RS Group PLC · LSE:RS1

RS — Electrocomponents — H1 2011/12 Earnings Presentation

45 slides from RS's earnings presentation, Nov 14, 2011

  1. Slide 1: Announcement of Interim Results, Half Year Ended 30 September 2011

    Electrocomponents plc ANNOUNCEMENT OF INTERIM RESULTS HALF YEAR ENDED 30 SEPTEMBER 2011 14 NOVEMBER 2011

  2. Slide 2: Agenda

    Agenda Overview and current trading Ian Mason Financial performance Simon Boddie Strategy update Ian Mason  UK Paul Quested Q&A All 2

  3. Slide 3: Key themes

    Key themes  Strong first half performance  International driving growth, >70% share of Group  Investment in strategic initiatives to capture structural growth  Both Electronics and Maintenance performing well  Excellent progress in eCommerce, significant improvements to websites  Improved prof

  4. Slide 4: Financial highlights

    Financial highlights  Strong sales growth 11%, International 14%  Stable gross margin 46.7%, stable half-on-half  Good cost leverage 0.5% pt improvement  High double-digit PBT growth £59.4m, 18%  Healthy free cash flow £22.7m, after £22m w/cap investment  Strong balance sheet Bank refinancing,

  5. Slide 5: Current trading

    Current trading Underlying sales growth FY12 Q1 Q2 September October Continental Europe 17% 12% 8% 5% North America 16% 12% 9% 5% Asia Pacific 15% 8% 3% 11% International 17% 11% 8% 6% UK 8% 2% -1% 2% Group 14% 8% 5% 5% October Group sales growth similar to September 5

  6. Slide 6: Sales per day

    Sales per day UK SPD 1,500 1,300 1,100 900 Group SPD 700 5,500 500 5,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY09 FY09 FY09 FY09 FY10 FY10 FY10 FY10 FY11 FY11 FY11 FY11 FY12 FY12 4,500 £’000 sales per trading day (constant foreign exchange) ƒ 4,000 International SPD 3,500 4,000 3,000 Q1 Q2 Q3

  7. Slide 7: Current trading and outlook

    Current trading and outlook  Continuing to grow, 5% Group sales growth in October  Gaining market share, particularly from small competitors  Continuing to invest in our strategic initiatives to drive growth  Keeping a tight control of costs, being mindful of economic conditions  Expecting seco

  8. Slide 8: Agenda

    Agenda Overview and current trading Ian Mason Financial performance Simon Boddie Strategy update Ian Mason  UK Paul Quested Q&A All 8

  9. Slide 9: Basis of preparation

    Basis of preparation Unless otherwise stated:  Figures have been prepared using International Financial Reporting Standards (IFRS)  Changes in revenue are adjusted for exchange rates and for the number of trading days (‘underlying sales growth/decline’)  Changes in profit, cash flow, debt and sha

  10. Slide 10: Profit and loss account

    Profit and loss account H1 H1 Reported £m 2011/12 2010/11 Change Revenue 626.5 563.3 11.0% (1) Gross margin 46.7% 46.8% (0.1)% points Operating profit 62.1 53.6 15.9% Interest (2.7) (3.1) 12.9% Profit before tax 59.4 50.5 17.6% Return on sales 9.9% 9.5% 0.4% points Double-digit sales and profit grow

  11. Slide 11: Group pre-tax profit increase

    Group pre-tax profit increase Contribution growth (1) 14% 8% £4m £(6)m £11m £59m £50m £m H1 2010/11 International UK Processes H1 2011/12 International and UK driving contribution growth (1) Adjusted for currency 11

  12. Slide 12: International contribution

    International contribution H1 H1 Underlying £m 2011/12 2010/11 Change (1) Revenue 448.2 391.6 13.8% Operating costs (124.3) (112.4) (9.3)% Contribution 79.0 67.9 13.7% Contribution % 17.6% 17.3% 0.3% points All regions delivering double-digit sales growth (1) Adjusted for currency; revenue also adju

  13. Slide 13: International contribution components

    International contribution components Contribution 14% 16% 7% growth (1) £1m £79m £2m £8m £68m £m H1 2010/11 Continental Europe North America Asia Pacific H1 2011/12 Contribution growth broadly based (1) Adjusted for currency 13

  14. Slide 14: UK contribution

    UK contribution H1 H1 Underlying £m 2011/12 2010/11 Change (1) Revenue 178.3 171.7 4.6% Operating costs (37.5) (35.6) (5.5)% Contribution 51.6 47.8 7.9% Contribution % 28.9% 27.8% 1.1% points Contribution margin increasing by > 1% pt (1) Revenue adjusted for trading days 14

  15. Slide 15: Gross margin

    Gross margin  Group gross margin stable  UK increase (+1.5% pts):  Targeted selling price increases  Increased discount effectiveness  Favourable foreign exchange  International decrease (-0.6% pts):  Principally Continental Europe  Large customer account wins  Larger orders  Unfavourable

  16. Slide 16: Operating costs

    Operating costs Drivers of operating leverage Costs: % sales H1 H1  Fixed cost leverage 2011/12 2010/11 Change  Cost reductions:  Continuous Improvement International 27.8% 28.7% 0.9% pts  Refocused European marketing spend UK 21.1% 20.7% (0.4)% pts  Freight re-tender annualisation Processes 10

  17. Slide 17: Earnings per share

    Earnings per share H1 H1 Change £m 2011/12 2010/11 reported Profit before tax 59.4 50.5 17.6% Effective tax rate 31% 31% - Per share amounts: Earnings 9.4p 8.0p 17.5% Interim dividend 5.0p 5.0p - Interim dividend maintained:  Intention to re-weight interim dividend over time  Final dividend to be

  18. Slide 18: Cash flow

    Cash flow H1 H1 £m 2011/12 2010/11 Profit before tax 59.4 50.5 Depreciation 13.0 13.2 Employee share options / non-cash mvts 0.9 1.5 Finance expense (net) 2.7 3.1 Working capital (21.7) (13.1) Cash generated from operations 54.3 55.2 Interest paid (net) (2.7) (2.3) Tax paid (13.3) (9.6) Net capital

  19. Slide 19: Working capital

    Working capital Cash in / (out) flow H1 H1 £m 2011/12 2010/11 Comment Inventories (12.2) (26.6) Stock turn of 2.7x Trade receivables 14.7 (2.3) Debtor days flat Trade payables (24.2) 15.8 Impact of last year's stock intake Trade working capital (21.7) (13.1) FY12 cash considerations  Full year cape

  20. Slide 20: Net debt

    Net debt H1 £m 2011/12 Net debt as at 1 April 2011 (160.7) Free cash flow 22.7 Dividends paid (28.3) New shares issued 0.8 Translation differences (1.0) Net debt as at 30 September 2011 (166.5) Pension deficit £6.2m (March 2011 £5.4m) Strong balance sheet 20

  21. Slide 21: Facilities and covenants

    Facilities and covenants £210m committed bank facility H1  Maturity November 2015 £m 2011/12 Committed facilities 305 Used facilities (164) $150m Private Placement notes Unused facilities 141  Maturing 2015 and 2017 H1 H1 2011/12 2010/11 Covenant Net debt / EBITDA (1) 1.1x 1.2x <3.25x EBITA net in

  22. Slide 22: Financial highlights

    Financial highlights  Strong sales growth 11%, International 14%  Stable gross margin 46.7%, stable half-on-half  Good cost leverage 0.5% pt improvement, int’l and process  High double-digit PBT growth £59.4m, 18%  Healthy free cash flow £22.7m, after £22m w/cap investment  Strong balance shee

  23. Slide 23: Agenda

    Agenda Overview and current trading Ian Mason Financial performance Simon Boddie Strategy update Ian Mason  UK Paul Quested Q&A All 23

  24. Slide 24: Group strategy

    Group strategy “The world’s distributor of choice” Vision • International growth • Electronics and Maintenance • eCommerce Strategy • Operating leverage • UK profitability • Set by each business Priorities • Ensure alignment and clarity Investing in our clear and consistent strategy 24

  25. Slide 25: Structural growth opportunity

    Structural growth opportunity NOW (1) FUTURE (1) Growing markets Growing market share Ca. £30 bn available market Highly fragmented markets (ca. 85%) Electronics 2 x GDP Market share gains by 5 main players Maintenance GDP Increasing competitive advantages Emerging markets We are the leading global

  26. Slide 26: Electronics & Maintenance: balanced customer offer

    Electronics & Maintenance: balanced customer offer Higher Electronics Growth Similar Gross Margins Higher Maintenance Stock Turns Sales Growth (1) Gross Margins (1) Stock Turns (1) 30.0% 60.0% 5.0 4.0 20.0% 3.0 50.0% 2.0 10.0% 1.0 0.0% 40.0% 0.0 Electronics Maintenance Electronics Maintenance Electr

  27. Slide 27: Leading service levels

    Leading service levels Europe Customer Satisfaction Survey (1) Drivers of high customer satisfaction 100% 88% 78% 80% 72% 70%  Service accuracy 60% TRI*M Index 51%  40% Range & availability 20%  Easy to do business with 0% RS Europe Trade/Distribution Competitor A Competitor B Competitor C Europe

  28. Slide 28: eCommerce-led approach

    eCommerce-led approach Our eCommerce portfolio Revenue Revenue (1) (2)  Customers choose the web growth share Continental Europe 28% 60%  Effective way of acquiring customers North America 29% 41% Asia Pacific 53% 53%  Investment has shifted to the web International 32% 53% UK 14% 58%  Smaller c

  29. Slide 29: Business portfolio

    Business portfolio Underlying H1 FY11/12 sales % of Group Contribution Market £m growth revenue % of revenue position Continental Europe 15% 36% 21% No. 1 North America 14% 23% 17% No. 3 Asia Pacific 12% 13% 10% No. 1 International 14% 72% 18% No. 1 UK 5% 28% 29% No. 1 Group 11% 100% 21% No.1 Signif

  30. Slide 30: Continental Europe

    Continental Europe  15% sales growth, 9/10 markets double-digit Europe eCommerce share % 60%  28% eCommerce growth, 60% share 58% 56% 54%  17 large customer account wins 52% 50% 48%  Focus on pan-European marketing 46% 44% 42%  Excellent customer service levels 40% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

  31. Slide 31: North America

    North America  14% sales growth, strong automation & control  29% eCommerce growth, 41% share  Benefiting from multi-channel approach  16k new products introduced  SAP implementation on track for Q1 2012 Consistent market outperformance 31

  32. Slide 32: Asia Pacific

    Asia Pacific  12% sales growth, >20% in China  53% eCommerce growth, 53% share  China major focus of investment  Japan back in growth in October  ANZ automation and control Leveraging Group strategic initiatives 32

  33. Slide 33: UK Profitability

    UK Profitability UK Strategy UK H1 contribution at £51.6m  60 Driving sales growth 50  Leveraging the Group offer 40 £m 30  Developing new incremental ‘regular’ 20 revenue streams 10  Continuing to manage margin and cost 0 FY08 FY09 FY10 FY11 FY12 Sales growth driving improved performance 33

  34. Slide 34: UK: leveraging the Group offer

    UK: leveraging the Group offer  Leveraging Electronics and Maintenance UK conversion ratio offers  New product introductions  Technical Marketing solutions New Search & Browse Launched Mid July  14% eCommerce growth, 58% share  SEM and digital marketing driving visits  May-11 Jun-11 Jul-11 Aug

  35. Slide 35: UK: delivering incremental revenue streams

    UK: delivering incremental revenue streams  Growing core high service level offer  Large account growth  6 account wins  Structured Compliance programme  Flexible pricing offer  Driving sales and profit growth  Over 7% of customers using offer Flexibility & competitiveness changing price perc

  36. Slide 36: UK: effective margin and cost management

    UK: effective margin and cost management UK contribution margin 30%  Improve gross margin 29% 28.9%  Focused pricing strategy 28%  Increased discount effectiveness 27% Return on sales 26%  20% reduction in costs since 2007 25% 24%  Reinvesting cost savings 23% 22%  Offline spend into digital 

  37. Slide 37: Electronics

    Electronics  12% sales growth, >40% share ‘Most Popular Product of the Year’ in the IP/EDA category, EE Times 2011 Awards  20k new products introduced  DesignSpark: >700k visits  DesignSpark PCB: >100k downloads  PCB Converter for Google Sketch Up Delivering what our customers need, globally 37

  38. Slide 38: Maintenance

    Maintenance  11% sales growth, strong automation & control Strategic Suppliers sales growth 25%  Market differentiator and highly profitable Growth rate, rolling 12 months (%) 20%  4k new products introduced 15%  Pan-European maintenance offer 10% 5%  Focus on strategic suppliers 0% Maintenance

  39. Slide 39: Key themes

    Key themes  Strong first half performance  International driving growth, >70% share of Group  Investment in strategic initiatives to capture structural growth  Both Electronics and Maintenance performing well  Excellent progress in eCommerce, significant improvements to websites  Improved prof

  40. Slide 40: Agenda

    Agenda Overview and current trading Ian Mason Financial performance Simon Boddie Strategy update Ian Mason  UK Paul Quested Q&A All 40

  41. Slide 41: Announcement of Interim Results, Half Year Ended 30 September 2011

    Electrocomponents plc ANNOUNCEMENT OF INTERIM RESULTS HALF YEAR ENDED 30 SEPTEMBER 2011 14 NOVEMBER 2011

  42. Slide 42: Financial appendices

    Financial appendices 42

  43. Slide 43: Impact of foreign exchange

    Impact of foreign exchange Reported H1 2011/12 H1 2010/11 Growth Growth reported Foreign exchange adjusted £m £m % % International contribution Continental Europe 47.3 39.4 20.1% 14.0% North America 23.3 21.4 8.9% 15.7% Asia Pacific 8.4 7.1 18.3% 7.1% International 79.0 67.9 16.3% 13.7% UK contribut

  44. Slide 44: Five year performance framework

    Five year performance framework KPIs 5 year target H1 2011/12 2011 International sales growth 7-10% p.a. 13.8% 25.3% International share of group sales 70+% 72% 70% UK contribution Stable Increasing Increasing Sales via eCommerce 70% 54%(1) 53%(1) Underlying gross margin Stable Stable Stable in yr C

  45. Slide 45: Electrocomponents: what we do

    Electrocomponents: what we do Strong Brands 800K Catalogues 54% e Commerce 2,500 Major Suppliers 550,000 Products 1.6m Customers 17 Distribution Centres 40,000 Parcels Daily 90+% of World GDP The World’s distributor of choice 45

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