Farnell Electronics Plc, electronic components distributor and specialised telecommunications manufacturer, has greatly improved interim profits after a first-time full contribution from ESD Distribution, acquired in July 31, and a strong performance from Farnell Electronic Components. For the six months to July 31, pre-tax profits rose 64.2% to UKP21.8m, after UKP6.4 gains from the cash sale of a non-trading subsidiary, while turnover grew 55% to UKP126.8m. Operating profits increased 37% to UKP16m. The non-trading subsidiary, with net assets of UKP6.2m, was sold for UKP12.7m in May, but no further details are available. The Wetherby-based company is divided into two divisions: distribution and manufacturing. The distribution arm, which makes up over 50% of Farnell’s business, comprises Farnell Electronic Components and ESD Distribution. All sales are made via catalogues. Electronic Components supplies wholesale low-volume, high margin electronic components and instruments, to such customers as electricians and small businesses. A European distribution network has been set up to try and cash in on the opportunities presented by the single European market. In April, a sales and distribution office was established in Utrecht, the Netherlands. Next month, a new distribution subsidiary is to be opened in Lyon, France, with warehouse facilities in Villefranche-sur-Saone. Other subsidiaries exist in Eire, Germany and Australia. An additional warehouse will be opened at Farnell’s Maybrook, Leeds site over Christmas to service existing and potential new overseas operations. ESD Distribution distributes low-margin, high volume components to larger corporate customers and has provided Farnell with outlets in Scandinavia. Although gearing stood at 37% last year due to the UKP61m consideration paid for ESD, the cash-generative nature of the distribution division has caused this to drop now to 7%. Farnell is also no longer using its revolving credit facility, and borrowings have been reduced from UKP26.4m in 1991 to UKP7.2m. By year end, the group is expecting to be cash-positive again. The manufacturing division’s turnover was flat due to poor trading conditions in the UK. However, considerable restructuring has been undertaken to reduce overheads and profitability was maintained. Farnell Cayson, acquired in May 1991, and Wallis Hivolt have been transferred to an undisclosed location to share facilities with comparable operations, and further reorganisation is in the pipeline. Retired chairman Ray Kidd has been replaced by Richard Hanwell; Hanwell is well pleased with his company’s performance to date.
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