Premier Farnell sends Bain to boost U.S. recovery

June 11, 2009 //

Premier Farnell saw its sales in February and March further deteriorate as it continued to see de-stocking and reduced activity levels.

LONDON — Premier Farnell saw its sales in February and March further deteriorate as it continued to see de-stocking and reduced activity levels.

The news came as it announced that revenue for the financial quarter to Jan 31 was £204.3 million (about $336 million)) which was up from £199.3 million (about $328 million) in the same quarter a year before but down from £240.4 million (about $395 million) at constant exchange rates.

"We remain dissatisfied with our performance and are executing our detailed plans to ensure that we will emerge from this difficult period as a stronger, more agile organization," said Harriet Green, Premier Farnell's chief executive officer.

Year on year group sales performance in April and May showed an improvement over March and gross margins have remained stabilize at 39.4 percent.

The company carried out restructuring in the quarter in order to accelerate its web transition which it says will deliver an annualized benefit of £6 million (about $10m million) with a one-off cost of £4 million (about $7 million) recognized in the first quarter results. Profit it the first quarter 2009 was down 63 percent to £9.0 (about $15 million).

Web sales in the distribution businesses grew 5 percent in the first quarter, with Farnell Europe achieving 53 percent of total sales via eChannels. "Driving business to the web is key to reducing our cost base and we continue to transition business to the web globally," said Green.

International markets have shown strong performance with Eastern Europe sales up 56 percent and sales in India up 167 percent.

"Our results for the first quarter saw a further decline in sales as the market trends we saw in the fourth quarter continued into the current financial year, particularly the continuation of industrial and electronic destocking in the supply chain, as well as reduced activity," said Green. "However, our year on year sales performance in April and May showed an improvement over March." Sales per day for the quarter declined 14.9 percent when compared to the previous year. At constant exchange rates, underlying operating profit in the quarter was down 40.9 percent reflecting the sales decline and the operational gearing inherent in the business.

The company believes that the de-stocking activity going in will eventually create new opportunities for it. "Our high-service model, offering next day delivery for over 99 percent of orders will become even more essential to our customers as they manage their supply chain need," said Green.

"We have now seen the rate of year on year sales decline levelling out in April and May which both showed an improvement over March. We continue to look forward to further signs that our sales levels are stabilizing, as we remain focused on meeting customer need, taking market share and effectively managing our gross margin and cost base."

In Europe, including the U.K., where the electronic design engineering (EDE) and web transformation is more progressed, the company reported a sales decline of 11.2 percent. In North America, where the transformation is less progressed, Newark's year on year sales performance was down 21.6 percent. "In order to accelerate our strategic progress in North America, Laurence Bain, chief operating officer, has temporarily relocated to Chicago in order to share his knowledge, from our successes in Europe, and drive our strengthened Newark management team and engaged workforce," said Green.

The web remains a key enabler of Premier Farnell's other strategic priorities. "By 2012, experts predict that Asian web users, including approximately 490 million Chinese, will outnumber North Americans on the web by 3 to 1, whilst Indian users will become the third largest group online," said Green. "Web usage in China has more than doubled in the last 2 years to over 250 million, and investment in our APAC web capability continues as the channel gains in significance providing further opportunity for regional growth, customer retention and effective cost to serve."

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