Premier Farnell’s much-anticipated operational review has been unveiled. It pinpoints the opportunity to cut costs by £19m annually, including £7m already identified, and usher in more efficient purchasing. The drooping sales effort will be reinvigorated by a series of appointments allied with a push to improve the customer experience and offer them a multi-channel experience. The search for a Chief Executive Officer is still in progress with internal and external candidates on the slate.
In the here and now, Premier Farnell group third quarter sales per day grew 0.5%, though this figure gets revised to -2.3% if Raspberry Pi sales are excluded. The company says it benefitted from an improved CPC and MCM performance, driven by strong demand for single board computers, in particular the Raspberry Pi2, as well as an improved Akron Brass performance.
element14 sales per day decreased -1.9% primarily due to a slowdown in the US and UK which was only partially offset by strong double digit growth in the APAC region.
European sales declined -0.5% as a result of a weak UK performance. Continental Europe grew 3.7% with the majority of markets growing.
Sales in the Americas (excluding Brazil), which represents 35% of Group revenue, contracted -6.7% due to a more challenging trading environment in the industrials space, as indicated by weaker PMI trends and economic data.
Sales in APAC grew 14.9% in Q3. The region continued to show good growth in most markets with China, our largest market, growing at 13.8%.
CPC and MCM combined grew 7.7% in the period, principally due to on-going strong sales of Raspberry Pi.
Akron Brass, the fire-fighting equipment business which is up for sale, returned to growth in Q3, with sales increasing 13.6% as delayed projects were fulfilled.
Gross margin in Q3 was 33.6%, 2.5 ppts lower than Q3 of the prior year. This decline was driven by the continuing impact of foreign exchange (-1.0%), inventory provision movements including a write down relating to Raspberry Pi (-0.3%) and the balance being product, pricing and customer mix.
The distributor expects FY16 operating profit to be in line with previous guidance, albeit towards the lower end of the profit range.
It is focusing on executing the initiatives identified as part of the operational review in order to restore growth in profitability in FY17. It advises caution about the ongoing challenging industrial backdrop in the US and anticipates margin pressure reflecting the current competitive environment. It is hoped the effects will be mitigated as the benefit of the operational review actions start to feed through.
Commented Mark Whiteling, Interim Chief Executive Officer,: “Our results in the quarter are a reflection of the challenging conditions in the UK and US, however we are encouraged by the strong growth we continue to see in the APAC region.
The outcome of the operational review has identified a number of efficiency and margin improvement initiatives which will position the Group to deal with the margin pressures that it has experienced in recent times. The Board is confident that the combination of these initiatives will provide the platform for future growth.”
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