Purchase helps Farnell to 16% pre-tax profit rise

AN ACQUISITION combined with organic growth has pushed operating profits 37 per cent higher at Farnell Electronics for the six months to 31 July.

The pre-tax profit figure is up 16 per cent at pounds 15.4m, after a one-off pounds 6.4m gain was stripped out.

The windfall came as the result of a complex piece of financial engineering, involving the sale of a non-trading subsidiary to an unnamed company that needed a tax shelter.

Earnings per share increased from 6.5p to 7.5p, excluding the non-recurring item.

Turnover rose 55 per cent to pounds 127m, helped by the acquisition of ESD Distribution and what the company described as a strong performance by Farnell Electronic Components.

Richard Hanwell, the chairman, confirmed that Farnell was still looking for a chief executive, following the retirement in August of Ray Kidd, former executive chairman. He confirmed that Eric Hall, who was dismissed as head of Farnell's manufacturing amid much acrimony in June, was no longer a director.

Farnell also announced an expansion drive into France yesterday, with a distribution centre near Lyons. The company is to begin trading next month with a French language catalogue of 14,000 products stocked on site.

This follows the group's move into Germany, where initial results have been disappointing because of the slowdown in the economy and the Germans' unfamiliarity with buying electronic products from catalogues.

The company said it expected to be cash-positive at the year-end, despite having paid pounds 61m for the ESD acquisition.

Mr Hanwell said trading in the second half was continuing much as in the first and that there was no sign of any upturn in the general economic climate.

Analysts were expecting about pounds 38m for the full year against pounds 32.7m, but the shares dipped 3p to 312p. The final dividend rises to 2.8p (2.6p).