Electronics Production | March 19, 2009
Farnell profit up 3% in 2008, sales growth in Eastern Europe
Gross margin for the full year was 39.6% (2007/8: 39.7%) with stability having now been maintained for over 3 consecutive years, despite the more challenging conditions. Full year underlying profit before tax of £72.5 million (2007/8: £70.3 million) an increase of 3% on the prior year. Full year profit before tax of £72.8 million (2007/8: £71.2 million).
Marketing and Distribution Division (MDD) fourth quarter web sales grew by 13% with eCommerce sales now accounting for a total of 35% of MDD revenue and Farnell Europe achieving 51% as we remain on track to meet our strategic target of driving the web as our primary channel. “We have now announced further restructuring actions to move us towards a permanent 2% reduction in operating expenses as percentage of sales. These actions, which result from the growing operational efficiencies that we are able to achieve from our web transition, will deliver an annualised benefit of £6 million. We anticipate the cost of these actions in Q1 of FY10 to be £4 million”, said the company. Developing international markets continue to provide strong sales growth with fourth quarter sales in Eastern Europe and China up 58% and 15%, respectively, and India up 24% sequentially. Acquisition of our Eastern European distributor completed in the quarter, extending our customer reach into Poland, Hungary and the Czech Republic. Restructuring actions announced in December 2008 executed as planned and will deliver an annualised benefit of £12 million with the one-off associated cost of £3.4 million recognised in the Q4 results. Cash performance strong with cash generated from continuing operations in the fourth quarter, excluding restructuring, representing 168% (2007/8: 129%) of underlying operating profit and 117% in the full year (2007/8: 111%). Refinancing agreed in the fourth quarter with £150 million bank facilities secured until January 2013. “We are continuing to drive our strategy despite the more challenging markets. Whilst we are encouraged by our strategic progress and our outperformance of these markets, we are dissatisfied with our business results. With our strategy, the strength of the Premier Farnell team and our ability to capitalise on the opportunities in the supply chain, we can perform better; all supported by our strong cash generation and further investments in our proposition and inventory position. Internationalisation continues to provide ongoing growth, the EDE segment is performing better than the MRO segment and our web performance further underpins the actions we are taking to accelerate our transformation. The Board believes that the continuing implementation of the strategy and the ongoing restructuring will strengthen the business both to withstand the current more challenging markets and for future growth through an enhanced focus on our customers”, said Mrs. Harriet Green, Group Chief Executive.