Final Results
Electrocomponents PLC
30 May 2007
Embargoed to 7:00am, Wednesday 30 May 2007
PRELIMINARY STATEMENT
Electrocomponents plc, the leading international high service distributor of
electronic, electrical and industrial supplies, today announces its results for
the year ended 31 March 2007.
SUMMARY RESULTS
2007 2006
Revenue £877.5m £828.5m
Profit before tax - headline £84.4m £72.8m
Profit before tax - reported £85.2m £65.1m
Earnings per share - headline 12.8p 11.2p
Earnings per share - reported 12.9p 10.0p
Dividend per share 18.4p 18.4p
HIGHLIGHTS OF THE YEAR
• Continued strong revenue growth in our International Business of 15%
with all regions showing higher growth year on year.
• The UK growing revenue by 2% with the new strategy delivering results.
• e-Commerce growing by 23% and now accounting for 28% of Group revenue.
• The implementation of our EEM strategy is contributing to sales growth.
• Gross margin stabilising during the year with strong gross profit growth
across the regions.
• Significant operating cost leverage in the International business and
Processes.
• Annualised cost reductions of £7.6m now achieved.
• The roll out of EBS is now complete.
• Headline profit before tax growth of 16%.
• Dividend maintained at 18.4p.
THE PLAN FOR THE COMING YEAR
• Continued implementation of our strategy to drive sales growth.
• Supporting the recent EBS roll outs and realising the benefits of an
integrated system.
• Continuing to develop our e-Commerce channel.
• Completing the Allied warehouse move successfully.
• Further action to reduce the Group's cost base.
HELMUT MAMSCH, CHAIRMAN, COMMENTED:
'This has been a year of good progress with increased sales and profits. All
three pillars of the strategy are delivering: EEM is contributing to sales
growth, the rollout of EBS in Europe is now complete and 75% of the targeted
cost reductions have been delivered.'
Enquiries:
Helmut Mamsch, Chairman Electrocomponents plc 0207 567 8000*
Ian Mason, Group Chief Executive Electrocomponents plc 0207 567 8000*
Simon Boddie, Group Finance Director Electrocomponents plc 0207 567 8000*
Diana Soltmann Flagship Consulting Ltd 0207 886 8440
* Available to 15:00 on 30 May 2007, thereafter 01865 204000
The results and presentation to analysts are published on the corporate website
at www.electrocomponents.com
Definitions of terms:
In order to reflect underlying business performance, comparisons of revenue
between periods have been adjusted for exchange rates and the number of trading
days. Changes in profit, cash flow, debt and share related measures such as
earnings per share are at reported exchange rates.
Enterprise Business System (EBS): In order to make clear the costs of the EBS
project and the underlying performance of the business, EBS costs have been
disclosed separately. Therefore, unless explicitly stated, measures based on
operating costs, contribution and process costs exclude EBS.
Headline profit: A profit of £0.8m (2006: charge £7.7m) was incurred in the year
for items excluded from headline profit. Details of the items are given below
the Income Statement. Key performance measures such as return on sales, EBITDA
and ROCE use headline profit figures.
Safe Harbour:
Our preliminary statement 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.
CHAIRMAN'S STATEMENT ON THE PRELIMINARY RESULTS
INTRODUCTION
This has been a year of good progress. The implementation of the strategy
continues with good signs of success in both our Electronic and
Electromechanical (EEM) and Maintenance, Repair and Operations (MRO) businesses
and resultant strong sales growth. The Enterprise Business System (EBS) was
implemented successfully during the financial year in Austria, Italy and Germany
and since the year end in Benelux, Ireland, Scandinavia and Spain. It now
supports all the UK and European businesses. The work to create a lower cost
infrastructure has progressed well, including the move to a new head office, and
has achieved £7.6m of annualised cost savings.
Overall, headline profit increased by 16% to £84m supported by sustained sales
growth across the Group, gross margin stabilisation and tight control of costs.
STRATEGIC DEVELOPMENT
The strategy development is now delivering tangible benefits with the launch of
extended ranges and leading edge products, a more flexible service offer and
more competitive pricing to meet customer requirements. This has been supported
by more customer-specific selling and marketing activities.
DIVIDEND
The Board announced in 2005 that it would maintain the dividend for the
following three years, assuming no substantial deterioration in economic
conditions. Accordingly, the dividend will be maintained at 18.4p per share for
the full year, being year two of this three year period.
OUR PEOPLE
The business has had another very busy year. Revenue and profit growth has been
achieved at the same time as the further roll out of EBS. This has been made
possible as a result of the commitment and skill of all our people. On behalf of
the Board, I thank everyone for their hard work.
As previously announced, Bob Lawson retired as Chairman in October 2006. Bob
made an enormous contribution to Electrocomponents over his 26 years with the
Group. In many ways Bob has been the architect of the Group as it now stands. In
particular, he rolled out the RS concept internationally and this now comprises
more than £500m (nearly 60%) of the Group's total revenue. I have appreciated
enormously Bob's support in his handover to me and we all wish him well in the
future.
Nick Temple will be retiring at the Annual General Meeting after ten years on
the Board. We thank Nick for his valuable contribution, particularly in the
field of technology and e-Commerce, which has become a major channel for our
business. We wish him well for the future.
Tim Barker, who has been a non-executive director of the Company for seven
years, will replace Nick Temple as Senior Independent Director at the Annual
General Meeting.
Rupert Soames has been appointed to the Board as a non-executive director.
Rupert is currently CEO of Aggreko plc, the global leader in the rental of
power, temperature control and oil-free compressed air systems. He has
significant relevant international, high service and information systems
experience and we welcome him to the Group.
CURRENT TRADING
Since the year end the Group has successfully completed the EBS roll out across
Europe.
Group revenue has grown at around 6% with an improving performance during May.
The International business has grown revenue at around 10% and the UK business
has grown at around 2%.
Helmut Mamsch, Chairman
30 May 2007
OPERATING REVIEW
OVERVIEW
In May 2005, we committed to a plan to improve the financial performance of the
Group significantly. The plan had three main elements:
• Focus separately on two distinct customer groups: Electronic and
Electromechanical (EEM) and Maintenance, Repair and Operations (MRO)
• Implement the Enterprise Business System (EBS)
• Create a lower cost infrastructure
This year has seen a step change in the delivery of each element of the plan
which has consequently resulted in strong sales and profit growth. The two
infrastructure elements of our plan are largely done. The roll out of EBS in
Europe is now complete and three quarters of the targeted cost savings have been
achieved, with the remainder well in hand. Our focus is on our customers and
continuing to build on the enthusiastic response we have had to our improved EEM
and MRO offers.
ELECTRONIC AND ELECTROMECHANICAL (EEM)
Our EEM customers are primarily involved in electronics design and pre and low
volume electronics production. Strong electronics market growth, technology
proliferation and R&D investment make this an attractive and growing segment to
serve, and catalogue based distribution is the customers' preferred channel.
Their primary need is access to as broad, deep and innovative a product range as
possible.
During the year, we have updated our EEM product range: 100,000 extended range
products have been made available over the web from our North American and
Japanese offers; complete ranges of leading edge technologies have been launched
(wireless and displays, solid state lighting, power supplies, embedded
computing) and the current product ranges have been refreshed and increased in
depth. We have improved our EEM offer promotion to make it more targeted and
relevant to design engineers and done much more joint supplier promotion to
leverage our relationships with strong brands. All of these initiatives are
generating significant incremental revenue and re-establishing the Group as the
leading EEM distributor. As well as continuing to develop our product range, new
tools and flexible packaging options are being developed to better serve these
customers' needs.
MAINTENANCE, REPAIR & OPERATIONS (MRO)
Within MRO there is an important customer segment involved in factory automation
that primarily uses process control and automation (PCA) products. Both the MRO
and PCA segments have been buoyant due to the improved outlook for manufacturing
and increased use of automation in the workplace.
Within Europe, an extended range of products from four leading PCA suppliers has
been offered over the web and sales and marketing resources, including
technology specific discounts, have been more targeted at factory automation
customers. As a result, PCA is growing strongly across Europe. The profitability
of the MRO product ranges has been improved through range rationalisation,
increasing use of own brand and better buying with contribution growing at twice
the rate of sales. These successful initiatives will be scaled up in the coming
year to further improve profitability.
CUSTOMER RESEARCH
Customer research in the UK (soon to be completed in Europe) has demonstrated
considerable improvements in customer perceptions across all service measures
and value for money relative to competition. The actions we have taken on price
and customer discounts have been recognised by the customer. Our businesses have
clearly become more competitive in meeting customers' needs and will continue to
do so.
SUMMARY
The Group's strategy is clear and its implementation is leading to strong sales
and profit growth. The necessary infrastructure projects are largely behind us
and much preparatory work has been done to enable delivery of the strategy. We
will focus on further improving our customer offers to drive growth as well as
maintaining our control of costs. While there is much hard work still to do,
clear plans are in place and the forthcoming year will be another of further
progress.
OPERATING PERFORMANCE AND KEY PERFORMANCE INDICATORS
Operating Performance 2007 2006
Revenue £877.5m £828.5m
Gross margin 50.5% 51.5%
Contribution £192.2m £183.2m
Group Process costs (£82.9m) (£81.9m)
EBS costs (£19.0m) (£25.1m)
Headline operating profit £90.3m £76.2m
Interest (net) (£5.9m) (£3.4m)
Headline profit before tax £84.4m £72.8m
Headline earnings per share 12.8p 11.2p
Dividend per share 18.4p 18.4p
Key Performance Indicators 2007 2006
Group revenue growth 9.0% 5.0%
International 14.5% 11.8%
UK 1.9% (3.0%)
e-Commerce proportion of revenue 28% 25%
Headline Group return on sales 9.6% 8.8%
Headline EBITDA (1) £118.2m £100.3m
Free cash flow £45.3m £26.9m
Headline ROCE (2) 20.5% 16.7%
Stock turn (per year) 2.7x 2.5x
Revenue per head (£'000)(3) 161 155
Number of customers (millions) 1.5 1.4
(1) Headline earnings before interest, tax, depreciation and amortisation
(2) Return on capital employed is defined as headline operating profit expressed
as a percentage of net assets plus net debt
(3) Revenue on a like for like basis (2006 and 2007) adjusting for trading days
and foreign exchange
Headline profit before tax has increased by £11.6m (15.9%). The main areas of
improvement were an increase in the contribution of our International business
of £10.0m, and a reduction in EBS costs by £6.1m. Against this, the UK
contribution declined by £1.0m and Process costs and interest costs increased
by £1.0m and £2.5m respectively.
Profit before tax was adversely affected by the strengthening of Sterling by
around £0.8m year on year. Adjusting for this effect headline profit before tax
would have grown by 17.2%.
The contribution of our International business has again increased due to a
combination of high revenue growth and improved cost leverage. The UK
contribution fell slightly despite the revenue growth as operating costs
increased principally as a result of additional costs to support the new EBS
markets.
EBS costs were reduced following higher costs associated with the UK
implementation in the last financial year. Interest costs increased due to the
higher level of debt and rising interest rates.
e-Commerce is a key enabler of the strategy. It allows the Group to make a very
wide range of products available globally at lower cost. It also allows rapid
new product introductions and price changes. In addition, supplier relationships
have been leveraged through brand shops on the web. e-Commerce revenue growth
remains strong at 23% and it now represents 28% of Group revenue, including 57%
in Japan and 32% across Europe and the UK. In several operating companies we now
take more orders through our e-Commerce channels than by telephone.
Gross profit increased by £17.1m in 2007 with growth in all regions. The Group
gross margin reduced by 1% point year on year with different patterns by region.
The UK gross margin was stable throughout the year. The selling price
realignment, undertaken over the last few years to improve competitiveness, was
largely complete and the gross margin has benefited from reduced product costs,
through better buying and rationalisation of the MRO range, as well as greater
use of the higher margin RS own brand products.
The International gross margin declined year on year by 1.6% points but with the
rate of decline slowing during the year with a decline of 0.3% points first half
to second half. The strong growth of our lower, but stable gross margin business
in North America, was responsible for a proportion of the full year decline. The
underlying gross margin decline was in the European and Asia Pacific regions. In
Europe, selling price realignments and the growth of profitable larger order
business have impacted gross margins while in Asia Pacific foreign exchange
movements have been significant. In the future the European region, the largest
region in the International business, will benefit from the completion of the
selling price realignment and the full year impact of product cost savings
coming through.
Both operating and Process costs have been reduced as a percentage of revenue
due to tight management control and the beneficial scale effect of higher
revenue. Actions in the year have realised a further £3.2m of annualised cost
reductions comprising headcount savings, catalogue paper savings and the sale of
the head office in Oxford, combined with a move to smaller accommodation. The
total of annualised cost reductions achieved so far is £7.6m and further actions
are planned to deliver the annualised £10m targeted for 2008.
Net debt was £136.2m at 31 March 2007, £15.4m higher than last year with
interest cover remaining high. The pension deficit (net of deferred tax) fell by
£0.6m to £29.1m.
The reorganisation income of £0.8m comprised costs, relating to the creation of
a lower cost infrastructure (£1.1m), and a one-off profit on sale of the head
office (£1.9m).
Free cash flow at £45.3m was up £18.4m on last year principally due to higher
profits, and the sale of the head office. These improvements were offset, in
part, by increased gross capital expenditure associated with the build of the
new office and warehouse facilities in our North American business.
International
2007 2006
Revenue £521.3m £474.9m
Revenue growth 14.5% 11.8%
Gross margin 48.7% 50.3%
Operating costs % of revenue (30.2%) (32.1%)
Contribution £96.3m £86.3m
% of revenue 18.5% 18.2%
The International business comprises Continental Europe (55% of revenue of the
International business), North America (30%) and Asia Pacific (15%). During the
year, the International business continued to grow and now accounts for 59% of
Group revenue and 50% of Group contribution. After adjusting for the £1.9m
adverse impact of the strengthening of Sterling, contribution from the
International business increased by £11.9m year on year.
Revenue growth increased during the year with all regions growing faster than in
2006.
Operating costs reduced as a percentage of revenue by 1.9% points demonstrating
the ongoing operational gearing benefits of higher sales in the region.
Continental Europe
2007 2006
Revenue £287.5m £267.9m
Revenue growth 10.1% 8.3%
Contribution £64.5m £59.9m
% of revenue 22.4% 22.4%
During the year, the European region maintained strong revenue growth of 10.1%
which was consistent throughout both halves of the year.
This performance was achieved against the backdrop of the preparation for and
implementation of EBS in seven out of the eight European businesses: Austria,
Benelux, Germany, Ireland, Italy, Scandinavia and Spain. Our French business
implemented an upgrade to EBS in September 2006.
The European business continues to implement the strategy. This has included
refocusing local sales forces towards the EEM offer with dedicated EEM sales
forces being established in France and Germany. The EEM offer has improved with
the North American extended range being made available to the majority of the
European markets. Our quotations and larger order business, which delivers good
margins, has continued to grow in response to the more flexible approach we have
taken with our customers.
The level of best practice sharing and focus on key supplier initiatives across
businesses has been increased.
North America
2007 2006
Revenue £157.2m £137.5m
Revenue growth 21.8% 18.0%
Contribution £23.4m £19.2m
% of revenue 14.9% 14.0%
Allied, our North American business, increased its revenue growth during the
year. This is the third consecutive year of growth at around 20%. Contribution
grew to 14.9% of revenue, due to strong revenue growth, limited cost increases
and a stable gross margin.
The business has continued to pursue its proven sales growth strategy. This has
involved the strengthening of the field sales team throughout the business's 55
local branches. Allied's close relationship with its suppliers is another key
strength, with joint promotion programmes and suppliers often accompanying
Allied staff on customer visits. In addition, customer service and stock turn
have improved during the year.
The development of the new warehouse and office in Fort Worth is proceeding
according to plan. The new office move is now complete and the warehouse move is
planned in the middle of the next financial year. Move costs of around £1m are
expected to be incurred in the next financial year.
Asia Pacific
2007 2006
Revenue £76.6m £69.5m
Revenue growth 17.3% 14.5%
Contribution £8.4m £7.2m
% of revenue 11.0% 10.4%
Asia Pacific also accelerated its revenue growth from 2006. All regions grew
significantly including North Asia (19%), South Asia (38%), Australasia (8%) and
Japan (15%). We have strengthened the senior management across the region.
In China, the business started implementing its plan to accelerate revenue
growth. The business recently launched its fifth Chinese language catalogue with
50,000 locally stocked products and another 100,000 extended range products from
Japan and North America available via the web. The sales force and number of
local sales offices have been increased and there are now nearly 300 employees
involved in sales and marketing in China. The revenue investment by the Group on
this initiative in the financial year was around £1.3m.
South Asia's strong growth was due to the successful customer acquisition
programme and the contribution from the new Thailand sales office, which started
trading during the year.
Both Australasia and Japan continued to grow strongly during the year.
e-Commerce now represents some 57% of Japan's revenue.
UK
2007 2006
Revenue £356.2m £353.6m
Revenue growth 1.9% (3.0%)
Gross margin 53.3% 53.0%
Operating cost % of revenue (26.4%) (25.6%)
Contribution £95.9m £96.9m
% of revenue 26.9% 27.4%
The UK returned to revenue growth with the strategy delivering results. The full
year growth of 1.9% was 4.9% points higher than last year. Growth improved
during the year from around 1% in the first half to nearly 3% in the second
half.
The business benefited from the improvement in the UK manufacturing economy and
the implementation of the strategy. There has been increased sales focus with
the sales force realignment to the two customer offers of EEM and MRO, the
growth in larger order business at good margins and continued large account
wins.
e-Commerce grew significantly and accounted for 32% of the UK business's
revenue. The internet trading channel has continued to be upgraded with
additional functionality being created to support our EEM customers.
This was the first full year for the UK on the EBS platform and while certain
operational costs have increased post go live, there has been a focus on
realising the benefits of the system. The system facilitates the use of targeted
technology-based discounts which have increased revenue. In addition, an
ongoing continuous improvement culture is being used to drive enhanced customer
service and greater efficiency in the business.
EBS
2007 2006
Depreciation and amortisation £10.7m £6.8m
Project and local business costs £8.3m £18.3m
______ ______
Total £19.0m £25.1m
______ ______
Cash outflow £16.0m £38.0m
The roll out of EBS in Europe is now complete. By the year end, a single
integrated regional system supported our businesses in Austria, France, Germany,
Italy and the UK. The final element of the European roll out was completed in
May 2007, with the businesses in Benelux, Ireland, Scandinavia and Spain
migrating to the EBS platform. During their first few months post implementation
these businesses are being supported by teams from the rest of the Group with
previous EBS expertise.
The benefits of an integrated system are starting to be realised. While there
are some higher operating costs initially after the implementation of the new
system, the costs are expected to be lower in the medium term. This was the
pattern experienced in France after its implementation in June 2003. In 2007,
the UK benefited from the additional flexibility of technology-based customer
discounts, which have helped drive its sales growth. In the future, we expect
increased stock turn in Europe due to the improved stock visibility and regional
demand planning.
The EBS implementation in our Asian operations was virtually completed during
the year, with the Chinese sales offices being brought onto the system. The
timing of the roll out of EBS into our North American business will be
determined after the completion of the local warehouse move.
The EBS costs have reduced by £6m year on year to £19m. This is as a result of
the lower implementation costs (£10m) following the high prior year costs as a
result of the UK implementation, offset in part by the higher depreciation (£4m)
as the asset has now been in use for a full year. The cash outflow has reduced
by £22m year on year principally due to the lower implementation costs (£10m)
and the prior year safety stock, associated with the UK implementation, coming
out in this financial year (£14m).
In the next financial year the total EBS costs, including depreciation,
implementation costs, and system development costs incurred post implementation,
are expected to be slightly lower than in 2007. As there have been
implementation costs incurred in early 2008, the depreciation and implementation
costs will continue to be disclosed as EBS costs. The costs of developing the
system post implementation to drive the strategy and benefits, will be included
with the other Information Systems costs and disclosed within Process costs.
From 2009 it is anticipated that EBS costs will not be separately disclosed and
the ongoing EBS depreciation costs will be included within Process costs.
Processes
2007 2006
Process costs £82.9m £81.9m
Process costs % of revenue 9.4% 9.9%
The Processes support our operating companies by ensuring that they have the
products, infrastructure and expertise to provide consistently high service
levels around the World. The costs have reduced year on year as a percentage of
revenue even after allowing for the £3.1m one off Information Systems costs
incurred last year.
Information Systems
The role of Information Systems is to support and develop the enterprise system
applications that are required by the business.
The recent focus has been on consolidating the operations of the businesses on
the EBS platform. Other activities have included completing the global
technology refresh of desktop hardware, software and email infrastructure. The
ongoing move of core applications to our data centres has also strengthened our
disaster recovery capabilities.
Supply Chain
The Supply Chain Process is responsible for all the logistics surrounding
product supply and the management of stock levels.
The dual objectives have been to maintain high levels of customer service whilst
also starting to exploit the regional planning capabilities provided by EBS.
This has now started, evidenced by the improvement in stock turn from 2.5 to 2.7
times.
Product Management
The role of Product Management is to manage the selection and purchase of some
350,000 distinct products around the World.
During the year, Product Management strengthened relationships with key EEM and
PCA suppliers. This has led to more joint initiatives, focusing on product range
development, marketing and web promotions across all geographies. Examples
extend to suppliers where their European customers, who wish to buy small
volumes of certain products, are directed to our local operating companies for
fulfilment.
Media Publishing
The Media Publishing Process is responsible for the design and production of the
Group's publications and associated content for e-Commerce.
Further strides have been made by Media Publishing to reduce costs, particularly
in the print and paper costs of our catalogues, whilst maintaining their
quality.
Capital structure
Net debt of £136.2m comprised gross borrowings of £155.3m (currency split:
£52.6m in US Dollars, £40.5m in Euros, £31.9m in Japanese Yen, £10.3m in
Sterling and the balance of £20.0m in other currencies), and financial assets of
£19.1m (currency split: £1.9m in Sterling, £13.3m in Euros and the balance of
£3.9m in other currencies). This currency mix is due to the hedging of
translation exposure, interest differentials and tax efficiency. The peak net
borrowing during the year was £179m. In addition the pension deficit (net of
associated deferred tax) was £29.1m at 31 March 2007.
The Group's main sources of debt are a syndicated facility for $120m and £110m
from nine banks and a syndicated facility for £63.5m from three banks both
maturing in February 2010. At 31 March 2007, the Group also had a bilateral
facility for $100m in place, which was terminated in early April 2007.
Taxation
The Group's effective tax rate is 34% of profit before tax which represents a 1%
point increase from the prior year due to the increasing proportion of Group
profits realised in higher tax countries outside the UK. This rate includes the
effect of a significant, and ongoing, increase in the deferred tax liability due
to the tax amortisation of overseas goodwill. The deferred tax liability is not
expected to crystallise in the foreseeable future. This, together with the
differing timing of payments, causes a discrepancy between the effective tax
rate of 34% and the cash tax rate of 26% of profit before tax.
Pension
The Group has defined benefit schemes in the UK, Ireland and Germany. All these
schemes are now closed to new entrants. Elsewhere (including the replacement
schemes in the UK and Ireland), the schemes are defined contribution.
Under IAS 19, the combined deficit of the defined benefit schemes was £38.7m at
31 March 2007.
The most recent valuation of the UK defined benefit scheme was carried out as at
31 March 2007. This disclosed a gross deficit of £31.9m. To eliminate the
deficit, based on the assumptions used in the valuation as at 31 March 2004, the
Group will make additional annual payments to the scheme for the next 12 years
(2007: £4.5m and increasing at 3% per year).
Ian Mason, Group Chief Executive
Simon Boddie, Group Finance Director
30 May 2007
Group Income Statement
For the year ended 31 March 2007
2007 2006
Note £m £m
------ -------- --------
Revenue 2 877.5 828.5
Cost of sales (434.0) (402.1)
-------- --------
Gross profit 443.5 426.4
Distribution and marketing expenses (346.2) (348.9)
Administrative expenses (6.2) (9.0)
-------- --------
Operating profit 91.1 68.5
Financial income 11.2 6.9
Financial expenses (17.1) (10.3)
-------- --------
Profit before tax 1,2 85.2 65.1
Income tax expense 3 (29.0) (21.5)
-------- --------
Profit for the year attributable to equity 56.2 43.6
shareholders
-------- --------
Earnings per share - Basic 4 12.9p 10.0p
Earnings per share - Headline 4 12.8p 11.2p
Dividends
Amounts recognised in the period:
Final dividend for the year ended 31 March 2006 12.6p 12.6p
Interim dividend for the year ended 31 March 2007 5.8p 5.8p
-------- --------
18.4p 18.4p
-------- --------
A final dividend of 12.6p per share relating to the period has been proposed
since the period end.
Headline profit
Headline operating profit
Operating profit 91.1 68.5
Provision for RoHS - 4.0
Reorganisation (income) costs (0.8) 3.7
-------- --------
90.3 76.2
-------- --------
Headline profit before tax
Profit before tax 85.2 65.1
Provision for RoHS - 4.0
Reorganisation (income) costs (0.8) 3.7
-------- --------
84.4 72.8
-------- --------
Group Statement of Recognised Income and Expense
For the year ended 31 March 2007
2007 2006
£m £m
-------- --------
Foreign exchange translation differences (11.6) 11.6
Actuarial (loss) gain on defined benefit pension
schemes (0.4) 4.2
Gain (loss) on cash flow hedges 1.0 (1.0)
Tax on items taken directly to equity - (1.3)
-------- --------
Net income recognised directly in equity (11.0) 13.5
Profit for the year 56.2 43.6
-------- --------
Total recognised income and expense for the
period attributable to equity shareholders 45.2 57.1
-------- --------
Group Balance Sheet
As at 31 March 2007
2007 2006
Note £m £m
-------- --------
Non-current assets
Intangible assets 7 196.7 208.2
Property, plant and equipment 8 111.1 112.8
Investments 0.3 0.3
Other receivables 2.7 3.2
Deferred tax assets 14.2 17.5
-------- --------
325.0 342.0
-------- --------
Current assets
Inventories 160.6 158.6
Trade and other receivables 171.0 162.3
Income tax receivables 1.1 1.0
Cash and cash equivalents 10 19.1 39.4
-------- --------
351.8 361.3
-------- --------
Current liabilities
Trade and other payables (132.9) (123.5)
Loans and borrowings (79.0) (23.0)
Tax liabilities (14.5) (13.3)
Net current assets 125.4 201.5
-------- --------
Total assets less current liabilities 450.4 543.5
-------- --------
Non-current liabilities
Other payables (7.9) (7.8)
Retirement benefit obligations 6 (38.7) (41.8)
Loans and borrowings (76.3) (137.2)
Deferred tax liability (22.9) (20.3)
-------- --------
Net assets 304.6 336.4
-------- --------
Equity
Called-up share capital 43.5 43.5
Share premium account 38.7 38.4
Other reserves 222.4 254.5
-------- --------
Equity attributable to the shareholders of the
of the parent 9 304.6 336.4
-------- --------
Group Cash Flow Statement
For the year ended 31 March 2007
2007 2006
£m £m
-------- --------
Cash flows from operating activities
Profit before tax 85.2 65.1
Depreciation and other amortisation 27.0 24.1
Equity settled transactions 2.7 2.7
Finance income and expense 5.9 3.4
-------- --------
Operating cash flow before changes in working
capital, interest and taxes 120.8 95.3
Increase in inventories (7.7) (12.8)
Increase in trade and other receivables (9.2) (14.6)
Increase in trade and other payables - 13.2
-------- --------
Cash generated from operations 103.9 81.1
Interest received 11.2 6.8
Interest paid (17.0) (10.1)
Income tax paid (22.0) (25.8)
-------- --------
Operating cash flow 76.1 52.0
-------- --------
Cash flows from investing activities
Capital expenditure and financial investment (42.4) (26.3)
Proceeds from sale of non-current assets 11.6 1.2
-------- --------
Net cash used in investing activities (30.8) (25.1)
Free cash flow 45.3 26.9
-------- --------
Cash flows from financing activities
Proceeds from the issue of share capital 0.3 -
New bank loans 30.3 54.3
Repayment of bank loans (16.6) (25.6)
Equity dividends paid (80.0) (80.0)
-------- --------
Net cash used in financing activities (66.0) (51.3)
-------- --------
-------- --------
Net decrease in cash and cash equivalents (20.7) (24.4)
-------- --------
Cash and cash equivalents at the beginning
of the year 38.0 62.6
Effect of exchange rates on cash (0.1) (0.2)
-------- --------
Cash and cash equivalents at the end of the year 17.2 38.0
-------- --------
Notes to the Preliminary Statement
For the year ended 31 March 2007
1. Analysis of income and expenditure
2007 2006
£m £m
-------- --------
Revenue 877.5 828.5
Cost of sales (434.0) (402.1)
Distribution and marketing expenses (251.3) (243.2)
-------- --------
Contribution before Enterprise Business System costs 192.2 183.2
-------- --------
Distribution and marketing expenses within Process costs (74.8) (74.0)
Administrative expenses (8.1) (7.9)
-------- --------
Group Process costs (82.9) (81.9)
Distribution and marketing expenses: Enterprise
Business System costs (19.0) (25.1)
-------- --------
Headline operating profit 90.3 76.2
Net financial expense (5.9) (3.4)
-------- --------
Headline profit before tax 84.4 72.8
Distribution and marketing expenses: provision for RoHS - (4.0)
Distribution and marketing expenses: reorganisation costs (1.1) (2.6)
Administrative expenses: reorganisation income (costs) 1.9 (1.1)
-------- --------
Profit before tax 85.2 65.1
-------- --------
2. Segmental analysis
2007 2006
a. By geographical destination £m £m
-------- --------
Revenue: United Kingdom 341.5 339.9
Continental Europe 293.3 272.5
North America 155.6 135.9
Asia Pacific 87.1 80.2
-------- --------
877.5 828.5
-------- --------
2007 2006
b. By geographical origin £m £m
-------- --------
Revenue: United Kingdom 356.2 353.6
Continental Europe 287.5 267.9
North America 157.2 137.5
Asia Pacific 76.6 69.5
-------- --------
877.5 828.5
-------- --------
2007 2006
£m £m
-------- --------
Profit
before tax: United Kingdom 95.9 96.9
Continental Europe 64.5 59.9
North America 23.4 19.2
Asia Pacific 8.4 7.2
-------- --------
Contribution before Enterprise Business
System costs 192.2 183.2
Groupwide Process costs (82.9) (81.9)
Enterprise Business System costs (19.0) (25.1)
Net financial expense (5.9) (3.4)
-------- --------
Headline profit before tax 84.4 72.8
Provision for RoHS - (4.0)
Reorganisation income (costs) 0.8 (3.7)
-------- --------
Profit before tax 85.2 65.1
-------- --------
3. Income tax expense
2007 2006
£m £m
-------- --------
United Kingdom taxation 11.7 8.8
Overseas taxation 17.3 12.7
-------- --------
Total income tax expense in income statement 29.0 21.5
-------- --------
Profit before tax 85.2 65.1
-------- --------
Effective tax rate 34.0% 33.0%
4. Earnings per share
2007 2006
£m £m
-------- --------
Profit for the year attributable to equity shareholders 56.2 43.6
Provision for RoHS - 4.0
Reorganisation (income) costs (0.8) 3.7
Tax impact of reorganisation income (costs) and provision
for RoHS 0.2 (2.4)
-------- --------
Headline profit for the year attributable to equity
shareholders 55.6 48.9
-------- --------
Weighted average number of shares (million) 434.9 434.9
Earnings per share - basic 12.9p 10.0p
Earnings per share - headline 12.8p 11.2p
-------- --------
5. 2007 final dividend
The timetable for the payment of the proposed final dividend is:
Ex-dividend date 27 June 2007
Record date 29 June 2007
Annual General Meeting 13 July 2007
Dividend payment date 27 July 2007
6. Pension Schemes
The funding of the United Kingdom defined benefit scheme is assessed in
accordance with the advice of independent actuaries. The pension costs for the
year ended 31 March 2007 amounted to £5.2m (2006: £7.6m). The contributions paid
by the Group to the defined contribution section of the scheme amounted to £2.2m
(2006: £1.2m).
In addition to the UK scheme outlined above there are certain pension benefits
provided on a defined benefit basis in Germany and Ireland amounting to £1.1m
(2006: £1.0m), defined contribution basis in Australia and North America
amounting to £0.9m (2006: £0.8m), and via government schemes in France, Italy,
Scandinavia and North Asia amounting to £2.4m (2006: £2.0m).
The Group expects to pay a total of £9.4m to its UK defined benefit pension
scheme in 2008.
The principal assumptions used in the valuations of the liabilities of the
Group's schemes were:
2007 2006
Republic Republic
United of United of
Kingdom Germany Ireland Kingdom Germany Ireland
------- ------- -------- ------- ------- --------
Discount rate 5.25% 4.75% 4.75% 4.90% 4.50% 4.50%
Rate of increase
in salaries 3.85% 3.00% 4.00% 3.90% 3.00% 4.00%
Rate of increase
of pensions in
payment 3.10% 2.00% 2.00% 2.90% 2.00% 2.00%
Inflation
assumption 3.10% 2.00% 2.00% 2.90% 2.00% 2.00%
------- ------- -------- ------- ------- --------
The expected long term rates of return on the schemes' assets as at 31 March
were:
2007 2006
Republic Republic
United of United of
Kingdom Germany Ireland Kingdom Germany Ireland
------- ------- -------- ------- ------- --------
Equities 7.40% n/a 7.30% 7.05% n/a 7.00%
Corporate bonds 4.50% n/a n/a 4.15% n/a n/a
Government bonds 3.90% n/a 4.30% 3.55% n/a 4.00%
Cash 4.50% n/a n/a 3.75% n/a n/a
Other n/a n/a 5.30% n/a n/a 5.00%
------- ------- -------- ------- ------- --------
Based upon the demographics of scheme members, the weighted average life
expectancy assumptions used to determine benefit obligations were:
2007
Republic
United of
Kingdom Germany Ireland
Years Years Years
------- ------- --------
Member aged 65 (current life expectancy) - male 20.2 18.4 21.4
Member aged 65 (current life expectancy) - female 23.1 22.5 26.4
Member aged 45 (life expectancy at aged 65) - male 21.2 21.8 21.4
Member aged 45 (life expectancy at aged 65) - female 24.0 25.7 26.4
------- ------- --------
The amounts recognised in the income statement were:
2007 2006
Republic Republic
of of
UK Germany Ireland Total UK Germany Ireland Total
£m £m £m £m £m £m £m £m
---- ------- ------- ----- ---- ------- ------- -----
Current
service cost 6.9 0.7 0.1 7.7 7.1 0.7 0.1 7.9
Past
service cost - - - - - - - -
Interest
cost 14.2 0.3 0.1 14.6 13.1 0.2 0.1 13.4
Expected
return on
assets (15.9) - (0.1) (16.0) (12.6) - (0.1) (12.7)
---- ------- ------- ----- ---- ------- ------- -----
Total income
statement
charge 5.2 1.0 0.1 6.3 7.6 0.9 0.1 8.6
---- ------- ------- ----- ---- ------- ------- -----
Of the charge for the year, £0.3m (2006: £0.4m) has been included in
administrative expenses and the remainder £6.0m (2006: £8.2m) in distribution
and marketing expenses.
The actual return on scheme assets was: UK £14.4m (2006: £48.7m), Germany £nil
(2006: £nil), and Republic of Ireland £0.2m (2006: £0.4m).
The valuations of the assets of the schemes as at 31 March were:
2007 2006
Republic Republic
United of United of
Kingdom Germany Ireland Kingdom Germany Ireland
£m £m £m £m £m £m
------- ------- -------- ------- ------- --------
Equities 203.7 n/a 1.6 189.9 n/a 1.4
Corporate bonds 24.0 n/a - 22.6 n/a -
Government bonds 41.6 n/a 0.2 39.7 n/a 0.2
Cash 2.6 n/a - 1.5 n/a -
Other - n/a 0.2 - n/a 0.2
------- ------- -------- ------- ------- --------
Total market
value of assets 271.9 n/a 2.0 253.7 n/a 1.8
------- ------- -------- ------- ------- --------
No amount is included in the market value of assets relating to either financial
instruments or property occupied by the Group.
The amount included in the balance sheet arising from the Group's obligations in
respect of its defined benefit pension schemes is:
2007 2006
Republic Total Republic Total
of Valu- of Valu-
UK Germany Ireland ation UK Germany Ireland ation
£m £m £m £m £m £m £m £m
----- ------- ------- ----- ---- ------- ------- -----
Total market
value of
assets 271.9 - 2.0 273.9 253.7 - 1.8 255.5
Present
value of
scheme
liabilities (303.8) (6.5) (2.3) (312.6)(288.7) (6.3) (2.3)(297.3)
------ ------- ------- ----- ---- ------- ------- -----
Deficit in
the scheme (31.9) (6.5) (0.3) (38.7) (35.0) (6.3) (0.5) (41.8)
------ ------- ------- ----- ---- ------- ------- -----
The rules of the UK Electrocomponents Group Pension Scheme give the Trustee
powers to wind up the Scheme, which it may exercise if the Trustee is aware that
the assets of the scheme are insufficient to meet its liabilities. Although the
Scheme is currently in deficit, the Trustee and the Company have agreed a plan
to eliminate the deficit over time and the Trustee has confirmed that it has no
current intention of exercising its power to wind up the Scheme.
The German scheme is unfunded, in line with local practice, and the deficit of
£6.5m in the German scheme is financed through accruals established within the
German accounts.
In addition, the value of the assets and liabilities held in respect of AVCs
amounted to £1.0m as at 31 March 2007 (2006: £1.0m). The value of the assets and
liabilities held in respect of the defined contribution section of the scheme
amounted to £5.5m as at 31 March 2007 (2006: £2.8m).
7. Intangible assets
Other
Goodwill Software Intangibles Total
Cost £m £m £m £m
-------- -------- ----------- ------
At 1 April 2006 150.4 85.1 0.3 235.8
External additions - 20.0 - 20.0
Disposals - (2.2) - (2.2)
Translation differences (16.8) (1.0) - (17.8)
-------- -------- ----------- ------
At 31 March 2007 133.6 101.9 0.3 235.8
-------- -------- ----------- ------
Amortisation
At 1 April 2006 27.6 - 27.6
Charged in the year 11.5 - 11.5
Disposals - - -
Translation differences - - -
-------- -------- ----------- ------
At 31 March 2007 39.1 - 39.1
-------- -------- ----------- ------
Net book value
At 31 March 2007 133.6 62.8 0.3 196.7
-------- -------- ----------- ------
At 31 March 2006 150.4 57.5 0.3 208.2
-------- -------- ----------- ------
8. Property, Plant and Equipment
Land and Plant and Computer
buildings machinery Systems Total
Cost £m £m £m £m
-------- -------- -------- ------
At 1 April 2006 96.8 101.6 59.1 257.5
Additions 10.6 7.0 7.2 24.8
Disposals (9.9) (1.6) (2.2) (13.7)
Reclassification - 1.8 (1.8) -
Translation differences (1.7) (1.4) (0.9) (4.0)
-------- -------- -------- ------
At 31 March 2007 95.8 107.4 61.4 264.6
-------- -------- -------- ------
Depreciation
At 1 April 2006 22.6 79.5 42.6 144.7
Charged in the year 1.5 6.5 7.5 15.5
Disposals (1.2) (1.4) (2.2) (4.8)
Reclassification - 1.6 (1.6) -
Translation differences (0.2) (1.0) (0.7) (1.9)
-------- -------- -------- ------
At 31 March 2007 22.7 85.2 45.6 153.5
-------- -------- -------- ------
Net book value
At 31 March 2007 73.1 22.2 15.8 111.1
-------- -------- -------- ------
At 31 March 2006 74.2 22.1 16.5 112.8
-------- -------- -------- ------
9. Reconciliation of movements in equity
2007 2006
£m £m
-------- -------
Profit for the year 56.2 43.6
Dividend (80.0) (80.0)
-------- -------
Retained loss (23.8) (36.4)
Translation differences (11.6) 11.6
Gain(loss) on cash flow hedges 1.0 (1.0)
Actuarial (loss) gain on defined benefit pension schemes (0.4) 4.2
Tax impact on adjustments taken directly to reserves - (1.3)
Equity settled transactions 2.7 2.7
New share capital subscribed 0.3 -
-------- -------
Net reduction to equity (31.8) (20.2)
Equity shareholders' funds at the beginning of the year 336.4 356.6
-------- -------
Equity shareholders' funds at the end of the year 304.6 336.4
-------- -------
10. Cash and cash equivalents
2007 2006
£m £m
-------- -------
Bank balances 16.1 15.4
Call deposits and investments 3.0 24.0
-------- -------
Cash and cash equivalents in the balance sheet 19.1 39.4
Bank overdrafts (1.9) (1.4)
-------- -------
Cash and cash equivalents in the statement of cash flows 17.2 38.0
Current instalments of loans (77.1) (21.6)
Loans repayable after more than one year (76.3) (137.2)
-------- -------
Net debt (136.2) (120.8)
-------- -------
11. Principal exchange rates
2007 2006
Average Closing Average Closing
------- ------- ------- -------
United States Dollar 1.90 1.96 1.79 1.74
Euro 1.47 1.47 1.46 1.43
Japanese Yen 221 232 202 205
------- ------- ------- -------
12. Basis of preparation
Electrocomponents plc (the 'Company') is a company domiciled in England. The
Group accounts for the year ended 31 March 2007 comprise the Company and its
subsidiaries (together referred to as the 'Group') and the Group's interest in a
jointly controlled entity. Subsidiaries are entities controlled by the Company.
All subsidiary accounts are made up to 31 March and are included in the Group
accounts. Further to the IAS Regulation (EC 1606/2002) the Group accounts have
been prepared in accordance with International Financial Reporting Standards
('IFRS') as adopted for use by the EU ('adopted IFRS').
The accounts were authorised for issue by the Directors on 30 May 2007.
The accounts are presented in £ Sterling and rounded to £0.1m. They are prepared
on the historical cost basis except certain financial instruments detailed
below.
The preparation of accounts in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and
various other factors believed to be reasonable, under the circumstances, the
results of which form the basis of making the judgements about carrying values
and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates.
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 March 2007 or 2006 but is derived from
those accounts . Statutory accounts for 2006 have been delivered to the
Registrar of Companies, and those for 2007 will be delivered following the
Company's Annual General Meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements under section 237
(2) or 237(3) of the Companies Act 1985.
Copies of the Annual Report and Accounts for the year ended 31 March 2007 will
be available from 12 June 2007 from the Company Secretary, Electrocomponents
plc, International Management Centre, 8050 Oxford Business Park North, Oxford
OX4 2HW, United Kingdom. Telephone +44 (0)1865 204000. The Report will also be
published on the Corporate website at www.electrocomponents.com.
The Annual General Meeting will be held at Electrocomponents plc, International
Management Centre, 8050 Oxford Business Park North, Oxford OX4 2HW, United
Kingdom on 13 July 2007 at 12.00pm.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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