ELECTROCOMPONENTS 2019 half-year financial results 20 November - - PowerPoint PPT Presentation

2019 Half-year Results

ELECTROCOMPONENTS 2019 half-year financial results

20 November 2018

2019 Half-year Results

SAFE HARBOUR

This presentation contains certain statements, statistics and projections that are or may be forward-looking. The accuracy and completeness of all such statements, including, without limitation, statements regarding the future financial position, strategy, projected costs, plans and objectives for the management of future operations of Electrocomponents plc and its subsidiaries is not warranted or guaranteed. These statements typically contain words such as "intends", "expects", "anticipates", "estimates" and words of similar import. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Although Electrocomponents plc believes that the expectations reflected in such statements are reasonable, no assurance can be given that such expectations will prove to be correct. There are a number of factors, which may be beyond the control of Electrocomponents plc, which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking

• statements. Other than as required by applicable law or the

applicable rules of any exchange on which our securities may be listed, Electrocomponents plc has no intention or obligation to update forward-looking statements contained herein.

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2019 Half-year Results

OVERVIEW Above market, sustainable growth and strong execution

9.8% like-for-like(1) revenue growth, continuing to drive share gains in large, fragmented market Adjusted(2)

• perating profit

margin rose 1.5 percentage points aided by higher gross margin and cost control Strong growth in profit before tax, earnings and free cash flow Further improvement in customer experience – Group NPS(3) up 3.8% IESA acquisition performing well – >30% revenue growth and encouraging new contract wins Good progress on PIP II(4) – positioning the Group to drive continued growth and superior returns

(1) Like-for-like change excludes the impact of acquisitions and the effects of changes in exchange rates on translation of overseas

• perating results, with 2018 converted at 2019 average exchange rates for the period. Revenue is also adjusted to eliminate the

impact of trading days year on year. (2) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, asset write-downs, one-off pension credits or costs, significant tax rate changes and associated income tax. (3) Rolling 12-month Net Promoter Score – a measure of customer satisfaction. (4) Second phase of Performance Improvement Plan (PIP). 3

2019 Half-year Results

AGENDA 1 2

PERFORMANCE IMPROVEMENT PLAN

3

CURRENT TRADING & OUTLOOK FINANCIAL RESULTS

6 4

BECOMING FIRST CHOICE REGIONAL PERFORMANCE

5

ACCELERATING OWN-BRAND GROWTH VALUE-ADDED SERVICES – IESA

7

David Egan CFO Lindsley Ruth CEO

4

2019 Half-year Results 2019 Half-year Results

FINANCIAL RESULTS

1

Significant progress

2019 Half-year Results

Significant growth in profit and earnings per share

FINANCIAL HIGHLIGHTS

Strong revenue growth Improving profitability EPS and dividend growth

13.0 17.2 H1 2018 H1 2019 Like-for-like change

Adjusted EPS (p)

5.25 5.30 H1 2018 H1 2019

Dividend per share (p)

9.9 11.4 H1 2018 H1 2019 Like-for-like change

Adjusted operating profit margin (%)

(1) Like-for-like change excludes the impact of acquisitions and the effects of changes in exchange rates on translation of overseas operating results, with 2018 converted at 2019 average exchange rates for the

• period. Revenue is also adjusted to eliminate the impact of trading days year on year.

(2) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, asset write-downs, one-off pension credits or costs, significant tax rate changes and associated income tax. (3) At the year end it was announced that in the normal course of business, the interim dividend would be equivalent to 40% of the prior year full-year dividend.

> > >

43.4 44.4 H1 2018 H1 2019 Like-for-like change

Gross margin (%)

30.5% 0.7 pts 1.4 pts

12.2 9.7 9.8 RS Pro Digital Group

Like-for-like revenue growth (%)

81.2 104.0 H1 2018 H1 2019 Like-for-like change

Adjusted operating profit (£m)

25.9%

6

2019 Half-year Results

 1.0 percentage point improvement – 0.3 percentage point accretion from IESA acquisition – 0.7 percentage point like-for-like improvement  Driven by our own actions to: – Grow higher-margin products, including RS Pro – Improve discount discipline and pricing  Foreign exchange broadly neutral  Tougher H2 gross margin comparatives (gross margin was 43.4% in H1 2018 and 44.5% in H2 2018) but on track to deliver stable gross margin in our base business(1) in the full year

Progress Going forward

DRIVING OPERATIONAL EXCELLENCE – GROSS MARGIN

> >

Shifting our culture to focus on profitability

We are focused on initiatives to drive gross margin:  Growing higher-margin products: – Accelerating new product introductions at RS Pro – 5,400 new products in 2018 – 5,290 new products in H1 2019 – On track for > 10,000 new products in 2019  Controls and process – more discipline on discounting  Pricing – dynamic pricing tool to be rolled out in EMEA in H2  Smarter purchasing: – Today strategic supplier engagement – Tomorrow global sourcing initiatives

7 (1) Base excludes the post-acquisition results of IESA.

2019 Half-year Results

 We are focused on improving our operating profit margin towards best-in-class mid-teen operating profit margin  Revenue growth, higher gross margin and improvement in adjusted operating profit conversion ratio to 25.7% (H1 2018: 22.7%) drove a 1.5 percentage point improvement in adjusted operating profit margin to 11.4% (H1 2018: 9.9%)

DRIVING OPERATIONAL EXCELLENCE – OPERATING PROFIT MARGIN

Revenue growth and gross margin improvement – Market growth and

market share gains, plus improving product mix

Disciplined investment – In H1 we saw the annualisation of the

step up in digital and innovation investment made in H2 2018. Despite this, adjusted operating costs grew at 7.8% on a like-for-like basis, below revenue growth of 9.8%. Adjusted operating costs as a percentage of revenue fell to 33.0% (H1 2018: 33.5%)

Operating profit margin

6% 7% 8% 9% 10% 11% 12% 13% 14%

FY18 H1 IESA Revenue Growth Gross Margin Inflation Digital People Other FY19 H1

Adjusted operating profit margin

2.7% 0.6% 0.6% 0.9% 0.2% 0.2% 0.1% 9.9% 11.4%

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2019 Half-year Results

SUMMARY INCOME STATEMENT

£m H1 2019 H1 2018

Reported Adjustments Adjusted(1) Reported Adjustments Adjusted(1) Revenue 911.8

• 911.8

823.8

• 823.8

Operating profit 96.8 7.2 104.0 77.9 3.3 81.2 Net finance costs (3.9)

• (3.9)

(2.2)

• (2.2)

Share of profit of JV 0.1

• 0.1
• Profit before tax

93.0 7.2 100.2 75.7 3.3 79.0 Income tax expense (23.0) (1.2) (24.2) (21.2) (0.6) (21.8) Profit for the period 70.0 6.0 76.0 54.5 2.7 57.2 Earnings per share (p) 15.9 1.3 17.2 12.4 0.6 13.0

(1) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, asset write-downs,

• ne-off pension credits or costs, significant tax rate changes and associated income tax.

Highlights

 Revenue saw an adverse impact from currency (£7.5 million); this was partially

• ffset by a positive impact from extra

trading days (£4.3 million)  Net finance costs increased to £3.9 million (H1 2018: £2.2 million)  Adjusted PBT excludes:

– £5.4 million labour-related restructuring costs – £1.8 million amortisation of intangible assets arising

• n acquisition of IESA

 H1 2019 adjusted tax rate of 24% (H1 2018: 28%)

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2019 Half-year Results

CASH FLOW

Highlights

£m H1 2019 H1 2018

EBITDA 111.8 90.7 Movement in working capital (49.1) (50.7) Movement in provisions 2.2 2.4 Other 3.9 2.4 Cash generated from operations 68.8 44.8 Net interest paid (3.2) (2.5) Income tax paid (20.3) (16.2) Net cash from operating activities 45.3 26.1 Net capital expenditure (14.5) (9.4) Free cash flow 30.8 16.7 Add back cash effect of adjustments(2) 3.2 0.7 Adjusted free cash flow 34.0 17.4

(1) Adjusted operating cash flow conversion is adjusted free cash flow before income tax and net interest paid as a percentage of adjusted

• perating profit.

(2) Adjusted excludes the impact of substantial reorganisation cash flows.

 Cash generated from operations increased to £68.8 million (H1 2018: £44.8 million)  Working capital as a percentage of sales increased by 1.5 percentage points to 22.7%

– Like-for-like increase was 0.3 percentage points – Balance relates to acquisition of IESA

 H1 2019 capex was 0.9 times depreciation (H1 2018: 0.7 times) – expect the full year to be around 1.7 times  Adjusted operating cash flow conversion(1) 55.3% (H1 2018: 44.5%)  Net debt increased to £139.0 million (H1 2018: £124.5 million)  Additional short-term investment of around £30 million in fast-moving inventory in H2 to ensure we can maintain customer service during the UK’s exit from the EU

10

2019 Half-year Results 2019 Half-year Results

PERFORMANCE IMPROVEMENT PLAN – PHASE II

Setting ourselves up to drive continued success

2

2019 Half-year Results

PERFORMANCE IMPROVEMENT PLAN II - UPDATE

Objective

To build an even more customer-centric, lean and scalable platform for growth

More activities and decision making taking place closer to the customer Good progress at building a scalable platform to support growth

Scalable Simple

New simpler regional structure in place

Customer Centric

12

2019 Half-year Results

PERFORMANCE IMPROVEMENT PLAN II - UPDATE

Simple

 More activities closer to customers and suppliers  Increased accountability  On track to deliver:

– £4 million of savings in year to March 2019 – £12 million of cumulative annualised savings by March 2021

New regional model

Suppliers Customers EMEA Americas Asia Pacific Regional focus:

 Sales  Product & Inventory  Marketing & Digital  People  Finance Corporate Services Commercial Services

 Group Finance  Group HR  Group Legal  Corporate Development  Technology  Sourcing  Pricing  RS Pro  Electronics  Supply Chain

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2019 Half-year Results

PERFORMANCE IMPROVEMENT PLAN II - UPDATE

Global shared services strategy

 New regional centre of expertise (CoE) opened for Asia Pacific in Foshan, China

– Today – 100 people in finance, customer services and inventory – H2 expansion – digital content teams, Australia / New Zealand support functions

 EMEA regional shared service CoE in Corby

– Focus today is finance and customer services but scope to expand over time

 Establishing regional CoE in the Americas

Global automation

 Pilots complete, third party automation partner identified and on track to deliver

• ur first automated solution this financial year

 Identifying standardised transactional activities across the business which could be automated  Plans to scale the use of automation across the business

Optimise and invest in supply chain

 Global track and trace capability now live  Launching global project to optimise transportation

 Shared services  Automation  Customer-centric supply chain

Building the engine to support continued growth and drive improved service at lower cost

Scalable

14

2019 Half-year Results 2019 Half-year Results

BECOMING FIRST CHOICE

3

Sustainable growth and superior returns over the longer term

2019 Half-year Results

OUR MISSION Becoming first choice

 More than just a slogan  Fundamental development

• f the entire organisation

 Delivering a customer-centric, scalable and agile business capable

• f driving sustainable growth

Sustainable growth and superior financial returns over the long term

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2019 Half-year Results

WHICHEVER WAY YOU LOOK AT IT, OUR MARKETPLACE IS LARGE

Our market is large and highly

• fragmented. We

have significant scope to grow market share

• rganically and via

acquisition

$155bn

Global A&C(4) market

Source: Business Wire

$570bn

Global MRO (1) market

Source: W.W. Grainger

$140bn

US MRO(1) market

Source: Fastenal

$343bn

Semiconductor and IP&E (6) market

Source: Avnet

c.£300bn

Global Electronic component market

Source: DiscoverIE

c.£400bn

Global MRO (1), HSE(2)market

Source: Electrocomponents

Our market today

 Large  Highly fragmented  Traditional competition – Largely offline businesses – Regional / local players and /

• r vertical sub-category

specialists $800bn

US MRO (1) & OEM (5) market

Source: WESCO

c.$1 trillion

US B2B (3) e-commerce market

Source: Forrester Research

(1) MRO is Maintenance Repair and Operations. (2) HSE is the High Service Electronics market. (3) B2B is Business to Business. (4) A&C is Automation and Control. (5) OEM is an Original Equipment Manufacturer. (6) IPE is Interconnect, Passive and Electromechanical. 17

2019 Half-year Results

A SIGNIFICANT OPPORTUNITY TO TAKE SHARE

(1) Source: Oxford Economics. 2017 manufacturing value-added output, real US$, at constant 2010 prices and exchange rates.

UK Germany Japan US China

Our differentiation

 Global scale  Digital leadership / expertise  One-stop shop  Range and inventory availability  Technical expertise and value- added services

(1)

We are focused on driving growth in customer numbers

Multiple of UK manufacturing GDP Customers

18

50,000 100,000 150,000 200,000 5 10 15 20 Manufacturing GDP Number of customers

We have significant potential to grow the number of customers we serve. We have > 160K customers in the UK, over 2x that of the US, despite the fact that the US market is > 9x the size of UK

2019 Half-year Results

WE ARE FOCUSED ON DRIVING SHARE IN A FRAGMENTED MARKET

Increasing spend with existing customers Organic investment and acquisitions to accelerate strategy

We will be disciplined in our allocation of strong cash flow between investment in business to drive sustainable growth and superior returns for shareholders

Growing our customer base

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2019 Half-year Results 2019 Half-year Results

REGIONAL PERFORMANCE

4

Driving share in the regions

2019 Half-year Results

ANOTHER STEP FORWARD IN CUSTOMER / SUPPLIER EXPERIENCE

Driving a best-in-class online experience

 Optimised and simplified online navigation  Scaled data-driven personalisation – making online experience more relevant to the user  Introduced solution-orientated bundles to provide customers with all the associated parts to build a solution  Further acceleration in our mobile first strategy – with improved mobile experience – faster page loads and search improvements

Other customer and supplier improvements

 Continuous improvement project to drive a better returns process  Significant reduction in the time to launch new products from an average of 162 days in Q1 2018 to 27 days in Q2 2019  Improvement in our on time to promise (OTTP) delivery of back orders(1) with a 25% improvement in monthly OTTP during the current financial year

All our regions saw improved customer Net Promoter Scores in H1

(1) Back orders are when stock is not held at the time the order is placed.

Customer- centric

21

2019 Half-year Results

DRIVING MARKET SHARE

Strong revenue growth across board

>

9.6 10.9 9.3 4 8 12 Asia Pacific Americas EMEA

Like-for-like revenue growth %

Estimated market growth Estimated market share gains

Increasing average order value across existing and new customers

>

…and growing our customer count via digital and more effective marketing Average order value (AOV) – we are selling more to our customer base…

Average order value (AOV) Customer numbers

When we are first choice, our research shows customers spend 25% more with us

22

Customers Average order value

£160 £170 £180 £190 500,000 575,000 650,000 725,000 Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug FY2016 FY2017 FY2018 H1 2019

Digital marketing step-up

2019 Half-year Results

REGIONAL PERFORMANCE – EMEA

£m H1 2019 H1 2018 Like-for-like change(1) Northern Europe revenue 254.2 217.8 10.8% Southern Europe revenue 171.7 158.7 6.6% Central Europe revenue 126.0 112.6 10.8% Emerging Markets revenue 23.8 22.2 7.4% EMEA revenue 575.7 511.3 9.3% EMEA operating profit 89.1 73.5 16.6% EMEA operating profit margin (%) 15.5% 14.4% 0.9 pts

Significant market share gains driving growth

 9.3% like-for-like revenue growth

– Strong market share gains – All sub-regions in growth

 Selling more to existing customers

– Improved customer experience NPS up 4.3% – Broader offer and value-added services – Better utilisation of our sales resource – Data-driven website personalisation and solution - based selling

 Adding new customers

– Brand awareness and digital marketing

 Gross margin improvement and tight cost control  16.6% like-for-like operating profit growth and further improvement in operating profit margin to 15.5%

Highlights

23 (1) Like-for-like adjusted for currency and to exclude the impact of acquisitions; revenue also adjusted for trading days.

2019 Half-year Results

REGIONAL PERFORMANCE – Americas

£m H1 2019 H1 2018 Like-for-like change(1) Revenue 240.2 222.8 10.9% Operating profit 31.4 25.8 25.6% Operating profit margin (%) 13.1% 11.6% 1.6 pts  Double-digit like-for-like revenue growth

– Half market / half share gain

 Selling more to existing customers

– Improved customer experience NPS up 2.7% – Range expansion – 19,500 new stocked products in H1, warehouse expansion project – Automation and Control focus driving share – Introducing RS Pro to our customer base

 Adding new customers

– Brand awareness and digital marketing – Geographic expansion (Mexico)

 Gross margin improvement

– Discount discipline – RS Pro expansion

 25.6% like-for-like growth in operating profit, improved operating profit margin

Highlights Strong growth, gross margin improvement and tight cost control

24 (1) Like-for-like adjusted for currency; revenue also adjusted for trading days.

2019 Half-year Results

REGIONAL PERFORMANCE – Asia Pacific

£m H1 2019 H1 2018 Like-for-like change(1) Revenue 95.9 89.7 9.6% Operating profit / (loss) 0.7 (3.9) 115.9% Operating profit / (loss) margin (%) 0.7% (4.3)% 5.7 pts

Highlights

 9.6% like-for-like revenue growth

– Outgrowing the market: Australia / New Zealand, South East Asia – Growing more in line with market: China / Japan

 We have fixed many of the basics

– Improved customer experience NPS up 18.2% – Restructured cost base – Opened shared service centre in Foshan

 We need to build our capabilities to grow

– Strengthen local leadership team – Improve local online experience – Develop and build local offer

 Good progress on RS Pro

– Local reseller strategy

 Profitable in H1. Need to drive scale to improve profitability longer term

Fixed basics, investing to build capabilities to drive faster growth

25 (1) Like-for-like adjusted for currency; revenue also adjusted for trading days.

2019 Half-year Results 2019 Half-year Results

ACCELERATING OWN-BRAND GROWTH

6

2019 Half-year Results

RS PRO ‒ BECOMING FIRST CHOICE FOR QUALITY AND VALUE

Longer term we aspire to generate 20% of revenue from RS Pro

Outperforming Group growth

 Revenue growth accelerated to 12.2% in H1

Focused on key markets

 Strong today: UK > 20% of revenue and France around 15% of revenue  Opportunities: Americas, Germany, Italy and China

New channels to market

 Reseller partnerships  IESA opportunities

Data-driven range expansion

 10,000 new products in 2019  Expand range in A&C and IP&E  Localise range in T&C

27

2019 Half-year Results 2019 Half-year Results

VALUE-ADDED SERVICES − IESA ACQUISITION

5

2019 Half-year Results

 Deepens customer relationships  Extends value-added services  Fast growing and accretive

Strong initial contribution

 £11 million revenue and £2.8 million adjusted operating profit in first four months of ownership by Group  > 30% like-for-like revenue growth during first four months  Accretive to Group gross margin and Group operating profit margin  Encouraging new business pipeline with contract wins from blue chip clients  On track to cover our cost of capital in first full year of ownership

IESA acquisition

VALUE-ADDED SERVICES – BECOMING FIRST CHOICE

29

2019 Half-year Results

 Further growth with IESA’s existing client base – UK and

• verseas

 Potential to sell IESA’s services to RS and Allied customers over time  Scope to deepen the supplier relationship between RS, RS Pro and IESA

Significant potential

VALUE-ADDED SERVICES – BECOMING FIRST CHOICE

Singapore Slovakia France Sweden

IESA has 80 blue chip customers across 7 countries

Ireland Germany 2018 2008 2007 2001

30

2016

2019 Half-year Results 2019 Half-year Results

CURRENT TRADING AND OUTLOOK

7

Well positioned to show continued strong progress in current financial year

2019 Half-year Results

AN ENCOURAGING START TO H2 2019

We have seen around 7% like-for-like revenue growth in the first seven weeks of the second half

 While the external environment in some of our key markets is uncertain, we are focused on driving market share  We are tightly managing our costs, while investing to drive longer-term growth  We are on track to deliver savings

• f £4 million in the year to 31

March 2019 and £12 million of savings by March 2021

We continue to make strong progress in full year

32

2019 Half-year Results

SUMMARY

 We have a significant market opportunity  We have invested in talent and are building a simple, scalable model so we are well placed to exploit it  We will continue to drive share gains via: – A relentless focus on the customer – Leadership in digital – Expansion of our range and value-added service offering  We will look to use value accretive acquisitions to accelerate our strategy  We remain excited by the significant opportunity for continued growth and improvement

33

Well positioned to continue to drive sustainable growth and superior returns for shareholders

2019 Half-year Results 2019 Half-year Results

Q&A

8

Thank you for your continued interest in Electrocomponents

2019 Half-year Results 2019 Half-year Results

APPENDIX

9

2019 Half-year Results

STORY IN A NUTSHELL

1

SIGNIFICANT MARKET OPPORTUNITY

• We estimate the overall high-service electronics

and industrial market in which we operate is valued a c. £400bn

• Growing at GDP+
• Highly fragmented but beginning to see

consolidation

• Digitally immature but digital transition now

starting

2

DRIVING MARKET SHARE GAINS

• Market-leading customer service
• Leadership in digital
• Strong supplier relationships, product knowledge

and technical expertise

• Best-in-class sales process and

go-to-market approach

• Value-added services
• Differentiation with technology, innovation and

data-led insight

3

BUILDING A LEAN AND SCALABLE MODEL

• We aim to maintain stable and where possible

grow our gross margin

• We are committed to using shared services and

automation to lower our cost to serve while continuing to drive improved service

• Since 2015, we have increased our adjusted
• perating profit conversion ratio from 15.3% to

25.7% at H1 2019, and our long-term goal is to further improve this ratio to 30%

• Over the same period, we have increased

adjusted operating profit margin from 6.7% to 11.4% at H1 2019 and our long-term aspiration is to achieve a mid-teen adjusted operating profit margin

4

STRONG CASH GENERATION

• We are a highly cash-generative business
• We will be focused on disciplined reinvestment

both organic and inorganic to accelerate top-line growth

• We are committed to growing our dividend while

improving dividend cover and generating attractive returns for our shareholders

• c. £400bn

market opportunity

>2X

market growth is our goal

30%

adjusted operating profit conversion ratio is our goal

> 80%

adjusted operating cash flow conversion

36

2019 Half-year Results

PERFORMANCE OVER TIME

37

 Since the change in management in April 2015 and the launch of the first Performance Improvement Plan in November 2015, Electrocomponents has delivered significantly improved financial results  Adjusted operating profit margin has increased from 6.7% in 2015 to 11.4% in H1 2019  The Group has also consistently grown adjusted operating profit and adjusted earnings per share over this period  Return on Capital Employed has also benefited since the company’s turnaround strategy, rising from 13.4% in H1 2016 to 26.4% in H1 2019

5.2 7.4 9.1 11.9 13.0 15.4 17.2 H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 H1 19

Adjusted earnings per share (p)

33.8 48.2 57.7 75.5 81.2 95.9 104.0 H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 H1 19

Adjusted operating profit (£m)

(1) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, asset write-downs,

• ne-off pension credits or costs, significant tax rate changes and associated income tax.

(2) ROCE is adjusted operating profit for 12 months expressed a percentage of net assets excluding net debt and retirement benefit obligations.

13.4% 14.5% 17.6% 22.0% 25.2% 28.6% 26.4% H1 16 FY16 H1 17 FY17 H1 18 FY18 H1 19

Return on Capital Employed (ROCE)

2019 Half-year Results

BASIS OF PREPARATION

Unless otherwise stated:

 Figures have been prepared using International Financial Reporting Standards as adopted by the European Union  Adjusted measures of profitability and cash flow exclude amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, asset write-downs, one-off pension credits

• r costs, significant tax rate changes and associated income tax

 Like-for-like change excludes the impact of acquisitions and the effects of changes in exchange rates on translation of overseas operating results, with 2018 converted at 2019 average exchange rates for the period. Revenue is also adjusted to eliminate the impact of trading days year on year  Changes in profit, cash flow, debt and share-related measures such as earnings per share are, unless otherwise stated, at reported exchange rates  Sign conventions: % changes in revenue and costs are positive if improving profit and negative if reducing profit  A net charge of £7.2 million (H1 2018: £3.3 million) was reported for items excluded from adjusted profit before tax

38

2019 Half-year Results

GUIDANCE POINTS

Trading days

 Expect around £9 million positive impact on revenue from additional trading days in the year to March 2019

Other guidance points

 Capex: £40 million Allied warehouse expansion project will mean capex to depreciation running at closer to 1.7x in 2019 and 2020  Stock turn: 2019 will be c. 2.5x given additional potential inventory investment to maintain service during the UK’s exit from the EU  2019 effective tax rate: 24%  Cash tax rate: to converge with profit and loss rate over time  Remain committed to a progressive dividend policy. In the normal course the interim dividend will be equivalent to 40%

• f prior year full-year dividend

Foreign exchange Foreign exchange rates (average for the period)

H1 2019 rates H1 2018 rates 2019 rates* Euro 1.13 1.14 1.13 USD 1.33 1.29 1.31

* 2018 adjusted profit before tax converted at 2019 forecast average rates, using 16 November 2018 closing rates extrapolated for rest of year. 39

 Currency movements decreased H1 2019 adjusted profit before tax by £0.8 million  If November rates persist we would expect around a £0.7 million benefit on adjusted profit before tax in the full year *

2019 Half-year Results

GROUP FINANCIAL HIGHLIGHTS

(£m) H1 2018 H1 2017

Adjusted cash generated from operations 45.5 82.1 Net interest paid (2.5) (2.6) Income tax paid (16.2) (9.2) Adjusted net cash inflow from operating activities 26.8 70.3 Net capital expenditure (9.4) (8.4) Adjusted(1) free cash flow 17.4 61.9 Outflow related to restructuring (0.7) (3.0) Free cash flow post restructuring 16.7 58.9 Net debt (124.5) (140.9) H1 2019 H1 2018 Change Like-for- like change Revenue (£m) 911.8 823.8 10.7% 9.8% Gross profit (£m) 404.8 357.4 13.3% 11.9% Adjusted operating profit (£m) 104.0 81.2 28.1% 25.9% Adjusted PBT (£m) 100.2 79.0 26.8% 24.9% Adjusted EPS (p) 17.2 13.0 32.3% 30.5% Adjusted free cash flow (£m) 34.0 17.4 95.4% Net debt (£m) 139.0 124.5 Like-for-like revenue growth (%) 9.8 13.3 Gross margin (%) 44.4 43.4 1.0 pts 0.7 pts Adjusted operating profit margin (%) 11.4 9.9 1.5 pts 1.4 pts Adjusted operating profit conversion (%) 25.7 22.7 3.0 pts 2.8 pts Adjusted operating cash flow conversion (%) 55.3 44.5 Net debt to adjusted EBITDA (x) 0.6 0.7 Return on capital employed (%) 26.4 25.2

40

2019 Half-year Results

KEY PERFORMANCE INDICATORS

KPI Changes

 We have changed our Net Promoter Score from RS to Group  We are changing Group Lost Time Accident frequency to All Accidents

Driving an improved performance for customers, suppliers and shareholders

H1 2019 H1 2018 Change Like-for-like revenue growth (%) 9.8 13.3 (3.5) pts Group Net Promoter Score 52.5 50.6 3.8% Adjusted operating profit conversion (%) 25.7 22.7 3.0 pts Adjusted operating profit margin (%) 11.4 9.9 1.5 pts Adjusted EPS (p) 17.2 13.0 32.3% Return on capital employed (%) 26.4 25.2 1.2 pts Adjusted operating cash flow conversion (%) 55.3 44.5 All Accidents 26 29

41

2019 Half-year Results

 Like-for-like adjusted operating cost growth of 7.8%, less than revenue growth of 9.8%. Adjusted operating cost as percentage

• f revenue fell to 33.0% (H1 2018: 33.5%)

 Improvement in adjusted operating profit conversion ratio to 25.7% (H1 2018: 22.7%)

ADJUSTED OPERATING COSTS

Adjusted operating cost (£m)

Cost discipline

Inflation – 2.0% inflationary rises in

wages

Volume-related costs – During H1 2019

we saw higher variable costs driven by revenue growth

Disciplined investment – Annualisation

• f the increased investment seen during

H2 2018 in areas such as digital, talent and innovation

250 260 270 280 290 300 310

H1 FY18 FX IESA Inflation Volume FTEs Digital Other H1 FY19

Like-for-like change 2.0% 1.4% 0.6% 3.0% 0.7%

42

2019 Half-year Results

£m H1 2019 H1 2018

Net debt at 1 April (65.0) (112.9) Adjusted free cash flow(1) 34.0 17.4 Acquisition of business (30.9)

• Cash and cash equivalents acquired with business

1.0

• Loans acquired with business

(42.0)

• Cash effect of adjustments

(3.2) (0.7) Equity dividends paid (35.4) (32.2) New shares issued 2.1 0.3 Purchase of own shares by Employee Benefit Trust

• (1.3)

Translation differences 0.4 4.9 Net debt at 30 September (139.0) (124.5)

NET DEBT MOVEMENTS

Strong balance sheet

 Net debt rose to £139.0 million, £74.0 million higher than at 31 March 2018 with the increase largely due to the acquisition of IESA and associated loans  In May 2018 the Group arranged a new £120 million two-year loan  Net debt: EBITDA 0.6x (H1 2018: 0.7x)

Pension

 Combined deficit £66.1 million (September 2017: £100.9 million)

(1) Adjusted excludes the impact of substantial reorganisation costs. 43

2019 Half-year Results

IMPACT OF FOREIGN EXCHANGE

Translation Exposure

 Reported profit sensitivity to a one cent movement in: – Euro: £1.3 million – USD: £0.4 million

Transaction Exposure

 Group treasury maintains 3-6 month hedging to smooth impact of currency movements  Key exposures: net buyer of US dollars, net seller of euros and other currencies  Gross margin impacted over time from weakening in sterling versus: – USD: negative impact – Euro and other currencies: positive impact

44

1.00 1.10 1.20 1.30 1.40 1.50

Euro and USD movements to Sterling

€ to £ $ to £