ANNOUNCEMENT OF PRELIMINARY RESULTS

Transcription

1 The leading high service distributor to engineers worldwide ANNOUNCEMENT OF PRELIMINARY RESULTS YEAR ENDED 31 MARCH May 2009

2 Agenda Overview and current trading Ian Mason Financial performance Simon Boddie Strategy and business review Ian Mason 2

3 Key themes Economic conditions impacted sales and profits Significant cost reductions, strong free cash flow and maintained financial strength Continued investment into electronics, e-commerce and strategy Increasing number of strategic initiatives coming through More stable trading environment in recent months Market position as the No. 1 international high service distributor Group is well positioned for the future 3

4 Financial highlights Economy impacted sales H1 +1%, H2 (11)% Good gross margin Operating costs reduced Headline profit before tax Strong free cash flow H2> H1-2%, H2< H1 86.6m +4%, 118%, H2> H1 Robust financial metrics 13x, 1.7x Bank financing in place 281m, 2012 Maintaining our financial strength 4

5 Operational highlights Significant cost reductions Strengthened electronics offer 18m, 8% workforce People, products, packaging, pricing Developed e-commerce 10% / 40% Strengthened regional management Driving global supplier partnerships Europe, Asia Pacific Market outperformance Implementing our strategy 5

6 Current trading first 8 weeks Sales 2009 Q Q wks UK (6)% (14)% (14)% Continental Europe (8)% (16)% (17)% North America (5)% (19)% (23)% Asia Pacific (2)% (18)% (15)% International (7)% (17)% (19)% Index PMIs PMIs (average across major markets) Group (6)% (16)% (17)% 30 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 More stable trading environment 6

7 Agenda Overview and current trading Ian Mason Financial performance Simon Boddie Strategy and business review Ian Mason 7

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/decline ) Changes in profit, cash flow, debt and share related measures, such as earnings per share, are at reported exchange rates A net credit of 9.9m was incurred in the year for items excluded from headline profit before tax. Contribution and operating costs use headline figures. Key performance measures such as return on sales, EBITDA and ROCE use headline profit figures 8

9 Profit and loss account ( m) Change Revenue (5.3)% (1) Gross profit % Gross margin 49.5% 50.2% (0.7)% points Headline operating profit (9.7)% Interest (7.0) (7.3) 4.1% Headline profit before tax (10.2)% Headline profit before tax of 86.6m (1) Underlying revenue growth adjusting for currency and trading days 9

10 Foreign exchange impact reported exchange 2009 growth (1) constant exchange International contribution 4.7% (10.2)% UK contribution (7.7)% (7.7)% Total contribution (1.5)% (9.1)% Process costs (7.1)% (1.5%) Headline operating profit (9.7)% (18.8)% (1) Headline basis Reported profit favourably impacted by Sterling weakening 10

11 H1 versus H2 performance 2009 H1 H2 Underlying revenue growth (1) 0.8% (11.4)% Gross margin 49.3% 49.7% Operating costs change (2) 1.0% 2.1% Headline profit before tax growth 13.1% (24.9)% Headline profit before tax split 49% 51% Action taken in second half to underpin profitability (1) Underlying revenue growth adjusting for currency and trading days (2) At constant exchange 11

12 International contribution ( m) Revenue Gross margin % 48.2% 48.5% Operating costs (2) (199.3) (172.4) Contribution (2) Change (constant exchange) (4.5)% (1) (0.3)% points 0.7% (10.2)% International contribution of 107m (1) Underlying revenue growth adjusting for currency and trading days (2) Headline basis 12

13 Regional performance Revenue (1) % Costs (2) % Continental Europe (6.9) Reduced North America (2.2) Stable Asia Pacific (0.3) Investment International (4.5) 0.7% Cost reductions reinvested in Asia Pacific (1) Underlying revenue growth adjusting for currency and trading days 13 (2) Headline basis at constant currency

14 UK contribution ( m) Revenue Gross margin % 51.8% 53.1% Operating costs (2) (82.6) (89.1) Contribution (2) Change (constant exchange) (6.7)% (1) (1.3)% points 7.3% (7.7)% Costs reduced through continuous improvement (1) Underlying revenue growth adjusting for currency and trading days (2) Headline basis 14

15 Gross margin Gross margin drivers 50.2% 49.5% 2008 Selling price Promotions & discounts Product cost Mix Foreign exchange 2009 Reduction year on year (0.7)% points UK promotions and discounts Asia Pacific country mix, foreign exchange Second half improvement +0.4% points Targeted promotional activity Better buying Selling price increase Gross margin improved in H2 15

16 Process costs ( m) Group Process costs (1) % of revenue (10.9)% (10.8)% Change (constant exchange) (1.5)% Key investments Strengthened electronics team New product introductions / production packaging launch Developed e-commerce Process costs stable as % of revenue (1) Headline basis 16

17 Headline earnings per share ( m) Headline profit before tax Pension changes and reorganisation costs 9.9 (1.0) Profit before tax Change reported (10.2)% 1.2% Tax (30.3) (31.5) 3.8% Profit for period % Effective tax rate 31% 33% 2% points Per share amounts Headline earnings 13.6p 14.8p (8.1)% Reported earnings 15.2p 14.7p 3.4% Dividend 11.0p 18.4p (40.2)% Reported profit favourably impacted by 10m net credit 17

18 One-off pension and reorganisation ( m) H1: UK pension scheme changes Redundancy costs & other initiatives (0.5) (1.0) H2: Redundancy costs & other initiatives (7.1) - Income / (costs) 9.9 (1.0) Second half reorganisation actions to deliver 18m p.a. savings 18

19 Pensions update Changes to UK defined benefit scheme to improve sustainability Pension funding level compared with FTSE350 Early retirement, salary cap, life expectancy sharing Funding level of UK DB scheme in top quartile of FTSE350 (1) At 31 March 2009 UK deficit reduced by 15.5m to 6.3m UK pension position significantly improved (1) Source: Mercer, May

20 Dividends Special dividend not paid Proposed in different economic climate Financial strength maintained Ordinary dividend of 11p per share Announced in May p interim; 6p final proposed Ordinary dividend pay out ratios (1) Headline earnings 81% Free cash flow 61% Dividends as announced in April (1) Based on 2009 financials 20

21 Cash flow ( m) Profit before tax Depreciation Employee share options / non-cash mvts Finance expense (net) Non-cash pension credit (16.7) - Working capital 6.2 (7.4) Cash generated from operations Interest paid (net) (8.7) (5.9) Tax paid (22.9) (22.8) Net capital expenditure (11.8) (19.4) Free cash flow % of profit after tax 118% 117% Strong cash flow of 78m, up 4% 21

22 Working capital and capital expenditure Cash in / (out) flow ( m) Inventories Trade receivables Trade payables (25.2) (15.3) Comment Stock turn maintained (1) Debtor days reduced by 3 Low Q4 stock purchases Trade working capital 6.2 (7.4) 2009 capex 15m below depreciation. Expecting 20m capex in 2010 Working capital inflow and capex control (1) Constant foreign exchange 22

23 H1 versus H2 cash flow H1 H2 ( m) Profit before tax Depreciation Employee share options / non-cash mvts Finance expense (net) Non-cash pension credit (17.5) 0.8 Working capital (0.9) 7.1 Cash generated from operations Interest paid (net) (4.7) (4.0) Tax paid (12.0) (10.9) Net capital expenditure (2.8) (9.0) Free cash flow Strong cash flow maintained in H2 23

24 Net debt ( m) 2009 Net debt as at 1 April 2008 (151.1) Free cash flow 78.0 Dividends paid (76.6) New finance leases (2.3) Translation differences (51.2) Net debt as at 31 March 2009 (203.2) Sterling weaker in 2009 US Dollar 28% Euro 14% Japanese Yen 28% Increase in net debt due to foreign exchange 24

25 Facilities and covenants ( m) 2009 Committed facilities 314 Net debt (203) Headroom m committed bank facility concluded September 2008 Maturity September 2012 Funding by 10 banks Multicurrency 2009 Covenant Net debt / EBITDA 1.7x <3x EBITA net interest cover 15x >3x Significant headroom on banking covenants 25

26 Financial highlights Economy impacted sales H1 +1%, H2 (11)% Good gross margin Operating costs reduced Headline profit before tax Strong free cash flow H2> H1-2%, H2< H1 86.6m +4%, 118%, H2> H1 Robust financial metrics 13x, 1.7x Bank financing in place 281m, 2012 Maintaining our financial strength 26

27 Agenda Overview and current trading Ian Mason Financial performance Simon Boddie Strategy and business review Ian Mason 27

28 Group strategy Development of the Group s electronics and maintenance offers Exploit the full potential of e-commerce Leverage the Group s global infrastructure and increase operating margins Focus on international markets Strategic initiatives coming through 28

29 Electronics Attractive market and position Electronics market Leadership team strengthened Total $300bn 2 x GDP 10K new products launched RS available $15bn share Production packaging launched RS electronics Competitive price position Product sales 370m ca 40% Customers buying 1.2m 80% Global growth opportunity 29

30 Electronics strategy Electronic design engineer and buyers One global electronics offer Supplier and technology leadership Centralised technical marketing Common pricing strategy New inventory management approaches Electronics distributor of choice 30

31 Supplier megatrends Strategic supplier partnerships eg global supplier 25m sales Significant outperformance Structured development programme Scaling up number of partners Suppliers rationalising distribution eg Tyco Electronics Authorised master distributor, Europe Building development capability Other suppliers in pipeline Leveraging market leadership position and customer reach Global potential and roll-out 31

32 Maintenance Market leading maintenance offer Good technology performances Own brand outperformance Continued cost price reductions Targeting regular purchases Maintaining leadership position 32

33 e-commerce Increase in unique visitors Improved conversion rates and AOV Enhanced functionality: mobile Enabling large account wins Reduced off-line operating costs 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% FY03 - H1 FY03 - H2 Growing e-commerce share FY04 - H1 FY04 - H2 Exit rate 40% FY05 - H1 FY05 - H2 FY06 - H1 FY06 - H2 FY07 - H1 FY07 - H2 FY08 - H1 FY08 - H2 FY09 - H1 FY09 H2 Central to Group strategy 33

34 e-commerce strategy Customer expectations changing Customer journey focus Customer Journey Awareness Best in class retail approach Key enabler for electronics Product Selection Relationship Management Create e-centric organisation Driving a step change in e-commerce 34

35 Leverage infrastructure and processes Significant cost reductions Increased process efficiency Annualised savings ca 18m Service up, stock down 8% of the workforce Logistics costs reduced Across all areas of the Group Culture change programme Enabled by e-commerce and systems Continued systems development Improving operating efficiency 35

36 Business portfolio ( m) Revenue % of Group revenue Contribution (1) % of revenue Market Position Europe % 22% No. 1 North America % 13% No. 3 Asia Pacific % 7% No. 1 International % 17% No. 1 UK % 27% No. 1 Group % 21% No. 1 No. 1 International high service distributor (1) Headline basis 36

37 Europe 7% sales decline Continuous Improvement in France (1) 8% e-commerce growth Customer satisfaction +1%pt Created regional leadership team Productivity +40% E2E operating efficiency Continuous improvement approach Stock turn Debtor days +1.5x -8 days Improving regional effectiveness and efficiency (1) 2005 to

38 North America 2% sales decline 26% Growing e-commerce share e-commerce acceleration Increased branch effectiveness Joint supplier initiatives 24% 22% 20% 18% 16% 14% 12% 10% 8% Ca. 45% growth 6% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar e-commerce step change 38

39 Asia Pacific Sales 5% growth, excluding Japan 10+% growth in high potential markets Sales focus on growing sectors Reorganisation of region Thailand +38% Singapore +18% China +17% Leadership position in Asia Pacific 39

40 UK 7% sales decline Large accounts 10% e-commerce growth Large account performance Existing ca 250-2% Wins 25 +5% National Contact Centre award 7% cost reduction New compliance programme No significant account losses Focus on profitability 40

41 Summary Economic conditions impacted sales and profits Significant cost reductions, strong free cash flow and maintained financial strength Continued investment into electronics, e-commerce and strategy Increasing number of strategic initiatives coming through More stable trading environment in recent months Market position as the No. 1 international high service distributor Group well positioned for the future 41

42 The leading high service distributor to engineers worldwide ANNOUNCEMENT OF PRELIMINARY RESULTS YEAR ENDED 31 MARCH May 2009

43 Appendix

44 Five year performance framework KPIs International sales growth 5 year target 7-10% p.a International share of group sales 70% 65% 61% UK contribution Stable Decreasing Increasing Sales via e-commerce 50%+ 40% (1) 33% (1) Underlying gross margin Stable Cost as % of sales (2) Reducing Increasing Reducing (3) Capex Below (4) depreciation (4.5)% 8% Stable H1/H2 Below (4) depreciation Stable Below (4) depreciation Return on capital employed (5) 25%+ 18% 24% 1. Exit rate, 2. International and Process Costs, 3. Excluding the one off North American warehouse move costs 4. Including amortisation, 5. Headline operating profit expressed as a percentage of net assets plus net debt 44