Interim Results
Electrocomponents PLC
06 November 2006
INTERIM STATEMENT
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 2006.
SUMMARY RESULTS
H1 2006/07 H1 2005/06
Revenue £422.4m £396.8m
Profit before tax - headline* £36.3m £35.3m
Profit before tax - reported £35.6m £33.6m
Earnings per share - headline 5.5p 5.4p
Earnings per share - basic 5.4p 5.2p
Interim dividend per share 5.8p 5.8p
* Growth in headline profit before tax, adjusted for
trading days 16%
HIGHLIGHTS OF THE FIRST HALF
* The strong revenue growth of our International business has continued with
first half growth of 15% and all regions showing double digit growth.
International revenue is now almost 60% of the Group.
* The UK has returned to revenue growth and the new strategic direction is being
implemented.
* The headline profit growth, adjusting for the £4m impact of there being fewer
trading days this half year, was 16%.
* Further progress has been made on the Electronic and Electromechanical (EEM)
strategy with the roll out of the Allied extended range to Asia Pacific, and
the highly successful launch of leading-edge wireless and displays
technologies in Europe.
* The percentage gross margin was flat compared with the second half of the last
financial year, after allowing for the change in business mix, due to the
strong growth of our North American business with its lower gross margin.
* Good operating cost leverage has been achieved in the International business
and contribution increased by £4m.
* Actions taken to reduce the cost base will achieve annualised savings of £6m
out of the planned total of £10m by 2008. This includes £1m per annum benefit
from the sale of the Head Office, which will also generate a £10m cash inflow
in the second half.
* The upgrade of the French enterprise business system was successfully
concluded in September.
* The interim dividend is maintained at 5.8p per share.
FOCUS FOR THE SECOND HALF
* Roll out EBS across the European markets.
* Continue to deliver more EEM strategy initiatives; October 2006 has seen a
significant increase in the range of EEM products available in the new
catalogues in the major European markets.
* Implement the MRO strategy focused initially on the UK.
* Continue implementation of the cost reduction plans.
Enquiries:
Ian Mason, Chief Executive Electrocomponents plc 0207 567 8000*
Simon Boddie, Finance Director Electrocomponents plc 0207 567 8000*
Diana Soltmann Flagship Consulting Ltd 0207 886 8440
* Available to 15:00 on 6 November, thereafter 01865 204000
The results and analyst presentation are published on the corporate website at
www.electrocomponents.com.
Definitions of terms: In order to reflect underlying business performance,
comparisons of revenue between periods have been adjusted for exchange rates and
the number of trading days. Changes in profit, cash flow, debt and share related
measures such as earnings per share are at reported exchange rates.
Enterprise Business System (EBS): In order to make clear the costs of the EBS
project and the underlying performance of the business, EBS costs have been
disclosed separately. Therefore, unless explicitly stated, measures based on
operating costs, contribution and process costs exclude EBS.
Headline profit: A charge of £0.7m (2005/06: £1.7m) 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. Where profit growth is shown adjusted for
there being fewer trading days the adjustment is made to the prior year.
Safe Harbour: Our interim statement contains certain statements, statistics and
projections that are or may be forward-looking. The accuracy and completeness of
all such statements, including, without limitation, statements regarding the
future financial position, strategy, projected costs, plans and objectives for
the management of future operations of Electrocomponents plc and its
subsidiaries is not warranted or guaranteed. These statements typically contain
words such as 'intends', 'expects', 'anticipates', 'estimates' and words of
similar import. By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on circumstances that will
occur in the future. Although Electrocomponents plc believes that the
expectations reflected in such statements are reasonable, no assurance can be
given that such expectations will prove to be correct. There are a number of
factors, which may be beyond the control of Electrocomponents plc, which could
cause actual results and developments to differ materially from those expressed
or implied by such forward-looking statements. Other than as required by
applicable law or the applicable rules of any exchange on which our securities
may be listed, Electrocomponents plc has no intention or obligation to update
forward-looking statements contained herein.
CHAIRMAN'S STATEMENT
Introduction
In the first half of this year, the Group has shown good progress in improving
its financial performance. Sales growth was 9% and headline profit growth,
adjusting for the £4m impact of there being fewer trading days this half year,
was 16%.
Sales growth in the International business remained at the high level of 15%
experienced in the second half of the last financial year with all regions
showing double digit growth. It is also pleasing to see that the UK has returned
to growth of 1%, benefiting from the new strategic direction being implemented.
Gross margin was flat compared with the second half of the last financial year,
after allowing for the change in business mix, due mainly to the strong growth
of Allied, our North American business, with its lower gross margin.
Good operating cost leverage has been achieved in the International business
where contribution increased by £4m. Where costs increased, they were generally
in customer facing areas and were closely linked to the strategy implementation.
Overall, in my first few months with Electrocomponents, I have been impressed by
how this well-focused Group and its committed employees are determined to raise
the performance of the business.
Strategic Development
This is the second year of our 3 year strategic development plan and good
progress has continued to be made in implementing the strategy.
The implementation of the EEM strategy has continued. Allied products have been
made available in Asia Pacific and the launch of leading edge wireless and
displays technologies in Europe has been highly successful.
The Group continues to focus on the roll out of its Enterprise Business System
(EBS) to the rest of Europe with the successful upgrade in France having taken
place in the first half.
The Group has implemented actions to achieve over £6m p.a. of cost savings and
further actions are planned to deliver the rest of the 2007/08 target of £10m
p.a. cost savings.
Interim Dividend
The interim dividend has been maintained at 5.8p. When the 3 year strategic
development plan was announced in May 2005, the Board decided that, assuming
there was no substantial deterioration in economic conditions, it should
maintain the current level of dividend for the following three years.
Board
During the half year, three Directors left the Group. Dieter Lennertz and Kevin
Abbott left in July, whilst Bob Lawson, the former Chairman, retired in October
after 26 years with the business. Throughout this time, Bob made an enormous
contribution to the Group and provided the leadership needed to grow the
International business to its current size. On behalf of the Board, I wish to
express our thanks to Bob, Dieter and Kevin.
Current Trading and Outlook
In October, Group revenue growth has been around 9% year on year. Growth in our
International business was around 15% and the UK growth was around 1%.
In the second half of the financial year, the Group will focus on delivering a
successful European EBS implementation. The Board is confident of delivering
profit growth through implementing the new strategy.
Helmut Mamsch, Chairman
6 November 2006
OPERATING REVIEW
Progress on 3 Year Plan
In May 2005, the Group announced a 3 year plan to substantially improve the
financial performance of the Group. This plan comprised three key elements:
* Focus separately on two distinct customer groups (EEM and MRO)
* Implement the Enterprise Business System (EBS)
* Create a lower cost infrastructure
We are now half way through the three year period and good progress has been
made with all three elements.
Electronic and Electromechanical (EEM)
The Group competes for EEM customers across the product lifecycle, from research
and development (R&D), through pre-production and small scale production, to
maintenance. The business supplies a broad range of products and is a primary
supplier for customers' product needs.
The market for low volume component distribution is around £12bn worldwide plus
the value of electromechanical and other associated 'pull through' products.
This market is highly fragmented and the proportion served by distribution is
growing with R&D customers and new technologies driving this growth. The Group
has only around 3% of the global low volume distribution market so there are
significant growth opportunities for the Group across the world.
The EEM market is currently undergoing fundamental change, with the geographical
separation of R&D from production, technology proliferation and increasing use
of the e-Commerce channel. This is creating a more fragmented customer base with
different requirements. Customers increasingly demand technology solutions as
well as individual products and need more product support.
The Group's offer is ideally suited to these customers by providing an economic
way to serve these needs and leveraging the core strengths of the RS brand. In
this way, RS is building a differentiated and attractive competitive position to
serve the EEM market.
The main elements of our EEM strategy implementation are to:
* focus the business on EEM by recruiting new skills to the Group and creating a
new EEM division and sales teams
* improve our offer for R&D engineers through updating our component ranges,
widening product availability and new technology solutions beyond the wireless
and displays range that was launched successfully in the main European markets
in the first half
* develop our pre-production sales model with pilots underway in Europe
* develop new capabilities needed to serve EEM customers
Early results of these actions have been positive. Sales of the extended range
of 75,000 products from Allied (our North American company) have grown strongly
month on month. This range of EEM products was launched in the major European
markets last financial year, rolled out to Asia Pacific during the half year and
will be made available in the other European markets in the second half.
Similarly, the web-only wireless and displays launch was highly successful and
the range was included in the October catalogues.
Maintenance, Repair and Operations (MRO)
Our MRO offer is aimed primarily at maintenance engineers at the end of the
product lifecycle. These customers value a broad range of products and
technologies and they view RS as a secondary supplier of these products, as we
are particularly strong at fulfilling convenient or urgent needs for infrequent
or hard-to-find products.
The largest MRO business within the Group is in the UK and this business is
developing the MRO strategy on behalf of the Group.
The main elements of our MRO strategy are to:
* focus on existing strong technologies within MRO with the creation of a
Process Control and Automation (PCA) operating unit and the offer of an
extended PCA range from key suppliers
* rationalise the MRO support product range starting with a planned 20%
reduction in the UK
* increase the proportion of RS own-brand products in the UK by 30%
* build maintenance related services such as the UK Call and Collect facilities
We are achieving strong PCA growth in the UK and Europe.
Common Actions
These EEM and MRO strategies build upon RS core strengths of broad product
range, reliable delivery, order facilitation and broad customer base. They also
benefit from increased price flexibility via larger order promotions and
targeted discounts for large customers.
These programmes are supported by common infrastructure, processes and systems
including EBS and e-Commerce. e-Commerce, which represented 26% of Group sales
in the first half, is a key enabler of the strategy implementation allowing the
global availability of web-only products coupled with rapid price and offer
changes. Consequently, the Group continues to invest in and develop the
e-Commerce channel with an improved search facility, a more relevant offer to
EEM and MRO customers and an enhanced large customer offer through
e-Procurement.
Enterprise Business System (EBS)
The Enterprise Business System is supporting the UK business, France and the
International supply activities well. During the half year, there was an update
to bring France onto the same EBS version as the UK. This was achieved
successfully.
The roll out of EBS to the other European businesses remains on schedule and is
expected to be largely complete by the end of this financial year. The EBS
system was successfully rolled out to China in October.
The European roll out is a major focus for the second half and, although it
presents a significant challenge, we are confident of success. The timing of the
roll out of EBS to Allied in North America is still to be determined and will be
considered after the completion of EBS in Europe and the warehouse move in North
America, which is scheduled for mid 2007/08.
Following the European roll out, the Group will focus on the delivery of
benefits, including higher stock turn in Europe from regional inventory
planning, the enablement of further cost savings and increased revenue.
Infrastructure
During the half year, the Group has achieved good cost leverage in all
International regions, driven by strong sales growth and cost reduction
initiatives.
In 2005/06, actions were taken to deliver £4.4m of annualised cost savings. In
the first half of 2006/07, action was taken to deliver further cost savings of
£0.9m with a reorganisation cost of £0.7m.
In September, the sale of the International Management Centre building in Oxford
with an associated move to a smaller rented building was agreed. The move will
generate a cash flow benefit of around £10m in the second half of the financial
year. The lower running costs of the new building and interest benefit on the
cash received will give an annualised benefit of around £0.8m per year.
As part of the 3 year plan, the Group plans to achieve infrastructure savings of
£10m p.a. through cost reduction initiatives by 2007/08. To date, actions have
been taken to deliver annual cost savings of £6.1m, including the Head Office
saving.
Financial Performance
The headline profit before tax was £36.3m, up £1.0m from last year. This
increase has been driven by five main factors. The contribution of the
International business has increased by £3.5m and EBS costs have reduced by
£2.5m. Against this, UK contribution has declined by £2.4m, process costs have
increased by £1.4m and interest has increased by £1.2m. The profit growth was
16%, after adjusting for the £4m impact of there being fewer trading days this
half year, principally as a result of the timing of Easter relative to the year
end.
Revenue for the Group increased by 9.0% to £422.4m. The International business
grew at 15.5% and the UK business returned to growth at 0.9%. Growth in the
International business was maintained at the same high level as the second half
of the last financial year with Europe growing at 10.3%, North America at 24.1%
and Asia Pacific at 18.8%. Revenue via e-Commerce grew by 21% and now accounts
for 26% of Group revenue.
Gross profit increased by £7.7m over the first half of last year. Gross margin
was flat compared with the second half of last year, after allowing for the
change in geographic mix caused by the particularly fast growth of the lower
margin North American business.
Market contribution increased to £87.7m from £86.6m in the first half of last
year. The increase in International (up £3.5m) has been partially negated by the
fall in the UK (down £2.4m).
Headline EBITDA increased by £3.9m (8.2%) to £51.6m.
Process costs have increased to £41.1m from £39.7m last year but have reduced as
a percentage of revenue from 10.0% to 9.7%. The cost increase is caused, in
part, by the higher sales demand. EBS costs were £7.8m, £2.5m below last year
due to the European EBS roll out being focused on the second half.
The interest charge was £2.5m, up £1.2m on the first half of last year due to
increased net debt. Closing net debt was £151.2m, £30.4m higher than last year
end. The financial ratios remain strong with interest cover of around 15 times.
Reported profit before tax was £35.6m, up from £33.6m last year due to the £1.0m
increase in headline profit before tax and £1.0m lower reorganisation costs.
Free cash flow was £12.2m, down £5.9m on last year due largely to the previously
announced higher capital expenditure on the North American warehouse and the
reduction in creditors from the unusually high level in September 2005 which
related to the EBS go-live.
Group H1 2006/07 H1 2005/06
Revenue £422.4m £396.8m
Gross margin 50.7% 52.0%
Contribution £87.7m £86.6m
Group process costs (£41.1m) (£39.7m)
EBS costs (£7.8m) (£10.3m)
Headline operating profit £38.8m £36.6m
Interest (net) (£2.5m) (£1.3m)
Headline profit before tax £36.3m £35.3m
Headline earnings per share 5.5p 5.4p
Interim dividend per share 5.8p 5.8p
Key performance indicators
Group H1 2006/07 H1 2005/06
Group sales growth 9.0% 2.9%
International 15.5% 8.7%
UK 0.9% (3.6)%
Headline Group return on sales 8.6% 8.9%
Headline EBITDA (1) £51.6m £47.7m
Free cash flow £12.2m £18.1m
(1) Earnings before interest, tax, depreciation and amortisation
Gross margin
Group gross profit increased by £7.7m year on year. Gross margin was 50.7% in
the period for the Group, being 1.3% points below the prior year.
In the UK, the gross margin was 53.3%, level with the first half of last year.
The majority of the selling price realignment has now been completed and the
business is getting the benefits of the action taken to reduce product costs
through better buying.
In the International business, where gross profit increased by £9.0m, gross
margin has been reduced by 2.2% points from the first half of the last financial
year. This was due to price realignment actions and increased customer and large
order discounts in Europe and Asia Pacific as well as the geographical mix
impact of the rapid North American revenue growth. In North America, gross
margin continues to be stable at around 36%.
The Group is focused on driving gross profit through the implementation of the
EEM strategy, increasing large customer and larger order business and reducing
product cost. Costs will be reduced by better buying, rationalising the MRO
product range and increasing the sales of higher margin RS own-brand product. In
the second half of the financial year the International business will benefit
from the actions taken to reduce product cost that were seen in the UK earlier
because of its higher stock turn.
The Group gross margin was flat compared with the second half of the last
financial year, after allowing for the change in business mix, due mainly to the
strong growth of our North American business with its lower gross margin.
International
H1 2006/07 H1 2005/06
Revenue £248.7m £220.5m
Revenue growth % 15.5% 8.7%
Gross margin 48.8% 51.0%
Operating costs % of revenue (31.7)% (33.3)%
Contribution £42.5m £39.0m
% of revenue 17.1% 17.7%
The International business now accounts for 59% of Group revenue and 48% of
Group contribution. It comprises Continental Europe (53% of the revenue in the
International business), North America (31%) and Asia Pacific (16%). Revenue
growth, at 15.5%, remained at the high level experienced in the second half of
the last financial year. All of the regions delivered double digit revenue
growth in the period.
There has been good cost leverage with costs as a percentage of sales reducing
by 1.6% points with improvements in all regions. Contribution has increased by
£3.5m (9.0%) in the period with all regions increasing contribution.
Continental Europe
H1 2006/07 H1 2005/06
Revenue £132.6m £122.8m
Revenue growth % 10.3% 5.1%
Contribution £27.3m £27.1m
% of revenue 20.6% 22.1%
Continental Europe includes eight businesses. France, Germany and Italy are the
larger businesses, together comprising around 75% of regional revenue. The
smaller businesses (Austria, Benelux, Ireland, Scandinavia and Spain) comprise
the remainder.
All of the businesses have had revenue growth in the period and, in particular,
growth has been maintained at double digit level in the larger markets. This
growth has been supported by the EEM strategy implementation, in particular the
revenue from the Allied extended range and from the increased flexibility
offered to customers for larger orders. In addition, there has been more sharing
of best practice between the European markets and the successful joint supplier
marketing programme from Allied has been adopted.
e-Commerce is an important enabler of the strategy, and its success is
illustrated by the fact that e-Commerce revenue is up 30% on the first half of
last year and now represents 31% of total revenue.
Despite the rise in revenue, and the local cost leverage, the contribution as a
% of revenue has fallen 1.5% points from last year due to the reduction in gross
margin.
North America
H1 2006/07 H1 2005/06
Revenue £77.7m £64.1m
Revenue growth % 24.1% 14.0%
Contribution £11.3m £8.6m
% of revenue 14.5% 13.4%
The revenue in Allied (our North American business) has continued to grow
strongly at 24.1%. e-Commerce revenue was 9% of total revenue. This is the sixth
half year in succession with revenue growth of more than 10%. Over a three year
period, sales have increased by around three quarters and the contribution has
more than doubled.
The growth strategy is working with the reinforcement of the strong network of
55 branches providing the local presence that our North American customers
value, and increased sales training and technical knowledge. The expansion of
our product range with additional key brands and the decision to improve the
service levels offered to customers has also had a positive impact.
The new warehouse and office remains on track (go-live mid 2007/08) and on
budget (£22m in capital expenditure).
Contribution as a percentage of revenue has increased by over 1% point in the
period.
Asia Pacific
H1 2006/07 H1 2005/06
Revenue £38.4m £33.6m
Revenue growth % 18.8% 12.6%
Contribution £3.9m £3.3m
% of revenue 10.2% 9.8%
Revenue growth in the Asia Pacific region has increased to 18.8%. e-Commerce
revenue was 27% of total revenue, including 56% in Japan.
In China, where revenue grew by 21% over the first half of last year, the growth
acceleration plans have started with the driving of the Same Day Offer and the
successful EBS implementation in October 2006. The Chinese equivalent of RoHS is
to be introduced in March 2007 and we are planning for this introduction.
Revenue in South Asia grew by 42% over the first half of last year. Economic
indicators are positive, particularly in Singapore and Malaysia. The new sales
office in Thailand and the Allied extended range availability have also
contributed to the growth.
Revenue growth in Japan has continued to recover with growth of 16% following
the weaker performance in the first half of last year. The Group plans to lease
more warehouse space to cope with this additional growth.
In Australasia, revenue growth was 7% despite the weak industrial growth in the
country.
Contribution as a % of revenue in the region improved by 0.4% points.
United Kingdom
H1 2006/07 H1 2005/06
Revenue £173.7m £176.3m
Revenue growth % 0.9% (3.6)%
Gross margin 53.3% 53.3%
Operating costs % of revenue (27.3)% (26.3)%
Contribution £45.2m £47.6m
% of revenue 26.0% 27.0%
The aim of the UK business is to generate a sustainable profit and enable future
growth.
The UK business is moving from a 'one size fits all' offer to two targeted
offers: EEM and MRO. These two targeted offers will be supported by common
systems, processes and infrastructure.
The UK will adopt the Group EEM strategy and will develop the MRO strategy on
behalf of the Group. This will involve two sales forces (EEM and MRO), and one
catalogue with two distinct books. The UK will become an increasingly
web-centric business with, in the medium term, more than 50% of its revenue
being through the e-Commerce channel. The web will allow a more dynamic offer to
customers. The UK will exploit EBS benefits to reduce its operating costs and it
will move towards a continuous improvement and change orientated culture.
The UK business, supported by EBS, has returned to revenue growth (of 0.9%) and
maintained its gross margin with the success of the larger order business and
key account wins. e-Commerce revenue increased to 30% of total revenue.
Contribution was £45.2m, down £2.4m on the first half of last year. The
contribution as a percentage of revenue has fallen by 1% point to 26.0% due to
there being fewer trading days, principally as a result of Easter, and an
increase in costs of around 2%.
Restriction of Hazardous Substances (RoHS)
RoHS is a European Directive introduced in July 2006 for components used in
production. It has become a de facto world standard. The Group offers around
100,000 RoHS compliant products in Europe and around 100,000 in North America.
All new products introduced into the Group are RoHS compliant.
The Group is currently dual stocking around 2,000 products where there has been
significant demand for both compliant and non-compliant product.
The net impact on sales has not been significant.
EBS financial impact
EBS costs were £7.8m in the first half compared with £10.3m in the first half of
last year. Within this, depreciation increased by £2.7m to £5.3m, while project
and local business costs declined by £5.2m to £2.5m following the UK
implementation. The expected full year cost, in the low £20m's, is again
weighted towards the second half, in line with the planned roll out in the rest
of Europe in the second half.
The cash flow impact of EBS in the first half was £8.3m, a reduction of £2.5m
from the prior year.
Pensions
The Group has defined benefit pension schemes in the UK, Ireland and Germany,
all of which are now closed to new entrants and have been replaced by defined
contribution schemes. All other schemes are defined contribution.
Under IAS 19, the defined benefit schemes showed a combined deficit of £41.8m at
31 March 2006 of which the deficit in the UK scheme was £35.0m. As at 30
September 2006, the estimated deficit of the UK scheme was £36m, based on
substantially similar assumptions to those used at the year end.
Ian Mason, Group Chief Executive
Simon Boddie, Group Finance Director
6 November 2006
Group Income Statement
6 months to 6 months to Year to
30.9.2006 30.9.2005 31.3.2006
(unaudited) (unaudited) (audited)
Note £m £m £m
__________ __________ __________
Revenue 1 422.4 396.8 828.5
__________ __________ __________
Gross profit 214.0 206.3 426.4
Operating profit 38.1 34.9 68.5
Financial income 5.3 2.3 6.9
Financial expenses (7.8) (3.6) (10.3)
__________ __________ __________
Profit before tax 1 35.6 33.6 65.1
Income tax expense 2 (12.1) (11.1) (21.5)
__________ __________ __________
Profit for the period
attributable to equity
shareholders 23.5 22.5 43.6
__________ __________ __________
Earnings per share - Basic 3 5.4p 5.2p 10.0p
Earnings per share - Diluted 3 5.4p 5.2p 10.0p
Dividends
Amounts recognised
in the period:
Final dividend for the year
ended 31 March 2006 4 12.6p 12.6p 12.6p
Interim dividend for the
year ended 31 March 2006 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 38.1 34.9 68.5
Provision for RoHS - - 4.0
Reorganisation costs 0.7 1.7 3.7
__________ __________ __________
38.8 36.6 76.2
__________ __________ __________
Headline profit before tax
Profit before tax 35.6 33.6 65.1
Provision for RoHS - - 4.0
Reorganisation costs 0.7 1.7 3.7
__________ __________ __________
36.3 35.3 72.8
__________ __________ __________
Group Statement of Recognised Income and Expense
Note 6 months to 6 months to Year to
30.9.2006 30.9.2005 31.3.2006
(unaudited) (unaudited) (audited)
£m £m £m
__________ _________ __________
Foreign exchange translation
differences 6 (6.5) 8.3 11.6
Actuarial gain on defined
benefit pension schemes 6 - - 4.2
Gain (loss) on cash flow hedges 6 2.2 0.3 (1.0)
Tax on items taken directly to
equity 6 - - (1.3)
__________ _________ ___________
Net income recognised directly
in equity (4.3) 8.6 13.5
Profit for the period 23.5 22.5 43.6
__________ _________ ___________
Total recognised income and
expense for the period
attributable to equity
shareholders before opening
balance sheet adjustment 19.2 31.1 57.1
Opening balance sheet
adjustment: adoption of IAS32
and IAS39 - 0.9 0.9
__________ _________ __________
Total recognised income and
expense for the period
attributable to equity
shareholders 19.2 32.0 58.0
__________ _________ ___________
Group Balance Sheet
30.9.2006 30.9.2005 31.3.2006
(unaudited) (unaudited) (audited)
Note £m £m £m
____________ _________ __________
Non-current assets
Intangible assets 201.3 203.8 208.2
Property, plant and equipment 104.8 112.4 112.8
Investments 0.3 0.2 0.3
Trade and other receivables 2.7 2.5 3.2
Deferred tax asset 17.3 18.2 17.5
____________ _________ __________
326.4 337.1 342.0
____________ _________ __________
Current assets
Inventories 162.9 157.3 158.6
Trade and other receivables 157.1 148.0 162.3
Income tax receivables 1.5 0.3 1.0
Assets held for sale 5 8.5 - -
Cash and cash equivalents 16.6 58.2 39.4
____________ _________ __________
346.6 363.8 361.3
____________ _________ __________
Current liabilities
Trade and other payables (119.6) (120.5) (123.5)
Loans and borrowings (34.1) (22.8) (23.0)
Tax liabilities (13.9) (12.8) (13.3)
____________ _________ __________
(167.6) (156.1) (159.8)
____________ _________ __________
Net current assets 179.0 207.7 201.5
____________ _________ __________
Total assets less current
liabilities 505.4 544.8 543.5
____________ _________ __________
Non-current liabilities
Trade and other payables (6.5) (11.1) (7.8)
Retirement benefit obligations (40.5) (45.9) (41.8)
Loans and borrowings (133.7) (131.7) (137.2)
Deferred tax liability (22.7) (21.6) (20.3)
____________ _________ __________
Net assets 302.0 334.5 336.4
____________ _________ __________
Equity
Called-up share capital 43.5 43.5 43.5
Share premium account 38.4 38.4 38.4
Retained earnings 220.1 252.6 254.5
____________ _________ __________
Total equity available to the
shareholders of the parent 6 302.0 334.5 336.4
____________ _________ __________
Group Cash Flow Statement
6 months to 6 months to Year to
30.9.2006 30.9.2005 31.3.2006
(unaudited) (unaudited) (audited)
Note £m £m £m
____________ _________ __________
Cash flows from operating
activities
Profit before tax 35.6 33.6 65.1
Depreciation and other 12.8 11.1 24.1
amortisation
Equity settled transactions 1.2 1.6 2.7
Finance income and expense (net) 2.5 1.3 3.4
____________ _________ __________
Operating profit before changes
in working capital, interest
and taxes 52.1 47.6 95.3
Increase in inventories (8.8) (12.7) (12.8)
Decrease (increase) in trade
and other receivables 5.4 (0.1) (14.6)
(Decrease) increase in trade
and other payables (8.8) 12.6 13.2
____________ _________ __________
Cash generated from operations 39.9 47.4 81.1
Interest received 5.3 2.3 6.8
Interest paid (7.8) (3.6) (10.1)
Income tax (8.0) (13.8) (25.8)
____________ _________ __________
Operating cash flow 29.4 32.3 52.0
Cash flows from investing
activities
Capital expenditure and
financial investment (17.2) (14.2) (25.1)
____________ _________ __________
Net cash used in investing
activities (17.2) (14.2) (25.1)
____________ _________ __________
Free cash flow 12.2 18.1 26.9
____________ _________ __________
Cash flows from financing
activities
Loans 15.3 28.9 28.7
Dividends paid (54.8) (54.8) (80.0)
____________ _________ __________
Net cash used in financing
activities (39.5) (25.9) (51.3)
____________ _________ __________
Net movement in cash and cash
equivalents (27.3) (7.8) (24.4)
____________ _________ __________
Cash and cash equivalents at
the beginning of the period 38.0 62.6 62.6
Effects of exchange rates on
cash 1.4 1.8 (0.2)
____________ _________ __________
Cash and cash equivalents at
the end of the period 7 12.1 56.6 38.0
____________ _________ __________
Basis of Preparation and Principal Accounting Policies
Electrocomponents plc (the 'Company') is a company domiciled in the UK. The
Group interim financial statements as at, and for, the six months ended 30
September 2006 comprise the Company and its subsidiaries (together referred to
as the 'Group') and the Group's interests in jointly controlled entities.
The Group financial statements for the year ended 31 March 2006 are available
upon request from the Company's registered office at International Management
Centre, 5000 Oxford Business Park South, Oxford, OX4 2BH.
The comparative figures for the financial year ended 31 March 2006 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
These interim financial statements have been prepared in accordance with
International Accounting Standards. They do not include all of the information
required for full annual financial statements, and should be read in conjunction
with the Group financial statements for the year ended 31 March 2006.
These interim financial statements were approved by the Board of Directors on 6
November 2006.
Significant accounting policies
The accounting policies applied by the Group in these financial statements are
the same as those applied by the Group in its financial statements for the year
ended 31 March 2006.
Estimates and judgements
The preparation of interim 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 2006. We view the only
significant judgement made in the financial statements for the year ended 31
March 2006, surrounds the capitalisation of the Enterprise Business System
asset. During the development of the software, judgements were required as to
whether expenditure met the criteria for capitalisation in IAS38. In December
2005, the Enterprise Business System was implemented successfully in the UK and,
in the half year, there was an update to bring France on to the same version as
the UK.
Notes to the Interim Statement
6 months to 6 months to Year to
30.9.2006 30.9.2005 31.3.2006
(unaudited) (as restated) (audited)
(unaudited)
1 Segmental Reporting £m £m £m
By geographical destination
Revenue: United Kingdom 166.7 169.4 339.9
Continental Europe 135.4 124.9 272.5
North America 76.9 63.2 135.9
Asia Pacific 43.4 39.3 80.2
____________ _________ _________
422.4 396.8 828.5
____________ _________ _________
By geographical origin
Revenue: United Kingdom 173.7 176.3 353.6
Continental Europe 132.6 122.8 267.9
North America 77.7 64.1 137.5
Asia Pacific 38.4 33.6 69.5
____________ _________ _________
422.4 396.8 828.5
____________ _________ _________
Profit
before
tax: United Kingdom 45.2 47.6 96.9
Continental Europe 27.3 27.1 59.9
North America 11.3 8.6 19.2
Asia Pacific 3.9 3.3 7.2
____________ _________ _________
Headline contribution 87.7 86.6 183.2
Group process costs (41.1) (39.7) (81.9)
Enterprise Business
System costs (7.8) (10.3) (25.1)
____________ _________ _________
Headline operating profit 38.8 36.6 76.2
Net financial expense (2.5) (1.3) (3.4)
____________ _________ _________
Headline profit before tax 36.3 35.3 72.8
Provision for RoHS - - (4.0)
Reorganisation costs (0.7) (1.7) (3.7)
____________ _________ _________
35.6 33.6 65.1
____________ _________ _________
The results for the 6 months to 30 September 2005 have been restated to include
Japan within Asia Pacific rather than reporting it as a separate segment as this
reflects the increasing alignment of the Group's management of these businesses.
Profit before tax has also been restated to show the costs relating to the
Enterprise Business System separately. The impact of this is:
6 months to Restatement 6 months to
30.9.2005 as 30.9.2005 as
originally stated restated
£m £m £m
Headline contribution 85.1 1.5 86.6
Group process costs (48.5) 8.8 (39.7)
costs
Enterprise Business System costs - (10.3) (10.3)
____________ _________ _________
Headline operating profit 36.6 - 36.6
____________ _________ _________
Within headline contribution the
regional impact is:
United Kingdom contribution 46.5 1.1 47.6
Continental Europe contribution 26.7 0.4 27.1
____________ _________ _________
6 months to 6 months to Year to
30.9.2006 30.9.2005 31.3.2006
(unaudited) (unaudited) (audited)
2 Taxation on the profit of the Group £m £m £m
United Kingdom taxation 5.3 4.3 8.8
Overseas taxation 6.8 6.8 12.7
____________ _________ _________
12.1 11.1 21.5
____________ _________ _________
6 months to 6 months to Year to
30.9.2006 30.9.2005 31.3.2006
(unaudited) (unaudited) (audited)
3 Earnings per share £m £m £m
Profit for the year attributable
to equity shareholders 23.5 22.5 43.6
Provision for RoHS - - 4.0
Reorganisation costs 0.7 1.7 3.7
Tax impact of provision for RoHS
and reorganisation costs (0.3) (0.6) (2.4)
____________ _________ _________
Headline profit for the year
attributable to equity shareholders 23.9 23.6 48.9
____________ _________ _________
Weighted average number of shares 434.9m 434.9m 434.9m
Diluted weighted average number
of shares 435.7m 435.2m 435.3m
Headline basic earnings per share 5.5p 5.4p 11.2p
Basic earnings per share 5.4p 5.2p 10.0p
Headline diluted earnings per share 5.5p 5.4p 11.2p
Diluted earnings per share 5.4p 5.2p 10.0p
____________ _________ _________
6 months to 6 months to Year to
30.9.2006 30.9.2005 31.3.2006
(unaudited) (unaudited) (audited)
4 Interim dividend £m £m £m
Amounts recognised in the period:
Final dividend for the year
ended 31 March 2006 - 12.6p
(2005: 12.6p) 54.8 54.8 54.8
Interim dividend for the year
ended 31 March 2006 - 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 2007 - 5.8p 25.2
The timetable for the payment of the
interim dividend is:
Ex-dividend date 13 December 2006
Dividend record date 15 December 2006
Dividend payment date 18 January 2007
5 Assets held for sale
The Group has agreed to sell its office building in Oxford and move into
alternative accommodation nearby. In accordance with IFRS 5 (Non-current Assets
Held for Sale and Discontinued Operations), the value of the building (£8.5m)
has been reclassified from Property, Plant and Equipment to current assets. The
sale will be completed prior to 31 March 2007.
6 months to 6 months to Year to
30.9.2006 30.9.2005 31.3.2006
(unaudited) (unaudited) (audited)
6 Reconciliation of movements in equity £m £m £m
Profit for the period 23.5 22.5 43.6
Dividends (54.8) (54.8) (80.0)
____________ _________ _________
Loss for the period (31.3) (32.3) (36.4)
Foreign exchange translation
differences (6.5) 8.3 11.6
Actuarial gain on defined benefit
pension scheme - - 4.2
Gain (loss) on cash flow hedges 2.2 0.3 (1.0)
Tax on items taken directly to equity - - (1.3)
Equity settled transactions 1.2 1.6 2.7
____________ _________ _________
Net reduction in equity (34.4) (22.1) (20.2)
____________ _________ _________
Equity shareholders' funds at the
beginning of the period 336.4 355.7 355.7
Opening balance sheet adjustment:
IAS 39 - 0.9 0.9
Equity shareholders' funds at the
beginning of the period as restated 336.4 356.6 356.6
____________ _________ _________
Equity shareholders' funds at the end
of the period 302.0 334.5 336.4
____________ _________ _________
30.9.2006 30.9.2005 31.3.2006
(unaudited) (unaudited) (audited)
7 Cash and cash equivalents £m £m £m
Bank balances 9.7 5.5 15.4
Call deposits and investments 6.9 52.7 24.0
____________ _________ _________
Cash and cash equivalents in the
balance sheet 16.6 58.2 39.4
Bank overdrafts (4.5) (1.6) (1.4)
____________ _________ _________
Cash and cash equivalents in the cash
flow statement 12.1 56.6 38.0
Current instalments of loans (29.6) (21.2) (21.6)
Loans repayable after more than one
year (133.7) (131.7) (137.2)
____________ _________ _________
Net debt (151.2) (96.3) (120.8)
____________ _________ _________
8 Principal exchange rates 6 months to 6 months to Year to
30.9.2006 30.9.2005 31.3.2006
(unaudited) (unaudited) (audited)
Average for the period
Euro 1.46 1.47 1.46
United States Dollar 1.85 1.82 1.79
____________ _________ _________
30.9.2006 30.9.2005 31.3.2006
Period end
Euro 1.48 1.47 1.43
United States Dollar 1.87 1.76 1.74
____________ _________ _________
Independent Review Report to Electrocomponents plc
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 September 2006 which comprises the Group income
statement, balance sheet, cash flow statement, the statement of recognised
income and expense, and basis of preparation and principal accounting policies
and notes 1 to 8. We have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
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 Listing
Rules of the Financial Services Authority. 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 interim report, including the financial information contained therein, is
the responsibility of and has been approved by the Directors. The Directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual financial statements except
where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
Review of interim financial information issued by the Auditing Practices Board
for use in the UK. A review consists principally of making enquiries of group
management and applying analytical procedures to the financial information and
underlying financial data and, based thereon, assessing whether the accounting
policies and presentation have been consistently applied unless otherwise
disclosed. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. A review is substantially
less in scope than an audit performed in accordance with International Standards
on Auditing (UK and Ireland) and therefore provides a lower level of assurance
than an audit. Accordingly, we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2006.
KPMG Audit Plc
Chartered Accountants
8 Salisbury Square
London
EC4Y 8BB
6 November 2006
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