PRELIMINARY RESULTS Year ended 31 March 2010 2 June 2010 Agenda - - PowerPoint PPT Presentation

PRELIMINARY RESULTS

Year ended 31 March 2010

2 June 2010

2

Agenda

Introduction

Richard Moon

Operational review

Nick Jefferies

Financial review

Paul Neville

Strategy and current trading

Nick Jefferies

3

A year of change and progress

Trading improves with return to profitability and growth in order book Acquisition of BFi Optilas completed and will achieve > £4.4m p.a. (€5m) operational

savings

Specialisation strategy progressively implemented across Electronics division and

repositions the Group

Supply Chain stable following acquisition of SSE Strong net cash position of £13.9m at end of March 2010 Maintained full year dividend of 7.0p (final 4.67p)

4

Agenda

Introduction

Richard Moon

Operational review

Nick Jefferies

Financial review

Paul Neville

Strategy and current trading

Nick Jefferies

5

Highlights

Second half much better than first half, return to profitability Improving sales trends Significant operational improvements Positive operating cash flow, strong net cash position BFi Optilas trading profitably from day one, integration proceeding well Specialisation strategy making good progress Continued trading improvement since the year end

6

Improved operating performance

H1 2009 H2 2009 H1 2010 H2 2010

Op Profit /Loss £m Sales £m

0.7

Return to profitability in second half

Recovery in volumes – 11% sequential (excluding BFi) Benefit of cost savings made in H1

Return to year on year growth

Group Orders increased 16% in March Group Sales increased 6% in March Customer order pipeline up 22% (Electronics)

BFi Optilas included for 4 months

Profitable from day one (£0.7m) Sales of £30.5m

Increasing sales, combined with decisive action to reduce operating expenses and working capital and increased gross margins, returns Group to profitability. Enhanced by BFi acquisition.

7

Improved gross margins

Gross margin increased 1.1% points year-on-

year

Underlying margin stable in second half

BFi enhances Group gross margin by c.0.2%

c.0.4% annualised

Specialisation strategy focuses on higher

margin products

8

Reduced operating expenses

£m

Operating expenses reduced by 12% on

comparable basis, £5.9m year-on-year

£1.1m associated exceptional cost

H2 operating expenses maintained at H1 level

despite increased volumes

Further cost reductions underway in Supply

Chain

BFi expenses of £8m for the 4 months

13% reduction year-on-year

Note: Operating Expenses (adjusted) are at constant exchange rates and include SSE for comparable periods

9

BFi Optilas integration proceeding to plan

Mid way through integration Plan to complete by March 2011 On track to achieve synergies p.a. > £4.4m

(€5m), c.10% of combined cost base

Maintaining separate trading divisions Acal Technology and BFi Optilas Common warehouses, IT, F&A Opportunities for additional revenue Selective cross selling of product offer Increased attractiveness to new suppliers

Includes BFi on a like for like basis

10

Lower working capital

Working capital reduced by £10.1m, 38%

since 31 March ’09

Reduced to 12.7% as a percentage of sales

(including acquisitions)

Operating cash flow before exceptional and

pension payments positive £9.5m

Specialisation strategy reduces requirements

for uncommitted inventory

Working capital defined as net inventory, trade debtors plus other receivables less trade payables and other payable

£m

11

Agenda

Introduction

Richard Moon

Operational review

Nick Jefferies

Financial review

Paul Neville

Strategy and current trading

Nick Jefferies

12

Profit and Loss Account

£m

H1 FY10 H2 FY10 FY 10 FY09 Change Revenue

• Existing
• Acquisition – BFi

71.5 71.5 79.6 30.5 110.1 151.1 30.5 181.6 165.4 165.4

• 8.6%

+9.8% Gross Margin 27.4% 27.6% 27.6% 26.5% +1.1% Operating (loss) / profit (adjusted) (1.7) 1.2 (0.5) 0.4 Exceptional items (0.4) (4.3) (4.7) (33.1) Finance (cost)/income (excluding IAS19) (0.2)

• (0.2)

0.5 (Loss) / profit before tax (adjusted) (1.9) 1.2 (0.7) 0.8 Loss before tax (2.7) (3.6) (6.3) (32.6) Taxation (0.1) (0.2) (0.3) (4.4) Basic loss per share excluding exceptional items (9.5p) 1.3p (8.2p) (3.8p) Dividends per share relating to period 2.33p 4.67p 7.0p 7.0p

Operating performance (H2)

• Sales improvement (+11%)
• Gross margin improvement (+0.2pts)
• Operating expense reduction

Interest charge

• H2 reduced to zero

Tax charge

• Small charge reflects profits in UK and

unrelieved losses in mainland Europe.

• £24m losses to c/fwd

EPS H2 to profit of 1.3p per share reducing loss for year to 8.2p per share Dividend maintained at 7p per share

13

Divisional results - sales

£m

H1 FY10 H2 FY10 FY10 FY09 Absolute Change Underlying Change Electronics (Acal) 39.4 42.5 81.9 103.7

• 21.0%
• 23.5%

BFi 30.5 30.5 Electronics Total 39.4 73.0 112.4 103.7 Supply Chain 29.2 32.8 62.0 54.2 14.4%

• 5.6%

Medical 2.9 4.3 7.2 7.5

• 4.0%
• 7.7%

Revenue (reported) Revenue (exc. BFi) H2 on H1 increase 71.5 71.5 110.1 79.6 11.3% 181.6 151.1 165.4 165.4 9.8%

• 8.6%
• 16.3%

H2 on H1 sales increase excl BFi of 11.3%

• Electronics 8% excl BFi
• Supply Chain 12%
• Medical 48%

Year on year underlying decline 16.3%

Absolute decline 8.6% FX impact 2.5% SSE acq’n in Jan 09 5.2% Underlying decline 16.3%

Underlying revenue reflects:

Electronics

• Market decline

16%

• Loss of Linear Tech franchise

8% Supply Chain 6% Medical 8%

14

Divisional results – adjusted operating profit

£m

H1 FY10 H2 FY10 FY10 FY09 Electronics (Acal) (1.5) 0.6 (0.9) 0.9 BFi 0.7 0.7 Electronics Total (1.5) 1.3 (0.2) 0.9 Supply Chain 0.6 0.6 1.2 1.1 Medical 0.3 0.5 0.8 1.0 Unallocated costs (1.1) (1.2) (2.3) (2.6) Adjusted operating (loss)/ profit (1.7) 1.2 (0.5) 0.4

H2 operating profit of £1.2m reduces full year

• perating loss to £0.5m
• All divisions profitable in H2

Electronics profit in H2 of £1.3m includes £0.7m BFi for 4 months

• Sales in H2 increased 8% on H1
• Opex reduced during year by £4.7m (18%)

Supply Chain profit up £0.1m

• Underlying sales 6% down after adj for SSE

acquisition in prior year Medical H2 improvement on H1 but delayed NHS expenditure gives lower full year result than prior year

Adjusted operating profit – operating profit before share-based payments, amortisation of intangible assets and exceptional items

15

Exceptional operating items

£m

FY 2010 FY 2009 Integration restructuring costs 2.4

• Other restructuring costs

1.9 2.6 Goodwill impairment 0.3 41.8 Sale of investment in MessageLabs 0.1 (15.9) Other

• (0.8)

Operating exceptionals 4.7 27.7

Integration restructuring costs primarily relate to provision for closure of Netherlands warehouse and other office closures as well as certain termination costs

• Total synergy savings forecast p.a. > £4.4m (€5m)

Other restructuring costs relate to;

• Expense reductions

£1.1m

• Director terminations /other

£0.8m Goodwill relates to impairment of ATM Parts Company Ltd in Supply Chain division

16

Balance sheet

£m

31 March 2010 31 March 2009 Var Prop, plant & equip 3.9 4.7 (0.8) Intangible assets 16.5 15.0 1.5 Working capital 30.8 26.7 4.1 Tax (including deferred) (0.2) (2.6) 2.4 Provisions (7.5) (4.0) (3.5) Pensions (5.5) (5.7) 0.2 Net cash 13.9 24.5 (10.6) Net assets 51.9 58.6 (6.7)

Movements in net assets: £’m

• Loss after tax

(6.6)

• Translation differences

(0.6)

• IAS 19 / LTIP

(0.2)

• Purchase of MI

(0.4)

• New share capital

2.7

• Dividends

(1.6) (6.7)

• Balance sheet reflects BFi acquisition and maintains strong net cash balance of £13.9m
• Working capital – underlying reduction (31 March 2010 includes £14m for BFi)
• Provisions include certain synergy provisions for exceptional costs

17

Pension Update

IAS 19 pension liability £5.5 million (31 March 09: £5.7 million) Update on Fund Actuarial Valuation Triennial actuarial valuation at Dec 2009 agreed at £11.2m deficit (previous estimate £15m) New funding from 1 April 2010

• for two years at reduced 50% rate of £0.65m from 1 April 2010
• followed by further 10 years starting at £1.5m indexed by 3% p.a. to £2.0m for y/e 2022

18

Working capital balances

Working capital

• Underlying reduction of £8.6m (32%)

Inventories

• £8.0m (32%) reduction since 31 March 09
• Electronics reduced by 48% since 1 Jan 09
• Turns increased from 5.3 to 7.5

Receivables

• Group Days Sales Outstanding maintained at 51

days

• Excluding BFi reduced by 5 days to 46 days

Working Capital as % of sales

Working capital as % of sales

• Including BFi annualised is12.7% due to

larger European debtors

19

Movement in net cash

£m

FY10 Underlying FY10 FY09 Operational cash flow 5.2 8.2 (2.4) Capital expenditure less disposals 0.3 (0.8) (1.2) Proceeds from sale of investments 1.0

• 15.1

Acquisitions (11.7)

• (4.4)

Interest (net)/associate dividends (0.2) (0.2) 0.8 Dividends paid (1.6) (2.0) (4.8) Tax (3.1) (0.7) (3.4) Net cash flow (10.1) 4.5 (0.3) Exchange /other 0.5 (0.8) Debt acquired (1.0)

• Net cash movement

(10.6) (1.1) Opening cash 24.5 25.8 Net cash at 31 March 13.9 24.5

Underlying net cash flow before exceptionals positive of £4.5m

20

Financial highlights

Strong net cash position at £13.9m Operating cash inflow before pension and exceptionals of £9.5m Underling net cash inflow of £4.5m Working capital reduced giving significantly improved KPI’s Triennial pension deficit valuation and funding resolved satisfactorily

21

Agenda

Introduction

Richard Moon

Operational review

Nick Jefferies

Financial review

Paul Neville

Strategy and current trading

Nick Jefferies

22

Strategy – Building Europe’s leading specialist electronics distributor

Competitive landscape

High Volume, Low Gross Margin

Global High Service

RS, Farnell Digikey

Global High Volume

Arrow Avnet Future

European Specialist

Acal / BFi Optilas

Low Volume, High Gross Margin

GM<10% GM 30% GM 50+%

Group Strategy

• 1. Specialised distribution
• Differentiated, market niches
• 2. Higher margins
• Avoids commodities
• 3. European
• Infrastructure scale
• 4. Organic and acquisitive growth
• Complementary Electronics

Differentiators

Operate in market niches Product range Custom value add Technical knowledge of staff

General components Specialist components & systems

23

Operating in multiple niche markets

Magnetics & Power

Custom power solutions EMI Shielding Magnetic Components Thermal Interface

Communication

RF & MW Components Fibreoptic components Wireless Modules

Imaging

IR Thermal Imagers High Speed cameras Modules Software

Electromechanical

Cabling and assemblies Advanced Connectors

Photonics

Lasers & Diodes Optics & Optical-Mechanics Laser Beam Analysis Scanners & Modulation Spectroscopy Photometry

Speciality Semiconductors

Reprogrammable FPGAs Solid state storage Microcontrollers

Microsystems

Single board computers Server blades I/O boards

Sensors

Sensors & Transducers Accelerometers Rotary Signal Transmitters

24

Group profile has changed significantly with the acquisition of BFi Optilas

Before BFi With BFi

Electronics division accounts for 72% of Group

sales

• Increasing further since year end

Electronics maintains separate trading divisions

• Acal Technology
• BFi Optilas
• Operating on one infrastructure

Six month sales Oct 09 to March 10

25

Electronics – Balanced geographic profile

With BFi Before BFi

Common Group strategy

Direction & objectives European business units Local implementation

Six month sales Oct 09 to March 10

26

Strategy implementation – making progress one year on

The Electronics strategy is:

Increasing specialist product sales

55% 57% 78%

(as a proportion of total)

Balancing product mix

33% 29% 21%

(proportion of largest product group)

Building sales outside UK

54% 57% 70%

Increasing gross margin

26.5% 27.4% 27.8%

(Group gross margin including Electronics)

Acal last year

Yr ended Mar 09

Acal now

Yr ended Mar 10

Acal+ BFi* now

Yr ended Mar 10

* BFi included pro rata for 12 months

27

Electronics returning to growth

Pipeline of customer orders up 22% (at 31 March 2010) Low point June 2009 (including acquisitions) Further increase since year end Growth rates will slow as comparator improves Second half

Includes acquisitions on a like for like basis

28

Current trading

Continued improvement in Group trading since

year end

Sales increased by c.18% (underlying) Supply Chain exit from major customer

contract

Electronics division continues to improve Sales increased by c.20% Continued strong customer order pipeline

Group underlying trading

Q1 FY10 = April + May 2009, Q1 FY11 = April + May 2010 Includes BFi on a like for like basis

29

Summary

Specialisation strategy creates clear competitive position by focusing on multiple niche

markets

Implementation of strategy making good progress Acquisition of BFi brings clear benefits, integration proceeding to plan Improving sales trends and growing order book Continued trading improvements since the year end

30

Appendices

31

Cost reductions

Overheads - £m

FY10 FY 09 Underlying (Reduction)/ increase Variance Exchange Variance Other FY09 Reported Electronics excl BFi 21.9 26.6 (4.7) (1.0)

• 25.6

Electronics incl BFi 29.9 Supply Chain 16.5 17.7 (1.2) (0.1) (3.8) 13.8 Medical 1.9 1.6 0.3 (0.1)

• 1.5

Head Office 2.3 2.6 (0.3)

• 2.6

Total including BFi 50.6 Total excluding BFi 42.6 48.5 (5.9) (1.2) (3.8) 43.5

• Group savings of £5.9m (at constant exchange with comparable SSE), primarily in Electronics and Supply Chain
• Electronics 18% reduction, Supply Chain 7% reduction
• Further reductions in FY11 for synergies and Supply Chain restructuring

32

Operating cash flow

£m

FY10 FY09 Operating loss before exceptionals (0.8) 0.3 Depreciation and amortisation 1.5 1.9 Working capital 8.6 (0.8) Movement in provisions /other 0.2 (0.4) Operating cash flow before pension and exceptionals 9.5 1.0 Pensions (1.3) (1.3) Exceptional cash flows (3.0) (2.1) Operating cash flow 5.2 (2.4)

Underlying operating flow before exceptionals and pension payments £9.5m Operating cash flow positive at £5.2m compared to prior year outflow