Profits slip doesn’t dent Premier Farnell’s confidence

PROFITS and sales may have fallen by Premier Farnell’s determination to improve its performance remains unshaken.

First quarter results published by the electrical components firm show a fall in underlying pre-tax profits for the financial year ending January 31, 2010 from £20.4m to £13m.

Underlying earnings per share were 2.4p (2008/9, 3.9p). Total
earnings per share for the first quarter were 1.7p (2008/9, 4.9p).

In March, the Leeds-based group said sales via the web and expansion of its international markets had combined to deliver sales growth with pre-tax profits up 2% to £72.8m and revenue up 1% to £804.4m in the 12 months to February 1.

Today the group said that quarter one saw a further decline in sales as market trends seen in the fourth quarter continued.

However, year-on-year sales performance in April and May showed an improvement on March and Premier can still boast other gains.

Restructuring actions designed to accelerate the group’s web transition are set to deliver an annualised benefit of £6m. A one-off cost of £4m is recognised in the first quarter results.

Web sales for its distribution businesses grew 5% in the first quarter, with
Farnell Europe achieving 53% of total sales via eChannels as its web
transition continues apace.

The group’s developing international markets have shown strong performance again, with Eastern Europe sales up 56% and sales in India up 167%.

The group’s cost base has been reduced by £3m reflecting the benefit of ongoing cost actions as well as those taken late last year.

A strong cash performance and healthy funding position give Premier more reasons to be confident.

In addition to the new £150m syndicate bank facilities agreed at the end of the last quarter, which expire in January 2013, it recently entered into a further £20m bank facility which expires in May 2012.

Harriet Green, the group’s chief executive officer, said:”Premier Farnell is investing for leadership as our strategic assumptions continue to be validated despite market conditions.

“Sales to electronic design engineering customers are outperforming maintenance, repair and operation sales globally and are less impacted by declining global markets.”

She continued: “Our growing portfolio of products and services to meet the demands of this segment is attracting new customers and the demand for web excellence continues as increasing levels of business are transacted via eCommerce channels.”

However, Ms Green said that the firm remained dissatisfied with its performance and were executing detailed plans to ensure it emerged from “this difficult period” as a stronger more agile organisation.

“Through decisive actions to further embed the strategy and strong management of costs, the board believes that the business is improving its position to seize the opportunities for growth that exist in our chosen segments, now and into the future,” she added.