Electronics Production | March 16, 2006

Farnell increase sales

Premier Farnell PLC has announced its results for the Fourth Quarter and Financial Year ended 29 January 2006. total sales for 2005 ended £787.2, up from £776.7 in 2004.
Marketing and Distribution Division (MDD) sales per day in fourth quarter up 8.8% in the Americas, up 2.8% in the UK, up 12.4% in mainland Europe. Industrial Products Division (IPD) sales per day in fourth quarter up 15.1%.

Underlying operating profit of £19.6million in fourth quarter 17.4% ahead of prior year, with underlying return on sales up to 9.4% (2004/5: 9.0%).

Fourth quarter operating profit impacted by:
£3.9million reorganisation costs related to restructuring of BuckHickman InOne, as announced on 27 January, and £6.6million provision for obsolete and slow moving non-compliant inventory resulting from RoHS legislation, in line with estimates published in the Interim Statement. Strong cash flow with net cash generated from operations being 117% of underlying operating profit in the fourth quarter, and 110% in the full year.

Sir Peter Gershon, Executive Chairman commented:
The Group had an encouraging close to the year, delivering solid growth in
both sales and underlying operating profit in the fourth quarter. Results in the quarter benefited from the full effect of the cost reduction programme during the third quarter.

Growth in the North American electronics market helped MDD Americas record its best quarterly sales increase of the year. Importantly, this was achieved
whilst exercising tighter control over the quality of its business and stemming the gross margin erosion seen earlier in the year. The electronics market in the UK began to stabilise after three very difficult quarters and Farnell InOne continued to perform well. In mainland Europe it substantially out-performed the underlying markets, growing sales by 12.4%.

Actions taken in the second half of the year to improve the Group's
performance have started to be rewarded as underlying return on sales increased sequentially in both the third and fourth quarters. They create a stronger foundation from which Harriet Green, who joins the Board on 3 April as Chief Executive, can pursue the opportunities available to the Group. As previously announced, on this date I will revert to the position of non-executive Chairman.

Our electronics distribution businesses have continued to make good progress in preparing for the implementation of the EU RoHS Directive on 1 July. Nevertheless, in order to manage a successful migration to compliance, a considerable amount of work remains to be done. The leadership position that they are establishing in this area is winning the support of suppliers and is being used as part of a wider drive to grow sales.

The trading performance of the Group in the first few weeks of 2006/7 has been satisfactory. We continue to plan on the basis of modest growth in our markets. Whilst maintaining tight control of cost, we are reinvesting selectively to support business development and growth opportunities.

Click Here to read the full report (LSE).
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