Premier Farnell plc 19th March 2003
Premier Farnell, the leading global marketer and distributor of electronic,
maintenance, repair and operations (MRO) and specialist products and services,
today announces its results for the fourth quarter and the financial year ended
2nd February 2003.
Key Financials, �million
Fourth Fourth Full Year Full Year
Quarter Quarter 2002/3 2001/2
2002/3 2001/2 �m �m
�m �m
Sales 177.2 199.8 759.0 806.4
Profit before taxation, 15.8 16.4 67.2 72.5
goodwill amortisation and
loss on business
disposals
Earnings per share 2.7p 2.0p 9.3p 4.6p
Adjusted earnings per 2.9p 2.2p 11.2p 9.2p
share
Key Financials, $million
$m $m $m $m
(�1 = $1.60) (�1 = $1.42) (�1 = $1.53) (�1 =
$1.43)
Sales 283.5 283.7 1,161.3 1,153.2
Profit before taxation, 25.2 23.3 102.9 103.6
goodwill amortisation and
loss on business
disposals
Earnings per share $0.043 $0.028 $0.142 $0.066
Adjusted earnings per $0.046 $0.031 $0.171 $0.132
share
Highlights
* Strong earnings progress - earnings per share up 102% - adjusted earnings
per share up 22%
* Operating margin 10.9%, despite unprecedented industry downturn
* Net cash flow 111% of operating profit (before goodwill amortisation)
* Sales per day* up 1.2%, at constant exchange rates (including Buck &
Hickman acquired in July 2001)
* Gross margins remain robust
* Dividend maintained
* Major contracts won with US Government, Vauxhall and Rolls-Royce in March
2003
"All in all, this has been a year of achievement in difficult circumstances, to
which some large customer contract wins and market share gains attest. Markets,
for the most part, remained slow, particularly in North America. Despite this,
we have continued to improve our ability to service our customers. Gross
margins have been maintained and costs tightly controlled so that net margins
have remained robust and working capital closely managed.
"We have achieved major financial benefits through the capital restructuring
accomplished in April 2002, including increased earnings per share and dividend
cover, improved cash flow for this and future years, of �9million, reduced
financial gearing and a more balanced capital structure.
"We have developed a comprehensive skill set to capitalise on the accelerating
demand by major companies to improve their indirect materials procurement and
inventory management. These skills have opened access to large customers and
demonstrate that we are achieving significant success which would previously
have been beyond our reach. There remains significant potential to gain market
share and the Group is in a strong position for further progress when the
markets turn."
John Hirst, Group Chief Executive
* Comparison of sales for specific periods is affected by three variables:
1. Changes in exchange rates used to translate the overseas sales in different
currencies into sterling
2. Differences in the number of working days
3. Disposal or acquisition of businesses
To eliminate the impact of these variables and give an accurate comparison, the
percentage change in sales per day is for continuing businesses at constant
exchange rates and is used throughout the preliminary statement.
For further information, contact:
Premier Farnell plc
John Hirst, Group CEO +44 (0) 20 7851 4100
Andrew Fisher, Group Finance Director +44 (0) 20 7851 4100
Nicholas Ross, Group Director, +44 (0) 20 7851 4100
Communications
Richard Mountain +44 (0) 20 7269 7291
at Financial Dynamics (UK)
Andrew Saunders + 1 212 889 4350
at Taylor Rafferty (NA)
The Preliminary Results presentation to analysts on 19th March will be recorded
and be available on the Group website later in the morning of 19th March.
Premier Farnell's announcements and presentations are published on the Internet
at www.premierfarnell.com, together with business information, the 2002 Annual
Report and Accounts and links to all other Group web sites.
A conference call for institutional investors and analysts will be held at 4.00
pm, UK time, on 19th March. To obtain details please call Financial Dynamics or
Taylor Rafferty.
The results for the first quarter of the financial year to 1st February 2004
will be announced on Wednesday 28th May 2003.Premier Farnell plc
CHAIRMAN'S STATEMENT ON RESULTS FOR
THE FINANCIAL YEAR ENDED 2nd FEBRUARY 2003
Premier Farnell, the leading global marketer and distributor of electronic,
maintenance, repair and operations (MRO) and specialist products and services,
today announces its results for the fourth quarter and the financial year ended
2nd February 2003.
Financial Results
NOTE:
All growth rates are quoted throughout for continuing businesses and like
periods at constant exchange rates
Operating profit and operating margins are quoted throughout before goodwill
amortisation
* Group Sales
Group sales for the year were �759.0million (52 weeks) compared to �
806.4million in the previous year (53 weeks). Sales per day*, for continuing
businesses at constant exchange rates, were up 1.2%, including Buck & Hickman
(acquired in July 2001). Excluding Buck & Hickman, sales per day at constant
exchange rates were down 5.1%. Fourth quarter sales were �177.2million (2001/2:
�199.8million). Fourth quarter sales per day, for continuing businesses at
constant exchange rates, were ahead 2.8% compared to last year and 1.4% above
the third quarter.
* Comparison of sales for specific periods is affected by three variables:
1. Changes in exchange rates used to translate the overseas sales in different
currencies into sterling
2. Differences in the number of working days
3. Disposal or acquisition of businesses
To eliminate the impact of these variables and give an accurate comparison, the
percentage change in sales per day is for continuing businesses at constant
exchange rates and is used throughout the preliminary statement.
* Margins
Gross margins remained stable in all businesses and costs continued to be
tightly controlled. Consequently, operating margins have held up well during
the past two years, while the Group's markets have experienced an unprecedented
downturn. Operating profits for the year were �82.9million (2001/2: �
88.4million) before goodwill amortisation, resulting in an operating margin of
10.9% (2001/2: 11.0%). In the fourth quarter, Group operating profits were �
19.7million (2001/2: �21.0million). Group operating margin of 11.1% in the
fourth quarter compared to 10.5% in the fourth quarter last year and 11.3% in
the third quarter. The operating margin in the Marketing and Distribution
Division for the year was 11.4%, (2001/2: 11.4%) and 11.3% in the fourth
quarter (2001/2: 11.2%).
Weakness of the US dollar against sterling in the year resulted in an adverse
currency translation effect on turnover and pre-tax profit of �22.2million and
�0.9million, respectively, and of �9.1million and �0.5million in the fourth
quarter. The net interest charge for the year of �15.7million (2001/2: �
15.9million) was covered 5.3 times by operating profit before goodwill
amortisation.
* Profit Before Tax
Profit before tax and goodwill amortisation and loss on disposal of businesses
was �67.2million, compared with �72.5million last year.
* Capital Restructuring
As described in the September 2002 interim statement, the Company created a
special right, for a limited period, for Preference Shareholders to convert
their Cumulative Redeemable Preference Shares into Ordinary Shares, at an
enhanced conversion rate. The offer resulted in 70% of the Company's Preference
Shares being converted and 89.8million new Ordinary Shares, arising from the
conversion, were issued. The conversion has resulted in increased earnings per
share and reduced financial gearing. It has also improved cash flow by more
than �9million this year, enhanced dividend cover and provided a more balanced
capital structure. In addition, following the expiry of the special conversion
right, the Company acquired 644,000 Preference Shares in the market for
cancellation, at a cost of �8.3million. The total number of Preference Shares
in issue at 2nd February 2003 was 7.8million. The number of ordinary shares now
in issue is 362.4million and the weighted average number of ordinary shares in
issue during the year was 331.6million.
* Earnings per Share
Earnings per share for the year were 9.3p (2001/2: 4.6p). Adjusted earnings per
share for the year (before amortisation of goodwill and the loss on disposal of
businesses) were 11.2pence (2001/2: 9.2pence), up 21.7%. This improvement
reflects the capital restructuring described above and the consequent reduction
in the preference dividend in the year to �10.8million (2001/2: �26.1million).
* Dividend
The Board is recommending a final dividend of 5pence (2001/2: 5pence) making a
total for the year of 9pence (2001/2: 9pence). The dividend is covered 1.14
times (adjusted). The final dividend is payable on 25th June 2003 to
shareholders on the register on 30th May 2003.
* Balance Sheet and Cash Flow
Net debt at 2nd February 2003 was �209.2million, down from �236.4million at 3rd
February 2002, due to the impact of movement in exchange rates on
re-translation of the Group's US dollar denominated borrowings. Net cash flow
from operating activities in the year was 111% of operating profit before
goodwill amortisation. Working capital remains stable and under tight control.
* Loan Note Refinancing
The Company has $155million 7.0% Senior Notes, repayable in June 2003. In
anticipation of this repayment the Company has secured additional funding, to
be drawn in June 2003, of $225million, comprising $159million Senior Notes
payable 2013 at an effective interest rate of 5.9% and $66million Senior Notes
payable 2010 at an effective interest rate of 5.3%.
* Disposal
The year's results reflect the disposal, in the second quarter, of D-A
Lubricants, a non-core business. This resulted in a loss before tax on the
disposal of �4.9million, including �2.6million of goodwill previously
eliminated against reserves. In addition, �0.1m of deferred consideration,
relating to prior year disposals, was received in the fourth quarter.
* Pensions
The Group accounts for pensions in accordance with SSAP 24. The profit and loss
account includes a net pension credit of �4.4million (2001/2: �5.3million) in
relation to all of the Group's pension schemes. It is estimated that this
pension credit will be reduced by approximately �1.5million in the financial
year ending 1st February 2004, primarily as a result of the decline in the
market value of assets in the Group's UK and US defined benefit schemes.
Operations
* Market Overview
The Group's main markets are in North America, Europe, Australasia and Asia.
Economic activity has been subdued during the year in all the countries in
which the Group operates, reflecting continued weakness in industrial demand.
More recently, The Institute of Supply Management surveys in the US have shown
some improvement in order books while equivalent European data has remained
weak. The movement of higher volume electronic product manufacturing and
assembly from the US and Western Europe to areas of lower cost has continued,
while research and development and small quantity manufacturing, which are the
markets targeted by the Group, are generally being maintained in existing
locations.
Activity in the electronics industry, which is a major purchaser of Group
products, was weak throughout the year in both the US and Europe, but appears
to have stabilised. At its lowest point, the market has been estimated to be
some 40% below its peak. Some major customers closed their plants for the last
two weeks of the year and others imposed a short spending freeze to reduce
costs. Despite the low level of industrial activity, Premier Farnell continues
to execute its strategy of forging closer relationships with customers. In
2002, the Group improved its competitive position in all its major territories
by increasing service performance and introducing new products and added value
activities.
Marketing and Distribution Division (MDD)
Newark Electronics, Farnell, Buck & Hickman (acquired July 2001), CPC and MCM
4th Qtr 2002/3 4th Qtr 2001/2 Full Year 2002/ Full Year 2001/
3 2
�m �m
�m �m
Sales 155.2 172.8 660.2 688.2
Op Profit * 17.6 19.4 75.2 78.6
Return on sales 11.3 11.2 11.4 11.4
%*
*Before goodwill amortisation
NOTE: All growth rates are quoted throughout for continuing businesses and like
periods at constant exchange rates
Divisional sales for the year were �660.2million (52 weeks) compared with �
688.2million last year (53 weeks). Sales per day were up 1.0% over last year,
including Buck & Hickman (acquired in July 2001). Sales in the fourth quarter,
were �155.2million, up 2.2% over the same period last year, and 1.4% above the
third quarter.
Throughout the division, work has been focused on winning additional sales in
the absence of any help from the market. The division has concentrated on
improving operational effectiveness and increasing share by targeting specific
market segments. Closer customer relationships are being built using the newly
installed customer relationship management (CRM) Siebel software, and added
value services are helping customers increase their own productivity and reduce
the overall cost of indirect material procurement. Evidence of the success of
this strategy is demonstrated by the contracts signed this year with Vauxhall,
Lockheed Martin, the US Government and Rolls Royce in March 2003.
* The Americas
4th Qtr 2002/3 4th Qtr 2001/2 Full Year 2002/ Full Year 2001/
3 2
�m �m
�m �m
Sales 68.9 85.4 311.6 373.7
Op Profit 7.5 9.3 33.0 38.4
Return on sales 10.9 10.9 10.6 10.3
%
NOTE: All growth rates are quoted throughout for continuing businesses and like
periods at constant exchange rates
Sales in the Americas for the year were �311.6million, compared to �
373.7million last year. Sales per day were down 9.7% against last year. In the
fourth quarter, sales per day were down 2.1% compared to the fourth quarter
last year and down 1.8% compared to the third quarter. The fourth quarter is
normally the weakest as it includes Thanksgiving and Christmas/New Year
holidays. This year, some large customers again took the opportunity to extend
plant shutdowns. Operating margin for the year was 10.6%, compared with 10.3%
in the previous year, despite sales per day being down 9.7%, reflecting tight
control of gross margins and costs.
At Newark, sales per day have been stable from May 2002 in a generally weak
market and internal analysis indicates Newark has gained market share.
Importantly, gross margin remained constant during the year. The Newark
distribution centre in Gaffney, South Carolina, has been recommended for ISO
14001 accreditation for its environmental management system. This
internationally recognised standard is becoming a pre-requisite for trading
with a number of large customers.
MCM sales for the year declined 5.2%, but in the fourth quarter showed growth
of 1.1% on the same period last year, in a difficult market.
* Europe and Asia Pacific
4th Qtr 2002/3 4th Qtr 2001/2 Full Year 2002/ Full year 2001/
3 2
�m �m
�m �m
Sales 86.3 87.4 348.6 314.5
Op Profit * 10.1 10.1 42.2 40.2
Return on sales 11.7 11.6 12.1 12.8
%*
* Before goodwill amortisation
NOTE: All growth rates are quoted throughout for continuing businesses and like
periods at constant exchange rates
Europe and Asia Pacific sales for the year were �348.6million, up 13.3% over
last year, including Buck & Hickman (acquired in July 2001). The fourth quarter
sales performance was encouraging, up 6.5% compared to the same period last
year and 4.2% above the third quarter. Gross margins in Europe and Asia Pacific
were slightly ahead of last year and influenced by Farnell customers ordering
smaller quantities at higher prices.
In the UK, total sales, including Buck & Hickman, for the year were up 19.7% at
�240.8million. Farnell annual sales in the UK were down 9.4% against the
previous year, while in the fourth quarter, sales were down 3.5% compared to
last year but 0.8% above the third quarter. Early in the year, Farnell won the
Queen's Award for International Trade, following a strong export sales
performance. This trend continued with export sales up 22.7% during the year.
The return on sales in Europe and Asia Pacific for the year was 12.1%, (2001/2:
12.8%) with the reduction attributable to the inclusion of Buck & Hickman,
which has a lower operating margin.
Buck & Hickman sales for the year were �96.1million, (2001/2: �52.9million -
acquired in July 2001) and in the fourth quarter sales were up 15.6% compared
to the fourth quarter last year and 8.5% above the third quarter. This
performance and gain in market share in a weak market demonstrate the success
of winning some major customer accounts, in co-operation with Farnell. Also the
focus on specific growth segments such as Health and Safety, have helped sales
of these products increase 29% over the previous year.
CPC sales for the year improved 10.3% against last year and were ahead 10.1% in
the fourth quarter over last year, although, they slowed slightly in January
after a busy Christmas period.
Sales in mainland Europe were down 1.9%, against last year, but were up 3.2% in
the fourth quarter, compared to the previous year, and 5.3% above the third
quarter. Particular success was recorded in Germany and Austria, with fourth
quarter sales 10.1% above last year and 7.6% above the third quarter. This
performance partly reflects the Austrian branch opening earlier in the year,
the development of major account sales and other marketing activities. A sales
office was opened in Italy during March 2003 and the Italian contact centre
staff have re-located to Milan from Leeds, in the UK. This move follows the
pattern of the successful expansion into the Spanish market in 1999.
In January 2003, the principal customer list and certain sales executives of
the electronic component distributor Merkelbach, based in Essen, Germany, were
acquired for 350,000 Euros.
In Asia, annual sales were 10.1% over last year and in the fourth quarter were
15.9% ahead of last year, although they slowed compared to the third quarter.
In Australia, against a weak electronics industry background, sales have been
flat during the year with levels in the fourth quarter similar to last year.
Marketing and Distribution Division - Review of Progress
* Focus on Major Customers Continues
In all Premier Farnell's key markets, major international businesses are
beginning to apply the same procurement discipline to indirect material
procurement that they have traditionally applied to production material costs.
They are increasing their productivity by working with partnership suppliers,
realising savings through electronic procurement, vendor reduction and vendor
managed stockrooms. Premier Farnell's Marketing and Distribution Division is
ideally placed to benefit from this trend around the world.
With Farnell, Buck & Hickman and CPC's unrivalled range of 240,000 products, UK
customers are now able to reduce their vendor numbers easily and lower costs.
Vendor managed inventory installations, ranging from full electronic systems to
weekly manual check arrangements, are in place in many locations. There are now
246 managed stockrooms in North America, up from 98 at the end of last year,
and in the UK there are 157, generating sales 27% ahead of last year. Each of
these builds a closer and more durable relationship with customers and develops
a working partnership.
Sales to major customers increased during the year, compared to the previous
year. In the Americas, the 36 designated major corporate accounts reached 13%
of Newark's sales and sales per day on these accounts improved by 3% over the
previous year. The US Government Supply Agreement, signed in May 2002, fuelled
an increase in Government sales per day of 12%.
In the UK, comparable sales to major customers increased 11%, excluding the new
contract with Vauxhall, announced in October 2002. Contracts were signed with
19 customers during the year, and all are now in the process of development.
Major account sales increased in France and Germany to customers including the
French Department of Defence, Audi and Daimler Chrysler. New business was also
won in Holland, Belgium, Spain and Australia.
The contract with Vauxhall, the UK operating Division of General Motors,
enabled Vauxhall to replace many hundreds of suppliers of consumable products
with Premier Farnell's UK businesses, working as one. A sophisticated vendor
managed inventory system has been installed at Vauxhall with the local
stockroom managed by on-site Buck & Hickman staff. This solution saves Vauxhall
time and administration costs and detailed product usage reports are available
on demand. This contract is expected to generate sales of �40million over five
years. In March 2003, the Group announced a �30million contract over three
years with Rolls-Royce in the UK. This multi-site deal incorporates vendor
managed inventory installations and eProcurement through Exostar, the aerospace
portal.
* Continued Growth in eCommerce Sales
Total electronic sales per day for the year increased 28% over last year, with
Farnell showing growth of 82%. Electronic sales are now 8% of divisional sales.
Websites Show Sales Growth
Sales through websites, generally to smaller customers, have increased
significantly as system improvements were rolled out across many different
countries. Sales per day at Farnell increased 109% during the year and growth
at CPC was 240%, following its new website launch in September 2002. MCM sales
per day increased 29% in the year and at Newark, web sales increased 10%, as
new website functionality was introduced during the latter part of the year.
Further enhancements are planned for the coming year.
eProcurement Partnerships Increased
The division's leading eProcurement capability, which can connect to any
recognised customer computer system, is another major reason for the success in
developing major account sales. eProcurement sales per day in North America
have increased by 52% and are now 27% of North American electronic sales. In
Europe and Asia Pacific, sales per day have shown huge growth from a low base
and in the fourth quarter were more than double third quarter sales.
The flexibility of the system means that a solution to a problem can be
individually designed and exactly matched to customer needs. 43 new
eProcurement partnerships have been completed in North America during the year,
including Fuji Film, NBC and Johnson & Johnson and there are 42 potential
customer partners at various stages of implementation. In Europe and Asia
Pacific, 65 partnerships have been established during the year and 36
additional customers are preparing to implement eProcurement systems.
Generally, eProcurement partnerships take at least 12 -18 months to develop
fully as customers train staff to operate the new systems and impose
compliance. Most customers introducing eProcurement are multi-site
organisations which implement progressively across their organisations. By
working with customers, the division assists them to realise fully the benefit
of their investment, organising face to face courses and Internet guided
training.
* Business Development Initiatives
Challenge Program
Over the last few years, the division has invested in the recruitment of
talented management and higher service levels to improve markedly the quality
of the businesses to address the future needs of customers. It has also
researched, identified and is now installing a world class integrated suite of
customer facing systems. These include the global product and customer
databases, Siebel customer relationship management software for more effective
marketing, data analysis software to understand customer buying patterns,
trading website technology and market leading eProcurement capability. The
combination of people skills and systems has already delivered market share
gains and gross margin stability. Whilst the development of the business will
continue, with the implementation of integrated systems in the UK, (November
2002), and in the US (March 2003), the capital expenditure programme will be
substantially complete.
InOne Brand Launched
Deployment of the integrated customer facing systems and the enhanced
capabilities across the larger businesses in the division now mark a
significant point in the Group's development and is the logical time to bring
the companies together under the new brand name "InOne". Early this year
Newark, Farnell and Buck & Hickman will be renamed as Newark InOne, Farnell
InOne and BuckHickman InOne. MCM will become endorsed as MCM, an InOne company,
while CPC remains unchanged, because its customers have demonstrably different
needs. The cost of this rebranding exercise is �2.4million and will be charged
in the first quarter of the financial year 2003/4.
The unification of the businesses under the "InOne" name highlights to
customers, suppliers and employees the close alignment between these businesses
and their near global capability and reach. It will also enhance international
collaboration. Using the "InOne" brand name as a suffix retains the goodwill of
the existing brands and provides further opportunity to promote, through
marketing initiatives, the major improvements in product range and services
achieved during the recent past. The parent company will continue to be called
Premier Farnell plc.
Marketing Initiatives
Plans are underway this year to increase further activity in a number of
marketing areas so as to secure further market share gains and establish a
broader position for the future.
These initiatives include:
* Introducing a significant number of new products throughout the division.
* Expanding direct marketing to capitalise on the data collected and analysed
over the past year.
* Expanding and promoting the Product Find service database to include 6
million products.
* Introducing a further 1.1 million products to the Newark website listed for
direct search by customers in March 2003.
* Promoting stockroom management for customers using both manual and
electronic systems.
* Continuing to expand the flexible capability to link electronically with
larger customers to increase the number of eProcurement partnerships and
enhance existing relationships.
* Continue to penetrate major account customers with multiple locations to
increase their level of purchases from the division.
Industrial Products Division
4th Qtr 2002/3 4th Qtr 2001/2 Full Year 2002/ Full Year 2001/
3 2
�m �m
�m �m
Sales : 22.0 23.4 93.4 95.8
Continuing 3.6 5.4 22.4
businesses
Businesses sold
Op Profit 3.9 3.7 15.2 17.7
Return on sales 17.7 13.7 15.4 15.0
%
NOTE: All growth rates are quoted throughout for continuing businesses and like
periods at constant exchange rates
* Akron Brass
Sales per day at Akron Brass, the manufacturer of fire service nozzles and
water cannons, were 4.0% above last year. Sales to the US municipal and
original equipment markets increased, but the industrial segment was weaker.
The business has continued to benefit from the investment in new plant in
September 2001 and efficiency rates have continued to improve.
* TPC Wire and Cable
Despite difficult market conditions, TPC achieved growth in sales per day of
3.1% over last year, with fourth quarter sales well ahead of both the same
period last year and the third quarter. The original equipment market has
remained quiet across North America but the maintenance market has improved.
New and engineered products accounted for some 30% of sales during the year,
offsetting other market segment reductions.
* Kent
The Kent distribution business experienced declining markets in most countries,
but sales per day were only 0.9% below last year. The sales force salary
restructuring has now been completed in all countries, although it caused some
disruption in France during the second half of the year. The re-skilling of the
sales force, which accompanied this process, has enabled the introduction of
new products and sales productivity is now increasing across the business.
Outlook
The Group's principal businesses have secured market share gains against a
background of harsh economic and industry conditions. This progress has been
supported by important initiatives in many areas, including eProcurement
solutions, vendor managed inventory installations, increased product ranges,
improved service levels and geographical expansion.
The Group has further enhanced its proposition to customers during the year,
enabling them to increase productivity. Notwithstanding the political and
global economic outlook and the lack of confidence in major industrial markets,
the Board remains confident that it is pursuing the appropriate strategy.
Sir Malcolm Bates
Chairman
19th March 2003
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the United
States Private Securities Litigation Reform Act of 1995: The U.S. Private
Securities Litigation Reform Act of 1995 provides a "safe harbor" for
forward-looking statements. This press release contains certain forward-looking
statements relating to the business of the Group and certain of its plans and
objectives, including, but not limited to, future capital expenditures, future
ordinary expenditures and future actions to be taken by the Group in connection
with such capital and ordinary expenditures, the introduction of new
information technology and e-commerce platforms, 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 cost-saving
initiatives to offset current market conditions, integration of new personnel
and new information systems, continued use and acceptance of e-commerce
programs and systems and the impact on other distribution 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 world-wide and national economies.
Consolidated Profit and Loss Account
For the fourth quarter and financial year ended 2nd February 2003
2002/3 2001/2 2002/3 2001/2
Fourth Fourth Full Full
quarter quarter year year
(13 (14 (52 (53
weeks) weeks) weeks) weeks)
unaudited unaudited audited audited
Notes �m �m �m �m
Turnover 1 177.2 199.8 759.0 806.4
Operating profit
- before amortisation of 19.7 21.0 82.9 88.4
goodwill
- amortisation of goodwill (0.6) (0.6) (2.6) (1.5)
Total operating profit 1 19.1 20.4 80.3 86.9
Loss on disposal of businesses 2 0.1 - (4.8) (11.0)
Net interest payable (3.9) (4.6) (15.7) (15.9)
Profit before taxation 3 15.3 15.8 59.8 60.0
Taxation 4 (3.7) (4.0) (18.2) (21.4)
Profit after taxation 11.6 11.8 41.6 38.6
Preference dividend (1.7) (6.5) (10.8) (26.1)
Profit attributable to
ordinary
shareholders 9.9 5.3 30.8 12.5
Ordinary dividend (18.1) (13.6) (32.6) (24.5)
Retained loss for the year (8.2) (8.3) (1.8) (12.0)
Earnings per share 5
Basic
Before amortisation of 2.9p 2.2p 11.2p 9.2p
goodwill and disposals
After amortisation of goodwill 2.7p 2.0p 9.3p 4.6p
and disposals
Diluted
Before amortisation of 2.9p 2.2p 11.2p 9.2p
goodwill and disposals
After amortisation of goodwill 2.7p 2.0p 9.3p 4.6p
and disposals
Dividend per share 9.0p 9.0p
All of the Group's turnover and operating profit relates to continuing
operations. There is no material difference between the results as disclosed in
the profit and loss account and the results on an unmodified historical cost
basis.
Statement of Total Recognised Gains and Losses
For the financial year ended 2nd February 2003
2002/3 2001/2
Full Full
year year
(52 (53
weeks) weeks)
audited audited
�m �m
Profit after taxation 41.6 38.6
Currency translation (0.3) (1.3)
adjustment
Total recognised gains for 41.3 37.3
the year
Prior year adjustment - 16.2
Total recognised gains since last Annual 41.3 53.5
Report
Consolidated Profit and Loss Account
For the fourth quarter and financial year ended 2nd February 2003
2002/3 2001/2 2002/3 2001/2
Fourth Fourth Full Full
quarter quarter year year
(13 (14 (52 (53
weeks) weeks) weeks) weeks)
unaudited unaudited audited audited
Notes $m $m $m $m
Turnover 1 283.5 283.7 1,161.3 1,153.2
Operating profit
- before amortisation of 31.5 29.8 126.9 126.4
goodwill
- amortisation of goodwill (0.9) (0.8) (4.0) (2.1)
Total operating profit 1 30.6 29.0 122.9 124.3
Loss on disposal of businesses 2 0.2 - (7.4) (15.7)
Net interest payable (6.3) (6.5) (24.0) (22.8)
Profit before taxation 3 24.5 22.5 91.5 85.8
Taxation 4 (5.9) (5.7) (27.9) (30.6)
Profit after taxation 18.6 16.8 63.6 55.2
Preference dividend (2.7) (9.2) (16.5) (37.3)
Profit attributable to ordinary
shareholders 15.9 7.6 47.1 17.9
Ordinary dividend (29.0) (19.3) (49.9) (35.0)
Retained loss for the year (13.1) (11.7) (2.8) (17.1)
Earnings per share 5
Basic
Before amortisation of goodwill and $0.046 $0.031 $0.171 $0.132
disposals
After amortisation of goodwill and $0.043 $0.028 $0.142 $0.066
disposals
Diluted
Before amortisation of goodwill $0.046 $0.031 $0.171 $0.132
and disposals
After amortisation of goodwill and $0.043 $0.028 $0.142 $0.066
disposals
The translation of sterling into
US dollars
has been presented for convenience
purposes only using the following
average
exchange rates: 1.60 1.42 1.53 1.43
Consolidated Balance Sheet
As at 2nd February 2003
2ndFebruary 3rd February
2003 2002
audited audited
Notes �m �m
Fixed Assets
Intangible assets 48.5 51.1
Tangible assets 112.9 114.1
Interests in own shares 0.2 0.5
161.6 165.7
Current Assets
Stocks 147.8 152.9
Debtors - due within one year 121.8 132.1
- due after more than one year 82.2 87.0
Cash and short term deposits 8 29.6 28.1
381.4 400.1
Creditors due within one year
Loans and overdrafts 8 (97.3) (23.0)
Other (157.4) (145.6)
(254.7) (168.6)
Net current assets 126.7 231.5
Total assets less current liabilities 288.3 397.2
Creditors due after more than one year
Loans 8 (141.5) (241.5)
Provisions for liabilities and charges 6 (43.3) (44.2)
Net assets 103.5 111.5
Equity shareholders' funds (23.2) (375.2)
Non-equity shareholders' funds 126.7 486.7
Total shareholders' funds 103.5 111.5
Reconciliation of Movements in Shareholders' Funds
For the financial year ended 2nd February 2003
2002/3 2001/2
Full Full
year year
(52 weeks) (53 weeks)
audited audited
Notes �m �m
Profit after taxation 41.6 38.6
Dividends - preference (10.8) (26.1)
- ordinary (32.6) (24.5)
(1.8) (12.0)
New share capital subscribed 0.7 0.2
Purchase of own preference shares 9 (8.3) -
Preference share conversion costs 9 (0.9) -
Goodwill reinstated on disposal of 2 2.6 25.6
businesses
Currency translation adjustment (0.3) (1.3)
Net change in shareholders' funds (8.0) 12.5
Opening shareholders' funds 111.5 99.0
Closing shareholders' funds 103.5 111.5
Consolidated Balance Sheet
As at 2nd February 2003
2nd 3rd
February February
2003 2002
audited audited
$m $m
Fixed Assets
Intangible assets 79.5 72.0
Tangible assets 185.2 160.9
Interests in own shares 0.3 0.7
265.0 233.6
Current Assets
Stocks 242.4 215.6
Debtors - due within one 199.8 186.2
year
- due after more than 134.8 122.7
one year
Cash and short term 48.5 39.6
deposits
625.5 564.1
Creditors due within one
year
Loans and overdrafts (159.6) (32.4)
Other (258.1) (205.3)
(417.7) (237.7)
Net current assets 207.8 326.4
Total assets less 472.8 560.0
current liabilities
Creditors due after more
than one year
Loans (232.1) (340.5)
Provisions for (71.0) (62.3)
liabilities and charges
Net assets 169.7 157.2
Equity shareholders' (38.1) (529.0)
funds
Non-equity shareholders' 207.8 686.2
funds
Total shareholders' 169.7 157.2
funds
The translation of
sterling into US dollars
has been presented for
convenience
purposes only using the
following year end
exchange rates: 1.64 1.41
Summarised Consolidated Cash Flow Statement
For the fourth quarter and financial year ended 2nd February 2003
2002/3 2001/2 2002/3 2001/2
Fourth Fourth Full Full
quarter quarter year year
(13 (14 (52 weeks) (53
weeks) weeks) weeks)
unaudited unaudited audited audited
Notes �m �m �m �m
Operating profit 19.1 20.4 80.3 86.9
Depreciation and 2.3 1.7 11.6 8.9
non-cash items
Working capital (3.0) 6.7 0.1 11.3
Net cash inflow from
operating
activities 7 18.4 28.8 92.0 107.1
Net interest payable (7.7) (8.1) (15.8) (15.6)
Preference dividends (3.3) (13.0) (10.8) (26.1)
Taxation paid (1.6) (8.0) (12.7) (27.4)
Purchase of tangible (9.8) (4.1) (24.9) (24.8)
fixed assets
Sale of tangible 1.3 0.6 1.7 1.3
fixed assets
Purchase of own - - - (0.6)
ordinary shares
Purchase of - (0.1) - (66.0)
subsidiary
undertaking
Purchase of minority - (0.3) - (0.3)
interest
Disposal of 0.1 (0.4) 3.3 27.5
subsidiary
undertakings (net of
costs)
Ordinary dividends - - (28.1) (24.5)
paid
Cash (outflow)/
inflow before use of
liquid resources and (2.6) (4.6) 4.7 (49.4)
financing
Decrease in short
term deposits
with banks - - - 16.3
Issue of ordinary 0.2 0.2 0.7 0.2
shares
Purchase of own - - (8.3) -
preference shares
Preference share - - (0.9) -
conversion costs
New bank loans 6.1 - 29.1 48.0
Repayment of bank (13.0) (6.0) (23.0) (11.0)
loans
(Decrease)/increase (9.3) (10.4) 2.3 4.1
in cash
Reconciliation of net
debt
Net debt at beginning (236.4) (179.2)
of year
Increase in cash 2.3 4.1
Decrease in short term - (16.3)
deposits
Increase in debt (6.1) (37.0)
Exchange movement 31.0 (8.0)
Net debt at end of 8 (209.2) (236.4)
year
Summarised Consolidated Cash Flow Statement
For the fourth quarter and financial year ended 2nd February 2003
2002/3 2001/2 2002/3 2001/2
Fourth Fourth Full Full
quarter quarter year year
(13 weeks) (14 (52weeks) (53 weeks)
weeks)
unaudited unaudited audited audited
$m $m $m $m
Operating profit 30.6 29.0 122.9 124.3
Depreciation and non-cash 3.6 2.4 17.7 12.7
items
Working capital (4.8) 9.5 0.2 16.2
Net cash inflow from
operating
activities 29.4 40.9 140.8 153.2
Net interest payable (12.3) (11.5) (24.2) (22.3)
Preference dividends (5.3) (18.5) (16.5) (37.3)
Taxation paid (2.6) (11.4) (19.4) (39.2)
Purchase of tangible (15.7) (5.8) (38.1) (35.5)
fixed assets
Sale of tangible fixed 2.1 0.8 2.6 1.9
assets
Purchase of own ordinary - - - (0.9)
shares
Purchase of subsidiary - (0.1) - (94.4)
undertaking
Purchase of minority - (0.4) - (0.4)
interest
Disposal of subsidiary 0.2 (0.6) 5.0 39.3
undertakings (net of
costs)
Ordinary dividends paid - - (43.0) (35.0)
Cash (outflow)/inflow
before use of
liquid resources and (4.2) (6.6) 7.2 (70.6)
financing
Decrease in short term deposits
with banks - - - 23.3
Issue of ordinary 0.3 0.3 1.1 0.3
shares
Purchase of own - - (12.7) -
preference shares
Preference share - - (1.4) -
conversion costs
New bank loans 9.8 - 44.5 68.6
Repayment of bank (20.8) (8.5) (35.2) (15.7)
loans
(Decrease)/increase in (14.9) (14.8) 3.5 5.9
cash
The translation of sterling
into US dollars
has been presented for
convenience
purposes only using the
following average
exchange rates: 1.60 1.42 1.53 1.43
Notes
1) Segment information
i) Business segments
2002/3 2001/2 2002/3 2001/2
Fourth Fourth Full Full
quarter quarter year year
(13 (14 (52 (53 weeks)
weeks) weeks) weeks)
unaudited unaudited audited audited
�m �m �m �m
Turnover
Marketing & Distribution Division
Americas 68.9 85.4 311.6 373.7
Europe and Asia Pacific 86.3 87.4 348.6 314.5
155.2 172.8 660.2 688.2
Industrial Products Division 22.0 27.0 98.8 118.2
177.2 199.8 759.0 806.4
Operating profit
Marketing & Distribution Division
Americas 7.5 9.3 33.0 38.4
Europe and Asia Pacific 10.1 10.1 42.2 40.2
17.6 19.4 75.2 78.6
Amortisation of goodwill* (0.6) (0.6) (2.6) (1.5)
17.0 18.8 72.6 77.1
Industrial Products Division 3.9 3.7 15.2 17.7
Head Office costs (1.8) (2.1) (7.5) (7.9)
19.1 20.4 80.3 86.9
Net operating assets
Marketing & Distribution Division
Americas 123.9 136.6
Europe and Asia Pacific 139.6 138.7
263.5 275.3
Industrial Products Division 25.8 40.1
289.3 315.4
$m $m $m $m
Turnover
Marketing & Distribution Division
Americas 110.2 121.3 476.7 534.4
Europe and Asia Pacific 138.1 124.1 533.4 449.8
248.3 245.4 1,010.1 984.2
Industrial Products Division 35.2 38.3 151.2 169.0
283.5 283.7 1,161.3 1,153.2
Operating profit
Marketing & Distribution Division
Americas 12.0 13.2 50.5 54.9
Europe and Asia Pacific 16.2 14.3 64.6 57.5
28.2 27.5 115.1 112.4
Amortisation of goodwill* (0.9) (0.8) (4.0) (2.1)
27.3 26.7 111.1 110.3
Industrial Products Division 6.2 5.3 23.3 25.3
Head Office costs (2.9) (3.0) (11.5) (11.3)
30.6 29.0 122.9 124.3
Net operating assets
Marketing & Distribution Division
Americas 203.2 192.6
Europe and Asia Pacific 228.9 195.6
432.1 388.2
Industrial Products Division 42.3 56.5
474.4 444.7
*Amortisation of goodwill relates to the acquisition of Buck & Hickman in 2001/
2 (Europe and Asia Pacific segment).
ii) Geographical segments by origin
2002/3 2001/2 2002/3 2001/2
Full Full Full Full
year year year year
(52 (53 (52 weeks) (53
weeks) weeks) weeks)
audited audited audited audited
�m �m $m $m
Turnover
Americas 375.3 456.9 574.2 653.4
UK 251.6 215.5 385.0 308.2
Rest of World 132.1 134.0 202.1 191.6
759.0 806.4 1,161.3 1,153.2
Operating profit
Americas 45.8 52.9 70.1 75.6
UK 36.4 34.1 55.7 48.8
Rest of World 8.2 9.3 12.6 13.3
Head Office (7.5) (7.9) (11.5) (11.3)
Amortisation of goodwill (UK) (2.6) (1.5) (4.0) (2.1)
80.3 86.9 122.9 124.3
Net operating assets
Americas 116.4 168.3 190.9 237.3
UK 132.1 112.7 216.6 158.9
Rest of World 40.8 34.4 66.9 48.5
289.3 315.4 474.4 444.7
The geographical analysis of turnover by destination is not significantly
different from that shown above.
iii) Reconciliation of net operating assets with net assets
2nd February 3rd
February
2003 2002
audited audited
�m �m
Net operating assets 289.3 315.4
Net debt (209.2) (236.4)
Goodwill 48.5 51.1
Pension fund prepayment 82.2 87.0
Tax, dividends and other (107.3) (105.6)
Net assets 103.5 111.5
2 Disposal of businesses
2002/3 2001/2
Full Full
year year
audited audited
�m �m
Loss/(gain) on assets sold (net of costs) 2.3 (14.6)
Goodwill previously eliminated against reserves 2.6 25.6
Loss on disposal of businesses in the year 4.9 11.0
Deferred consideration received from 2001/2 disposals (0.1) -
Loss on disposal of businesses 4.8 11.0
On 28th June 2002, the Company sold DA Lubricants, the speciality lubricants
business of the Industrial Products Division in North America, for a
consideration of �4.3m.
In the period up to disposal, this business contributed �5.4m of sales (2001/2:
fourth quarter �3.6m and full year �15.3m) and incurred an operating loss of �
0.1m (2001/2: fourth quarter operating profit �nil and full year operating
profit �0.4m).
3 Profit before taxation
Profit before taxation is stated after charging/(crediting):
2002/3 2001/2 2002/3 2001/2
Full Full Full Full
year year year year
audited audited audited audited
�m �m $m $m
Gain on sale of fixed (0.5) (1.5) (0.8) (2.1)
assets
Restructuring costs 0.6 1.6 0.9 2.3
Performance share plan - 1.2 - 1.7
4 Taxation
The taxation charge comprises a current year charge of �20.1m (2001/2: �22.1m),
which represents an effective rate of 29.9% (2001/2: 30.5%), excluding the loss
on disposal of businesses and goodwill amortisation. A credit arose in respect
of prior years of �1.0m (2001/2: �0.7m). A tax credit of �0.9m arose on the
business disposal referred to in Note 2. No tax charge/credit arose on the
business disposals in 2001/2.
5 Earnings per share
Basic earnings per share are based on the profit attributable to ordinary
shareholders and the weighted average number of ordinary shares in issue,
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, i.e. those
share options granted to employees where the exercise price is less than the
average market price of the Company's ordinary shares during the year.
Reconciliations of earnings and the weighted average number of shares used in
the calculations for the full year are set out below.
2002/3 2001/2
Full Full
year year
audited audited
�m �m
Profit attributable to ordinary shareholders 30.8 12.5
Loss on disposal of businesses 4.8 11.0
Tax attributable to disposal of businesses (0.9) -
Amortisation of goodwill 2.6 1.5
Profit attributable to 37.3 25.0
ordinary shareholders before
amortisation of goodwill and
disposals
Number Number
Weighted average number of shares 331,570,659 271,879,752
Dilutive effect of share 850,520 1,007,168
options
Diluted weighted average number of 332,421,179 272,886,920
shares
Basic earnings per share
Before amortisation of goodwill and 11.2p 9.2p
disposals
After amortisation of goodwill and disposals 9.3p 4.6p
Diluted earnings per share
Before amortisation of goodwill and disposals 11.2p 9.2p
After amortisation of goodwill and disposals 9.3p 4.6p
Adjusted earnings per share
(ie before amortisation of
goodwill and disposals) have
been provided in order to
facilitate year on year
comparison.
6 Provisions for liabilities and charges
Provisions for liabilities and charges comprise deferred taxation of �36.6m
(3rd February 2002: �37.7m), provision for overseas post-retirement obligations
of �5.2m (3rd February 2002: �5.0m) and provision for dilapidation costs on
leased properties of �1.5m (3rd February 2002: �1.5m).
7 Reconciliation of operating profit to net cash inflow from operating
activities
2002/3 2001/2
Full Full
year year
audited audited
�m �m
Operating profit 80.3 86.9
Depreciation charge (net of gain on 15.8 14.1
disposals)
Amortisation of goodwill 2.6 1.5
Net pension credit (6.8) (6.7)
(Increase)/decrease in stocks (9.0) 9.3
Decrease in debtors 0.8 29.7
Increase/(decrease) in 8.3 (27.7)
creditors
Net cash inflow from 92.0 107.1
operating activities
8 Net debt
2nd February 3rd
February
2003 2002
audited audited
�m �m
Cash and short term deposits 29.6 28.1
Unsecured loans and (238.8) (264.5)
overdrafts
(209.2) (236.4)
Unsecured loans and
overdrafts comprise:
Bank overdrafts 2.7 3.0
Bank loans 44.0 37.0
7.0% US dollar Guaranteed Senior Notes payable 94.5 109.9
2003
7.2% US dollar Guaranteed Senior Notes payable 94.5 109.9
2006
Other loans 3.1 4.7
238.8 264.5
Unsecured loans and overdrafts are repayable as follows:
Within one year 97.3 23.0
Between one and two years 0.2 109.9
Between two and five years 138.8 126.9
After five years 2.5 4.7
238.8 264.5
The Group has committed bank facilities expiring in 2006 of �125m of which �44m
was drawn down at 2nd February 2003. Since the year end, the Group has raised
$225m (�137m) of new funding, principally in order to refinance the 7.0% Senior
Notes repayable in June 2003. This comprises $66m Senior Notes payable 2010 and
$159m Senior Notes payable 2013 at fixed interest rates of 5.3% and 5.9%,
respectively.
9 Capital restructuring
On 13th May 2002 shareholders approved a special conversion right which enabled
preference shareholders, for a limited period, to convert their preference
shares into ordinary shares at an enhanced rate of conversion of 4.6 ordinary
shares for each preference share. This compares to the normal conversion rate
of approximately 2.1 ordinary shares for each preference share. The right to
exercise this special conversion expired on 24th June 2002 for US holders and
on 26th June 2002 for UK holders. Holders of preference shares were entitled to
receive a one-time payment in lieu of the preference dividend in respect of
those preference shares converted of 19.8 pence for each sterling preference
share converted or $0.30 for each US preference share converted.
As a result of the special conversion right, 19.5 million preference shares
were converted into 89.8 million ordinary shares. The total number of ordinary
shares in issue on 2nd February 2003 was 362.4 million (3rd February 2002:
272.2 million).
In addition, on 3rd and 4th July 2002 the Company purchased a total of 0.6
million of its own preference shares at a cost of �8.3m. These shares were
subsequently cancelled. The total number of preference shares in issue on 2nd
February 2003 was 7.8 million (3rd February 2002: 27.9 million).
* Pensions
The Group accounts for pensions in accordance with SSAP 24. The Group's net
assets include a pension asset of �82.2m (3rd February 2002: �87.0m) which is
included in debtors due after more than one year. The consolidated profit and
loss account includes a net pension credit of �4.4m (2001/2: �5.3m) in relation
to all of the Group's pension schemes. It is estimated that this credit will be
reduced by approximately �1.5m in the 2003/4 financial year, primarily as
result of the decline in the market value of assets in the Group's UK and US
defined benefit schemes.
The results do not reflect the adoption of FRS 17, Retirement Benefits, which
is not mandatory until 2005/6. If the standard had been fully adopted in 2002/
3, profit before tax would have been reduced by �3.2m, which is the net of �
10.2m charged to operating profit and �7.0m credited to interest, and
consolidated net assets would have been reduced by �31.1m. Under FRS 17 the
value of the net surplus of the UK and US schemes would have been �34.7m,
comprising a surplus in the US scheme of �49.4m and a deficit in the UK scheme
of �14.7m.
* Basis of preparation
The audited consolidated financial information for the financial year ended 2nd
February 2003 (52 weeks) has been prepared applying the accounting policies
disclosed in the Group's 2002 Annual Report and Accounts.
The principal average exchange rates used to translate the Group's overseas
profits were as follows:
2002/3 2001/2 2002/3 2001/
2
Fourth Fourth Full Full
quarter quarter year year
US dollar 1.60 1.42 1.53 1.43
Euro 1.54 1.63 1.58 1.62
Australian dollar 2.80 2.78 2.78 2.81
12 Ordinary dividend
The Board of Premier Farnell plc has recommended payment of a final dividend of
5.0p (2001/2: 5.0p) per share to ordinary shareholders on the register on 30th
May 2003. The recommended final dividend, together with the interim dividend
already paid, makes a total dividend for the year of 9.0p (2001/2: 9.0p). The
Annual General Meeting of Premier Farnell plc will be held on 11th June 2003
and the final dividend will be paid on 25th June 2003.
13 Report and accounts
The foregoing statements do not constitute the Group's statutory accounts. The
Group's 2003 statutory accounts, on which the Company's auditors,
PricewaterhouseCoopers LLP, have given an unqualified opinion in accordance
with Section 235 of the Companies Act 1985, are to be delivered to the
Registrar of Companies. The Group's 2002 statutory accounts, which contain an
unqualified audit report, have been filed with the Registrar of Companies.
Copies of the Group's Annual Report and Accounts will be posted to all
shareholders no later than 9th May 2003. Additional copies will be available
from Premier Farnell plc, 150 Armley Road, Leeds, LS12 2QQ.
END