TIDMECM
RNS Number : 4988P
Electrocomponents PLC
18 November 2016
ELECTROCOMPONENTS PLC
RESULTS FOR THE HALF YEARED 30 SEPTEMBER 2016
PERFORMANCE IMPROVEMENT PLAN DRIVES 45% UNDERLYING H1 HEADLINE
PBT GROWTH
Underlying
H1 Change
Highlights 2017 H1 2016 Change (1)
Revenues GBP706.3m GBP626.5m 12.7% 2.1%
Gross Margin 43.6% 43.3% 0.3pts 0.3pts
Headline operating
profit(2) GBP57.7m GBP33.8m 70.7% 42.1%
Headline operating
margin(2) 8.2% 5.4% 2.8pts 2.3pts
Headline profit
before tax(2,3) GBP55.1m GBP31.3m 76.0% 44.6%
Headline earnings
per share(2) 9.1p 5.2p 75.0% 56.9%
Headline free cash
flow(2) GBP61.9m GBP11.8m 424.6%
Net debt GBP140.9m GBP169.6m 16.9%
Leverage (x EBITDA) 1.0x 1.6x 37.5%
Interim dividend 5.0p 5.0p -
Reported profit
before tax GBP54.5m GBP19.9m 173.9% 85.3%
Reported earnings
per share 9.0p 3.1p 190.3% 143.2%
--------------------- ---------- ---------- ------- -----------
(1) Underlying growth, unless otherwise stated, is adjusted for
currency movements, in addition underlying revenue growth measures
are also adjusted for trading days. Positive currency movements
increased Group reported H1 revenues by GBP58 million, additional
trading days boosted Group H1 revenues by around GBP8 million.
(2) Headline measures of profitability and cash flow are defined
as the relevant reported profit/cash flow measure before
reorganisation costs/cash flows, asset write-downs or
disposals.
(3) Positive currency movements increased headline profit before tax by around GBP7 million.
Financial highlights
-- Revenues were up 12.7% aided by foreign exchange and extra
trading days. Underlying revenue growth was 2.1%.
-- Underlying revenue growth increased to 3.1% in Q2 (0.9% Q1)
as North America and Asia returned to growth.
-- Gross margins improved 0.3% points driven by initiatives on
pricing and discounting discipline.
-- Reported PBT of GBP54.5m was up 174% aided by a significant
reduction in the exceptional charge year on year.
-- Headline H1 PBT of GBP55.1m was up 76% and 45% on an underlying basis.
-- 'Simplify - Operate for Less' actions drove a 2.3% points
underlying improvement in operating margins to 8.2%.
-- Strong headline free cash flow was up GBP50.1m year on year,
with improved stock turn 2.8x (H1 2016: 2.5x).
-- Reported EPS was 9.0p up 190%. Headline EPS was 9.1p up 75% or 57% on an underlying basis.
-- Interim dividend maintained at 5.0p.
Operational highlights
-- 2017 cost savings ahead of plan: GBP13m delivered in H1.
Raising March 2017 savings target to GBP18m versus GBP15m.
-- We now expect to deliver GBP30m of total annualised net
savings by March 2018 (previous guidance at least GBP25m).
-- Significant progress in Asia Pacific, losses reduced to GBP4.2m versus GBP13.2m in H1 2016.
-- Improved customer experience: Group customer satisfaction
rating (Net Promoter Score) up 9% to 42.1.
-- Online customer satisfaction up 60% year on year in August
2016. Online speed improved by 33% year on year.
-- Successful repositioning of own brand range, RS Pro, (12.6%
of revenues) with 6.6% growth in H1.
CURRENT TRADING & PROSPECTS
We have made an encouraging start to the second half of the
year, with all hubs seeing an improvement in underlying revenue
growth in October versus the Q2 trend. The return to positive
revenue growth that we saw in our North America and Asia Pacific
hubs in Q2 has continued. Northern and Southern Europe are again
seeing good growth, while Central Europe returned to modest growth
in the month.
We have raised our cost savings guidance to GBP18m of net
savings in 2017 and total annualised net savings of GBP30 million
by March 2018. Work continues to identify further efficiencies and
simplify the way we operate. All these actions mean that we are
well positioned to make strong progress in the year to March
2017.
LINDSLEY RUTH, CHIEF EXECUTIVE OFFICER, COMMENTED:
"One year on from the launch of the Performance Improvement
Plan, I am extremely pleased by the progress we are making to put
the customer back at the heart of this business, increase
accountability and operate for less. As a result of our actions we
have seen significant growth in both profits and cash flow during
the first half of our financial year. However, while we have taken
a major step forward, we are only just at the beginning of this
journey and still a long way from best in class. We remain
extremely focused on delivering a further step change in the
performance of this organisation and are excited about the
significant potential for further improvement and growth."
Enquiries:
Lindsley Ruth, Chief Executive Electrocomponents 020 7567
Officer plc 8000(*)
Electrocomponents 020 7567
David Egan, Group Finance Director plc 8000(*)
Polly Elvin, VP of Investor Electrocomponents
Relations plc 07973 812481
020 7353
David Allchurch / Martin Robinson Tulchan Communications 4200
* Available until 12:00 on 18 November 2016, thereafter 01865
204000
The results statement and presentation to analysts are published
on the corporate website at www.electrocomponents.com.
Notes on financial terms:
In order to reflect underlying business performance, comparisons
of revenue between periods (including by region, product group and
channel) have been adjusted for currency and trading days
(underlying revenue growth).
Changes in profit, cash flow, debt and share related measures
such as earnings per share are, unless otherwise stated, at
reported exchange rates.
Sign conventions: % changes in revenues and costs are disclosed
as positive if improving profit and negative if reducing
profit.
Key performance measures such as return on sales and EBITDA use
headline profit figures.
Notes to editors:
Electrocomponents has operations in 32 countries. We offer more
than 500,000 products through the internet, catalogues and at trade
counters to over one million customers, shipping more than 44,000
parcels a day. Our products sourced from 2,500 leading suppliers,
include electronic components, electrical, automation and control
and test and measurement equipment and engineering tools and
consumables.
The business satisfies the small quantity needs of its customers
who are typically electronics design engineers, machine and panel
builders, maintenance engineers or buyers. A large number of
high-quality goods are stocked, which are dispatched the same day
that the order is received. The average customer order value is
around GBP150 although the range of order values is wide. The
Group's customers come from a wide range of industry sectors with
diverse product demands.
OVERALL RESULTS
H1 2017 H1 2016 Change Underlying
Change(1)
Revenue GBP706.3m GBP626.5m 12.7% 2.1%
0.3
Gross margin 43.6% 43.3% 0.3pts pts
Headline operating
profit GBP57.7m GBP33.8m 70.7% 42.1%
Headline operating 2.8 2.3
margin 8.2% 5.4% pts pts
Operating profit 6.3 5.0
conversion % 18.8% 12.5% pts pts
1) Underlying adjusted for currency; revenue also adjusted for trading days
Revenue
Group revenue increased by 12.7% on a reported basis to GBP706.3
million (2016: GBP626.5 million). Foreign exchange had a positive
impact on revenues of GBP58.0 million during the half, while
additional trading days boosted revenues by around GBP8 million.
Underlying revenue growth was 2.1% during H1, with revenue growth
improving from 0.9% during Q1 to 3.1% during Q2. All hubs except
for Central Europe saw positive growth during the first half with
the strongest growth being seen in Northern and Southern Europe.
eCommerce revenues saw underlying revenue growth of 2.1% in H1 and
represented 62% of total revenues. RS Pro, which represents 12.6%
of revenues, outperformed overall Group growth with underlying
revenue growth of 6.6%.
Gross Margin
Group gross margin at 43.6% was up 0.3 percentage points on both
an underlying and a reported basis with management initiatives on
price and increased discipline on discounting more than off-setting
a 0.2 percentage points negative impact from transactional foreign
exchange.
Looking forward, assuming constant pricing, recent sterling
weakness means foreign exchange should move to be a positive
feature for gross margins during the second half of this financial
year. Sterling weakness will mean lower cost prices for our
Southern Europe, Central Europe and Asia Pacific hubs when buying
from the UK, which should more than offset the negative impact of
higher cost prices for our UK business.
Operating costs
Total headline operating costs, which include hub costs and
central costs, fell 2.1% on an underlying basis, but increased 5.3%
on a reported basis to GBP250.0 million (H1 2016 : GBP237.5
million). Operating costs fell in underlying terms as we began to
see the benefit of the cost-reduction initiatives undertaken as
part of the PIP. Overall, we delivered savings of GBP13 million in
the first half of 2017, which was ahead of our original target.
As part of our 'Simplify - Operate for Less' initiative, we will
continue to make our operating model as lean and efficient as
possible, so we can convert a higher percentage of gross profit
into operating profit. As a result of the significant actions we
have taken to address our cost base over the last year, our
operating profit conversion ratio (headline operating profit as a
percentage of gross profit) rose 6.3 percentage points in H1 2017
to 18.8% (H1 2016: 12.5%).
Headline operating profit
Headline operating profit for the year increased 70.7% to
GBP57.7 million (H1 2016: GBP33.8 million) or 42.1% on an
underlying basis. The operating margin improved 2.8 percentage
points to 8.2% (H1 2016: 5.4%) or 2.3 percentage points on an
underlying basis.
We are pleased by the significant improvement in profitability
and momentum we have seen in the 12 months since the initiation of
the PIP last November. We believe we are only just at the beginning
of this journey to deliver a step change in the performance at
Electrocomponents and we are extremely excited about the
significant potential we see for further improvement and
growth.
Segmental Results
The following section looks at the performance of each of our
five hubs: Northern Europe, Central Europe, Southern Europe, North
America and Asia Pacific (includes our emerging markets operations)
as well as the central costs.
Northern Europe
H1 2017 H1 2016 Change Underlying
change
(1)
Revenue GBP199.3m GBP187.1m 6.5% 3.5%
Operating profit GBP42.0m GBP31.2m 34.6% 28.4%
Operating margin 21.1% 16.7% 4.4 pts 3.8 pts
1) Underlying adjusted for currency; revenue also adjusted for trading days
The Northern European hub consists of the UK, Ireland and
Scandinavia and remains our most profitable hub. The UK is the main
market for this hub and accounts for c. 90% of the revenue. Our UK
business is the market leader, supported by 16 trade counters with
a local stock profile, located in the UK's key industrial towns and
cities.
Overall, Northern European revenue increased by 3.5% on an
underlying basis and 6.5% on a reported basis to GBP199.3million
(H1 2016: GBP187.1 million). Revenue growth remained strong across
the period with 2.5% growth in Q1 despite some uncertainty in the
UK ahead of the referendum vote in June and 4.4% growth in Q2. In
H1, eCommerce revenue, which accounts for 69% of revenue, grew at
2.3% on an underlying basis. RS Pro sales, which account for 22% of
revenue, grew at 4.7% on an underlying basis. Growth was strong
across all three markets within the hub during the first half. In
October the UK saw its eleventh consecutive month of growth with
the new cross-functional hub leadership team driving a common
go-to-market approach focused on identifying customer potential
with increased sector and regional focus. As we move into Q4, we
will begin to lap stronger trading comparatives in the UK, with the
anniversary of our return to growth in the UK in December 2015 and
the Raspberry Pi 3 launch in March 2016. However, we remain focused
on continuing to take market share in the UK and driving
incremental improvements to our customer and supplier experience.
We are currently undertaking a major initiative to improve sales
effectiveness across the Group, this work and the development of a
consistent end-to-end sales process is currently being piloted in
the UK.
Operating profit increased by 28.4% on an underlying basis, an
increase of 34.6% on a reported basis to GBP42.0 million (H1 2016:
GBP31.2 million). Operating margins rose 3.8 percentage points on
an underlying basis and 4.4 percentage points on a reported basis
to 21.1% (H1 2016: 16.7%) aided by an improvement in gross margins
and tight cost control.
Southern Europe
H1 2017 H1 2016 Change Underlying
change(1)
Revenue GBP136.3m GBP114.3m 19.2% 3.8%
Operating profit GBP12.1m GBP9.5m 27.4% 0.8%
0.6
Operating margin 8.9% 8.3% pts (0.3)pts
1) Underlying adjusted for currency; revenue also adjusted for trading days
The Southern European hub consists of France, Italy, Spain and
Portugal. France is the main market for this hub and accounts for
approximately two-thirds of the revenue.
Overall, Southern European revenue increased by 3.8% on an
underlying basis, an increase of 19.2% on a reported basis to
GBP136.3 million (H1 2016: GBP114.3 million), with all countries
contributing to this strong performance. Growth was broadly
consistent across the two quarters with Q1 up 3.9% and Q2 up 3.1%.
France saw good growth driven by strong performances of RS Pro and
the small and medium-sized customer segment. We saw a slowdown in
the rate of growth with French corporate accounts, given
particularly strong comparatives in the period. Spain also saw a
good performance in spite of lower Raspberry Pi sales. Italy saw a
more mixed performance, with some softness in corporate accounts.
eCommerce revenue, which accounts for 73% of revenue, was up 3.2%
on an underlying basis. RS Pro, which accounts for 15% of revenue
in the hub, saw a very strong performance up 12.3% on an underlying
basis.
Operating profits were up 0.8% on an underlying basis, an
increase of 27.4% on a reported basis to GBP12.1 million (H1 2016:
GBP9.5 million). Operating margins fell 0.3 percentage points on an
underlying basis, but rose 0.6 percentage points at reported rates
to 8.9% (H1 2016: 8.3%). Hub margins fell for two key reasons:
first we saw a negative impact on gross margins from foreign
exchange, with the six month lag on currency hedging meaning we did
not see any benefit from recent sterling weakness during the first
half; second we saw an increase in allocated costs due to increased
investment in digital, RS Pro and supply chain with some additional
one-off supply chain costs associated with the introduction of the
Global Planning Tool.
Central Europe
H1 2017 H1 2016 Change Underlying
change(1)
Revenue GBP95.3m GBP82.6m 15.4% (0.2)%
Operating profit GBP4.3m GBP3.5m 22.9% (15.7)%
Operating margin 4.5% 4.2% 0.3pts (0.9)pts
1) Underlying adjusted for currency; revenue also adjusted for trading days
The Central European hub consists of Germany, Austria, Benelux,
Switzerland and Eastern Europe. Germany is the main market for this
hub and accounts for approximately two-thirds of the revenue.
Overall, Central European revenues reduced by 0.2% on an
underlying basis, an increase of 15.4% on a reported basis to
GBP95.3 million (H1 2016: GBP82.6 million). Revenue performance
softened during the second quarter of the year with a decline of
1.1% in Q2 versus 0.5% growth in Q1. In terms of markets, Germany,
Austria and Benelux all saw low single digit declines in revenues
and this was only partially offset by a strong performance in the
smaller markets of Switzerland and Eastern Europe. eCommerce, which
accounts for 72% of revenue in the hub, saw a decline in revenues
of 1.0% on an underlying basis. RS Pro, which accounts for 13% of
revenue in the hub, grew 5.5% on an underlying basis. Operating
profits were down 15.7% on an underlying basis, an increase of
22.9% on a reported basis to GBP4.3 million (H1 2016: GBP3.5
million). Operating margins declined 0.9 percentage points on an
underlying basis, a 0.3 percentage points improvement on a reported
basis to 4.5% (H1 2016: 4.2%) with hub cost reductions more than
offset by the negative impact of foreign exchange movements upon
gross margins and higher allocated costs due to investment in
digital and some one-off supply chain costs associated with the
introduction of the Global Planning Tool.
Overall, the performance in our Central European hub has been
disappointing with financial metrics below our expectations. Given
this unacceptable performance we are making changes to the hub
leadership team. We are currently in the process of recruiting a
new leader for our Central European hub. In the meantime we have an
interim management team in place and have developed a new
commercial plan for Central Europe, which is similar to the
turnaround plan that has been so successful in Northern Europe. Our
immediate focus is fourfold: first, establishing a strong
leadership team in Central Europe; second, defining a clear
go-to-market strategy - identifying and focusing on high potential
accounts; third, increased focus on supplier relationships and RS
Pro; and fourth, a continued focus on the digital experience and
digital revenue growth in this important hub.
North America
H1 2017 H1 2016 Change Underlying
change(1)
Revenue GBP181.8m GBP159.9m 13.7% 1.4%
Operating profit GBP21.0m GBP17.9m 17.3% 4.5%
Operating margin 11.6% 11.2% 0.4pts 0.4pts
1) Underlying adjusted for currency; revenue also adjusted for trading days
The North American hub consists of our Allied business and
includes operations in the USA and Canada.
Overall, North American revenues increased by 1.4% on an
underlying basis, an increase of 13.7% on a reported basis to
GBP181.8 million (H1 2016: GBP159.9 million). Allied saw a strong
recovery in trading in the second quarter of the year with Q2
revenues up 4.3% versus a decline in Q1 of 1.5%. We are currently
searching for a new hub leader for our North American business.
However, the interim management team at Allied has driven a
successful marketing campaign to win back market share during the
first half, with a particular focus on search engine marketing
spend. As a result, we believe we have taken market share in the US
market during the first half, particularly in the Automation and
Control market. During the first half, eCommerce revenue, which
accounts for 42% of hub revenue, grew 1.7% on an underlying basis
and RS Pro continued to grow extremely strongly from a low
base.
Operating profit was up 4.5% on an underlying basis, and up
17.3% on a reported basis to GBP21.0 million (H1 2016: GBP17.9
million). While competitive initiatives led to a reduction in the
gross margin in the first half, this was more than offset by cost
reduction initiatives. As a result, overall margins improved by 0.4
percentage points on both a reported and underlying basis to 11.6%
(H1 2016: 11.2%).
Asia Pacific
H1 2017 H1 2016 Change Underlying
change(1)
Revenue GBP93.6m GBP82.6m 13.3% 0.5%
Operating loss GBP(4.2)m GBP(13.2)m 68.2% 69.6%
Operating margin (4.5)% (16.0)% 11.5pts 10.5pts
1 ) Underlying adjusted for currency; revenue also adjusted for
trading days
The Asia Pacific hub consists of four similarly sized
subregions: Australia/New Zealand, Greater China, Japan and South
East Asia. We also have emerging markets operations in South Africa
and Chile and use distributors in other territories.
Overall, Asia Pacific hub revenue increased 0.5% on an
underlying basis, 13.3% growth on a reported basis to GBP93.6
million (H1 2016: GBP82.6 million). After a revenue decline of 1.6%
in Q1 to June, the hub returned to revenue growth of 2.5% in the Q2
of the year, which was a pleasing performance given the significant
restructuring we have carried out in Asia Pacific over the last
year. eCommerce, which accounts for 51% of hub revenue, saw a
strong performance with 4.4% growth on an underlying basis. RS Pro,
which accounts for 13% of revenue, also significantly out-performed
with 3.2% underlying revenue growth. We have made good progress
during the first half at improving our service reliability in Asia
Pacific, with a range reliability project across the region
delivering some excellent results including an improvement in our
'On Time To Promise' (OTTP) service metric in China from 73% to
87%. All this work has helped lift our net promoter score in the
Asia Pacific region by 11% year on year.
Both Australia/New Zealand and our emerging markets regions saw
strong, double-digit growth across H1. The areas more impacted by
the recent restructuring, i.e. Japan, China and Singapore (within
SEA), saw declines in revenues during Q1. Encouragingly, however,
we have seen a reduction in revenue declines in both SEA and China
during Q2. This has partly been driven by improvements to our
service and our go-to-market approach in these key markets and also
strong growth in some of our smaller markets such as the
Philippines and Korea, which together drove an improved regional
performance during the second quarter of the year.
Operating losses reduced by 69.6% on an underlying basis, a
68.2% reduction on a reported basis to GBP4.2 million (H1 2016:
GBP13.2 million). This strong performance was driven by the
significant restructuring activity within the region to lower the
cost base as well as a good performance on gross margin driven in
part by management initiatives on price and mix. Furthermore, a
currency tailwind from sterling weakness led to some immediate
benefits on cost prices in certain Asian currencies.
Central Costs
H1 2017 H1 2016 Change Underlying
change(1)
Headline central costs GBP(17.5)m GBP(15.1)m (15.9)% (12.9)%
1) Headline costs are defined as before reorganisation costs, asset write-downs or disposals
Headline central costs are Group head office costs and include
PLC, finance, human resources and legal costs. Central costs of
GBP17.5 million (H1 2016: GBP15.1 million) increased by 12.9% on an
underlying basis and 15.9% on a reported basis. The increase
related to higher performance related pay, reflecting improved
results. We expect to see a similar impact on central costs during
the second half as a result of performance related pay.
Simplify - Operate for Less
During the first half we delivered net cost savings of GBP13
million, which was in excess of our original expectation of GBP10
million, as we continued to find ways to work more efficiently and
held back on some reinvestment plans. As a result of this better
than expected progress we now expect to deliver cost savings of
GBP18 million in the full year to March 2017. Given this strong
progress we are raising our 2018 annualised net savings target from
GBP25 million to GBP30 million. Work continues to identify further
ways we can work more efficiently and redeploy investment into
areas where we can drive faster growth.
FINANCIAL REVIEW
Net finance costs
Net finance costs in the first half were GBP2.6 million, broadly
in line with H1 2016 of GBP2.5 million.
Restructuring charges
The Group saw a labour-related restructuring charge of GBP1.8
million in the first half. This was partially offset by a profit on
disposal of our Singapore warehouse of GBP1.2 million leading to a
net restructuring charge of GBP0.6 million.
Profit before tax
Headline profit before tax was up 76% to GBP55.1 million (H1
2016: GBP31.3 million), a 45% increase on an underlying basis.
Reported profit before tax was up 174% to GBP54.5 million (H1 2016:
GBP19.9 million) aided by the significant reduction in net
exceptional charges from GBP11.4 million in H1 2016 to GBP0.6
million in H1 2017.
Earnings per share
Reported earnings per share of 9.0p was up 190% (H1 2016: 3.1p).
Headline earnings per share of 9.1p was up 75.0% or 56.9% on an
underlying basis.
The weighted average number of shares was 440.3 million (H1
2016: 439.3million).
Return on Capital Employed (ROCE)
Net assets at the end of the first half were GBP326.9 million
(H1 2016: GBP360.4 million). ROCE calculated using period end net
assets and net debt balances was 22.5% (H1 2016: 14.6%).
Cash flow
GBP million H1 H1
2017 2016
Headline Operating Profit 57.7 33.8
Depreciation and amortisation 14.9 14.1
Loss on assets and other non-cash movements 2.5 1.6
Movement in working capital 7.0 (11.1)
--------------------------------------------- ------ -------
Adjusted cash generated from operations 82.1 38.4
Net interest paid (2.6) (2.5)
Income taxes paid (9.2) (9.8)
--------------------------------------------- ------ -------
Adjusted net cash inflow from operating
activities 70.3 26.1
Net capital expenditure (8.4) (14.3)
--------------------------------------------- ------ -------
Headline free cash flow 61.9 11.8
Net outflow related to restructuring (3.0) (0.5)
--------------------------------------------- ------ -------
Free cash flow post restructuring 58.9 11.3
--------------------------------------------- ------ -------
Headline operating profit for the first half was GBP57.7 million
(H1 2016: GBP33.8 million). Depreciation was GBP14.9 million (H1
2016: GBP14.1 million). Working capital inflow in H1 2017 was
GBP7.0 million (H1 2016: outflow of GBP11.1 million). The working
capital inflow was driven by our ongoing efforts to reduce levels
of inventory and improve debtor and creditor days. Working capital
as a percentage of revenue improved 1.5 percentage points to 22.4%
(H1 2016: 23.9%). Stock turn rose to 2.8x (H1 2016: 2.5x).
Net interest paid of GBP2.6 million (H1 2016: GBP2.5 million)
was in respect of interest on borrowings, whilst income tax paid
amounted to GBP9.2 million (H1 2016: GBP9.8 million).
Net capital expenditure (excluding the impact of the sale of the
Singapore warehouse) in the first half was GBP8.4 million (H1 2016:
GBP14.3 million). We reviewed a number of capital expenditure
projects in the first half as we drove a higher level of financial
discipline and project prioritisation into the capital expenditure
planning process. As a result, capital expenditure fell to 0.6x
depreciation during the first half (H1 2016: 1.0x). Given these
changes, we now anticipate capital expenditure will run at around
0.7x depreciation in the full year, lower than our previous
guidance of 1.0x.
Headline free cash flow for the first half was GBP61.9 million
(H1 2016: GBP11.8 million). Operating cash flow conversion, which
is defined as headline free cash flow pre-taxation and interest as
a percentage of operating profits and is one of our seven KPIs,
improved to 127.7% (H1 2016: 71.3%).
There was a net cash outflow related to the restructuring
activities of GBP3.0 million during the first half, which largely
relates to labour restructuring charges only partially offset by
the proceeds from the sale of our Singapore warehouse of
GBP6.3m.
Net debt
At 30 September 2016 net debt was GBP140.9 million. This was
GBP24.2 million lower than at 31 March 2016. This was principally
due to first-half headline free cash flow of GBP61.9 million being
more than the final dividend of GBP29.7 million for the 2016
financial year paid during the period.
The Group's c. GBP186 million syndicated multi-currency bank
facility maturing in August 2019 was extended with six banks from 6
October 2016 to August 2021. This facility, together with the
Group's $185 million of US Private Placement (PP) notes, provides
the majority of the Group's committed debt facilities and loans of
GBP329.8million, of which GBP158.1 million was undrawn as at 30
September 2016. The PP notes are split, $100 million maturing in
June 2020 and $85 million maturing in June 2017, and cross currency
interest rate swaps have swapped $45 million of the PP notes from
fixed Dollar to floating Sterling, $40 million from fixed Dollar to
floating Euro and $20 million from fixed Dollar to fixed Sterling,
giving the Group an appropriate spread of financing maturities and
currencies.
The Group's financial metrics remain strong with EBITA interest
cover of 23.7x and Net Debt to EBITDA of 1.0x (both measures are
based upon twelve months ended 30 September 2016 financials),
leaving significant headroom to the Group's banking covenants.
Under the new extended bank facility the Net Debt to EBITDA ratio
has been amended so that Net Debt is now computed using average
rather than closing exchange rates, i.e. the same rates as for the
EBITDA. Under this basis Net Debt to EBITDA was 1.0x.
Pension
The Group has material-defined benefit schemes both in the UK
and Europe. The UK scheme is by far the largest. All these schemes
are closed to new entrants and in Germany and Ireland the pension
schemes are closed to accrual for future service.
Under IAS19, the deficit of the UK defined benefit scheme at 30
September 2016 was GBP116.6 million (GBP30.4 million at 31 March
2016). The combined gross deficit of the Group's defined benefit
and retirement indemnity schemes at 30 September 2016 was GBP133.5
million (GBP43.3 million at 31 March 2016).
The increase in the UK deficit over the six months ending 30
September 2016 was principally caused by an increase in liabilities
due to discount rates falling by 1.2% percentage points from 3.6%
to 2.4%.
The triennial valuation of the UK Scheme at 31 March 2016 showed
a deficit of GBP60.8 million on a statutory technical provisions
basis. A recovery plan is in place, which has been agreed with the
Trustees of the UK Scheme and our deficit contributions will
continue with the aim that the Scheme is fully funded on a
technical provisions basis by 2023.
Dividend
The Board recognises the importance of dividends to shareholders
and we remain committed to improving dividend cover over time by
driving improved results and stronger cash flow. We propose to
maintain the interim dividend of 5.0p per share. This will be paid
on 11 January 2017 to shareholders on the register on 2 December
2016.
Foreign exchange risk
The Group does not hedge translation exposure on the income
statements of overseas subsidiaries. Based on the 2016 mix of
non-pound sterling denominated revenue and adjusted operating
profit, a one cent movement in euro would impact profits by GBP0.8
million and a one cent movement in US dollars would impact profits
by GBP0.3 million.
The Group is also exposed to foreign currency transactional risk
because most operating companies have some level of payables in
currencies other than their functional currency. Some operating
companies also have receivables in currencies other than their
functional currency. Group Treasury maintains three to six month
hedging against freely tradable currencies to smooth the impact of
fluctuations in currency. The Group's largest exposures relate to
euros and US dollars.
Risks and uncertainties
The Group's risk management process identifies, evaluates and
manages the Group's principal risks and uncertainties. These are
reviewed by both the Group's Risk Committee, comprising the Group's
senior managers, and the Board which regularly discusses the
principal risks and receives risk reports covering risk mitigations
and controls.
The Group has a defined risk appetite, which has been adopted by
the Board, across three risk categories: strategic, operating and
regulatory/compliance risk categories. These risk appetites have
both quantitative and qualitative criteria.
The principal risks and mitigations in the 2016 Annual Report
continue to be valid. However the risk highlighted at the year-end
(31 March 2016) regarding 'uncertainty around the UK referendum on
continued membership of the European Union (EU)' has developed
further following the decision on 23 June 2016 to leave the EU. The
risk is now more defined around the management of the business and
trading consequences of the UK's decision to leave the EU.
While the UK government process is still in its early stages the
Group has identified areas that may be affected; these include the
global supply chain infrastructure which supports the Group's
business model. Areas being reviewed include the transport of
products between the UK and EU; and group purchasing arrangements
both within and outside the EU.
Responsibility statement of the directors in respect of the
half-year financial report
The directors confirm that these Condensed Interim Financial
Statements have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and that the interim management report
includes a fair review of the information required by Disclosure
and Transparency Rules (DTR) 4.2.7 and DTR 4.2.8, namely:
-- An indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- Material related party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The directors of Electrocomponents plc are listed in the
Electrocomponents Annual Report and Accounts for the year ended 31
March 2016. A list of current directors is maintained on the
Electrocomponents plc website: www.electrocomponents.com.
Lindsley Ruth, Chief Executive Officer David Egan, Group Finance
Director
17 November 2016
SAFE HARBOUR
This financial report contains certain statements, statistics
and projections that are or may be forward-looking. The accuracy
and completeness of all such statements, including, without
limitation, statements regarding the future financial position,
strategy, projected costs, plans and objectives for the management
of future operations of Electrocomponents plc and its subsidiaries
is not warranted or guaranteed. These statements typically contain
words such as "intends", "expects", "anticipates", "estimates" and
words of similar import. By their nature, forward-looking
statements involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future.
Although Electrocomponents plc believes that the expectations
reflected in such statements are reasonable, no assurance can be
given that such expectations will prove to be correct. There are a
number of factors, which may be beyond the control of
Electrocomponents plc, which could cause actual results and
developments to differ materially from those expressed or implied
by such forward-looking statements. Other than as required by
applicable law or the applicable rules of any exchange on which our
securities may be listed, Electrocomponents plc has no intention or
obligation to update forward-looking statements contained
herein.
Condensed Consolidated Income Statement
Unaudited Unaudited Audited
6 months 6 months Year to
Note to 30.9.2016 to 30.9.2015 31.3.2016
GBPm GBPm GBPm
----------------------------------- ---- -------------- ------------- ----------
Revenue 1 706.3 626.5 1,291.1
Cost of sales (398.6) (355.2) (729.6)
----------------------------------- ---- -------------- ------------- ----------
Gross profit 307.7 271.3 561.5
Distribution and marketing
expenses (232.5) (222.4) (449.5)
Administrative expenses (18.1) (26.5) (71.9)
Operating profit 57.1 22.4 40.1
Financial income 0.5 0.8 2.3
Financial expense (3.1) (3.3) (7.5)
Profit before tax 1 54.5 19.9 34.9
Income tax expense 3 (14.7) (6.2) (13.0)
----------------------------------- ---- -------------- ------------- ----------
Profit for the period attributable
to the equity shareholders
of the parent company 39.8 13.7 21.9
=================================== ==== ============== ============= ==========
Earnings per share - Basic 4 9.0p 3.1p 5.0p
Earnings per share - Diluted 4 9.0p 3.1p 5.0p
Dividends
Amounts recognised in the
period:
----------------------------------- ---- -------------- ------------- ----------
Final dividend for the year
ended 31 March 5 6.75p 6.75p 6.75p
Interim dividend for the year
ended 31 March 2016 5 - - 5.0p
----------------------------------- ---- -------------- ------------- ----------
An interim dividend of 5.0p per share has been proposed since
the period end.
Unaudited Unaudited Audited
6 months 6 months Year to
Note to 30.9.2016 to 30.9.2015 31.3.2016
GBPm GBPm GBPm
Headline operating profit
Operating profit 57.1 22.4 40.1
Intangible fixed asset write
down 2 - 11.4 11.2
Net reorganisation costs 2 0.6 - 30.7
----------------------------- ---- ------------- ------------- ----------
57.7 33.8 82.0
============================= ==== ============= ============= ==========
Headline profit before tax
Profit before tax 54.5 19.9 34.9
Intangible fixed asset write
down 2 - 11.4 11.2
Net reorganisation costs 2 0.6 - 30.7
----------------------------- ---- ---- ----
55.1 31.3 76.8
============================= ==== ==== ====
The notes on pages 17 to 24 form part of the condensed set of
financial statements.
Condensed Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months 6 months Year to
to 30.9.2016 to 30.9.2015 31.3.2016
GBPm GBPm GBPm
-------------------------------------- ------------- ------------- ----------
Profit for the period 39.8 13.7 21.9
--------------------------------------- ------------- ------------- ----------
Other comprehensive income
Items that are not reclassified
subsequently to the income statement
Remeasurement of pension deficit (91.3) 16.6 16.3
Taxation relating to re-measurement
of pension deficit 15.0 (3.3) (4.6)
Items that are reclassified
subsequently to the income statement
Foreign exchange translation
differences 30.6 (4.2) 10.4
Gain (loss) on cash flow hedges 3.6 (2.2) (6.4)
Taxation relating to components
of other comprehensive income 1.7 0.3 (0.7)
Other comprehensive (expense)
income for the financial period (40.4) 7.2 15.0
Total comprehensive (expense)
income for the financial period (0.6) 20.9 36.9
======================================= ============= ============= ==========
The notes on pages 17 to 24 form part of the condensed set of
financial statements.
Condensed Consolidated Balance Sheet
As restated* As restated*
Unaudited Unaudited Audited
Note 30.9.2016 30.9.2015 31.3.2016
GBPm GBPm GBPm
--------------------------------- ---- ---------- ------------ ------------
Non-current assets
Intangible assets 254.8 234.8 241.3
Property, plant and equipment 97.5 97.4 96.0
Investments 0.8 0.5 0.7
Other receivables 2.7 4.4 2.1
Other financial assets 8 1.8 10.2 11.2
Deferred tax assets 26.7 8.7 9.3
Non-current assets held for
sale - - 5.1
--------------------------------- ---- ---------- ------------ ------------
384.3 356.0 365.7
--------------------------------- ---- ---------- ------------ ------------
Current assets
Inventories 6 277.9 283.7 269.4
Trade and other receivables 238.9 205.3 231.9
Other financial assets 8 13.7 - -
Income tax receivables 0.5 0.8 0.8
Cash and cash equivalents 7 56.3 315.3 351.5
--------------------------------- ---- ---------- ------------ ------------
587.3 805.1 853.6
--------------------------------- ---- ---------- ------------ ------------
Current liabilities
Trade and other payables (199.2) (181.5) (201.9)
Provisions and other liabilities (2.3) (0.4) (9.5)
Loans and borrowings 8 (107.7) (307.5) (343.2)
Other financial liabilities 8 - (0.2) -
Income tax liabilities (8.2) (3.4) (2.4)
--------------------------------- ---- ---------- ------------ ------------
(317.4) (493.0) (557.0)
--------------------------------- ---- ---------- ------------ ------------
Net current assets 269.9 312.1 296.6
--------------------------------- ---- ---------- ------------ ------------
Total assets less current
liabilities 654.2 668.1 662.3
--------------------------------- ---- ---------- ------------ ------------
Non-current liabilities
Other payables (10.1) (6.9) (7.7)
Retirement benefit obligations 9 (133.5) (45.7) (43.3)
Loans and borrowings 8 (105.0) (187.5) (184.6)
Deferred tax liabilities (78.7) (67.6) (70.9)
--------------------------------- ---- ---------- ------------ ------------
(327.3) (307.7) (306.5)
--------------------------------- ---- ---------- ------------ ------------
Net assets 326.9 360.4 355.8
================================= ==== ========== ============ ============
Equity
Called-up share capital 44.2 44.0 44.1
Share premium account 44.4 42.7 43.5
Retained earnings 177.2 256.7 242.9
Cumulative translation reserve 64.4 19.2 33.8
Other reserves (3.3) (2.2) (8.5)
--------------------------------- ---- ---------- ------------ ------------
Equity attributable to the
equity shareholders of the
parent company 326.9 360.4 355.8
================================= ==== ========== ============ ============
The notes on pages 17 to 24 form part of the condensed set of
financial statements.
*Restated for the grossing up of cash pool balances. See
accounting policies on page 18 for more details.
Condensed Consolidated Cash Flow Statement
Unaudited Unaudited
6 months 6 months Audited
to to Year to
Note 30.9.2016 30.9.2015 31.3.2016
GBPm GBPm GBPm
------------------------------------ ---- ---------- ---------- ----------
Cash flows from operating
activities
Profit before tax 54.5 19.9 34.9
Depreciation and other amortisation 14.9 14.1 29.6
Loss (profit) on disposal
of non-current assets 0.8 11.5 15.6
Equity-settled transactions 1.2 1.5 2.9
Net finance expense 2.6 2.5 5.2
Non-cash movement on investment
in associate (0.2) - (0.1)
Operating cash flow before
changes in working capital,
interest and taxes 73.8 49.5 88.1
Decrease (increase) in inventories 6.5 (1.7) 22.1
Decrease (increase) in trade
and other receivables 11.5 10.7 (6.6)
Decrease in trade and other
payables (9.0) (20.3) (10.8)
(Decrease) increase in provisions
and other liabilities (7.5) (0.3) 8.1
------------------------------------ ---- ---------- ---------- ----------
Cash generated from operations 75.3 37.9 100.9
Interest received 0.5 0.8 2.3
Interest paid (3.1) (3.3) (7.5)
Income tax paid (9.2) (9.8) (20.2)
------------------------------------ ---- ---------- ---------- ----------
Net cash from operating activities 63.5 25.6 75.5
Cash flows from investing
activities
Capital expenditure (8.4) (14.3) (28.9)
Proceeds from sale of property,
plant and equipment 3.8 - -
------------------------------------ ---- ---------- ---------- ----------
Net cash used in investing
activities (4.6) (14.3) (28.9)
Free cash flow 58.9 11.3 46.6
------------------------------------ ---- ---------- ---------- ----------
Cash flows from financing
activities
Proceeds from the issue of
share capital 1.0 0.8 1.7
Purchase of own shares (0.4) (1.1) (2.3)
Loans drawn down - 33.4 63.6
Loans repaid (23.8) (13.1) (54.5)
Equity dividends paid 5 (29.7) (29.7) (51.6)
------------------------------------ ---- ---------- ---------- ----------
Net cash used in financing
activities (52.9) (9.7) (43.1)
Net increase in cash and
cash equivalents 6.0 1.6 3.5
------------------------------------ ---- ---------- ---------- ----------
Cash and cash equivalents
at the beginning of the period 8.3 5.5 5.5
Effects of exchange rate
fluctuations on cash 1.0 0.7 (0.7)
------------------------------------ ---- ---------- ---------- ----------
Cash and cash equivalents
at the end of the period 7 15.3 7.8 8.3
==================================== ==== ========== ========== ==========
Unaudited Unaudited Audited
6 months 6 months Year to
to 30.9.2016 to 30.9.2015 31.3.2016
GBPm GBPm GBPm
Headline free cash flow
Free cash flow 58.9 11.3 46.6
Net reorganisation cash flow 3.0 0.5 16.0
------------------------------ ------------- ------------- ----------
61.9 11.8 62.6
============================= ============= ============= ==========
The notes on pages 17 to 24 form part of the condensed set of
financial statements.
Condensed Consolidated Statement of Changes in Equity
Other reserves
--------------------
Share
Share premium Hedging Own shares Cumulative Retained
capital account reserve held translation earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2016 44.1 43.5 (5.5) (3.0) 33.8 242.9 355.8
Profit for the period - - - - - 39.8 39.8
Foreign exchange
translation differences - - - - 30.6 - 30.6
Remeasurement of
pension deficit - - - - - (91.3) (91.3)
Net gain on cash
flow hedges - - 3.6 - - - 3.6
Taxation relating
to components of
other comprehensive
income (expense) - - 1.7 - - 15.0 16.7
---------------------------- -------- -------- -------- ---------- ------------ --------- ------
Total comprehensive
income (expense) - - 5.3 - 30.6 (36.5) (0.6)
---------------------------- -------- -------- -------- ---------- ------------ --------- ------
Equity settled transactions - - - - - 1.2 1.2
Dividends paid - - - - - (29.7) (29.7)
Shares allotted in
respect of share
awards 0.1 0.9 - 0.3 - (0.3) 1.0
Own shares acquired - - - (0.4) - - (0.4)
Related tax movements - - - - - (0.4) (0.4)
At 30 September 2016 44.2 44.4 (0.2) (3.1) 64.4 177.2 326.9
============================ ======== ======== ======== ========== ============ ========= ======
At 1 April 2015 44.0 41.9 1.6 (0.9) 23.4 258.3 368.3
Profit for the period - - - - - 13.7 13.7
Foreign exchange
translation differences - - - - (4.2) - (4.2)
Remeasurement of
pension deficit - - - - - 16.6 16.6
Net loss on cash
flow hedges - - (2.2) - - - (2.2)
Taxation relating
to components of
other comprehensive
income (expense) - - 0.3 - - (3.3) (3.0)
Total comprehensive
income (expense) - - (1.9) - (4.2) 27.0 20.9
---------------------------- -------- -------- -------- ---------- ------------ --------- ------
Equity settled transactions - - - - - 1.5 1.5
Dividends paid - - - - - (29.7) (29.7)
Shares allotted in
respect of share
awards - 0.8 - 0.1 - (0.1) 0.8
Own shares acquired - - - (1.1) - - (1.1)
Related tax movements - - - - - (0.3) (0.3)
---------------------------- -------- -------- -------- ---------- ------------ --------- ------
At 30 September 2015 44.0 42.7 (0.3) (1.9) 19.2 256.7 360.4
============================ ======== ======== ======== ========== ============ ========= ======
Other reserves
--------------------
Share
Share Premium Hedging Own shares Cumulative Retained
capital account reserve held translation earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2015 44.0 41.9 1.6 (0.9) 23.4 258.3 368.3
Profit for the
period - - - - - 21.9 21.9
Foreign exchange
translation differences - - - - 10.4 - 10.4
Remeasurement of
pension deficit - - - - - 16.3 16.3
Net loss on cash
flow hedges - - (6.4) - - - (6.4)
Taxation relating
to components of
other comprehensive
income (expense) - - (0.7) - - (4.6) (5.3)
------------------------- -------- -------- -------- ---------- ------------ --------- ------
Total comprehensive
income (expense) - - (7.1) - 10.4 33.6 36.9
------------------------- -------- -------- -------- ---------- ------------ --------- ------
Equity settled
transactions - - - - - 2.9 2.9
Dividends paid - - - - - (51.6) (51.6)
Shares allotted
in respect of share
awards 0.1 1.6 - 0.2 - (0.2) 1.7
Own shares acquired - - - (2.3) - - (2.3)
Related tax movements - - - - - (0.1) (0.1)
At 31 March 2016 44.1 43.5 (5.5) (3.0) 33.8 242.9 355.8
========================= ======== ======== ======== ========== ============ ========= ======
The notes on pages 17 to 24 form part of the condensed set of
financial statements.
BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES
Electrocomponents plc (the Company) is a company domiciled in
the UK. The condensed set of financial statements for the six
months ended 30 September 2016 comprises the Company and its
subsidiaries (together referred to as the Group) and the Group's
interest in a jointly controlled entity. This condensed set of
financial statements does not comprise statutory accounts within
the meaning of section 434 of the Companies Act 2006. Statutory
accounts for the year ended 31 March 2016 were approved by the
Board of Directors on 19 May 2016 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was
unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under section 498 of the Companies
Act 2006.
This condensed set of financial statements has been reviewed,
not audited. The Group financial statements for the year ended 31
March 2016 are available upon request from the Company's registered
office at International Management Centre, 8050 Oxford Business
Park North, Oxford, OX4 2HW, United Kingdom.
The Group presents headline operating profit, headline profit
before tax, headline free cash flow, headline contribution and
headline earnings per share information as it believes these
measures provide a helpful indication of its performance and
underlying trends. The term headline refers to the relevant measure
being reported before one-off items. These measures are used by the
Company for internal performance analysis. The terms headline and
one- off items are not defined terms under IFRS and may not,
therefore, be comparable with similarly titled measures reported by
other companies. They are not intended to be a substitute for, or
be superior to, GAAP measurements of performance.
These condensed interim financial statements for the six months
ended 30 September 2016 have been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS 34, 'Interim financial reporting', as
adopted by the European Union. The condensed set of financial
statements should be read in conjunction with the annual financial
statements for the year ended 31 March 2016, which have been
prepared in accordance with IFRSs as adopted by the European
Union.
Going concern
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence over a period of at least twelve months from
the date of approval of the financial statements. For this reason
they continue to adopt the going concern basis in preparing the
financial statements. The financial risk management objectives and
policies of the Group and the exposure of the Group to price risk,
credit risk, liquidity risk and cash flow risk are discussed in
note 21 to the Group's Annual Report and Accounts for the year
ended 31 March 2016.
Statement of compliance
This condensed set of financial statements was approved by the
Board of Directors on 17 November 2016.
Significant accounting policies
The accounting policies applied by the Group in these condensed
consolidated financial statements are the same as those that
applied to the consolidated financial statements of the Group for
the year ended 31 March 2016, except for the change to the
treatment of cash pool balances as detailed below.
There are no further IFRSs or IFRS Interpretation Committee
interpretations not yet effective that would be expected to have a
material impact on the Group.
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 were the same as those that applied to
the Group financial statements for the year ended 31 March 2016.
The key risks and uncertainties are explained on pages 8 and 9 of
this half-year financial report. Full details are in the Group's
Annual Report and Accounts on pages 24 to 26.
Cash pooling
In April 2016, the IFRS Interpretations Committee (IFRS IC)
issued an agenda decision regarding the treatment of offsetting and
cash pooling arrangements in accordance with IAS 32: Financial
Instruments: Presentation. This provided additional guidance on
when bank overdrafts in cash pooling arrangements would meet the
requirements for offsetting in accordance with IAS 32.
Following this additional guidance, the Group has reviewed its
cash pooling arrangements and has revised its presentation of cash
and cash equivalents and bank overdrafts on the Group Balance
Sheet. Comparatives at 31 March 2016 and 30 September 2015 have
been grossed up by GBP317.0 million and GBP307.2 million
respectively. The impact on the 31 March 2015 balance sheet would
have been to gross it up by GBP277.9 million.
1. Segmental reporting
In accordance with IFRS 8 Operating Segments, Group management
has identified its operating segments. The performance of these
operating segments is reviewed, on a monthly basis, by the Chief
Executive Officer and the Executive Management Team.
The Group's operating segments are organised into five operating
hubs and one segment of central costs. These hubs are: Northern
Europe, Southern Europe, Central Europe, Asia Pacific (APAC) and
Emerging Markets, and North America. Each segment is comprised of a
hub with one or more associated local markets. Northern Europe's
hub is the UK, with associated local markets in Denmark, Norway,
Sweden and Republic of Ireland. Southern Europe's hub is France,
with associated local markets in Italy, Spain and Portugal. Central
Europe's hub is Germany, with associated local markets in Austria,
Switzerland, the Netherlands, Belgium, Poland, Hungary and the
Czech Republic. North America's hub is the United States of
America, with an associated local market in Canada. Asia Pacific
and Emerging Markets has a hub in Hong Kong and local markets in
Japan, Australia, New Zealand, Singapore, Malaysia, Philippines,
Thailand, Taiwan, People's Republic of China, South Korea, Chile,
South Africa and exports to distributors where the Group does not
have a local operating company.
Each reporting segment derives its revenue from the high service
level distribution of electronics, automation and control and other
maintenance products. Intersegment pricing is determined on an
arm's length basis, comprising sales of product at cost and a
handling charge included within distribution and marketing
expenses. Our business has a broad portfolio of customers and
products, and as such has a seasonal impact in line with economic
output, with a slightly greater weighting of activity in the second
half of the year.
As re-presented*
6 months 6 months Year
to to to
30.9.2016 30.9.2015 31.3.2016
GBPm GBPm GBPm
--------------------------------- ---------- ---------------- ----------
Revenue from external customers
Northern Europe 199.3 187.1 384.2
Southern Europe 136.3 114.3 250.4
Central Europe 95.3 82.6 173.4
--------------------------------- ---------- ---------------- ----------
Europe 430.9 384.0 808.0
--------------------------------- ---------- ---------------- ----------
APAC and Emerging Markets 93.6 82.6 163.2
North America 181.8 159.9 319.9
--------------------------------- ---------- ---------------- ----------
Group 706.3 626.5 1,291.1
================================= ========== ================ ==========
*Re-presented for the changes in the Group reporting
structure.
As re-presented*
6 months 6 months Year
to to to
30.9.2016 30.9.2015 31.3.2016
GBPm GBPm GBPm
--------------------------- ---------- ---------------- ----------
Contribution
Northern Europe 42.0 31.2 68.3
Southern Europe 12.1 9.5 23.0
Central Europe 4.3 3.5 6.3
--------------------------- ---------- ---------------- ----------
Europe 58.4 44.2 97.6
--------------------------- ---------- ---------------- ----------
APAC and Emerging Markets (4.2) (13.2) (21.9)
North America 21.0 17.9 36.3
--------------------------- ---------- ---------------- ----------
Group 75.2 48.9 112.0
=========================== ========== ================ ==========
*Re-presented for the changes in the Group reporting
structure.
6 months 6 months Year
to to to
30.9.2016 30.9.2015 31.3.2016
GBPm GBPm GBPm
----------------------------------------- ---------- ---------- ----------
Reconciliation of contribution
to profit before tax
Contribution 75.2 48.9 112.0
Reorganisation costs and profit
on disposal (0.6) (11.4) (41.9)
Central costs (excluding reorganisation
costs) (17.5) (15.1) (30.0)
Net financial expenses (2.6) (2.5) (5.2)
Profit before tax 54.5 19.9 34.9
========================================= ========== ========== ==========
The Group derives its revenue from two product categories:
6 months 6 months
to to Year to
30.9.2016 30.9.2015 31.3.2016
GBPm GBPm GBPm
------------ ---------- ---------- ----------
Industrial 429.6 414.3 861.1
Electronics 276.7 212.2 430.0
------------ ---------- ---------- ----------
Group 706.3 626.5 1,291.1
============ ========== ========== ==========
2 Reorganisation costs
Items excluded from headline profit arising during the period
were as follows:
6 months 6 months
to to Year to
30.9.2016 30.9.2015 31.3.2016
GBPm GBPm GBPm
---------------------------- ---------- ---------- ----------
Labour restructuring charge 1.8 - 23.0
Profit on sale of warehouse (1.2) - -
Cost of exiting facilities - - 3.9
Website write-down - 11.4 11.2
Other write-downs - - 3.8
---------------------------- ---------- ---------- ----------
Total reorganisation costs 0.6 11.4 41.9
============================ ========== ========== ==========
During the six months ended 30 September 2016, the group
undertook further restructuring activities across Europe in order
to centralise and consolidate standard processes resulting in costs
of GBP1.8 million in the period. During the period, GBP1.0 million
was paid and GBP0.8 million is held within provisions due in less
than one year.
The sale of the warehouse and associated land in Singapore was
completed during the period resulting in an exceptional profit on
disposal of GBP1.2 million and a one-off cash inflow of GBP6.3
million. The proceeds were split between fixed assets (GBP3.8
million) and long term debtors (GBP2.5 million).
During the year ended 31 March 2016, the Group undertook
restructuring activities in several markets in line with the Group
strategy. The costs incurred included GBP23.0 million relating to
labour restructuring in line with the Group reorganisation and
efficiency programme and GBP3.9 million relating to the closure of
facilities, primarily the warehouse in Singapore. There was a
further non-cash write down of GBP11.2 million relating to
development on a new website and GBP3.8 million relating to a
number of smaller IT projects halted during the year.
3 Taxation on the profit of the Group
6 months 6 months
to to Year to
30.9.2016 30.9.2015 31.3.2016
GBPm GBPm GBPm
------------------------ ---------- ---------- ----------
United Kingdom taxation 3.8 (3.2) (5.2)
Overseas taxation 10.9 9.4 18.2
------------------------ ---------- ---------- ----------
14.7 6.2 13.0
======================== ========== ========== ==========
4 Earnings per share
6 months 6 months
to to Year to
30.9.2016 30.9.2015 31.3.2016
GBPm GBPm GBPm
--------------------------------------- ---------- ---------- ----------
Profit for the period attributable
to equity shareholders 39.8 13.7 21.9
Net reorganisation costs 0.6 11.4 41.9
Tax impact of net reorganisation
costs (0.6) (2.3) (8.4)
--------------------------------------- ---------- ---------- ----------
Headline profit on ordinary activities
after taxation 39.8 22.8 55.4
--------------------------------------- ---------- ---------- ----------
Weighted average number of shares
(millions) 440.3 439.3 439.4
Diluted weighted average number
of shares (millions) 441.7 440.3 440.3
Headline basic earnings per share 9.1p 5.2p 12.6p
Basic earnings per share 9.0p 3.1p 5.0p
Headline diluted earnings per
share 9.0p 5.2p 12.6p
Diluted earnings per share 9.0p 3.1p 5.0p
======================================= ========== ========== ==========
5 Dividends
6 months 6 months Year
to to to
30.9.2016 30.9.2015 31.3.2016
GBPm GBPm GBPm
----------------------------------- ----------- ----------- -----------
Amounts recognised and paid
in the period:
Final dividend for the year
ended 31 March 2016: 6.75p
(2015: 6.75p) 29.7 29.7 29.7
Interim dividend for the year
ended 31 March 2016: 5.0p (2015:
5.0p) - - 21.9
----------------------------------- ----------- ----------- -----------
29.7 29.7 51.6
=================================== =========== =========== ===========
Amounts determined after the
balance sheet date:
Interim dividend for the year
ending 31 March 2017: 5.0p 22.1
The timetable for the payment of the interim dividend is:
Ex-dividend 1 December 2016
Dividend record 2 December 2016
date
Dividend payment 11 January 2017
date
6 Inventories
30.9.2016 30.9.2015 31.3.2016
GBPm GBPm GBPm
------------------ --------- --------- ---------
Gross inventories 309.1 309.0 297.6
Stock provision (31.2) (25.3) (28.2)
------------------ --------- --------- ---------
Net inventory 277.9 283.7 269.4
================== ========= ========= =========
During the 6 months ended 30 September 2016 GBP5.3 million
(2015: GBP4.4 million; year ended 31 March 2016: GBP10.4 million)
was recognised as an expense relating to the write down of
inventory to net realisable value.
7 Cash and cash equivalents/analysis of movements in net
debt
As restated* As restated*
30.9.2016 30.9.2015 31.3.2016
Cash and cash equivalents GBPm GBPm GBPm
------------------------------ ------------ ------------- -------------
Cash and cash equivalents
in the balance sheet 56.3 315.3 351.5
Bank overdrafts (41.0) (307.5) (343.2)
------------------------------ ------------ ------------- -------------
Cash and cash equivalents
in the cash flow statement 15.3 7.8 8.3
Loans repayable after more
than one year (28.1) (62.1) (53.7)
Private placement loan notes (143.6) (125.3) (130.9)
Fair value of swap hedging
fixed rate borrowings 15.5 10.0 11.2
------------------------------ ------------ ------------- -------------
Net debt (140.9) (169.6) (165.1)
Pension deficit (133.5) (45.7) (43.3)
------------------------------ ------------ ------------- -------------
Net debt including pension
deficit (274.4) (215.3) (208.4)
------------------------------ ------------ ------------- -------------
*Restated for the grossing up of cash pool balances. See
accounting policies on page 18 for more details.
6 months 6 months Year
to to to
30.9.2016 30.9.2015 31.3.2016
Analysis of movements in net
debt GBPm GBPm GBPm
----------------------------- ---------- ---------- ----------
Net debt at 1 April (165.1) (152.6) (152.6)
Free cash flow 58.9 11.3 46.6
Equity dividends paid (29.7) (29.7) (51.6)
New shares issued 1.0 0.8 1.7
Own shares acquired (0.4) (1.1) (2.3)
Translation differences (5.6) 1.7 (6.9)
Net debt at period end (140.9) (169.6) (165.1)
============================= ========== ========== ==========
8 Financial Instruments
Fair values of financial assets and liabilities
The fair values of financial assets and liabilities, together
with the carrying amounts shown in the statement of financial
position, are below. None of the financial assets or financial
liabilities has been reclassified during the year.
Carrying Fair
value value
-------------------------------------- --------------
Valuation
Methodology GBPm GBPm
-------------------------------------- -------------- --------- -------
Financial assets at 30 September
2016
Financial assets held at Fair
Value
Interest rate swaps used for
fair value hedging A 15.5 15.5
Forward exchange rate contracts
used for cash flow hedging A 1.1 1.1
-------------------------------------- -------------- --------- -------
16.6 16.6
----------------------------------------------------- --------- -------
Financial assets held at Amortised
Cost
Cash and cash equivalents D 56.3 56.3
Trade receivables, other receivables
and accrued income F 222.0 222.0
-------------------------------------- -------------- --------- -------
278.3 278.3
----------------------------------------------------- --------- -------
Total Financial assets 294.9 294.9
------------------------------------------------------ --------- -------
Financial liabilities at 30
September 2016
Financial liabilities held at
Fair Value
Forward exchange rate contracts
used for cash flow hedging A (2.2) (2.2)
(2.2) (2.2)
------------------------------------- -------- --------
Financial liabilities held at
Amortised Cost
Bank facilities D (28.1) (28.1)
Private Placement notes subject
to fair value hedge C (82.0) (85.3)
Private Placement notes D (61.6) (65.4)
Bank overdrafts D (41.0) (41.0)
Trade payables, other payables
and accruals F (193.1) (193.1)
--------------------------------- --- -------- --------
(405.8) (412.9)
------------------------------------- -------- --------
Total Financial liabilities (408.0) (415.1)
-------------------------------------- -------- --------
Carrying Fair
value value
-------------------------------------- --------------
Valuation
Methodology GBPm GBPm
-------------------------------------- -------------- --------- --------
Financial assets at 30 September
2015
Financial assets held at Fair
Value
Interest rate swaps used for
fair value hedging A 10.2 10.2
Forward exchange rate contracts
used for cash flow hedging A 1.6 1.6
-------------------------------------- -------------- --------- --------
11.8 11.8
----------------------------------------------------- --------- --------
Financial assets held at Amortised
Cost
Cash and cash equivalents D 315.3 315.3
Trade receivables, other receivables
and accrued income F 197.1 197.1
-------------------------------------- -------------- --------- --------
512.4 512.4
----------------------------------------------------- --------- --------
Total Financial assets as restated* 524.2 524.2
------------------------------------------------------ --------- --------
Financial liabilities at 30
September 2015
Financial liabilities held at
Fair Value
Interest rate swaps used for
fair value hedging A (0.2) (0.2)
Interest rate swaps used for
cash flow hedging A (0.1) (0.1)
Forward exchange rate contracts
used for cash flow hedging A (0.6) (0.6)
(0.9) (0.9)
----------------------------------------------------- --------- --------
Financial liabilities held at
Amortised Cost
Bank facilities D (62.1) (62.1)
Private Placement notes subject
to fair value hedge C (92.3) (92.3)
Private Placement notes D (33.0) (34.9)
Bank overdrafts D (307.5) (307.5)
Trade payables, other payables
and accruals F (194.3) (194.3)
-------------------------------------- -------------- --------- --------
(689.2) (691.1)
----------------------------------------------------- --------- --------
Total Financial liabilities
as restated* (690.1) (692.0)
------------------------------------------------------ --------- --------
Carrying Fair
value value
-------------------------------------- --------------
Valuation
Methodology GBPm GBPm
-------------------------------------- -------------- --------- --------
Financial assets at 31 March
2016
Financial assets held at Fair
Value
Interest rate swaps used for
fair value hedging A 11.2 11.2
Forward exchange rate contracts
used for cash flow hedging A 0.4 0.4
-------------------------------------- -------------- --------- --------
11.6 11.6
----------------------------------------------------- --------- --------
Financial assets held at Amortised
Cost
Cash and cash equivalents D 351.5 351.5
Trade receivables, other receivables
and accrued income F 216.0 216.0
-------------------------------------- -------------- --------- --------
567.5 567.5
----------------------------------------------------- --------- --------
Total Financial assets as restated* 579.1 579.1
------------------------------------------------------ --------- --------
Financial liabilities at 31
March 2016
Financial liabilities held at
Fair Value
Forward exchange contracts used
for cash flow hedging A (5.0) (5.0)
(5.0) (5.0)
----------------------------------------------------- --------- --------
Financial liabilities held at
Amortised Cost
Bank facilities D (53.7) (53.7)
Private Placement loan notes
subject to fair value hedge C (75.1) (77.4)
Private Placement loan notes D (55.8) (59.8)
Bank overdrafts D (343.2) (343.2)
Trade payables, other payables
and accruals F (198.3) (198.3)
-------------------------------------- -------------- --------- --------
(726.1) (732.4)
----------------------------------------------------- --------- --------
Total Financial liabilities
as restated* (731.1) (737.4)
------------------------------------------------------ --------- --------
*Restated for the grossing up of cash balances not netted at
reporting date. See accounting policies on page 18 for more
details.
Estimation of fair values
The fair values reflected in the table above have been
determined by reference to available market information at the
balance sheet date and using the methodologies described below.
A Derivative financial assets and liabilities
Fair values are estimated by discounting expected future
contractual cash flows using prevailing interest rate curves and
valuing any amounts denominated in foreign currencies at the
exchange rate prevailing at the balance sheet date. These financial
instruments are included on the balance sheet at fair value,
derived from observable market prices (Level 2 as defined by IFRS 7
Financial Instruments: Disclosures).
B Interest bearing loans held at fair value
These comprise sterling and foreign currency denominated
interest bearing loans which are subject to hedge accounting. Fair
values are estimated by discounting expected contractual cash flows
using prevailing interest rate curves and valuing any amounts
denominated in foreign currencies at the exchange rate prevailing
at the balance sheet date (Level 2 as defined by IFRS 7 Financial
Instruments: Disclosures).
C Loans designated under fair value hedge relationships
These comprise sterling and foreign currency denominated
interest bearing loans which are subject to hedge accounting. Fair
values are estimated by discounting expected contractual cash flows
using prevailing interest rate curves and valuing any amounts
denominated in foreign currencies at the exchange rate prevailing
at the balance sheet date. These loans have been designated under
fair value hedge relationships (Level 2 as defined by IFRS 7
Financial Instruments: Disclosures).
D Cash and cash equivalents, Bank overdrafts, Interest-bearing
loans held at amortised cost
Cash and cash equivalents largely comprise local bank account
balances, which typically bear interest at rates set by reference
to local applicable rates or cash float balances which have not yet
cleared for interest purposes. Fair values are estimated to equate
to carrying amounts as their re-pricing maturity is less than one
year.
Interest bearing loans held at amortised cost comprise fixed
rate sterling and foreign currency denominated loans. For carrying
values the foreign currency principal amounts have been valued at
the exchange rate prevailing at the balance sheet date. Fair values
are estimated by discounting future cash flows using prevailing
interest rate curves.
Bank overdrafts are repayable on demand and are all unsecured.
They bear interest at rates set by reference to applicable local
rates. Fair values are estimated to equate to carrying amounts as
their re-pricing maturity is less than one year.
E Finance lease liabilities
Fair values are estimated by discounting future cash flows using
prevailing interest rate curves.
F Other financial assets and liabilities
Fair values of receivables and payables are determined by
discounting future cash flows. For amounts with a re-pricing
maturity of less than one year, fair value is assumed to
approximate to the carrying amount.
9 Retirement benefit obligations
The Group operates defined benefit pension schemes in the United
Kingdom and Europe.
Details of the assets and liabilities of the Group's defined
benefit pension schemes are shown below:
30.9.2016 30.9.2015 31.3.2016
GBPm GBPm GBPm
Total market value of the schemes'
assets 500.5 425.9 443.5
Present value of the schemes'
liabilities (634.0) (471.6) (486.8)
----------------------------------- --------- --------- ---------
Schemes' deficit (133.5) (45.7) (43.3)
=================================== ========= ========= =========
10 Principal exchange rates
6 months 6 months
to to Year to
30.9.2016 30.9.2015 31.3.2016
----------------------- ---------- ----------- -----------
Average for the period
Euro 1.22 1.39 1.37
United States Dollar 1.37 1.54 1.51
30.9.2016 30.9.2015 31.3.2016
----------------------- ---------- ----------- -----------
Period end
Euro 1.15 1.35 1.26
United States Dollar 1.30 1.51 1.44
----------------------- ---------- ----------- -----------
11 Related party transactions
There are no significant related party transactions requiring
disclosure. Key management compensation will be disclosed in the
2017 Annual Report and Accounts.
Independent review report to Electrocomponents PLC
Report on the condensed set of financial statements
Our conclusion
We have reviewed Electrocomponents PLC's condensed set of
financial statements (the "interim financial statements") in the
half-yearly financial report of Electrocomponents PLC for the 6
month period ended 30 September 2016. Based on our review, nothing
has come to our attention that causes us to believe that the
interim financial statements are not prepared, in all material
respects, in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and
the Disclosure Rules and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated balance sheet as at 30 September 2016;
-- the condensed consolidated income statement and statement of
comprehensive income for the period then ended;
-- the condensed consolidated statement of cash flows for the period then ended;
-- the condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half-yearly
financial report have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Rules and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
As disclosed in the "Basis of Preparation" in the interim
financial statements, the financial reporting framework that has
been applied in the preparation of the full annual financial
statements of the Group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half-yearly financial report, including the interim
financial statements, 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
Disclosure Rules and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the half-yearly financial report based on
our review. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Rules and Transparency Rules of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and
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.
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 interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
17 November 2016
a) The maintenance and integrity of the Electrocomponents PLC
website is the responsibility of the directors; the work carried
out by the auditors does not involve consideration of these matters
and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the interim financial statements
since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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