Final Results

RNS Number : 6553Z

Electrocomponents PLC

25 May 2021

 

25 May 2021, 7.00 am

ELECTROCOMPONENTS PLC

RESULTS FOR YEAR ENDED 31 MARCH 2021

STRONG PERFORMANCE WITH FURTHER STRONG MARKET SHARE GAINS

LINDSLEY RUTH, CHIEF EXECUTIVE OFFICER, COMMENTED: "Electrocomponents has delivered a strong performance in a challenging year. We continue to drive market share gains, invest in our organic growth opportunities and generate good cash flow. In addition, we welcomed three high quality businesses into our Group to accelerate our strategic aspirations. I am incredibly proud of how well our people stepped up to the challenge, and I thank them all.

While we remain mindful of external pressures including ongoing cost inflation and potential supply chain shortages, we are confident that we are well positioned for a rapidly changing world. The Group has carried strong momentum into the new financial year, and we are excited about the opportunities we see through our Destination 2025 strategic roadmap to drive profitable market share growth and operational efficiencies."

Highlights	2020/21	2019/20	Change	Like-for-like1 change
Revenue	£2,002.7m	£1,953.8m	2.5%	1.4%
Adjusted2 operating profit	£188.3m	£220.7m	(14.7)%	(16.2)%
Adjusted2 operating profit margin	9.4%	11.3%	(1.9) pts	(2.0) pts
Adjusted2 profit before tax	£181.7m	£215.0m	(15.5)%	(17.0)%
Adjusted2 earnings per share	31.3p	37.7p	(17.0)%	(18.4)%
Operating profit	£167.2m	£205.3m	(18.6)%	(19.4)%
Profit before tax	£160.6m	£199.6m	(19.5)%	(20.4)%
Earnings per share	27.7p	34.7p	(20.2)%	(21.1)%
Full-year dividend	15.9p	15.4p3	3.2%
Adjusted2 free cash flow	£145.4m	£80.9m	79.7%
Net debt	£122.0m	£189.8m
Net debt to adjusted2 EBITDA	0.5x	0.7x

Growth driven by improving momentum throughout the year and strong market share gains

· Revenue growth of 2.5%, with like-for-like up 1.4%, reflecting strong market share gains in all key markets

· Superior availability, product and service solutions and being digitally-enabled has driven Group outperformance

· RS PRO like-for-like revenue growth of 9.7%, due to greater brand awareness and new product development

· Web revenue grew 2.4% with total digital revenue accounting for 63% of Group revenue

· Three strategic acquisitions performing in line with expectations, with integration and cross-selling on track

· Despite external challenges our Group Net Promoter Score⁴ remains high at 54.4 (2019/20: 55.7)

· We continue to improve our environmental, social and governance journey (ESG), driving higher external ratings⁵

Profitability affected by additional costs relating to COVID-19, Brexit and inventory provisions

· Gross margin of 42.7%, down 1.0 pts relating to increased freight costs, inventory provisions and regional mix

· Operating costs included c. £19 million relating to COVID-19 and Brexit due to higher freight and cost to serve

· RISE programme to simplify and streamline the Group delivered £7 million of cost benefits

· Adjusted operating profit margin down 1.9 pts to 9.4% due to gross margin reduction and additional costs

· Adjusted profit before tax fell 17.0% on a like-for-like basis, profit before tax lower by 19.5%

· Adjusted EPS decreased 17.0%, down 18.4% on a like-for-like basis; EPS fell 20.2%

Growth in full-year dividend supported by strong balance sheet and cash flow

· 3.2% growth in full-year dividend, in line with progressive dividend policy; adjusted dividend cover of 2.0 times

· Strong adjusted free cash flow generation of £145.4 million driven largely by our focus on conserving cash

· Balance sheet strength, net debt to adjusted EBITDA of 0.5x supports, organic and inorganic strategic expansion

Current trading shows strong start to the year due to COVID-19 comparatives

In the first seven weeks of 2021/22 we have seen very strong revenue growth due to the weaker comparatives from the first COVID-19 lockdowns. Looking at our performance on a two-year view, like-for-like revenue growth remains robust and broadly in line with our annual like-for-like revenue growth in H2 2020/21. Our performance in Americas continues to benefit from a wider product range due to the extended distribution centre and change in focus by our sales teams. We are particularly pleased with the performance in EMEA given ongoing lockdowns and the logistical challenges presented by Brexit. Asia Pacific remains strong helped by the buoyant electronics market.

Well positioned for accelerating our growth strategy organically and inorganically

Our proposition is becoming increasingly differentiated as we invest further in our product and service solutions, enhance our digitally-enabled customer experience and expand our main own-brand, RS PRO. External pressures continue, such as ongoing additional costs and uncertainty relating to the pandemic, Brexit frictions, potential supply chain shortages and the translational impact from the strength of sterling. However, growth in our market share and customer numbers demonstrate our proposition is resonating with customers and we are excited about the opportunities we see to drive further profitable market share growth and deliver our medium-term goal of a mid-teen adjusted operating profit margin. The Group has an active acquisition pipeline and a strong balance sheet, although we will retain our disciplined approach to assessing opportunities. We are well positioned to make good progress in the current financial year and our expectations for strong growth in 2021/22 remain unchanged.

1.  Like-for-like change excludes the impact of acquisitions and the effects of changes in exchange rates on translation of overseas operating results, with 2019/20 converted at 2020/21 average exchange rates. Revenue is also adjusted to eliminate the impact of trading days year on year. Acquisitions are only included once they have been owned for a year, at which point they start to be included in both the current and comparative periods for the same number of months. Currency movements decreased revenue by 3.2 million, fewer trading days decreased revenue by £4.8 million. Currency movements increased adjusted profit before tax by £1.5 million. 

2.  Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, acquisition-related items, substantial reorganisation costs, substantial asset write-downs, one-off pension credits or costs, significant tax rate changes and associated income tax (refer to Note 10 on pages 24 to 28 for reconciliations). 

3.  An additional interim dividend for the year ended 31 March 2020 of 9.5p, to replace the deferred final dividend, was paid on 18 December 2020. This is included in the 2019/20 dividend per share.

4.  Rolling 12-month NPS is a measure of customer satisfaction.

5.  Main ESG ratings: MSCI ESG A rating, CDP Climate Change leadership score A-, Sustainalytics negligible risk (6.2) 10 / 13,494 companies (3 / 540 in sector), FTSE4Good Index score 3.2 / 5 score, EcoVadis Gold medal rating.

6.  Consensus for the year ending 31 March 2022 is adjusted profit before tax of £241.2 million within a range of £225.1 million to £258.9 million (source: Electrocomponents.com/investors/analyst-coverage).

LEI: 549300KVXDURRKVW7R37

Enquiries:

David Egan, Chief Financial Officer	Electrocomponents plc	020 7239 8400
Lucy Sharma, VP Investor Relations	Electrocomponents plc	020 7239 8427
Martin Robinson / Olivia Peters	Tulchan Communications	020 7353 4200

There will be a presentation for analysts and investors today at 10.00am BST via an audio conference call and webcast. A replay of the webcast will be provided shortly after the event via the investor relations page of the Electrocomponents website :   https://www.electrocomponents.com/investors

Participant dial-in numbers

United Kingdom (Local):  020 3936 2999

All other locations:  [phone]

Participant access code:  172201

Webcast link: https://www.investis-live.com/electrocomponents/60940437a52baa1000253b26/grol

Notes to editors:

Electrocomponents plc is a global omni-channel provider of product and service solutions for designers, builders and maintainers of industrial equipment and operations. We stock more than 650,000 industrial and electronic products, sourced from over 2,500 leading suppliers, and provide a wide range of product and service solutions to over 1.2 million industrial customers. With operations in 32 countries, we trade through multiple channels and ship c. 60,000 parcels a day.

We support customers across the product life cycle, whether via innovation and technical support at the design phase, improving time to market and productivity at the build phase, or reducing purchasing costs and optimising inventory in the maintenance phase. We offer our customers tailored product and service propositions that are essential for the successful operation of their businesses and help them save time and money.

Electrocomponents plc is listed on the London Stock Exchange and in the year ended 31 March 2021 reported revenue of £2.0 billion. Electrocomponents plc has nine operating brands; RS Components, Allied Electronics & Automation, RS PRO, OKdo, DesignSpark, IESA, Synovos, Needlers and Liscombe.
 

CEO STRATEGIC REVIEW

This has been a difficult year for us all. The COVID-19 pandemic has brought many tough challenges for everyone, both personally and professionally. We responded early and flexibly which allowed us to adapt our working practices quickly to a new normal. Our number one priority is always the health, safety and wellbeing of our people, none more so than during the pandemic. Everyone has worked together to ensure this, allowing us to keep our distribution centres (DCs) open to provide ongoing premium customer service, while those that could work from home have transitioned smoothly as a result of our technological capabilities. The result has been increased cohesion across the Group with everyone supporting each other and a greater understanding of how important a role we play in delivering critical products and services especially within our communities. I am immensely proud of our amazing people and all they have achieved. Thank you.

We have also navigated the ending of the transition period following the UK's exit from the EU (Brexit). We prepared well to ensure as smooth a process as possible, from increasing inventory going into the end of the transition period, updating our technology, working closer with our customers, suppliers and logistic partners and increasing flexibility within our supply chain. This meant that all areas within our control ran fairly smoothly. However, there were a number of issues that all operators faced, such as longer customs controls, increased paperwork and transport carriers stuck at borders, which made it more of a challenge but which we have worked to mitigate. We look forward to improving our service to Europe further when the extension to our German DC opens in the early autumn of 2021.

We are a socially and environmentally responsible organisation with high ethical and governance standards, which I am fully responsible for implementing and maintaining and to which I am wholly committed. This is a core target within our strategic roadmap, Destination 2025. We are driving changes throughout the Group; such as from sourcing more sustainable products and building more energy-efficient operations and facilities, to educating and training both our own people and broader communities. Additionally, we support non-profit organisations that share our passions such as Engineers Without Borders-International and The Washing Machine Project. I am proud that our ESG work has gained recognition by external agencies including a MSCI ESG A rating, a CDP Climate Change leadership score of A-, 10th out of 13,494 companies with Sustainalytics and a Gold medal rating by EcoVadis.

During the year we also welcomed three new businesses to our Group: Needlers Holdings Limited, Synovos, Inc. and John Liscombe Limited. Synovos is a leading player in integrated supply solutions, based in Americas, and is very similar to our IESA business. Needlers and Liscombe expand our product and service solutions offer in safety, hygiene and personal protective equipment (PPE) through their specialist product ranges, supply base and expertise. The integration of a ll three businesses is on track and they are performing in line with expectations. We can accelerate our organic growth through acquisition targets that fit strategically, culturally and generate value.

The challenges encountered during 2020/21 have stress-tested the business materially, but the growth we delivered in market share and customer numbers has demonstrated our resilience and strength. We are building a strong foundation to accelerate future growth, with our proposition well-positioned for this changing world. We have an offer that is resonating and gaining traction with existing and new customers but still have less than a 1% market share globally, highlighting the opportunities we have.

Accelerating Destination 2025

Our Destination 2025 strategy, outlined over two years ago, sets out five strategic priorities to deliver value for all our stakeholders. There is no change to the overall plan, but we believe we can accelerate delivery of these ambitions.

During 2020/21 we initiated RISE, our programme to streamline our Group to build a leaner and more scalable business capable of accelerating growth and driving higher sustainable returns. This included flattening the regional management structure and expanding the shared business services team to spread knowledge, expertise and best practice across marketing , digital, innovation and product and supplier management. This simpler operating model will enable Electrocomponents to go faster, improve margins and operate more efficiently.

We are also moving towards becoming a more environmentally sustainable business. We are working with our supplier base to reduce unnecessary transportation routes through restructuring the network, both inbound as we receive product from suppliers, and outbound as we distribute to our customers. This will result in more deliveries direct from the manufacturing location, via sea rather than air freight, growing the level of inventory held locally and increasing regional sourcing options. This will streamline our in-country operations, reduce costs and lead to significantly lower carbon emissions from our supplier base and third-party delivery network. Moving the product closer to the customer will improve product availability, delivery times, consistency and customer service levels. This is a large project as we restructure decades of historic working, but one we are passionate about delivering.

Driving sustainable growth through our differentiated offer

We have over 1.2 million customers and are delivering c. 60,000 parcels daily from over 2,500 suppliers of our stocked products. The average order value is £191, with many being fast, just-in-time purchases, illustrating that product availability, security of supply and speed of delivery is crucial to our customers' needs. Given our proposition and reach, there is an enormous opportunity to become more connected with our customers, increasing their average basket size through growing the amount of product and services we offer, developing service solutions for their procurement problems and generating growth through new customers. Extending our depth with existing customers and widening our breadth through new customers will deliver operational leverage, profitability and environmental benefits for our customers, our suppliers and the Group.

We believe that focusing on our key strengths will have the greatest potential to accelerate delivery of Destination 2025 and sustainable profitable market share growth. These areas of differential are:

· Customer experience and our omni-channel model : Customers are increasingly expecting a fast, personal, efficient and frictionless experience. Our digitally-enabled model allows us to service customers whichever way is easiest for them and we continue to invest in this area, adding a responsive web platform at RS during 2020/21. Our digital channel participation at 63% of revenue reflects how our customers are increasingly purchasing. However, we also provide specialist technical support and advice through our expert sales teams which, when combined with our digital capabilities, give us a significant competitive advantage.

· Product and service solutions offer : Our customers are looking at ways to ease their procurement requirements. We provide a portfolio of product and service solutions relating to design, procurement, inventory, supply chain, engineering and maintenance. Part of this offer is within the core RS and Allied brands and part within our brands such as DesignSpark and our integrated supply businesses, IESA and Synovos. The opportunity to personalise supply solutions with ranges of associated products relevant to specific customer uses is significant. Delivering this leads to stronger customer relationships, improved loyalty and greater lifetime value as we become increasingly more integrated with our customers.

· Specialist product breadth, depth and expertise : The breadth and depth of our product offering, underpinned by the strength of our supplier relationships, continues to set us apart from our competition. We are expanding our range of new and innovative products further and growing our expertise in an increasing number of product categories while our electronics offer drives differentiation from industrial peers. The extensive digital and customer data we have allows us to make informed decisions about our range depending on customer demand. Where we already have the supplier relationships and in-house expertise and experience, we are building out specialist product ranges that our customers require. Where there are opportunities to develop this faster in categories where we are less well known, we are looking at acquisitions.

· Own-brand proposition : Our main own-brand, RS PRO, continues to outperform the Group. We have a strong quality offering, sourced from tier one level suppliers, that delivers value for money to our customers and a more targeted product offer based on utilising our data. Being able to identify new product opportunities and offer full solutions such as test and measurement kits has been very successful. We see significant opportunity to develop this further, especially in Americas where penetration is low, increasing the contribution and strengthening overall margins.

Driving operational efficiency

During the year, we have focused on continued investment in our proposition, ensuring that we retain a strong service to drive future profitable market share gains. Many of the fundamentals are in place and, although we are obsessive about ongoing continued investment to stay relevant, our model is now shaped for delivering operational efficiency.

We have completed the doubling of our DC capacity in Fort Worth, US, and are close to finishing a similar expansion at our DC in Bad Hersfeld, Germany. These DCs are more sustainable, automated and environmentally efficient with solar panels, decreased waste output and improved packaging systems. The two extensions will allow us to increase substantially the breadth of our product offering and also expand our sales of RS PRO. Additionally, our German DC will drive economic and environmental efficiencies in helping supply Europe now that Brexit is complete.

We continue to spend c. 4% of Group revenue per annum on our digital and technology offer so we remain industry leading. We are utilising our data better for the benefit of our customers, suppliers and our own-brand RS PRO offering. This has resulted in a greater understanding of customer lifetime values and improved returns from more targeted marketing spend.

Our RISE initiative will drive further operational efficiencies. We have already seen the benefits of leveraging our central expertise further and being able to focus on the higher returning areas within our business model.

We continue to target organic growth in the key areas outlined above. However, we see ways we can accelerate this inorganically through acquisitions that fit strategically, culturally and generate value. Delivering market share growth and operating leverage will underpin our progress towards our goal of a mid-teen adjusted operating profit margin.

Thank you to our amazing team

Key to the strength of Electrocomponents is our people. I am incredibly proud of how strong our team is, both in the dedication and care our people have shown each other, our customers, suppliers and communities, and in how they have responded to this difficult year. I thank everyone for their hard work, collaboration, fortitude, positive attitude and humour, which continues to make Electrocomponents the amazing business I am honoured to lead.

OVERALL   RESULTS  

	2020/21	2019/20	Change	Like-for-like1 change
Revenue	£2,002.7m	£1,953.8m	2.5%	1.4%
Gross margin	42.7%	43.7%	(1.0) pts	(1.1) pts
Operating profit	£167.2m	£205.3m	(18.6)%	(19.4)%
Adjusted2 operating profit	£188.3m	£220.7m	(14.7)%	(16.2)%
Adjusted2 operating profit margin	9.4%	11.3%	(1.9) pts	(2.0) pts
Adjusted2 operating profit conversion	22.0%	25.8%	(3.8) pts	(4.0) pts

1.  Like-for-like change excludes the impact of acquisitions and the effects of changes in exchange rates on translation of overseas operating results, with 2019/20 converted at 2020/21 average exchange rates. Revenue is also adjusted to eliminate the impact of trading days year on year. Acquisitions are only included once they have been owned for a year, at which point they start to be included in both the current and comparative periods for the same number of months.

2.  Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, acquisition-related items, substantial reorganisation costs, substantial asset write-downs and one-off pension credits or costs (see Note 10 for reconciliations).

Revenue

Group revenue increased by 2.5% to £2,002.7 million (2019/20: £1,953.8 million). Adjusting for the year-on-year impact of acquisitions (1.5%), fewer trading days and foreign exchange movements, like-for-like revenue growth was 1.4%. The first half was significantly impacted by the COVID-19 pandemic, with like-for-like revenue falling by 7.3%. Trading momentum improved going into the second half as restrictions eased, delivering 10.2% like-for-like revenue growth, helped by weaker comparatives over the last two weeks of the year. Industrial production data indicates we gained market share as we widened our customer base. RS PRO, our main own-brand range, which accounts for 14% of Group revenue, continued to outperform the Group with like-for-like revenue growth of 9.7%. Digital, which accounts for 63% of Group revenue, recorded like-for-like revenue growth of 0.9%, slightly behind the overall Group due to lower eProcurement revenue from some larger corporate customers. Web sales grew by 2.4%. OKdo, which represents 5% of Group revenue, saw like-for-like revenue growth of 5.2%.

Gross margin

Group gross margin decreased by 1.0 percentage points to 42.7% (2019/20: 43.7%). Excluding a negative impact of 0.1 percentage points from acquisitions and a 0.2 percentage points favourable impact from foreign exchange, the like-for-like decline was 1.1 percentage points. This includes a 0.6 percentage points impact from inventory provisions relating to the decline in the price of certain PPE products bought at the start of the pandemic. Higher inbound freight costs and an adverse geographic and product mix were offset partially by a higher contribution from our own-brand RS PRO products and our continued focus on improving our product margin.

Operating costs

Total operating costs, which include regional costs and central costs, increased by 6.1%. Excluding substantial reorganisation costs, amortisation of acquired intangibles, acquisition-related items and 2019/20's substantial asset write-downs, total adjusted operating costs increased by 5.3%, 4.1% on a like-for-like basis, to £667.7 million (2019/20: £634.0 million).

Costs relating to COVID-19 were c. £17 million, significantly above the £1 million COVID-19 related costs in 2019/20. These costs included an additional £12 million of outbound freight, £3 million labour operating costs and £2 million technology and overhead costs. Although we have taken actions to mitigate these where possible and have seen some improvements in the fourth quarter, freight rates remain high and some costs will continue into 2021/22.

Brexit added about c. £2 million of costs in 2020/21 as we incurred increased brokerage and air freight costs, the latter as we tried to minimise the impact on our customer service from the disruption at the border. Some of these costs will continue into 2021/22 but will reduce as the new DC in Bad Hersfeld, Germany, comes onstream.

The post-acquisition adjusted operating costs incurred by the acquisitions were £8.2 million. Stripping out these costs and those relating to COVID-19 and Brexit, leaves a remaining increase of about 1% in adjusted operating costs year on year. This increase was due to higher digital advertising spend to deliver revenue improvements with a better return, depreciation starting to increase following the completion of the expansion of our DC in Fort Worth, US, and higher costs for performance-related incentives and share-based payments due to our resilient performance.

Our focus remains on working to simplify our organisation and drive a lean and scalable model through our RISE programme. We have sought to streamline and flatten our operating model to serve customers and suppliers better, delivering £7.0 million of savings in 2020/21.

Adjusted operating costs as a percentage of revenue increased to 33.3% (2019/20: 32.4%). Adjusted operating profit conversion ratio fell by 3.8 percentage points to 22.0% (2019/20: 25.8%) as a result of both the lower gross margin and higher operating costs.

Items excluded from adjusted profit

To improve the comparability of information between reporting periods and between businesses with similar assets that were internally generated, we exclude certain items from adjusted profit measures. The items excluded from 2020/21 are described below. In 2019/20 we also excluded substantial asset write-downs of £7.3 million related to British Steel Limited's receivables. See Note 10 for definitions and reconciliations of adjusted measures.

Substantial reorganisation costs

The Group incurred substantial reorganisation costs of £11.2 million during the year, primarily labour-related restructuring costs to implement RISE. This cost is less than the cost booked in the first half of £16.0 million due to stopping some plans due to Brexit, more people with lower pay and less service than expected leaving and redeploying a number of people from redundant roles into vacant roles. The benefits were £7 million in 2020/21, with a further £15 million expected in 2021/22 and another £3 million in 2022/23. We expect the total implementation cost to be around £16 million.

Amortisation of acquired intangibles

Amortisation of acquired intangibles was £7.0 million (2019/20: £5.4 million) and relates to the intangibles assets arising from acquisitions.

Acquisition-related items

Acquisition-related items of £2.9 million relate to transaction costs directly attributable to the acquisition of businesses.

Operating profit

Operating profit was down 18.6% to £167.2 million (2019/20: £205.3 million). Adjusted operating profit saw a decline of 14.7% to £188.3 million. Excluding acquisitions and the positive benefits of currency movements, adjusted operating profit saw a like-for-like decline of 16.2%. Adjusted operating profit margin fell by 1.9 percentage points, 2.0 percentage points on a like-for-like basis, to 9.4% (2019/20: 11.3%).

Regional performance

The strength of our proposition was demonstrated by the resilience of the revenue performance across all regions during 2020/21 despite the challenges that COVID-19 and Brexit presented. We responded early and flexibly to the pandemic and were able to adapt our working practices and business model quickly. Our teams within our DCs operated with elevated controls and discipline, safely ensuring our DCs remained open and our supply chains operated effectively. Meanwhile, our technology capabilities meant those people that could work from home had the right tools and technology to continue collaborating virtually. It is a testament to the strength of our people that product, geographic and vertical teams work so successfully together.

We continued to grow ahead of the industrials market regionally, as we grew market share, with particularly strong performance in Americas, UK, France and smaller markets in Asia Pacific and EMEA. All regions were able to react quickly to support changing customer needs and priorities, deepening our relationship as a trusted partner. The security of our strong product availability, as well as our position as an omni-channel provider of product and service solutions, has driven strong growth in our customer numbers across 2020/21.

We have increased collaboration across the Group to drive best practice within our regions. This allows us to leverage resources such as sales tools, supplier engagement, product and service solutions and marketing materials across the Group to improve service, accelerate performance, reduce duplication and increase efficiency. Our regional heads adapt global expertise and best practice to suit local needs. The investments we continually make into areas such as product and service solutions, digital, inventory and our DC infrastructure enabled us to successfully navigate the COVID-19 challenges. The RISE programme streamlines the operational structure of our business further, speeding up management decisions and operational efficiencies in pursuit of our Destination 2025 strategic ambitions. We continue to automate, consolidate and simplify how we do business to improve operating leverage further as we accelerate our market share growth and take advantage of strategic opportunities.

Our product and service solutions offer provides a real differentiation to our peers, driving stronger client relationships. IESA won an increased number of new contracts over the past year and, with the acquisition of Synovos based in Americas, offers a global integrated supply solution to service our customers' procurement, inventory and maintenance needs. The acquisitions of Needlers and Liscombe expanded our product and service solutions into PPE, safety and hygiene. DesignSpark, our free online engineering community, grew members by 14% to over one million.

Customer experience remains a core focus for the business. Our Group rolling 12-month Net Promoter Score (NPS), a measure of customer satisfaction, was 54.4 for 2020/21, down 2.3% over the year (2019/20: 55.7). While we worked closely with our suppliers to minimise service disruption from global supply chain constraints, we were not able to fully mitigate the impact of product shortages and longer lead times from the pandemic, the impact from Brexit and customs delays in EMEA and extreme weather in Texas, US. Our teams are working closely with suppliers and customers to address these issues and this is a key metric within our performance targets. Our online satisfaction score, CSAT, was in line with prior year at 71 (2019/20: 71).

EMEA

EMEA accounts for 64% of Group revenue and is managed across the key markets of: UK and Ireland; France; Italy; Iberia; Germany, Austria and Switzerland; and rest of EMEA which includes Benelux, Eastern Europe, Scandinavia, South Africa and our export business (covering 32 international distribution partners servicing 82 countries). RS, RS PRO, IESA, Needlers and Liscombe are our key trading brands in EMEA. A broad range of products, high inventory availability and specialist expert service are key priorities for our customers. We differentiate our offering from our competition by providing a best-in-class online experience, supported by a knowledgeable salesforce, technical expertise, 24/7 customer support and product and service solutions. Delivering on these drives stronger customer relationships, higher average order values and operational leverage.

	2020/21	2019/20	Change	Like-for-like 1 change
Revenue	£1,277.4m	£1,239.8m	3.0%	1.0%
Operating profit2	£172.6m	£197.0m	(12.4)%	(14.5)%
Operating profit margin	13.5%	15.9%	(2.4) pts	(2.4) pts

1.  Like-for-like adjusted for currency and to exclude the impact of acquisitions; revenue also adjusted for trading days.

2.  See Note 2 on page 21 for reconciliation to Group operating profit.

· We saw a resilient performance across EMEA during a difficult year with many challenges. Industrial production data shows that we gained share in our core markets during the period as, especially with the uncertainty presented by COVID-19, the security of our offer, in terms of product availability and financial strength, resonated with customers. We have provided ongoing service to our customers and limited as much of the disruption from the pandemic and Brexit that we can.

· We prepared well for Brexit, testing our capabilities, adding additional supply chain and technology resource, working closely with our suppliers and bringing forward our inventory requirements so we were well stocked prior to 31 December 2020. However, increased and varied customs controls, greater paperwork and transport operators stuck at borders were all issues out of our control, leading to a slower service into Europe than we target. We are mitigating as much of this as we can with increased air freight, rerouting of transport, changes to our ordering patterns and greater local sourcing.

· The extension of our German DC is on track to be completed by early autumn of 2021. This will allow us to broaden our product range, offer service solutions and increase automation to improve sustainability and efficiency. Additionally, it provides the Group with a more substantial distribution platform for Europe post Brexit.

· Overall, EMEA revenue grew 3.0%, 1.0% on a like-for-like basis, to £1,277.4 million (2019/20: £1,239.8 million). Revenue fell 8.0% on a like-for-like basis in the first half due to the pandemic, but we saw an improvement in the second half with growth of 9.6% as conditions improved with COVID-19 restrictions easing somewhat.

· Digital, accounting for 73% of the region's revenue, outperformed with 2.0% like-for-like revenue growth as greater focus was placed on driving organic growth through search engine optimisation (SEO) marketing, improving content and introducing a mobile-responsive website. We saw lower contribution from eProcurement business due to smaller participation from larger customers.

· RS PRO, which accounts for 19% of the region's revenue, strongly outperformed with 9.5% like-for-like revenue growth due to new product launches targeted to customer needs, more product-specific marketing campaigns increasing brand equity and sales incentives.

· IESA has a large proportion of customers within the automotive and aerospace sectors which suffered significant trading pressure from COVID-19 affecting IESA's revenue. Costs were managed accordingly, although we invested in developing capabilities in new territories as a result of several international contract wins. We have a strong pipeline of new business wins which are being rolled out and implemented as local lockdowns ease.

· The UK was most impacted by government-imposed lockdown restrictions in the first quarter but its diverse customer base meant it was relatively resilient and saw an improvement in momentum across the year as industries returned to work.

· We saw a quicker recovery in performance in France, Iberia and Italy, aided by our ongoing investment in talent, more focused salesforces, value-led selling and improved sales effectiveness. This has led to a growth in RS PRO participation and gross margin enhancement in those markets.

· Our German business is heavily focused on original equipment manufacturer (OEM), automotive and electronic subcontractor segments, industries that were hugely impacted by reduced capital budgets this year. We have a new country head and a refocused salesforce, with signs of improvement seen in the fourth quarter.

· EMEA saw gross margin decline year on year largely relating to inventory provisions on certain PPE products which were bought at the start of the pandemic at inflated prices. Excluding the PPE impact, the gross margin was more robust as our continued focus on improving the product margin meant we were able to take actions to mitigate the impact of higher inbound freight costs due to both COVID-19 and Brexit.

· Operating profit decreased 12.4%, down 14.5% on a like-for-like basis, to £172.6 million (2019/20: £197.0 million).

· Operating profit margin declined 2.4 percentage points to 13.5% (2019/20: 15.9%), from a lower gross margin and £13 million of extra costs relating to COVID-19 and Brexit from higher outbound freight costs and a greater cost to serve.

· EMEA's rolling 12-month NPS was 55.5 (2019/20: 56.6). Although our teams worked hard to mitigate any delays from COVID-19 and Brexit, there were unavoidable impacts on delivery lead times and inventory availability.

· The acquisitions of Needlers and Liscombe expand our products and solutions in the safety, hygiene and PPE product category. Integration into the Group is going well and trading is in line with expectations. Revenue and operating profit contribution since acquisition were £15.9 million and £1.6 million respectively.

Americas

Americas accounts for 26% of Group revenue, with Allied, Synovos and RS PRO our trading brands. We have operations in the US, together with smaller operations in Canada, Mexico and Chile. Americas has seen a significant amount of transformation over the last two years, with the majority of the leadership team changing, including the President and CFO, and more than doubling the capacity of the DC to widen our product offering further into the maintenance, repair and operations (MRO) market. The acquisition of Synovos provides a significant opportunity to deliver revenue-generating opportunities from cross-selling Synovos and Allied products and expanding our RS PRO participation. We have also implemented a field sales transformation programme, utilised shared expertise across the Group and made a step change investment in digital which is driving greater customer engagement and marketing returns.

	2020/21	2019/20	Change	Like-for-like 1 change
Revenue	£517.0m	£515.7m	0.3%	1.4%
Operating profit2	£51.9m	£57.8m	(10.2)%	(8.4)%
Operating profit margin	10.0%	11.2%	(1.2) pts	(1.0) pts

1.  Like-for-like adjusted for currency and to exclude the impact of acquisitions; revenue also adjusted for trading days.

2.  See Note 2 on page 21 for reconciliation to Group operating profit.

· Americas delivered a strong result with improving momentum throughout the year, despite the severe weather in February 2021 significantly disrupting our DC. We continued to invest in our salesforce and management and our teams are now better aligned to revenue and margin growth as they form part of their incentive plans. Field teams are now focused on customer acquisition and retention as well as expanding our product proposition and RS PRO participation, with a central customer service team providing specialist support.

· Americas revenue grew 0.3%, 1.4% on a like-for-like basis, to £517.0 million (2019/20: £515.7 million). The impact of COVID-19 led to like-for-like revenue falling 7.8% in the first half before improving to deliver strong growth in the second half of 11.1%. Entertainment as well as oil and gas remained significantly down across the year, compensated by growth in industries less impacted by COVID-19.

· In February extreme cold weather conditions in Texas, US, led to state-wide power grid failures. Our DC, based in Fort Worth, US, was affected temporarily but we had the site back up and running within a few days.

· Digital revenue accounted for 39% of the region's revenue, growing 0.2% like-for-like and underperforming Americas' overall growth due to a smaller contribution from eProcurement orders from corporate clients heavily affected by the pandemic. However, pure web revenue participation was broadly flat, driven by stronger growth in the second half which benefited from investment in our digital platform to improve site speed and search engine optimisation.

· RS PRO accounts for under 1% of the region's revenue but has grown significantly and is expected to be a key beneficiary of the extended DC, new sales incentive programme and the acquisition of Synovos. This will drive revenue and gross margin enhancement.

· Gross margin grew with higher inbound freight costs offset by continued focus on improving our product margin through reducing the level of sales discounting and price optimisation.

· Operating profit declined 10.2%, down 8.4% on a like-for-like basis, to £51.9 million (2019/20: £57.8 million) driven by higher costs predominantly in the supply chain and a higher level of depreciation reflecting the DC capital investment.

· Operating profit margin declined 1.2 percentage points, down 1.0 percentage points on a like-for-like basis, to 10.0% (2019/20: 11.2%).

· Americas' NPS score was strong across the year as it continued to focus on driving improvements in both offline and online customer experience. The rolling 12-month NPS remained the highest of all the regions at 71.9 although longer delivery lead times due to February's extreme weather conditions meant it was down 0.4% year on year (2019/20: 72.2).

· Synovos contributed £13.0 million to revenue and £0.5 million to operating profit since its acquisition in January 2021. The integration of Synovos into the Group is going well and trading is in line with expectations. IESA and Synovos present a transatlantic integrated supply solution offer and are working together on new business opportunities. We see further revenue-generating synergies from an enhanced Americas customer proposition of RS PRO, Allied and Synovos.

Asia Pacific

Asia Pacific accounts for 10% of Group revenue and consists of Australia and New Zealand (ANZ), Greater China, Japan and South East Asia. RS and RS PRO are our main trading brands in Asia Pacific. Our broadening product offer, strong technical expertise, omni-channel service and a growing range of service solutions underpin our market share growth. This allows us to become increasingly a one-stop-shop partner of choice for our customers.

	2020/21	2019/20	Change	Like-for-like 1 change
Revenue	£208.3m	£198.3m	5.0%	4.6%
Operating profit2	£1.4m	£3.7m	(62.2)%	(64.1)%
Operating profit margin	0.7%	1.9%	(1.2) pts	(1.3) pts

1.  Like-for-like adjusted for currency; revenue also adjusted for trading days.

2.  See Note 2 on page 21 for reconciliation to Group operating profit.

· Asia Pacific revenue increased 5.0%, 4.6% on a like-for-like basis to £208.3 million (2019/20: £198.3 million) with our performance in the first quarter hit by COVID-19. The team quickly adapted to the adverse environment and moved into growth as we entered the second half with double-digit growth by the third quarter which continued into the fourth quarter.

· Performance has been mixed and varies by country depending on the various COVID-19 related lockdown measures. Industry data suggests strong market share gains in our industrial markets, particularly ANZ, Greater China and most of South East Asia. Greater China, excluding OKdo revenue, has seen growth every month, even during the height of COVID-19, as it benefited from last year's leadership change and a refocused salesforce. Meanwhile, Japan struggled due to its electronics exposure and low brand recognition, although a stronger performance of the electronics market at the end of the year moved the country into positive growth by the fourth quarter. South East Asia's performance has fluctuated throughout the year reflecting various enforced lockdowns in the sub-region but returned to mid-single digit growth in the second half.

· Digital, which accounts for 57% of the region's revenue, grew 4.4% like-for-like, mainly due to better performance within web and purchasing manager functions. We have been adjusting our model to focus on improving the efficiency of marketing spend which is driving more traffic from similar costs.

· RS PRO, which accounts for 13% of the region's revenue, saw strong like-for-like revenue growth of 9.4%, outperforming the region. This increase was driven by work to grow the brand's penetration through distribution agreements with local resellers in ANZ and strong and successful marketing campaigns (especially in Thailand and Japan) driving higher margin product which saw an overall increase in the RS PRO margin itself.

· Gross margin declined year on year due to product and geographic mix, with slower growth from higher gross margin products such as interconnect and electromechanical, and increased sales of lower gross margin products such as OKdo and PPE. Inbound freight costs, additional customs and duties and negative exchange rate movements also adversely impacted gross margin.

· Operating profit declined 62.2%, down 64.1% on a like-for-like basis, to £1.4 million (2019/20: £3.7 million), due to higher outbound freight costs and customs duties relating to COVID-19 on a small profit base which more than offset revenue growth.

· Operating profit margin declined 1.2 percentage points, down 1.3 percentage points on a like-for-like basis, to 0.7% (2019/20: 1.9%).

· Asia Pacific's rolling 12-month NPS of 37.4 (2019/20: 38.3) was impacted by longer supply lead times during the pandemic lockdowns and our decision to implement delivery charges for some small value orders which have low levels of profitability. We remain committed to improving customer satisfaction and have implemented a more focused salesforce across the region, especially in Greater China.

Central costs

Central costs relate to Group head office costs and include the Board, Group Finance and Group Professional Services and People that cannot be attributed to region-specific activity.

	2021	2020	Change	Like-for-like 1 change
Central costs	£(37.6)m	£(37.8)m	(0.5)%	(0.5)%

1.  Like-for-like adjusted for currency.

Central costs decreased by 0.5% to £37.6 million (2019/20: £37.8 million) with higher performance-related incentives and share-based payments more than offset by tighter cost control of overheads and no recurrence of the OKdo launch costs incurred last year.

FINANCIAL REVIEW

Net finance costs

Net finance costs increased to £6.8 million (2019/20: £5.9 million) with lower finance income on our cash and short-term deposits as interest rates have fallen compared to last year. Finance costs have not fallen as much as a high proportion of our debt is at fixed interest rates and included £0.9 million of costs relating to refinancing our revolving credit facility and our COVID-19 liquidity buffer bank facility.

Profit before tax

Profit before tax was down 19.5% to £160.6 million (2019/20: £199.6 million). Adjusted profit before tax was down 15.5% to £181.7 million (2019/20: £215.0 million), down 17.0% on a like-for-like basis.

Taxation

The Group's income tax charge was £35.1 million (2019/20: £44.9 million). The adjusted income tax charge, which excludes the impact of tax relief on items excluded from adjusted profit, was £39.6 million (2019/20: £46.9 million), resulting in an effective tax rate of 21.8% on adjusted profit before tax (2019/20: 21.8%). The effective tax rates for both 2020/21 and 2019/20 were favourably impacted by c. one percentage points by one-off tax credits which are not expected to recur. We expect the 2021/22 effective tax rate to increase due to corporate income tax rate increases in the UK and US.

Earnings per share

Earnings per share was down 20.2% to 27.7p (2019/20: 34.7p). Adjusting for items excluded from adjusted profit and associated income tax effects, adjusted earnings per share of 31.3p (2019/20: 37.7p) was down 18.4% on a like-for-like basis.

Cash flow

£m	2020/21	2019/20
Operating profit	167.2	205.3
Add back depreciation and amortisation	56.5	50.9
EBITDA	223.7	256.2
Add back impairments and (profit) / loss on disposal of non-current assets	0.3	0.1
Movement in working capital	(1.5)	(51.2)
Movement in provisions	1.6	(5.3)
Other	7.0	3.4
Cash generated from operations	231.1	203.2
Net interest paid	(8.3)	(6.2)
Income tax paid	(35.2)	(49.9)
Net cash from operating activities	187.6	147.1
Net capital expenditure	(54.7)	(74.7)
Free cash flow	132.9	72.4
Add back cash effect of adjustments1	12.5	8.5
Adjusted1 free cash flow	145.4	80.9

1.  Adjusted excludes the impact of substantial reorganisation and acquisition-related items cash flows.

We continued to demonstrate our strength as a robust cash generative business despite the challenges our customers, suppliers and teams have faced while keeping safe. During the year we took actions to conserve cash due to the uncertainties caused by COVID-19. As a result, cash generated from operations increased to £231.1 million (2019/20: £203.2 million) with movements in working capital being significantly less negative than last year and only partially offset by lower EBITDA.

Net interest paid increased to £8.3 million (2019/20: £6.2 million) due to the higher net finance costs and the prepaid fees for the refinancing of our revolving credit facility.

Income tax paid fell to £35.2 million (2019/20: £49.9 million) with utilisation of some overpayments from 2019/20 and taxable profit being lower than 2019/20. In 2019/20 the changes in timing of UK tax payments resulted in an increase in tax payments in the first half offset by lower tax payments in the second half partly due to the write off of the receivables from British Steel Limited.

Net capital expenditure decreased to £54.7 million (2019/20: £74.7 million) as we focused our investments on those key to delivering Destination 2025, including our technology platforms such as our new RS mobile-first responsive website and other enhancements to our systems. Our expanded Fort Worth, US, DC was completed in the first half and we continued to invest in expanding our Bad Hersfeld, Germany, DC. Capital expenditure decreased to 1.7 times depreciation (2019/20: 2.6 times), moving more in line with our typical maintenance capital expenditure levels of closer to 1.0 - 1.5 times depreciation. We anticipate capital expenditure in 2021/22 to be c. £65 million.

Given our focus on conserving cash, free cash flow increased to £132.9 million (2019/20: £72.4 million) and is after an additional £12.5 million deficit contribution paid into our UK pension scheme during the year. Excluding cash outflows of £12.5 million (2019/20: £8.5 million) related to substantial reorganisation costs and acquisition-related items, adjusted free cash flow was £145.4 million (2019/20: £80.9 million).

Working capital

We have actively managed our working capital and, as a result, working capital as a percentage of revenue decreased by 2.1 percentage points to 21.8% (2019/20: 23.9%).

We have had a particular focus on receivables collection, which remains our greatest short-term liquidity sensitivity. We took action to limit our exposure by tightening our credit policies, including short payment terms and low credit limits for new customers and seeking payment commitments for overdue balances before releasing new orders to existing customers. So far, we have seen limited adverse impact from the COVID-19 pandemic on our receivables collection, however, we continue to monitor closely collection metrics.

The acquisitions increased trade and other receivables by £64.7 million and this, together with the significant increase in March's revenue year on year, led to trade and other receivables ending the year at £492.4 million (2019/20: £406.6 million). Gross trade receivables increased to £435.2 million from £355.5 million at 31 March 2020. The great work our accounts receivables teams have done in collecting overdue balances has meant the ageing profile of our trade receivables has improved, with only 17% overdue compared with 25% at 31 March 2020. Our trade receivables impairment allowance increased to £7.4 million (2019/20: £6.9 million) as the acquisitions brought impairment allowances of £0.7 million.

Gross inventories increased by £13.8 million to £460.4 million (2019/20: £446.6 million) with £10.9 million due to the acquisitions and we also added some inventory into our newly operational expanded DC in Fort Worth, US. Our inventory levels were lower than we would have liked due to delays in receiving inventory into the UK due to Brexit and the Suez Canal blockage. As a result, annualised inventory turn was 2.7 times (2019/20: 2.6 times). Inventory provisions increased to £40.6 million (2019/20: £27.6 million) due to the lower net realisable value of certain personal PPE products bought at the start of the pandemic as a result of significant falls in their selling prices. 

Overall trade and other payables increased to £475.3 million from £358.7 million at 31 March 2020 with the acquisitions accounting for £67.5 million of this increase, mainly in trade payables. Trade payables increased to £319.4 million (2019/20: £241.1 million), while other payables have increased mainly in accruals due to timing of invoicing for other costs and the pickup in business during March.

Looking forward to 2021/22, we will continue to manage actively our working capital position and remain focused on receivables collection. We continue to manage actively our inventory position to reduce excess wherever possible, while at the same time investing in the right inventory to ensure we are well positioned to maintain service levels and focus on opportunities as our markets recover and we grow. We continue to pay our suppliers to terms and have worked with some of our larger suppliers to improve terms where possible.

Return on capital employed (ROCE)

We have updated the calculation of ROCE to be adjusted operating profit for the 12 months ended 31 March 2021 expressed as a percentage of the monthly average capital employed (net assets excluding net debt and retirement benefit obligations) rather than closing capital employed to prevent distortion due to the fact our acquisitions were all completed towards the end of the year. ROCE remained strong at 19.4%, although down 4.6 percentage points year on year (2019/20 updated: 24.0%). Of this decline, 0.4 percentage points was due to the acquisitions, 3.5 percentage points due to lower adjusted operating profit and 0.7 percentage points due to higher average capital employed year on year.

Net debt

During the last year of uncertainty, our cash generative business model has enabled us to maintain a strong financial position.

At 31 March 2021, net debt was £122.0 million, £67.8 million lower than at 31 March 2020 when it was £189.8 million. Net debt comprised gross borrowings of £321.0 million (2019/20: £391.6 million), including lease liabilities of £61.5 million (2019/20: £56.3 million) offset by cash and short-term deposits of £197.9 million (2019/20: £200.8 million) and interest rate swaps with a fair value of £1.1 million (2019/20: £1.0 million).

In December 2020, we successfully completed a £180 million equity placing of ordinary shares to fund acquisitions and retain financial flexibility. We were pleased with the strong support we received from new and existing shareholders, including a number of private shareholders via the retail offer. A total of 21,518,181 new ordinary shares were placed with institutional investors, while private investors subscribed for a total of 300,000 new ordinary shares. Together, the placing and retail offer comprised 21,818,181 new ordinary shares, approximately 5% of the existing issued ordinary share capital, prior to the placing.

The equity placing raised £176.1 million, net of costs, and free cash flow was £132.9 million, while acquisitions increased net debt by £159.3 million and dividend payments were £71.2 million.

In November 2020, we completed the refinancing of our bank facilities with a group of eight existing and new relationship banks. The new increased facilities comprise a three-year revolving credit facility of £300 million, with an accordion of up to a further £100 million. The maturity of this facility may be extended at the option of the Group for up to two further one-year terms subject to individual lender approval. This refinancing provides the Group with additional flexibility and reinforces Electrocomponents' strong financial position.

These facilities were undrawn at 31 March 2021 and, together with £147.3 million of private placement loan notes, form our committed debt facilities of £447.3 million.

We cancelled our COVID-19 liquidity buffer bank facility at the same time as we completed the refinancing of our bank facilities and let lapse our eligibility to participate in the Bank of England Covid Corporate Financing Facility (CCFF). Both were there for an emergency and we did not use them.

The Group's financial metrics remain strong, with net debt to adjusted EBITDA of 0.5x and EBITA to interest of 26.7x, leaving significant headroom for the Group's banking covenants of net debt to adjusted EBITDA less than 3.25 times and EBITA to interest greater than 3 times.

We are emerging from this challenging year stronger and ready to take advantage of, and accelerate, our growth ambitions.

Retirement benefit obligations

The Group has defined benefit pension schemes in the UK and Europe, with the UK scheme being by far the largest. All these schemes are closed to new entrants and in Germany and Ireland the pension schemes are closed to accrual for future service.

Overall, the accounting deficit of the Group's defined benefit schemes at 31 March 2021 was £55.7 million compared to £60.5 million at 30 September 2020 and £55.8 million at 31 March 2020.

The UK defined benefit scheme had an accounting deficit of £41.2 million. At 31 March 2020, it had a small accounting deficit of £2.1 million plus an additional liability of £41.2 million as the present value of the agreed future contributions under the recovery plan was greater than the funded status. The increase in the UK scheme's deficit was principally due to an increase in liabilities caused by a decrease in the discount rate falling by 0.3 percentage points and an increase of 0.7 percentage points in inflation-linked assumptions, partly offset by an increase in the value of the assets.

The triennial funding valuation of the UK scheme at 31 March 2019 showed a deficit of £44.7 million on a statutory technical provisions basis. A new recovery plan was agreed with the trustee of the UK scheme with deficit contributions paid with the aim that the scheme is fully funded on a technical provisions basis by March 2022. These deficit contributions started in 2019/20 and consist of an annual contribution of at least £10 million, increased each 1 April by the increase in the Retail Prices Index (RPI) for the year to the preceding December, plus an additional contribution of £25 million. This additional contribution can be paid in instalments and paid as and when we deem appropriate, provided the total additional contribution has been paid no later than 31 March 2022. Given our financial strength in 2020/21, we paid the first £12.5 million of this additional contribution.

Dividend

As highlighted in the Annual Report and Accounts for the year ended 31 March 2020, the Board deferred the decision on the final dividend for that year until the impact of COVID-19 on activity levels and cash generation in the Group's key markets had become clearer. We stated that the Board recognised the importance of its progressive dividend policy to its shareholders and would therefore review making an additional interim dividend payment related to the year ended 31 March 2020 at the Group's half-year results in November 2020.

In November 2020, as a result of the resilience the Group had demonstrated, our robust trading position and strong balance sheet, and after due care and consideration, the Board decided to pay a final dividend for the year ended 31 March 2020 at the same level as the March 2019 final dividend of 9.5p per share. As it was no longer possible for this dividend to be approved by shareholders at the Annual General Meeting, it was paid as an additional interim dividend for the year ended 31 March 2020 in December 2020. An interim dividend for the year ended 31 March 2021 of 6.1p per share was paid in January 2021, equivalent to approximately 40% of the prior year full-year dividend.

The Board proposes to increase the final dividend to 9.8p per share. This will be paid on 23 July 2021 to shareholders on the register on 18 June 2021. As a result, the proposed full-year dividend for 2020/21 will be 15.9p per share (2019/20: 15.4p), representing an increase of 3.2% over the 2019/20 full-year dividend. Adjusted earnings dividend cover for 2020/21 was 2.0 times.

The Board intends to pursue a progressive dividend policy while remaining committed to a healthy dividend cover over time by driving improved results and stronger cash flow. In the normal course, the interim dividend will be equivalent to approximately 40% of the full-year dividend of the previous year.

Foreign exchange risk

The Group does not hedge translation exposure on the income statements of overseas subsidiaries. Based on the mix of non-sterling denominated revenue and adjusted operating profit, a one cent movement in the euro would impact annual adjusted profit before tax by £1.5 million and a one cent movement in the US dollar would impact annual adjusted profit before tax by £0.4 million.

The Group is also exposed to foreign currency transactional risk because most operating companies have some level of payables in currencies other than their functional currency. Some operating companies also have receivables in currencies other than their functional currency. Group Treasury maintains three to seven months' hedging against freely tradable currencies to smooth the impact of fluctuations in currency. The Group's largest exposures related to euros and US dollars.

RISKS AND UNCERTAINTIES

The Board has overall accountability for the Group's risk management, which is managed by the Senior Management Team (SMT) and co-ordinated by the Group's risk team. The Group's risk management process identifies, evaluates and manages the Group's principal risks and uncertainties. These are reviewed by both the SMT Risk Committee, comprising the Group's senior managers, and the Board, which regularly discusses the principal risks and receives risk reports covering risk mitigations and controls.

The Group has a defined risk appetite, which has been adopted by the Board, and is considered across three risk categories: strategic, regulatory / compliance and operational. These three categories use both quantitative and qualitative criteria.

Principal risks and uncertainties

The Group has identified 10 principal risks, reduced from 11 disclosed last year, with the combining of two operational risks related to failure in the business's critical infrastructure (key locations and technology infrastructure) together with other minor changes.

Strategic risk category

1.  Prolonged effects of the ongoing COVID-19 pandemic

2.  Prolonged effects of the UK's exit from the EU

3.  Failure to respond to strategic market shifts e.g. changes in customer demands / competitor activity and related stakeholder requirements

4.  The Group's revenue and profit growth initiative are not successfully implemented

Regulatory / compliance risk category

5.  Failure to comply with international and local legal / regulatory requirements

Operational risk category

6.  Failure in the business's critical infrastructure

7.  Cyber security breach / information loss

8.  UK defined benefit pension scheme cash requirements are in excess of the cash available

9.  People resources unable to support the existing and future growth of the business

10.  Impact on the business if the macroeconomic environment deteriorates

Two of the Group's principal risks require further explanation: the more prolonged effects of the ongoing COVID-19 pandemic and the UK's exit from the EU.

COVID-19 pandemic

The Group is maintaining its operations and at present all our DCs around the world are open and operating effectively. Our online business model continues to differentiate us and is helping us to continue to serve our customers. The pandemic continues to affect some of our other, already identified, principal risks.

Uncertainties related to this risk

Since the pandemic has its own specific uncertainties we continue to disclose it as a separate principal risk. These include:

· Changes in demand across our diverse customer base and possible changed behaviours following the pandemic.

· Potential impacts on cash flow, specifically the recoverability of trade receivables which is a key liquidity sensitivity.

· Changes to sourcing inventory as suppliers' production capabilities are affected by the pandemic and demand levels change in any recovery phase.

· Significant transport constraints and increased costs and how quickly these will recover following the pandemic.

· Uncertainty about the duration and later frequency of future disease control activities.

· The difficulties managing the business's return to partial office-based working as respective governments' restrictions on people movement are eased.

· When the pandemic passes, the speed and extent to which industries can recover from the effects is unclear.

· The longer-term effects of the pandemic on business activity, government finances and related levels of public expenditure.

Mitigating actions  

The business has several structural factors, including the diverse nature of its customer base and strong online capabilities, that have helped protect it from some effects of the pandemic. These have enabled the business to continue to support customers during the pandemic.

During the year the business took several mitigating actions, many of which are still in place, including:

· The majority of our office-based staff working from home and enhanced PPE for our DC employees.

· Appropriate cost actions taken to protect profit and focus on maintaining cash flow.

· Improving the Group's balance sheet flexibility including securing additional funding facilities.

· Supporting employees' physical safety in our DCs and mental wellbeing for those during extended periods of home working.

· Maintained cyber monitoring and training reflecting the changing business working environment and increased external threats.

The effectiveness of the business's operational controls during the COVID-19 pandemic have been reviewed by the Group's internal audit team on a risk-based approach. These were initially focused on COVID-19 effects whereas now these have been embedded within the team's ongoing market and functional audits.

The UK's exit from the EU

The UK has formally left the EU and the agreed transition period ended on 31 December 2020 and the principal risk that the Group was working to mitigate has now crystallised. Our planning activities leading up to this date meant that the business was largely able, where possible, to mitigate the associated risks. Nonetheless, the business is monitoring the risk of further unforeseen consequences following the UK's exit from the EU. There is now a hard border between the UK and the EU and this has led to more transactional friction when moving goods across this border. As expected, the business is experiencing more customs administration, tax, duty and brokerage fees when moving products across this border. Further, the customs clearance processes continue to evolve in some areas, for example between Northern Ireland and Great Britain. For this reason, we continue to track and monitor the effects of Brexit on the operational activities of the business as a principal risk, albeit that this risk is lower than the prior year.

Emerging risks

As part of the Board's Group risk reviews of developing risk themes, climate change is identified as an important emerging risk.

There are several more detailed and specific risks, and opportunities, that the Group, as a global distributor, faces due to climate change. These include physical risks with increased likelihood of more extreme events such as storms, significant rainfall episodes, droughts and heatwaves which could affect the business's physical sites or its distribution process. Other risks are more transition oriented, including regulatory change, often by governments, designed to reduce greenhouse gas (GHG) emissions. These may render certain products obsolete while increasing demand for others. Other potential impacts include increases, for example, in the costs of air transport of inventory to meet customer demands. There is also reputation risk if the business is not seen to be taking deliberate and tangible actions to reduce its GHG emissions.

 

GROUP INCOME STATEMENT

For the year ended 31 March 2021

		2021	2020
	Notes	£m	£m
Revenue	2	2,002.7	1,953.8
Cost of sales		(1,146.7)	(1,099.1)
Gross profit		856.0	854.7
Distribution and marketing expenses		(630.1)	(596.2)
Administrative expenses		(58.7)	(53.2)
Operating profit	2	167.2	205.3
Finance income		1.8	3.3
Finance costs		(8.6)	(9.2)
Share of profit of joint venture		0.2	0.2
Profit before tax	2	160.6	199.6
Income tax expense		(35.1)	(44.9)
Profit for the year attributable to owners of the Company		125.5	154.7
Earnings per share - Basic	4	27.7p	34.7p
Earnings per share - Diluted	4	27.5p	34.6p

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2021

		2021	2020
		£m	£m
Profit for the year		125.5	154.7
Other comprehensive income
Items that will not be reclassified subsequently to the income statement
Remeasurement of retirement benefit obligations		(22.5)	21.1
Income tax on items that will not be reclassified to the income statement		4.3	(1.9)
Items that may be reclassified subsequently to the income statement
Foreign exchange translation differences of joint venture		(0.1)	(0.1)
Foreign exchange translation differences		(42.4)	20.5
Movement in cash flow hedges		(4.5)	4.3
Income tax on items that may be reclassified to the income statement		1.0	(0.5)
Other comprehensive (expense) / income for the year		(64.2)	43.4
Total comprehensive income for the year attributable to owners of the Company		61.3	198.1

 

GROUPBALANCE SHEET

As at 31 March 2021

		2021	2020
	Notes	£m	£m
Non-current assets
Intangible assets		468.9	329.6
Property, plant and equipment		170.2	167.5
Right-of-use assets		58.6	54.4
Investment in joint venture		1.1	1.0
Other receivables		2.9	0.9
Interest rate swaps	8	1.1	1.0
Retirement benefit net assets	9	0.8	1.9
Deferred tax assets		9.9	17.1
Total non-current assets		713.5	573.4
Current assets
Inventories	6	419.8	419.0
Trade and other receivables	7	492.4	406.6
Cash and cash equivalents - cash and short-term deposits	8	197.9	200.8
Other derivative assets		2.2	4.3
Current income tax receivables		21.3	13.6
Total current assets		1,133.6	1,044.3
Total assets		1,847.1	1,617.7
Current liabilities
Trade and other payables		(475.3)	(358.7)
Cash and cash equivalents - bank overdrafts	8	(111.5)	(166.0)
Other borrowings	8	(0.7)	(7.5)
Lease liabilities	8	(17.4)	(15.0)
Other derivative liabilities		(2.0)	(2.4)
Provisions		(4.9)	(2.6)
Current income tax liabilities		(19.2)	(18.2)
Total current liabilities		(631.0)	(570.4)
Non-current liabilities
Other payables		(6.8)	(5.8)
Retirement benefit obligations	9	(56.5)	(57.7)
Borrowings	8	(147.3)	(161.8)
Lease liabilities	8	(44.1)	(41.3)
Provisions		(1.6)	(1.5)
Deferred tax liabilities		(60.4)	(59.3)
Total non-current liabilities		(316.7)	(327.4)
Total liabilities		(947.7)	(897.8)
Net assets		899.4	719.9
Equity
Share capital		47.0	44.6
Share premium account		228.5	51.4
Hedging reserve		(1.4)	-
Own shares held by Employee Benefit Trust (EBT)		(1.5)	(0.7)
Cumulative translation reserve		39.0	81.5
Retained earnings		587.8	543.1
Equity attributable to owners of the Company		899.4	719.9

 

GROUP CASH FLOW STATEMENT

For the year ended 31 March 2021

		2021	2020
	Notes	£m	£m
Cash flows from operating activities
Profit before tax		160.6	199.6
Depreciation and amortisation		56.5	50.9
Loss on disposal of non-current assets		0.3	0.1
Equity-settled share-based payments		7.0	3.4
Net finance costs		6.8	5.9
Share of profit of and dividends received from joint venture		(0.2)	(0.2)
Increase in inventories		(4.4)	(25.2)
(Increase) / decrease in trade and other receivables		(32.6)	10.0
Increase / (decrease) in trade and other payables		35.5	(36.0)
Increase / (decrease) in provisions		1.6	(5.3)
Cash generated from operations		231.1	203.2
Interest received		1.8	3.4
Interest paid		(10.1)	(9.6)
Income tax paid		(35.2)	(49.9)
Net cash from operating activities		187.6	147.1
Cash flows from investing activities
Acquisition of businesses	11	(157.5)	(0.2)
Cash and cash equivalents acquired with businesses	11	22.0	-
Purchase of intangible assets, property, plant and equipment		(54.7)	(74.7)
Net cash used in investing activities		(190.2)	(74.9)
Cash flows from financing activities
Proceeds from the issue of share capital		179.5	2.0
Purchase of own shares by EBT		(1.6)	(0.9)
Loans drawn down	8	-	162.7
Loans repaid	8	(24.3)	(178.6)
Settlement of interest rate swap		-	2.6
Payment of lease liabilities	8	(16.4)	(14.8)
Dividends paid	5	(71.2)	(68.5)
Net cash generated from / (used in) financing activities		66.0	(95.5)
Net increase / (decrease) in cash and cash equivalents		63.4	(23.3)
Cash and cash equivalents at the beginning of the year		34.8	51.1
Effects of exchange rate changes		(11.8)	7.0
Cash and cash equivalents at the end of the year	8	86.4	34.8

 

GROUP STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2021

	Share capital	Share premium account	Hedging reserve	Own shares held by EBT	Cumulative translation reserve	Retained earnings	Total
	£m	£m	£m	£m	£m	£m	£m
At 1 April 2019	44.4	49.6	0.2	(1.2)	61.1	434.8	588.9
Profit for the year	-	-	-	-	-	154.7	154.7
Remeasurement of retirement benefit obligations	-	-	-	-	-	21.1	21.1
Foreign exchange translation differences	-	-	-	-	22.6	-	22.6
Fair value loss on net investment hedges	-	-	-	-	(2.2)	-	(2.2)
Net gain on cash flow hedges	-	-	4.3	-	-	-	4.3
Taxation on other comprehensive income	-	-	(0.5)	-	-	(1.9)	(2.4)
Total comprehensive income	-	-	3.8	-	20.4	173.9	198.1
Cash flow hedging gains transferred to inventories	-	-	(5.0)	-	-	-	(5.0)
Tax on cash flow hedging gains transferred to inventories	-	-	1.0	-	-	-	1.0
Dividends (Note 5)	-	-	-	-	-	(68.5)	(68.5)
Equity-settled share-based payments	-	-	-	-	-	3.4	3.4
Settlement of share awards	0.2	1.8	-	1.4	-	(1.4)	2.0
Purchase of own shares by EBT	-	-	-	(0.9)	-	-	(0.9)
Tax on equity-settled share-based payments	-	-	-	-	-	0.9	0.9
At 31 March 2020	44.6	51.4	-	(0.7)	81.5	543.1	719.9
Profit for the year	-	-	-	-	-	125.5	125.5
Remeasurement of retirement benefit obligations	-	-	-	-	-	(22.5)	(22.5)
Foreign exchange translation differences	-	-	-	-	(44.7)	-	(44.7)
Fair value gain on net investment hedges	-	-	-	-	2.2	-	2.2
Net loss on cash flow hedges	-	-	(4.5)	-	-	-	(4.5)
Tax on other comprehensive income	-	-	1.0	-	-	4.3	5.3
Total comprehensive (expense) / income	-	-	(3.5)	-	(42.5)	107.3	61.3
Cash flow hedging losses transferred to inventories	-	-	2.7	-	-	-	2.7
Tax on cash flow hedging losses transferred to inventories	-	-	(0.6)	-	-	-	(0.6)
Dividends (Note 5)	-	-	-	-	-	(71.2)	(71.2)
Equity-settled share-based payments	-	-	-	-	-	7.0	7.0
Share placing, net of transaction costs	2.2	173.9	-	-	-	-	176.1
Settlement of share awards	0.2	3.2	-	0.8	-	(0.8)	3.4
Purchase of own shares by EBT	-	-	-	(1.6)	-	-	(1.6)
Tax on equity-settled share-based payments	-	-	-	-	-	2.4	2.4
At 31 March 2021	47.0	228.5	(1.4)	(1.5)	39.0	587.8	899.4

 

NOTES TO THE CONDENSED GROUP ACCOUNTS

1.  Basis of preparation

The financial information contained in this release does not constitute the Company's statutory accounts for the years ended 31 March 2021 or 31 March 2020 but is derived from those accounts. The accounts are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRIC) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. Except as described below, they have been prepared on the basis of the accounting policies set out in the Annual Report and Accounts for the year ended 31 March 2020. Statutory accounts for the year ended 31 March 2020 have been delivered to the Registrar of Companies and those for the year ended 31 March 2021 will be delivered following the Company's Annual General Meeting. The auditors have reported on both of these sets of accounts. Their reports were unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain any statement under sections 498(2) or 498(3) of the Companies Act 2006. The accounts for the year ended 31 March 2021 were approved by the Board of Directors on 24 May 2021.

Standards and interpretations adopted in the year

The Group adopted the following standards, amendments to standards and interpretations on 1 April 2020.

Amendment to IFRS 16 'Covid-19-Related Rent Concessions'

With effect from 1 April 2020, the Group has early adopted Amendment to IFRS 16 'Covid-19-Related Rent Concessions'. This amendment allows lessees to elect not to treat a rent concession occurring as a direct consequence of the COVID-19 pandemic that reduces only payments before 30 June 2021 as a lease modification and effectively credit any change in lease payments to operating profit. There was no material impact on the reported results or financial position of the Group.

Other

Conceptual Framework for Financial Reporting, Amendments to References to the Conceptual Framework in IFRS Standards, Amendments to IFRS 3 'Definition of a Business' and Amendments to IAS 1 and IAS 8 'Definition of Material' were adopted in the year. There was no material impact on the reported results or financial position of the Group.

2.  Segmental reporting

The Group's operating segments comprise three regions: EMEA, Americas and Asia Pacific.

	EMEA	Americas	Asia Pacific	Group
	£m	£m	£m	£m
Year ended 31 March 2021
Revenue from external customers	1,277.4	517.0	208.3	2,002.7
Segmental operating profit	172.6	51.9	1.4	225.9
Central costs				(37.6)
Adjusted operating profit				188.3
Amortisation of acquired intangibles				(7.0)
Acquisition-related items (Note 10)				(2.9)
Substantial reorganisation costs (Note 3)				(11.2)
Operating profit				167.2
Net finance costs				(6.8)
Share of profit of joint venture				0.2
Profit before tax				160.6
Year ended 31 March 2020
Revenue from external customers	1,239.8	515.7	198.3	1,953.8
Segmental operating profit	197.0	57.8	3.7	258.5
Central costs				(37.8)
Adjusted operating profit				220.7
Amortisation of acquired intangibles				(5.4)
Substantial asset write-downs (Note 7)				(7.3)
Substantial reorganisation costs (Note 3)				(2.7)
Operating profit				205.3
Net finance costs				(5.9)
Share of profit of joint venture				0.2
Profit before tax				199.6

As a result of the RISE programme the Group has streamlined its operating model and now targets industrial customers with a wide range of product and service solutions which mainly have similar economic characteristics. The most significant difference in economic characteristic is whether it is an own-brand product or not and so, in the table below, revenue is now disaggregated by own-brand or branded and sales channels. The Group's largest own-brand is RS PRO and some of the Group's recent acquisitions also sell own-brand products. £1,973.8 million of revenue is recognised at a point in time (2019/20: £1,935.9 million) and £28.9 million over time (2019/20: £17.9 million).

	EMEA	Americas	Asia Pacific	Group
	£m	£m	£m	£m
Year ended 31 March 2021
Own-brand / branded products
Own-brand products	248.5	3.6	27.7	279.8
Other product and service solutions	1,028.9	513.4	180.6	1,722.9
Group	1,277.4	517.0	208.3	2,002.7
Sales channel
Digital	932.3	203.2	118.6	1,254.1
Offline	345.1	313.8	89.7	748.6
Group	1,277.4	517.0	208.3	2,002.7
Year ended 31 March 2020
Own-brand / branded products
Own-brand products	220.4	3.0	25.2	248.6
Other product and service solutions	1,019.4	512.7	173.1	1,705.2
Group	1,239.8	515.7	198.3	1,953.8
Sales channel
Digital	906.5	210.4	112.8	1,229.7
Offline	333.3	305.3	85.5	724.1
Group	1,239.8	515.7	198.3	1,953.8

3.  Substantial reorganisation costs

In September 2020 the Group launched RISE to enable it to move faster to accelerate the delivery of its Destination 2025 strategy. Some small elements, which did not require consultation with collective bodies such as the Group's European Works Council, were initiated before then. It is a two-year evolutionary programme to simplify the Group's operating model, accelerate growth and reduce the cost to serve. Redundancy and associated costs of £11.2 million were incurred in the year ended 31 March 2021. These costs have been excluded from adjusted performance measures.

The conclusion of the second phase of the Performance Improvement Plan gave rise to substantial reorganisation costs of £2.7 million in the year ended 31 March 2020 which were excluded from adjusted performance measures.

4.  Earnings per share

	2021	2020
	Number	Number
Weighted average number of shares	453,851,022	445,325,071
Dilutive effect of share-based payments	2,069,427	2,303,406
Diluted weighted average number of shares	455,920,449	447,628,477
Basic earnings per share	27.7p	34.7p
Diluted earnings per share	27.5p	34.6p

5.  Dividends

	2021	2020
	£m	£m
Final dividend for the year ended 31 March 2020 - nil p (2019: 9.5p)	-	42.1
Additional interim dividend for the year ended 31 March 2020 to replace deferred final dividend - 9.5p	42.6	-
Interim dividend for the year ended 31 March 2021 - 6.1p (2020: 5.9p)	28.6	26.4
	71.2	68.5

A proposed final dividend for the year ended 31 March 2021 of 9.8p is subject to approval by shareholders at the Annual General Meeting on 15 July 2021 and the estimated amount to be paid of £46.0 million has not been included as a liability in these accounts. This will be paid on 23 July 2021 to shareholders on the register on 18 June 2021.

6.  Inventories

	2021	2020
	£m	£m
Gross inventories	460.4	446.6
Inventory provisions	(40.6)	(27.6)
Net inventories	419.8	419.0

£21.1 million (2019/20: £6.4 million) was recognised as an expense relating to the write-down of inventories to net realisable value. This includes £12.7 million related to PPE products bought at the start of the COVID-19 pandemic as a result of their significant decline in selling price.

Currently the Group does not expect any reasonably likely changes, including any further impacts of the COVID-19 pandemic, to have a material impact on the net realisable value of inventories.

 

 7.  Trade and other receivables

	2021	2020
	£m	£m
Gross trade receivables	435.2	355.5
Impairment allowance	(7.4)	(6.9)
Net trade receivables	427.8	348.6
Other receivables (including prepayments and contract assets)	64.6	58.0
Trade and other receivables	492.4	406.6

Trade receivables are written off when there is no reasonable expectation of recovery, for example when a customer enters liquidation or the Group agrees with the customer to write off an outstanding invoice. Except for the 2019/20 British Steel Limited receivable, as described below, the Group has historically experienced very low levels of trade receivables not being recovered, including those significantly past due. In 2019/20, with the worsening macroeconomic environment due to COVID-19, the Group increased its expected loss rates for those markets and industries that were most affected. The Group took action to limit its exposure by tightening its credit policies, including short payment terms and low credit limits for new customers and seeking payment commitments for overdue balances before releasing new orders to existing customers. During the year, the Group has continued to experience very low levels of trade receivables not being recovered and has managed to recover a higher proportion of past due receivables than in prior years. However, with the COVID-19 pandemic continuing and the potential impact on companies when the various government support schemes around the world end, the Group remains cautious about its exposure and so has carefully reviewed, and maintained at a higher level, its expected loss rates for those markets and industries that are most affected.

During 2019/20, the Group wrote off £7.3 million of receivables which were no longer recoverable as they related to transactions with British Steel Limited before 22 May 2019 when it entered compulsory liquidation. This write off was excluded from adjusted performance measures.

8.  Net debt

	2021	2020
	£m	£m
Cash and short-term deposits	197.9	200.8
Bank overdrafts	(111.5)	(166.0)
Cash and cash equivalents	86.4	34.8
Bank facilities repayable after more than one year	-	(0.4)
Private placement loan notes repayable after more than one year	(147.3)	(161.4)
Non-current interest rate swaps designated as fair value hedges	1.1	1.0
Secured bank loans repayable within one year	(0.7)	-
Money market loans repayable within one year	-	(7.5)
Current lease liabilities	(17.4)	(15.0)
Non-current lease liabilities	(44.1)	(41.3)
Net debt	(122.0)	(189.8)

Movements in net debt were:

	Borrowings	Lease liabilities	Total liabilities from financing activities	Interest rate swaps	Cash and cash equivalents	Net debt
	£m	£m	£m	£m	£m	£m
Net debt at 1 April 2019	(175.3)	(53.3)	(228.6)	1.8	51.1	(175.7)
Cash flows	15.9	14.8	30.7	(2.6)	(23.3)	4.8
Net lease additions	-	(17.7)	(17.7)	-	-	(17.7)
(Loss) / gain in fair value in year	(1.8)	-	(1.8)	1.8	-	-
Translation differences	(8.1)	(0.1)	(8.2)	-	7.0	(1.2)
Net debt at 31 March 2020	(169.3)	(56.3)	(225.6)	1.0	34.8	(189.8)
Cash flows	24.3	16.4	40.7	-	63.4	104.1
Acquired with businesses (Note 11)	(16.9)	(6.9)	(23.8)	-	-	(23.8)
Net lease additions	-	(15.2)	(15.2)	-	-	(15.2)
(Loss) / gain in fair value in year	(0.1)	-	(0.1)	0.1	-	-
Translation differences	14.0	0.5	14.5	-	(11.8)	2.7
Net debt at 31 March 2021	(148.0)	(61.5)	(209.5)	1.1	86.4	(122.0)

9.  Retirement benefit obligations

The Group operates defined benefit schemes in the United Kingdom and Europe.

	2021	2020
	£m	£m
Fair value of scheme assets	580.9	542.4
Present value of defined benefit obligations	(636.6)	(557.0)
Effect of asset ceiling / onerous liability	-	(41.2)
Retirement benefit obligations	(55.7)	(55.8)
Amount recognised on the balance sheet - liability	(56.5)	(57.7)
Amount recognised on the balance sheet - asset	0.8	1.9

Based on the UK scheme's rules, the Group does not have an unconditional right to any surplus that may arise on the scheme and so IFRIC 14 applies. At 31 March 2020, the present value of the contributions due under the recovery plan to the UK scheme was greater than the funded status and so the Group recognised an additional liability of £41.2 million.At 31 March 2021, this was no longer the case and the minimum funding requirements were lower than the accounting deficit and so no adjustments were required.

10.  Alternative Performance Measures (APMs)

The Group uses a number of APMs in addition to those measures reported in accordance with IFRS. Such APMs are not defined terms under IFRS and are not intended to be a substitute for any IFRS measure. The Directors believe that the APMs are important when assessing the underlying financial and operating performance of the Group. The APMs are used internally for performance analysis and in employee incentive arrangements, as well as in discussions with the investment analyst community.

The APMs improve the comparability of information between reporting periods by adjusting for factors such as fluctuations in foreign exchange rates, number of trading days and items, such as reorganisation costs, that are substantial in scope and impact and do not form part of operational or management activities that the Directors would consider part of underlying performance. As a result of acquisitions of businesses in the year, the Group has updated its adjusted measures to exclude acquisition-related items as well as amortisation of intangible assets arising on acquisition of businesses. The Directors believe that excluding recent acquisitions and acquisition-related items aid comparison of the underlying performance between reporting periods and between businesses with similar assets that were internally generated.

Base business

The Group's base business excludes acquisitions in the relevant years until they have been owned for a year, at which point they start to be included in both the current and comparative periods for the same number of months.

			2021
			Base business	Acquisitions	Group
			£m	£m	£m
Revenue
	EMEA		1,261.5	15.9	1,277.4
	Americas		504.0	13.0	517.0
	Asia Pacific		208.3	-	208.3
Group			1,973.8	28.9	2,002.7
Segmental operating profit
	EMEA		171.0	1.6	172.6
	Americas		51.4	0.5	51.9
	Asia Pacific		1.4	-	1.4
Segmental operating profit			223.8	2.1	225.9
Central costs			(37.6)	-	(37.6)
Adjusted operating profit			186.2	2.1	188.3
Adjusted profit before tax			179.7	2.0	181.7
Adjusted earnings per share			31.0p	0.3p	31.3p
Adjusted diluted earnings per share			30.8p	0.3p	31.1p

The principal exchange rates applied in preparing the Group accounts and in calculating the following like-for-like measures are:

	2021	2021	2020	2020
	Average	Closing	Average	Closing
US dollar	1.308	1.377	1.271	1.242
Euro	1.121	1.174	1.144	1.132

Like-for-like revenue change

Like-for-like revenue change is change in revenue adjusted to eliminate the impact of acquisitions and changes in exchange rates and trading days year on year. It is calculated by comparing the revenue of the base business for the current year with the prior year's revenue converted at the current year's average exchange rates and pro-rated for the same number of trading days as the current year. This measure enables management and investors to track more easily, and consistently, the underlying revenue performance.

	2021 base business	2020	2020 at 2021 rates and trading days	Like-for-like change
	£m	£m	£m	%
EMEA	1,261.5	1,239.8	1,249.6	1.0%
Americas	504.0	515.7	497.1	1.4%
Asia Pacific	208.3	198.3	199.1	4.6%
Group's base business	1,973.8	1,953.8	1,945.8	1.4%

				£m
Revenue for 2020				1,953.8
Effect of exchange rates				(3.2)
Effect of trading days				(4.8)
Revenue for 2020 at 2021 rates and trading days				1,945.8

Gross margin and like-for-like gross margin change

Gross margin is gross profit divided by revenue. Like-for-like change in gross margin is calculated by taking the difference between gross margin for the base business for the current year and gross margin for the prior year with revenue and gross profit converted at the current year's average exchange rates.

	2021 Group	2021 base business	2020	2020 at 2021 rates	Like-for-like change
	£m	£m	£m	£m	pts
Revenue	2,002.7	1,973.8	1,953.8	1,950.6
Gross profit	856.0	845.7	854.7	855.5
Gross margin	42.7%	42.8%	43.7%	43.9%	(1.1) pts

Working capital as a percentage of revenue

Working capital is inventories, current trade and other receivables and current trade and other payables.

	2021	2020
	£m	£m
Inventories	419.8	419.0
Current trade and other receivables	492.4	406.6
Current trade and other payables	(475.3)	(358.7)
Working capital	436.9	466.9
Revenue	2,002.7	1,953.8
Working capital as a percentage of revenue	21.8%	23.9%

 

Adjusted profit measures

These are the equivalent IFRS measures adjusted to exclude amortisation of intangible assets arising on acquisition of businesses, acquisition-related items, substantial reorganisation costs, substantial asset write-downs, one-off pension credits or costs, significant tax rate changes and, where relevant, associated tax effects.

	Operating costs1	Operating profit	Operating profit margin2	Operating profit conversion3	Profit before tax	Profit for the year	Basic earnings per share	Diluted earnings per share
	£m	£m	%	%	£m	£m	p	p
Year ended 31 March 2021
Reported	(688.8)	167.2	8.3%	19.5%	160.6	125.5	27.7p	27.5p
Amortisation of acquired intangibles	7.0	7.0			7.0	5.6	1.2p	1.2p
Acquisition-related items	2.9	2.9			2.9	2.5	0.5p	0.5p
Substantial reorganisation costs (Note 3)	11.2	11.2			11.2	8.5	1.9p	1.9p
Adjusted	(667.7)	188.3	9.4%	22.0%	181.7	142.1	31.3p	31.1p
Year ended 31 March 2020
Reported	(649.4)	205.3	10.5%	24.0%	199.6	154.7	34.7p	34.6p
Amortisation of acquired intangibles	5.4	5.4			5.4	5.2	1.2p	1.2p
Substantial asset write-downs (Note 7)	7.3	7.3			7.3	5.9	1.3p	1.3p
Substantial reorganisation costs (Note 3)	2.7	2.7			2.7	2.3	0.5p	0.5p
Adjusted	(634.0)	220.7	11.3%	25.8%	215.0	168.1	37.7p	37.6p

1.  Operating costs are distribution and marketing expenses and administrative expenses.

2.  Operating profit margin is operating profit expressed as a percentage of revenue.

3.  Operating profit conversion is operating profit expressed as a percentage of gross profit.

Acquisition-related items comprise transaction costs directly attributable to the acquisition of businesses and deferred consideration payments relating to the retention of former owners of businesses acquired.

Like-for-like profit change

Like-for-like change in profit is adjusted to exclude the effects of changes in exchange rates on translation of overseas profits. The change is calculated by comparing the base business for the current year with the prior year converted at the current year's average exchange rates.

		2021 base business	2020	2020 at 2021 rates	Like-for-like change
		£m	£m	£m	%
Segmental operating profit for base business
	EMEA	171.0	197.0	200.0	(14.5)%
	Americas	51.4	57.8	56.1	(8.4)%
	Asia Pacific	1.4	3.7	3.9	(64.1)%
Segmental operating profit for base business		223.8	258.5	260.0	(13.9)%
Central costs		(37.6)	(37.8)	(37.8)	0.5%
Adjusted operating profit for base business		186.2	220.7	222.2	(16.2)%
Adjusted profit before tax for base business		179.7	215.0	216.5	(17.0)%
Adjusted earnings per share for base business		31.0p	37.7p	38.0p	(18.4)%

Return on capital employed (ROCE)

As a result of the acquisitions in the year, the calculation of ROCE has been updated to be based on the monthly average capital employed rather than the closing capital employed. Therefore, ROCE is now adjusted operating profit expressed as a percentage of the monthly average net assets excluding net debt and retirement benefit obligations. The comparative has also been updated.

	2021	2020
	£m	£m
Average net assets	791.0	650.9
Add back: average net debt	127.2	197.7
Add back: average retirement benefit net (assets) / obligations	53.8	69.2
Average capital employed	972.0	917.8
Adjusted operating profit	188.3	220.7
ROCE	19.4%	24.0%

Earnings before interest, tax, depreciation and amortisation (EBITDA) and net debt to adjusted EBITDA

EBITDA is operating profit excluding depreciation and amortisation. Net debt to adjusted EBITDA is the ratio of net debt to EBITDA excluding acquisition-related items, substantial reorganisation costs, substantial asset write-downs and one-off pension credits or costs.

	2021	2020
	£m	£m
Operating profit	167.2	205.3
Add back: depreciation and amortisation	56.5	50.9
EBITDA	223.7	256.2
Add back: substantial asset write-downs	-	7.3
Add back: substantial reorganisation costs	11.2	2.7
Add back: acquisition-related items	2.9	-
Adjusted EBITDA	237.8	266.2
Net debt (Note 8)	122.0	189.8
Net debt to adjusted EBITDA	0.5x	0.7x

Earnings before interest, tax and amortisation (EBITA) and EBITA to interest

EBITA is adjusted EBITDA after depreciation. EBITA to interest is the ratio of EBITA to finance costs including capitalised interest less finance income.

	2021	2020
	£m	£m
Adjusted EBITDA	237.8	266.2
Less: depreciation	(32.5)	(27.6)
EBITA	205.3	238.6
Finance costs	8.6	9.2
Less: finance income	(1.8)	(3.3)
Add back: capitalised interest	0.9	1.2
Interest (per debt covenants)	7.7	7.1
EBITA to interest	26.7x	33.6x

Ratio of capital expenditure to depreciation

Ratio of capital expenditure to depreciation is capital expenditure divided by depreciation and amortisation excluding amortisation of acquired intangibles and depreciation of right-of-use assets.

	2021	2020
	£m	£m
Depreciation and amortisation	56.5	50.9
Less: amortisation of acquired intangibles	(7.0)	(5.4)
Less: depreciation of right-of-use assets	(17.1)	(15.6)
Adjusted depreciation and amortisation	32.4	29.9
Capital expenditure	56.2	78.6
Ratio of capital expenditure to depreciation	1.7 times	2.6 times

Inventory turn

Inventory turn is cost of sales divided by inventories.

	2021	2020
	£m	£m
Cost of sales	1,146.7	1,099.1
Inventories	419.8	419.0
Inventory turn	2.7	2.6

 

Free cash flow, adjusted free cash flow and adjusted operating cash flow conversion

Free cash flow is the net movement in cash and cash equivalents before net cash used in financing activities, acquisition of businesses and cash and cash equivalents acquired with businesses. Adjusted free cash flow is free cash flow adjusted for the impact of substantial reorganisation and acquisition-related items cash flows. Adjusted operating cash flow conversion is adjusted free cash flow before income tax and net interest paid, expressed as a percentage of adjusted operating profit.

	2021	2020
	£m	£m
Net increase / (decrease) in cash and cash equivalents	63.4	(23.3)
Add back: cash (generated from) / used in financing activities	(66.0)	95.5
Add back: cash used in acquisition of businesses	157.5	0.2
Less: cash and cash equivalents acquired with businesses	(22.0)	-
Free cash flow	132.9	72.4
Add back: impact of substantial reorganisation cash flows	9.6	8.5
Add back: impact of acquisition-related items cash flows	2.9	-
Adjusted free cash flow	145.4	80.9
Add back: income tax paid	35.2	49.9
Add back: net interest paid	8.3	6.2
Adjusted free cash flow before income tax and net interest paid	188.9	137.0
Adjusted operating profit	188.3	220.7
Adjusted operating cash flow conversion	100.3%	62.1%

11.  Acquisitions

On 9 December 2020 the Group acquired 100% of the issued share capital of Needlers Holdings Limited and subsidiaries (Needlers), a leading UK provider of safety products and PPE. Needlers expands the Group's products and solutions in safety, hygiene and PPE. The goodwill is attributable to the synergies which are expected to arise from opportunities to accelerate growth in revenue by increasing the Group's range of PPE products and using the Group's platform to accelerate Needlers's growth in private label, digital and beyond the UK, plus opportunities for the Group to benefit from Needlers's strong sourcing capabilities and differentiated service proposition in safety products and PPE.

On 12 January 2021 the Group acquired 100% of the issued share capital of Synovos, Inc. and its subsidiaries (Synovos), a leading player in integrated supply solutions in the Americas. Synovos accelerates the Group's delivery of a global integrated supply proposition and strengthens the Group's Americas business. The goodwill is attributable to the synergies which are expected to arise from opportunities for Synovos and IESA to create a global integrated supply proposition in the growing market for product and service solutions, opportunities to accelerate growth in revenue by increasing the Group's penetration with Synovos's customers, plus opportunities for Synovos to grow through benefiting from the Group's global presence.

On 28 February 2021 the Group acquired 100% of the share capital of John Liscombe Limited and its subsidiary (Liscombe), a leading supplier of industrial safety products and PPE. Combined with Needlers, Liscombe expands the Group's products and solutions in safety, hygiene and PPE across more industries. The goodwill is attributable to the synergies which are expected to arise from opportunities to accelerate growth in revenue by further increasing the Group's range of PPE products and using the Group's platform to accelerate Liscombe's growth.

The fair value of the net assets acquired, consideration paid and goodwill arising, plus transaction costs and contribution to the Group's results since acquisition were:

		Needlers	Synovos	Liscombe	Total
		£m	£m	£m	£m
Intangible assets		21.0	40.8	1.9	63.7
Property, plant and equipment		0.4	0.7	0.7	1.8
Right-of-use assets		2.3	3.8	0.5	6.6
Non-current other receivables		-	1.3	-	1.3
Working capital		3.5	(1.8)	6.4	8.1
Derivative liabilities		-	-	(0.1)	(0.1)
Lease liabilities		(2.2)	(4.2)	(0.5)	(6.9)
Cash and cash equivalents - cash and short-term deposits		4.6	11.3	6.1	22.0
Borrowings		-	(12.7)	(4.2)	(16.9)
Provisions		(0.1)	(0.6)	-	(0.7)
Current income tax assets / (liabilities)		0.1	0.7	(0.4)	0.4
Deferred tax liabilities		(4.0)	(9.6)	(0.4)	(14.0)
Net assets acquired		25.6	29.7	10.0	65.3
Goodwill		16.8	71.4	1.8	90.0
Consideration paid - cash		42.4	103.6	11.5	157.5
Consideration payable / (refundable) - accrued, due on agreement of completion accounts		-	(2.5)	0.3	(2.2)

The goodwill arising on all acquisitions completed during the year will not be deductible for tax purposes. The fair values of tax balances and working capital for Synovos are provisional while the Group continues to assess the liabilities acquired.

SAFE HARBOUR

This financial report 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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