Review of Results
| 2009 (52 weeks) £m |
2008 (53 weeks) £m |
Growth | |
|---|---|---|---|
| Revenue | 804.4 | 744.7 | +1%(a) |
| Total operating profit | 85.4 | 88.0 | −13%(a) |
| Underlying operating profit(b) | 88.8 | 88.0 | −9%(a) |
| Total profit before taxation | 72.8 | 71.2 | +2% |
| Underlying profit before tax(c) | 72.5 | 70.3 | +3% |
| Basic earnings per share | |||
| – total | 14.3p | 10.0p | +43% |
| – continuing operations | 14.3p | 13.7p | +4% |
| Underlying earnings per share(c) | |||
| – total | 13.9p | 9.7p | +43% |
| – continuing operations | 13.9p | 13.4p | +4% |
Notes:
(a) In order to reflect underlying business performance, sales growth is based on sales per day for continuing businesses at constant exchange rates and for like periods, and growth in operating profit is calculated at constant exchange rates, unless otherwise stated.
(b) Underlying operating profit excludes restructuring costs of £3.4 million (2008: nil).
(c) Underlying profit before taxation and earnings per share excludes restructuring costs of £3.4 million (2008: nil) and excludes gains on the purchase and cancellation of preference shares of £3.7 million (2008: £0.9 million).
Group sales from continuing operations for the 52 week financial year were £804.4 million (2008, 53 weeks: £744.7 million), reflecting year on year sales growth, based on sales per day for continuing businesses at constant exchange rates, of 1.0%. Group sales in the first half grew 5.4% as the Group saw the continued execution of, and investment in, its strategy for profitable growth. The impact of the global economic downturn in the second half resulted in a sales decline of 3.3% with the third quarter growing by 1.7% and the fourth quarter declining 8.4%. However, our ongoing focus on the execution of the strategy has ensured that we have continued to outperform the market and will position the Group well in the challenging and unpredictable economy.
Sales growth for MDD North Americas, where our EDE sales represent 30% of the business, was 0.3% for the full year although the impact of the global recession resulted in a sales decline of 11.4% in the fourth quarter.
The success of our internationalisation plans are clearly demonstrated by our sales growth in China of 39.4% for the full year with the fourth quarter maintaining double digit sales growth of 14.8%, and Eastern Europe where we have maintained well over 50% sales growth each quarter throughout the year. In Mainland Europe, where approximately 65% of sales are to EDE customers, full year growth was 4.5% reflecting the resilience of our strategic positioning despite the economic conditions. In the UK, the business continued to outperform the market throughout the year with sales growth for the full year growing 0.8%.
Combined full year sales for Akron Brass and TPC Wire & Cable, which together represent 93% of the IPD Division, declined 2.5% as these businesses partly mitigated the impact of the economic downturn on their traditional markets by focusing on new product initiatives and new international markets. Cadillac Electric sales, which represented 7% of total IPD sales and 0.6% of Group sales declined 30.8% in the year to £4.8 million, reflecting the continued planned wind down of specific trading activity. As a suitable buyer for the business has not been found, we have decided to close the business and have successfully transferred customers and products of the “Hoffman” range to our TPC Wire & Cable business. The closure will be completed by the end of April 2009 at no significant cost to the Group.
The Group’s gross margin in the year from continuing operations was 39.6% compared to the prior year of 39.7%. This reflects over three years of gross margin stability which underpins the Group’s strategy and continues to differentiate Premier Farnell from the industry.
Total operating profit was £85.4 million (2008: £88.0 million). Underlying operating profit from continuing operations for the 52 week financial year was £88.8 million compared to the prior period, which was a 53 week period, of £88.0 million. Underlying operating margin for the year was 11.0% compared to 11.8% in the prior year reflecting incremental investment in our strategic initiatives in the year of over £8.0 million. There was a beneficial impact on operating profit of £9.8 million from the translation of overseas results compared with the prior year, reflecting the relative strength of both the US dollar and the Euro. A one cent movement in the exchange rate between the US dollar and sterling, impacts the Group’s operating profit by approximately £0.2 million per annum, and a one cent movement in the exchange rate between the Euro and sterling impacts the Group’s operating profit by approximately £0.2 million per annum. At constant exchange rates, the decrease in operating profit was 9.2%, or 7.5% after adjusting for the extra week in the prior year.
Return on net operating assets (operating profit expressed as a percentage of net assets excluding cash, financial liabilities, taxation and goodwill) for the year was 29.6% before restructuring costs (2008: 30.2%) compared to our strategic target of 30% and reflects the impact of the relative strength of the US dollar and Euro on our overseas net assets.
The consolidated year end balance sheet has been significantly impacted by the relative strength of currencies compared to sterling with the year end US dollar exchange rate at US$ 1.44 (3 February 2008: US$ 1.97) and the Euro at Euro 1.13 (3 February 2008: Euro 1.33). The most significant impacts of exchange rate movements on the year end balance sheet compared to the prior year end has been to increase the reported value of inventory by £32.1 million, trade and other receivables by £21.7 million, and to increase net financial liabilities by £59.2 million. In addition, the impact of exchange rates on the US Pension Plan was a benefit of £15.8 million.
Net finance costs for the year were £12.6 million compared to £16.8 million in 2008 reflecting primarily the benefit from the purchase and cancellation of preference shares during the year.
Underlying profit before taxation from continuing operations was £72.5 million compared to the prior year of £70.3 million, an increase of 3.1% on the prior year or 5.1% after adjusting for the extra week in the prior year.
Profit attributable to ordinary shareholders was £51.7 million (2008: £36.3 million).
Underlying earnings per share from continuing operations of 13.9p represented year on year growth of 3.7%.
