Rs Group Plc · LSE:RS1
Rs — Electrocomponents — H1 2015 Earnings Presentation
37 slides from Rs's earnings presentation, Nov 13, 2014
Slide 1: The global distributor for engineers
The global distributor for engineers ELECTROCOMPONENTS PLC Announcement of Results for the Half-year ended 30 September 2014 13 November 2014 www.electrocomponents.com
Slide 2: Agenda
AGENDA • H1 2015 highlights and current trading Ian Mason • Financial performance Simon Boddie • Business performance Ian Mason • Strategy update Ian Mason • Q&A conference call All • +44 (0) 20 3059 8125 • Password: Electrocomponents 2
Slide 3: H1 2015 Highlights and Current Trading
H1 2015 HIGHLIGHTS AND CURRENT TRADING 3
Slide 4: Confident in strategy
OVERVIEW • Investing in strategy to drive faster sales growth • Sales growth rates consistent, not yet improving • Profits impacted by continued investment in strategy • Growth in International sales and contribution • Strong momentum in eCommerce and Famous For products • Focused on improving perfo
Slide 5: Good progress implementing global strategy
H1 2015 HIGHLIGHTS FINANCIAL OPERATIONAL (1) • 3% sales growth driven by • 5% eCommerce growth, 58% International at 5% share • 0.7%pt decline in gross margin • 5% Famous For growth reflecting mix and discounting • 15% of product range available • 16% headline PBT decline, with globally 10% pts due
Slide 6: Current trading: sales growth
CURRENT TRADING Sales Growth (1) Q1 2015 Q2 2015 H1 2015 October Continental 2% 2% 2% 3% Europe North America 8% 12% 10% 10% Asia Pacific 8% 1% 5% 0% International 5% 5% 5% 5% UK (2)% (2)% (2)% (3)% UK ex-Rasp. Pi (1)% (2)% (1)% (2)% Group 3% 3% 3% 3% (1) Underlying sales growth, adjusted for curren
Slide 7: Financial Performance
FINANCIAL PERFORMANCE 7
Slide 8: Basis of preparation
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 re
Slide 9: Profit and loss account
PROFIT AND LOSS ACCOUNT £m H1 2015 H1 2014 Change Sales 616.4 635.4 3% (1) Gross margin (%) 44.7% 45.4% (0.7)% pts Headline operating costs (235.6) (241.1) (2)% (1) Headline operating profit 40.0 47.2 (15)% (2) Headline operating margin (%) 6.5% 7.4% (0.9)% pts Headline PBT 37.4 44.6 (16)% (2) (1) A
Slide 10: Group headline profit before tax movement
GROUP HEADLINE PROFIT BEFORE TAX MOVEMENT (1) (2) Growth (10)% 9% (6)% (8)% Strong International contribution growth offset by UK decline and process cost investment (1) Adjusted for currency movements 10 (2) Impact of Foreign exchange and trading days on reported profit before tax
Slide 11: Gross margin
GROSS MARGIN Change (0.3)% (0.1)% 0.1% (0.4)% (0.4)% Gross margin impacted by mix & price investment 11
Slide 12: Operating costs
OPERATING COSTS (1) Growth (1.5)% (1.3)% (1.2)% 1.7% (2.3)% Planned investment in global strategy 12 (1) Adjusted for currency movements
Slide 13: Headline earnings per share
HEADLINE EARNINGS PER SHARE H1 2015 H1 2014 Change Headline PBT 37.4 44.6 (16)% Exceptional pension credit 20.0 - - Reorganisation costs (1.9) - - Reported PBT 55.5 44.6 24% Effective tax rate (%) (28)% (29)% - Per share amounts: Headline earnings 6.1p 7.2p (15)% Interim dividend 5.0p 5.0p - Maintai
Slide 14: Pension update
PENSION UPDATE CHANGES MADE TO BENEFITS OF UK DEFINED BENEFIT SCHEME PENSION DEFECIT MEMBERS • Freeze DB pensionable pay • The combined pension deficit was stable at £41m • Increase member contributions • £20m one-off credit relating to benefit changes • Increase Group’s deficit • Adverse impact of
Slide 15: Reorganisation costs
REORGANISATION COSTS BENEFITS IMPACTS Changes to UK & APAC sales force: • One-off costs: £1.9m in H1 • Reduced management layers • One-off cash outflows: £1.7m in H1 • Simplified structure • One year payback • Shift from field to internal sales • Net reduction of 65 roles Creating a more effective s
Slide 16: Cash flow
CASH FLOW £m H1 2015 H1 2014 Profit before tax 55.5 44.6 Depreciation & amortisation 14.9 13.5 Working capital (19.4) 0.5 Finance expenses (net) 2.6 2.6 Other non-cash movements 0.9 1.1 Operating cash flow 54.5 62.3 Interest paid (net) (2.6) (2.6) Tax paid (11.7) (13.0) Net capital expenditure (17.3
Slide 17: Funding position
FUNDING POSITION SUCCESSFUL REFINANCING STRONG FINANCIAL METRICS • £170m multi-currency facility • £102.7m of our facilities were signed in August 2014 expiring undrawn at 30 September 2014 in August 2019 • EBITA to interest cover of 23.4 • 5 year term with eight banks (covenant >3x) • Net debt of £
Slide 18: 2015 full year guidance
2015 FULL YEAR GUIDANCE PROFIT AND LOSS CASH FLOW • Translation impact from FX and • Increasing stock turn from 2.4x to 2.5x trading days £7m (H1: £4m; H2: £3m) • Transactional impacts of • Capex £40m, depreciation & strengthening Sterling on gross amortisation £32m margin • Operating cost growth at
Slide 19: Business Performance
BUSINESS PERFORMANCE 19
Slide 20: Business portfolio
BUSINESS PORTFOLIO H1 2015 Sales % of Group Contribution Market (1) growth sales margin position Continental Europe 2% 35% 22% No.1 North America 10% 24% 13% No.3 Asia Pacific 5% 12% 6% No.1 International 5% 71% 16% No.1 UK (2)% 29% 27% No.1 Group 3% 100% 19% No.1 (1) Underlying sales growth, adjust
Slide 21: Continental Europe
CONTINENTAL EUROPE (35% Group sales) (1) • Smaller markets performing H1 2015 H1 2014 Growth well • France in decline, Germany Sales £213.3m £223.3m 2% in growth but softening Contribution £46.4m £46.3m 7% • 6% eCommerce growth, 70% eCommerce share Contribution (+2% pts) 21.8% 20.7% 1.1% pts margin
Slide 22: North America
NORTH AMERICA (24% Group sales) • Strong growth throughout H1 (1) H1 2015 H1 2014 Growth • 19% eCommerce growth, 40% eCommerce share Sales £146.5m £145.1m 10% (+3% pts) • 63k new products added, Contribution £19.6m £19.3m 11% of which 33k from range level-up Contribution 13.4% 13.3% 0.1% pts margin
Slide 23: Asia Pacific
ASIA PACIFIC (12% Group sales) • Three sub-regions in growth (1) H1 2015 H1 2014 Growth • 2% eCommerce growth, 47% eCommerce share Sales £76.5m £81.7m 5% (-2% pts) • 8% Famous For product growth Contribution £4.7m £4.9m 21% • Gross margin action plan being Contribution implemented 6.1% 6.0% 0.1% pts
Slide 24: UK
UK (29% Group sales) • Performance similar to H1 2015 H1 2014 Growth (1) others in industry • eCommerce outperforming, 63% eCommerce share Sales £180.1m £185.3m (2)% (+1% pts) • Famous For product sales Contribution £49.3m £52.5m (6)% flat Contribution • Salesforce reorganised 27.4% 28.3% (0.9)% pts
Slide 25: Performance action plans
PERFORMANCE ACTION PLANS UK/FRANCE SALES PLAN • Focus on corporate accounts • Enhance tools & consumables product categories • Improve online search conversion Focused on improving performance 25
Slide 26: Strategy Update
STRATEGY UPDATE 26
Slide 27: Global strategy
GLOBAL STRATEGY 2015 focus on One Global Offer 27 and eCommerce with a Human Touch
Slide 28: One Global Offer
ONE GLOBAL OFFER H1 PROGRESS INCREASING GLOBAL RANGE Global Range availability and incremental • Significant step-up in NPI sales • 15% of range available globally • Improved customer offer with partial shipments service 28 5% Famous For product category growth
Slide 29: eCommerce with a Human Touch
ECOMMERCE WITH A HUMAN TOUCH JOINT GLOBAL MARKETING H1 PROGRESS CAMPAIGNS WITH SUPPLIERS • 58% eCommerce share, Continental Europe at 70% • Increased digital marketing • Enhanced online content for top 50k selling products • Good progress preparing for upgrade of web platform 5% eCommerce growth 29
Slide 30: Other strategic developments
OTHER STRATEGIC DEVELOPMENTS STRATEGIC PRIORITY H1 PROGRESS Grow target customers • 1% growth in customers Value for money • Significant step-up in price communication to customers World class systems • Completed SAP-based IT system roll-out Progress towards our medium-term goals 30
Slide 31: Summary
SUMMARY FOCUS ON NEAR-TERM ACTION PLANS, MEDIUM-TERM STRATEGY • Investing in strategy to drive faster sales growth • Sales growth rates consistent, not yet improving • Profits impacted by continued investment in strategy • Growth in International sales and contribution • Strong momentum in eCommerce
Slide 32: Q&A
Q&A • Conference call • +44 (0) 20 3059 8125 • Password: Electrocomponents 32
Slide 33: Appendix
APPENDIX 33
Slide 34: Impact of foreign exchange
IMPACT OF FOREIGN EXCHANGE Growth Growth H1 2015 H1 2014 reported fx adjusted £m £m Continental Europe 46.4 46.3 0.2% 7.2% North America 19.6 19.3 1.6% 11.4% Asia Pacific 4.7 4.9 (4.1)% 20.5% International 70.7 70.5 0.3% 9.1% contribution UK contribution 49.3 52.5 (6.1)% (6.1)% Process costs (80.0)
Slide 35: Financial KPIs
FINANCIAL KPIs Medium-term Performance Framework 2013 Medium-term 2014 (Base year) target range Group sales growth(1) 0.5% 2.1% 5% - 8% Group return on sales 8.1% (2) 8.3% 9% - 11% Return on capital 18.5% (2) 20.9% 20% - 30% employed Free cash flow as a 4.5% 4.6% 4% - 6% percentage of sales (1) Unde
Slide 36: Operational KPIs
OPERATIONAL KPIs Medium-term Performance Framework 2013 2014 Medium-term target (Base year) Growth in corporate Customer number growth key 3% 3% driver of sales growth customer numbers eCommerce sales growth > Group eCommerce sales growth 4% 6% sales growth Famous For product sales Famous For sales
Slide 37: The global distributor for engineers
The global distributor for engineers ELECTROCOMPONENTS PLC Announcement of Results for the Half-year ended 30 September 2014 13 November 2014 www.electrocomponents.com