Electrocomponents plc ANNOUNCEMENT OF PRELIMINARY RESULTS YEAR - - PowerPoint PPT Presentation

Electrocomponents plc ANNOUNCEMENT OF PRELIMINARY RESULTS

YEAR ENDED 31 MARCH 2012 24 May 2012

2 2

Agenda

Overview and current trading Ian Mason 2012 performance Simon Boddie Strategy update Ian Mason

• Maintenance

Kevin Thompson Q&A All

3 3

Key themes

• Record sales, gaining market share internationally
• International growth of 9%, International > 70% of Group
• Both Electronics and Maintenance grew by 7%, two strong offers
• eCommerce at heart of multi-channel marketing approach, growth of 18%
• UK performed well, profit now 5% above pre 2008 recession levels
• Significant IT investments to further strengthen global infrastructure

Leveraging competitive advantages to gain market share

4 4

Financial highlights

• Broad based sales growth

7%, c. £1.3bn

• Stable gross margin

47%, through year

• Further cost leverage

0.3% points improvement

• Continued PBT growth

£122m, 7% growth

• Rising return on capital employed

+0.4% points, 24.6%

• Increased full year dividend

2%, confidence

Broad based grow th delivering record sales

5 5

Current trading

(1) seven weeks to 18 May 2012 (2) underlying sales growth adjusted for currency and trading days

Group sales at similar level to last year

Sales FY12 FY13 growth

(2)

H1 Q3 Q4 Apr&May

(1)

Continental Europe

15% 5% 2% (1)%

North America

14% 6% 1% (3)%

Asia Pacific

12% 11% 4% (3)%

International

14% 6% 2% (2)%

UK

5% 2% 4%

Group

11% 5% 1% 0% Sales FY12 FY13 growth

(2)

H1 Q3 Q4 Apr&May

(1)

Continental Europe

15% 5% 2% (1)%

North America

14% 6% 1% (3)%

Asia Pacific

12% 11% 4% (3)%

International

14% 6% 2% (2)%

UK

5% 2% 0% 4%

Group

11% 5% 1% 0%

6 6

Sales per day

ƒ

Group sales per day 15% above 2008 levels (1)

£’000 sales per trading day (constant foreign exchange) £’000 sales per trading day (constant foreign exchange) £’000 sales per trading day (constant foreign exchange)

Group sales per day UK sales per day International sales per day

(1) constant foreign exchange

1,500 2,000 2,500 3,000 3,500 4,000 Q 4 F Y 8 Q 1 F Y 9 Q 2 F Y 9 Q 3 F Y 9 Q 4 F Y 9 Q 1 F Y 1 Q 2 F Y 1 Q 3 F Y 1 Q 4 F Y 1 Q 1 F Y 1 1 Q 2 F Y 1 1 Q 3 F Y 1 1 Q 4 F Y 1 1 Q 1 F Y 1 2 Q 2 F Y 1 2 Q 3 F Y 1 2 Q 4 F Y 1 2 500 700 900 1,100 1,300 1,500 1,700 Q 4 F Y 8 Q 1 F Y 9 Q 2 F Y 9 Q 3 F Y 9 Q 4 F Y 9 Q 1 F Y 1 Q 2 F Y 1 Q 3 F Y 1 Q 4 F Y 1 Q 1 F Y 1 1 Q 2 F Y 1 1 Q 3 F Y 1 1 Q 4 F Y 1 1 Q 1 F Y 1 2 Q 2 F Y 1 2 Q 3 F Y 1 2 Q 4 F Y 1 2 3,000 3,500 4,000 4,500 5,000 5,500 Q 4 F Y 8 Q 1 F Y 9 Q 2 F Y 9 Q 3 F Y 9 Q 4 F Y 9 Q 1 F Y 1 Q 2 F Y 1 Q 3 F Y 1 Q 4 F Y 1 Q 1 F Y 1 1 Q 2 F Y 1 1 Q 3 F Y 1 1 Q 4 F Y 1 1 Q 1 F Y 1 2 Q 2 F Y 1 2 Q 3 F Y 1 2 Q 4 F Y 1 2

7 7

Agenda

Overview and current trading Ian Mason 2012 performance Simon Boddie Strategy update Ian Mason

• Maintenance

Kevin Thompson Q&A All

8 8

Basis of preparation

Unless otherwise stated:

• Figures have been prepared using International Financial Reporting Standards

(IFRS)

• Changes in revenue are adjusted for exchange rates and for the number of

trading days (‘underlying sales growth’)

• Changes in profit, cash flow, debt and share related measures, such as earnings

per share, are at reported exchange rates

9 9

Profit and loss account

(1) Underlying revenue growth adjusting for currency and trading days (2) See appendix for impact of foreign exchange on operating profit

Revenue and PBT increasing by 7%

(£m) 2012 2011 Change Revenue 1,267.4 1,182.2 7% (1) Gross margin 46.8% 47.1% (0.3)% points Operating costs as % of sales 36.7% 37.0% 0.3% points Operating profit (2) 128.1 119.8 7% Interest (5.8) (5.8)

• Profit before tax

122.3 114.0 7% Return on capital employed 24.6% 24.2% 0.4% points

10 10

Group pre tax profit increase

£m

2011 International UK Processes 2012

£114m £15m £4m £(11)m £122m

Contribution growth (1) 9% 4%

(1) constant foreign exchange

Both International and UK delivering contribution grow th

11 11

International contribution

(£m) 2012 2011 Underlying change (1) Revenue 902.7 825.9 9% Operating costs (249.4) (235.6) (5)% Contribution 160.8 146.3 9% Contribution % 17.8% 17.7% 0.1% points

(1) adjusted for currency; revenue also adjusted for trading days

9% International contribution grow th (1)

12 12

International contribution increase

2011 Continental Europe North America Asia Pacific 2012

£m

Contribution 8% 7% (2) 26% growth (1)

(1) at constant foreign exchange (2) excluding additional IT costs related to SAP implementation £146m £9m £1m £5m £161m

All regions contributing, strong performance from Asia Pacific

13 13

UK contribution

(£m) 2012 2011 Underlying change (1) Revenue 364.7 356.3 3% Operating costs (76.5) (72.8) (5)% Contribution 106.0 101.7 4% Contribution % 29.1% 28.5% 0.6% points

(1) revenue adjusted for trading days

UK contribution 5% above pre-2008 recession level

14 14

Gross margin

Gross margin stable through the year

• Group gross margin broadly stable
• UK increase (+1.0% pts):
• Price differentiation strategy
• Increased discount effectiveness
• Favourable foreign exchange
• International decrease (-0.8% pts):
• Principally Continental Europe and Asia Pacific
• Large customer account wins
• Larger orders
• Unfavourable foreign exchange

15 15

Operating costs

Costs : % sales 2012 2011 International 27.6% 28.5% (0.9)% pts. UK 20.9% 20.5% 0.4% pts. Processes 11.0% 10.9% 0.1% pts. Total 36.7% 37.0% (0.3)% pts. Change

Drivers of 2012 operating leverage:

• International scale benefits:
• Particularly in Asia Pacific
• Cost reductions:
• Continuous Improvement
• Catalogue costs, notably in Europe
• Cost increases:
• Inflation, stock holding costs
• Investment in sales and marketing
• Investment at Nuneaton

Costs reduced by 0.3% points of sales

2013 cost considerations:

• European catalogue/marketing costs in H1 c. £2m
• APAC SAP implementation costs c. £1m
• Non-cash pension charge increase c. £2m

16 16

Earnings per share

(£m) 2012 2011 Change Profit before tax 122.3 114.0 7% Effective tax rate 31% 31%

• Per share amounts

Earnings 19.5p 18.0p 8% Full year dividend (1) 11.75p 11.5p 2% Dividend cover 1.7x 1.6x 0.1x

(1) 2012: includes 6.75p final proposed dividend

8% increase in headline EPS

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Dividend

• Increase full year dividend by 2%, resulting in cover of 1.7 times
• Significant opportunities to invest for growth at attractive returns
• Intention to maintain adequate resources to take advantage of opportunities
• Over time, as earnings increase, intention to pursue progressive dividend policy

whilst increasing cover to around 2 times

Confidence in Group’s prospects

18 18

Cash flow

(£m) 2012 2011 Profit before tax 122.3 114.0 Depreciation 27.9 27.0 Employee share options / non-cash mvts 3.0 1.8 Finance expense (net) 5.8 5.8 Working capital (35.8) (41.7) Cash generated from operations 123.2 106.9 Interest paid (net) (5.8) (6.1) Tax paid (26.9) (21.5) Net capital expenditure (37.8) (21.9) Free cash flow 52.7 57.4 Over £50m of free cash flow

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Investment to drive grow th

2013 – capex c. £30m and stock turns c. 2.5x

WAREHOUSES IT SYSTEMS STOCK CURRENT STATUS FUTURE

• 17 warehouses
• Recent investments:
• Allied (2007)
• Shanghai (2011)
• Strengthen key global warehouses
• Enable range expansion
• SAP in UK, Europe & Allied
• 2011 investments:
• UK/Europe upgrade
• Data centre move
• SAP installed in Allied
• Implement SAP in Asia Pacific,
• c. £20m over 2-3 years
• Exploit additional functionality in

UK/Europe

• Drive benefits of Allied SAP
• Broad maintenance range
• Expanded electronics offer
• Increased local stock in Asia

Pacific

• Continue to expand electronics

range, especially semiconductors

• Drive sales worldwide

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Net debt

(£m ) 2012 Net debt as at 1 April 2011 (160.7) Free cash flow 52.7 Dividends paid (50.1) New shares / finance loans 1.1 Translation differences 2.8 Net debt as at 31 March 2012 (154.2)

Net debt reduced by £7m

Pension net deficit £8.3m (2011: £5.4m)

Strong balance sheet metrics: 2012 2011 Net debt:EBITDA 1.0x 1.1x Interest cover 25x 23x Successful £210m bank refinancing, maturity Nov 2015

21 21

Financial highlights

• Broad based sales growth

7%, c. £1.3bn

• Stable gross margin

47%, through year

• Further cost leverage

0.3% points improvement

• Continued PBT growth

£122m, 7% growth

• Rising return on capital employed

+0.4% points, 24.6%

• Increased full year dividend

2%, confidence

Broad based grow th delivering record sales

22 22

Agenda

Overview and current trading Ian Mason 2012 performance Simon Boddie Strategy update Ian Mason

• Maintenance

Kevin Thompson Q&A All

23 23

Group strategy

• Focus on core strengths
• Global approach, delivered locally
• International growth
• Electronics and Maintenance
• eCommerce
• Operating leverage
• UK profitability

“The world’s distributor of choice”

Vision Strategy Priorities

Accelerating implementation

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Benefits of common approach

Enabled faster strategy implementation

• Increased marketing intensity
• Larger, consistent product offer
• Greater supplier engagement
• Focused, local sales approach

(1) constant foreign exchange Continental Europe regionalisation

100 200 300 400 500 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 Reported sales (£m) 4%

(1) CAGR FY05 - FY09

15%

(1) CAGR FY10 - FY12

Regionalisation begins

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Clear trends to globalisation in our business

Building global operating model

• Customer needs are similar everywhere
• Customers want to access the full range of our
• ffer from anywhere
• eCommerce enables global marketing approach
• Global brands dominate electronics and

automation & control product range

Service accuracy Ease of doing business Range & availability

26 26

Global operating model

SALES OFFER MARKETING

Global approach, delivered locally

• Delivering a global product offer
• Reliable service
• Dynamic pricing
• Global marketing capability
• eCommerce with the human touch
• Acquire new customers
• Focused, local sales approach
• Develop & grow existing customers
• Enhanced customer experience

27 27

Business portfolio

Cost leverage to drive rising International returns

FY12 (£m) Underlying sales growth % of Group revenue Contribution % of revenue Market position Continental Europe 9% 36% 22%

• No. 1

North America 9% 22% 16%

• No. 3

Asia Pacific 9% 13% 10%

• No. 1

International 9% 71% 18%

• No. 1

UK 3% 29% 29%

• No. 1

Group 7% 100% 21% No.1

28 10% 15% 20% 25% 30% 35% 40% 45% 50 100 150 200 250 300 350 400 Sales FY12 (£m) Costs as % of sales FY12

UK US France Germany + Austria Italy Australia Japan China

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Operating cost leverage

Increasing scale is driving cost leverage

International operating costs as % of sales: >7% point reduction over 10 years

29 29

Continental Europe

• 9% sales growth, 8% contribution growth

(1)

• 22% eCommerce growth, 61% share
• Improved, consistent Maintenance offer
• 25 corporate account wins
• Good progress in Eastern Europe

Benefitting from regionalisation

Achieving compliance with corporate accounts

(1) Revenue and contribution at constant foreign exchange

30 30

North America

• 9% sales growth, 7% contribution growth

(1)

• 13% eCommerce growth, 39% share
• Strong track record of growth
• Leveraging strong sales network and

warehouse footprint

• SAP IT system successfully installed

Invested in platform for grow th

(1) Revenue and contribution at constant exchange, contribution excluding costs associated with SAP system implementation

Track record of growth

50 100 150 200 250 300 FY08 FY09 FY10 FY11 FY12 North America Sales (£m)

8% 5-year sales CAGR (1)

31 31

Asia Pacific

• 9% sales growth, 26% contribution growth

(1)

• 32% eCommerce growth, 51% share
• 16% Greater China sales growth
• Localising the Group’s eCommerce expertise
• Improving the offer, investing in stock
• IT system investment over next 2-3 years

Regional focus w ith global leverage

(1) Revenue and contribution at constant foreign exchange

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UK contribution margin

20% 22% 24% 26% 28% 30% FY08 FY09 FY10 FY11 FY12

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UK

• 3% sales growth, 4% contribution growth
• 11% eCommerce growth, 58% share
• Leveraging the Group initiatives
• 13 corporate account wins
• Successful price differentiation strategies
• Developing new revenue streams

Contribution 5% above pre 2008 recession level

33 33 33

Electronics

Market outperformance

• 7% sales growth, outperforming the market
• 32k new products
• Over 1.2m DesignSpark visitors since launch
• Over 130k DesignSpark PCB downloads
• Authorised distributor of Raspberry Pi

34 34 34

Electronics and maintenance synergies

Leveraging common infrastructure

Electronics 42% Maintenance 58%

Customers Suppliers Cross-sell

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Maintenance: Overview

Leading global position in an attractive market

Global presence Maintenance sales by region Group sales by region

UK 39% 29% Continental Europe 39% 36% North America 10% 22% Asia Pacific 12% 13%

Key Technologies % of Maintenance Products

Automation & control

• c. 35%

Sensors & switches Process control Pneumatics, hydraulics & power transmission Low voltage switchgear Machine guarding & enclosures Electrical

• c. 25%

Cables & accessories Conduits & trunking Lighting, HVAC & pipe systems Support

• c. 40%

Test & measurement Mechanical products Tools & tool storage Health & safety equipment

Strong financial returns Maintenance Group

FY12 growth 7% 7% Gross margins Stable Stable Stock turns > 3.5x 2.6x

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Maintenance: Offer Development

• Broad range of leading global brands
• 8k new products introduced in FY12
• Added 6k ‘Asia for Asia’ products
• Improved, consistent Europe offer

Investment in range driving customer satisfaction and loyalty

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Maintenance: Automation and Control

• No.1 position in a large &

fragmented market

• Strong market fundamentals
• Fast growing segment
• Focus on eCommerce
• Strengthening supplier

arrangements

A key differentiator for the Group

3-year sales CAGR Automation & Control vs. Total Maintenance

0% 5% 10% 15% Automation and Control Maintenance Total 3-year sales CAGR (%)

38

0% 5% 10% 15% Maintenance Strategic Suppliers Maintenance Total FY12 sales growth (%)

Maintenance: Strategic Supplier Partnerships

• Group level relationships with key

partners

• Majority of maintenance new product

introductions with these suppliers

• FY12 growth of 12% from

Maintenance Strategic Suppliers

Maintenance Strategic Suppliers Growth vs. Total Maintenance Growth FY12

Strong partnerships for grow th

39

Maintenance: Pricing

• Price differentiation strategies
• Web enables dynamic pricing
• UK trials in lighting have delivered

significant sales & profit uplift

• Increased price communication

Pricing a key value driver for the Group

Price differentiation

Competitor price index Fast moving products Slow moving products Tail Parity Average position

Drive price perception on our key value items Less price perception in the tail The bulk of products sit at or just under the average

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eCommerce

• 18% sales growth, 54% share in year
• 23% increase in online traffic
• New Search & Browse functionality
• Improving conversion rates
• Future website enhancements

Exploiting the full potential of eCommerce

Revenue growth (1) Revenue share (2) Continental Europe 22% 61% North America 13% 39% Asia Pacific 32% 51% International 21% 52% UK 11% 58% Group 18% 54%

(1) Adjusted for currency and trading days (2) Average share in year

Our eCommerce portfolio

41 41

Key themes

• Uncertain economic environment
• Strong business model and proven strategy
• Well-positioned versus the numerous, smaller competitors
• Our broad product range, high customer service level and eCommerce

capabilities are key differentiators

• Well-invested global infrastructure
• Strong balance sheet

Leveraging competitive advantages to gain market share

42 42

Agenda

Overview and current trading Ian Mason 2012 performance Simon Boddie Strategy update Ian Mason

• Maintenance

Kevin Thompson Q&A All

43

Electrocomponents plc ANNOUNCEMENT OF PRELIMINARY RESULTS

YEAR ENDED 31 MARCH 2012 24 May 2012

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Financial appendices

45 45

Impact of foreign exchange

Foreign exchange operating profit sensitivities:

• A 10 cent weakening of the Euro against Sterling reduces Group operating profit by c. £6m
• A 10 cent weakening of the US Dollar against Sterling reduces Group operating profit by c. £2m

Growth Reported Growth Foreign exchange 2012 2011 Reported adjusted £m £m % % International contribution Continental Europe 99.8 90.5 10% 8% North America 43.3 42.5 2% 4% Asia Pacific 17.7 13.3 33% 26% International 160.8 146.3 10% 9% UK contribution 106.0 101.7 4% 4% Group contribution 266.8 248.0 8% 7% Process costs (138.7) (128.2) (8)% (8)% Headline operating profit 128.1 119.8 7% 6%

46 46

Five year performance framew ork

• 1. Average share during year 2. International and Process Costs 3. Including amortisation 4. Operating profit expressed as a percentage of

net assets plus net debt

KPIs 5 year target 2012 2011 International sales growth 7-10% p.a. 8.7% 25.3% International share of group sales 70+% 71% 70% UK contribution Stable Increasing Increasing Sales via e-Commerce 70% 54%(1) 49%(1) Underlying gross margin Stable Stable in yr. Stable in yr. Cost as % of sales(2) Reducing Reducing Reducing Return on capital employed(4) 25%+ 24.6% 24.2%

47 47 800K Catalogues 54% e Commerce 46,000 Parcels Daily > 1m Customers Strong Brands 2,500 Major Suppliers > 550,000 Products 17 Distribution Centres 90+% of World GDP

Electrocomponents: w hat w e do

The World’s distributor of choice