Distributor and manufacturer of electronic components and equipment, Farnell Electronics Plc, has reaped the rewards of overseas expansion for its fiscal year to January 31. Turnover rose by 24.1% to UKP254.3m, while pre-tax profits rose 27.2% to UKP41.6m – after gains of UKP6.4m from the sale of corporation tax credits. Farnell took the business of one of its trading companies, changed the name and sold off its considerable corporation tax to an unnamed buyer. It then re-instated the old name and reaped the gains, while business continued as usual. The proceeds, together with capital earned from trading, were used to wipe out net borrowings of UKP13.8m, the equivalent of 17% gearing. The Wetherby, Yorkshire company now has UKP600,000 net cash.
EDS Distribution
And the board has recommended a final dividend of 3.4 pence, which makes a total of 6.2 pence for the year, a rise of 7% on 1992. This, according to chairman Richard Hanwell, is the result of our earnings per share once again showing unbroken growth. While finance director Henry Elstone said that the company grew by approximately 6.5% organically, the figures for the first time also include a full year’s contribution from ESD Distribution Ltd, which Farnell acquired in July 1991 for UKP61m. Sales here were UKP95.8m compared with UKP55.9m in 1992, while operating profit grew to UKP9m this time from UKP5m last. ESD sells low margin, high-volume electronic components to large corporate customers under franchise, mainly in the UK, but also in Scandinavia and Ireland. It has just won an additional franchise in Germany and according to Elstone, the company will move more and more into Europe as the UK market continues to mature. The other distribution business, Farnell Electronic Components, supplies wholesale low volume, high margin electronic components and instruments to such customers as electricians and small businesses, promising overnight delivery. It also had a good year, particularly in the UK, although overseas outlets saw excellent growth. The company has established operations in the UK, Ireland, France and the Netherlands, but opened two new offices in Australia and Germany during the year. Elstone said that Farnell’s immediate aim was to cover the whole of Europe; and eventually the world. Some 80% of total group turnover is still generated in the UK, however. For the division as a whole, sales grew 30.9% to UKP208.8m, while operating profit increased 18.7% to UKP36.2m. But, despite restructuring, things weren’t so rosy at the manufacturing division. Turnover was flat at UKP50.5m, while profits fell 58.9% to UKP1m. During the year, Farnell amalgamated 14 separate operating companies into three businesses: one manufactures components and sub-assemblies; the two others, Farnell Power Ltd and Farnell Instruments, undertake the development and marketing of power supplies, and test and measurement equipment respectively. Although Elstone reckons that no more reorganisation will be necessary in the near future, he doesn’t believe performance at the division will improve markedly until the recession is over. But, he said, its new management is going all out to ensure that it becomes more efficient cost-wise, that it focusses its research more effectively, and that it becomes more market-led. From October, the group will have a new chief executive to replace the old one, who retired last August. He he has a similar job at another UK public company was all Farnell would say. The shares added ninepence to 387p against the trend.
