Rs Group Plc · LSE:RS1
Rs — Electrocomponents — Investor Presentation (June 2014)
27 slides from Rs's investor presentation, June 2014
Slide 1: Electrocomponents plc Investor Update June 2014
The global distributor for engineers ELECTROCOMPONENTS PLC INVESTOR UPDATE June 2014 www.electrocomponents.com
Slide 2: Agenda
AGENDA • Business overview • The structural growth opportunity • Strategy update • Financial performance • Summary 2
Slide 3: Electrocomponents: What We Do
ELECTROCOMPONENTS: WHAT WE DO Strong Brands 800k Catalogues 59% eCommerce 2,500 Major Suppliers 500,000 Products > 1m Customers 17 Distribution Centres 44,000 Parcels Daily 90+% of World GDP The world’s distributor of choice 3
Slide 4: Our Customers
ELECTROCOMPONENTS: OUR CUSTOMERS Our key customer groups: Buyers Electronics Design Engineers Maintenance Engineers Nature of demand: • Average order value c. £150 • Average order size is 2 to 3 product lines • Wide variety of products per order Stages of the product lifecycle Over 1 million custome
Slide 5: Business Portfolio
BUSINESS PORTFOLIO 2014 Sales % of Group Contribution Market (1) growth sales margin position Continental Europe 4% 36% 22% No.1 North America 4% 22% 14% No.3 Asia Pacific 2% 13% 8% No.1 International 4% 71% 17% No.1 UK (2)% 29% 29% No.1 Group 2% 100% 20% No.1 (1) Underlying sales growth, adjusted f
Slide 6: Operating Cost Leverage
OPERATING COST LEVERAGE 45% International operating costs as % of sales: >7% point reduction over 10 years 40% Costs as % of sales FY12 China 35% Japan Italy 30% Australia 25% France Germany UK + Austria 20% US 15% 10% 0 50 100 150 200 250 300 350 400 Sales FY12 (£m) Increasing scale is driving cost
Slide 7: 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
Slide 8: Structural Growth Through the Cycle – In Practice
STRUCTURAL GROWTH THROUGH THE CYCLE – IN PRACTICE International Sales CAGR Development, 2006 - 2013 6% 5% International sales 6% CAGR 3.0% by region: CAGR, 2006 - 2013 4% • Asia Pacific 8% 3% 6.0% • North America 8% 2% 3.0% • Continental Europe 5% 1% 0% Market Growth (1) (2) Share Gains Sales CAGR N
Slide 9: Our Competitive Advantages vs. Smaller Players
OUR COMPETITIVE ADVANTAGES vs. SMALLER PLAYERS Sales & marketing Offer Global Service customer accuracy reach eCommerce Product range capabilities & availability Partnerships Multi-channel with leading approach global suppliers Structural trends favour larger, global competitors 9
Slide 10: Global Strategy Focus
GLOBAL STRATEGY FOCUS INTERNATIONAL SHARE GAINS UK PROFITABILITY • Highly fragmented markets • More mature market growing > GDP • Historic 6% pa sales growth • Historic 1% pa profit growth • 50% from share gains • Target 7-10% pa sales growth • Target 1-2% pa sales and profit • >50% from share gains
Slide 11: Global Strategy
GLOBAL STRATEGY Good progress, all elements contributing 11
Slide 12: Grow Target Customers
GROW TARGET CUSTOMERS Customer type Common needs Actions to improve our value proposition • Range & Range availability • Global range level-up and expansion ELECTRONICS • Global product management tool DESIGN ENGINEER Availability • Reliable • Global planning tool service • Compliance capability inv
Slide 13: One Global Offer
ONE GLOBAL OFFER STRATEGY YEAR 1 PROGRESS • Building a global range • 30k products available globally • RS and Allied working together • Global inventory management • Implementing new global planning tool • Reliable 1,2,3 day service • Lead times UK to Asia Pacific reduced by 20% - 40% • Stock provi
Slide 14: Value for Money
VALUE FOR MONEY STRATEGY YEAR 1 PROGRESS • Global pricing strategy • Comprehensive pricing toolkit • Supermarket skillset • Dynamic pricing • >15m price changes pa • >12m price checks pa • Value for money • Improved price reality communication • Improved price perception Improved price perception dr
Slide 15: eCommerce with a Human Touch
ECOMMERCE WITH A HUMAN TOUCH eCommerce sales as % of Group sales 70% 60% c. £735m ---- Electrocomponents (58%) 50% Revenue share (%) 40% c. £350m ---- W.W. Grainger (33%) 30% 20% c. £110m ---- M&S General Merchandise (13%) 10% ---- Tesco Grocery (3%) 0% FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 F
Slide 16: eCommerce Is Transforming the Way We Do Business
ECOMMERCE IS TRANSFORMING THE WAY WE DO BUSINESS BEFORE: CONSISTENT VALUE PROPOSITION AFTER: Catalogue-led offer eCommerce-led offer • 5,000 new products / year • Range & availability • 5,000 new products / month • Limited product information • Reliable service • Substantial product information, des
Slide 17: Investing in eCommerce with a Human Touch Strategy
INVESTING IN ECOMMERCE WITH A HUMAN TOUCH STRATEGY • DesignSpark • Search Engine • Global Nursery • eProcurement Mechanical Marketing Programme solutions Better management of customer life cycle 17
Slide 18: 2015 Strategic Focus
2015 STRATEGIC FOCUS ECOMMERCE WITH ONE GLOBAL OFFER A HUMAN TOUCH • More range level-up • Upgrade of web platform • Global planning tool • More web development, faster • Product management tool • Digital marketing Improving our value proposition for customers 36
Slide 19: Financial KPIs
FINANCIAL KPIs Medium-term Performance Framework 2013 2014 Medium-term (Base year of plan) (Year 1 of plan) target range Group sales 0.5% 2.1% 5% - 8% growth(1) Group return on 8.1% (2) 8.3% 9% - 11% sales Return on capital 18.5% (2) 20.9% 20% - 30% employed Free cash flow as a 4.5% 4.6% 4% - 6% per
Slide 20: Operational KPIs
OPERATIONAL KPIs Medium-term Performance Framework 2013 2014 Medium-term target (Base year of plan) (Year 1 of plan) Growth in corporate Customer number growth 3% 3% key driver of sales growth customer numbers eCommerce sales growth eCommerce sales growth 4% 6% > Group sales growth Famous For produc
Slide 21: Profit and Loss Account
PROFIT AND LOSS ACCOUNT £m 2014 2013 Change Sales 1,273.1 1,235.6 2.1% (1) Gross margin (%) 45.9% 46.0% (0.1)% pts Headline operating costs (477.8) (468.7) (2.3)% (1) Headline operating profit 106.1 99.7 6.4% Headline operating margin (%) 8.3% 8.1% 0.2% pts Headline PBT 101.1 94.1 7.4% (2) (1) Adjus
Slide 22: Gross Margin
GROSS MARGIN (1) 46.0% (0.2)% 0.0% 0.2% (0.1)% 45.9% 2013 Geographic Product mix Currency Price & 2014 mix movements discounts (1) Product mix has had a positive impact on UK gross margin and a negative impact on International gross margin Stable gross margin 22
Slide 23: Operating Costs
OPERATING COSTS Change (1) 0.6% 0.4% (0.4)% (1.4)% (1.5)% (2.3)% 2013 Reorganisation Lower stock Additional Strategic Cost inflation 2014 efficiencies provisions depreciation investment Absence of 2014 reorg. & stock provision benefits EXPECT 2015 COST GROWTH OF AROUND 5%: Full-year impact of de
Slide 24: Cash Flow
CASH FLOW £m 2014 2013 2015 Guidance Profit before tax 101.1 86.7 Depreciation & amortisation 28.1 25.9 c. £32m Working capital (14.3) (12.3) Stock turn 2.5x Finance expenses (net) 5.0 5.6 Other non-cash movements 2.9 2.0 Operating cash flow 122.8 107.9 Interest paid (net) (5.0) (5.6) Tax paid (24.5
Slide 25: Net Debt
NET DEBT MOVEMENT IN NET DEBT £(159.7)m £57.7m £9.8m £(51.4)m £(143.6)m 2013 Free cash flow Translation/Other Dividends paid 2014 BANKING COVENANTS PENSION DEFICIT 2014 Covenant Combined deficit £40.9m (2013: 19.0m) Net debt: EBITDA 1.1x <3.25x Benefit changes recently announced in UK EBITA net
Slide 26: Summary
SUMMARY • We are well-established global market leader • The markets we operate in grow faster than GDP through the cycle • The marketplace we operate in is highly fragmented, we are well-placed to take a greater share of this fast-growing market from the numerous smaller competitors • We have evolv
Slide 27: The global distributor for engineers
The global distributor for engineers ELECTROCOMPONENTS PLC INVESTOR UPDATE June 2014 www.electrocomponents.com
Electrocomponents — Investor Presentation (June 2014) on 6ix