ELECTROCOMPONENTS 2019 half-year financial results 20 November - PowerPoint PPT Presentation

ELECTROCOMPONENTS 2019 half-year financial results 20 November 2018 2019 Half-year Results

SAFE HARBOUR This presentation 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. 2 2019 Half-year Results

OVERVIEW Above market, 9.8% like-for-like (1) Adjusted (2) Strong growth in sustainable growth and revenue growth, operating profit profit before tax, strong execution continuing to drive margin rose 1.5 earnings and free share gains in percentage points cash flow large, fragmented aided by higher market gross margin and cost control Further IESA acquisition Good progress on improvement in performing well – PIP II (4) – positioning customer >30% revenue the Group to drive experience – growth and continued growth Group NPS (3) up encouraging new and superior 3.8% contract wins returns (1) Like-for-like change excludes the impact of acquisitions and the effects of changes in exchange rates on translation of overseas operating results, with 2018 converted at 2019 average exchange rates for the period. Revenue is also adjusted to eliminate the impact of trading days year on year. (2) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, asset write-downs, one-off pension credits or costs, significant tax rate changes and associated income tax. (3) Rolling 12-month Net Promoter Score – a measure of customer satisfaction. 3 2019 Half-year Results (4) Second phase of Performance Improvement Plan (PIP).

AGENDA David Egan 1 FINANCIAL RESULTS CFO 2 PERFORMANCE IMPROVEMENT PLAN Lindsley Ruth 3 BECOMING FIRST CHOICE CEO 4 REGIONAL PERFORMANCE 5 ACCELERATING OWN-BRAND GROWTH 6 VALUE-ADDED SERVICES – IESA 7 CURRENT TRADING & OUTLOOK 4 2019 Half-year Results

1 FINANCIAL RESULTS Significant progress 2019 Half-year Results 2019 Half-year Results

FINANCIAL HIGHLIGHTS > > > Strong revenue growth Improving profitability EPS and dividend growth Like-for-like revenue growth (%) Adjusted operating profit (£m) Adjusted EPS (p) 17.2 12.2 104.0 9.7 9.8 81.2 13.0 25.9% 30.5% RS Pro Digital Group H1 2018 H1 2019 Like-for-like change H1 2018 H1 2019 Like-for-like change Gross margin (%) Adjusted operating profit margin (%) Dividend per share (p) 5.30 44.4 5.25 43.4 11.4 9.9 0.7 pts 1.4 pts H1 2018 H1 2019 Like-for-like change H1 2018 H1 2019 Like-for-like change H1 2018 H1 2019 Significant growth in profit and earnings per share (1) Like-for-like change excludes the impact of acquisitions and the effects of changes in exchange rates on translation of overseas operating results, with 2018 converted at 2019 average exchange rates for the period. Revenue is also adjusted to eliminate the impact of trading days year on year. (2) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, asset write-downs, one-off pension credits or costs, significant tax rate changes and associated income tax. 6 2019 Half-year Results (3) At the year end it was announced that in the normal course of business, the interim dividend would be equivalent to 40% of the prior year full-year dividend.

DRIVING OPERATIONAL EXCELLENCE – GROSS MARGIN > > Progress Going forward  1.0 percentage point improvement We are focused on initiatives to drive gross margin: 0.3 percentage point accretion from IESA acquisition –  Growing higher-margin products: 0.7 percentage point like-for-like improvement Accelerating new product introductions at RS Pro – –  Driven by our own actions to: 5,400 new products in 2018 – Grow higher-margin products, including RS Pro – 5,290 new products in H1 2019 – Improve discount discipline and pricing – On track for > 10,000 new products in 2019 –  Foreign exchange broadly neutral  Controls and process – more discipline on discounting  Tougher H2 gross margin comparatives (gross margin was  Pricing – dynamic pricing tool to be rolled out in EMEA in H2 43.4% in H1 2018 and 44.5% in H2 2018) but on track to deliver  Smarter purchasing: stable gross margin in our base business (1) in the full year Today strategic supplier engagement – Tomorrow global sourcing initiatives – Shifting our culture to focus on profitability (1) Base excludes the post-acquisition results of IESA. 7 2019 Half-year Results

DRIVING OPERATIONAL EXCELLENCE – OPERATING PROFIT MARGIN Operating profit margin We are focused on improving our operating profit margin towards best-in-class mid-teen operating profit margin  Revenue growth, higher gross margin and improvement in adjusted operating profit conversion ratio to 25.7% (H1 2018: 22.7%)  drove a 1.5 percentage point improvement in adjusted operating profit margin to 11.4% (H1 2018: 9.9%) 9.9% 0.1% 2.7% 0.6% 0.6% 0.9% 0.2% 0.2% 11.4% 14% 13% Adjusted operating 12% profit margin 11% 10% 9% 8% 7% 6% FY18 H1 IESA Revenue Gross Margin Inflation Digital People Other FY19 H1 Growth Revenue growth and gross margin Disciplined investment – In H1 we saw the annualisation of the improvement – Market growth and step up in digital and innovation investment made in H2 2018. Despite this, adjusted operating costs grew at 7.8% on a like-for-like market share gains, plus improving basis, below revenue growth of 9.8%. Adjusted operating costs as product mix a percentage of revenue fell to 33.0% (H1 2018: 33.5%) 8 2019 Half-year Results

SUMMARY INCOME STATEMENT Highlights £m H1 2019 H1 2018 Revenue saw an adverse impact from  Adjusted (1) Reported Reported Adjustments Adjustments Adjusted (1) currency (£7.5 million); this was partially offset by a positive impact from extra Revenue 911.8 - 911.8 823.8 - 823.8 trading days (£4.3 million) Net finance costs increased to £3.9 million  Operating profit 96.8 7.2 104.0 77.9 3.3 81.2 (H1 2018: £2.2 million) Net finance costs (3.9) - (2.2) - (3.9) (2.2) Adjusted PBT excludes:  – £5.4 million labour-related restructuring costs Share of profit of JV 0.1 - 0.1 - - - £1.8 million amortisation of intangible assets arising – on acquisition of IESA Profit before tax 93.0 7.2 100.2 75.7 3.3 79.0 H1 2019 adjusted tax rate of 24% (H1 2018:  Income tax expense (23.0) (1.2) (21.2) (0.6) (24.2) (21.8) 28%) Profit for the period 70.0 6.0 76.0 54.5 2.7 57.2 Earnings per share (p) 15.9 1.3 17.2 12.4 0.6 13.0 (1) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, asset write-downs, one-off pension credits or costs, significant tax rate changes and associated income tax. 9 2019 Half-year Results

CASH FLOW Highlights £m H1 2019 H1 2018 Cash generated from operations increased  EBITDA 111.8 90.7 to £68.8 million (H1 2018: £44.8 million) Movement in working capital (49.1) (50.7) Working capital as a percentage of sales  increased by 1.5 percentage points to 22.7% Movement in provisions 2.2 2.4 – Like-for-like increase was 0.3 percentage points Other 3.9 2.4 Balance relates to acquisition of IESA – Cash generated from operations 68.8 44.8 H1 2019 capex was 0.9 times depreciation  Net interest paid (3.2) (2.5) (H1 2018: 0.7 times) – expect the full year to be around 1.7 times Income tax paid (20.3) (16.2) Adjusted operating cash flow conversion (1)  Net cash from operating activities 45.3 26.1 55.3% (H1 2018: 44.5%) Net debt increased to £139.0 million (H1  Net capital expenditure (14.5) (9.4) 2018: £124.5 million) Free cash flow 30.8 16.7 Additional short-term investment of around  Add back cash effect of adjustments (2) 3.2 0.7 £30 million in fast-moving inventory in H2 to ensure we can maintain customer service Adjusted free cash flow 34.0 17.4 during the UK’s exit from the EU (1) Adjusted operating cash flow conversion is adjusted free cash flow before income tax and net interest paid as a percentage of adjusted operating profit. (2) Adjusted excludes the impact of substantial reorganisation cash flows. 10 2019 Half-year Results

2 PERFORMANCE IMPROVEMENT PLAN – PHASE II Setting ourselves up to drive continued success 2019 Half-year Results 2019 Half-year Results