Annual Financial Report

RNS Number : 6505N

Electrocomponents PLC

15 June 2010

 



ELECTROCOMPONENTS PLC 

ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2010

NOTICE OF 2010 ANNUAL GENERAL MEETING

In accordance with Listing Rule 9.6.1, Electrocomponents plc has today submitted two copies of each of the above documents to the UK Listing Authority which have been posted today to shareholders.  These documents will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility, which is situated at:

Financial Services Authority

25 The North Colonnade

Canary Wharf

London

E14 5HS

Tel. no. + 44 (0) 20 7066 1000

The Annual Report and Accounts and Notice of Annual General Meeting, which includes explanatory notes on proposed resolutions, are also available on the Electrocomponents plc website at www.electrocomponents.com/annualreport.

Electrocomponents plc announced its Preliminary Results for the year ended 31 March 2010 on 28 May 2010. The Preliminary Results announcement included a summary of the Group's financial results and management report.  The information contained in this announcement, together with the extracts of the statements of Related Party Transactions, Risks and Directors' Responsibilities below, constitute the material required to be disclosed by DTR 6.3.5. This material is not a substitute for reading the full 2010 Annual report. Page and note references in the text below refer to page numbers in the 2010 Annual Report.

RELATED PARTY TRANSACTIONS

The Company has a related party relationship with its subsidiaries as disclosed in note 15 to the Group accounts and with its key management personnel. The key management personnel of the Group are the Executive Directors. Compensation of key management personnel was:

	2010	2009
	£m	£m
Remuneration	1.8	1.1
Social security costs	0.1	-
Equity-settled transactions	0.4	0.2
Pension costs	0.1	0.3
	2.4	1.6

Details of transactions with the jointly controlled entity are given in note 15 to the Group accounts.

RS Components & Controls (India) Limited (RSCC) is a jointly controlled entity with Controls & Switchgear Company Limited, a company registered in India. The authorised share capital of this company is Rs20m, of which Rs18m is issued and owned in equal shares by Electrocomponents UK Limited and its partner. RS Components Limited supplies product and catalogues to RSCC, while office space and distribution network are provided by Controls & Switchgear. During the year ended 31 March 2010 the Group made sales of £0.8m (2009 £0.9m) to RSCC and supplied catalogues at a cost to RSCC of £0.1m (2009: £0.1m). RSCC is treated in the accounts as an associated undertaking.

RISKS

The Group has well established risk management and internal control processes for the identification, assessment and management of risks likely to affect the achievement of the Group's corporate and strategic objectives.

The Board and Group Executive Committee receive regular reports covering risks and mitigating actions arising from external factors, key dependencies, project delivery and corporate responsibility areas.

This section summarises the most significant risks to the achievement of our objectives:

Global economic conditions remain weak or worsen

Our sales and profits were adversely impacted by the economic downturn during 2009 and 2010. The business responded quickly and decisively to the downturn through a controlled programme of cost control. Reductions in operating costs were delivered through headcount reductions, logistics restructuring and other cost efficiencies realising annualised cost savings of around £18m.

Whilst the last six months have seen signs of a global recovery with an increase in sales being experienced across all our markets, the short to medium term economic outlook continues to be uncertain. The business is however highly cash generative, with significant headroom to the Group's banking covenants. The vast majority of the Group's committed facilities available at 31 March 2010 have a maturity date of September 2012 or later.

Increasing competition in key markets

During an economic downturn in global markets customers can place even greater significance on pricing and value for money, which competitors may respond to more aggressively by offering additional services and more competitive pricing. This development could threaten our core markets and relative competitive position, resulting in the loss of market share and margin.

To address this risk, we use robust market pricing frameworks across global markets to monitor competitor pricing and market developments, and to assess our 'value for money' relative to our competitors. This allows us to anticipate and respond quickly to competitor actions through new pricing, discounting and service offers. We have continued to change prices on a significant number of electronics products, and have expanded our own brand ranges to support our ability to compete on price in the current business environment.

By emphasising the innovation in our eCommerce capabilities, continuing high service levels and stock availability, our customer communications are able to deliver consistent messaging to our customers on our 'value for money' proposition. Collectively, these actions aim to ensure we remain competitive in the current tough and unpredictable market conditions.

Employee engagement

Staff engagement is essential to the successful delivery of the business strategy, particularly following the cost reduction measures implemented in response to the economic downturn, and changes to the business structure and organisation.

Employee engagement is monitored through the annual employee survey. Considerable effort has been devoted to communicating the business strategy so employees are clear on our business objectives and their role in the strategy. A 'Change Champion' network exists with employees drawn from all parts of the business whose central role is to ensure the strategy message is clearly and consistently communicated to their respective teams, and to provide feedback to senior management.

The employee appraisals process and the setting of personal objectives operates within the framework of our corporate objectives. The aim is for employees to understand the direction of the Group so they are appropriately engaged and incentivised in their role in delivering the strategy.

Dependence on business information systems

There is dependence on the core information systems infrastructure to support the business operations. A prolonged disruption to the systems infrastructure, applications or data would severely impact customer service operations including sales, order taking and order fulfilment.

The Group has developed considerable experience in operating its core systems in partnership with our business partners. The systems infrastructure is designed to provide considerable contingency against disruption. Upgrades to core systems and other applications are strictly controlled through tight project management processes and include rigorous test processes prior to any release. This ensures that the core systems and attendant applications remain stable and available at all times.

All systems are subject to continuous testing of system protections with well practised incident management procedures and fully documented crisis management plan arrangements. Ongoing programmes are in place to continuously test and reassess our systems, to ensure they are effectively protected against external security risks.

Foreign exchange rate volatility

The geographic spread of the Group means that financial results can be significantly affected by movements in foreign exchange rates. The Group has major businesses in Continental Europe, North America and Asia Pacific.

A 10 cent weakening of the Euro and US Dollar currencies against Sterling would create a translation exposure and reduce the Group's operating profit before tax by about £6m and £1m respectively.

The risk presented by currency fluctuations may materially affect business planning and product procurement costs. Actions in place to address and mitigate this risk include the placing of forward contracts against planned expenditure and increased purchasing of stock in Euros and US Dollars. More detailed information is provided in Note 20 to these accounts.

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL REPORT AND ACCOUNTS

The Annual Report contains a responsibility statement in compliance with DTR 4.1.12 signed on behalf of the Board by Ian Mason, Chief Executive Officer and Simon Boddie, Group Finance Director.  This states that on 28 May 2010, the date of approval of the Annual Report, the Directors confirm that to the best of their knowledge:

We confirm that to the best of our knowledge:

·       The accounts, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

·       The Directors' report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Ian Mason,                                                       Simon Boddie,

Group Chief Executive                                    Group Finance Director

28 May 2010

This announcement 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.

 

END

 

 

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