Annual Financial Report

RNS Number : 4662I

Electrocomponents PLC

15 June 2011

 



ELECTROCOMPONENTS PLC 

ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2011

NOTICE OF 2011 ANNUAL GENERAL MEETING

Pursuant to Listing Rule 9.6.1R copies of the documents listed below have been submitted to the Financial Services Authority National Storage Mechanism and will shortly be available for viewing at: www.hemscott.com/nsm.do.

·    Annual Report and Accounts for the year ended 31 March 2011 ("2011 Annual Report and Accounts")

·    Circular and Notice of Annual General Meeting ("AGM") to be held on 15 July 2011

·    Form of proxy for the AGM  to be held on 15 June 2011

·    Letter regarding availability of the 2011 Annual Report and Accounts on the Company's website

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

IMPORTANT: EXPLANATORY NOTE AND WARNING

The primary purpose of this announcement is to inform the market about the publication of Electrocomponents plc's 2011 Annual Report and Accounts.

The information below, which is extracted from the 2011 Annual Report and Accounts, is included solely for the purpose of complying with DTR 6.3.5R and the requirements it imposes on issuers as to how to make public annual financial reports. It should be read in conjunction with Electrocomponents' Preliminary Results announcement issued on 27 May 2011. Together these constitute the material required by DTR 6.3.5R to be communicated in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full 2011 Annual Report and Accounts.

Page and note references in the text below relate to pages and notes in the 2011 Annual Report and Accounts.

Related parties

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:

	2011 £m	2010 £m
Remuneration	2.0	1.8
Social security costs	0.2	0.1
Equity-settled transactions	0.6	0.4
Pension costs	0.1	0.1
	2.9	2.4

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 Company Limited. During the year ended 31 March 2011 the Group made sales of £0.9m (2010 £0.8m) to RSCC and supplied catalogues at a cost to RSCC of £nil (2010: £0.1m). RSCC is treated in the accounts as an associated undertaking.

Principal risks and uncertainties

Governance

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

The risk management process

The Board has overall responsibility for the Group's risk management process with the Audit Committee reviewing its effectiveness.  Day to day management of risk is delegated to the Group Executive Committee ('GEC') who are accountable for the implementation and management of risk mitigation activities.

The GEC conducts a formal review and assessment of the potential risks to the Group's strategy at the start of each financial year, and prioritises the agreed risks according to an assessment of the Group's risk tolerance limits.  The output of this process is reported to the Board for review.

All agreed Group risks have an allocated Executive Committee 'risk owner' who is responsible to the GEC for developing a risk plan that identifies the risk scenarios, documents the risk exposures and monitors performance.

The GEC receive scheduled updates on the major business risks and review new or developing risks for their potential effects on the business. The Board receive scheduled summaries of the prioritised Group major risks from the respective GEC risk owners during the year, together with updates to the Group's risk register.

All operational businesses complete an annual combined risk and controls profile, which feeds into the overall risk assessment process that is reviewed by the GEC, and by the Audit Committee in the annual Risk Review. The results of the risk assessment are factored into the audit plan to focus audit testing on key controls within the business.

Principal risks and uncertainties

The table on pages 28 and 29 presents the principal risks to the achievement of the Group's strategic objectives as identified through the risk management process described above.

The risks are described in terms of their likely impacts and opportunities, the measures that are applied in monitoring the risk, and the mitigating actions that form the main elements of the risk plan.

The senior executives responsible for the management of risks are required to report on progress with their respective risk plans to the GEC and the Board, to ensure the risk and the mitigating actions are appropriate and proportionate.

Risk	Impact	Key Risk Measures	Mitigating actions
Pricing Customers value the high service model less in a price sensitive market. The risk is that our competitors close the service gap and become more competitive on price.	Threat ·  Pressure on gross margin ·  Lower sales if we do not act quickly Opportunity ·  Differentiated by industry leading service levels ·  Sales opportunity for value RS brand products	·  Gross margin ·  Value for money (VfM) performance ·  Competitor price matching coverage ·  Frequency of price reviews ·  RS Brand sales growth ·  'On Time in Full' performance indicators	→ Dynamic pricing strategy →Adapt sale prices in response to and in anticipation of external factors →Increase price matches with competitor products →Continued focus on customer service →Monitor and maintain customer service
Macro Economic Conditions The improving global economic conditions remain vulnerable to major shocks such as a further banking crisis or sovereign debt defaults. The Group's sales and profits could be exposed by a worsening of global economic conditions and a loss of business confidence.	Threat ·  Reduced sales ·  Lowering of operational leverage ·  Excess stock ·  Bad debts increase ·  Funding shortfall Opportunity ·  Focus on markets served by smaller competitors ·  Customers reduce stock holding and use RS to source and supply components	·  Free cash flow ·  Available 'headroom' in banking covenants and facilities ·  Working capital metrics ·  Costs	→Strong balance sheet →Significant headroom to the Group's banking covenants and facilities →Cost management →Geographic spread of business →Working capital management
Risks from the implementation of the Allied ERP system The implementation of the new ERP platform in the Allied business holds inherent risks as with any project of this scale, including the potential distraction from 'business as usual'  activities.	Threat ·  Project costs are higher than anticipated ·  Project does not deliver expected business benefits ·  Project deadlines are not achieved Opportunity ·  Provides a robust platform for business growth and the development of new service opportunities ·  Improved management information	·  Project milestones monitored through formal project Steering Group with executive committee oversight ·  Project costs and benefits reviewed by Steering Group ·  Project risks and major risks logs monitored by Group	→Specialist consultancy support embedded in the implementation team →Approved project governance procedures in place →Close review and monitoring by Allied management team, with executive committee oversight →Benefits management process
Customer acquisition, retention and frequency of spend is insufficient to meet strategy objectives The business does not attract sufficient numbers of new customers, and is unable to develop new and existing customer behaviour to increase order frequency at a sustained level.	Threat ·  Insufficient numbers of new customers ·  Development of new customers behind target ·  Average order frequency does not improve ·  Unable to achieve sustainable sales growth Opportunity ·  Increased sales and profitability ·  Sustained growth in market share	·  New customer acquisition ·  Average order frequency ·  Metrics on new customers' purchasing behaviours ·  Customer retention metrics ·  Customer satisfaction survey	→Customer acquisition campaign →Brand awareness programmes in new markets →Development programme to influence new customer purchasing behaviours →Improvements to the eCommerce 'customer journey' →Targeted and relevant mass marketing programmes →Continuing high levels of new product introductions
Product data quality and content reduces eCommerce effectiveness The risk is that current information and data structures inhibit the future effectiveness of the eCommerce offer. The risk anticipates increasing market demands for faster rates of new product introductions, price changes and provision of comprehensive product information.	Threat ·  eCommerce sales are not optimised ·  Poor customer experience relative to competitors ·  Competitors are quicker to innovate and develop new web functionality Opportunity ·  Increase of eCommerce sales ·  Improve cross selling within the eCommerce offer ·  Better 'search and find' attracts new customers	·  Web conversion rate ·  Sales credits ·  Proportion of product data 'cleansed' ·  Customer satisfaction survey	→Ongoing programmes to improve product data and content quality →Customer expectations and experiences monitored through customer surveys →Localisation of product hierarchies →Governance structure for new product introductions

The Annual Report contains a responsibility statement in compliance with DTR 4.1.12 signed on behalf of the Board by Ian Mason, Group Chief Executive and Simon Boddie, Group Finance Director.

Responsibility Statement of the Directors in respect of the Annual Report and Accounts

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

27 May 2011

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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