Chairman's Statement
Introduction
2009 has been a year of dramatic change for both Premier Farnell and the global economy. Internally we have continued to embed a high performance culture that is driving our relentless pursuit of profitable growth, while affecting changes to our structure that will permanently alter the way in which we operate. Every action we have taken throughout the year was intended to drive further value for our shareholders. This was recognised in the market as Premier Farnell was the 35th best performer in the FTSE 250 during the 2009 financial year, outperforming the broader market and the Support Services segment.
We have delivered year on year sales growth of 1% with an accompanying stable gross margin of 39.6%. The first half of the year delivered strong growth that was in line with our strategic objectives. The economy rapidly changed in the second half and we struggled to achieve the targets we set; we are however encouraged by the progress we made in implementing our business agenda. When we set out our strategy over two years ago we could not have predicted the current state of the global economy, but what we did predict was the market behaviours we might see if the economy slowed. We said the electronics design engineering (EDEs) segment would continue to outperform the maintenance and repair (MRO) segment, the web would continue to attract new customers and would become our primary sales channel, and developing international markets would continue to grow faster than mature economies. These are precisely the behaviours that we are now seeing.
Our financial position remains strong with good liquidity and free cash flow. During the year the Board decided that the risk associated with the renewal of its banking facilities, which were due to expire in May 2010, should be mitigated early in view of the uncertainties associated with the accessibility of bank finance. On 28 January 2009 we were able to announce the conclusion of our refinancing which replaced our £200 million bilateral facilities set to expire in May 2010 with £150 million syndicate bank facilities.
These new facilities expire in January 2013 and, together with our continuing strong cash generation, provide the necessary level of operational and financial flexibility to meet our funding requirements for the long-term. Our headroom on these new bank borrowings, at the end of the year, was £37 million, which together with our cash holding of £39 million, gives us a healthy funding position. The Group anticipates that the combination of free cash-flow, existing cash resources and available bank facilities will enable it to meet the repayment of the US$66 million Senior Notes which become due in June 2010.
Under the strong leadership of Harriet Green, Chief Executive Officer, the Company has now begun to accelerate its transition to the web. The nature of the web has enabled us to enhance our back office systems to better align with our web front end, thereby requiring less manual processing and greater automation. This has resulted in improved flexibility of the operations as resource is now being redistributed with an even greater focus on best in class sales and improving the customer’s experience.
We continue to carefully measure our performance relative to our strategic objectives and the Key Performance Indicators set out on pages 8 and 9 of this report. The full Corporate Social Responsibility Report (CSR) is available in this section, and there are more details about the all-employee survey in the case study. We recognise that there are many sectors of our business that are being affected by the state of the global economy, however there continue to be areas that are growing, and we will continue to invest and take advantage of the growth.
Employees across the business have faced new challenges this year, challenges never before seen. I am proud of how our team has responded to the changing world in which we live. I would like to thank all current employees and those who have left the business during the year for their contribution. The previous experience of our Board members in leading through recessions is also proving valuable during these uncertain times and I remain confident that the Premier Farnell Board is “fit for purpose” and will guide the Company to a strong future.
No-one can predict with any confidence what the coming year will hold, but I am positive that under the guidance of this strong leadership team, and with the commitment of our employees globally, Premier Farnell will capitalise on all opportunities available within its markets, while maintaining a very tight focus on costs and cash. The Board remains committed to providing investment where the business sees growth, and I am confident that our journey to become a transformed company, will continue despite the current economic adversity. When the markets change we will have a business ready to seize new opportunities for growth and continue to exceed customers’ expectations.
Sir Peter Gershon
Chairman
