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April 26, 1994

SOMETHING ROTTEN IN THE STATE OF DENMARK BRINGS FARNELL AN $11m REBATE

By CBR Staff Writer

Farnell Electronics Plc, the Wetherby, Yorkshire-based electronic component distribution and manufacturing company, yesterday announced strong end of year results as well as receiving an unexpected refund of $11m from its acquisition of Multicomponents, a franchised distributor of components, from ITT Corp in December last year. Farnell will now pay only $59m, as opposed to the circulated price of $70m, after the completion audit for the purchase revealed a misrepresentation by Multicomponents’ Danish branch over the last three years, overstating gross profits and understating overheads to a total of $7m. The savings represented an $8m reduction in Farnell’s goodwill fund and a $3m reduction in assets. The erring Danish branch is presently being combined with Farnell’s existing Danish distributor, Compower, as part of a cost-cutting package throughout Europe, necessitated by the takeover, while corrective action has removed the relevant personnel. For the year ended January 30, pre-tax profits rose 18% to UKP49m, while turnover grew 26% to UKP320m. Earnings per share have increased by 3% to 24 pence, and a final dividend of sevenpence, up 19% will be paid. These results have broken all previous records according to Henry Elstone, finance director, while Richard Hanwell, chairman, believes Farnell faces the future with confidence. The purchase of Multicomponents has turned Farnell into Europe’s second-largest distributor of electronic components and shifted the focus of the company away from the manufacture of components, although Henry Elstone said that he would not rule out the possibility of future expansion of the manufacturing arm, after its successful restructuring last year. After consolidating its European position, Farnell says that it is looking to expand into North America and the Far East – and the world’s our oyster said Elstone.

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