Directors' Report

Principal activities and business review

A detailed review of the Group’s activities and the development of its business, together with an indication of likely future developments, the main trends and factors likely to affect future performance and a description of the principal risks and uncertainties it faces, are set out in the previous sections. Information about environmental matters, employees and social and community issues appear in the CSR report.

The principal activity of the Group remains unchanged and is the distribution of electronic, electrical and industrial products to the design, maintenance and repair sectors.

As described in the Business Review, the Group does not have significant reliance on any individual customer or supplier and therefore there are no contractual or other arrangements that are essential to the Group’s business.

Profit and dividends

The Group’s operating profit for the financial year from continuing operations was £85.4 million (2008: £88.0 million). Excluding restructuring costs of £3.4 million (2008: nil) to reshape the business and transition to the web, the Group’s operating profit was £88.8 million (2008: £88.0 million). The Group’s profit for the financial year attributable to ordinary shareholders was £51.7 million (2008: £36.3 million).

The Directors recommend that a final dividend of 5.2 pence (2008: 5.2 pence) per ordinary share be paid on 24 June 2009 to those shareholders on the register of members at the close of business on 29 May 2009. An interim dividend of 4.2 pence per ordinary share was paid on 15 October 2008, making a total for the year of 9.4 pence (2008: 9.2 pence) per ordinary share.

The Premier Farnell Executive Trust holds ordinary shares in the Company (acquired in the market) in order to meet obligations under the Premier Farnell Performance Share Plan or to provide similar employee benefits. The trustees have waived the right to receive dividends in respect of the ordinary shares held by the Trust.

Share capital

Details of the changes in the issued, ordinary share capital of the Company during the year are set out in note 19 to the Consolidated Financial Statements.

At the forthcoming Annual General Meeting, the Company will be seeking authority to purchase its ordinary and preference shares. Authorities were previously granted at the Annual General Meeting in 2008, but expire at the close of the forthcoming meeting.

During the year under review the Company purchased 1,824,302 of its cumulative redeemable preference shares in the market for a total cash consideration of £23.6 million. These shares had a nominal value of £1,824,302 and represented 31.6% of the cumulative convertible redeemable preference shares in issue prior to such purchases. All shares purchased were then cancelled. The purchases are considered to be beneficial to the ongoing earnings and cash flow profile of the Group.

During the year, the Premier Farnell Executive Trust acquired 1,532,806 of the Company’s ordinary shares for a total cash consideration of £2.9 million, in order to meet future obligations under the Premier Farnell Performance Share Plan.

Directors

The names and biographical details of the Directors who held office at the date of this report appear in Board of Directors and Officers. John Roques and Cary Nolan retired from the Board on 17 June 2008.

In accordance with the Company’s Articles of Association, Harriet Green and William Korb will retire at the forthcoming Annual General Meeting of the Company and offer themselves for re-election. A formal evaluation process having been carried out during the course of the year in respect of both of these Directors, their performance continues to be effective and both continue to demonstrate commitment to their roles.

During the financial year ended 1 February 2009 the Company provided indemnities to each of its Directors in accordance with the provisions of the Company’s Articles of Association providing for the indemnification of Directors out of the assets of the Company to the extent permitted by law. These indemnities constitute qualifying third party indemnities for the purposes of the Companies Act 2006 and remain in force at the date of approval of this report.

Additional information relating to Directors’ remuneration, service contracts and interests in the Company’s shares is given in the Remuneration Report. The details of Directors’ interests in the Company’s shares form part of this report.

Share Capital and Control

Details of the Company’s issued share capital are set out in notes 15 and 19 to the Consolidated Financial Statements. The Company’s authorised share capital comprises ordinary shares of 5 pence each nominal value and cumulative convertible redeemable preference shares of £1 each nominal value. As at 1 February 2009, the ordinary shares and preference shares represented 82.2% and 17.8% respectively of the Company’s total share capital.

The rights attached to the Company’s ordinary shares and its preference shares, in addition to those conferred on their holders by law, are set out in the Company’s articles of association (the “articles”), a copy of which can be obtained on request from the Company Secretary. A summary of the rights attached to the preference shares appears in note 15 to the Consolidated Financial Statements.

The articles contain certain restrictions on the transfer of ordinary and preference shares and on the exercise of voting rights attached to them, including where the Company has exercised its right to prohibit transfer following the omission of their holder or any person interested in them to provide the Company with information requested by it in accordance with Part 22 of the Companies Act 2006. Holders of preference shares are entitled to receive notice of, but not attend or vote at general meetings of the Company other than in limited circumstances.

Rules about the appointment and replacement of Directors are set out in the articles. Changes to the articles must be approved by shareholders passing a special resolution. The Directors’ powers are conferred on them by UK legislation and by the articles.

The Directors’ authority to effect purchases of the Company’s shares on its behalf is conferred by resolution of the shareholders and renewed annually at the Company’s Annual General Meeting.

There are no agreements between any Group company and any of its employees or any Director of the Company which provide for compensation to be paid to the employee or Director for termination of employment or for loss of office as a consequence of a takeover of the Company, other than provisions that would apply on any termination of employment.

The Company’s multi-currency syndicate bank facilities contain provisions allowing the lending banks to terminate the facilities in the event of a change of control.

The trustees of the Premier Farnell Executive Trust (an employee benefit trust) may vote or abstain from voting shares held in the trust in any way they see fit.

Financial instruments

Information on the Group’s financial risk management objectives and policies and on the exposure of the Group to relevant risks in respect of financial instruments is set out under the heading Treasury Operations and in note 18 to the Consolidated Financial Statements.

Supplier payment policy

The Group’s operating companies are responsible for agreeing terms and conditions under which business transactions with their suppliers are conducted. Payments to suppliers are made in accordance with those terms, provided that suppliers also comply with all relevant terms and conditions. At 1 February 2009, the amount the Group owed its suppliers represented 34 working days’ purchases (2008: 30 working days). The Company is a holding company and does not have any trade creditors.

Product research and development

The Group’s product research and development activities are restricted to the development of new or enhanced products for Akron Brass, part of the Group’s Industrial Products Division. During the year Akron Brass expensed £1.6 million (2008: £1.3 million) of such costs.

In addition, the Group is constantly striving to develop new and improved solutions to customer service. The advances in our web offering, such as eQuotes and iBuy, the development of the eCommunity allowing EDEs access to colleagues, suppliers and experts globally, the Global Technology Centres and the Innovation Lab (all of which are detailed further in our business review and the sections of this report on the web and EDEs) are good examples of this. During the year the Group expensed £2.0 million (2008: £1.0 million) in these areas.

Charitable and political donations

In the US, the Group has an ongoing policy of donating certain items of inventory to charitable organisations. In addition, during the year the Group made charitable donations in cash of £58,000.

Further details of the Group’s charitable activities appear in the Corporate Responsibility section of the Business Review.

The Group continues its policy of not making contributions to political parties.

Employment

The Group places great emphasis on optimising the contribution made by employees at all levels around the world. A Group-wide Performance Review process is in its tenth year of operation. This process has been enhanced by the inclusion of a 360 degree review for all those in the Group involved in leading others and by making the whole process available on-line. The Group continues to invest in the development of its employees and has carried out a review of leadership skills and development needs. Specific employee development programmes are designed on the basis of these identified needs. In addition, all employees have attended workshops covering the attributes required for high performance and are now entitled to spend an hour every week on personal development activities. The content available through the Group’s on-line learning centre includes customised internal course material and access to a wide range of external materials delivered in partnership with a leading business school. A comprehensive induction module forms part of every new employee’s introduction to the Company. A formal job grading system exists across the Group to assist remuneration practices as well as career development and organisational planning processes.

There is further information on the 360 degree reviews and on development plans, as well as on the Company’s other initiatives to attract, retain and motivate its employees.

Employees are informed of the performance of the Group and a structured communication programme allows factors affecting their employment to be discussed. All employees attended kick off meetings at the beginning of the financial year which provided them with the opportunity to understand their individual role in delivering the Company’s strategy. A comprehensive cascade process ensures that information on the Company’s performance is made available to coincide with its quarterly results announcements. Cyber cafes have been installed in many of the Company’s locations around the world to allow access to the Group’s intranet for those who do not normally work using personal computers. An all employee engagement survey was conducted during the year, providing a mechanism for detailed feedback on many aspects of what it is like to work for the Company. The survey results showed encouraging progress in all aspects of employee engagement and there are further details of the results of this survey.

During the year a wide cross-section of the workforce had the opportunity to participate in the implementation of the Group’s business strategy through participation in the Premier Farnell Leadership Council. This forum consists of quarterly meetings at which the strategy and key issues related to its implementation are discussed. As well as the permanent members of the Council, each meeting is attended by individuals invited to contribute as subject matter experts or because of their high performance and potential.

Working in close co-operation with elected representatives from its European operating companies, the Group’s European Works Council (The Premier Farnell European Forum) is in its ninth year of operation. The Forum provides an arena for the exchange of relevant and appropriate information and constructive dialogue between management and employees on European issues.

The Group gives full and fair consideration to applications for employment from disabled persons, with regard to their particular aptitudes and abilities. Efforts are made to continue the employment of those who become disabled during their employment. Training, career development and promotion are, as far as practicable, identical for all employees according to their skills and abilities. The Group consistently seeks to recruit, develop and employ throughout the organisation suitably qualified, capable and experienced people, irrespective of age, race, gender, religion or sexual orientation.

Employees’ participation in the Group’s performance is encouraged through the Group’s UK savings-related share option scheme and by the provision of cost-effective share dealing services.

Environment

The Group recognises the importance of responsible environmental management and its obligation to protect the environment. The Group therefore gives high priority to all environmental matters. Further information appears in the Corporate Social Responsibility Report of the Business Review.

Substantial shareholdings

At 15 April 2009 the Company had been notified, pursuant to the Financial Services Authority’s Disclosure and Transparency Rules, of the following notifiable voting rights in its ordinary share capital:

Independent Auditors

Resolutions to reappoint PricewaterhouseCoopers LLP as Auditors and to authorise the Directors to determine their remuneration will be proposed at the forthcoming Annual General Meeting of the Company.

Audit information

Each of the Directors confirms that so far as he or she is aware, there is no relevant audit information of which the Company’s auditors are unaware; and that he or she has taken all steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

Annual General Meeting

The notice convening the Company’s 2009 Annual General Meeting at Maybrook Distribution Centre, Castleton Road, Leeds, LS12 2EN on 16 June 2009 at 10:30 a.m. is set out in a separate document issued to shareholders.

The Directors’ Report for the year ended 1 February 2009 comprises this section and the other sections of the Annual Report cross-referred to above, which sections and pages are incorporated by reference.

By order of the Board

Steven Webb
Secretary
Farnell House
Forge Lane
Leeds LS12 2NE

17 April 2009

Statement of Directors’ Responsibilities

Company law requires the Directors to prepare financial statements for each financial year. The Directors have prepared the Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the parent Company Financial Statements in accordance with UK Generally Accepted Accounting Practice (UK GAAP). The financial statements are required by law to give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Company and Group for that period.

In preparing these financial statements the Directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state that the Consolidated Financial Statements comply with IFRSs as adopted by the European Union and the parent company financial statements comply with UK GAAP; and
• prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Company or Group, as appropriate, will continue in business, in which case there should be supporting assumptions or qualifications as necessary.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 1985 and, as regards the Consolidated Financial Statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The 2009 financial statements will be published on the Company’s web site (in addition to the normal paper version). The Directors are responsible for maintenance and integrity of this electronic version of the financial statements to the same extent as for the paper version. The work carried out by the Auditors does not include consideration of the maintenance and integrity of the web site.

Directors’ responsibility statement pursuant to DTR4

Each of the Directors, as listed in Board of Directors and Officers, confirms that, to the best of his or her knowledge:

(a) the Group’s Consolidated Financial Statements in this report, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU, IFRIC interpretations and those parts of the Companies Act 1985 applicable to companies reporting under IFRS, and the Company Financial Statements in this report which have been prepared in accordance with UK GAAP give a true and fair view of the assets, liabilities, financial position and profit of the Group or of the Company, respectively, taken as a whole; and

(b) the Business Review contained in this Annual Report includes a fair review of the development and performance of the business and the position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties that they face.