Interim Results
Electrocomponents PLC
09 November 2007
HALF-YEARLY FINANCIAL REPORT
Electrocomponents plc, the major international high service distributor of
electronic, electrical and industrial supplies, today announces its results for
the half year ended 30 September 2007.
SUMMARY RESULTS
H1 2007/08 H1 2006/07
Revenue £443.8m £422.4m
Profit before tax - headline £40.4m £36.3m
Profit before tax - reported £39.4m £35.6m
Earnings per share - headline 6.1p 5.5p
Earnings per share - basic 6.0p 5.4p
Interim dividend per share 5.8p 5.8p
Growth in headline profit before tax at constant
foreign exchange 13% 4%
HIGHLIGHTS OF THE FIRST HALF
* Group revenue growth of 7%.
* The International business has continued to grow strongly with first half
revenue growth of 11%.
* The UK has maintained its revenue growth at 2%, which is its third
successive half year of growth.
* Headline profit before tax at constant foreign exchange rates has grown by 13%.
* Further progress has been made on the Electronic and Electromechanical (EEM)
strategy.
* e-Commerce grew strongly at 22% and now represents 30% of the Group's revenue.
* Gross margin stable across the half year's two quarters at 50.1%.
* All businesses contributing to the Group's 1% point improvement in
operating cost leverage.
* The previously announced cost reduction programme substantially complete.
* Strong cash flow performance with free cash flow of £36.4m, up £24.2m on the
first half last year.
* The roll-out of EBS within Europe now successfully completed and benefits are
being delivered.
* North American warehouse move completed.
* The interim dividend maintained at 5.8p per share.
FOCUS FOR THE SECOND HALF
* Deliver further EEM strategy initiatives; October 2007 has seen a
significant increase in the range of EEM products available in the new
catalogues in all the major European markets.
* Launch an improved e-Commerce offer providing world-leading functionality and
enabling faster and continuous new product introductions.
* Identify and drive for further cost reductions.
HELMUT MAMSCH, CHAIRMAN COMMENTED:
'During the first half of the year, the Group has maintained its strong
financial performance. Overall Group sales growth was 7% with a strong
performance from the International business which delivered 11% growth and the
UK delivering its third successive half year of growth. Headline profit before
tax growth was 13% at constant foreign exchange rates.
Good progress continues to be made implementing our strategic development plan
with the European EBS roll-outs and the previously announced cost reduction
programmes being substantially complete. The focus is now on the rapid
implementation of the EEM and e-Commerce strategies.'
Enquiries:
Helmut Mamsch, Chairman Electrocomponents plc 0207 567 8000*
Ian Mason, Group Chief Executive Electrocomponents plc 0207 567 8000*
Simon Boddie, Group Finance Director Electrocomponents plc 0207 567 8000*
Diana Soltmann Flagship Consulting Ltd 0207 886 8440
* Available to 15:00 on 9 November, thereafter 01865 204000
The results and presentation to analysts are published on the corporate website
at www.electrocomponents.com.
Definitions of terms: Unless otherwise stated, in order to reflect underlying
business performance, comparisons of revenue between periods have been adjusted
for exchange rates and the number of trading days. Likewise, and unless
otherwise stated, changes in profit, cash flow, debt and share related measures
such as earnings per share are at reported exchange rates.
Enterprise Business System (EBS): In order to make clear the costs of the EBS
project and the underlying performance of the business, EBS costs (comprising
depreciation and implementation costs) have been disclosed separately.
Therefore, unless explicitly stated, measures based on operating costs,
contribution and Process costs exclude EBS.
Headline profit: A charge of £1.0m (H1 2006/07: £0.7m charge) was incurred in
the half year for items excluded from headline profit. Details of the items are
given below the Income Statement. Key performance measures such as return on
sales and EBITDA use headline profit figures.
Safe Harbour: This half-yearly 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.
CHAIRMAN'S STATEMENT
INTRODUCTION
During the first half of the year, the Group has maintained its strong financial
performance. Overall Group sales growth was 7% and headline profit before tax
growth was 13% at constant foreign exchange.
The International business grew at 11% with all regions showing growth. Asia
Pacific has continued its strong performance from the second half of last year
maintaining 16% sales growth. Europe grew at 9% and Allied, our North American
business, performed particularly well compared to the market, achieving 12%
revenue growth. The UK has continued to grow at 2%, reporting a third successive
half year of growth.
The performance by Allied is all the more impressive since the business also
managed its office and warehouse move during the half year. In October, the move
and transfer of stock to the new warehouse was successfully completed.
Gross margin was stable during the half year at 50.1% with the previous year's
selling price realignments in Europe largely completed and the product cost
saving initiatives providing financial benefits.
The Group's operating cost leverage has improved by 1% point of revenue with
both the International and UK businesses improving their cost leverage. The
resulting Group contribution increased by £6.5m.
STRATEGIC DEVELOPMENT
Good progress continues to be made implementing our strategic development plan.
The implementation of the EEM strategy has gained momentum with investment
across continental Europe of additional EEM sales resource and further expansion
of the product range and marketing support.
The process control and automation (PCA) range within Maintenance Repair and
Operations (MRO) has again performed particularly well. This has been supported
by focused initiatives with strategic suppliers helping to extend the range of
products on offer and supporting increased joint promotions.
A notable milestone event during the half year was the successful completion of
the EBS roll-out across Europe. The business is now in a strong position to
drive further benefits from this system across all the European businesses.
The Group has now actioned cost reduction initiatives to achieve £9.2m of
annualised cost savings. Plans are in place to deliver the balance of the
targeted £10m annualised savings by the end of the current financial year and
drive for further reductions in the future.
DIVIDEND
The Board announced in 2005 that it would maintain the dividend for the 3 years
to 31 March 2008, assuming no substantial deterioration in economic conditions.
Accordingly, the interim dividend will be maintained at 5.8p per share.
BOARD
During the half year, Nick Temple retired after 10 years with the Group,
latterly as Senior Non-Executive Director, and Rupert Soames joined the Board.
Rupert is CEO of Aggreko plc and has significant and relevant international
experience.
CURRENT TRADING AND OUTLOOK
During October, Group revenue growth has been around 6% year on year. Our
International business grew at around 9% and the UK at around 2%.
In the second half of the financial year, the Group will continue to focus on
the implementation of our strategy. While we are watchful of the general macro
economic conditions and those in North America in particular, the Board is
confident that this financial year will be another of good progress.
Helmut Mamsch, Chairman
9 November 2007
OPERATING REVIEW
PROGRESS ON THE STRATEGIC PLAN
In May 2005, the Group announced its plan to improve the financial performance
of the Group. This plan had three key elements:
* Focus separately on two distinct customer groups: Electronic and
Electromechanical (EEM) and Maintenance, Repair and Operations (MRO).
* Implement the Enterprise Business System (EBS) in Europe and Asia Pacific.
* Create a lower cost infrastructure.
The two infrastructure elements of the plan are now largely complete. Therefore,
the Group's focus has been to continue improving the EEM and MRO offers and
build on the positive customer reaction to date.
ELECTRONIC AND ELECTROMECHANICAL (EEM)
The Group's EEM customers are primarily involved in electronics design and small
batch production. This is a growing segment to serve, and 'catalogue' based
distribution is the customers' preferred channel. Their primary need is to
access as broad, deep and innovative a product range as possible.
During the half year, the Group has progressed further in updating its EEM
product range to provide a more competitive and compelling offer for customers.
New technologies have been launched across many diverse areas, including thermal
management, embedded computing and power supplies, together with updates to
previous successful campaigns for wireless and solid state lighting
technologies. In keeping with this product range increase, there has been
significant investment in additional EEM sales heads and supplier-linked
marketing support across Europe.
MAINTENANCE, REPAIR AND OPERATIONS (MRO)
To improve profitability, the MRO product range has been rationalised across the
UK and Europe with 5,000 products being removed from the UK support range since
October 2005 without adverse customer impact. This simplifies and improves
customer product selection and reduces product costs.
Within MRO there is an important customer segment, the automation engineer, that
primarily uses process control and automation (PCA) products. PCA in particular
has shown strong growth in the UK and Continental Europe with the Group's broad
product offer and high service delivery supporting the increased use of
automation in the workplace.
ENTERPRISE BUSINESS SYSTEM (EBS)
The roll-out in Asia Pacific completed during the previous financial year. The
roll-out of EBS across Europe was completed successfully in May 2007. EBS now
supports all the Group's operating companies in Europe: Austria, Benelux,
France, Germany, Ireland, Italy, Scandinavia, Spain and the UK. The Group is now
able to drive further benefits both from the use of an integrated system and the
sharing of best practices across the businesses. The increase in Group stock
turn from 2.6 times in September 2006 to 2.8 times in September 2007 is an
example of EBS benefits being delivered across Europe.
The timing of the roll out of EBS to Allied, our North American business, will
be reviewed early in the next calendar year.
LOWER COST INFRASTRUCTURE
During the half year, the Group has achieved cost leverage in all International
regions and in the UK, with the Group's operating costs reducing by 1% point of
revenue compared to last year. These benefits have been achieved by both ongoing
sales growth and the focus on cost reductions.
During the first half of the year, cost reduction initiatives were taken to
deliver £1.6m of annualised benefits with accompanying reorganisation costs of
£1.0m. The majority of these costs: approximately £0.9m, related to headcount
reductions. These activities crossed a number of functions with most of the
savings being made in administrative and support areas in the UK and Europe. To
date some £9.2m of the targeted £10m of annualised cost reductions have been
achieved and there are plans for the remaining balance to be actioned by the end
of the financial year.
E-COMMERCE
The e-Commerce channel continues to grow confirming its increasing strategic
importance to the future of the Group. e-Commerce revenue is now 30% of the
Group's total revenue and is over 60% of the Japanese business. In support of
the EEM strategy web site links have been established with key electronics
suppliers.
The Group plans to launch an improved e-Commerce offer towards the end of the
financial year in the UK, Europe and Asia Pacific. This will provide
world-leading functionality, enabling faster and continuous new product
introductions.
FINANCIAL PERFORMANCE
Group H1 2007/08 H1 2006/07
Revenue £443.8m £422.4m
Gross margin 50.1% 50.7%
Contribution £94.2m £87.7m
Group Process costs (£42.1m) (£41.1m)
EBS costs (£8.0m) (£7.8m)
Headline operating profit £44.1m £38.8m
Interest (net) (£3.7m) (£2.5m)
Headline profit before tax £40.4m £36.3m
Headline earnings per share 6.1p 5.5p
Interim dividend per share 5.8p 5.8p
Key performance indicators
Group H1 2007/08 H1 2006/07
Group revenue growth 7.3% 9.0%
International 11.1% 15.5%
UK 2.0% 0.9%
e-Commerce proportion of revenue 30% 26%
Headline Group return on sales 9.1% 8.6%
Headline EBITDA (1) £57.2m £51.4m
Free cash flow £36.4m £12.2m
Stock turn (per year) 2.8x 2.6x
(1) Earnings before interest, tax, depreciation and amortisation (inc. govt.
grants)
The headline profit before tax was £40.4m, up £4.1m from the first half of last
year. This 11.3% growth on last year (13.5% at constant foreign exchange rates)
has been driven by four factors. The contributions of the International and the
UK businesses have increased by £3.8m and £2.7m respectively. Offsetting this
improvement have been increased Process and EBS costs of £1.2m and higher
interest costs of £1.2m.
The Group's revenue increased by 7.3% (5.1% reported growth) to £443.8m. The
International business grew strongly during the half year by 11.1%. Within the
International Business, Europe grew at 9.2%, North America at 12.1% and Asia
Pacific at 15.8%.
The UK business grew revenue by 2.0%, which is its third successive half year
of growth.
Revenue from the Group's e-Commerce channel grew by 22% and now accounts for 30%
of Group revenue driven by continuing developments including dynamic links with
key suppliers' web sites.
Gross profit increased by £8.5m over last year. Gross margin was stable between
the first and second quarters of the first half of the year at 50.1%. This was
0.3% lower than the second half of the last year, and was caused by a 0.3%
reduction in International and a 0.2% reduction in the UK. Within the
International business the principle movement was in Europe due to the impact of
the previous year's selling price realignments which were undertaken to improve
competitiveness. In the UK higher customer discounts, particularly those
associated with the growing profitable larger order business, impacted the
business's gross margin.
Process costs increased by £1.0m to £42.1m for the first half but reduced as a
percentage of revenue from 9.7% to 9.5%.
Headline EBITDA increased by £5.8m (11.3%) to £57.2m.
The net interest charge was £3.7m, up £1.2m on the first half of last year due
to both higher interest rates and higher average net debt. Closing net debt was
£154.2m, £18.0m higher than last year end but comparable with net debt at 30
September 2006 (£151.2m).
Reported profit before tax was £39.4m, up from £35.6m from the first half of the
last financial year comprising the £4.1m increase in headline profit before tax
and offsetting £0.3m higher reorganisation costs.
Free cash flow was £36.4m, an increase of £24.2m on last year due largely to
increased profit, improving stock turn (from 2.6 times first half last year to
2.8 times first half this year) and lower capital expenditure associated with
reduced requirements from both EBS and the North American warehouse build.
International
H1 2007/08 H1 2006/07
Revenue £266.6m £248.7m
Revenue growth % 11.1% 15.5%
Gross margin 48.2% 48.8%
Operating costs % of revenue (30.8%) (31.7%)
Contribution £46.3m £42.5m
% of revenue 17.4% 17.1%
The International business is an increasingly important part of the Group,
representing 60% of the Group's revenue and around 50% of the Group's
contribution. The business comprises Continental Europe (54% of the revenue in
the International business), North America (30%) and Asia Pacific (16%).
The Business grew by 11.1% during the half year (on a reported basis at 7.2%).
Gross margin is 0.6% lower than the first half of the last financial year, the
principal underlying declines resting within Europe and Asia Pacific. In Europe
the previous, now largely complete, selling price realignments to improve
competitiveness have impacted margin; while in Asia Pacific foreign exchange
movements were significant.
There has been ongoing cost leverage. Costs as a percentage of sales reducing by
0.9% points compared to last year with all regions producing leverage during the
half year.
Contribution has increased by £3.8m (8.9%) in the period with all regions
showing growth.
Continental Europe
H1 2007/08 H1 2006/07
Revenue £144.4m £132.6m
Revenue growth % 9.2% 10.3%
Contribution £30.2m £27.3m
% of revenue 20.9% 20.6%
Continental Europe includes eight businesses. France, Germany and Italy are the
larger businesses, which together comprise around 75% of regional revenue. The
smaller businesses (Austria, Benelux, Ireland, Scandinavia and Spain) represent
the remainder.
During the first half of the year, the EBS roll-out across Europe was completed,
such that all the region's operating companies now operate from a single
integrated platform with the UK business.
All the businesses have shown good revenue growth in the period. This strong
performance has been supported by the ongoing strategy implementation, including
new EEM technology introductions across all companies, further EEM sales force
recruitments in France and Germany and continuing exploitation of the Allied
extended range. Within MRO the increasing relevance of the broad PCA product
offer, local supplier agreements to broaden product ranges and joint supplier
promotions have driven increased revenue.
e-Commerce revenue grew at 19% on the first half of last year and now represents
34% of total revenue.
Local costs have reduced as a percentage of revenue and contribution has
improved by 0.3% points to 20.9% of revenue.
North America
H1 2007/08 H1 2006/07
Revenue £80.1m £77.7m
Revenue growth % 12.1% 24.1%
Contribution £11.4m £11.3m
% of revenue 14.2% 14.5%
Revenue in Allied (our North American business) has continued to grow during the
half year at 12.1% (on a reported basis at 3.1%); e-Commerce revenue grew by 21%
to nearly 10% of total revenue.
The consistent growth strategy implemented within Allied is working well. The
strategy is being reinforced by increasingly improved service levels to
customers and further investments in sales personnel across the business's
national network of branches.
The move to the new warehouse and office facility has been successfully
completed. The office move was completed in May and the transfer of stock to the
new warehouse recently completed, to plan, in October. The one-off costs
associated with this move are approximately £1.5m with about £0.8m being
incurred in the first half of the year.
The previous warehouse facility was struggling to meet the increasing customer
demand and the new facility will support the future growth of the business and
generate scale benefits going forward. However, at current revenue levels, it
will result in higher operating costs of approximately £1m per annum starting
during the second half of the current financial year.
Excluding the costs of the current facility move, Allied's contribution would
have increased by some £0.9m and by 0.7% points as a percentage of revenue when
compared to the first half of last year.
Asia Pacific
H1 2007/08 H1 2006/07
Revenue £42.1m £38.4m
Revenue growth % 15.8% 18.8%
Contribution £4.7m £3.9m
% of revenue 11.2% 10.2%
Revenue in the Asia Pacific region has grown by 15.8% (on a reported basis at
9.6%), with all the regions showing double digit growth. e-Commerce revenue grew
at 35% during the half year now representing 31% of total revenue.
In North Asia many of the previous year's revenue generating activities,
including same day offer and sales force investment, have helped accelerate
revenue growth over the first half of last year. In South Asia revenue growth
was driven by customer acquisition, the new sales office in Thailand and the
Allied extended range offer. In Japan, the business performed well, growing
revenue in a difficult local economic environment; e-Commerce now represents 62%
of the Japanese business's revenue. In Australasia, revenue growth accelerated
as more opportunities were pursued in growing sectors of the regional economies.
The business improved its operating cost leverage compared to the first half of
last year with contribution as a percentage of revenue improving by 1% point.
United Kingdom
H1 2007/08 H1 2006/07
Revenue £177.2m £173.7m
Revenue growth % 2.0% 0.9%
Gross margin 53.0% 53.3%
Operating costs % of revenue (26.0%) (27.3%)
Contribution £47.9m £45.2m
% of revenue 27.0% 26.0%
The UK business grew revenue by 2.0% compared to last year whilst e-Commerce
revenue continued to grow increasing its share to 36% of total UK revenue.
The business has maintained its momentum implementing the Group's EEM strategy.
This has involved the creation of a new sales team providing more EEM
customer-oriented support and access to non-stocked product ranges. The business
has developed relationships with a number of key EEM suppliers to improve
customers' speed of access to new products. To date, this activity has been
successful in generating incremental revenue.
Gross margin is 0.3% lower than the first half of the last financial year due to
higher customer discounts, particularly those associated with the growing and
profitable larger order business.
Within MRO, the PCA product offer has grown particularly strongly. This is due
to both the business's broad and relevant offer, together with local initiatives
focusing on particular customers in conjunction with joint direct mail,
e-Commerce and sales activities with larger supplier partners.
The business improved its cost leverage during the half year by 1.3% points of
revenue as the benefits of the previously announced cost reduction programme
were realised. In addition, the higher operating costs incurred following the
business's EBS go live last calendar year were reduced as well as EBS benefits
starting to be realised.
Contribution was £47.9m, an increase of £2.7m on the first half of last year.
Contribution as a percentage of revenue has increased by 1% point to 27.0%.
EBS financial impact
EBS costs which comprise depreciation and system implementation costs were £8.0m
in the first half compared with £7.8m in the first half of last year. The slight
year on year increase was caused by higher depreciation and the implementation
and post go live support in Europe during the first half of the year. Within
this balance, depreciation was £5.4m, while project and local business costs
were £2.6m. The cash flow impact of EBS in the first half was an outflow of
£4.2m, a reduction of £4.1m from the first half last year principally due to
lower capital expenditure.
Future EBS development costs incurred post the implementation will not be
disclosed within EBS costs but instead will be disclosed within Process costs.
For the current financial year, total EBS costs comprising depreciation, system
implementation costs and the post implementation development costs referred to
above, is expected to be slightly lower than the previous financial year (£19m).
For year ending 31 March 2009 and onwards, EBS costs will not be separately
disclosed; instead they will be included within Process costs.
Pensions
The Group has defined benefit pension schemes in the UK, Ireland and Germany,
all of which are now closed to new entrants. All other schemes are defined
contribution.
Under IAS 19, the defined benefit schemes showed a combined deficit of £38.7m at
31 March 2007 of which the deficit in the UK scheme was £31.9m. As at 30
September 2007, the estimated deficit of the UK scheme was £12.0m. The principal
reasons for the reduction in the deficit are the higher investment returns
together with a higher discount rate.
RISKS AND UNCERTAINTIES STATEMENT
In line with the requirements of DTR 4.2.7R of the Disclosure and Transparency
Rules the following sections provide a description of the principal risks and
uncertainties for the remaining six months of the Group's financial year.
In the Board's opinion, there are six key risks and uncertainties facing the
Group, comprising Group strategy implementation, pricing, people, IT and
communication systems, the macro-economic environment and foreign exchange
rates. These are summarised below:
Group strategy implementation
Considerable progress has been made on the implementation of the Group's
strategy; the most significant risk to the Group strategy is that it does not
deliver the anticipated results.
This is being responded to in many ways, focusing on effective and consistent
customer communication, the development of the EEM and MRO ranges, supported by
robust customer research and dedicated sales teams in the larger European
markets. These should ensure the relevance and competitiveness of the offers in
meeting customer needs. The effectiveness of these actions are closely monitored
and assessed for their contribution to the success of the strategy.
Further work to ensure an effective implementation has been driven by a highly
successful Group Communications meeting involving the Group's world wide senior
management team in June this year.
Pricing
To be successful, the Group must continue to improve its value for money rating
through market pricing, high service and effective customer communication. The
risk is that the service differential or price positioning with competitors is
not maintained, and that effective communication with customers is not
delivered.
To address this risk, market developments and competitor pricing are monitored.
Robust market pricing frameworks have been put in place to respond quickly and
decisively to these risks, with continuing activities to refine, improve and
effectively communicate the Group's service offer in each of its markets.
People
The successful implementation of the Group's strategy is ultimately dependent on
the expertise, commitment and strong support of its employees. Developing the
appropriate skills and a high performing, supportive organisational culture are
therefore key on-going challenges.
To ensure individuals have a clear understanding of their contribution to the
Group strategy, personal objectives and rewards are being aligned with Group
strategy delivery to ensure that there is successful operational implementation.
Technical skills and capabilities are being enhanced by the development of
internal competencies and these are being supplemented by adding new expertise
through external appointments.
The values and culture activities continue to be promoted throughout the Group
emphasising the positive attributes of speed, flexibility and customer service.
These values are being embedded into the UK organisation by a continuous
improvement approach to working where employee teams are encouraged to identify,
develop and implement process improvements to customer experience and process
efficiency.
IT and communications systems
There is a heavy dependency on data processing and communications systems to
support the Group's worldwide distribution businesses. The EBS systems
implementation in Europe, and the systems upgrade in the Asian businesses have
substantially replaced the 'Legacy' data processing systems and has
significantly improved the Group's risk profile.
The introduction of an integrated data network and infrastructure does, however,
introduce new risks of region-wide dependencies on common systems solutions.
Significant investments have been made in resilient systems infrastructure,
systems knowledge and region-wide disaster recovery provision. These processes
are subject to on-going testing and review with sharing of experiences and
solutions.
Macro economic environment
The Group operates within a wide variety of markets. Therefore the Group's
financial performance will be affected by changes in general macro economic
environments. Local operating companies frequently monitor their respective
trading environments by reviewing the relevant economic indicators.
Foreign exchange rates
The geographic spread of the Group means that its financial results can be
affected by movements in foreign exchange rates. The Group has significant
operations both in Europe and North America. Hence, by way of example, a 10 cent
weakening of both the Euro and US Dollar currencies against Sterling would
create a translation exposure and reduce the Group's annual profit before tax by
about £3m and £1m respectively.
The Group has a significant proportion of its borrowing denominated in Euros and
US Dollars, which provide a hedge against the Group's European and North
American investments.
Ian Mason, Group Chief Executive
Simon Boddie, Group Finance Director
9 November 2007
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEARLY
FINANCIAL REPORT
We confirm that to the best of our knowledge:
* The condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU;
* The interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of
the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for
the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the
related party transactions described in the last annual report that could
do so.
Ian Mason, Group Chief Executive
Simon Boddie, Group Finance Director
9 November 2007
Group Income Statement
6 months to 6 months to Year to
30.9.2007 30.9.2006 31.3.2007
Note (unaudited) (unaudited) (audited)
£m £m £m
-------- -------- --------
Revenue 1 443.8 422.4 877.5
Cost of Sales (221.3) (208.4) (434.0)
-------- -------- --------
Gross profit 222.5 214.0 443.5
Distribution and marketing expenses (175.9) (172.1) (346.2)
Administrative expenses (3.5) (3.8) (6.2)
-------- -------- --------
Operating profit 43.1 38.1 91.1
Financial income 5.5 5.3 11.2
Financial expenses (9.2) (7.8) (17.1)
-------- -------- --------
Profit before tax 1 39.4 35.6 85.2
Income tax expense 2 (13.4) (12.1) (29.0)
-------- -------- --------
Profit for the period attributable
to equity shareholders 26.0 23.5 56.2
======== ======== ========
Earnings per share - Basic 3 6.0p 5.4p 12.9p
Earnings per share - Diluted 3 5.9p 5.4p 12.9p
Dividends
Amounts recognised in the period:
Final dividend for the year
ended 31 March 2007 4 12.6p 12.6p 12.6p
Interim dividend for the year
ended 31 March 2007 4 - - 5.8p
-------- -------- --------
An interim dividend of 5.8p per share has been recognised since the period end.
Headline profit
Headline operating profit
Operating profit 43.1 38.1 91.1
Reorganisation costs (income) 1.0 0.7 (0.8)
-------- -------- --------
44.1 38.8 90.3
-------- -------- --------
Headline profit before tax
Profit before tax 39.4 35.6 85.2
Reorganisation costs (income) 1.0 0.7 (0.8)
-------- -------- --------
40.4 36.3 84.4
-------- -------- --------
Group Statement of Recognised Income and Expense
6 months to 6 months to Year to
30.9.2007 30.9.2006 31.3.2007
Note (unaudited) (unaudited) (audited)
£m £m £m
-------- -------- --------
Foreign exchange translation
differences 5 (3.2) (6.5) (11.6)
Actuarial gain (loss) on defined
benefit pension schemes 5 17.9 - (0.4)
(Loss) gain on cash flow hedges 5 (2.0) 2.2 1.0
Tax on items taken directly
to equity 5 (5.8) - -
-------- -------- --------
Net income recognised directly
in equity 6.9 (4.3) (11.0)
Profit for the period 26.0 23.5 56.2
-------- -------- --------
Total recognised income and expense
for the period attributable to
equity shareholders 32.9 19.2 45.2
======== ======== ========
Group Balance Sheet
Note 30.9.2007 30.9.2006 31.3.2007
(unaudited) (unaudited) (audited)
£m £m £m
-------- -------- --------
Non-current assets
Intangible assets 188.7 201.3 196.7
Property, plant and equipment 109.6 104.8 111.1
Investments 0.4 0.3 0.3
Other receivables 2.5 2.7 2.7
Deferred tax assets 8.7 17.3 14.2
-------- -------- --------
309.9 326.4 325.0
-------- -------- --------
Current assets
Inventories 161.1 162.9 160.6
Trade and other receivables 164.6 157.1 171.0
Income tax receivables 0.8 1.5 1.1
Assets held for sale - 8.5 -
Cash and cash equivalents 6 38.4 16.6 19.1
-------- -------- --------
364.9 346.6 351.8
-------- -------- --------
Current liabilities
Trade and other payables (134.3) (119.6) (132.9)
Loans and borrowings (7.3) (34.1) (79.0)
Tax liabilities (14.9) (13.9) (14.5)
-------- -------- --------
(156.5) (167.6) (226.4)
-------- -------- --------
Net current assets 208.4 179.0 125.4
-------- -------- --------
Total assets less current
liabilities 518.3 505.4 450.4
-------- -------- --------
Non-current liabilities
Other payables (5.4) (6.5) (7.9)
Retirement benefit obligations (18.8) (40.5) (38.7)
Loans and borrowings (185.3) (133.7) (76.3)
Deferred tax liabilities (24.8) (22.7) (22.9)
-------- -------- --------
Net assets 284.0 302.0 304.6
======== ======== ========
Equity
Called-up share capital 43.5 43.5 43.5
Share premium account 38.7 38.4 38.7
Other reserves 201.8 220.1 222.4
-------- -------- --------
Total equity attributable to the
shareholders of the parent 5 284.0 302.0 304.6
======== ======== ========
Group Cash Flow Statement
Note 6 months to 6 months to Year to
30.9.2007 30.9.2006 31.3.2007
(unaudited) (unaudited) (audited)
£m £m £m
-------- -------- --------
Cash flows from operating activities
Profit before tax 39.4 35.6 85.2
Depreciation and other amortisation 13.0 12.8 27.0
Equity settled transactions 1.3 1.2 2.7
Finance income and expense (net) 3.7 2.5 5.9
-------- -------- --------
Operating profit before changes
in working capital, interest
and taxes 57.4 52.1 120.8
(Increase) in inventories (0.4) (8.8) (7.7)
Decrease (increase) in trade
and other receivables 5.9 5.4 (9.2)
(Decrease) in trade and other
payables (6.3) (8.8) -
-------- -------- --------
Cash generated from operations 56.6 39.9 103.9
Interest received 5.5 5.3 11.2
Interest paid (7.9) (7.8) (17.0)
Income tax paid (10.4) (8.0) (22.0)
-------- -------- --------
Operating cash flow 43.8 29.4 76.1
Cash flows from investing
activities
Capital expenditure and
financial investment (7.4) (17.2) (42.4)
Proceeds from sale of
property, plant and
equipment - - 11.6
-------- -------- --------
Net cash used in investing
activities (7.4) (17.2) (30.8)
-------- -------- --------
Free cash flow 36.4 12.2 45.3
-------- -------- --------
Cash flows from financing
activities
Proceeds from the issue of
share capital - - 0.3
New bank loans 64.6 26.4 30.3
Repayment of bank loans (25.6) (11.1) (16.6)
Equity dividends paid (54.8) (54.8) (80.0)
-------- -------- --------
Net cash used in financing
activities (15.8) (39.5) (66.0)
-------- -------- --------
Net increase (decrease) in cash
and cash equivalents 20.6 (27.3) (20.7)
-------- -------- --------
Cash and cash equivalents at the
beginning of the period 17.2 38.0 38.0
Effects of exchange rates on cash (0.3) 1.4 (0.1)
-------- -------- --------
Cash and cash equivalents at the
end of the period 6 37.5 12.1 17.2
======== ======== ========
BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES
Electrocomponents plc (the 'Company') is a company domiciled in the UK. The
condensed set of financial statements as at, and for, the six months ended 30
September 2007 comprises the Company and its subsidiaries (together referred to
as the 'Group') and the Group's interests in jointly controlled entities.
The Group financial statements as at, and for, the year ended 31 March 2007 are
available upon request from the Company's registered office at International
Management Centre, 8050 Oxford Business Park North, Oxford, OX4 2HW.
The comparative figures for the financial year ended 31 March 2007 are not the
Company's statutory accounts for that financial year. Those accounts have been
reported on by the Company's auditors and delivered to the registrar of
companies. The report of the auditors was (i) unqualified, (ii) did not include
a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a statement
under section 237(2) or (3) of the Companies Act 1985.
Statement of compliance
The condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with IAS 34 Interim Financial Reporting
as adopted by the EU. The condensed set of financial statements do not include
all of the information required for full annual financial statements, and should
be read in conjunction with the Group financial statements as at, and for, the
year ended 31 March 2007.
This condensed set of financial statements was approved by the Board of
Directors on 9 November 2007.
Significant accounting policies
The accounting policies applied by the Group in this condensed set of financial
statements are the same as those applied by the Group in its financial
statements as at, and for, the year ended 31 March 2007.
The following new standards, amendments to standards or interpretations are
mandatory for the first time for the year ending 31 March 2008 and are relevant
to the Group.
IFRS 7 Financial Instruments: Disclosures, and IAS 1, Amendments to Capital
Disclosures, both effective for annual periods beginning on or after 1 January
2007. The full IFRS 7 disclosures, including the sensitivity analysis to market
risk and capital disclosures required by the amendment to IAS 1 will be
disclosed in the annual financial statements.
The following new standards, amendments to standards or interpretations are
mandatory for the first time for the financial year ending 31 March 2008 but
have no material impact on the Group.
IFRIC 9 - Reassessment of Embedded Derivatives, effective for annual periods
beginning on or after 1 June 2006.
IFRIC 8 - Scope of IFRS 2 effective for annual periods beginning on or after 1
May 2006.
IFRIC 10 - Interims and Impairment, effective for annual periods beginning on or
after 1 November 2006.
IFRIC 11, IFRS 2 - Group and Treasury Share Transactions effective for annual
periods beginning on or after 1 March 2007.
The following new standards, amendments to standards and interpretations have
been issued, but are not effective for the financial year ending 31 March 2008
and have not been early adopted.
IFRIC 12 - Service Concession Arrangements.
IFRS 8 - Operating Segments.
Estimates and judgements
The preparation of a condensed set of financial statements requires management
to make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates.
The significant judgements made by management in applying the Group's accounting
policies and the key sources of uncertainty were the same as those that applied
to the Group financial statements as at 31 March 2007.
Notes to the condensed set of financial statements
6 months to 6 months to Year to
30.9.2007 30.9.2006 31.3.2007
(unaudited) (unaudited) (audited)
1 Segmental Reporting £m £m £m
-------- -------- --------
By geographical destination
Revenue: United Kingdom 169.6 166.7 341.5
Continental Europe 147.8 135.4 293.3
North America 78.2 76.9 155.6
Asia Pacific 48.2 43.4 87.1
-------- -------- --------
443.8 422.4 877.5
======== ======== ========
By geographical origin
Revenue: United Kingdom 177.2 173.7 356.2
Continental Europe 144.4 132.6 287.5
North America 80.1 77.7 157.2
Asia Pacific 42.1 38.4 76.6
-------- -------- --------
443.8 422.4 877.5
======== ======== ========
Profit before
tax: United Kingdom 47.9 45.2 95.9
Continental Europe 30.2 27.3 64.5
North America 11.4 11.3 23.4
Asia Pacific 4.7 3.9 8.4
-------- -------- --------
Headline contribution 94.2 87.7 192.2
Group Process costs (42.1) (41.1) (82.9)
Enterprise Business
System costs (8.0) (7.8) (19.0)
-------- -------- --------
Headline operating profit 44.1 38.8 90.3
Net financial expense (3.7) (2.5) (5.9)
-------- -------- --------
Headline profit before tax 40.4 36.3 84.4
Reorganisation (costs) income (1.0) (0.7) 0.8
-------- -------- --------
39.4 35.6 85.2
======== ======== ========
6 months to 6 months to Year to
30.9.2007 30.9.2006 31.3.2007
(unaudited) (unaudited) (audited)
2 Taxation on the profit of the Group £m £m £m
-------- -------- --------
United Kingdom taxation 6.3 5.3 11.7
Overseas taxation 7.1 6.8 17.3
-------- -------- --------
13.4 12.1 29.0
======== ======== ========
6 months to 6 months to Year to
30.9.2007 30.9.2006 31.3.2007
(unaudited) (unaudited) (audited)
3 Earnings per share £m £m £m
-------- -------- --------
Profit for the period attributable to
equity shareholderss 26.0 23.5 56.2
Reorganisation costs (income) 1.0 0.7 (0.8)
Tax impact of reorganisation costs (0.3) (0.3) 0.2
-------- -------- --------
Headline profit for the period
attributable to equity shareholders 26.7 23.9 55.6
-------- -------- --------
Weighted average number of shares 435.0m 434.9m 434.9m
Diluted weighted average number of shares 437.1m 435.7m 436.4m
Headline basic earnings per share 6.1p 5.5p 12.8p
Basic earnings per share 6.0p 5.4p 12.9p
Headline diluted earnings per share 6.1p 5.5p 12.7p
Diluted earnings per share 5.9p 5.4p 12.9p
======== ======== ========
6 months to 6 months to Year to
30.9.2007 30.9.2006 31.3.2007
(unaudited) (unaudited) (audited)
4 Interim dividend £m £m £m
-------- -------- --------
Amounts recognised and paid in the
period:
Final dividend for the year ended
31 March 2007 - 12.6p (2006: 12.6p) 54.8 54.8 54.8
Interim dividend for the year
ended 31 March 2007 - 5.8p - - 25.2
-------- -------- --------
54.8 54.8 80.0
======== ======== ========
Amounts determined after the balance
sheet date:
Interim dividend for the year
ended 31 March 2008 - 5.8p 25.2
The timetable for the payment of the interim dividend is:
Ex-dividend date 12 December 2007
Dividend record date 14 December 2007
Dividend payment date 18 January 2008
6 months to 6 months to Year to
30.9.2007 30.9.2006 31.3.2007
(unaudited) (unaudited) (audited)
5 Reconciliation of movements in equity £m £m £m
-------- -------- --------
Profit for the period 26.0 23.5 56.2
Dividend (54.8) (54.8) (80.0)
-------- -------- --------
Retained loss (28.8) (31.3) (23.8)
Foreign exchange translation differences (3.2) (6.5) (11.6)
Actuarial gain (loss) on defined
benefit pension schemes 17.9 - (0.4)
(Loss) gain on cash flow hedges (2.0) 2.2 1.0
Tax impact on adjustments taken
directly to equity (5.8) - -
Equity settled transactions 1.3 1.2 2.7
New share capital subscribed - - 0.3
-------- -------- --------
Net reduction in equity (20.6) (34.4) (31.8)
-------- -------- --------
Total equity attributable to shareholders of
the parent at the beginning of the period 304.6 336.4 336.4
-------- -------- --------
Total equity attributable to shareholders of
the parent at the end of the period 284.0 302.0 304.6
======== ======== ========
Within equity shareholders' funds is a cumulative translation reserve (deficit).
The balance as at 30 September 2007 was £1.7m deficit (31 March 2007 £1.5m
reserve and 30 September 2006 £6.6m reserve).
30.9.2007 30.9.2006 31.3.2007
(unaudited) (unaudited) (audited)
6 Cash and cash equivalents £m £m £m
-------- -------- --------
Bank balances 8.2 9.7 16.1
Call deposits and investments 30.2 6.9 3.0
-------- -------- --------
Cash and cash equivalents in the
balance sheet 38.4 16.6 19.1
Bank overdrafts (0.9) (4.5) (1.9)
-------- -------- --------
Cash and cash equivalents in the cash
flow statement 37.5 12.1 17.2
Current instalments of loans (6.4) (29.6) (77.1)
Loans repayable after more than one year (185.3) (133.7) (76.3)
-------- -------- --------
Net debt (154.2) (151.2) (136.2)
======== ======== ========
6 months to 6 months to Year to
30.9.2007 30.9.2006 31.3.2007
7 Principal exchange rates (unaudited) (unaudited) (audited)
-------- -------- --------
Average for the period
Euro 1.47 1.46 1.47
United States Dollar 2.01 1.85 1.90
Japanese Yen 239 213 221
-------- -------- --------
30.9.2007 30.9.2006 31.3.2007
-------- -------- --------
Period end
Euro 1.43 1.48 1.47
United States Dollar 2.04 1.87 1.96
Japanese Yen 234 221 232
======== ======== ========
INDEPENDENT REVIEW REPORT TO ELECTROCOMPONENTS PLC
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2007 which comprises the Group Income Statement, Balance Sheet, Cash
Flow Statement, the Statement of Recognised Income and Expense and the related
explanatory notes. We have read the other information contained in the
half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed
set of financial statements.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Disclosure
and Transparency Rules ('the DTR') of the UK's Financial Services Authority
('the UK FSA'). Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work for
this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the Directors. The Directors are responsible for preparing the half-yearly
financial report in accordance with the DTR of the UK FSA.
The annual financial statements of the Group are prepared in accordance with
IFRSs as adopted by the EU. The condensed set of financial statements included
in this half-yearly financial report has been prepared in accordance with IAS 34
Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
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 UK. A review of half-yearly 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 Ireland) 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.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 September 2007 is not prepared, in all
material respects, in accordance with IAS 34 as adopted by the EU and the DTR of
the UK FSA.
KPMG Audit Plc
Chartered Accountants
8 Salisbury Square, London
9 November 2007
This information is provided by RNS
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