues (such as water security) may be of significant interest to some stakeholders, our impact on these issues is very limited. We have therefore chosen to refocus on those issues that we can positively and sustainably affect. All environmental data provided is based on the year January to December Some figures have been updated where errors or omissions were identified from previous years.

35 Premier Farnell 33 Energy use and carbon emissions Type of Energy consumed Total amount used ( 000) Unit rate Total used/ 1,000 of sales Waste Disposed Total amount ( 000) kg Unit rate (kg per 1,000) Total 922 1,305 1,088 1, Waste Recycled Total amount ( 000) kg Unit rate (kg per 1,000) Total 3,487 3,638 3,346 2, Percent of waste recycled 79% 74% 75% 68% Unit rate Total used/thousand square foot Electricity (KwH) 30,216 31,593 31,342 29, Natural gas (cubic metres) 1,036 1,201 1,266 1, Propane (kilograms) Fuel oil (litres) Petrol for company cars/trucks (litres) Diesel fuel (litres) Employee Business Travel Petrol for rented cars/trucks (litres) Metric tonnes CO2 emitted Metric tonnes CO2/ 1,000 of sales 21,591 22,863 22,971 22, We have not reached our three-year goal of a 10% reduction in Green House Gas emissions against 2009 levels, with emissions weighing 21,591 tonnes in 2012 against 22,399 tonnes in Significant investment in efficient lighting and other projects has taken place in 2012, resulting in a lower reduction of 3.6% During 2013/14, our businesses will re-baseline their Scope 1, 2 and 3 GHG emissions and the costs of using the energy that generates these. They will then develop a new three-year plan to reduce emissions by 10% in each region. Waste generated and disposed Overview Strategic focus Business review Governance Financial statements We have recorded an 11% reduction in the total weight of waste generated by the business between 2011 and 2012 and a 36% reduction in the weight of waste disposed since 2009 meeting our Group target to achieve a 10% reduction by the end of Our recycling rate has improved by five percentage points this year, increasing from 74% to 79% the highest rate of performance for the last five years. This has been achieved through a mixed approach of improving recycling agreements with our waste disposal contractors, better segregation of waste on-site and implementing waste re-use schemes to reclaim and re-use waste packaging rather than disposing of it. Business travel Domestic Air International Air Rail Total Distance (km) 3,596,358 8,907, ,695 12,748,547 CO2 emissions (tonnes) 349 1, ,373 Each region has been set the target for 2013/14 of reducing their business travel by 20% including flights, rail and road journeys. We have also implemented improved calculations to estimate the waste at those facilities where we do not receive regular reporting from our suppliers, which has resulted in a reduced estimate of the waste sent to landfill by our facilities. In 2013/14, all businesses in the Group will develop plans to accurately measure their waste output and achieve an improved recycling rate at their facilities. This will be further supported by the expansion of our unique packaging recycling service, which reclaims unwanted production packaging from customers and re-uses it on-site.

36 34 Premier Farnell People The people that we employ are still paramount to the success of our sustainability strategy, and ensuring that we attract, develop and retain those people is what will ensure our continued profitability. Outside the organisation, we continue to pursue our workplace standards programme with suppliers of private label products, to ensure that consistent high standards are being delivered across all partners. Health and Safety Recordable Injuries DAW Injuries Target (injuries per 100,000 hours worked) Performance We have reintegrated the Distribution Centre in Liège into our Group safety reporting. In 2012/13, we achieved our target for Recordable Injuries but missed our DAW Injury target. This is primarily a result of the legal conditions in Belgium, where the threshold for being required to take time off work as a result of an injury is significantly lower than in other operating countries. Despite having missed our target, the Group has still achieved a DAW rate that is lower than the computed US industry average and we are pleased to report that Liège achieved a reduction in Recordable accidents of over 30% this year as a result of new training and accident investigation initiatives being run locally. Absenteeism UK-based operations 3.6% Mainland European Distribution (Belgium) 8.5% Krakow Contact Centre (Poland) 6.1% US Operations 2.4% Asia-Pacific Operations 1.2% Organisational development Our organisational development performance is measured by the number of employees who had a completed Personal Development Plan (PDP), agreed with their line manager, at the end of the financial year. These plans are used to inform training and development decisions and opportunities made available to employees. The target for 2012/13 was that 100% of employees would have a completed PDP by the end of the financial year. This was not achieved, with 53% of employees PDPs having been signed-off by their managers at the end of the year. Supplier workplace standards 71% of Private Label suppliers have now completed a standards survey since % have undergone a site audit conducted by our technical team. Site audits and surveys identified recurring themes of below-average safety policies and procedures. All non-conformities raised with suppliers have been voluntarily addressed. Community investment We are redeveloping our system for measuring Community Investment performance to better understand the return on investment that the activities bring to the company. Therefore there is no data to report for 2012/13. The value of donations made to charity can be found on page 53. Absenteeism is related to the business s ability to engage its employees and inspire them to attend work and be productive. In 2013/14, the Group target is to increase employee engagement by 2%. Independent assurance SGS United Kingdom Ltd was commissioned by Premier Farnell plc to conduct an independent assurance of the data and information contained in the Annual Sustainability Report 2012/13. The scope of the assurance included the text and 2012 data in accompanying tables contained therein. We are of the opinion that the information in the Annual Sustainability Report 2012/13 is reliable and provides a fair and balanced representation of Premier Farnell s activities in Our full Assurance Statement provides our detailed findings and conclusions and can be found at the following web address: sustainability-assurance-statement

37 Premier Farnell Employees A high performing, engaged workforce is critical to Premier Farnell s success in meeting its strategic objectives for the benefit of all its stakeholders. Through its employee initiatives, described below, the Group seeks to ensure that it attracts, retains and develops its people around the globe. Performance review process Effective performance management is critical in enabling our employees to perform at their best and contribute optimally to the organisation. Our Group-wide performance review process has been instrumental in shaping our journey towards a high performance culture. All employees participate in our annual performance review process which links each individual employee s work with the Company s strategic and operational objectives. The performance review process also incorporates our key development planning processes so that we continually address performance and ongoing professional and personal development. We also consider the performance review process to be an ideal platform for engaging and motivating employees, as performance management takes place all-year round. As part of 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 We are continually building on our commitment to enable our people to reach their full potential through learning, training and development. We invest in the development of our employees even throughout tough economic cycles, providing a suite of various training and development options and avenues, depending on needs, both individual and organisational, identified during our performance review process. 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. Our online learning centre provides all employees with a variety of material and resources to aid professional and personal development. Our learning and development offer includes leadership development, and various programmes and learning tools such as 360 degree feedback and mentoring are available for first line supervisors, managers and leaders of people. Our online learning centre provides all employees with a variety of material and resources to aid professional and personal development. This includes customised learning programmes delivered in partnership with a leading business school. We also provide a comprehensive induction module available online so that every new employee in the world has equal opportunity to learn and grow when they join us. Our formal career development and organisational planning processes are linked. As we have grown, our people have also grown. We offer job postings internally in line with our belief of nurturing and developing our people internally. We have continued to evolve our performance review process to cover development planning that caters to employees longer term aspirational and career goals. Diversity and inclusion 35 Our employees are tapped from as diverse a pool as possible. Our employee base proudly reflects the diversity of the various countries we operate in around the globe. We continually seek to recruit, develop and employ throughout the organisation as well, to place suitably qualified, capable and experienced people, irrespective of age, race, ethnicity, gender, religion or sexual orientation. We are fully supportive of the benefits of diversity in the workplace. We believe that a diverse workforce ensures richness in both business and culture as we build an organisation that best reflects our global business presence. As we nurture diversity within our talent and leadership pool, we are also ensuring we build a future team that best reflects our client, investor and general employee base. The diversity of backgrounds has given us higher levels of insight into the needs of the various communities in all the geographies in which we operate, providing us with a wealth of knowledge and experience to best deliver service excellence. We have also continued to leverage our internal development networks aimed at addressing the needs and accelerating the development and engagement of our female and Generation Y populations. Our internal Mentoring We believe that a diverse workforce ensures richness in both business and culture as we build an organisation that best reflects our global business presence. Programme is now in its 6th year and we pair high-potential employees with mentors across and within every function and geography, ensuring the nurturing of a global culture. We also match our high-potential female leaders, both existing and future, with senior level mentors. Mentoring continues to be a powerful tool for the development of our key and emerging talent pool with the senior team having internal, external and board mentors. Employee communications Our people have access to information about our business, strategy and operational performance, and our connection to the world through various internal communication channels. This includes our global intranet, weekly newsletters and various townhalls, with local business context, content and translation where appropriate. To support our emphasis on building a high performance culture, all employees in all regions and countries participate in our annual kick-off meetings, which are conducted at the start of the financial year. The theme of the annual kick-offs provides clarity on the key strategic imperatives and allows the shaping of the objectives cascade process which highlights the individual s expected contribution towards delivering the Company s strategy. Our ongoing business updates, through regular, consistent and open communication, are key to engaging our people by keeping them informed. Overview Strategic focus Business review Governance Financial statements

38 36 Premier Farnell Employees Our values Core values are central to the long term success of any organisation and bind it together with an operating framework for employees. In short, values help describe how we behave around here. This year the Global Executive Team developed and launched a refined set of values which better reflect our desired culture. These have been widely embraced and are now embedded as a guide for how the Company operates and makes decisions. 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 We hear what our employees say, feel and think through both the survey and through direct feedback channels to the CEO. Even in challenging economic times, we are firmly committed to understanding and responding to the internal pulse of our people. Your voice all employee engagement survey Our 6th all-employee engagement survey was conducted in 2012/13, providing a mechanism for detailed feedback on many aspects of what it is like to work for the Company. Despite a challenging economic climate, we firmly believe in the sustained power of listening to our people. This year was no different. Specific and concrete action plans are derived, built and implemented to continually improve the organisation, leveraging on the key engagement drivers uncovered as a result of the survey. This year the key engagement drivers are: Training & Development; Leadership; Strategy & Direction; and Organisational Change. Despite a challenging economic climate, we firmly believe in the sustained power of listening to our people. One of the focus areas that emerges from these findings will centre on the critical role that the leader and manager will play in driving superior business performance as well as enhancing engagement, which links back to every aspect of our human resource strategy. Senior leadership forums As with previous years, we are continuing the Group s commitment to include representation and participation from a cross section of employees in our Leadership Forums. These forums consist of quarterly meetings at which the strategy and key issues related to its implementation are discussed, and participants have the opportunity to learn about and provide inputs to our business progress. Our forums provide an arena for the exchange of relevant and appropriate information and constructive dialogue between executive management and leadership regarding where the business is, and where it intends to go. ican recognition Our internal online reward and recognition programme ican is now in its third year and it continues to enjoy a large degree of success. In addition to the more formal means of rewarding and recognising performance and contribution, our people are also enabled and empowered to do the same for their colleagues and peers. The ican system of nominating deserving employees for virtual thank-you s and specific rewards reflective of contribution and impact has proven to be a highly effective mechanism for also engaging employees. The ican nominations, allocated at the discretion of managers and colleagues, provide an opportunity to recognise and reward employees and a way to build engagement and empowerment. Great place to work To complement our journey towards building a high performance culture, we are also continuing with our initiative to create an internal environment within Premier Farnell as a great place to work. There are several global activities that transcend national and cultural barriers, such as the Premier Farnell Office Olympics, our support of three Paralympics athletes, and various recreational events. At the same time, we have also encouraged culturally specific events that resonate with the local population. Performance related share option scheme Building on the Group s UK savings related share option scheme, we have now extended our share option reward schemes to other parts of our business in all regions. We strongly believe in including employees for participation in the Group s performance by providing a stake in our future together.

39 Premier Farnell Leadership Forums Premier Farnell is constantly evolving to be a highly efficient, global organisation Global Executive Team Premier Farnell is constantly evolving to be a highly efficient, global organisation and the formation of the Global Executive Team (GET) was another step along this path. The GET was established in July 2012 as a high level forum of senior leaders to improve accountability, regularly and quickly address issues, decide on priorities and assess the progress of the implementation of the Group s strategy ensuring a consistent and clear focus for the organisation. The GET, which meets every two weeks virtually, with one face to face meeting per quarter, comprises the CEO, CFO, Regional Business Presidents, Group General Counsel, Chief Technology Officer, Chief Strategy Officer and Chief of Supply Chain along with subject matter experts based on the committee s agenda. In addition, senior leaders from around the business, including the GET, individual business leaders and functional heads, meet regularly at an internal conference to review, research and develop the Group s strategy. This approach of strong governance in the Group s strategic direction ensures that now and in the future we are able to continue to execute and deliver on the commitments made to our customers, suppliers, shareholders and employees. Service Excellence Awards 37 The senior leadership team at Premier Farnell spearhead the Group s quest to become a high performing company. As part of this commitment to embrace high performance and become an even more customer-focused market leader, every quarter they recognise the outstanding contribution of high performing employees who have delivered service excellence to the business in an extraordinary manner, which has consequently further enhanced the level of service we provide to our customers. Employees and managers are encouraged to submit details of an individual or team that they feel has gone above and beyond their required duties to deliver a really high level of service, either internally or externally. 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. The senior leaders vote for one individual or one team from each category who they feel has exhibited true desire and determination to deliver service excellence in that quarter. The awards are categorised, with the global winners being recognised for internal customer service excellence, supplier service excellence, customer service excellence or going the extra degree and finally there is a special CEO award. All of the global winners receive special recognition and an award presented by Laurence Bain. In the event of very tough competition, highly commended awards may be presented locally by the business leaders. This year, Premier Farnell recognised 67 individuals and teams from around the globe through its global service excellence awards. Overview Strategic focus Business review Governance Financial statements

40 38 Premier Farnell Board of Directors Val Gooding*, CBE Aged 62 Role: appointed as Non-Executive Chairman on 15 June Other appointments: Non-Executive Director of Standard Chartered plc, the Home Office and the Lawn Tennis Association. Skills and experience: Val has formerly held a number of senior operational and strategic roles in businesses with a reputation for high levels of customer service and brings a wealth of global business experience to the Board. Val was CEO of BUPA during a ten-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 J Sainsbury plc and of the BBC. Laurence Bain, CA Aged 59 Role: appointed as Chief Executive Officer on 12 June Laurence joined the Board as an Executive Director in his former role of Chief Operating Officer on 1 July Skills and experience: Laurence is a chartered accountant and spent ten years working in the profession in Scotland. He has extensive financial and a wealth of operational management experience which he gained at the highest level, primarily 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. Dennis Millard* CA (SA) MBA Aged 64 Role: appointed as a Non-Executive Director in September 2007 and as Senior Independent Director in June Dennis chairs the Audit Committee. Other appointments: Non-Executive Chairman of Halfords Group plc and of Smiths News Plc, Senior Independent Director and Chairman of the Remuneration Committee of Debenhams plc and Chairman of the Board of Trustees of the Holy Cross Children s Trust charity. Skills and experience: In addition to the extensive experience that Dennis brings of non-executive Board leadership, Dennis is a chartered accountant and was, for nine years until 2005, Group Finance Director of Cookson Group plc. Andrew Dougal*, B Acc, CA Aged 61 Role: appointed as a Non-Executive Director in September Other appointments: 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). Skills and experience: Andrew is a chartered accountant and has considerable 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.

41 Premier Farnell Committee Membership at March 2013 Audit Committee Dennis Millard (Chairman) Andrew Dougal Paul Withers Nominations Committee Val Gooding (Chairman) Andrew Dougal Dennis Millard Laurence Bain Paul Withers Thomas Reddin Mark Whiteling, M.COMM (HONS) Aged 50 Role: appointed as Chief Financial Officer on 5 November Other appointments: Non-Executive Director and Chair of the Audit Committee of Future plc. Skills and experience: Mark is a chartered accountant, with extensive 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. Remuneration Committee Paul Withers (Chairman) Andrew Dougal Dennis Millard Paul Withers* MA Aged 56 Role: appointed as a Non-Executive Director in September Paul chairs the Remuneration Committee. 39 Other appointments: Non-Executive Director of Hyder Consulting plc, Devro plc, and Senior Independent Director of Keller Group plc. Skills and experience: Paul has a background in engineering and has considerable experience of business expansion and operations in developing markets, particularly Asia. Paul was formerly Group Managing Director of BPB plc, where he led their Emerging Markets operations. Overview Strategic focus Business review Governance Financial statements Thomas Reddin*, BSc, MBA Aged 52 Role: appointed as a Non-Executive Director in September Other appointments: Non-Executive Director of Valassis Communications Inc and Tanger Factory Outlet Centers Inc. He is also a Managing Partner of Red Dog Ventures, LLC, a venture capital and advisory firm in the digital arena, and is publisher of MortgageRates.us. Skills and experience: Tom s expertise ranges from marketing, branding and innovation to the web. 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 web-based lending. Secretary Steven Webb, LLB Solicitor Aged 50 Role: appointed as Company Secretary and General Counsel in December Other appointments: Member of the Board of Governors of Leeds Metropolitan University. Skills and experience: 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. * Denotes Non-Executive Director