RS Group PLC · LSE:RS1
RS — Electrocomponents — Non-Deal Roadshow (December 2012)
50 slides from RS's roadshow presentation, Dec 3, 2012
Slide 1: North American Investor Site Visit
NORTH AMERICAN INVESTOR SITE VISIT 3 DECEMBER 2012 FORT WORTH, TEXAS
Slide 2: Agenda
Agenda Group Overview Ian Mason Allied Overview Lee Davidson & Team Q&A All Lunch All Allied Operations & Site Tour Kenneth Bradley Q&A All
Slide 3: Electrocomponents: who we are
Electrocomponents: who we are Strong Brands 800K Catalogues 54% eCommerce 2,500 Major Suppliers > 550,000 Products > 1m Customers 17 Distribution Centres 44,000 Parcels Daily 90+% of World GDP The World’s distributor of choice 3
Slide 4: Electrocomponents: our customers
Electrocomponents: our customers Our key customer groups: Nature of demand: Buyers Electronics Design Engineers Maintenance Engineers • Average order value c. £140 / c. $220 • Average order size is 3 to 4 product lines • Customers usually purchase different lines each order Stages of the product lif
Slide 5: Electrocomponents: where we operate
Electrocomponents: where we operate % of Contribution Number of H1 FY13 Group as % of Market distribution revenue revenue position centres Continental Europe 33% 19% No. 1 6 North America 22% 14% No. 3 1 Asia Pacific 14% 6% No. 1 8 International 69% 14% No. 1 15 UK 31% 28% No. 1 2 Group 100% 19% No.
Slide 6: Structural growth opportunity – theory
Structural growth opportunity – theory NOW (1) FUTURE (1) Growing markets Growing market share c.£30bn/c.$45bn available market Highly fragmented markets (ca. 85%) Electronics 2 x GDP Market share gains by 5 main players Maintenance GDP We are the leading global distributor Emerging markets Increasi
Slide 7: Structural growth through the cycle – in practice
Structural growth through the cycle – in practice International Sales CAGR Development, FY03 - FY12 8% 3.4% 6% CAGR, FY03 - FY12 4% 0.9% 8.0% 4.7% 2% 3.8% 0% Nominal GDP grow th (1) Electronics (2) Market Grow th Share Gains Sales CAGR (1) Nominal GDP grow th w eighted to Electros geographic split (
Slide 8: 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 8
Slide 9: Group strategy
Group strategy “The world’s distributor of choice” Vision • International growth • Electronics and Maintenance • eCommerce Strategy • Operating leverage • UK profitability • Focus on core strengths Priorities • Global approach, delivered locally Accelerating implementation 9
Slide 10: New global organisation structure in place
New global organisation structure in place Strong forces driving globalisation Global Operating Model STRATEGY Reorganised whole of business in 6 months From country-based to function-based OFFER MARKETING SALES Faster implementation of strategy and IT FINANCE HR increased efficiency Signifi
Slide 11: Single, global product offer
Single, global product offer Integration of electronics, maintenance Five product categories and supply chain Electronics Famous Electronics (semiconductors, (semiconductors, passives & electromechanical) passives & Automation & Control for electromechanical) Automation & Control Industry-leadin
Slide 12: Sales: focused on growing target customers
Sales: focused on growing target customers Targeting 4 contact groups Focused, local sales approach Electronic Design Machine & Maintenance Engineers Panel Builders Engineers Electronics (semiconductors, passives & electromechanical) Develop and grow existing customers Automation & Control Test
Slide 13: New global marketing approach
New global marketing approach Single global effort across contact lifecycle Awareness Acquisition Nursery Development Brand awareness First purchase First 4 months Beyond 4 months • Contacts know who • Acquire contacts in • Drive average • Drive breadth of we are both new and existing purchases high
Slide 14: Highly attractive financial characteristics
Highly attractive financial characteristics EPS Growth High return on capital employed 7% CAGR through the global 20.0 30% economic recession 18.0 16.0 5-yr avge 21.6% 14.0 20% 12.0 pence ROCE 10.0 8.0 6.0 10% 4.0 2.0 0.0 0% FY08 FY09 FY10 FY11 FY12 FY08 FY09 FY10 FY11 FY12 Strong cash conversion St
Slide 15: Proforma return on sales range of 8% - 12%
Proforma return on sales range of 8% - 12% Proforma Group Return on Sales (%) * 12% 11.4% 11.1% 10.2% 10.2% 10.2% 10.1% 10.0% 10% 9.5% 9.0% Return on Sales % 7.9% 7.8% 8% 6% 4% 2% 0% FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 * Based on historical performance adjusted for FY12 Internatio
Slide 16: Performance framework
Performance framework KPIs Medium-term target FY12 International sales growth 7% - 10% p.a. 8.7% UK contribution Stable Increasing Sales via e-Commerce 70% 54% Underlying gross margin Stable Stable in yr Cost as % of sales Reducing Reducing Return on capital employed (1) 25%+ 24.6% (1) Operating pro
Slide 17: Recent trading: key themes
Recent trading: key themes Difficult market conditions during H1 FY13, particularly in electronics Significant impact on H1 FY13 financial performance Decisive actions taken and expect stronger H2 FY13 New organisation structure to accelerate strategy and drive efficiencies Structural grow
Slide 18: Recent sales growth performance
Recent sales growth performance Underlying sales growth (1) FY12 Q1 Q2 H1 October Continental Europe 1% (1)% 0% 1% North America (4)% (6)% (5)% (6)% Asia Pacific (3)% 3% 0% (1)% International (2)% (2)% (2)% (2)% UK 5% 5% 5% 3% Group 0% 0% 0% 0% October Group sales trends consistent with H1 (1) Adjus
Slide 19: Sales per day
Sales per day UK sales per day 1,700 1,500 1,300 1,100 Group sales per day 900 5,500 700 5,000 500 4,500 £’000 sales per trading day (constant currency) 4,000 ƒ International sales per day 3,500 4,000 3,000 3,500 3,000 £’000 sales per trading day (constant currency) 2,500 2,000 1,500 £’000 sales per
Slide 20: Summary
Summary We are a strong and well-invested global business Through the last 5 years we have taken market share from smaller competitors and demonstrated that the structural growth opportunity exists Our global scale and reach, broad product range, high customer service level and eCommerce capab
Slide 21: Agenda
Agenda Group Overview Ian Mason Allied Overview Lee Davidson & Team Q&A All Lunch All Allied Operations & Site Tour Kenneth Bradley Q&A All
Slide 22: Allied: proud of our heritage
Allied: proud of our heritage Founded in 1928 as Allied Radio Began as the radio parts distribution arm of Columbia Radio Corporation Acquired by Electrocomponents in 1999 A long legacy of excellent customer service 22
Slide 23: Allied sales history
Allied sales history 500 450 Sales CAGR since FY95 = 9% 400 Last 10 years sales CAGR = 11% 350 300 Sales $m 250 200 150 100 50 0 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 A strong track record of sales growth 23
Slide 24: Allied key facts
Allied key facts Sales facts: 6,000+ inbound calls per day 4,500+ orders shipped per day 9,000+ lines billed/shipped per day $375-$400 average order size 200k+ annual catalogue production 33%+ eCommerce share Product facts: Employee facts: 300+ suppliers c.800 employees 200+ front
Slide 25: Allied: a strong platform for growth
Allied: a strong platform for growth Systems investment: – 2012: SAP ERP infrastructure c.$20m – New sales tool to allow sales to work more effectively – Infrastructure to support back-office processes efficiently – Improved data analytics to support eCommerce growth Warehouse investment: – 2007
Slide 26: US Industrial Production Growth
Market environment: Industrial Production key lead indicator Growth in US Industrial Production compared to daily sales growth : from Jan 2007 10% 50% 8% 40% 6% 30% 4% 2% 20% US Industrial Production Growth 0% 10% Allied Daily Sales Growth -2% 0% -4% -10% -6% -8% -20% -10% -30% -12% -40% -14% -50% -
Slide 27: Allied sales and operating margin performance
Allied sales and operating margin performance Sales and Return on Sales % 16% 400 14% 12% 300 10% 8% Sales 200 ROS % 6% 4% 100 2% 0 0% FY08 FY09 FY10 FY11 FY12 Increased scale leading to higher operating margins 27
Slide 28: Allied return on capital and cash conversion
Allied return on capital and cash conversion Return on Capital Cash Conversion Ratio 40% 250% Conversion of net profits to free cash Return on capital employed Average 30% 200% 30% 150% 20% Average 110% flow 100% 10% 50% 0% 0% FY08 FY09 FY10 FY11 FY12 FY08 FY09 FY10 FY11 FY12 Attractive financial ch
Slide 29: Sales: Allied's local presence
Sales: Allied’s local presence 53 sales offices across North America 300 Inside Sales Reps 50+ Outside Sales Reps 40+ National Sales Center Reps & sales support staff 7 Regional Directors 5 National Account Managers Recognising the value of local sales offices 29
Slide 30: Allied customer segments
Allied customer segments Machine and Panel Builders Customer split by contact type Design, development & production support at small/medium-sized OEMs/CMs Electronics Design Board level & control cabinet applications Engineers Emergency/shortage support Maintenance Maintenance Engineers Engine
Slide 31: Allied product mix by technology
Allied product mix by technology Other Test & Measurement Automation & Control Passive/Active/ Opto Wire & Cable Interconnect Electromechanical Power Focused on electronics & automation and control 31
Slide 32: Supplier and portfolio management
Supplier and portfolio management Supplier Relationship Execution & Strategic Feedback Planning Market Portfolio Positioning Evaluation Win-win supplier relationships a key competitive advantage 32
Slide 33: Supplier focus drives growth
Supplier focus drives growth • Top 20 Suppliers drive 43% of sales • Strategic and Tactical suppliers combine to account for 66% of sales Prioritised approach to managing suppliers 33
Slide 34: Print marketing
Print marketing Reaching over 20 million customers per year 34
Slide 35: Online marketing
Online marketing Over 70 million customer touch points per year 35
Slide 36: Internal marketing
Internal marketing A closed loop marketing communication strategy 36
Slide 37: Extensive SEM presence
Extensive SEM presence Website traffic drivers Campaigns Direct traffic Referral traffic Search traffic Search a key driver of website traffic 37
Slide 38: Engaging email program
Engaging email program Targeted and relevant email campaigns 38
Slide 39: Conclusion
Conclusion Business has a good financial characteristics – Strong cash flow and returns – Ability to leverage cost base to deliver return to bottom line – Solid financial investment base to support growth Focused business with strong local sales presence within a clear global strategy Win-win
Slide 40: Agenda
Agenda Group Overview Ian Mason Allied Overview Lee Davidson & Team Q&A All Lunch All Allied Operations & Site Tour Kenneth Bradley Q&A All
Slide 41: Agenda
Agenda Group Overview Ian Mason Allied Overview Lee Davidson & Team Q&A All Lunch All Allied Operations & Site Tour Kenneth Bradley Q&A All
Slide 42: Agenda
Agenda Group Overview Ian Mason Allied Overview Lee Davidson & Team Q&A All Lunch All Allied Operations & Site Tour Kenneth Bradley Q&A All
Slide 43: Warehouse operations: our facility
Warehouse operations: our facility Distribution center opened in Sept 2007 290k square foot warehouse 180 employees 115k unique stocked materials Capacity utilization – Forward pick face 63% – High bay 75% – Pallet 88% Work environment – Quiet environment – Solar tube lighting – Climate
Slide 44: Warehouse operations: technical solutions
Warehouse operations: technical solutions Warehouse management system Warehouse conveyor system – RF technology – Paperless picking Conveyor – PLC – OSR Inbound receiving Recent investment in systems to drive efficiency 44
Slide 45: Warehouse operations: service delivery
Warehouse operations: service delivery Order processing – 4,500+ Daily orders – 9,000+ Daily order lines – 90% Domestic / 10% Export 99.9% Orders Inducted Shipped the Same Day 94.0% Stocked Product Linefill Hours of Operation: – Monday to Friday – 4am to 10.30pm Delivering reliable and accur
Slide 46: Warehouse operations: facility layout
Warehouse operations: facility layout 46
Slide 47: Agenda
Agenda Group Overview Ian Mason Allied Overview Lee Davidson & Team Q&A All Lunch All Allied Operations & Site Tour Kenneth Bradley Q&A All
Slide 48: Appendix
Appendix Allied Electronics Committed to Delivering a Great Customer Experience
Slide 49: Allied Executive Team
Allied Executive Team Lee Davidson President (10 years) Kenneth Bradley Dennis Cash Andy Jackson VP Supply Chain VP HR/Admin VP CIO (9 years) (9 years) (2 years) Ken Kempker Scott McLendon Mark Simon Chief Financial Officer VP Marketing & Product Mgt VP Sales (4 years) (6 years) (8 years) 49
Slide 50: eCommerce grown rapidly since FY09
eCommerce grown rapidly since FY09 eCommerce strategy began 2008 eCommerce as a % of Sales 45% 40% 35% Rapid growth 2008 – 2011 30% 25% 20% Temporary decline in 2012 15% 10% 5% 0% FY07 FY08 FY09 FY10 FY11 H1 FY12 FY12 eCommerce will become the channel of choice 50
Electrocomponents — Non-Deal Roadshow (December 2012) on 6ix