Farnell post sales decline in Q1, but E. Europe sales went up 56%

Year on year group sales performance in April and May showed an improvement over March. Gross margin stability, 39.4% compared with 39.3% in the fourth quarter, aided by the higher margin characteristics of Electronic Design Engineering (EDE) sales and sales via the web. Restructuring actions executed in the quarter in order to accelerate our web transition will deliver an annualised benefit of £6 million (one-off cost of £4 million recognised in the first quarter results). Reduction in cost base of £3 million (at constant exchange rates) against the first quarter last year, reflecting the benefit of ongoing cost actions together with those taken in November of last year. Strong cash performance - cash generated from operations, excluding restructuring, represented 149% of underlying operating profit compared with 91% achieved in the first quarter of last year. Return on net operating assets was 28%. Healthy funding position with £88 million in facility headroom on bank borrowings and a net cash position of £30 million. In Europe, where company's strategy is more embedded, we are outperforming our markets, reflecting the higher growth, higher margin characteristics of EDE and the web. Web sales for Farnell's distribution businesses grew 5% in the first quarter, with Farnell Europe achieving 53% of total sales via eChannels as web transition continues apace. Company's developing international markets have shown strong performance again, with Eastern Europe sales up 56% and sales in India up 167%. Commenting on the results, Harriet Green, Chief Executive Officer, said: “Our results for the first quarter saw a further decline in sales as the market trends we saw in the fourth quarter continued into the current financial year, particularly the continuation of industrial and electronic destocking in the supply chain, as well as reduced activity. However, our year on year sales performance in April and May showed an improvement over March.