Electrocomponents plc

Transcription

1 Electrocomponents plc Preliminary results for year ended 31 March May

2 AGENDA Overview Financial performance Business performance Simon Boddie Current trading Introduction & initial observations Lindsley Ruth Q&A All 2

3 OVERVIEW Overall these are a disappointing set of financial results with headline PBT adjusted for FX and days down 13% (1) Investment not yet delivering expected step-up in revenues UK business remains in revenue decline Gross margin decline of 1.3% Foreign exchange and trading days adversely impacted PBT by 8% Some bright spots Accelerating H2 growth in Europe and double-digit North American growth 6% ecommerce growth with share increasing to 59% 27% of products available globally, up from 10% last year Global rollout of SAP completed Actions to address underperformance are being intensified 3 (1) Adjusted for currency movements and trading days

4 FINANCIAL PERFORMANCE 4

5 BASIS OF PREPARATION Unless otherwise stated: Figures have been prepared using International Financial Reporting Standards Changes in sales are adjusted for currency movements and for the number of trading days ( underlying sales growth/decline ) Changes in profit, cash flow, debt and share related measures such as earnings per share are, unless otherwise stated, at reported exchange rates Key performance measures such as return on sales use headline profit figures Sign conventions: % changes in sales and costs are disclosed as positive if improving profit and negative if reducing profit In 2015 net income of 16.0m was reported for items excluded from headline profit before tax We have revised the accounting treatment on rebates from vendors which are included in gross margin from a cash to an accruals basis. This has had no material impact on full-year results, but would result in earlier recognition of 1.6m of rebates in our half-year results for the six months to 30 September This will be shown in restated comparatives for the 2016 half-year results. More details on this restatement in the Appendix (slide 30). 5

6 PROFIT AND LOSS ACCOUNT m Change Sales 1, , % (1) Gross margin (%) 44.6% 45.9% (1.3)% pts Headline operating costs (479.5) (477.8) 3.6% (1) Headline operating profit (19.7)% (2) Headline operating margin (%) 6.7% 8.3% (1.6)% pts Headline PBT (20.8)% (2) (1) Adjusted for currency; sales also adjusted for trading days (2) Fewer trading days & currency movements decreased headline Operating Profit, PBT by c. 8m. Excluding these factors headline PBT reduced by c. 13% 6 Headline PBT down 21%, a 13% decline adjusting for FX and trading days

7 GROUP HEADLINE PROFIT BEFORE TAX MOVEMENT Change (1) (8%) (2) 6% (8%) (9%) (0%) 101.1m 80.1m 2014 Fx and Days International UK Processes Interest 2015 International contribution growth offset by UK decline and process cost investment 7 (1) Adjusted for currency movements (2) Impact of foreign exchange and trading days on reported pre-tax profits

8 INTERNATIONAL CONTRIBUTION Change (1) 4% 9% 10% 6% 150.4m 149.5m 2014 Fx Cont Europe North America Asia Pacific 2015 All International regions contributed to growth 8 (1) Adjusted for currency movements

9 GROSS MARGIN 45.9% (0.2)% pt (1) (0.3)% pt (2) (0.4)% pt (0.4)% pt 44.6% 2014 Geographic mix Product mix Currency movements Price & discounts 2015 Gross margin impacted by mix, currency & price 9 (1) Geographic mix relates to faster growth in lower margin geographies such as North America (2) Product mix relates to faster growth in lower margin product categories such as semiconductors

10 OPERATING COSTS Change (1) 1.4% 2.5% 0.5% (0.8%) 3.6% 478.0m 479.5m 2014 Fx Inflation Strategy inc Depn Variable Reorg efficiencies 2015 Cost growth reflects investment in strategy 10 (1) Adjusted for currency movements

11 HEADLINE EARNINGS PER SHARE m Change Headline PBT (20.8)% Pension credit and Reorganisation costs (1) Reported PBT (5.0)% Effective tax rate (28)% (29)% 1% pt Per share amounts: Headline earnings 13.2p 16.3p (19.0)% Full-year dividend (2) 11.75p 11.75p - (1) Comprises a 20.4m pension credit and reorganisation costs of 4.4m (2) 2015 comprises 5p interim dividend, 6.75p proposed final dividend 11 Dividend maintained

12 IMPACT OF FOREIGN EXCHANGE - TRANSLATION STRENGTHENING OF STERLING REDUCES PROFIT BEFORE TAX During FY15 the Euro weakened and the US dollar strengthened significantly against sterling As such adverse FX movements reduced FY15 Headline PBT by 6m Reported profit sensitivity to a 1 cent movement in: Euro: 0.5m US $: 0.2m Headline PBT Reported rates May 15 rates Impact 80m 75m (5)m Sterling:Euro (8)% Sterling:USD % PBT at current FX rates would be 5m lower

13 CASH FLOW m guidance Profit before tax (1) Depreciation & amortisation c. 33m Working capital 0.4 (14.3) Stock turn 2.5x Pension credit (20.4) - Finance expenses (net) Other non-cash movements Operating cash flow Interest paid (net) (5.1) (5.0) Tax paid (21.6) (24.5) Net capital expenditure (37.5) (35.6) c. 35m Reported free cash flow Add back: reorg. cash flows Headline free cash flow (1) A 20.4m non-cash pension credit is included in profit before tax 13 Headline free cash flow of 52.3m

14 NET DEBT 52.3m (51.6)m (3.3)m (6.4)m (143.6)m (152.6)m 2014 Headline Free cashflow Dividends paid Reorganisation Translation/Other 2015 SUCCESSFUL REFINANCING PENSION DEFICIT m multi-currency facility signed in Aug 2014, expiring in Aug 2019 Group has agreed to issue $100m of fixed rate five year private placement (PP) notes to replace the $65m PP notes due in June 2015 Combined deficit 60.4m (2014: 40.9m) Changes to benefits in UK One-off non cash pension credit of 20.4m New deficit recovery plan agreed Strong balance sheet with 1.3x Net Debt/EBITDA

15 BUSINESS PERFORMANCE 15

16 BUSINESS PORTFOLIO 2015 Sales growth (1) % of Group sales Contribution margin Continental Europe 4% 35% 21% North America 10% 24% 14% Asia Pacific 4% 12% 8% International 6% 71% 17% UK (2)% 29% 27% Group 3% 100% 20% (1) Underlying sales growth, adjusted for currency and trading days 16 International over 70% of sales

17 CONTINENTAL EUROPE (35% Group sales) Growth (1) Sales 447.3m 460.6m 4.4% Contribution 95.7m 99.4m 4.0% Contribution margin 21.4% 21.6% (0.2)% pts (1) Adjusted for currency; sales also adjusted for trading days All markets in growth France back in growth following management action plan 8% ecommerce growth 71% ecommerce share (+2% pts) eprocurement solutions driving corporate accounts expansion 4% contribution growth Sales growth accelerated in H2 17

18 NORTH AMERICA (24% Group sales) Growth (1) Sales 302.7m 281.3m 10.0% Contribution 41.9m 39.1m 8.8% Contribution margin 13.8% 13.9% (0.1)% pts (1) Adjusted for currency; sales also adjusted for trading days Strong revenue growth driven by growth in automation & control Significant new product introductions 16% ecommerce growth 41% ecommerce share (+2% pts) 9% contribution growth held back by investment in SEM and healthcare insurance Double-digit revenue growth 18

19 ASIA PACIFIC (12% Group sales) Growth (1) Sales 152.4m 156.9m 3.6% Contribution 11.9m 11.9m 10.2% Contribution margin 7.8% 7.6% 0.2% pts (1) Adjusted for currency; sales also adjusted for trading days Growth in China & SEA Japan recovering post SAP rollout Australasia difficult SAP rollout completed ecommerce grew 4%, represents 50% of revenues Cost benefits from reorganisation initiatives driving contribution growth 10% contribution growth 19

20 UK (29% Group sales) UK market remains difficult Growth (1) Sales 363.8m 374.3m (2.4)% Contribution 98.8m 107.5m (8.1)% Contribution margin 27.1% 28.7% (1.6)% pts ecommerce revenues flat, represents 63% of revenues 8% contribution decline UK Action Plan Tools and consumables Corporate accounts Online conversion (1) Sales adjusted for trading days A disappointing performance 20

21 CURRENT TRADING Sales Growth (1) Continental Europe H H Q Apr/May 2016 (2) 2% 7% 8% 11% North America 10% 10% 6% 4% Asia Pacific 5% 3% 4% (1)% International 5% 7% 7% 6% UK (2)% (3)% (3)% (2)% UK ex-rasp. Pi (1)% (2)% (2)% (2)% Group 3% 4% 4% 4% 21 (1) Underlying sales growth, adjusted for currency and trading days (2) Seven weeks to 15 May 2015 Continental Europe strength offset by slower growth in US

22 LINDSLEY RUTH INTRODUCTION & INITIAL OBSERVATIONS Career history Future Electronics Inc. Executive Vice President Solectron Corporation Vice President, Materials TTI Inc. Director Texas A&M University Assistant Lecturer, College of Engineering 22 A passion for distribution

23 INITIAL OBSERVATIONS STRENGTHS Strong brands Global footprint RS branded products ecommerce expertise Commitment of the people Innovative solutions e.g. DesignSpark Strong brands and market position 23

24 INITIAL OBSERVATIONS OPPORTUNITIES Increase customer focus Improve service levels Streamline decision making Simplify operating model Drive operating efficiencies Asia Pacific and Emerging Markets Execution needs to improve 24

25 SUMMARY SIGNIFICANT OPPORTUNITY TO IMPROVE PERFORMANCE Overall, 2015 financial results not satisfactory Significant opportunity to improve performance Will present my detailed plans at our interim results in November Meanwhile actions to address underperformance are being intensified 25 Focusing on driving faster growth and improved shareholder returns

26 26 Q&A

27 27 APPENDIX

28 IMPACT OF FOREIGN EXCHANGE 2015 m 2014 m Growth Reported Growth FX adjusted Continental Europe (3.7)% 4.0% North America % 8.8% Asia Pacific % International contribution (0.6)% 5.9% UK contribution (8.1)% (8.1)% Process costs (163.1) (151.8) (7.4)% (9.4)% Operating profit (19.7)% (14.5)% All figures refer to headline movements where relevant 28

29 FINANCIAL KPIs Medium-term Performance Framework 2014 (Year 1 of plan) 2015 (Year 2 of plan) Medium-term target range Group sales growth (1) 2.1% 3.5% 5% - 8% Group return on sales 8.3% 6.7% 9% - 11% Return on capital employed Free cash flow as a percentage of sales 20.9% 16.4% 20% - 30% 4.6% 4.1% 4% - 6% (1) Underlying sales growth, adjusted for currency and trading days 29

30 RESTATED FY15 HALF-YEAR RESULTS 30 m Group UK Int l Europe APAC Allied As originally reported Sales Gross profit Gross margin 44.7% 49.5% 42.7% Contribution Contribution margin 19.5% 27.4% 16.2% 21.8% 6.1% 13.4% Restated analysis Gross profit Gross margin 45.0% 49.9% 43.0% Contribution Contribution margin 19.7% 27.7% 16.5% 22.2% 6.4% 13.4% Additional H1 rebates We have revised the accounting treatment on rebates from vendors, relating to volume of purchases which are included in gross margins. Previously the Group recognised rebates only once cash was received. These will now be recognised on an accruals basis, when there is a binding arrangement, the amount can be reliably estimated and receipt is probable. This change has had no material impact on the full-year results, but would result in the earlier recognition of 1.6m of rebates in our half-year results for the six months to 30 September The 1.6m increase in 2015 half-year operating profits will be shown in restated comparatives with the 2016 half-year results and is highlighted in the table above.

31 Electrocomponents plc Preliminary results for year ended 31 March May