Pessimism within City circles ahead of Premier Farnell’s half-year numbers proved unjustified. Sales may be down and deteriorating margins meant a bigger than expected drop in profits, yet the shares rocketed 10 per cent after the industrial components supplier continued to outperform both rivals and the market, especially in Europe, and offered signs of growth, too.
Sales per day fell just 1.6 per cent during the second quarter compared with a 5 per cent slump during the previous quarter, and year-on-year sales actually grew for the first time since December 2011 - up 0.4 per cent in August. Premier’s work is notoriously hard to predict, but comparisons are getting softer and chief executive Laurence Bain fully expects a return to growth in the second half. It won’t be easy. Heavy discounting and sales of low-margin items such as the tiny Raspberry Pi computer, cut second-quarter gross margin to 38.5 per cent, 110 basis points below the long-term average. Still, costs are coming down - a new call centre in Poland will generate annualised savings of £1.2m and a new web platform should drive online orders next year.
Peel Hunt isn’t convinced. With industry indicators still in decline, the broker has cut full-year adjusted pre-tax profit estimates from £86.3m to £79.4m, giving adjusted EPS of 15.6p (£88.5m and 17.2p in 2012).
PREMIER FARNELL (PFL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 190p | MARKET VALUE: | £ 703m | |
| TOUCH: | 187-190p | 12-MONTH HIGH: | 229p | Low: 141p |
| DIVIDEND YIELD: | 5.5% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 16p* | NET DEBT: | 404% | |
| Half-year to 29 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 498 | 64.9 | 13.4 | 4.4 |
| 2012 | 479 | 31.8 | 6.20 | 4.4 |
| % change | -4 | -51 | -54 | - |
Ex-div: 19 Sep Payment: 17 Oct *Includes intangible assets of £65.6m, or 18p per share | ||||
