Premier Farnell plc 6 December 2012 Results for the Third Quarter and Nine Months of the 53 week financial year ending 3 February 2013 Key Financials Continuing operations (unaudited) Q3 12/13 Q3 11/12 Q3 Growth (a) 9M 12/13 9M 11/12 9M Growth (a) Total revenue 233.5 241.8-1.6% 712.7 739.7-2.8% Adjusted operating profit (b) 22.0 25.8-10.4% 72.1 81.8-9.2% Adjusting items (b) - (1.7) (7.9) 16.1 Total operating profit 22.0 24.1-3.7% 64.2 97.9-33.1% Adjusted profit before tax (b) 17.3 21.1-18.0% 57.0 68.2-16.4% Total profit before taxation 17.3 19.4-10.8% 49.1 84.3-41.8% Adjusted earnings per share (b) 3.4p 4.2p -19.0% 11.2p 13.4p -16.4% Basic earnings per share 3.4p 3.8p -10.5% 9.6p 17.2p -44.2% Free cash flow (c) 3.5 14.2-75.4% 36.5 24.2 50.8% Financial highlights Group third quarter year on year sales per day decline of 1.6%, unchanged from the second quarter, reflecting less favourable market conditions overall in September and October compared with the slight growth experienced in August. Latest market conditions reported by the SIA (d) show declines of 9.4% in Europe and 0.4% in Asia Pacific, with the Americas reporting growth for the first time since June 2011 of 2.6%, and AFDEC (d) reported a decline of 11.1% in the UK. Third quarter gross margin of 38.3% was down 0.2% from the second quarter as we continue to manage in line with market conditions. Operating expenses in line with prior year, after adjusting for the impact of the Embest acquisition, as cost actions offset the impact of cost increases. 4m of annualised cost savings were implemented early in the fourth quarter with a resultant 0.8m saving expected this year. Depending on our sales trajectory through the fourth quarter, further cost actions will be taken if momentum does not improve. Our return on sales, at 9.4% for the third quarter and 10.1% for the first nine months, remains industry leading. Operating cash generation (e) (excluding impact of adjusting items) was in line with our expectations at 83.6% of operating profit for the quarter and 111.5% year to date (2011/12: 85.7%). Strategic highlights Our active customer base exited the third quarter up 2.3% on the prior year, excluding Raspberry Pi, compared with the second quarter of 1.0%, giving us confidence in future growth opportunities. Raspberry Pi sales in the quarter of 4.1m increased from 3.9m in the second quarter. MDD ecommerce penetration increased by 1.1 percentage points from the start of the year to the third quarter at 56.4% and exited at 57.3%. The element14 Community maintained its strong progress, receiving over 1.7 million visits and adding more than 21,000 new registered users in the quarter, with total registered users now over 138,000. Engagement on the site increased with over 100,000 interactions per week by the end of the quarter. Emerging markets sales grew 14.2% in the quarter benefitting from the integration of our Embest acquisition (6.4% growth excluding Embest), and now represent 9.2% of total MDD sales. Our multichannel sales transformation continues with our Krakow contact centre now officially opened. 1
Commenting on the results, Laurence Bain, Group Chief Executive, said: After seeing a slightly positive start to the quarter in August, market conditions remained volatile in September and October and we saw year on year sales declines in those months. As a result, our third quarter sales declined 1.6%, in line with that reported in the second quarter. In November, year on year trends in our MDD Europe and APAC region improved slightly, but the MDD Americas performance declined, partly as a result of the impact of Hurricane Sandy. After adjusting for Sandy, Group year on year sales declined 3.2% in November. We continued to manage gross margin as we develop initiatives to meet customer needs in this challenging environment. Keeping our cost base flat year on year has enabled us to continue to achieve an industry leading return on sales, 9.4% for the quarter and 10.1% for the first nine months. Our cash performance remains strong, demonstrating the resilience of our business model in challenging markets. With global conditions continuing to be uncertain, and with very limited forward order visibility, we have executed cost actions in the fourth quarter which will deliver annualised savings of 4m. In addition, depending on our sales trajectory through the fourth quarter, further cost actions will be taken if momentum does not improve. The continued strength of our balance sheet, our growing active customer base and the ongoing evolution of our customer proposition, all give us confidence in our ability to weather the current market challenges while building for future growth. For further information, contact: Laurence Bain, Chief Executive Officer Mark Whiteling, Chief Financial Officer Thomas Churchill, Investor Relations Andrew Lorenz Richard Mountain Premier Farnell plc +44 (0) 20 7851 4100 FTI Consulting +44 (0) 20 7269 7291 Premier Farnell s announcements and presentations are published at www.premierfarnell.com together with business information and links to all other Group web sites. The results for the fourth quarter of the 53 week financial year ending 3 February 2013 will be announced on 21 March 2013. Notes: (a) Throughout this statement, in order to reflect underlying business performance, sales growth is based on sales per day for continuing businesses at constant exchange rates and for like periods, and growth in operating profit is calculated at constant exchange rates, unless otherwise stated. (b) Current year adjusted operating profit, profit before tax, and earnings per share in the table above exclude restructuring costs of 7.5m (in the first quarter) and acquisition costs of 0.4m related to the purchase of the entire share capital of Shenzhen Embest Technology Co Ltd (Embest) (in the second quarter). In the prior year, adjusted operating profit, profit before tax, and earnings per share, excluded the gain on sale of TPC Wire & Cable (pre-tax gain of 17.8m), the gain on sale of Newark s calibration services business of 1.1m and exclude restructuring costs of 2.8m. (c) Free cash flow comprises total cash generated from operations, excluding cash flows related to restructuring, less net capital expenditure, interest, preference dividends and tax payments. Free cash flow also excludes net proceeds from the sale of businesses. (d) SIA data from Semiconductor Industry Association publication, AFDEC data from Association of Franchised Distributors of Electronic Components, PMI data from relevant Purchasing Managers Index published source in each market. (e) Operating cash flow (before capital expenditure) as a percentage of adjusted operating profit. 2
Divisional Analysis Revenue Q3 12/13 Q3 11/12 Q3 Growth 9M 12/13 9M 11/12 9M Growth UK 27.8 30.0-7.3% 87.8 92.2-4.8% Rest of Europe 56.2 61.8-2.4% 176.1 197.3-5.1% APAC (1) 16.8 15.7 8.4% 50.1 48.8 2.1% MDD Europe & APAC 100.8 107.5-2.2% 314.0 338.3-4.0% MDD Americas 89.6 93.1-3.6% 269.7 281.4-5.2% MDD Other 26.3 25.6 2.5% 77.8 73.6 5.1% MDD Division 216.7 226.2-2.3% 661.5 693.3-3.5% IPD Division 16.8 15.6 8.1% 51.2 46.4 8.3% Group 233.5 241.8-1.6% 712.7 739.7-2.8% Adjusted Operating Profit/Return on Sales Q3 12/13 Q3 11/12 Q3 Growth 9M 12/13 9M 11/12 9M Growth MDD Europe & APAC (2) 13.0 16.1-12.6% 46.4 53.9-9.0% 12.9% 15.0% 14.8% 15.9% MDD Americas (3) 6.5 7.9-17.6% 19.7 24.2-19.8% 7.3% 8.5% 7.3% 8.6% MDD Other (4) 2.6 2.5 4.2% 7.5 6.7 11.8% 9.9% 9.8% 9.6% 9.1% MDD Division (5) 22.1 26.5-12.5% 73.6 84.8-10.5% 10.2% 11.7% 11.1% 12.2% IPD Division (6) 2.9 2.5 16.6% 8.5 7.1 17.3% 17.3% 16.0% 16.6% 15.3% Head office costs (7) (3.0) (3.2) -6.2% (10.0) (10.1) -1.1% Group 22.0 25.8-10.4% 72.1 81.8-9.2% 9.4% 10.7% 10.1% 11.1% Notes: (1) Current year includes the results of Embest post acquisition on 26 June 2012 (excluding Embest: Q3-0.5%, 9M -1.5%) (2) Current year adjusted to exclude impact of 6.9m restructuring costs (Q1) and 0.4m of acquisition costs (Q2) and prior year adjusted to exclude 2.2m of restructuring costs (3) Current year adjusted to exclude impact of 0.6m restructuring costs (Q1) and prior year adjusted to exclude impact of gain on sale of Calibration services business 1.1m and 0.3m of restructuring costs (4) Prior year adjusted to exclude 0.1m of restructuring costs (5) Current year adjusted to exclude impact of 7.5m restructuring costs (Q1) and 0.4m of acquisition costs (Q2) and prior year adjusted to exclude impact of gain on sale of Calibration services business 1.1m and 2.6m of restructuring costs (6) Prior year adjusted to exclude impact of gain on sale 17.8m of TPC Wire & Cable (7) Prior year adjusted to exclude 0.2m of restructuring costs 3
Results for the Third Quarter of the 53 week financial year ending 3 February 2013 Introduction In the third quarter, year on year sales per day performance improved compared to the second quarter in our main MDD geographic regions, other than the UK, despite the impact of the challenging global electronics market. The Semiconductor Industry Association (SIA), an indicator for electronics growth trends, saw the global industry contract by 2.3% year on year in the three months to October with Europe and Asia Pacific down 9.4% and 0.4%, respectively, and with the Americas reporting growth for the first time since June 2011 of 2.6% compared with the 3.9% decline reported for the three months to September. Our continued gross margin management and cost control has enabled us to achieve industry leading return on sales, 9.4% for the quarter and 10.1% for the nine month period. Sales Third quarter Group year on year sales per day declined 1.6%, unchanged from the second quarter. The stable sales per day we had seen in the prior four quarters was impacted this quarter by normal seasonality due to the Summer holiday period, although sales per day improved through the quarter. Within our MDD Division the Americas sales per day was flat sequentially on Q2, a strong performance given the expected seasonal decline. Sales per day declined 3.6% compared to the prior year, an improvement of 0.5 percentage points against the year on year decline in the second quarter. On a year on year basis sales per day for Europe as a whole performed similarly to the second quarter, with a year on year reduction of 4.0%, outperforming the challenging electronics market and growing market share. This compares to the overall European market reported by DMASS (Distributors and Manufacturers Association of Semiconductor Specialists) which reported a decline of 6.0% for the calendar third quarter. Europe outside the UK improved from a 5.2% decline in the second quarter to a 2.4% decline in the third quarter. In the third quarter UK sales per day fell 7.3% year on year. This compares to the most recent data from the Association of Franchised Distributors of Electronic Components (AFDEC) which reported a decline of 11.1% for the equivalent period. Against the backdrop of PMI manufacturing readings below 50 in all our Asia Pacific markets except for India and Indonesia, sales per day for the region reduced by only 0.5% in the quarter (excluding Embest), an improvement of 3.7 percentage points on the equivalent 4.2% decline experienced in the second quarter. The acquisition of Embest in the second quarter helped drive total APAC sales growth in the third quarter to +8.4% as we embed this business and begin to benefit from its strategic significance. Third quarter sales per day from our emerging markets grew 14.2% in the period (6.4% excluding Embest) and now represent 9.2% of global MDD sales. Our Other Distribution Businesses again performed strongly, with CPC again delivering year on year growth, at 1.9% in the third quarter, despite seeing a sequential sales decline, having benefited from the run up to the Olympics. CPC s growth is being driven by web-focused customer acquisition and the introduction of new products sourced globally. Encouragingly, given the weak US consumer electronics market, MCM returned to 4.5% year on year sales growth in the third quarter in part driven by the release of its enhanced new catalogue. MCM is now benefiting from increased collaboration with CPC and its initiatives to increase focus on the web, targeted product segments and new product introductions. 4
In the Industrial Products Division, Akron Brass continued to perform strongly, with sales up 8.1% versus the prior year. Akron Brass has benefitted from the ongoing development of its strategic focus on International markets and new product areas, whilst early signs of stabilisation in home US markets give cause for optimism over the longer term. Gross margin Third quarter gross margin of 38.3% was down 0.2% from the second quarter as we develop initiatives that support our customer needs in the current environment. Year on year gross margin performance improved from the second quarter with the year on year reduction down from 1.3% in the second quarter to 0.3% in the third quarter. The successful launch in the second quarter of our lower margin, but strategic, Raspberry Pi product again impacted gross margin by 0.3 percentage points. Gross margin management remains a key area of focus for all of our businesses across the economic cycle. Costs The Group continues to manage its cost base both strategically, taking advantage of the globalisation of our business model and efficiencies arising from increased ecommerce activity, and tactically, in response to sales volumes. At constant exchange rates, third quarter net operating expenses were flat year on year, after excluding the impact of the Embest acquisition which incurred 0.5m of net operating expenses in the quarter. This resulted in net operating expenses at 28.9% of sales compared with 28.4% in the second quarter, reflecting the slightly lower sales. This performance reflects the cost actions put in place over recent quarters as the impact of inflationary increases is absorbed. As the market environment continues to be challenging and in anticipation of continuing inflationary pressures, early in the fourth quarter we took actions to reduce costs by 4m pa, through the reduction of 41 heads. These actions will reduce this year s operating expenses by 0.8m with one-off costs of 1.3m recognised in the fourth quarter. Return On Sales/Profitability Focus on the implementation of our strategy, gross margin, and cost management, has allowed the Group to deliver industry leading return on sales throughout the period since our strategy began. Despite the ongoing weakness in our markets, we delivered third quarter return on sales of 9.4%. The 0.7 percentage point reduction from the second quarter return on sales reflects the 0.2% decline in gross margin and the impact of operational leverage on the sequentially lower sales in the quarter. Year to date, the Group s return on sales was 10.1%. Actions across the Group to drive strategic cost efficiencies, alongside continued focus on maximising gross margin relative to market conditions, will protect profitability in the short term and position the business to leverage our significant long term profitable growth opportunities. Despite sales per day growth being unchanged sequentially, in the third quarter return on sales from MDD Americas improved by 0.3 percentage points over the second quarter indicating positive strategic progress. Our North American business continues to show improvements to its customer focussed strategic metrics and, with focus on gross margin and costs, and whilst its markets remain very challenging, it is well positioned to optimise the impact of recovery in its underlying markets. Primarily as a consequence of the impact of operational leverage on the sequentially lower sales in the third quarter the return on sales from our European and APAC businesses reduced sequentially from 14.7% in the second quarter 5
to 12.9%. The regions continue to make strategic progress and market share gains across the quarter which, combined with growth in the active customer base and the strategic cost actions we are taking, gives confidence in the recovery of returns from these markets as conditions improve. Cash Flow/Balance Sheet Third quarter cash conversion of 83.6% (2011/12: 103.1%) was in line with our expectations. The year to date conversion at 111.5% (2011/12: 85.7%) reflects ongoing focus on the management of working capital. In the third quarter the Group s inventory levels decreased by 2.5m (at constant exchange rates), despite investment of 5.5m in new products across the technology spectrum, as we rebalance our inventory profile through the reduction of slower moving items following our 12.2m investment in the second quarter. We anticipate that by the year end our inventory levels will be back to those seen at the start of the second quarter. In the third quarter, after payment of the interim dividend, net financial liabilities (including preference shares) increased to 243.6m from 234.3m in the prior quarter. The impact of exchange rates in the period was to reduce net financial liabilities by 6.1m, principally in relation to our US$ denominated private placement notes. Net debt to EBITDA of 2.1 at the end of the third quarter increased from 2.0 in the prior quarter primarily as a result of the timing of the interim dividend payment. Premier Farnell s financial position remains robust with good liquidity and strong free cash flow. At the quarter end, our headroom on bank borrowings was 180m under facilities in place until October 2016. This headroom, combined with our net cash position of 108.8m, gives us a secure funding position. In the third quarter the Group explored the possibility of early repayment of its $159m 2013 USPP notes at terms attractive to the Group. Debt market conditions make settlement on these terms unattractive to the note-holders and as such the notes will remain in issue until planned repayment in June 2013. Foreign Currency Impact 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 for the quarter of 1.2m from the translation of overseas results compared with the prior year. Finance Costs Net finance costs in the third quarter were 4.7m (2011/12: 4.7m). This comprises net interest payable of 3.6m (2011/12: 3.6m), which was covered 6.1 times by adjusted operating profit, and a net charge of 1.1m (2011/12: 1.1m) in respect of the Company s convertible preference shares. Profit Before Tax Total profit before tax in the third quarter was 17.3m (2011/12: 19.4m), a decrease of 10.8% on the previous year and a decrease of 18.0% on an adjusted basis. No adjusting items occurred in the third quarter this year but restructuring costs of 2.8m and the gain on sale of Newark s calibration services business of 1.1m occurred in the comparable prior year period. 6
Tax The effective tax rate of the Group is 27.5% of profit before tax after adding back preference dividends charged within finance costs. The underlying effective tax rate of 27.5% is unchanged from the prior year. Earnings Per Share Adjusted basic earnings per share for the third quarter are 3.4p (2011/12: 4.2p). Basic earnings per share after the net impact of one-off items are 3.4p (2011/12: 3.8p). Pensions As a consequence of offering to buy out the pension rights of deferred members of the Group s US defined benefit pension plan, the Group is expected to reduce its US net pension liability by approximately 3.7m in the fourth quarter, which will be recorded as a one-off gain through the income statement. In addition, this option will help reduce the future risk of the US Plan. Strategy Whilst global economic and market conditions remain uncertain and challenging we remain focused on managing the implementation of our strategic transformation. Our strategy has delivered industry leading returns throughout its implementation and, as we continue to increase our focus on meeting our customers requirements and delivering our multi channel sales strategy, we also target further progression in growth and share relative to the market and our competitors. Through the third quarter we delivered a year on year increase in our active customer base of 2.3%, excluding Raspberry Pi, demonstrating the ability of our proposition to attract new customers whatever the market environment. We continue to see progress in our customer service metrics with our Net Promoter Score (our internal customer satisfaction metric) increasing through the year. The strength of our customer proposition was increased further in the third quarter with the signing of a new global franchise agreement with the Lattice Semiconductor Corporation, the leading provider of innovative, low cost, low power, programmable semiconductors and power management design solutions. Our global multi channel sales strategy continues to strengthen. Our European contact centre in Krakow has now formally opened and is fully operational and is already delivering the expected benefits in customer service and marketing. At the end of the financial year we will commence the phased roll out of our new web platform which will deliver significant benefits to our customers and further improve operational efficiency. This will accelerate progress towards our goal of being a digitally focussed enterprise from our current ecommerce penetration in the third quarter of 56.4%, up 1.1 percentage points since the start of the year and exiting the quarter at 57.3%. The element14 community remains a vibrant and differentiating source for electronic design engineers as they collaborate and source the essential information they require in their work. In the third quarter the Community received over 1.7 million visits, maintaining the strong progress seen since the launch of Raspberry Pi, as it saw over 95,000 community interactions each week, reaching over 100,000 by the end of the quarter, and added more than 21,000 registered users, with total registered users now over 138,000. The Community s innovative approach to customer interaction was rewarded with awards from Forrester Research Inc. and JiveWorld. Raspberry Pi continues to attract a large number of relevant new customers to our proposition, helped by the launch of the new double memory 512MB board, with sales strengthening further from the second quarter to 4.1m, and demand exceeding supply. Sales of this revolutionary, credit-card sized computer have to date attracted 197,000 new customers and contributed to the significant increase in activity of our community websites, helping Premier Farnell win the Makey award for best education/outreach program against competition including Intel, 7
NASA and Autodesk. The lower margin impact of Raspberry Pi will diminish as we add a range of higher margin associated products such as the Gertboard and Pi-Face. Following our second quarter acquisition, Embest, a provider of embedded development tools based in China, has integrated well into the Group and has already shown strategic value as part of our services beyond product work with suppliers such as STMicroelectronics and NXP. In addition, the launch of the Freescale Freedom Development Platform earlier this year has further enhanced the product offering we can provide to the design engineering community. The success of this launch saw Premier Farnell receive four awards from Freescale at the recent Electronica 2012 Fair in Munich. We continue to work closely with Freescale, leveraging Embest s expertise in the embedded space. Embest will also be a key supplier of Raspberry Pi associated products. This, together with our element14 community, our unique on line engineer design portal, the Knode, and our 40+ transactional sites now provide true solution partner support to our customers and our suppliers. Board Changes On 5 November, Mark Whiteling rejoined the Company and Board as Chief Financial Officer. Nicholas Cadbury left the company on 13 November and the Group would like to thank Nicholas for his contribution whilst at Premier Farnell. Outlook After seeing a slightly positive start to the quarter in August, market conditions remained volatile in September and October and we saw year on year sales declines in those months. As a result, our third quarter sales declined 1.6%, in line with that reported in the second quarter. In November, year on year trends in our MDD Europe and APAC region improved slightly, but the MDD Americas performance declined, partly as a result of the impact of Hurricane Sandy. After adjusting for Sandy, Group year on year sales declined 3.2% in November. We continued to manage gross margin as we develop initiatives to meet customer needs in this challenging environment. Keeping our cost base flat year on year has enabled us to continue to achieve an industry leading return on sales, 9.4% for the quarter and 10.1% for the first nine months. Our cash performance remains strong, demonstrating the resilience of our business model in challenging markets. With global conditions continuing to be uncertain, and with very limited forward order visibility, we have executed cost actions in the fourth quarter which will deliver annualised savings of 4m. In addition, depending on our sales trajectory through the fourth quarter, further cost actions will be taken if momentum does not improve. The continued strength of our balance sheet, our growing active customer base and the ongoing evolution of our customer proposition, all give us confidence in our ability to weather the current market challenges while building for future growth. Key Performance Indicators Long-term Goal Achieved in Q3 Sales per day growth 6-8% -1.6% Gross margin % Stability 38.3% Return on sales % 12%-15% 9.4% Return on net operating assets % >30% 34.6% Working capital as a % of sales <22% 25.4% Free cash flow as a % of sales 6% 1.5% % of MDD sales from ecommerce 70% 56.4% % of MDD sales from EDE 50%-70% 49% % all sales from international growth markets 30% 22.5% MDD active customer growth 6% 2.3% 8
Condensed Consolidated Income Statement For the third quarter and nine months ended 28 October 2012 2012/13 2011/12 2012/13 2011/12 2011/12 Third Third Nine Nine Full quarter quarter months months year unaudited unaudited unaudited unaudited audited Notes Continuing operations Revenue 3 233.5 241.8 712.7 739.7 973.1 Cost of sales (144.1) (148.5) (435.5) (445.9) (588.1) Gross profit 89.4 93.3 277.2 293.8 385.0 Net operating expenses - adjusted operating expenses (67.4) (67.5) (205.1) (212.0) (277.7) - adjusting items 4 - (1.7) (7.9) 16.1 16.1 Total net operating expenses (67.4) (69.2) (213.0) (195.9) (261.6) Operating profit - adjusted operating profit 3 22.0 25.8 72.1 81.8 107.3 - adjusting items 4 - (1.7) (7.9) 16.1 16.1 Total operating profit 3 22.0 24.1 64.2 97.9 123.4 Finance income 0.1-0.4-0.1 Finance costs - interest payable (3.7) (3.6) (12.2) (10.3) (14.6) - preference dividends (0.9) (0.9) (2.7) (2.7) (3.5) - premium on redemption of preference shares (0.2) (0.2) (0.6) (0.6) (0.8) Total finance costs (4.8) (4.7) (15.5) (13.6) (18.9) Profit before taxation 17.3 19.4 49.1 84.3 104.6 Taxation 5 (5.0) (5.7) (14.2) (21.9) (27.7) Profit for the period attributable to ordinary shareholders 12.3 13.7 34.9 62.4 76.9 Earnings per share 6 Basic 3.4p 3.8p 9.6p 17.2p 21.2p Diluted 3.3p 3.7p 9.5p 16.9p 20.9p Ordinary dividends Interim - proposed 4.4p 4.4p 4.4p Final - proposed 6.0p Paid 10.4p 10.4p 10.4p Impact on shareholders' funds () 37.9 37.8 37.8 Condensed Consolidated Statement of Comprehensive Income For the third quarter and nine months ended 28 October 2012 2012/13 2011/12 2012/13 2011/12 2011/12 Third Third Nine Nine Full quarter quarter months months year unaudited unaudited unaudited unaudited audited Profit for the period attributable to ordinary shareholders 12.3 13.7 34.9 62.4 76.9 Net exchange adjustments 1.2 (0.2) (0.6) (0.1) 0.4 Recycling of cumulative translation adjustments on disposal of subsidiary undertaking - - - (0.8) (0.8) Actuarial gains/(losses) on pensions and other post-retirement obligations 2.0 (3.9) (12.7) (8.4) (10.0) Deferred tax (charge)/credit on actuarial gains/(losses) on pensions and other post retirement obligations (0.7) 1.2 3.8 2.5 2.5 Deferred tax charge on share based payments - - - - (2.3) Net fair value (losses)/gains on hedges (1.5) - (2.0) (0.4) 2.2 Other comprehensive income/(expense) for the period 1.0 (2.9) (11.5) (7.2) (8.0) Total comprehensive income for the period attributable to ordinary shareholders 13.3 10.8 23.4 55.2 68.9 The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Condensed Consolidated Balance Sheet As at 28 October 2012 28 October 30 October 29 January 2012 2011 2012 unaudited unaudited audited Notes ASSETS Non-current assets Goodwill 37.4 34.3 34.3 Other intangible assets 30.2 28.7 26.9 Property, plant and equipment 54.6 52.6 57.4 Deferred tax assets 11.8 15.0 10.5 Total non-current assets 134.0 130.6 129.1 Current assets Inventories 224.9 224.4 214.5 Financial assets 7 0.4-2.3 Trade and other receivables 137.6 148.5 139.5 Current tax receivable 1.0-1.0 Cash and cash equivalents 7 108.8 62.8 116.9 Total current assets 472.7 435.7 474.2 LIABILITIES Current liabilities Financial liabilities 7 (101.7) (1.8) (1.3) Trade and other payables (125.6) (123.6) (113.4) Current tax payable (14.6) (22.9) (15.6) Total current liabilities (241.9) (148.3) (130.3) Net current assets 230.8 287.4 343.9 Non-current liabilities Financial liabilities 7 (251.1) (317.8) (355.0) Retirement and other post-employment benefits (53.9) (42.6) (43.8) Deferred tax liabilities (3.9) (3.5) (6.4) Total non-current liabilities (308.9) (363.9) (405.2) NET ASSETS 55.9 54.1 67.8 EQUITY Ordinary shares 18.5 18.5 18.5 Equity element of preference shares 10.4 10.4 10.4 Share premium 31.9 31.1 31.1 Capital redemption reserve 4.4 4.4 4.4 Hedging reserve (0.6) (1.2) 1.4 Cumulative translation reserve 19.0 19.1 19.6 Retained earnings (27.7) (28.2) (17.6) TOTAL EQUITY 55.9 54.1 67.8 Consolidated Statement of changes in Equity For nine months ended 28 October 2012 2012/13 2011/12 2011/12 Nine Nine Full months months year unaudited unaudited audited Total equity at beginning of period 67.8 38.4 38.4 Profit for the period 34.9 62.4 76.9 Other comprehensive expense (11.5) (7.2) (8.0) Total comprehensive income 23.4 55.2 68.9 Transactions with owners: Ordinary dividends paid (37.9) (37.8) (37.8) Ordinary share capital subscribed 0.8 2.7 2.7 Purchase of ordinary shares - (5.8) (5.8) Share-based payments 1.8 1.4 1.4 Total transactions with owners (35.3) (39.5) (39.5) Total equity at end of period 55.9 54.1 67.8 The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Condensed Consolidated Statement of Cash Flows For the third quarter and nine months ended 28 October 2012 2012/13 2011/12 2012/13 2011/12 2011/12 Third Third Nine Nine Full quarter quarter months months year unaudited unaudited unaudited unaudited audited Notes Cash flows from operating activities Operating profit 3 22.0 24.1 64.2 97.9 123.4 Adjusting items: - net income statement impact 4-1.7 7.9 (16.1) (16.1) - cash impact (1.6) (1.2) (4.7) (1.2) (2.2) Non cash impact of adjusting items (1.6) 0.5 3.2 (17.3) (18.3) Depreciation and amortisation 4.5 5.0 13.7 13.7 18.2 Changes in working capital (8.0) (4.0) (5.3) (24.5) (13.6) Additional funding for post retirement defined benefit plans (0.8) (0.9) (2.3) (2.4) (3.4) Other non-cash movements 0.7 0.7 2.2 1.5 1.7 Total cash generated from operations 16.8 25.4 75.7 68.9 108.0 Interest received 0.1-0.4-0.1 Interest paid (1.2) (1.1) (9.0) (7.0) (11.0) Dividends paid on preference shares - - (1.8) (1.8) (3.5) Taxation paid (7.6) (5.6) (17.0) (20.4) (26.9) Net cash generated from operating activities 8.1 18.7 48.3 39.7 66.7 Cash flows from investing activities Net (outflow) / inflow from disposal of businesses (net of tax paid) - (0.3) - 24.6 23.2 Net outflow from purchase of business (0.1) - (2.8) - - Purchase of property, plant and equipment (2.1) (2.8) (5.1) (5.3) (9.1) Purchase of intangible assets (computer software) (4.1) (2.9) (11.4) (11.4) (12.6) Net cash (used in)/generated from investing activities (6.3) (6.0) (19.3) 7.9 1.5 Cash flows from financing activities Purchase of ordinary shares - - - (5.8) (5.8) Issue of ordinary shares 0.2-0.8 2.7 2.7 New borrowings 0.5 51.8 0.7 79.1 174.6 Repayment of borrowings - (39.5) - (58.2) (118.9) Dividends paid to ordinary shareholders (16.1) (16.0) (37.9) (37.8) (37.8) Net cash (used in)/generated from financing activities (15.4) (3.7) (36.4) (20.0) 14.8 Net (decrease)/increase in cash, cash equivalents and bank overdrafts (13.6) 9.0 (7.4) 27.6 83.0 Cash, cash equivalents and bank overdrafts at beginning of period 123.7 50.6 116.9 33.4 33.4 Exchange gains/(losses) (1.3) 3.2 (0.7) 1.8 0.5 Cash, cash equivalents and bank overdrafts at end of period 108.8 62.8 108.8 62.8 116.9 Reconciliation of net financial liabilities Net financial liabilities at beginning of period (237.1) (262.9) (262.9) Net (decrease)/increase in cash, cash equivalents and bank overdrafts (7.4) 27.6 83.0 Increase in debt (0.7) (20.9) (55.7) Premium on redemption of preference shares (0.6) (0.6) (0.8) Derivative financial instruments (1.6) - 3.2 Amortisation of arrangement fees (0.8) (1.4) (2.1) Exchange movement 4.6 1.4 (1.8) Net financial liabilities at end of period 7 (243.6) (256.8) (237.1) The accompanying notes form an integral part of this unaudited condensed consolidated financial information.
Notes 1 Basis of preparation The unaudited condensed consolidated financial information in this report has been prepared based on International Financial Reporting Standards (IFRSs), as adopted by the European Union, and applying the accounting policies disclosed in the Group's 2012 Annual Report and Accounts on pages 122 to 125 except as described below. There are no new standards or amendments to standards that are mandatory for the first time in the current financial year which have had a significant impact upon the Group. This condensed consolidated financial information does not comprise statutory accounts within the meaning of Section 498 of the Companies Act 2006. Statutory accounts for the financial year ended 29 January 2012, were approved by the board of directors on 19 April 2012 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain any statement under Section 237 of the Companies Act 1985. Copies of the Company's Annual Report and Accounts are available from Premier Farnell plc, 150 Armley Road, Leeds, LS12 2QQ, England, or from the Company's website at www.premierfarnell.com. 2 Acquisition On 26 June 2012, the Group completed its acquisition of the entire issued share capital of Shenzhen Embest Technology Co Ltd (Embest), a leading provider of embedded system development boards and tools, as well as design engineering services. Of the total consideration of 3.4 million, 0.2 million relates to the provisional fair value of net assets acquired and 3.2 million relates to goodwill attributable to the future profitability of the business. The total consideration includes deferred consideration of 0.8 million dependent on the performance of the acquired business over the next two years. In accordance with IFRS 3 Business Combinations, acquisition costs of 0.4 million have been charged to administrative expenses and shown as an adjusting item in the consolidated income statement for the period. Both the trading results of Embest for the period since acquisition, and also for the period since the start of the financial year had the acquisition taken place on that date, are not material to the Group's results. 3 Segment information 2012/13 Third quarter unaudited 2011/12 Third quarter unaudited Before Adjusting items After Before Adjusting items After adjusting items (Note 4) adjusting items adjusting items (Note 4) adjusting items Revenue Marketing and Distribution Division Americas 89.6-89.6 93.1-93.1 Europe and Asia Pacific 100.8-100.8 107.5-107.5 Other Distribution Businesses 26.3-26.3 25.6-25.6 Total Marketing and Distribution Division 216.7-216.7 226.2-226.2 Industrial Products Division 16.8-16.8 15.6-15.6 233.5-233.5 241.8-241.8 Operating profit Marketing and Distribution Division Americas 6.5-6.5 7.9 0.8 8.7 Europe and Asia Pacific 13.0-13.0 16.1 (2.2) 13.9 Other Distribution Businesses 2.6-2.6 2.5 (0.1) 2.4 Total Marketing and Distribution Division 22.1-22.1 26.5 (1.5) 25.0 Industrial Products Division 2.9-2.9 2.5-2.5 Head Office costs (3.0) - (3.0) (3.2) (0.2) (3.4) 22.0-22.0 25.8 (1.7) 24.1 2012/13 Nine months unaudited 2011/12 Nine months unaudited Before Adjusting items After Before Adjusting items After adjusting items (Note 4) adjusting items adjusting items (Note 4) adjusting items Revenue Marketing and Distribution Division Americas 269.7-269.7 281.4-281.4 Europe and Asia Pacific 314.0-314.0 338.3-338.3 Other Distribution Businesses 77.8-77.8 73.6-73.6 Total Marketing and Distribution Division 661.5-661.5 693.3-693.3 Industrial Products Division 51.2-51.2 46.4-46.4 712.7-712.7 739.7-739.7 Operating profit Marketing and Distribution Division Americas 19.7 (0.6) 19.1 24.2 0.8 25.0 Europe and Asia Pacific 46.4 (7.3) 39.1 53.9 (2.2) 51.7 Other Distribution Businesses 7.5-7.5 6.7 (0.1) 6.6 Total Marketing and Distribution Division 73.6 (7.9) 65.7 84.8 (1.5) 83.3 Industrial Products Division 8.5-8.5 7.1 17.8 24.9 Head Office costs (10.0) - (10.0) (10.1) (0.2) (10.3) 72.1 (7.9) 64.2 81.8 16.1 97.9
3 Segment information (continued) 2011/12 Full year audited Before Adjusting items After adjusting items (Note 4) adjusting items Revenue Marketing and Distribution Division Americas 369.1-369.1 Europe and Asia Pacific 443.1-443.1 Other Distribution Businesses 99.4-99.4 Total Marketing and Distribution Division 911.6-911.6 Industrial Products Division 61.5-61.5 973.1-973.1 Operating profit Marketing and Distribution Division Americas 31.3 0.8 32.1 Europe and Asia Pacific 71.0 (2.2) 68.8 Other Distribution Businesses 9.3 (0.1) 9.2 Total Marketing and Distribution Division 111.6 (1.5) 110.1 Industrial Products Division 9.5 17.8 27.3 Head Office costs (13.8) (0.2) (14.0) 107.3 16.1 123.4 4 Operating profit 2012/13 2011/12 2012/13 2011/12 2011/12 Statutory operating profit is stated after (charging)/crediting the following: Third Third Nine Nine Full quarter quarter months months year unaudited unaudited unaudited unaudited audited - Restructuring costs - (2.8) (7.5) (2.8) (2.8) - Acquisition costs - - (0.4) - - - Gains on disposal of businesses - 1.1-18.9 18.9 - (1.7) (7.9) 16.1 16.1 Due to their significance and nature, adjusted operating expenses and adjusted operating profit has been disclosed on the face of the income statement which exclude these items above. 5 Taxation The taxation charge represents an effective tax rate for the 2012/13 financial year on profit before tax and preference dividends of 27.5% (2011/12: 27.5% before tax on gains from business disposals). 6 Earnings per share Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders for the period by the weighted average number of ordinary shares in issue during the period, excluding those shares held by the Premier Farnell Executive Trust. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume issue of all dilutive potential ordinary shares, being those share options and awards with a non-market based performance condition granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period, and those shares with a market based performance condition based on the current estimate of the number of shares that will vest under the performance criteria. Reconciliations of earnings and the weighted average number of ordinary shares used in the calculations are set out below. 2012/13 2011/12 Nine months unaudited Nine months unaudited Basic per Diluted per Basic per Diluted per Earnings share amount share amount Earnings share amount share amount pence pence pence pence Earnings per share Profit attributable to ordinary shareholders 34.9 9.6 9.5 62.4 17.2 16.9 Restructuring costs 7.5 2.1 2.1 2.8 0.7 0.8 Tax attributable to restructuring costs (2.1) (0.6) (0.6) (0.7) (0.2) (0.2) Acquisition costs 0.4 0.1 0.1 - - - Tax attributable to acquisition costs (0.1) - - - - - Gains on disposal of businesses - - - (18.9) (5.2) (5.1) Tax on gains on disposal of businesses - - - 3.2 0.9 0.9 Adjusted profit attributable to ordinary shareholders 40.6 11.2 11.1 48.8 13.4 13.3 Number Number Weighted average number of shares 364,122,334 363,000,958 Dilutive effect of share options 3,069,651 5,230,907 Diluted weighted average number of shares 367,191,985 368,231,865
6 Earnings per share (continued) 2011/12 Full year audited Basic per Diluted per Earnings share amount share amount pence pence Earnings per share Profit attributable to ordinary shareholders 76.9 21.2 20.9 Restructuring costs 2.8 0.7 0.7 Tax attributable to restructuring costs (0.7) (0.2) (0.2) Gains on disposal of businesses (18.9) (5.2) (5.1) Tax on gains on disposal of businesses 3.2 0.9 0.9 Adjusted profit attributable to ordinary shareholders 63.3 17.4 17.2 Number Weighted average number of shares 363,091,496 Dilutive effect of share options 4,952,153 Diluted weighted average number of shares 368,043,649 Adjusted Earnings per share has been provided in order to facilitate year on year comparison. 7 Net financial liabilities 28 October 30 October 29 January 2012 2011 2012 unaudited unaudited audited Cash and cash equivalents 108.8 62.8 116.9 Unsecured loans and overdrafts (289.6) (256.8) (294.2) Net financial liabilities before preference shares and derivatives (180.8) (194.0) (177.3) Preference shares (62.4) (61.6) (61.8) Derivative financial instruments (net) (0.4) (1.2) 2.0 Net financial liabilities (243.6) (256.8) (237.1) Net financial liabilities are analysed in the balance sheet as follows: Current assets Cash and cash equivalents 108.8 62.8 116.9 Derivative financial instruments 0.4-2.3 109.2 62.8 119.2 Current liabilities Other loans (1.7) (0.6) (1.0) 5.9% US dollar Guaranteed Senior Notes payable 2013 (99.2) - - Derivative financial instruments (0.8) (1.2) (0.3) (101.7) (1.8) (1.3) Non-current liabilities Bank loans (18.5) (78.9) (18.9) 5.9% US dollar Guaranteed Senior Notes payable 2013 - (99.3) (100.8) 3.0% US dollar Guaranteed Senior Notes payable 2016 (53.0) (53.5) (54.0) 5.2% US dollar Guaranteed Senior Notes payable 2017 (18.8) (18.9) (19.1) 4.4% US dollar Guaranteed Senior Notes payable 2018 (36.3) - (37.0) 4.8% US dollar Guaranteed Senior Notes payable 2021 (56.7) - (57.8) Other loans (5.4) (5.6) (5.6) Preference shares (62.4) (61.6) (61.8) (251.1) (317.8) (355.0) At 28 October 2012, the Group's syndicate bank facilities totalled 200 million expiring in October 2016. Based on these facilities, the headroom on bank borrowings at 28 October 2012 was 180 million. 8 Pension commitments The valuation of the Group's defined benefit pension schemes in the UK and the US has been updated at 28 October 2012 on an actuarial basis, applying current discount and inflation rate assumptions and incorporating the market value of assets at 28 O ctober 2012. The actuarial losses in the nine months of 12.7 million ( 8.9 million net of associated deferred tax) has been taken through the statement of other comprehensive income. 9 Exchange rates The principal average exchange rates used to translate the Group's overseas profits were as follows: 2012/13 2011/12 2012/13 2011/12 2011/12 Third Third Nine Nine Full quarter quarter months months year US dollar 1.60 1.60 1.58 1.61 1.60 Euro 1.26 1.15 1.24 1.14 1.15