17 March 2016

 

PREMIER FARNELL PLC

 

FULL YEAR UNAUDITED RESULTS FOR THE FINANCIAL YEAR ENDED 31 JANUARY 2016

 

Adjusted operating profit in line with guidance. 

 

Financial Summary	Total Operations*			Continuing Operations
(£m except for per share) ( unaudited - 52 weeks)	FY 15/16 (d)	FY 14/15		FY 15/16(d)	FY 14/15**
Total revenue	982.7	960.1		903.9	886.6
Sales per day growth (a)	1.6%	3.3%		1.7%	3.5%
Gross profit	338.2	353.2		307.2	323.6
Gross margin	34.4%	36.8%		34.0%	36.5%
Adjusted operating profit (b)	73.0	88.0		57.4	73.0
Total operating profit	58.6	83.1		44.9	68.1
Adjusted profit before tax (b)	57.3	74.0		41.7	59.0
Adjusted earnings per share (b)	11.1p	13.8p		8.2p	10.9p
Basic earnings per share	8.1p	12.9p		5.6p	10.0p
Adjusted free cash flow (c)	66.7	35.2
Net debt	243.3	256.6

*Includes Akron Brass (presented as a discontinued operation) **Restated to reflect Akron Brass disposal

 

Financial Performance Continuing Operations (excludes Akron Brass) 2015/16:

·        Sales per day growth of 1.7% year-on-year, reflecting growth in Continental Europe and Asia-Pacific, weakness in North America and UK.

·        Gross profit margin reduction, 2015/16 34.0% (2014/15: 36.5%) due to adverse exchange rate movements, price positioning and product mix.

·        Adjusted operating profit of £57.4m (2014/15: £73.0m).

·        Total Operations (including Akron Brass) adjusted operating profit of £73.0m (2014/15: £88.0m) in line with management guidance.

 

Operational Review:

·        Sale of Akron Brass for $224.2m completed on 16 March 2016, reducing net debt and enabling increased focus on core distribution business.

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

 

CEO Appointment:

·        Jos Opdeweegh joining as Chief Executive 11 April 2016.

 

Dividend:

·        Proposed final dividend of 3.6p per share, a reduction of 40% on the prior year. Total proposed 2015/16 dividend of 6.2p a reduction of 40% on the prior year, following previously announced dividend rebasing.

 

Val Gooding, Chairman, commented:

"We have commenced implementation of a series of actions in the past year to address a challenging period for Premier Farnell. The operational review has already yielded positive results which we will continue to build on. On 16 March 2016, we completed the sale of Akron Brass for $224.2m, enabling the company to reduce its net debt and concentrate on its core activities. We have also rebased the dividend to a level from which we aim to deliver a sustainable and progressive dividend policy.

"Following an extensive global search, we were delighted to announce last week the appointment of Jos Opdeweegh as Chief Executive of Premier Farnell.  His strong international experience and track record of value creation provides a strong platform for the next stage of our development."

Mark Whiteling, Interim Chief Executive Officer, commented:

"Although we continued to face difficult trading conditions in our North America and UK markets, we are making good progress in achieving increased operating efficiency and are on track to deliver expected cost savings of £19 million in financial year 2017/2018.

"We believe that Premier Farnell is now better positioned to serve its customers and expect our business to make progress during the current financial year as we continue to focus on improving our operational and financial performance."

Outlook

Looking ahead, we expect global market conditions to remain variable and are not anticipating any near-term diminution in the competitive pressures on our businesses. We are focused on implementing the actions from our operating review in order to stabilise our gross margin and reduce our operating costs. Whilst we expect some gross margin decline, we anticipate making progress during 2016/17.

A presentation will be held at 9am this morning at the offices of FTI Consulting, 200 Aldersgate, London, EC1A 4HD.

 

Dial in details for conference call:

Dial-in: 44(0) 20 3427 1905

Confirmation Code: 2545002

The call will be available as a live and on demand webcast on the Investor Relations section of Premier Farnell website: http://edge.media-server.com/m/p/2ho6vt5n

 

For further information, contact:

Mark Whiteling, Interim Chief Executive Officer Helen Willis, Interim Chief Financial Officer Paul Sharma, Investor Relations	Premier Farnell plc	+44 (0) 20 7851 4107
Richard Mountain/Andrew Lorenz	FTI Consulting	+44 (0) 20 3727 1374

 

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

Premier Farnell will hold its AGM on 14 June 2016. A trading update is expected to be announced on 16 June 2016.

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

(b) 2015/16 and 2014/15 adjusting items are outlined in the financial and operating review.

(c)  Adjusted free cash flow comprises total cash generated from operations, excluding cash flows related to adjusting items, less net capital expenditure, interest, preference dividends and tax payments.

(d) Financial year 2015/2016 ended 31 January 2016.

 

Company Overview

Premier Farnell plc is a global distributor of technology products and solutions. It has approximately 3,600 employees (excluding Akron Brass), operates in 36 countries, and consists of two continuing business units: element14; and CPC/MCM. The sale of Akron Brass was announced in September 2015 and was approved by shareholders on 16 March 2016 and completed on the same day. Given the disposal, Akron Brass is viewed as a discontinued operation and is presented accordingly in the financial statements.

Operational Review

In December 2015, we presented the findings of our operational review, confirming certain opportunities to improve the operational and financial performance of our business. A key focus of the operational review is the stabilisation of gross margins through improved controls on discounting. We are on track to deliver cost savings of £19m on an annualised basis in 2017/18. 

 

The review identified four areas that offered the greatest opportunity for simplification and improvement. These were: 

·      Improved customer proposition and a more effective multi-channel experience. Our major focus has been to build on the global online platform implemented last year and we have subsequently implemented two major upgrades of our online platform.

·      Improved sales force effectiveness through the redesign of the new global sales & marketing organisation.

·      Improved direct procurement through a global product organisation to drive product cost savings.

·      Operating and indirect procurement improvements across the business with the implementation of a global operating model.

 

During 2015/16, we discontinued our direct operations in Brazil, which were no longer cost-efficient.

FINANCIAL AND OPERATING REVIEW

Revenue

We experienced continued decline in our UK and North America markets during 2015/16. Although purchasing managers' indices (PMI) in the UK and North America have been broadly stable, there were increased competitive pressures in these markets. While there have been similar PMIs in mainland Europe, we have experienced a more benign marketplace and we saw strong growth in Continental Europe. Similarly, we have seen strong growth in APAC, ahead of regional GDP growth.

 

Revenue (£m)	H2 15/16	H2 14/15		FY 15/16	FY 14/15
element14	378.5	382.7		778.5	769.5
CPC/MCM	64.1	60.6		125.4	117.1
Akron Brass	41.5	37.5		78.8	73.5
Total Group	484.1	480.8		982.7	960.1

 

Revenue for element14 for 2015/16 was £778.5m (2014/15: £769.5m), a 1.2% increase on the prior year and revenue for CPC/MCM during 2015/16 was £125.4m (2014/15: £117.1m) a 5.0% increase on the prior year. Akron Brass revenue for 2015/16 was £78.8m (2014/15: £73.5m) a decline of 0.2% year-on-year.

Sales growth(a)		Q1	Q2	Q3	Q4	H2		FY
Europe		5.9%	1.6%	(0.5%)	1.1%	0.3%		2.1%
Americas		2.2%	(0.8%)	(6.9%)	(5.1%)	(6.1%)		(2.6%)
APAC		16.2%	8.2%	14.9%	19.4%	17.2%		14.6%
element14		5.3%	1.2%	(1.9%)	0.3%	(0.8%)		1.2%
CPC/MCM		13.9%	(1.9%)	7.7%	1.0%	4.3%		5.0%
Continuing Operations		6.3%	0.8%	(0.6%)	0.4%	(0.1%)		1.7%
Excluding Raspberry Pi		2.6%	0.0%	(3.7%)	(2.0%)	(2.9%)		(0.8%)
Akron Brass		(6.1%)	(4.6%)	13.6%	(2.7%)	5.1%		(0.2%)
Total Operations		5.4%	0.4%	0.5%	0.2%	0.3%		1.6%

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

 

Continuing Operations sales per day growth in 2015/16 was 1.7% year-on-year. Sales momentum increased slightly overall in the fourth quarter, due to growth in Continental Europe and APAC. We saw sales per day decline of 6.9% and 5.1% in Q3 and Q4 respectively in the Americas. We are looking to address the performance in the UK and North America markets and have appointed new senior management, as announced in the Q3 update. We saw sales per day growth of 14.6% in APAC for 2015/2016.

 

Continental Europe benefitted from strong sales per day growth of 7.0% year-on-year, in spite of the mixed economic backdrop across some of the Eurozone. This strong performance was offset by weakness in the UK, where conditions remain challenging and our performance has been mixed, with a second half sales decline of 9.5%.

 

Sales per day in the Americas declined over the second half compared to the prior year. While this was consistent with weaker US manufacturing PMIs in the second half, we have initiated a product-led repositioning of the business focused on industrial electronics.

 

Excluding Raspberry Pi, continuing operations sales per day declined 2.0% in Q4, compared with a decline of 3.7% in Q3. In the second half of 2015/16, continuing operations sales per day excluding Raspberry Pi declined 2.9% year-on-year. In February 2016, we launched the latest version of the Raspberry Pi, the Raspberry Pi 3.

 

CPC/MCM second half sales growth benefitted significantly from sales of Raspberry Pi 2, with year-on-year revenue growth of 4.3%.

Gross margin and gross profit

Gross margin for continuing operations fell from 36.5% in 2014/15 to 34.0% in 2015/16, driven mainly by the continuing impact of foreign exchange of -1.0% percentage point, -0.6% percentage points of price positioning and -0.6% percentage points of product mix.

Adjusted operating profit

Adjusted Operating Profit(b) (£m) Operating Margin %	H2 15/16	H2 14/15(c)		FY 15/16	FY 14/15(c)
element14	23.6 6.2%	33.9 8.8%		56.5 7.3%	73.2 9.5%
CPC/MCM	5.5 8.7%	6.1 10.2%		11.8 9.4%	11.7 10.0%
Central costs	(5.4)	(5.0)		(10.9)	(11.9)
Continuing Operations	23.7 5.4%	35.0 7.9%		57.4 6.4%	73.0 8.2%
Akron Brass	8.3 20.0%	7.5 20.0%		15.6 19.8%	15.0 20.5%
Total Group	32.0 6.6%	42.5 8.8%		73.0 7.4%	88.0 9.2%

(b) 2015/16 and 2014/15 adjusting items are outlined below (c) Restated to reflect Akron Brass disposal

Adjusted operating profit from total operations for the full year was £73.0m (2014/15: £88.0m), representing a decline of 17.0% year-on-year. Operating margin of 7.4% (adjusted) reflected a decline in gross margin as discussed above.

Adjusting items

In 2015/16, we charged £14.4m of adjusting items to the income statement of which £1.9m related to Akron Brass disposal costs. The remaining £12.5m in continuing operations consists of £11.7m related to the Group's operational review and global business reorganisation programme, £1.1m associated with the closure of our Brazil operation, £1.6m for senior management exit costs and a legal provision release of -£1.9m booked in the year.

The £11.7m costs associated with the Group's operational review and global business reorganisation programme consist of £3.8m of severance payments, £1.5m of asset write offs and £6.4m associated with the incremental resource requirements to design and plan the execution of the programmes, some of which will continue into 2016/17.

Total operating profit from total operations was £58.6m for the full year, reflecting a net cost from adjusting items of £14.4m (2014/15: £83.1m, after reflecting a net cost from adjusting items of £4.9m), representing a decline of 29.5% year-on-year.

Cash Flow

Adjusted free cash flow as a percentage of sales of 6.8% for the full year reflected strong working capital management. We do not expect a similarly strong level of working capital management to be repeated during 2016/2017. We benefitted, in part, from inflow of £6.7m from receivables and an inflow of £12.1m from payables as a result of working capital actions undertaken. Net cash inflow from working capital was £18.8m (2014/15: £15.1m outflow), resulting in adjusted cash generated from operations of £108.8m, an adjusted cash conversion of 149.0% (2014/15: 97.5%).

After adjusting items and ordinary dividends, cash generated in the period was £25.9m.

 

Net debt

Net financial liabilities (including preference shares) for total operations decreased to £243.3m from £256.6m at the end of the prior financial year. Net financial liabilities fell in the year due to the cash generated from working capital actions undertaken as noted above.  This was offset by an increase of £8.7m, due to the impact of exchange rates principally in relation to our US$ denominated private placement notes, and other non-cash movements of £3.9m.

 

Net cash proceeds arising from the disposal of Akron Brass will be used to reduce Premier Farnell's existing indebtedness including the redemption of all its preference shares. 

 

At the year end, net debt to adjusted EBITDA was 2.6x and headroom on bank borrowings was £216.5m under facilities in place until September 2019.

 

The pro forma impact of the disposal on the Group's total net indebtedness as at 2 August 2015, as if the disposal had occurred on 2 August 2015, was a reduction of £115.1 million from £235.3 million to £120.2 million.

 

Finance Costs

Net finance costs in 2015/16 were £15.7m (2014/15: £14.0m). This comprises net interest payable of £12.0m (2014/15: £10.5m), which was covered 6.1 times by adjusted total operating profit, and a net charge of £3.7m (2014/15: £3.5m) in respect of the Company's convertible preference shares.

 

Adjusted profit before tax

Adjusted profit before tax from total operations for the full year was £57.3m (2014/15: £74.0m), a decline of 22.6% on the previous year. Total profit before tax from total operations for 2015/16 was £42.9m (2014/15: £69.1m), a decline of 37.9% on the previous year.

 

Tax

The taxation charge represents an effective tax rate for the 2015/16 financial year on profit before tax and preference dividends of 28.4% (2014/15: 30.0%). After excluding adjusting items, the effective rate is 27.2% (2014/15: 29.9%). The effective tax rate for continuing operations is 26.2% (2014/15: 30.4%). After excluding adjusting items, the effective rate is 25.8% (2014/15: 30.3%).

 

Earnings per share

Adjusted basic earnings per share for the financial year are 11.1p (2014/15: 13.8p). Basic earnings per share after the net impact of adjusting items are 8.1p (2014/15: 12.9p). Adjusted basic earnings per share for continuing operations are 8.2p (2014/15: 10.9p). Basic earnings per share for continuing operations after the net impact of adjusting items are 5.6p (2014/15: 10.0p).

 

Akron Brass Disposal

In September 2015, we announced the decision to sell Akron Brass, as it did not fit strategically within the portfolio given the Group's refocus on its core distribution activities. On 5 February 2016, we entered into a conditional agreement with IDEX Corporation with respect to the sale of Akron Brass Holding Corp. for a consideration of US$224.2m payable in cash on completion, subject to customary working capital adjustments. On 16 March 2016 we received shareholder approval for the disposal.

 

Further to our announcement on 16 March 2016 regarding shareholders' approval for the proposed disposal of Akron Brass Holding Corp., as described in the circular to shareholders dated 29 February 2016, we are pleased to announce that all conditions to the disposal have been satisfied and the disposal has now been completed.

 

The sale of Akron Brass has been presented as a discontinued operation, with the assets and liabilities of Akron Brass classified as "held for sale". Total consideration receivable will be $224.2m (excluding disposal costs) payable on completion, subject to customary adjustments. Net cash proceeds arising from the disposal will be used to reduce Premier Farnell's existing indebtedness and to redeem its preference shares.

 

Akron Brass contributed £15.6m adjusted operating profit and £9.1m profit after tax to the Group for the full year (2014/15: £15.0m and £10.7m respectively).

 

Dividend

The Board recommends that the final dividend is 3.6p per share (2014/15: 6.0p per share), making a total for the year of 6.2p per share (2014/15: 10.4p per share). The final dividend, subject to approval at the Annual General Meeting on 14 June 2016, is payable on 23 June 2016 to shareholders on the register at 27 May 2016. Following the dividend rebasing in H1 2015/16, the Group will target a sustainable and progressive dividend with a cover of 1.5x to 2.0x.

 

Retirement and other post-employment benefits

Group liabilities in respect of retirement and other post-employment benefits have fallen from £70.7m in 2014/15 to £58.2m in 2015/16.  The valuation of the Group's defined benefit pension schemes in the UK and the US has been updated at 31 January 2016 on an actuarial basis, applying current discount and inflation rate assumptions and incorporating the market value of assets at 31 January 2016. Remeasurement gains relating to post employment benefit obligations in the year of £8.0 million (£5.9 million net of associated deferred tax) have been taken through the Consolidated Statement of Comprehensive Income.

 

Board Changes

On 8 March 2016, the Board of Premier Farnell plc announced the appointment of Jos Opdeweegh as Chief Executive with effect from 11 April 2016. Mark Whiteling, Interim Chief Executive, will assume the role of Deputy Chief Executive, with continuing oversight of the Finance function, starting 11 April 2016.  Helen Willis will continue as Interim Chief Financial Officer until a permanent CFO is appointed and she has been invited to consider applying for the role.

 

Jos was, until recently, Chief Executive of Neovia Logistics, where he led the carve out from Caterpillar, and for the last 16 years has worked in senior leadership positions in a number of industrial sectors in North America, including as CEO of Americold Realty Trust and of Syncreon (formerly TDS Logistics). 

 

This release contains certain forward-looking statements relating to the business of the Group and certain of its plans and objectives, including, but not limited to, future capital expenditures, future ordinary expenditures and future actions to be taken by the Group in connection with such capital and ordinary expenditures, the expected benefits and future actions to be taken by the Group in respect of certain sales and marketing initiatives, operating efficiencies and economies of scale. By their nature forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Actual expenditures made and actions taken may differ materially from the Group's expectations contained in the forward-looking statements as a result of various factors, many of which are beyond the control of the Group. These factors include, but are not limited to, the implementation of initiatives supporting the Group's strategy, the effect of legislation and regulatory enactments, recruitment and integration of new personnel, the implementation of cost saving initiatives, continued use and acceptance of e-commerce programs and systems, implementation of new IT systems, the ability to expand into new markets and territories, the implementation of new sales and marketing initiatives, changes in demand for electronic, electrical, electromagnetic and industrial products, rapid changes in distribution of products and customer expectations, the ability to introduce and customers' acceptance of new services, products and product lines, product availability, the impact of competitive pricing, fluctuations in foreign currencies, and changes in interest rates and overall market conditions, particularly the impact of changes in worldwide and national economies. The Group does not intend to update the forward-looking statements made herein.

 

 

Condensed Consolidated Income Statement

For the second half and full year ended 31 January 2016

 

		2015/16	2014/15		2015/16		2014/15
		Second	Second		Full		Full
		half	half		year		year
		unaudited	unaudited		unaudited		audited
			restated				restated
	Notes	£m	£m		£m		£m
Continuing operations
Revenue	2	442.6	443.3		903.9		886.6
Cost of sales		(296.2)	(284.2)		(596.7)		(563.0)
Gross profit		146.4	159.1		307.2		323.6
Net operating expenses
-adjusted operating expenses		(122.7)	(124.1)		(249.8)		(250.6)
-adjusting items	4	(9.6)	(2.5)		(12.5)		(4.9)
Total net operating expenses		(132.3)	(126.6)		(262.3)		(255.5)
Operating profit
-adjusted operating profit	2	23.7	35.0		57.4		73.0
-adjusting items	4	(9.6)	(2.5)		(12.5)		(4.9)
Total operating profit	2	14.1	32.5		44.9		68.1
Finance income		0.5	0.4		0.8		0.7
Finance costs
-interest payable		(6.8)	(6.0)		(12.8)		(11.2)
-preference dividends		(1.5)	(1.5)		(2.9)		(2.9)
-premium on redemption of preference shares		(0.4)	(0.2)		(0.8)		(0.6)
Total finance costs		(8.7)	(7.7)		(16.5)		(14.7)
Total profit before taxation		5.9	25.2		29.2		54.1
Taxation	5	(1.7)	(8.3)		(8.4)		(17.3)
Profit for the period from continuing operations		4.2	16.9		20.8		36.8
Discontinued operations
Profit for the year from discontinued operations	3	4.3	5.5		9.1		10.7
Profit for the period attributable to owners of the parent		8.5	22.4		29.9		47.5
Earnings per share
-Basic	6	2.3p	6.1p		8.1p		12.9p
-Diluted		2.3p	6.1p		8.1p		12.8p
Earnings per share (continuing operations)
-Basic	6	1.1p	4.6p		5.6p		10.0p
-Diluted		1.1p	4.6p		5.6p		9.9p
Ordinary dividends
-Interim - proposed					2.6p		4.4p
-Final - proposed					3.6p		6.0p
-Paid					8.6p		10.4p
-Impact on shareholders' funds (£m)					31.6		38.2

 

Condensed Consolidated Statement of Comprehensive Income

For the second half and full year ended 31 January 2016

 

		2015/16	2014/15		2015/16		2014/15
		Second	Second		Full		Full
		half	half		year		year
		unaudited	unaudited		unaudited		audited
			restated				restated
		£m	£m		£m		£m
Profit for the period		8.5	22.4		29.9		47.5
Items that will not be reclassified to profit or loss
Remeasurements of post employment benefit obligations		(3.5)	(24.6)		8.0		(26.7)
Deferred tax credit/(charge) on remeasurements of post employment benefit obligations		1.0	7.2		(2.1)		7.8
Total items that will not be reclassified to profit or loss		(2.5)	(17.4)		5.9		(18.9)
Items that may be reclassified subsequently to profit or loss
Net exchange adjustments		1.9	1.5		(1.6)		0.3
Net fair value (losses)/gains on cash flow hedges		(2.0)	0.9		(2.4)		0.2
Total items that may be reclassified subsequently to profit or loss		(0.1)	2.4		(4.0)		0.5
Total other comprehensive (expense)/income for the period		(2.6)	(15.0)		1.9		(18.4)
Total comprehensive income for the period attributable to owners of the parent		5.9	7.4		31.8		29.1
Total comprehensive income for the period attributable to owners of the parent arises from:
Continuing operations		1.4	2.4		22.5		18.9
Discontinued operations		4.5	5.0		9.3		10.2
		5.9	7.4		31.8		29.1

 

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

 

Condensed Consolidated Balance Sheet

As at 31 January 2016

			31 January		1 February
			2016		2015
			unaudited		audited
	Notes		£m		£m
ASSETS
Non-current assets
-Goodwill			42.6		47.1
-Other intangible assets			36.9		40.4
-Investment held at fair value			1.3		1.0
-Property, plant and equipment			43.3		52.3
-Deferred tax assets			0.6		3.5
Total non-current assets			124.7		144.3
Current assets
-Inventories			247.7		260.9
-Derivative financial instruments	7		2.9		2.4
-Trade and other receivables			126.6		142.5
-Current tax receivable			1.2		0.5
-Cash and cash equivalents	7		28.5		43.8
			406.9		450.1
-Assets classified as held for sale	3		45.6		-
Total current assets			452.5		450.1
LIABILITIES
Current liabilities
-Financial liabilities	7		(54.1)		(6.3)
-Derivative financial instruments	7		(3.1)		(0.2)
-Trade and other payables			(142.7)		(130.7)
-Current tax payable			(9.9)		(12.7)
			(209.8)		(149.9)
-Liabilities classified as held for sale	3		(11.9)		-
Total current liabilities			(221.7)		(149.9)
Net current assets			230.8		300.2
Non-current liabilities
-Financial liabilities	7		(217.7)		(296.3)
-Retirement and other post-employment benefits			(58.2)		(70.7)
-Deferred tax liabilities			(1.1)		(0.3)
Total non-current liabilities			(277.0)		(367.3)
NET ASSETS			78.5		77.2
EQUITY
-Ordinary shares			18.6		18.6
-Equity element of preference shares			8.5		8.5
-Share premium			33.1		32.8
-Capital redemption reserve			5.2		5.2
-Hedging reserve			(0.2)		2.2
-Cumulative translation reserve			15.7		17.3
-Retained earnings			(2.4)		(7.4)
TOTAL EQUITY			78.5		77.2

 

Consolidated Statement of Changes in Equity

For the year ended 31 January 2016

			2015/16		2014/15
			Full		Full
			year		year
			unaudited		audited
			£m		£m
Total equity at beginning of period			77.2		84.7
Profit for the period			29.9		47.5
Other comprehensive income/(expense)			1.9		(18.4)
Total comprehensive income			31.8		29.1
Transactions with owners:
-Ordinary dividends paid			(31.6)		(38.2)
-Ordinary share capital subscribed			0.3		0.1
-Share-based payments			0.8		1.5
Total transactions with owners			(30.5)		(36.6)
Total equity at end of period			78.5		77.2

 

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

 

Condensed Consolidated Statement of Cash Flows

For the second half and full year ended 31 January 2016

		2015/16	2014/15	2015/16	2014/15
		Second	Second	Full	Full
		half	half	year	year
		unaudited	unaudited	unaudited	audited
			restated		restated
	Notes	£m	£m	£m	£m
Cash flows from operating activities
Operating profit
-from continuing operations	2	14.1	32.5	44.9	68.1
-from discontinued operations	3	6.4	7.5	13.7	15.0
Total operating profit		20.5	40.0	58.6	83.1
Adjusting items:
-net income statement impact	3, 4	11.5	2.5	14.4	4.9
-cash impact		(6.4)	(4.3)	(9.3)	(7.0)
Non cash impact of adjusting items		5.1	(1.8)	5.1	(2.1)
Depreciation and amortisation		9.7	7.9	18.9	15.3
Changes in working capital		5.9	(0.7)	18.8	(15.1)
Additional funding for post retirement defined benefit plans		(0.7)	(2.0)	(2.7)	(3.9)
Other non-cash movements		-	(0.3)	0.8	1.5
Total cash generated from operations		40.5	43.1	99.5	78.8
Interest received		0.5	0.4	0.8	0.7
Interest paid		(6.2)	(5.3)	(12.0)	(10.3)
Dividends paid on preference shares		(1.5)	(1.5)	(2.9)	(2.9)
Taxation paid		(6.3)	(9.0)	(11.3)	(17.4)
Net cash generated from operating activities		27.0	27.7	74.1	48.9
Cash flows from investing activities
Net outflow from purchase of business		-	-	-	(7.8)
Adjusting items:
-akron transaction fees		(0.2)	-	(0.2)	-
-cash impact of US property disposal		-	(0.6)	-	(0.6)
Purchase of property, plant and equipment		(3.1)	(2.4)	(5.6)	(6.2)
Purchase of intangible assets		(5.4)	(8.2)	(11.1)	(14.5)
Net cash used in investing activities		(8.7)	(11.2)	(16.9)	(29.1)
Cash flows from financing activities
Issue of ordinary shares		-	-	0.3	0.1
Purchase of preference shares		-	-	-	(11.5)
Proceeds from bank loans		7.5	35.8	15.0	63.3
Repayment of bank loans		(42.0)	(35.1)	(55.0)	(35.1)
Dividends paid to ordinary shareholders		(9.5)	(16.2)	(31.6)	(38.2)
Net cash used in financing activities		(44.0)	(15.5)	(71.3)	(21.4)
Net (decrease)/increase in cash, cash equivalents and bank overdrafts		(25.7)	1.0	(14.1)	(1.6)
Cash, cash equivalents and bank overdrafts at beginning of period		51.3	39.5	43.8	42.8
Exchange gains/(losses)		3.1	3.3	(1.0)	2.6
Cash, cash equivalents and bank overdrafts at end of period		28.7	43.8	28.7	43.8
Reconciliation of net financial liabilities
Net financial liabilities at beginning of period		(235.3)	(240.8)	(256.6)	(225.8)
Net (decrease)/increase in cash, cash equivalents and bank overdrafts		(25.7)	1.0	(14.1)	(1.6)
Decrease/(increase) in debt		34.5	(0.7)	40.0	(28.2)
Purchase of preference shares		-	-	-	11.5
Premium on redemption of preference shares		(0.4)	(0.2)	(0.8)	(0.6)
Derivative financial instruments		(2.0)	0.9	(2.4)	0.2
Amortisation of arrangement fees		(0.4)	(0.4)	(0.7)	(0.6)
Exchange movement		(14.0)	(16.4)	(8.7)	(11.5)
Net financial liabilities at end of period	3, 7	(243.3)	(256.6)	(243.3)	(256.6)

 

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 2014/15 Annual Report and Accounts on pages 97 to 103 except as described below.

 

There are no new IFRS's or IFRIC's that are effective for the first time in the current year which have had a significant impact on the Group.

 

This condensed consolidated financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the financial year ended 1 February 2015, were approved by the Board of Directors on 24 April 2015 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain any statement under Section 498 of the Companies Act 2006. Copies of the Company's Annual Report and Accounts are available from Premier Farnell plc, 150 Armley Road, Leeds, LS12 2QQ, England, or from the Company's website at www.premierfarnell.com.

 

Going concern basis

Having reassessed the principal risks, the directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

 

Estimates

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 1 February 2015.

 

2.  Segment information

To facilitate the effective execution of the Group's strategy, the organisational structure of the Group's marketing and distribution activities has been reshaped. An integrated global structure has been implemented to form the element14 business segment, which replaces the former regional business units in the Americas and Europe/APAC. This simplified global structure will enable the element14 business to better leverage its expertise and resources around the globe, and deliver operating efficiencies and economies of scale.

 

The CPC & MCM (formerly 'MDD Other') business segment is unaffected by these organisational changes.

 

The results of Akron Brass (formerly 'Industrial Products Division') have been classified as discontinued operations in the current period; their performance in this period and comparative periods is therefore part of discontinued operations as presented in note 3.

 

The Group therefore comprises two distinct operating segments, each focussed on specific market sectors. These segments are consistent with the summary management information presented to the Board of Directors, who are identified as the Group's Chief Operating Decision Maker, responsible for allocating resources and assessing performance of the two operating segments. Following the changes above the prior year balances have been restated.

 

 

	2015/16 Second half unaudited						2014/15 Second half unaudited (restated)
	Before		Adjusting		After		Before		Adjusting		After
	adjusting		items		adjusting		adjusting		items		adjusting
	items		(Note 4)		items		items		(Note 4)		items
	£m		£m		£m		£m		£m		£m
Revenue
Europe	169.9		-		169.9		173.8		-		173.8
Americas	163.5		-		163.5		168.8		-		168.8
Asia Pacific	45.1		-		45.1		40.1		-		40.1
element14	378.5		-		378.5		382.7		-		382.7
CPC & MCM	64.1		-		64.1		60.6		-		60.6
	442.6		-		442.6		443.3		-		443.3
Operating profit from continuing operations
element14	23.6		(8.3)		15.3		33.9		(2.2)		31.7
CPC & MCM	5.5		(0.2)		5.3		6.1		-		6.1
Central costs	(5.4)		(1.1)		(6.5)		(5.0)		(0.3)		(5.3)
	23.7		(9.6)		14.1		35.0		(2.5)		32.5

 

 

	2015/16 Full year unaudited						2014/15 Full year audited (restated)
	Before		Adjusting		After		Before		Adjusting		After
	adjusting		items		adjusting		adjusting		items		adjusting
	items		(Note 4)		items		items		(Note 4)		items
	£m		£m		£m		£m		£m		£m
Revenue
Europe	347.9		-		347.9		357.1		-		357.1
Americas	341.0		-		341.0		333.1		-		333.1
Asia Pacific	89.6		-		89.6		79.3		-		79.3
element14	778.5		-		778.5		769.5		-		769.5
CPC & MCM	125.4		-		125.4		117.1		-		117.1
	903.9		-		903.9		886.6		-		886.6
Operating profit from continuing operations
element14	56.5		(11.2)		45.3		73.2		(4.4)		68.8
CPC & MCM	11.8		(0.2)		11.6		11.7		-		11.7
Central costs	(10.9)		(1.1)		(12.0)		(11.9)		(0.5)		(12.4)
	57.4		(12.5)		44.9		73.0		(4.9)		68.1

 

3.  Discontinued operations

On 5 February 2016 the Group announced it had entered into a conditional agreement to sell Akron Brass Holding Corp and its subsidiary ("Akron Brass") to IDEX Corporation.  The Group's shareholders approved the sale on 16 March 2016.

 

The financial performance of Akron Brass is presented within discontinued operations and assets and liabilities classified as held for sale.

 

Income Statement for discontinued operations		2015/16		2014/15
		Full		Full
		year		year
		£m		£m
Revenue		78.8		73.5
Adjusted expenses		(63.2)		(58.5)
- adjusting items		(1.9)		-
Total expenses		(65.1)		(58.5)
Operating profit
- adjusted operating profit		15.6		15.0
- adjusting items		(1.9)		-
Total operating profit		13.7		15.0
Taxation		(4.6)		(4.3)
Profit from discontinued operations		9.1		10.7
Assets and liabilities of Akron Brass classified as held for sale
Assets classified as held for sale
Goodwill		5.2		-
Other intangible assets		3.0		-
Property, plant and equipment		7.0		-
Inventories		18.4		-
Trade and other receivables		11.8		-
Cash and cash equivalents		0.2		-
		45.6		-
Liabilities classified as held for sale
Trade and other payables		(4.8)		-
Current tax payable		(2.6)		-
Deferred tax liability		(0.6)		-
Retirement and other post-employment benefits		(3.9)		-
		(11.9)		-
Net assets		33.7		-
Cash flow statement
Net cash flows from operating activities		16.6		13.4
Net cash flows from investing activities		(1.4)		(1.9)
Net cash flows from financing activities		-		-
Net cash flows from discontinued operations		15.2		11.5

 

 

4.  Operating profit		2015/16		2014/15		2015/16		2014/15
		Second		Second		Full		Full
		half		half		year		year
		unaudited		unaudited		unaudited		audited
		£m		£m		£m		£m
Statutory operating profit is stated after (charging)/ crediting the following:
- Restructuring costs		(9.5)		(2.8)		(13.3)		(5.1)
- Brazil closure costs		(0.1)		-		(1.1)		-
- Legal provision release		-		-		1.9		-
- Acquisition costs		-		-		-		(0.1)
- Net gain on US property disposal		-		0.3		-		0.3
		(9.6)		(2.5)		(12.5)		(4.9)

 

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

 

Restructuring costs of £13.3m incurred in the year include £11.7m relating to the Group's operational review and global business reorganisation programme and £1.6m for senior management exit costs.  The £11.7m costs associated with the Group's operational review and global business reorganisation programme consist of £3.8m of severance payments, £1.5m of asset write offs and £6.4m associated with the additional resource requirements to design and plan the programmes, some of which will continue into FY2016/17.

 

Costs related to the closure of local operations in Brazil of £1.1m were incurred in the year which include severance, legal costs and the write-off, disposal or impairment of assets no longer in use.

 

During the year the release of a £1.9m provision was included within adjusting items, relating to the successful conclusion of a potential legal action.

 

In the prior year, acquisition costs of £0.1 million related to the purchase of AVID Technologies. Restructuring costs of £5.1m incurred in the prior year related to the Group's global business re-organisation. The £0.3 million net gain on US property disposal related to savings on expenses incurred in the relocation of the Group's Americas Head Office.

 

5.  Taxation

The taxation charge represents an effective tax rate for the 2015/16 financial year on total profit before tax and preference dividends of 28.4% (2014/15: 30.0%). After excluding adjusting items, the effective rate is 27.2% (2014/15: 29.9%). The effective tax rate for continuing operations is 26.2% (2014/15: 30.4%). After excluding adjusting items, the effective rate is 25.8% (2014/15: 30.3%).

 

6.  Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to owners of the parent for the period by the weighted average number of ordinary shares in issue during the period, excluding those shares held by the Premier Farnell Executive Trust. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume issue of all dilutive potential ordinary shares, being those share options and awards with a non-market based performance condition granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period.

 

Reconciliations of earnings and the weighted average number of ordinary shares used in the calculations are set out below.

 

	2015/16						2014/15
	Second half unaudited						Second half unaudited
			Basic per		Diluted per				Basic per		Diluted per
			share		share				share		share
	Earnings		amount		amount		Earnings		amount		amount
	£m		pence		pence		£m		pence		pence
Earnings per share
Profit attributable to owners of the parent
Continuing	4.2		1.1		1.1		16.9		4.6		4.6
Discontinued	4.3		1.2		1.2		5.5		1.5		1.5
Total	8.5		2.3		2.3		22.4		6.1		6.1
Restructuring costs	9.5		2.6		2.6		2.8		0.8		0.8
Tax attributable to restructuring costs	(2.2)		(0.6)		(0.6)		(0.8)		(0.2)		(0.2)
Brazil closure costs	0.1		-		-		-		-		-
Tax attributable to Brazil closure costs	-		-		-		-		-		-
Akron transaction fees	1.9		0.5		0.5		-		-		-
Tax attributable to Akron transaction fees	(0.3)		(0.1)		(0.1)		-		-		-
Net gain on US property disposal	-		-		-		(0.3)		(0.1)		(0.1)
Tax attributable to net gain on US property disposal	-		-		-		0.1		-		-
Adjusted profit attributable to owners of the parent	17.5		4.7		4.7		24.2		6.6		6.6
					Number						Number
Weighted average number of shares					368,115,913						367,709,615
Dilutive effect of share options					1,222,790						1,322,335
Diluted weighted average number of shares					369,338,703						369,031,950

 

 

	2015/16						2014/15
	Full year unaudited						Full year audited
			Basic per		Diluted per				Basic per		Diluted per
			share		share				share		share
	Earnings		amount		amount		Earnings		amount		amount
	£m		pence		pence		£m		pence		pence
Earnings per share
Profit attributable to owners of the parent
Continuing	20.8		5.6		5.6		36.8		10.0		9.9
Discontinued	9.1		2.5		2.5		10.7		2.9		2.9
Total	29.9		8.1		8.1		47.5		12.9		12.8
Restructuring costs	13.3		3.6		3.6		5.1		1.4		1.4
Tax attributable to restructuring costs	(3.1)		(0.8)		(0.8)		(1.5)		(0.4)		(0.4)
Brazil closure costs	1.1		0.3		0.3		-		-		-
Tax attributable to Brazil closure costs	-		-		-		-		-		-
Legal provision release	(1.9)		(0.5)		(0.5)		-		-		-
Tax attributable to legal provision release	-		-		-		-		-		-
Akron transaction fees	1.9		0.5		0.5		-		-		-
Tax attributable to Akron transaction fees	(0.3)		(0.1)		(0.1)		-		-		-
Net gain on US property disposal	-		-		-		(0.3)		(0.1)		(0.1)
Tax attributable to net gain on US property disposal	-		-		-		0.1		-		-
Acquisition costs	-		-		-		0.1		-		-
Tax attributable to acquisition costs	-		-		-		-		-		-
Adjusted profit attributable to owners of the parent	40.9		11.1		11.1		51.0		13.8		13.7
					Number						Number
Weighted average number of shares					367,921,735						367,511,796
Dilutive effect of share options					1,099,218						1,498,900
Diluted weighted average number of shares					369,020,953						369,010,696

 

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

 

7.  Net financial liabilities

 

		31 January		1 February
		2016		2015
		unaudited		audited
		£m		£m
Cash and cash equivalents		28.5		43.8
Unsecured loans and overdrafts		(218.5)		(250.1)
Net financial liabilities before preference shares and derivatives		(190.0)		(206.3)
Preference shares		(53.3)		(52.5)
Derivative financial instruments		(0.2)		2.2
Net financial liabilities		(243.5)		(256.6)
Net financial liabilities are analysed in the balance sheet as follows:
Current assets
Cash and cash equivalents		28.5		43.8
Derivative financial instruments		2.9		2.4
		31.4		46.2
Current liabilities
Other loans		(0.8)		(6.3)
Derivative financial instruments		(3.1)		(0.2)
Preference shares		(53.3)		-
		(57.2)		(6.5)
Non-current liabilities
Bank loans		(31.8)		(66.4)
5.2% US dollar Guaranteed Senior Notes payable 2017		(20.9)		(20.0)
4.4% US dollar Guaranteed Senior Notes payable 2018		(40.7)		(38.8)
4.8% US dollar Guaranteed Senior Notes payable 2021		(63.6)		(60.7)
4.0% US dollar Guaranteed Senior Notes payable 2024		(59.2)		(56.5)
Other loans		(1.5)		(1.4)
Preference shares		-		(52.5)
		(217.7)		(296.3)

 

At 31 January 2016, the Group's syndicate bank facilities totalled £250 million expiring in September 2019. Based on these facilities, the headroom on bank borrowings at 31 January 2016 was £216.5 million.

 

8.  Retirement benefit obligations

The valuation of the Group's defined benefit pension schemes in the UK and the US has been updated at 31 January 2016 on an actuarial basis, applying current discount and inflation rate assumptions and incorporating the market value of assets at 31 January 2016. Remeasurements of post employment benefit obligations in the year of £8.0 million (£5.9 million net of associated deferred tax) have been taken through the Consolidated Statement of Comprehensive Income.

 

9.  Exchange rates

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

 

		2015/16		2014/15		2015/16		2014/15
		Second		Second		Full		Full
		half		half		year		year
US dollar		1.50		1.59		1.52		1.64
Euro		1.37		1.28		1.38		1.26

 

10.  Ordinary dividend

The directors are proposing a final dividend in respect of the year ended 31 January 2016, of 3.6p per share which will absorb £13.4 million of shareholders' funds. As the final dividend is subject to approval at the Annual General Meeting of the Company, to be held on 14 June 2016, it has not been provided for as at 31 January 2016. Once approved, the final dividend will be paid on 23 June 2016 to shareholders on the register of members on 27 May 2016.

 

11.  Related party transactions

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

 

12.  Events occurring after the reporting period

On 16 March 2016 shareholder approval was received for the disposal of Akron Brass to IDEX Corporation.