Electronics and industrial components distributor Premier Farnell continues to feel the effects of the recession, which started to bite in the final quarter last year. There's been little change in the overall trading picture with the higher technology electronic design engineering (EDE) sector proving more resilient than in maintenance and repair engineering.
Admittedly, there are signs that the sales decline has been slowing in Europe, with a pick-up in August, indicating a fall in destocking by the electronics supply chain. However, the position continued to deteriorate in North America, with its higher exposure to maintenance and repair, leading to a sharp decline in first-half operating profits (down from £14.7m to £4.3m). So Premier is now trying to boost the higher margin, higher growth EDE content of its North American business.
On the plus side, there's more to come from restructuring and Premier continues to boost the web content of sales. This channel now accounts for 21 per cent of sales in North America, over 55 per cent in Europe and 38 per cent overall. The target is to raise this to 50 to 70 per cent. Eastern European sales are going very strongly, sales in India doubled and progress in China indicates higher levels of economic activity there.
But brokers have pruned their forecasts in the light of the disappointing US sales and margin numbers, and now expect adjusted pre-tax profits of £47m and EPS of 8.5p (14.3p in 2008).
| PREMIER FARNELL (PFL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 151p | MARKET VALUE: | £552m | |
| TOUCH: | 150-151p | 12-MONTH HIGH: | 199p | 114p |
| DIVIDEND YIELD: | 6.2% | PE RATIO: | 14 | |
| NET ASSET VALUE: | * | NET DEBT: | £259m | |
| Half-year to 2 Aug | Turnover (£m) | Pre-tax profit (£m) | Share (p) | 2008 |
|---|---|---|---|---|
| 2008 | 395 | 42.1 | 8.4 | 4.2 |
| 2009 | 388 | 25.2 | 4.8 | 4.2 |
| % change | -2 | -40 | -43 | - |
Ex-div: 16 Sep Payment: 14 Oct *Net deficit on shareholders' funds, intangible assets worth £55.9m or 15p per share | ||||
