Premier Farnell boosted by online sales - Embedded.com

Premier Farnell boosted by online sales

London, UK — Sales at the Premier Farnell distribution group were stable in the first half of the financial year ending August 3 with eCommerce sales per day showing a major advance, growing 41% compared to the first half last year and are now 9.4% of divisional sales.

Group sales in the first half of the year were £390.6million (2002/3: £392.6million). Sales per day increased 3.1%, compared to the same period last year, for continuing businesses at constant exchange rates. Both the North American and European markets were generally weak and continued to reflect subdued customer demand.

The gross margin in the first half of 40.2% was below the previous year (40.9%) due to the start up of the two major contracts in the UK with Vauxhall and Rolls-Royce, and customer promotional activity in North America. Operating profit in the first half was £32.7million (2002/3: £40.6million), producing an operating margin of 8.4% (2002/3: 10.3%).

The company spent £2.4million on a rebranding exercise as well as investing in its Liège distribution centre in mainland Europe.

Currency fluctuations had an effect on the company's profits with weakness of the US dollar against sterling in the first half resulting in an adverse currency translation impact on sales of £14.8million, offset by a favourable euro effect of £6.4million, resulting in a net adverse impact on sales of £8.4million.

Profit before taxation in the first half of the year was £25.4million (2002/3: £27.9million) with earnings per share in the first half were up to 3.9pence (2002/3: 3.6pence). The interim dividend is being maintained at 4.0p per share.

The company's net debt has risen from £209.2million at the end of January to £228.9million at 3rd August 2003. Investment in inventory in the Americas and Europe pushed working capital up by £14.6million during the half year.

The company has also brought back 197,000 Preference Shares in the market for cancellation, at a cost of £2.3million. During the first quarter of this year, the brands of some of the Group's major businesses were modernised and unified. Newark, Farnell and Buck & Hickman were linked together with a new brand suffix, InOne.

In the America Newark InOne is now managing 254 customer stockrooms with more are under discussion. eCommerce sales increased in the first half by 20.9% and sales improved in both Mexico and Brazil.

In the UK, first half sales increased 10.8% over the same period last year. CPC sales increased through concentration on specific market segments, the introduction of new products and direct mail activity. BuckHickman InOne sales increased 23.1% in the first half in poor underlying industrial markets, including the benefits of the two contracts won in the last twelve months with Vauxhall and Rolls-Royce. Sales to the health and safety market segment increased by 42.2% during the first half.

The introduction of CRM software in the UK late last year is generating much greater visibility of sales and increased speed of response. This system, for example, provides data on individual customer sales trends by highlighting changes in buying patterns. It then schedules calls by telesales staff to explore reasons for the changes.

Sales improved in Germany and the Netherlands despite difficult markets, while in Scandinavia, sales declined as the electronics and telecommunications industry continued to reduce.

First half sales in Asia increased 15.1% over the same period last year, with all offices in the region contributing. In Australasia, first half sales increased by 2.9%, despite difficult local market conditions.

During the first half of the year, eProcurement partnerships in America increased by 14, bringing the active total to 130. Sales to these companies in the first half increased by 49.8%. New agreements signed in the second quarter include Proctor & Gamble, Daimler Chrysler and McCain Foods. A further 48 potential eProcurement arrangements are in discussion.

In Europe and Asia Pacific, 8 further partnerships are now active, including Pirelli in the UK, TNO in the Netherlands and Disneyland in France. This brings the total to 121. Plans and developments are under discussion with a further 59 potential eProcurement customers.

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