Half-year Report

RNS Number : 2742R

Electrocomponents PLC

04 November 2021

 

4 November 2021, 7.00am

ELECTROCOMPONENTS PLC
RESULTS FOR THE HALF YEAR ENDED 30 SEPTEMBER 2021

STRONG PERFORMANCE WITH CONTINUED MARKET SHARE GAINS

LINDSLEY RUTH, CHIEF EXECUTIVE OFFICER, COMMENTED:

"Electrocomponents has delivered a very strong performance due to our differentiated offer and a robust market driving significant revenue growth and an improved operating profit margin on a one and two-year basis. Having repositioned the Group, we are now moving on to the next stage of our Destination 2025 strategy to drive stronger profitable growth. Integral to this strategy is our continued commitment to build a more sustainable and inclusive environment and today we launch the next stage of our ESG action plan, 'For a better world'. With less than a one percent share of our global market and a strong proposition that is taking share, we have never been more confident of our growth opportunities despite the external challenges being faced."

Highlights	H1 2021/22	H1 2020/21	Change	Like-for-like2 change		H1 2019/20	Two-year change3
Revenue	£1,208.9m	£908.9m	33%	31%		£978.7m	24%
Adjusted4 operating profit	£144.8m	£77.6m	87%	95%		£105.6m	37%
Adjusted4 operating profit margin	12.0%	8.5%	3.5 pts	4.0 pts		10.8%	1.2 pts
Adjusted4 profit before tax4	£141.8m	£74.3m	91%	101%		£103.4m	37%
Adjusted4 earnings per share	23.0p	12.8p	80%	89%		17.8p	29%
Operating profit	£139.1m	£58.9m	136%	158%		£91.2m	53%
Profit before tax	£136.1m	£55.6m	145%	170%		£89.0m	53%
Earnings per share	21.5p	9.5p	126%	154%		15.2p	41%
Interim dividend	6.4p	6.1p	5%			5.9p	8%
Adjusted4 free cash flow	£84.8m	£85.0m	0%			£13.9m	>200%
Net debt	£83.6m	£114.8m				£220.7m
Net debt to adjusted4 EBITDA	0.3x	0.5x				0.9x

Market share gains driven by our people, differentiated proposition and supply expertise

· Our strong product breadth and availability, supply expertise and service offer underpin market outperformance

· Good growth in customer numbers and average order value achieved with minimal benefit from inflation

· Engaged and focused teams and leaders are the driving force behind our strength across the Group

· Rolling 12-month Net Promoter Score of 52.2, a two-year fall of 2.5, largely due to external issues such as industry supply shortages and Brexit

Margin expansion despite ongoing operational investment; strong free cash flow generation

· Gross margin of 43.7%, up 0.5 pts year-on-year, due to product margin gains offset by mix effects

· Operating cost control and £10 million of RISE benefits diluted by £9.4 million of extra COVID-19 and Brexit costs

· Adjusted operating profit margin of 12.0%, with adjusted operating profit conversion⁴ of 27.4%

o  EMEA operating profit margin of 15.9% underpinned by our improved operating model

o  Americas operating profit margin of 12.8% reflects our investment over recent years

o  Asia Pacific operating profit margin of 9.7% due to greater focus on marginal return

· Adjusted free cash flow generation remains strong at £84.8 million despite additional inventory investment

Opportunity to develop our strategic roadmap to drive stronger profitable growth

· Destination 2025 strategy unchanged and on track, with our needle movers driving organic and inorganic growth

· Well positioned to satisfy growing customer demand for sustainable product and service solutions

· Investigating opportunities to unlock further profitable growth and move from being good to great operationally

Launching environmental, social and governance (ESG) goals for 2030 to drive 'For a better world'

· Committed to being net zero in our operations by 2030 and across the wider value chain by 2050

· Science Based Targets initiative (SBTi) set for Scope 1, 2 and 3 emissions as we partner with our suppliers

· ESG-related targets included within our employee rewards programmes

· Restructured our existing £300 million revolving credit facility to be a sustainability-linked loan

· High external ESG ratings facilitating winning new contracts

Prepared for future growth opportunities with significant balance sheet headroom and liquidity

· Active pipeline of acquisition opportunities to accelerate our growth aspirations

· Strict financial, strategic and cultural hurdles underpinning our strong management discipline

· Net debt to adjusted EBITDA of 0.3x and £450 million committed debt facilities support our growth opportunities

Current trading

Over the first five weeks of the second half we have continued to see further good momentum across all regions. This is being driven by both ongoing growth in market share and strength in our underlying markets. The external environment remains very challenging especially within the supply chain, and the resulting product shortages, with inflation putting pressure on freight and labour costs. Our teams continue to work on mitigating these pressures as best we can, with our sourcing expertise and early action ensuring our availability rates remain strong and thus we remain confident of all we can influence and plan for, but mindful of the external uncertainties being faced.

1.  Consensus for the year ending 31 March 2022 is adjusted profit before tax of £272.8 million within a range of £269.8 million to £278.5 million (Source: Electrocomponents.com/investors/analyst-coverage).

2.  Like-for-like change excludes the impact of acquisitions and the effects of changes in exchange rates on translation of overseas operating results, with 2020/21 converted at 2021/22 average exchange rates for the period. 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 £38.0 million, extra trading days increased revenue by £3.0 million during the period. Currency movements decreased adjusted profit before tax by £5.5 million.

3.  Two-year change is on a reported basis and compares H1 2021/22 with H1 2019/20 to remove the impact of COVID-19 from comparatives.

4.  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. See Note 13 on pages 24 to 29 for definitions and reconciliations of all alternative performance measures.

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 an analyst presentation today at 9am (GMT) at UBS, 5 Broadgate, London EC2M 2QS. We will also provide a video webcast, which can be accessed live and later as a recording on the Electrocomponents website at www.electrocomponents.com .

Please find a video presentation of our ESG global goals and action plan for 2030 on our website. This provides more detail of our 15 ESG global goals, which are outlined in our accompanying financial release, as presented by our Vice President of Social Responsibility and Sustainability, Andrea Barrett.

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 REVIEW

Electrocomponents has delivered a very strong performance during the first half. This is being driven by our people, and I thank them for all their hard work and effort in what has been very challenging times both personally and professionally. We have grown market share due to our industry-leading product availability and breadth, responsive customer service and solutions offer and being omni-channel, against a stronger market backdrop particularly in electronics.

We continue to see a change in culture within the Group: we have continued to invest in talent, empowered our leaders, and incentivised our teams with targets that they can identify with and influence. This has been the over-riding driver of our market share growth across all three regions. We continue to develop this change in mindset through ongoing training that encourages greater operational ownership.

Our strong growth is being driven by focusing our efforts on our needle movers; developing our product and service solutions offer, improving our customer experience, and expanding our product offering including our specialist own-brands. We have invested in our capital and operating base and are excited to see the opportunities the new distribution centre (DC) extensions in the Americas and Germany bring; the latter will provide faster delivery times to our European customers and reduce freight miles. We are now accelerating our organic growth story with inorganic acquisitions that fit strategically.

For a better world, our 2030 goals

We have always put the interests of our stakeholders first as we pursue our ambition of being a truly responsible, sustainable, and inclusive business. Today we announce our 'For a better world' action plan with four ambitious ESG goals by 2030 for: advancing sustainability, championing education and innovation, empowering our people and doing business responsibly. Our ESG action plan has been integrated within our Destination 2025 growth strategy and supports our vision to be first choice for all our stakeholders. We have detailed our ESG goals in a separate press release and presentation today, including being net zero by 2030 in our direct operations and committing to the Science Based Targets initiative and Business Ambition for 1.5°C.

Our desire to act responsibly and develop accordingly has been embedded within our Group for many years. We see the opportunity to work with all our stakeholders to ensure that we are pointing in the right direction for a sustainable future. To that end, we are investing and developing businesses that deliver environmental benefits, we are working with our suppliers in advancing sustainable product and service solutions, we are reorganising transport routes to reduce emissions within the wider value chain and we are initiating recycling programmes for appropriate products, to name a few initiatives. We are committed in driving 'For a better world' throughout our Group in everything we do; our solar panels at our German DC are providing surplus energy into the grid, 67% of our electricity usage is from renewable sources and we have restructured our £300 million revolving credit facility to include three of our new 2030 ESG actions. Meanwhile our high ESG ratings are recognised by our customers and suppliers and have been instrumental in winning new business contracts.

Our number one priority remains to ensure that we create a safe, inclusive and dynamic culture in which our people can thrive and grow. Having inspiring leaders and amazing people underpins the fabric of our Group. But we also believe we can be integral in developing the next generation of engineers and designers, helping nurture their innovative work and projects. In that vein, through our brand, DesignSpark, we fund and support a community of over 1.1 million design engineers and students in providing free design models and services.

Driving stronger profitable growth

Operationally we are performing well. However, we know we can be better. Over the last twelve months, we have seen benefits from being a more streamlined and agile business and the value that can be generated through having a greater operational focus and ownership across our leaders. We are working closer as a Group and delivering
cross-business synergies as we leverage our offer and expertise. Additionally, our acquisitions are starting to deliver sales synergies through enhancing our proposition further.

There is no change to our strategy of Destination 2025. In fact, we have never been more confident of the growth opportunities we see. However, we think the potential is now greater and we have a programme of activity underway across our Group, helping identify how well our processes work, where we can operate better, what the bottlenecks are and what is required for us to become a great business.

We have many strengths that we are not optimising: our leaders want to go faster and have the ability to generate greater value; we can work harder on improving margins and we can drive stronger growth if we work more cohesively across our Group. We want to take advantage of the investments we have made over the last six years to move into the second part of our transformation strategy; to accelerate our market share and leverage our assets further. We want to move from being good to great, to drive greater operational efficiency and integrate our acquisitions faster.

We have never been short of amazing ideas, but we need to prioritise our initiatives to unlock the full potential of Destination 2025 and beyond and create greater value. We are still at the early stages of exploratory work and will return with our findings and conclusions at a later date.

The inorganic opportunity

Despite the progress we have delivered so far, we still have less than a one percent share of our target market globally. We are growing at over twice the market rate, but we want to go faster. We are looking at acquisitions that will accelerate our organic growth ambitions.

Our acquisition pipeline remains strong and we are actively working on a number of deals. We are highly focused on opportunities within our strategic sweet spot which will generate economic profit plus be a strong cultural fit. We remain rigorous and disciplined in our financial criteria. We have walked away from a number of deals over the past six months due to cultural and financial reasons, but we remain active and confident that there are deliverable opportunities which fit our criteria and which will generate significant economic value for the Group.

The next phase

Our Group has changed significantly over the last six years. We demonstrated our resilience during the pandemic but, most importantly, our relevance as our offer has resonated. We have continued to take market share and our profit has increased over the last twelve months despite the significant external challenges we have faced.

Our differentiated offer is what our customers want in this changing world and we are well positioned to accelerate our growth and improve our operational efficiencies further as we enter the next stage of our strategic journey. We have never been so confident about the opportunities we see in 'making amazing happen for a better world'.

OVERALL RESULTS

	H1 2021/22	H1 2020/21	Change	Like-for-like1 change		H1 2019/20	Two-year2 change
Revenue	£1,208.9m	£908.9m	33%	31%		£978.7m	24%
Gross margin	43.7%	43.2%	0.5 pts	0.9 pts		43.7%	0.0 pts
Operating profit	£139.1m	£58.9m	136%	158%		£91.2m	53%
Adjusted3 operating profit	£144.8m	£77.6m	87%	95%		£105.6m	37%
Adjusted3 operating profit margin	12.0%	8.5%	3.5 pts	4.0 pts		10.8%	1.2 pts
Adjusted3 operating profit conversion	27.4%	19.8%	7.6 pts	8.7 pts		24.7%	2.7 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 2020/21 converted at 2021/22 average exchange rates for the period. 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.  Two-year change is on a reported basis and compares H1 2021/22 with H1 2019/20 to remove the impact of COVID-19 from comparatives

3.  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 13 on pages 24 to 29 for definitions and reconciliations of all alternative performance measures.

Revenue

Group revenue in H1 2021/22 was £1,208.9 million (H1 2020/21: £908.9 million), an increase of 33%. During the first half the Group saw a positive impact of £61.9 million from acquisitions, £3.0 million from additional trading days and a negative impact of £38.0 million from foreign exchange movements, resulting in a 31% like-for-like revenue increase. On a two-year basis, to remove the impact of COVID-19 from comparatives, like-for-like revenue growth was 22%, with minimal difference in the growth rates between the first and second quarters.

Industrial production figures, supplier indications and results reported by peers show that we are outperforming the industrial market and gaining share as our customers have relied on our product availability, the breadth of our range and our experienced team to deliver products and services in time and ensure their trading continuity. On a two-year basis, we have seen a 24% increase in our total customer numbers and a 9% increase in our average order value, the majority of the growth driven by an increasing number of products within our customer baskets. There was only low single-digit price inflation within our revenue growth with the majority of the increase being driven by volume.

Our electronic products range, accounting for c. 22% of Group revenue and predominantly supplied into our industrial customers, saw 33% like-for-like two-year growth benefiting from a strong market, our product availability and new customers. OKdo, the Group's single-board computing (SBC) and Internet of Things (IoT) business, which accounts for c. 4% of revenue, grew by 3% on a two-year basis as supply tightened in the second quarter. For our industrial product ranges, H1 revenue grew on a two year like-for-like basis overall by 20%.

RS PRO, which is our main own-brand product range and accounts for c. 13% of Group revenue, grew by 28% on a two-year like-for-like basis, despite having a limited electronics products range. Our offer continues to gain traction with our performance aided by targeted product marketing and new product development.

Digital performed broadly in line with the Group overall in H1, delivering 22% like-for-like growth on a two-year basis and accounts for 63% of Group like-for-like revenue. Web revenue, which is a truer representation of our digital demand as it excludes eProcurement, grew by 26% on a two-year like-for-like basis. EProcurement, which is used predominantly by our larger customers who suffered heavily during lockdown, has recovered strongly with 19% growth on a two-year like-for-like basis.

We continue to redirect our digital marketing spend away from paid advertising towards organic marketing which is driving a better return on our investment. We have seen efficiency improvements in our key marketing channels as we have focused more on marginal return on investment rather than purely on revenue; a key benefit of the investment we have made in increasing the expertise within our digital teams. We have also benefited from promoting a 'test and learn' environment, resulting in quicker, less risky development changes.

Gross margin

Group gross margin increased 0.5 pts to 43.7%, (H1 2020/21: 43.2%), returning to the level delivered two years ago. Excluding the dilutive impact from our recent acquisitions and the impact of exchange rates, the like-for-like growth was 0.9 pts.

We have taken actions to improve our gross margin through revising our discount policy, ensuring pricing options reflect demand elasticity, growing our own-brand ranges and negotiating buying terms better. We are delivering gross margin benefits although this is being partly offset by regional and product mix dilution and ongoing pressures from inbound freight inflation.

The dilutive impact from acquisitions reflects the lower participation from digital and service solutions within the acquired businesses compared to our Group model. We expect this dilutive impact to reduce over time as integration continues.

Operating costs

During the first half total operating costs, which include regional and central costs, increased by 17%. Excluding amortisation of acquired intangibles and H1 2020/21's substantial reorganisation costs, total adjusted operating costs increased by 22%, 20% on a like-for-like basis, to £383.4 million (H1 2020/21: £314.7 million). Over half of this increase is volume driven, with a further quarter related to the acquisitions.  

In the first half we have seen a continuation of higher costs initially associated with COVID-19 of £15.7 million, a £6.9 million increase year on year. These include higher freight rates and associated charges, some ongoing social distance requirements especially within our DCs and additional technology costs to support our hybrid  working.

At the moment, we see no indications that the vast majority of these cost pressures will unwind. Freight rates, in particular, continue to increase with, in some instances, premium fees to expediate shipments given the shortage of containers. Our parcel delivery charges have also increased in the UK. We are managing what we can control, which includes working partly to mitigate this by storing our product closer to the customer, but this will take time to achieve.

A large proportion of our operating costs relate to our people. We awarded a pay rise across the Group early in the year but are seeing inflationary pressures build given general employment shortages across all specialist areas including technology, and within our US and UK DCs. Our employee turnover level is low, at 6.4% for 2020/21, but we are mindful of the competitive pressures for new talent.

Brexit added £2.5 million of costs in the first half. These included additional brokerage and air freight costs to ensure timely delivery, and greater administration expense relating to border and custom checks. The extension to our Bad Hersfeld DC in Germany is now finished and at early stage commissioning, with product being transferred gradually from our DCs in the UK. As such, we hope some of the Brexit costs will start to reduce from the fourth quarter.

We have increased investment in operational expenditure to strengthen our expertise, technological capabilities and product and services capacity, and improve our operating basics. We want to be the best-in-class in each of our disciplines and invest in our business to ensure it can support the strong organic growth we are delivering and the inorganic opportunities we see as we move into the next stage of our Destination 2025 strategy roadmap. We also know we can be better at the basics to drive greater operational leverage.

Our RISE programme to simplify the Group is on track, and we are excited by the benefits we see from having a more agile business and leaders with greater operational focus and ownership. We have delivered c. £10 million of benefits in the first half due to the flatter regional management structure and sharing our business functions across the Group including marketing, digital, innovation and product and supplier management. This simpler operating model has allowed Electrocomponents to go faster, improve margins and operate more efficiently. We can see from the work to date that there are more opportunities to generate stronger operating efficiencies and move Electrocomponents from being good operationally to great. We have embarked upon some exploratory work to understand fully the opportunity and what steps are involved in delivering a suitable programme.

Adjusted operating costs as a percentage of revenue decreased by 2.9 pts to 31.7% (H1 2020/21: 34.6%). On a
two-year view they decreased by 1.2 pts. Our improved trading momentum and steps taken to simplify our operating model to drive efficiencies have driven higher conversion of gross profit into operating profit, with adjusted operating profit conversion 7.6 pts higher at 27.4% (H1 2020/21: 19.8%), or 2.7 pts on a two-year basis. We remain committed to our Destination 2025 target of a 30% adjusted operating profit conversion. Over the medium term we remain highly focused on continuing to improve our adjusted operating profit conversion in order to achieve our aspiration of a
mid-teen adjusted operating profit margin.

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 H1 2021/22 are described below. In H1 2020/21 we also excluded substantial reorganisation costs of £16.0 million. See Note 13 for definitions and reconciliations of adjusted measures.

Amortisation of acquired intangibles

Amortisation of acquired intangibles was £5.7 million (H1 2020/21: £2.7 million) and relates to the intangible assets arising on acquisitions with the first half of this year also including Needlers, Synovos and Liscombe acquired in H2 2020/21.

Operating profit

Operating profit increased by 136% to £139.1 million. Adjusted operating profit increased by 87% to £144.8 million. Excluding acquisitions and the negative impact of currency movements, adjusted operating profit saw a like-for-like increase of 95%. Adjusted operating profit margin improved 3.5 pts to 12.0%, or 1.2 pts on a two-year basis.

Regional performance

The strength of our proposition was demonstrated in the strong revenue performance across all regions, with our differentiated offer continuing to resonate with customers in this changing world. Our management experience allowed us to identify the supply issues in the market early and partner closely with our suppliers to secure and invest appropriately in greater levels of inventory. This has ensured we have maintained strong product availability, delivery and service and continued to gain market share. Our investment into areas such as product and service solutions, digital, inventory and our DC infrastructure has meant that we have been able to navigate successfully not only COVID-19 but also Brexit and are well placed to face external industry supply challenges.

We have seen increased collaboration across the business as regional heads adapt global expertise and best practice to suit local needs. Regions are empowered to react quickly to support changing customer needs and priorities, deepening our relationship as a trusted partner to both our customers and our suppliers. Our customer base continues to increase and the breadth of our product offer and strong availability has meant that we are also seeing an increase in average order values across all regions. The more difficult supply environment has meant that online journeys have been supported more often by sales teams as customers seek reassurance about availability and lead times.

Our Group rolling 12-month Net Promoter Score (NPS), a measure of customer satisfaction, continued to soften as a result of the issues our business faced over the last year including Brexit, extreme weather in Texas and industry supply shortages. During the first half our rolling 12-month NPS fell to 52.2 (H1 2020/21: 56.3; 2020/21: 54.4). We are working hard on improving this score, which is part of our employee incentive plans and core to our customer centric strategy. We have continued to adapt our digital proposition to provide more information on availability and lead times and have seen greater interaction between our sales teams and customers; a benefit of our omni-channel model. As a result, we have seen some signs of improvement in the NPS trend, albeit it remains volatile on a monthly basis and difficult given that wider external supply chain issues continue to worsen.

EMEA

EMEA accounts for 62% 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.

	H1 2021/22	H1 2020/21	Change	Like-for-like1 change		H1 2019/20	Two-year change
Revenue	£753.2m	£567.5m	33%	29%		£615.0m	22%
Operating profit2	£119.8m	£75.0m	60%	63%		£96.8m	24%
Operating profit margin	15.9%	13.2%	2.7 pts	3.3 pts		15.7%	0.2 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 pages 20 and 21 for reconciliation to Group operating profit.

· Revenue performance was broadly similar across our main markets, benefiting from an improved market backdrop, operational model and sales focus with one-year like-for-like revenue growth of 29%, +19% on a
two-year like-for-like basis. Industrial production data shows that we continued to gain share during the period as the security of our offer, in terms of product availability and financial strength, resonated with customers.

· Supply shortages have been a significant challenge across the region as industrial production recovered. However, we maintained relatively stable levels of availability and service to our customers due to forward planning, our close relationships with suppliers and investment in our inventory position. We were able to limit as much of the supply disruption as possible through utilising our experience that we gained during Brexit and deploy air freight when needed, reroute transport, advance orders, increase local sourcing and hold greater inventory as a buffer.

· UK and Ireland, which accounts for c. 40% of the region's revenue, performed well but slightly below the region's overall performance due to lower industrial production growth. This was partly associated with labour shortages over the summer months relating to the COVID-19 'pingdemic' and supply constraints impacting some industry verticals, especially those in heavy industry. We saw improving momentum as we exited the summer and our peer analysis suggests we increased market share significantly during the first half.

· Germany is seeing good momentum and market share gains. We have a new German management team which is driving new sales strategies and focus. Performance during the period was helped by a slightly larger electronics product bias. Our DC expansion opened at the end of September and is in the early stages of commissioning. This enlarged facility will allow us to broaden our product range, offer service solutions to European customers and increase automation to improve sustainability and efficiency.

· Our business in France benefited, as a result of flattening the reporting structure in EMEA, from greater
end-to-end ownership by the team and some additional inventory within the French DC. 

· IESA continues to win new contracts and the pipeline is very strong. In some instances, new business rollout has been delayed due to lockdowns restricting our teams moving onto our clients' sites, although this was starting to improve by the end of the first half. We are also experiencing some of our newer European contracts being rolled out to sister locations. IESA is working closely with Synovos on joint pitches for transatlantic contracts.

· Digital, accounting for 71% of the region's revenue, outperformed with 29% like-for-like revenue growth ( 21% on a two-year basis) as greater focus was placed on driving organic growth through search engine optimisation (SEO) marketing, improving content and the mobile-responsive website introduced during last year. The latter has delivered a significant improvement in how easily our customers can search, find and order with us in real time during their production process. We also saw a recovery in our eProcurement business due to increased activity from our larger customers.

· RS PRO, which accounts for 18% of the region's revenue, performed well with 25% like-for-like revenue growth, against a strong comparative period last year and despite a lower electronics weighting. Two-year like-for-like growth was 27%.

· OKdo, which accounts for 4% of revenue in the region grew 24% on a one-year like-for-like basis but declined 2% on a two-year like-for-like basis with second quarter growth impacted by supply constraints.

· Gross margin has benefited from product management work to reduce the level of discounting, ensure appropriate prices given inventory turn and some mix benefits and has improved year on year excluding acquisitions. Needlers and Liscombe operate at a lower gross margin given their focus towards personal protective equipment (PPE).

· Operating profit improved 60%, up 63% on a like-for-like basis, to £119.8 million (H1 2020/21: £75.0 million).

· Operating profit margin improved 2.7 pts to 15.9% (H1 2020/21: 13.2%), despite extra costs relating to COVID-19 and Brexit from higher outbound freight costs and a greater cost to serve. Operating profit margin grew by 0.2 pts on a two-year basis.

· EMEA's rolling 12-month NPS was 51.7 (H1 2020/21: 57.7). Although our teams worked hard to mitigate
industry-wide supply challenges and the effect of Brexit, there were unavoidable impacts on delivery lead times and inventory availability.

· Needlers and Liscombe have expanded our products and solutions in the safety, hygiene and PPE product category, with revenue of £34.1 million and operating profit contribution of £3.0 million in the first half. We have signed a number of new contracts due to cross-selling opportunities although, due to timing, minimal benefit was seen in the first half.

Americas

Americas accounts for 28% of Group revenue, with Allied Electronics & Automation (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 significant transformation in recent years including more than doubling the capacity of the DC to widen our product offering further into the maintenance, repair and operations (MRO) market and a change to the majority of the leadership team, including the President and CFO. We also implemented a field sales transformation programme, utilised shared expertise across the Group and made a step change investment in digital which continues to drive greater customer engagement and marketing returns. Synovos, the integrated supply business we acquired in January 2021, is driving cross-business benefits as we introduce Allied as a supplier and RS PRO products as a competitive alternative to the branded ranges and offer transatlantic integrated supply solutions with IESA.

	H1 2021/22	H1 2020/21	Change	Like-for-like1 change		H1 2019/20	Two-year change
Revenue	£333.2m	£243.3m	37%	37%		£263.7m	26%
Operating profit2	£42.5m	£22.7m	87%	101%		£31.3m	36%
Operating profit margin	12.8%	9.3%	3.5 pts	4.3 pts		11.9%	0.9 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 pages 20 and 21 for reconciliation to Group operating profit.

· Like-for-like revenue growth grew 37%, or +27% on a two-year like-for-like basis. Growth has been consistent across the region underpinned by a strong market and the investment we have made over the last few years in our operating model, our DC and our people. We continue to drive strong growth within our automation and control product range but are also extending our proposition into the MRO market. The two-year growth rate has been similar across industrial and electronic products, with demand for the latter being driven by our industrial customers.  

· We have significantly invested in our people and culture, digital and marketing proposition, and a wider product offer resulting from our DC extension. Our salesforce, management and teams are better aligned to revenue and margin growth which forms part of their incentive plans. Field sales 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 and dealing with administrative tasks.

· Digital revenue accounted for 43% of the region's revenue, with 37% like-for-like growth broadly in line with Americas' overall performance and 18% like-for-like growth on a two-year basis. Like-for-like growth in pure web revenue was 49% as we continue to benefit from investments 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 continued to grow over the last two years. It is benefiting from a larger stocked range in the extended DC as well as a focused sales incentive programme and the acquisition of Synovos.

· OKdo, which accounts for 1% of revenue in the region, saw revenue decline due to supply constraints.

· Gross margin grew with higher inbound freight costs more than offset by a strong product margin focus to reduce the level of discounting and improve price optimisation across our products.

· Operating profit improved 87%, 101% on a like-for-like basis, to £42.5 million (H1 2020/21: £22.7 million).

· Operating profit margin improved 3.5 pts, 4.3 pts on a like-for-like basis, to 12.8% (H1 2020/21: 9.3%). This was 0.9 pts higher on a two-year basis, a function of stronger volumes, gross margin gains and operational leverage.

· Americas' rolling 12-month NPS remained the highest of all the regions at 69.0 but was down 5% year on year largely due to the serious weather disruption in February and longer delivery lead times generally within the industry. The focus remains on delivering a strong offline and online customer experience and mitigating the industry issues we are experiencing.

· Synovos contributed £27.8 million to revenue and £0.9 million to adjusted operating profit in the first half. There has been a delay in implementing new contracts due to client onsite restrictions as a result of COVID-19. However, we have signed a number of new contracts with global companies in the technology and pharmaceutical verticals and we are pleased with the integration into the Group and see more opportunities for cross-business benefits.

Asia Pacific

Asia Pacific accounts for 10% of Group revenue and consists of Australia and New Zealand (ANZ), Greater China, Japan and Korea, and South East Asia. RS and RS Pro are our key 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 industrial customers.

	H1 2021/22	H1 2020/21	Change	Like-for-like1 change		H1 2019/20	Two-year change
Revenue	£122.5m	£98.1m	25%	31%		£100.0m	23%
Operating profit2	£11.9m	£0.1m	>200%	>200%		£0.1m	>200%
Operating profit margin	9.7%	0.1%	9.6 pts	9.9 pts		0.1%	9.6 pts

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

2.  See Note 2 on pages 20 and 21 for reconciliation to Group operating profit.

· Asia Pacific revenue increased 25%, 31% on a like-for-like basis. On a two-year basis, like-for-like growth was 29% reflecting the earlier recovery in Asia Pacific post-COVID 19.

· A change in management culture has led to more focused and productive sales processes as we have increased attention on more profitable opportunities. This has delivered an improving revenue performance during the period, helped by a stronger participation of our electronics product range, and margin gains. Our industrial product performance has also remained strong and we have continued to take market share.

· Japan and Korea has benefited from a new President, greater understanding of the local customer needs and improved customer service. Greater China's sales team is focused on higher average order value and higher margin revenue opportunities. South East Asia's revenue performance remains volatile due to the variability of local COVID-19 lockdowns but is gaining share. ANZ has also been affected by continuing lockdowns in recent months but new contracts we won in the first half will underpin future growth.

· Digital revenue, which accounts for 61% of revenue in the region, grew by 41% on a like-for-like basis mainly driven by digital share gains in Greater China and South East Asia which both saw a strong recovery in eProcurement. Two-year like-for-like growth was 35%.

· RS PRO revenue, which accounts for 13% of revenue in the region, grew 26% on a like-for-like basis (28% on a two-year like-for-like basis) with growth strongest in South East Asia and ANZ where demand for RS PRO's predominantly industrial products was highest.

· OKdo, which accounts for 9% of the region's revenue, grew 22% on a one and two-year like-for-like basis.

· Asia Pacific's rolling 12-month NPS of 37.6 (H1 2020/21 38.0) has been impacted by longer supply lead times and our decision to implement delivery charges for some small value orders which have low levels of profitability. We remain committed to improving the customer experience and actions we have implemented, including a more focused salesforce, have supported an improvement in the trend in monthly NPS.

· Gross margin increased, driven by greater focus on higher revenue opportunities, implementation of a small order handling charge and price increases.

· Operating profit was £11.9 million, a significant improvement on the prior two years which both delivered £0.1 million.

· The operating profit margin of 9.7% was a 9.6 pts improvement on a one-year and two-year basis (H1 2020/21: 0.1%), benefiting from strong revenue growth, gross margin gains and increased scale.

Central costs

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

	H1 2021/22	H1 2020/21	Change	Like-for-like1 change		H1 2020/21	Two-year change
Central costs	£(29.4)m	£(20.2)m	46%	46%		£(22.6)m	30%

1.  Like-for-like adjusted for currency.

Central costs increased by £9.2 million to £29.4 million. A third of this increase is due to spend to achieve the Group's strategy and the remainder is equally split between higher costs related to prospective acquisitions, investment in future growth opportunities and higher performance-related incentives and share-based payments.

FINANCIAL REVIEW

Net finance costs

Net finance costs were £3.2 million (H1 2020/21: £3.4 million) with lower lease interest and less interest on uncertain income tax provisions. A high proportion of our debt is at fixed interest rates and with low interest rates there has been little benefit seen from our lower net debt.

Profit before tax

Profit before tax was up 145% to £136.1 million (H1 2020/21: £55.6 million). Adjusted profit before tax was up 91% to £141.8 million (H1 2020/21: £74.3 million), up 101% on a like-for-like basis.

Taxation

The Group's income tax charge was £34.9 million (H1 2020/21: £13.2 million). The adjusted income tax charge, which excludes the impact of tax relief on items excluded from adjusted profit before tax, was £33.8 million (H1 2020/21: £17.1 million). The effective tax rate on adjusted profit before tax is 23.8% (H1 2020/21: 23.0%) with the increase predominantly due to a recalculation of deferred tax balances as a result of the UK corporate income tax rate change from 19% to 25% effective from 1 April 2023 but enacted earlier this year.

Going forward we expect the full year 2021/22 effective tax rate on adjusted profit before tax to be c. 24%, increasing to c. 26% in 2023/24 reflecting the increase in the UK corporate income tax rate.

Earnings per share

Earnings per share was up 126% to 21.5p (H1 2020/21: 9.5p). Adjusting for items excluded from adjusted profit and associated income tax effects, adjusted earnings per share of 23.0p (H1 2020/21: 12.8p) grew 89% on a like-for-like basis.

Cash flow

£m	H1 2021/22	H1 2020/21
Operating profit	139.1	58.9
Add back depreciation and amortisation	31.4	27.1
EBITDA	170.5	86.0
Movement in working capital	(48.2)	23.5
Movement in provisions	(1.8)	12.1
Other	4.3	2.7
Cash generated from operations	124.8	124.3
Net interest paid	(3.0)	(3.5)
Income tax paid	(22.5)	(14.3)
Net cash from operating activities	99.3	106.5
Net capital expenditure	(16.0)	(25.5)
Free cash flow	83.3	81.0
Add back cash effect of adjustments1	1.5	4.0
Adjusted1 free cash flow	84.8	85.0

1.  Adjusted excludes the impact of substantial reorganisation cash flows.

We remain a robust cash generative business and the early actions we took to increase our focus on cash minimised the impact of disruption on receivables. Cash generated from operations was £124.8 million with higher EBITDA offset by movements in working capital. Adjusted operating cash flow conversion was 76.2%, a decline of 56 pts year on year.

Net interest paid decreased by £0.5 million to £3.0 million, £0.3 million more than the decrease in net finance costs as the fees for refinancing our revolving credit facility prepaid in the second half of last year unwind.

Income tax paid increased to £22.5 million due to relevant taxable profit being higher than that related to the income tax payments made in the first half of 2020/21. We also utilised some overpayments from 2019/20 in the first half of 2020/21.

Net capital expenditure decreased to £16.0 million as the expanded Americas DC was completed in H1 2020/21 and the timing of payments relating to the Bad Hersfeld DC extension in Germany is weighted towards the second half. Capital expenditure was 1.0 times depreciation (H1 2020/21: 2.1 times). We anticipate capital expenditure in 2021/22 to be c. £50 million.

Free cash flow increased to £83.3 million (H1 2020/21: £81.0 million). Excluding cash outflows of £1.5 million (H1 2020/21: £4.0 million) related to substantial reorganisation costs, adjusted free cash flow was £84.8 million (H1 2020/21: £85.0 million).

Working capital

We have actively managed our working capital and, as a result, working capital as a percentage of revenue decreased by 1.8 pts to 21.2% (H1 2020/21: 23.0%).

So far, we have seen limited adverse impact on our receivables collection, however, we continue to monitor collection metrics closely. We have maintained the actions we took at the start of last year to limit our exposure by tightening 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. Trade and other receivables at £536.1 million (H1 2020/21: £381.6 million; 2020/21 restated: £493.6 million) are higher due to increased revenue volumes and £89.3 million relating to the H2 2020/21 acquisitions.

Gross inventories increased to £505.7 million (H1 2020/21: £463.9 million; 2020/21: £460.4 million) and include £10.5 million relating to the acquisitions. We have added more inventory into our expanded DC in Fort Worth, US and have worked hard to add to our inventory levels across the Group to protect supply given external supply challenges, especially since they were lower than we would have liked at March 2021 due to delays caused by Brexit and the Suez Canal blockage. Strong experience and foresight by our procurement teams meant that we were able to take steps to secure our inventory position as signs of industry supply shortages began to develop. Our annualised inventory turn increased to 2.8 times (H1 2020/21: 2.5 times; 2020/21: 2.7 times). Inventory provisions have decreased by £4.7 million since the year end to £35.9 million mainly as a result of selling some heavily provisioned electronics products.

Overall trade and other payables increased to £517.9 million from £380.1 million at H1 2020/21 with the acquisitions accounting for £91.8 million of this increase. The remaining increase, and the increase from £475.3 million at 2020/21, is mainly due to the increase in purchases of products.

Looking forward we continue to manage actively our working capital position and remain focused on receivables collection. We continue to invest in our inventory position to ensure that we remain well positioned to maintain service levels and deliver strong growth within this supply constrained market. However, we understand that demand and supply dynamics can change quickly and that our systems and orders need to remain flexible to be able to adapt according to market forces. 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)

ROCE is the adjusted operating profit for the 12 months ended 30 September 2021 expressed as a percentage of the monthly average capital employed (net assets excluding net debt and retirement benefit obligations). ROCE remained strong at 24.7%, up 4.3 pts year on year (H1 2020/21 updated to be based on monthly average capital employed: 20.4%). Acquisitions reduced ROCE by 1.9 pts, while higher annualised adjusted operating profit increased it by 6.7 pts partly offset by 0.5 pts due to higher average capital employed year on year.

Net debt

Our cash generation has remained strong with net debt of £83.6 million at 30 September 2021, £31.2 million lower than at 30 September 2020 when it was £114.8 million and £38.4 million lower than at 31 March 2021 when it was £122.0 million. Net debt comprised gross borrowings of £285.9 million (H1 2020/21: £358.8 million; 2020/21: £321.0 million), including lease liabilities of £54.8 million (H1 2020/21: £57.9 million; 2020/21: £61.5 million) offset by cash and short-term deposits of £201.4 million (H1 2020/21: £242.6 million; 2020/21: £197.9 million) and interest rate swaps with a fair value of £0.9 million (H1 2020/21: £1.4 million; 2020/21: £1.1 million).

Our three-year revolving credit facility of £300 million has an accordion of up to a further £100 million and maturity of November 2023 which may be extended at the option of the Group for up to two further one-year terms subject to individual lender approval. This facility was undrawn at 30 September 2021 and, together with £149.9 million of private placement loan notes, form our committed debt facilities of £449.9 million.

On 29 October 2021 we moved our £300 million revolving credit facility to a sustainability-linked loan (SLL). We will be measured against annual ESG actions relating to scope 1 and 2 carbon emissions, packaging intensity and gender diversity. Meeting these annual ESG actions will mean a margin benefit of up to 2.5 basis points, while missing these ESG actions would mean we pay a margin premium of up to 2.5 basis points, and if all three ESG actions were missed the loan would be declassified as an SLL but this would not be an event of default. This new agreement also replaced LIBOR with risk free rates and we have submitted a request to take up the option to extend the maturity for a year.

The Group's financial metrics remain strong, with net debt to adjusted EBITDA of 0.3x and EBITA to interest of 36.4x, 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.

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 30 September 2021 was £57.4 million compared to £55.7 million at 31 March 2021 and £60.5 million at 30 September 2020.

The UK defined benefit scheme had an accounting deficit of £42.9 million, an increase from £41.2 million on 31 March 2021.   The increase in the UK scheme's deficit was principally due to an increase in liabilities caused by a 0.1 pts decrease in the discount rate (which fell from 2.1% to 2.0%) and an increase of 0.2 pts 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, we paid the first £12.5 million of this additional contribution in 2020/21 and will pay the remaining £12.5 million in H2 2021/22.

Dividend

The Board intends to continue 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 is equivalent to approximately 40% of the prior year full-year dividend. As such, the Board proposes an interim dividend of 6.4p per share. This will be paid on 7 January 2022 to shareholders on the register on 26 November 2021.

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 relate 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 risks are identified through a variety of sources, both external, to ensure that developing risk themes (emerging risks) are considered, and from within the Group, including the Board, senior, regional, and country management teams. These risks are reviewed by both the Group's SMT Risk Committee and the Board.

The principal risks and mitigations and emerging risk are disclosed in the 2021 Annual Report and Accounts (pages 44 to 49). These are:

Principal risks and uncertainties

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 initiatives are not successfully implemented

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

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

Emerging risk is the effects of climate change (both physical and transition risks) on the business's operations and its customers and supply chain.

These risks have not changed materially since they were reported in the 2021 Annual Report and Accounts. Nonetheless, we have provided updates on two of the Group's principal risks: the prolonged effects of the ongoing COVID-19 pandemic and the UK's exit from the EU. 

COVID-19 pandemic

The Group continues to maintain its operations and all our DCs are open and operating effectively. Our online business model has continued to differentiate us and is helping us serve our customers. The pandemic continues to affect some of our other, already identified, principal risks. The Group's crisis management and business continuity teams have continued to operate and monitor the situation with the more major areas of focus being:

· People: The health, safety and wellbeing of our people whether working within our DCs, returning to the office environments or working from home.

· Our global DC network: Our DCs are open and operating in line with Group and national guidance supporting our customers' high-level service requirements.

· Supply chain: In the current demanding circumstances for global supply chains, as the world economy recovers, we are working with our suppliers and carriers to manage our inventory needs. To date our supply chain has remained resilient with most of our suppliers open and operating at near pre-pandemic levels. 

The UK's exit from the EU

The UK formally left the EU and the agreed transition period ended on 31 December 2020. The Group's planning up to this date meant that the business was largely able, where possible, to mitigate the associated risks. Nonetheless, the business is monitoring any further risks of unforeseen consequences following the UK's exit from the EU. This includes the customs clearance processes which continue to evolve in some areas, for example between Northern Ireland and Great Britain.

GOING CONCERN

Overview

In adopting the going concern basis for preparing these condensed Group accounts, the Directors have considered the Group's future trading prospects; the Group's available liquidity, the maturity of its debt facilities and obligations under its debt covenants; and the Group's principal risks as summarised on page 13.

As described in more detail in the Viability Statement in the 2021 Annual Report and Accounts, our business model is structured so that the Group has a global network of 14 DCs; a strong digital presence, a very broad spread of customers both in terms of industry sector and geography and is not reliant on one particular group of customers or suppliers; and a broad range of products and service solutions.

Financial position, liquidity and debt covenants

Our capital position is supported by regular reviews of the Group's funding facilities and debt covenants' headroom, through the Board's Treasury Committee.

The Group's net debt at 30 September 2021 was £83.6 million (31 March 2021: £122.0 million). Our committed debt facilities and loans were £449.9 million, of which £300.0 million were undrawn (see page 12 for more details of our committed facilities). The earliest facility expiring is the Group's £300 million revolving credit facility with a maturity of November 2023 and an option for the Group to extend for up to two further one-year terms subject to individual lender approval.

The Group's debt covenants are EBITA to interest to be greater than 3 times and net debt to adjusted EBITDA to be less than 3.25 times, which are measured on a rolling 12-month basis at half year and year end. At 30 September 2021 EBITA to interest was 36.4x (31 March 2021: 26.7x) and net debt to adjusted EBITDA was 0.3x (31 March 2021: 0.5x) (see Note 13 on pages 24 to 29 for reconciliations).

Financial modelling

We frequently update our rolling 18-month forecast and this is regularly reviewed, and the assumptions approved, by the Board. We have undertaken reverse stress tests on the latest forecast, including significant declines in like-for-like revenue, significant declines in gross margin and a major deterioration in cash collection from trade receivables, to assess the circumstances that would threaten the Group's current financing arrangements and the Directors consider the risk of these circumstances occurring to be remote.

Going concern basis

Based on the assessment outlined above, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the going concern period of at least 12 months from 4 November 2021.   Therefore, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing these condensed Group accounts.

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEAR FINANCIAL REPORT  

The Directors confirm that these condensed Group accounts have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as contained in UK-adopted International Financial Reporting Standards (IFRS) and that the interim management report includes a fair review of the information required by Disclosure and Transparency Rules (DTR) 4.2.7 and DTR 4.2.8, namely:

· An indication of important events that have occurred during the first six months and their impact on the condensed set of accounts, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· Material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

The Directors of Electrocomponents plc are listed in the Electrocomponents Annual Report and Accounts for the year ended 31 March 2021. A list of current Directors is maintained on the Electrocomponents plc website: www.electrocomponents.com .

David Egan, Chief Financial Officer
3 November 2021

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.

GROUP INCOME STATEMENT

For the six months ended 30 September 2021

		Six months ended		Year ended
		30.9.2021	30.9.2020	31.3.2021
	Notes	£m	£m	£m
Revenue	2	1,208.9	908.9	2,002.7
Cost of sales		(680.7)	(516.6)	(1,146.7)
Gross profit		528.2	392.3	856.0
Distribution and marketing expenses		(354.0)	(294.4)	(630.1)
Administrative expenses		(35.1)	(39.0)	(58.7)
Operating profit	2	139.1	58.9	167.2
Finance income		0.5	1.0	1.8
Finance costs		(3.7)	(4.4)	(8.6)
Share of profit of joint venture		0.2	0.1	0.2
Profit before tax	2	136.1	55.6	160.6
Income tax expense		(34.9)	(13.2)	(35.1)
Profit for the period attributable to owners of the Company		101.2	42.4	125.5
Earnings per share - Basic	3	21.5p	9.5p	27.7p
Earnings per share - Diluted	3	21.4p	9.5p	27.5p

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 September 2021

		Six months ended		Year ended
		30.9.2021	30.9.2020	31.3.2021
		£m	£m	£m
Profit for the period		101.2	42.4	125.5
Other comprehensive income
Items that will not be reclassified subsequently to the income statement
Remeasurement of retirement benefit obligations		(6.2)	(8.9)	(22.5)
Income tax on items that will not be reclassified to the income statement		5.6	1.7	4.3
Items that may be reclassified subsequently to the income statement
Foreign exchange translation differences of joint venture		-	-	(0.1)
Foreign exchange translation differences		10.9	(6.7)	(42.4)
Movement in cash flow hedges		4.5	(0.4)	(4.5)
Income tax on items that may be reclassified to the income statement		(1.0)	0.1	1.0
Other comprehensive income / (expense) for the period		13.8	(14.2)	(64.2)
Total comprehensive income for the period attributable to owners of the Company		115.0	28.2	61.3

GROUP BALANCE SHEET

As at 30 September 2021

		30.9.2021	30.9.2020	31.3.2021
				restated1
	Notes	£m	£m	£m
Non-current assets
Intangible assets		468.5	323.1	466.4
Property, plant and equipment		171.4	181.7	170.2
Right-of-use assets		51.9	55.4	58.6
Investment in joint venture		1.2	1.1	1.1
Other receivables		2.7	1.1	2.9
Interest rate swaps	8	0.9	1.4	1.1
Retirement benefit net assets	5	0.8	1.9	0.8
Deferred tax assets		12.7	20.3	9.9
Total non-current assets		710.1	586.0	711.0
Current assets
Inventories	6	469.8	431.2	419.8
Trade and other receivables	7	536.1	381.6	493.6
Cash and cash equivalents - cash and short-term deposits	8	201.4	242.6	197.9
Other derivative assets		1.4	1.0	2.2
Current income tax receivables		16.2	15.5	21.3
Total current assets		1,224.9	1,071.9	1,134.8
Total assets		1,935.0	1,657.9	1,845.8
Current liabilities
Trade and other payables		(517.9)	(380.1)	(475.3)
Cash and cash equivalents - bank overdrafts	8	(81.2)	(142.6)	(111.5)
Other borrowings	8	-	-	(0.7)
Lease liabilities	8	(17.0)	(15.0)	(17.4)
Other derivative liabilities		(1.1)	(1.7)	(2.0)
Provisions		(2.5)	(13.7)	(4.9)
Current income tax liabilities		(22.8)	(19.6)	(20.0)
Total current liabilities		(642.5)	(572.7)	(631.8)
Non-current liabilities
Other payables		(7.7)	(6.1)	(6.8)
Retirement benefit obligations	5	(58.2)	(62.4)	(56.5)
Borrowings	8	(149.9)	(158.3)	(147.3)
Lease liabilities	8	(37.8)	(42.9)	(44.1)
Provisions		(2.8)	(2.8)	(2.0)
Deferred tax liabilities		(61.6)	(58.5)	(57.9)
Total non-current liabilities		(318.0)	(331.0)	(314.6)
Total liabilities		(960.5)	(903.7)	(946.4)
Net assets		974.5	754.2	899.4
Equity
Share capital		47.1	44.8	47.0
Share premium account		230.7	53.8	228.5
Hedging reserve		1.6	0.3	(1.4)
Own shares held by Employee Benefit Trust (EBT)		(0.1)	-	(1.5)
Cumulative translation reserve		49.9	74.8	39.0
Retained earnings		645.3	580.5	587.8
Equity attributable to owners of the Company		974.5	754.2	899.4

1.  Restated for measurement period adjustments for prior year acquisitions (Note 12).

GROUP CASH FLOW STATEMENT

For the six months ended 30 September 2021

		Six months ended		Year ended
		30.9.2021	30.9.2020	31.3.2021
	Notes	£m	£m	£m
Cash flows from operating activities
Profit before tax		136.1	55.6	160.6
Depreciation and amortisation		31.4	27.1	56.5
Loss on disposal of non-current assets		-	-	0.3
Equity-settled share-based payments		4.2	2.7	7.0
Net finance costs		3.2	3.4	6.8
Share of profit of and dividends received from joint venture		(0.1)	(0.1)	(0.2)
Increase in inventories		(46.2)	(12.9)	(4.4)
(Increase) / decrease in trade and other receivables		(40.0)	32.2	(32.6)
Increase in trade and other payables		38.0	4.2	35.5
(Decrease) / increase in provisions		(1.8)	12.1	1.6
Cash generated from operations		124.8	124.3	231.1
Interest received		0.5	1.0	1.8
Interest paid		(3.5)	(4.5)	(10.1)
Income tax paid		(22.5)	(14.3)	(35.2)
Net cash from operating activities		99.3	106.5	187.6
Cash flows from investing activities
Acquisition of businesses	12	2.2	-	(157.5)
Cash and cash equivalents acquired with businesses		-	-	22.0
Purchase of intangible assets, property, plant and equipment		(16.0)	(25.5)	(54.7)
Net cash used in investing activities		(13.8)	(25.5)	(190.2)
Cash flows from financing activities
Proceeds from the issue of share capital		2.3	2.6	179.5
Purchase of own shares by EBT		-	(0.1)	(1.6)
Loans repaid	8	(0.7)	(8.0)	(24.3)
Payment of lease liabilities	8	(9.1)	(8.1)	(16.4)
Dividends paid	4	(46.1)	-	(71.2)
Net cash (used in) / generated from financing activities		(53.6)	(13.6)	66.0
Net increase in cash and cash equivalents		31.9	67.4	63.4
Cash and cash equivalents at the beginning of the period		86.4	34.8	34.8
Effects of exchange rate changes		1.9	(2.2)	(11.8)
Cash and cash equivalents at the end of the period	8	120.2	100.0	86.4

GROUP STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 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 2020	44.6	51.4	-	(0.7)	81.5	543.1	719.9
Profit for the period	-	-	-	-	-	42.4	42.4
Remeasurement of retirement benefit obligations	-	-	-	-	-	(8.9)	(8.9)
Foreign exchange translation differences	-	-	-	-	(6.7)	-	(6.7)
Net loss on cash flow hedges	-	-	(0.4)	-	-	-	(0.4)
Taxation on other comprehensive income	-	-	0.1	-	-	1.7	1.8
Total comprehensive (expense) / income	-	-	(0.3)	-	(6.7)	35.2	28.2
Cash flow hedging losses transferred to inventories	-	-	0.7	-	-	-	0.7
Tax on cash flow hedging losses transferred to inventories	-	-	(0.1)	-	-	-	(0.1)
Equity-settled share-based payments	-	-	-	-	-	2.7	2.7
Settlement of share awards	0.2	2.4	-	0.8	-	(0.8)	2.6
Purchase of own shares by EBT	-	-	-	(0.1)	-	-	(0.1)
Tax on equity-settled share-based payments	-	-	-	-	-	0.3	0.3
At 30 September 2020	44.8	53.8	0.3	-	74.8	580.5	754.2
Profit for the period	-	-	-	-	-	83.1	83.1
Remeasurement of retirement benefit obligations	-	-	-	-	-	(13.6)	(13.6)
Foreign exchange translation differences	-	-	-	-	(35.8)	-	(35.8)
Net loss on cash flow hedges	-	-	(4.1)	-	-	-	(4.1)
Taxation on other comprehensive income	-	-	0.9	-	-	2.6	3.5
Total comprehensive (expense) / income	-	-	(3.2)	-	(35.8)	72.1	33.1
Cash flow hedging losses transferred to inventories	-	-	2.0	-	-	-	2.0
Tax on cash flow hedging losses transferred to inventories	-	-	(0.5)	-	-	-	(0.5)
Equity-settled share-based payments	-	-	-	-	-	4.3	4.3
Dividends (Note 4)	-	-	-	-	-	(71.2)	(71.2)
Share placing, net of transaction costs	2.2	173.9	-	-	-	-	176.1
Settlement of share awards	-	0.8	-	-	-	-	0.8
Purchase of own shares by EBT	-	-	-	(1.5)	-	-	(1.5)
Tax on equity-settled share-based payments	-	-	-	-	-	2.1	2.1
At 31 March 2021	47.0	228.5	(1.4)	(1.5)	39.0	587.8	899.4
Profit for the period	-	-	-	-	-	101.2	101.2
Remeasurement of retirement benefit obligations	-	-	-	-	-	(6.2)	(6.2)
Foreign exchange translation differences	-	-	-	-	10.9	-	10.9
Net gain on cash flow hedges	-	-	4.5	-	-	-	4.5
Taxation on other comprehensive income	-	-	(1.0)	-	-	5.6	4.6
Total comprehensive income	-	-	3.5	-	10.9	100.6	115.0
Cash flow hedging gains transferred to inventories	-	-	(0.6)	-	-	-	(0.6)
Tax on cash flow hedging gains transferred to inventories	-	-	0.1	-	-	-	0.1
Equity-settled share-based payments	-	-	-	-	-	4.2	4.2
Dividends (Note 4)	-	-	-	-	-	(46.1)	(46.1)
Settlement of share awards	0.1	2.2	-	1.4	-	(1.4)	2.3
Tax on equity-settled share-based payments	-	-	-	-	-	0.2	0.2
At 30 September 2021	47.1	230.7	1.6	(0.1)	49.9	645.3	974.5

NOTES TO THE CONDENSED GROUP ACCOUNTS

1.  Basis of preparation

These condensed Group accounts were approved by the Board of Directors on 3 November 2021 and are unaudited but have been reviewed by the auditor. They do not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006, but have been prepared in accordance with the UK-adopted International Accounting Standard (IAS) 34 'Interim Financial Reporting' and the Disclosure and Transparency Rules of the UK's Financial Conduct Authority. As outlined on page 14, the Directors consider it appropriate to continue to adopt the going concern basis in preparing these condensed Group accounts. The Annual Report and Accounts for the year ended 31 March 2021 has been delivered to the Registrar of Companies. The auditors' report on those accounts was 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 section 498(2) or 498(3) of the Companies Act 2006.

These condensed Group accounts have been prepared on the basis of the accounting policies set out in the Annual Report and Accounts for the year ended 31 March 2021 except for the estimation of income tax. Under IAS 34, the tax charge for the period is calculated using the estimated weighted average effective tax rate for the year ending 31 March 2022. Where tax balances are revised due to changes in tax rates or estimates of tax liabilities for prior periods, the full effect is included in the tax charge for the first half of the year. The Annual Report and Accounts for the year ended 31 March 2021 were prepared in accordance with IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applied in the European Union. The Annual Report and Accounts for the year ending 31 March 2022 will be prepared in accordance with UK-adopted IFRS. This will have no impact on the Group's accounting policies, reported results or financial position. The Group has adopted all relevant amendments to existing standards that are effective from 1 April 2021 and there was no impact on the Group's reported results or financial position.

The significant judgements made by the Group in applying its accounting policies and the key sources of estimation uncertainty were the same as those applied to the Group accounts for the year ended 31 March 2021, although the assumptions used in the judgements involved in estimations have been updated to take account of the Group's latest expectations of any likely further impact of the COVID-19 pandemic.

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
Six months ended 30 September 2021
Revenue from external customers	753.2	333.2	122.5	1,208.9
Segmental operating profit	119.8	42.5	11.9	174.2
Central costs				(29.4)
Adjusted operating profit				144.8
Amortisation of acquired intangibles				(5.7)
Operating profit				139.1
Net finance costs				(3.2)
Share of profit of joint venture				0.2
Profit before tax				136.1
Six months ended 30 September 2020
Revenue from external customers	567.5	243.3	98.1	908.9
Segmental operating profit	75.0	22.7	0.1	97.8
Central costs				(20.2)
Adjusted operating profit				77.6
Amortisation of acquired intangibles				(2.7)
Substantial reorganisation costs				(16.0)
Operating profit				58.9
Net finance costs				(3.4)
Share of profit of joint venture				0.1
Profit before tax				55.6

2.  Segmental reporting (continued)

	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				(2.9)
Substantial reorganisation costs				(11.2)
Operating profit				167.2
Net finance costs				(6.8)
Share of profit of joint venture				0.2
Profit before tax				160.6

In the table below, revenue is disaggregated by own-brand products or other products and service solutions, and also by sales channels. The Group's largest own-brand is RS PRO and some of the Group's recent acquisitions also sell own-brand products. £1,203.5 million of revenue is recognised at a point in time (six months ended 30 September 2020: £900.3 million; year ended 31 March 2021: £1,973.8 million) and £5.4 million over time (six months ended 30 September 2020: £8.6 million; year ended 31 March 2021: £28.9 million).

	EMEA	Americas	Asia Pacific	Group
	£m	£m	£m	£m
Six months ended 30 September 2021
Own-brand / branded products
Own-brand products	145.3	2.2	15.7	163.2
Other product and service solutions	607.9	331.0	106.8	1,045.7
Group	753.2	333.2	122.5	1,208.9
Sales channel
Digital	532.4	143.9	74.1	750.4
Offline	220.8	189.3	48.4	458.5
Group	753.2	333.2	122.5	1,208.9
Six months ended 30 September 2020
Own-brand / branded products
Own-brand products	108.7	1.8	13.0	123.5
Other product and service solutions	458.8	241.5	85.1	785.4
Group	567.5	243.3	98.1	908.9
Sales channel
Digital	418.5	92.6	55.2	566.3
Offline	149.0	150.7	42.9	342.6
Group	567.5	243.3	98.1	908.9
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

3.  Earnings per share

	Six months ended		Year ended
	30.9.2021	30.9.2020	31.3.2021
	Number	Number	Number
Weighted average number of shares	470,194,538	446,926,826	453,851,022
Dilutive effect of share-based payments	2,767,829	1,270,864	2,069,427
Diluted weighted average number of shares	472,962,367	448,197,690	455,920,449
Basic earnings per share	21.5p	9.5p	27.7p
Diluted earnings per share	21.4p	9.5p	27.5p

4.  Dividends

	Six months ended		Year ended
	30.9.2021	30.9.2020	31.3.2021
	£m	£m	£m
Final dividend for the year ended 31 March 2021 - 9.8p (2020: nil p)	46.1	-	-
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	-	-	28.6
	46.1	-	71.2

An interim dividend of 6.4p will be paid on 7 January 2022 to shareholders on the register on 26 November 2021 with an ex-dividend date of 25 November 2021 and the estimated amount to be paid of £30.1 million has not been included as a liability in these accounts.

5.  Retirement benefit obligations

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

	30.9.2021	30.9.2020	31.3.2021
	£m	£m	£m
Fair value of scheme assets	605.6	600.6	580.9
Present value of defined benefit obligations	(663.0)	(661.1)	(636.6)
Retirement benefit net obligations	(57.4)	(60.5)	(55.7)
Amount recognised on the balance sheet - liability	(58.2)	(62.4)	(56.5)
Amount recognised on the balance sheet - asset	0.8	1.9	0.8

6.  Inventories

	30.9.2021	30.9.2020	31.3.2021
	£m	£m	£m
Gross inventories	505.7	463.9	460.4
Inventory provisions	(35.9)	(32.7)	(40.6)
Net inventories	469.8	431.2	419.8

During the six months ended 30 September 2021 £1.7 million was recognised as an expense relating to the
write-down of inventories to net realisable value (six months ended 30 September 2020: £8.4 million; year ended 31 March 2021: £21.1 million including £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 reasonable 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

	30.9.2021	30.9.2020	31.3.2021
			restated
	£m	£m	£m
Gross trade receivables	461.4	326.7	435.2
Impairment allowance	(8.4)	(6.9)	(7.4)
Net trade receivables	453.0	319.8	427.8
Other receivables (including prepayments and accrued income)	83.1	61.8	65.8
Trade and other receivables	536.1	381.6	493.6

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. The Group continues to limit its exposure by maintaining tight 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. Historically, the Group has generally experienced very low levels of trade receivables not being recovered, including those significantly past due.

During the six months ended 30 September 2021, the Group continued to experience low levels of trade receivables not being recovered. 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.

8.  Net debt

	30.9.2021	30.9.2020	31.3.2021
	£m	£m	£m
Cash and short-term deposits	201.4	242.6	197.9
Bank overdrafts	(81.2)	(142.6)	(111.5)
Cash and cash equivalents	120.2	100.0	86.4
Non-current private placement loan notes	(149.9)	(158.3)	(147.3)
Non-current interest rate swaps designated as fair value hedges	0.9	1.4	1.1
Current secured bank loans	-	-	(0.7)
Current lease liabilities	(17.0)	(15.0)	(17.4)
Non-current lease liabilities	(37.8)	(42.9)	(44.1)
Net debt	(83.6)	(114.8)	(122.0)

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 2020	(169.3)	(56.3)	(225.6)	1.0	34.8	(189.8)
Cash flows	8.0	8.1	16.1	-	67.4	83.5
Net lease additions	-	(8.7)	(8.7)	-	-	(8.7)
(Loss) / gain in fair value in period	(0.4)	-	(0.4)	0.4	-	-
Translation differences	3.4	(1.0)	2.4	-	(2.2)	0.2
Net debt at 30 September 2020	(158.3)	(57.9)	(216.2)	1.4	100.0	(114.8)
Cash flows	16.3	8.3	24.6	-	(4.0)	20.6
Acquired with businesses	(16.9)	(6.9)	(23.8)	-	-	(23.8)
Net lease additions	-	(6.5)	(6.5)	-	-	(6.5)
Gain / (loss) in fair value in period	0.3	-	0.3	(0.3)	-	-
Translation differences	10.6	1.5	12.1	-	(9.6)	2.5
Net debt at 31 March 2021	(148.0)	(61.5)	(209.5)	1.1	86.4	(122.0)
Cash flows	0.7	9.1	9.8	-	31.9	41.7
Net lease additions	-	(2.1)	(2.1)	-	-	(2.1)
Gain / (loss) in fair value in period	0.2	-	0.2	(0.2)	-	-
Translation differences	(2.8)	(0.3)	(3.1)	-	1.9	(1.2)
Net debt at 30 September 2021	(149.9)	(54.8)	(204.7)	0.9	120.2	(83.6)

9.  Fair values of financial instruments

The other derivatives, interest rate swaps and the fair value of the private placement loan notes they are hedging are measured at fair value using Level 2 inputs. These are estimated by discounting the future contractual cash flows using appropriate market-sourced data at the balance sheet date.

For all financial assets and liabilities, fair value approximates the carrying amounts shown in the balance sheet except for the following:

	30.9.2021		30.9.2020		31.3.2021
	Carrying amounts	Fair value	Carrying amounts	Fair value	Carrying amounts	Fair value
	£m	£m	£m	£m	£m	£m
Private placement loan notes	(149.9)	(147.5)	(158.3)	(161.7)	(147.3)	(146.1)

The fair values are calculated using Level 2 inputs by discounting future cash flows to net present values using prevailing interest rate curves and the Group's credit margin.

10.  Related party transactions

There has been no material change in related party relationships in the six months ended 30 September 2021. There were no significant related party transactions which have materially affected the financial position or performance of the Group during that period.

11.  Capital commitments

As at 30 September 2021, the Group is contractually committed to, but has not provided for, future capital expenditure of £5.8 million (30 September 2020: £11.5 million; 31 March 2021: £4.9 million).

12.  Prior year acquisitions

As accrued for at 31 March 2021, an additional £0.3 million of consideration was paid for John Liscombe Limited and £2.5 million refunded for Synovos, Inc. (Synovos).

Two measurement period adjustments have been made to the fair values of Synovos's net assets acquired on 12 January 2021, although the Group continues to assess the liabilities acquired and so the fair values of tax balances and working capital are still provisional. The first adjustment relates to the measurement of uncertain tax provisions for transfer pricing and results in the recognition of an additional current income tax liability of £0.8 million, penalties and interest on uncertain tax provision of £0.4 million and an indemnification asset of £1.2 million. The second adjustment arises as result of new information received which changes the assumptions used to fair value the customer contracts and relationships intangible assets. This results in the customer contracts and relationships intangible asset decreasing by £10.1 million, goodwill increasing by £7.6 million and deferred tax liabilities decreasing by £2.5 million. The balance sheet as at 31 March 2021 has been restated accordingly and there is no change to the income statement for the year ended 31 March 2021.

13.  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. The Directors also 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.

13.  Alternative Performance Measures (APMs) (continued)

Principal exchange rates

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

	Average for six months ended		Closing
	30.9.2021	30.9.2020	30.9.2021	30.9.2020
US dollar	1.388	1.267	1.347	1.283
Euro	1.165	1.116	1.163	1.096

Base business

The Group's base business excludes acquisitions in the relevant periods 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.

			Six months ended 30.9.2021
			Base business	Acquisitions	Group
			£m	£m	£m
Revenue
	EMEA		719.1	34.1	753.2
	Americas		305.4	27.8	333.2
	Asia Pacific		122.5	-	122.5
Group			1,147.0	61.9	1,208.9
Segmental operating profit
	EMEA		116.8	3.0	119.8
	Americas		41.6	0.9	42.5
	Asia Pacific		11.9	-	11.9
Segmental operating profit			170.3	3.9	174.2
Central costs			(29.4)	-	(29.4)
Adjusted operating profit			140.9	3.9	144.8
Adjusted profit before tax			138.1	3.7	141.8
Adjusted earnings per share			22.5p	0.5p	23.0p
Adjusted diluted earnings per share			22.4p	0.4p	22.8p

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 period with the prior period's revenue converted at the current period's average exchange rates and
pro-rated for the same number of trading days as the current period. This measure enables management and investors to track more easily, and consistently, the underlying revenue performance.

				£m
Revenue for six months ended 30.9.2020 (H1 2020/21)				908.9
Effect of exchange rates				(38.0)
Effect of trading days				3.0
Revenue for H1 2020/21 at H1 2021/22 rates and trading days				873.9

	Six months ended		H1 2020/21 at H1 2021/22
	30.9.2021 base business	30.9.2020	rates and trading days	Like-for-like change
	£m	£m	£m	%
EMEA	719.1	567.5	558.0	29%
Americas	305.4	243.3	222.2	37%
Asia Pacific	122.5	98.1	93.7	31%
Group's base business	1,147.0	908.9	873.9	31%

13.  Alternative Performance Measures (APMs) (continued)

Two-year like-for-like revenue change

				£m
Revenue for six months ended 30.9.2019 (H1 2019/20)				978.7
Effect of exchange rates				(42.5)
Effect of trading days				6.7
Revenue for H1 2019/20 at H1 2021/22 rates and trading days				942.9

	Six months ended		H1 2019/20 at H1 2021/22	Two-year
	30.9.2021 base business	30.9.2019	rates and trading days	like-for-like change
	£m	£m	£m	%
EMEA	719.1	615.0	606.6	19%
Americas	305.4	263.7	241.1	27%
Asia Pacific	122.5	100.0	95.2	29%
Group's base business	1,147.0	978.7	942.9	22%

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 period and gross margin for the prior period with revenue and gross profit converted at the current period's average exchange rates.

	Six months ended			H1 2020/21 at
	30.9.2021 Group	30.9.2021 base business	30.9.2020	H1 2021/22 rates	Like-for-like change
	£m	£m	£m	£m	pts
Revenue	1,208.9	1,147.0	908.9	870.9
Gross profit	528.2	506.5	392.3	377.5
Gross margin	43.7%	44.2%	43.2%	43.3%	0.9 pts

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 period	Basic earnings per share	Diluted earnings per share
	£m	£m	%	%	£m	£m	p	p
Six months ended 30 September 2021
Reported	(389.1)	139.1	11.5%	26.3%	136.1	101.2	21.5p	21.4p
Amortisation of acquired intangibles	5.7	5.7			5.7	6.8	1.5p	1.4p
Adjusted	(383.4)	144.8	12.0%	27.4%	141.8	108.0	23.0p	22.8p
Six months ended 30 September 2020
Reported	(333.4)	58.9	6.5%	15.0%	55.6	42.4	9.5p	9.5p
Amortisation of acquired intangibles	2.7	2.7			2.7	2.2	0.5p	0.5p
Substantial reorganisation costs	16.0	16.0			16.0	12.6	2.8p	2.8p
Adjusted	(314.7)	77.6	8.5%	19.8%	74.3	57.2	12.8p	12.8p

⁽¹⁾ Operating costs are distribution and marketing expenses plus 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.

13.  Alternative Performance Measures (APMs) (continued)

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 period with the prior period converted at the current period's average exchange rates.

		Six months ended		H1 2020/21 at
		30.9.2021 base business	30.9.2020	H1 2021/22 rates	Like-for-like change
		£m	£m	£m	%
Segmental operating profit for base business
	EMEA	116.8	75.0	71.8	63%
	Americas	41.6	22.7	20.7	101%
	Asia Pacific	11.9	0.1	(0.2)	n/m
Segmental operating profit for base business		170.3	97.8	92.3	85%
Central costs		(29.4)	(20.2)	(20.2)	46%
Adjusted operating profit for base business		140.9	77.6	72.1	95%
Adjusted profit before tax for base business		138.1	74.3	68.8	101%
Adjusted earnings per share for base business		22.5p	12.8p	11.9p	89%

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 for the preceding twelve-month period.

	30.9.2021	30.9.2020	31.3.2021
	£m	£m	£m
Operating profit	139.1	58.9	167.2
Add back: depreciation and amortisation	31.4	27.1	56.5
EBITDA	170.5	86.0	223.7
Add back: acquisition-related items	-	-	2.9
Add back: substantial reorganisation costs	-	16.0	11.2
Adjusted EBITDA for this period	170.5	102.0	237.8
Adjusted EBITDA for prior year	237.8	266.2
Less: adjusted EBITDA for prior first half	(102.0)	(127.4)
Annualised adjusted EBITDA	306.3	240.8	237.8
Net debt (Note 8)	83.6	114.8	122.0
Net debt to adjusted EBITDA	0.3x	0.5x	0.5x

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 for the preceding twelve-month period.

	30.9.2021	30.9.2020	31.3.2021
	£m	£m	£m
Adjusted EBITDA for this period	170.5	102.0	237.8
Less: depreciation	(16.6)	(15.9)	(32.5)
EBITA for this period	153.9	86.1	205.3
EBITA for prior year	205.3	238.6
Less: EBITA for prior first half	(86.1)	(114.3)
Annualised adjusted EBITA	273.1	210.4	205.3
Finance costs	3.7	4.4	8.6
Less: finance income	(0.5)	(1.0)	(1.8)
Add back: capitalised interest	0.5	0.5	0.9
Interest (per debt covenants) for this period	3.7	3.9	7.7
Interest (per debt covenants) for prior year	7.7	7.1
Less: interest (per debt covenants) for prior first half	(3.9)	(2.7)
Annualised interest (per debt covenants)	7.5	8.3	7.7
EBITA to interest	36.4x	25.3x	26.7x

13.  Alternative Performance Measures (APMs) (continued)

Working capital as a percentage of revenue

Working capital is inventories, current trade and other receivables and current trade and other payables. Working capital as a percentage of revenue is working capital expressed as a percentage of annualised revenue.

	30.9.2021	30.9.2020	31.3.2021
			restated
	£m	£m	£m
Inventories	469.8	431.2	419.8
Current trade and other receivables	536.1	381.6	493.6
Current trade and other payables	(517.9)	(380.1)	(475.3)
Working capital	488.0	432.7	438.1
Revenue for this period	1,208.9	908.9	2,002.7
Revenue for prior year	2,002.7	1,953.8
Less: revenue for prior first half	(908.9)	(978.7)
Annualised revenue	2,302.7	1,884.0	2,002.7
Working capital as a percentage of revenue	21.2%	23.0%	21.9%

Return on capital employed (ROCE)

ROCE is annualised adjusted operating profit expressed as a percentage of annualised monthly average net assets excluding net debt and retirement benefit obligations. The comparative for 30 September 2020 has been updated to reflect the change to the definition made in 2020/21, as a result of the acquisitions in that year, to calculate ROCE on monthly average capital employed rather than closing capital employed.

	30.9.2021	30.9.2020	31.3.2021
	£m	£m	£m
Annualised monthly average net assets	885.4	707.6	791.0
Add back: annualised average net debt	96.4	180.7	127.2
Add back: annualised average retirement benefit net (assets) / obligations	54.2	55.7	53.8
Annualised average capital employed	1,036.0	944.0	972.0
Adjusted operating profit for this period	144.8	77.6	188.3
Adjusted operating profit for prior year	188.3	220.7
Less: adjusted operating profit for prior first half	(77.6)	(105.6)
Annualised adjusted operating profit	255.5	192.7	188.3
ROCE	24.7%	20.4%	19.4%

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.

	Six months ended		Year ended
	30.9.2021	30.9.2020	31.3.2021
	£m	£m	£m
Depreciation and amortisation	31.4	27.1	56.5
Less: amortisation of acquired intangibles	(5.7)	(2.7)	(7.0)
Less: depreciation of right-of-use assets	(9.0)	(8.5)	(17.1)
Adjusted depreciation and amortisation	16.7	15.9	32.4
Capital expenditure	17.4	33.2	56.2
Ratio of capital expenditure to depreciation	1.0 times	2.1 times	1.7 times

13.  Alternative Performance Measures (APMs) (continued)

Inventory turn

Inventory turn is annualised cost of sales divided by inventories.

	30.9.2021	30.9.2020	31.3.2021
	£m	£m	£m
Cost of sales for this period	680.7	516.6	1,146.7
Cost of sales for prior year	1,146.7	1,099.1
Less: cost of sales for prior first half	(516.6)	(551.0)
Annualised cost of sales	1,310.8	1,064.7	1,146.7
Inventories	469.8	431.2	419.8
Inventory turn	2.8	2.5	2.7

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.

	Six months ended		Year ended
	30.9.2021	30.9.2020	31.3.2021
	£m	£m	£m
Net increase in cash and cash equivalents	31.9	67.4	63.4
Add back: cash used in / (generated from) financing activities	53.6	13.6	(66.0)
Add back: cash (refunded) / used in acquisition of businesses	(2.2)	-	157.5
Less: cash and cash equivalents acquired with businesses	-	-	(22.0)
Free cash flow	83.3	81.0	132.9
Add back: impact of substantial reorganisation cash flows	1.5	4.0	9.6
Add back: impact of acquisition-related items cash flows	-	-	2.9
Adjusted free cash flow	84.8	85.0	145.4
Add back: income tax paid	22.5	14.3	35.2
Add back: net interest paid	3.0	3.5	8.3
Adjusted free cash flow before income tax and net interest paid	110.3	102.8	188.9
Adjusted operating profit	144.8	77.6	188.3
Adjusted operating cash flow conversion	76.2%	132.5%	100.3%

INDEPENDENT REVIEW REPORT TO ELECTROCOMPONENTS PLC

Report on the condensed Group accounts

Our conclusion

We have reviewed Electrocomponents plc's condensed consolidated interim financial statements (the interim financial statements) in the condensed Group accounts of Electrocomponents plc for the six month period ended 30 September 2021 (the period).

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with UK-adopted International Accounting Standard 34 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

· the Group balance sheet as at 30 September 2021;

· the Group income statement and Group statement of comprehensive income for the period then ended;

· the Group cash flow statement for the period then ended;

· the Group statement of changes in equity for the period then ended; and

· the explanatory notes to the condensed Group accounts.

The interim financial statements included in the condensed Group accounts of Electrocomponents plc have been prepared in accordance with the UK-adopted International Accounting Standard 34 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the Directors

The condensed Group accounts, including the interim financial statements, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the condensed Group accounts in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the condensed Group accounts based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the condensed Group accounts and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

London

3 November 2021

 

END

 

 

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