Despite slowing fourth-quarter sales, electronic components distributor
The year ahead looks like it could be tough with fourth-quarter sales per day declining by 1.9 per cent. Chief executive Harriet Green admitted that the decline in sales has continued at the same pace into the new financial year. But management has been quick to act, and saving £9.1m (£6.3m at constant exchange rates) in costs throughout last year meant adjusted gross margins were resilient at 39.6, from 40.7 per cent in the prior period, with Ms Green adding that margins were maintained in February. There are plans to achieve further savings by opening a new call centre in Krakow, Poland, but this could lead to £7m-£8m in exceptional costs in the first quarter.
As sales declined, stocks were run down and cash flowed in, which meant free cash flow was 24 per cent higher at £47m, bringing net debt down to £237m, from £263m previously.
Broker Collins Stewart forecasts adjusted pre-tax profits of £91.3m, giving EPS of 17.7p (£88.5m and 17.2p in 2011)
| PREMIER FARNELL (PFL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 222p | MARKET VALUE: | £821m | |
| TOUCH: | 222-222.2p | 12-MONTH HIGH: | 304p | LOW: 141p |
| DIVIDEND YIELD: | 4.7% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 18p | NET DEBT: | 350% | |
IC VIEW
Premier Farnell has done a good job of cutting costs and controlling stock to match weakening demand. The shares, at 12.9 times forecast earnings, are below their historical average – but with good reason. Hold.
Last IC view: Fairly priced, 161p, 8 Sep 2011
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