Components | September 08, 2011

Farnell sales up 4,8%

”The Group delivered the best Q2 sales per day and operating profit since our strategy began”, the company writes today. Still, the company remains cautions in regards to current economic situation.
At the same time, the operating profits went up by 1,8%.

Commenting on the results, Harriet Green, Group Chief Executive, said:

“We are confident that our strategy will deliver sustainable profitable growth across the economic and product cycles and we are pleased with the progress that we continue to make in its execution. We recognise that our business model inherently provides us with limited forward visibility, and that current global economic conditions are uncertain. August’s performance was negative – down 2.0% year on year, against very strong comparatives last year. We remain cautious in light of this continuing uncertain economic environment.”

As a result of this, Farnell has taken steps to focus capital expenditure strategically while at the same time working with cost efficiency.

Financial Highlights

• Group sales grew 4.8% in the first half and 1.4% in the second quarter despite the economic slowdown and the very strong comparators of 25% and 30%respectively.
• The Group delivered the best Q2 sales per day and operating profit since our strategy began (at constant exchange rates and after adjusting for the sale of TPC). Compared to the prerecessionary sales levels in the second quarter of financial year 2009, sales from our electronics distribution businesses have grown 11.7%.
• Following management actions second quarter sales in Asia Pacific grew 4.2% sequentially on Q1, with absolute sales per day in Singapore and Malaysia stable during the quarter.
• Second quarter gross margin of 39.8% contributed to a first half gross margin of 40.3%, stable with the prior year first half of 40.4%.
• Operating profit has grown 1.8% in Q2 (2010/11 Q2: 73%) giving first half operating profit growth of 7.4% (2010/11: 58%) and return on sales in the first half increased to 11.2% for the Group and 12.5% for MDD.
• Continued strong cash conversion with Q2 operating cash flow representing 94.9% of operating profit (2010/11: 91.9%).
• Management actions have delivered a reduction in planned costs of £2.1 million in Q2 with a further £15 million reduction in planned cost for the second half. Planned H2 capital expenditure reduced by 35% giving full year forecast of £25 million.
• The board has approved an interim dividend of 4.4 pence per share in line with the prior year.

Strategic Highlights

• Focus on the tactical execution of our strategic drivers – EDE, web, internationalisation and profitable MRO - intensified in face of the uncertain market conditions.
• Active customer base remains an important indicator of future performance and has continued to grow with 5.5% year on year growth in the first half.
• Second quarter sales via the web grew 19.0%, helped by the newly launched element14 knode. eCommerce sales now account for 55.1% of total MDD sales, an increase of 9.2 percentage points on Q2 of the prior year. Europe now exceeds our performance metric at 72.8%.
• Sales from our developing markets accounted for 23.9% of Group sales in the second quarter as we continue to move towards our strategic target of 30%, supported by our new markets of Taiwan, South Korea and Thailand where second quarter sales grew 46.8% sequentially.
• Element14 community registered users increased through the quarter, 10% higher overall than Q1 and six times higher than Q2 in the prior year with over 600,000 visits in the quarter.

© Farnell
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