The global distributor for engineers

Transcription

1 The global distributor for engineers ELECTROCOMPONENTS PLC Announcement of Preliminary Results for Year Ended 31 March May

2 AGENDA 2014 highlights and current trading Ian Mason Financial performance Simon Boddie Business performance Simon Boddie Strategy update Ian Mason Q&A All 2

3 2014 HIGHLIGHTS AND CURRENT TRADING

4 2014 HIGHLIGHTS FINANCIAL OPERATIONAL 2% sales growth (1) 4% International growth Stable gross margin 6% ecommerce growth 7% headline PBT growth 4% Famous For growth 4% free cash flow growth 4% UK contribution growth Good progress implementing global strategy (1) Underlying sales growth, adjusted for currency and trading days 4

5 CURRENT TRADING Sales Growth (1) H H Apr/May 2015 (2) Continental Europe 3% 5% 1% North America 3% 5% 6% Asia Pacific 0% 4% 8% International 3% 5% 4% UK (3)% (1)% (3)% UK ex-rasp. Pi (2)% 1% (2)% Group 1% 3% 2% (1) Underlying sales growth adjusted for currency and trading days (2) Seven weeks to 16 May 2014 May improving after Apr impacted by holidays 5

6 FINANCIAL PERFORMANCE

7 BASIS OF PREPARATION Unless otherwise stated: Figures have been prepared using International Financial Reporting Standards All figures are restated for the changes in IAS19R Employee Benefits Changes in sales are adjusted for currency movements 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, unless otherwise stated, at reported exchange rates Key performance measures such as return on sales use headline profit figures Sign conventions: % changes in sales and costs are disclosed as positive if improving profit and negative if reducing profit In 2013 expenses of 7.4m were reported for items excluded from headline profit before tax 7

8 PROFIT AND LOSS ACCOUNT m Change Sales 1, , % (1) Gross margin (%) 45.9% 46.0% (0.1)% pts Headline operating costs (477.8) (468.7) (2.3)% (1) Headline operating profit % Headline operating margin (%) 8.3% 8.1% 0.2% pts Headline PBT % (2) (1) Adjusted for currency ; sales also adjusted for trading days (2) Extra trading days & currency movements increased headline PBT by c. 4m. Excluding these factors headline PBT increased by c. 3% Sales growth & margin expansion 8

9 GROUP HEADLINE PROFIT BEFORE TAX MOVEMENT Change (1) 9% 4% (8)% 94.1m 11% 7% 101.1m 2013 International UK Processes Interest 2014 (1) Adjusted for currency movements Both International & UK driving PBT growth 9

10 INTERNATIONAL CONTRIBUTION Change (1) 6% 14% 20% 9% 2013 Cont. Europe North America Asia Pacific 2014 (1) Adjusted for currency movements International contribution up 70bp to 16.7% 10

11 GROSS MARGIN 46.0% (0.2)% 0.0% (1) 0.2% (0.1)% 45.9% 2013 Geographic mix Product mix Currency movements (1) Product mix has had a positive impact on UK gross margin and a negative impact on International gross margin Price & discounts 2014 Stable gross margin 11

12 OPERATING COSTS Change (1) 0.6% 0.4% (0.4)% (1.4)% (1.5)% (2.3)% 2013 Reorganisation efficiencies Lower stock provisions Additional depreciation Strategic investment Cost inflation 2014 EXPECT 2015 COST GROWTH OF AROUND 5%: Absence of 2014 reorg. & stock provision benefits Full-year impact of depreciation, strategic investment Cost inflation Variable cost growth (1) Restated for the changes in IAS19R Employee benefits Good cost control 12

13 HEADLINE EARNINGS PER SHARE m Change Headline PBT % Reorganisation costs - (7.4) Reported PBT % Effective tax rate (29)% (31)% 2% points Per share amounts: Headline earnings 16.3p 14.9p 9.4% (1) Full year dividend 11.75p 11.75p - (1) 2014: comprises 5p interim dividend, 6.75p proposed final dividend 9% headline EPS growth 13

14 IMPACT OF FOREIGN EXCHANGE STRENGTHENING OF STERLING REDUCES PROFIT BEFORE TAX Both the Euro and US dollar have weakened significantly against sterling over headline PBT retranslated at March rates lower by c. 3m Reported rates March rates Impact Headline PBT 101m 98m (3)m Sterling:Euro % Sterling:USD % 2014 PBT at March FX rates would be 3m lower 14

15 CASH FLOW m Guidance Profit before tax Depreciation & amortisation c. 32m Working capital (14.3) (12.3) Stock turn 2.5x Finance expenses (net) Other non-cash movements Operating cash flow Interest paid (net) (5.0) (5.6) Tax paid (24.5) (25.6) cash tax rate Net capital expenditure (35.6) (27.4) c. 40m Reported free cash flow Add back: reorg. cash flows Headline free cash flow % headline free cash flow growth 15

16 NET DEBT MOVEMENT IN NET DEBT (159.7)m 57.7m (51.4)m (143.6)m 9.8m 2013 Free cash flow Translation/Other Dividends paid 2014 BANKING COVENANTS 2014 Covenant Net debt: EBITDA 1.1x <3.25x EBITA net interest cover 24.7x >3x PENSION DEFICIT Combined deficit 40.9m (2013: 19.0m) Benefit changes recently announced in UK Triennial valuation due to complete summer 2014 Strong balance sheet maintained 16

17 FINANCIAL KPIs Medium-term Performance Framework 2013 (Base year of plan) 2014 (Year 1 of plan) Medium-term target range Group sales growth (1) 0.5% 2.1% 5% - 8% Group return on sales Return on capital employed Free cash flow as a percentage of sales 8.1% (2) 8.3% 9% - 11% 18.5% (2) 20.9% 20% - 30% 4.5% 4.6% 4% - 6% (1) Underlying sales growth, adjusted for currency and trading days (2) Restated for the changes in IAS19R Employee benefits Progress towards our medium-term goals 17

18 BUSINESS PERFORMANCE

19 BUSINESS PORTFOLIO 2014 Sales growth (1) % of Group sales Contribution margin Market position Continental Europe 4% 36% 22% No.1 North America 4% 22% 14% No.3 Asia Pacific 2% 13% 8% No.1 International 4% 71% 17% No.1 UK (2)% 29% 29% No.1 Group 2% 100% 20% No.1 (1) Underlying sales growth, adjusted for currency and trading days Opportunity to improve International margin 19

20 CONTINENTAL EUROPE Growth (1) Sales 460.6m 426.2m 4.1% Contribution 99.4m 90.9m 5.6% Contribution margin 21.6% 21.3% 0.3% pts All markets in growth 8% ecommerce growth 69% ecommerce share (+3% pts) eprocurement solutions driving corporate accounts expansion Strong Famous For growth (1) Adjusted for currency ; sales also adjusted for trading days ecommerce driving share gains 20

21 NORTH AMERICA Growth (1) Sales 281.3m 268.6m 4.2% Contribution 39.1m 34.9m 14.3% Broad geographic growth 19% ecommerce growth 39% ecommerce share (+5% pts) 42k new products added, range level-up begun Contribution margin 13.9% 13.0% 0.9% pts (1) Adjusted for currency ; sales also adjusted for trading days Strong automation & control growth Strong margin expansion 21

22 ASIA PACIFIC Japan and China sales growth Growth (1) Sales 156.9m 165.7m 2.1% Contribution 11.9m 12.0m 19.8% ANZ & SEA returning to growth by year end 5% ecommerce growth 50% ecommerce share (flat) Contribution margin 7.6% 7.2% 0.4% pts Strong corporate account performance (1) Adjusted for currency; sales also adjusted for trading days SAP roll-out in SEA & China Sales growth pick-up in H2 22

23 UK Growth (1) Broadly flat sales ex- Pi, slight improvement in H2 Sales 374.3m 375.1m (1.8)% ecommerce outperforming, 62% ecommerce share (flat) Contribution 107.5m 103.2m 4.2% Senior management changes Contribution margin (1) Sales adjusted for trading days 28.7% 27.5% 1.2% pts Increased profitability driven by gross margin & cost reductions 4% contribution growth 23

24 STRATEGY UPDATE

25 GLOBAL STRATEGY FOCUS INTERNATIONAL SHARE GAINS UK PROFITABILITY Highly fragmented markets growing > GDP More mature market Historic 6% pa sales growth 50% from share gains Historic 1% pa profit growth Target 7-10% pa sales growth >50% from share gains Target 1-2% pa sales and profit growth Faster rate of share gains, driven by common global strategy Maintain strong UK market position and contribution margin Growing market share with improving returns 25

26 GLOBAL STRATEGY Good progress, all elements contributing 26

27 GROW TARGET CUSTOMERS Customer type Common needs Actions to improve our value proposition ELECTRONICS DESIGN ENGINEER MACHINE & PANEL BUILDER MAINTENANCE ENGINEER BUYER Range & availability Reliable service Ease of doing business Value for money Range Global range level-up and expansion Global product management tool Availability Global planning tool Compliance capability investment Ease of doing business New web platform ecommerce agile ways of working Enhanced content strategy Value for money Roll-out of global pricing strategy Build dynamic pricing capability Step-change in value for money communication 3% growth in customer numbers 27

28 ONE GLOBAL OFFER STRATEGY YEAR 1 PROGRESS Building a global range 30k products available globally RS and Allied working together Global inventory management Implementing new global planning tool Reliable 1,2,3 day service Lead times UK to Asia Pacific reduced by 20% - 40% Improve return on stock Stock provisions reduced SAP HANA roll-out 4% Famous For product category growth 28

29 VALUE FOR MONEY STRATEGY YEAR 1 PROGRESS Global pricing strategy Comprehensive pricing toolkit Supermarket skillset Dynamic pricing >15m price changes pa >12m price checks pa Value for money communication Improved price reality Improved price perception Improved price perception driving sales growth 29

30 DYNAMIC PRICING DRIVING GROWTH Chemicals UK List Price Improved sales, stable gross margin 30

31 Revenue share (%) ECOMMERCE WITH A HUMAN TOUCH ecommerce sales as % of Group sales 70% 60% 50% c. 735m ---- Electrocomponents (58%) 40% 30% c. 350m ---- W.W. Grainger (33%) 20% c. 110m 10% 0% FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY M&S General Merchandise (13%) Tesco Grocery (3%) Group ecommerce sales share On our way to 1bn+ B2B ecommerce business 31

32 ECOMMERCE IS TRANSFORMING THE WAY WE DO BUSINESS BEFORE: Catalogue-led offer CONSISTENT VALUE PROPOSITION AFTER: ecommerce-led offer 5,000 new products / year Range & availability 5,000 new products / month Limited product information Reliable service Substantial product information, design tools More rigid pricing Ease of doing business Dynamic pricing Limited information on customers purchasing preferences Value for money Better understanding of customers purchasing preferences Core customer service proposition is unchanged 32

33 ECOMMERCE = GROWTH FASTER GROWTH MORE IMPORTANT THAN COST REDUCTION SALES GROWTH Fastest growing sales channel Customer acquisition tool Better customer experience COST AVOIDANCE Lower-cost range expansion Low-cost entry to new markets Global marketing campaigns COST REDUCTION Improved efficiencies More customers, better served, buying more 33

34 INVESTING IN ECOMMERCE WITH A HUMAN TOUCH STRATEGY DesignSpark Mechanical Search Engine Marketing Global Nursery Programme eprocurement solutions Better management of customer life cycle 34

35 CREATING A SYSTEMS PLATFORM FOR FUTURE GROWTH RECONFIGURING OUR WEB PLATFORM Existing web platform has already delivered significant benefits, but global strategy demands more from it New web platform will deliver: Faster change Better personalisation & merchandising Improved search Better SEO visibility Improved content & publishing tools Enhanced reporting & insight Investing to drive faster change 35

36 2015 STRATEGIC FOCUS ONE GLOBAL OFFER ECOMMERCE WITH A HUMAN TOUCH More range level-up Upgrade of web platform Global planning tool More web development, faster Product management tool Digital marketing Improving our value proposition for customers 36

37 OPERATIONAL KPIs Medium-term Performance Framework 2013 (Base year of plan) 2014 (Year 1 of plan) Medium-term target Growth in corporate customer numbers 3% 3% Customer number growth key driver of sales growth ecommerce sales growth 4% 6% ecommerce sales growth > Group sales growth Famous For product sales growth 2% 4% Famous For sales growth > Group sales growth Group gross margin 46.0% 45.9% 2% point decline due to mix effects Group lost time accident (1) Ongoing reduction rate (1) Number of accidents per 200,000 hours worked Progress towards our medium-term goals 37

38 SUMMARY PROGRESS TOWARDS OUR MEDIUM-TERM GOALS Growth in sales, profits and cash Strong momentum in ecommerce and International Good early progress implementing our global strategy Set on the right course for growth 38

39 Q&A

40 APPENDIX

41 IMPACT OF IAS19R EMPLOYEE BENEFITS m Reported 2013 IAS19R Restated 2013 UK contribution (2.7) International contribution Process costs (139.4) (1.9) (141.3) Headline operating profit (4.6) 99.7 Interest (5.6) - (5.6) Headline profit before tax 98.7 (4.6) 94.1 Reorganisation costs (7.4) - (7.4) Profit before tax 91.3 (4.6) 86.7 Headline tax (30.1) 1.1 (29.0) Tax on reorganisation costs Tax (28.4) 1.1 (27.3) Profit after tax 62.9 (3.5)

42 The global distributor for engineers ELECTROCOMPONENTS PLC Announcement of Preliminary Results for Year Ended 31 March May