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ANNOUNCEMENT OF PRELIMINARY RESULTS YEAR ENDED 31 MARCH 2006 1 June 2006

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Title: ANNOUNCEMENT OF PRELIMINARY RESULTS YEAR ENDED 31 MARCH 2006 1 June 2006


1
ANNOUNCEMENT OF PRELIMINARY RESULTS YEAR
ENDED 31 MARCH 2006 1 June 2006

2
BOB LAWSON CHAIRMAN
3
AGENDA
  • Welcome
  • Current trading
  • Progress on strategy delivery
  • Regional overview
  • Financial performance

Bob Lawson
Ian Mason
Simon Boddie
4
CURRENT TRADING
  • Since the year end, Group revenue growth has
    remained strong at around 9. The International
    business has grown by around 15 and the UK
    business has been flat. As planned, gross
    margins are lower than the equivalent period last
    year, largely due to actions taken to improve
    competitiveness

5
IAN MASON GROUP CHIEF EXECUTIVE
6
STRATEGY ANNOUNCED IN MAY 2005
1 Focus separately on two distinct customer groups Electronic and electromechanical (EEM) Maintenance, repair and operations (MRO)
2 Implement the Enterprise Business System (EBS)
3 Create a lower cost infrastructure
An update on developments, one year into the
three year plan
7
EEM STRATEGY PROGRESS
  • Extended product range performed well
  • Allied products available in Europe
  • Launched new leading edge technologies
  • Wireless and Displays
  • Aligned offer with customer needs
  • new packaging options
  • enhanced search and presentation
  • Planned strategy actions
  • all EEM products available worldwide
  • massively increase EEM product range
  • further improve customer service

8
EBS IMPLEMENTATION PROGRESS
  • Successful UK implementation over Christmas 2005
  • UK, International supply and Group processes
  • over 1 million customer orders so far!
  • European roll out underway and planned to be
    largely complete in 2006/07
  • accelerated roll out of established template
  • learning and confidence from France and UK
    implementations
  • Asia Pacific EBS roll out will be complete with
    China implementation in 2006/07
  • EBS provides the essential systems platforms to
    support strategy delivery
  • focus on benefits delivery

9
LOWER COST INFRASTRUCTURE
  • Sales growth to drive economies of scale
  • high fixed cost infrastructure
  • good cost leverage in International businesses
  • Cost reduction initiatives identified to achieve
    10m target over 3 years
  • 4.4m of annualised cost reduction achieved
  • includes removal of c.110 roles
  • one-off reorganisation costs of 3.7m
  • further actions planned in 2006/07 including EBS
    enabled benefits
  • Costs being systematically redeployed to front
    end sales and marketing

10
BUSINESS PORTFOLIO

Contribution
Revenue


of Group


of revenue

Europe

268m


32


22.4

US

138m


17


14.0

Asia Pacific

69m


8


10.4

International

475m


57


18.2







UK

354m


43


27.4

Group

829m


100


22.1


11
INTERNATIONAL
  • Revenue growth
  • full year 12
  • second half 15
  • current trading 15
  • Improvements in all regions
  • Gross margin reduction
  • Good operating cost leverage
  • Contribution increased by 9m

12
EUROPE
  • Revenue growth
  • full year 8
  • second half 11
  • current trading 12
  • Improvements throughout Europe
  • especially France, Germany and Italy
  • EEM strategy implementation
  • extended range sales growth
  • realigning marketing spend to EEM
  • halo effect on existing products
  • Successful MRO trial in Germany
  • Addressing key customer barriers
  • price perception
  • flexibility

13
GROSS MARGIN POSITION
  • Targeted price reductions and increased discount
    flexibility to improve the competitiveness
  • maintained overall price position and fixed price
    catalogue
  • continued to implement and develop market price
    framework
  • eg pass on commodity price increases quickly
  • specific customer and large order discounts
    delivering growth
  • Significant net cost price reductions achieved
  • supplier negotiation and range rationalisation
    particularly in MRO
  • ongoing programme of margin recovery
  • Net impact is a reduction in gross margin
  • high US growth and product mix have also impacted
    gross margin
  • Managing trade-off between gross margin, sales
    and gross profit
  • greater focus on increasing gross profit
  • rate of gross margin decline will slow as
    competitive position adjusted

14
IMPROVING COMPETITIVENESS
Operating Company
Product Range
15
US
  • Revenue growth
  • full year 18
  • second half 22
  • current trading 22
  • Continuation of proven growth strategy
  • expansion of field sales
  • 55 local branches
  • expansion of product range
  • marketing programmes developed with suppliers
  • improved customer service levels
  • Gross margin stabilised in H2 at 36
  • New warehouse on track for mid 2007

16
ASIA PACIFIC (INCLUDING JAPAN)
  • Revenue growth
  • full year 14
  • second half 16
  • current trading 17
  • Strong growth in all regions
  • N Asia 21, S Asia 19, Australasia 12, Japan
    11
  • Japan sales growth recovered well in H2
  • Thailand sales office to open in mid 2006
  • Solid foundations built across the Asia Pacific
    region
  • potential to accelerate growth in China

17
CHINA ACCELERATION
  • RS currently has a leading position in China
  • Same Day Offer in Shanghai, Beijing and Wuhan
  • high intangible value from official permissions
    and relationships
  • Research with RS customers identified they have
    three primary customer needs
  • wide range of products
  • assured delivery
  • knowledgeable local sellers
  • Four point plan for meeting these needs and
    driving growth in China
  • product range expansion
  • increased stock levels to improve delivery
    service
  • further sales offices and resource to enhance
    face to face selling
  • marketing investment to drive customer
    acquisition
  • Additional PL investment of 1.5m in 2006/07

18
UK
  • Revenue change
  • full year -3
  • second half -2
  • current trading flat
  • Successful implementation of EBS
  • Continued manufacturing decline
  • Increased discount flexibility
  • strong large order growth
  • several large account wins
  • Strong e-Commerce growth and now 28 of sales

19
UK STRATEGY
  • Objective is to generate a sustainable profit and
    enable future growth
  • The objective will be realised through the
    implementation of the Group strategy
  • built on core strengths range, availability,
    order facilitation and reliable delivery
  • develop new MRO strategy on behalf of the Group
  • 2 shop fronts leveraged off a common
    infrastructure
  • Significant changes to the operational approach
    to deliver the strategy
  • rationalisation of MRO offer with increased RS
    own-brand
  • greater price and discount flexibility with gross
    profit focus
  • migration of business to web and reduce other
    channel costs
  • changing role of the salesforce
  • Cost base will be reduced through targeted
    initiatives, reducing complexity and EBS benefits
  • Getting on with implementation

20
PROCESSES
  • Product Management
  • reorganised to align with the strategy
  • developing EEM and rationalising MRO ranges
  • effective cost price management
  • IS
  • aligned structure to post-EBS world
  • upgraded supporting infrastructure
  • Supply Chain
  • good stock and service level control
  • MPP
  • continued catalogue and production process cost
    reduction
  • HR
  • culture change programme
  • more customer focused and quicker to act

21
e-COMMERCE
revenue Group 25 Asia Pacific 27 UK 28
(including Japan 53) Europe 28 US 8
  • Revenue growth 29
  • Germany now c.40 e-Commerce
  • particularly strong e-Procurement growth
  • e-Commerce is enabling the strategy
    implementation
  • allows low cost offer of extended range
  • allows rapid product introduction,
  • discontinuation and price change
  • enables global availability of products

22
SIMON BODDIE GROUP FINANCE DIRECTOR
23
  • Unless otherwise stated
  • This has been prepared using International
    Financial Reporting Standards (IFRS)
  • Changes in revenue are 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
  • 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
  • A charge of 7.7m was incurred in the year for
    items excluded from headline profit. Key
    performance measures such as return on sales,
    EBITDA and ROCE use headline profit figures

24
INCOME STATEMENT 1
25
THE 5 MAIN MOVEMENTS IN PROFIT
9m
(10)m
100m
(16)m
(8)m
(2)m
73m
26
INTERNATIONAL
Contribution growth Europe 3.6m, US 3.5m and
Asia Pacific 1.7m
27
UK
28
EBS
Profit and loss account Profit and loss account Profit and loss account Profit and loss account Cash flow Cash flow Cash flow Cash flow
(m) 2005/06 Change (m) 2005/06 Change
Depreciation (6.8) (1.2) Profit and loss account (25.1) (15.9)
Project and support (12.4) (10.5) Depreciation 6.8 1.2
Local business costs (5.9) (4.2) Stock (7.0) (7.0)
(25.1) (15.9) Capital expenditure (12.7) 0.3
Cash flow impact (38.0) (21.4)

(m) 2006/07 (m) 2006/07
Estimated low 20s Estimated c(20)
capex similar to 2005/06 half of 2005/06 stock unwinds due to European roll out capex similar to 2005/06 half of 2005/06 stock unwinds due to European roll out capex similar to 2005/06 half of 2005/06 stock unwinds due to European roll out capex similar to 2005/06 half of 2005/06 stock unwinds due to European roll out

29
GROUPWIDE PROCESS COSTS
One-off IS costs groupwide technology upgrade,
IS restructuring
30
INCOME STATEMENT 2
31
RoHS THE IMPACT
Takes effect from 1 July 2006 for products used
in production 70,000 RoHS compliant products
currently available in Europe RS among the
first to achieve BSI RoHS trusted kitemark (in
UK and Benelux) Limited examples of dual
stocking where customer demand for compliant
stock is particularly strong Additional
provision of 4m made in 2005/06
32
CASH FLOW 1
33
WORKING CAPITAL
(m) 2005/06 2004/05
Stock (12.8) (13.6) Stock turn maintained at 2.5 times despite EBS stock 7m
Debtors (14.6) 9.3 Higher sales and timing of Easter
Creditors 13.2 (3.7) Higher purchases and accruals (eg reorganisation costs)
Movement in working capital (14.2) (8.0)
34
CAPITAL EXPENDITURE
(m) 2005/06 2004/05
EBS 12.7 13.0
Other computer systems 4.0 5.5
Other 8.4 5.3
Net capital expenditure 25.1 23.8
Net capex / depreciation 1.0x 1.1x
  • 2006/07 outlook
  • 40m European EBS roll out and US warehouse

35
CASH FLOW 2
(m) 2005/06   2004/05
Free cash flow 26.9 61.1
Dividends paid (80.0) (80.0)
Cash outflow (53.1) (18.9)
Exchange differences (7.2) (2.0)
New finance lease liabilities (5.1) -
Increase in net debt (65.4) (20.9)

Net debt (120.8) (55.4)
Pension deficit (net of deferred tax) (29.7) (32.4)
Financial ratios remain strong with high interest
cover
36
PENSIONS UPDATE
  • Defined benefit schemes in UK, Ireland and
    Germany
  • all closed to new entrants
  • all other schemes are defined contribution
  • Under IAS 19, combined gross deficit of 41.8m at
    31 March 2006
  • of which UK 35.0m
  • UK deficit lower than last year
  • improving bond yields greater than impact of
    people living longer

37
IMPROVING PERFORMANCE
  • To substantially improve the Groups medium term
    financial performance
  • need to grow profit and cash in 2006/07
  • Plans in place and management committed to
    deliver
  • International growth and cost leverage
  • sustainable profit and enable future growth in
    the UK
  • lower cost infrastructure enabled by EBS
  • improved cash delivery to restore a covered
    dividend

38
SAFE HARBOUR STATEMENT
This presentation 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.
39
QUESTIONS
40
APPENDIX
41
CONTINENTAL EUROPE
(m) 2005/06 2004/05 Change
Revenue 267.9 243.5 8.3
Contribution 59.9 56.3 3.6
of revenue 22.4 23.1 (0.7) points (0.7) points
42
NORTH AMERICA
(m) 2005/06 2004/05 Change
Revenue 137.5 112.8 18.0
Contribution 19.2 15.7 3.5
of revenue 14.0 13.9 0.1 points 0.1 points
43
ASIA PACIFIC (INCLUDING JAPAN)
(m) 2005/06 2004/05 Change
Revenue 69.5 58.8 14.5
Contribution 7.2 5.5 1.7
of revenue 10.4 9.4 1.0 points 1.0 points
44
JAPAN
(m) 2005/06 2004/05 Change
Revenue 18.6 17.0 11.2
Contribution 1.8 1.5 0.3
of revenue 9.7 8.8 0.9 points 0.9 points
45
ASIA PACIFIC (EXCLUDING JAPAN)
(m) 2005/06 2004/05 Change
Revenue 50.9 41.8 15.8
Contribution 5.4 4.0 1.4
of revenue 10.6 9.6 1.0 points 1.0 points
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