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ANNOUNCEMENT OF PRELIMINARY RESULTS YEAR ENDED 31 MARCH 2006 1 June 2006.

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Presentation on theme: "ANNOUNCEMENT OF PRELIMINARY RESULTS YEAR ENDED 31 MARCH 2006 1 June 2006."— Presentation transcript:

1 ANNOUNCEMENT OF PRELIMINARY RESULTS YEAR ENDED 31 MARCH 2006 1 June 2006

2 Electrocomponents plc Preliminary Results 2005/06 2 BOB LAWSON CHAIRMAN

3 Electrocomponents plc Preliminary Results 2005/06 3 AGENDA Welcome Current trading Progress on strategy delivery Regional overview Financial performance Bob Lawson Ian Mason Simon Boddie

4 Electrocomponents plc Preliminary Results 2005/06 4 CURRENT TRADING Since the year end, Group revenue growth has remained strong at around 9%. The International business has grown by around 15% and the UK business has been flat. As planned, gross margins are lower than the equivalent period last year, largely due to actions taken to improve competitiveness

5 Electrocomponents plc Preliminary Results 2005/06 5 IAN MASON GROUP CHIEF EXECUTIVE

6 Electrocomponents plc Preliminary Results 2005/06 6 STRATEGY ANNOUNCED IN MAY 2005 An update on developments, one year into the three year plan 1 Focus separately on two distinct customer groups Electronic and electromechanical (EEM) Maintenance, repair and operations (MRO) 2 Implement the Enterprise Business System (EBS) 3 Create a lower cost infrastructure

7 Electrocomponents plc Preliminary Results 2005/06 7 EEM STRATEGY PROGRESS Extended product range performed well Allied products available in Europe Launched new leading edge technologies Wireless and Displays Aligned offer with customer needs new packaging options enhanced search and presentation Planned strategy actions all EEM products available worldwide massively increase EEM product range further improve customer service

8 Electrocomponents plc Preliminary Results 2005/06 8 EBS IMPLEMENTATION PROGRESS Successful UK implementation over Christmas 2005 UK, International supply and Group processes over 1 million customer orders so far! European roll out underway and planned to be largely complete in 2006/07 accelerated roll out of established template learning and confidence from France and UK implementations Asia Pacific EBS roll out will be complete with China implementation in 2006/07 EBS provides the essential systems platforms to support strategy delivery focus on benefits delivery

9 Electrocomponents plc Preliminary Results 2005/06 9 LOWER COST INFRASTRUCTURE Sales growth to drive economies of scale high fixed cost infrastructure good cost leverage in International businesses Cost reduction initiatives identified to achieve £10m target over 3 years £4.4m of annualised cost reduction achieved –includes removal of c.110 roles –one-off reorganisation costs of £3.7m further actions planned in 2006/07 including EBS enabled benefits Costs being systematically redeployed to front end sales and marketing

10 Electrocomponents plc Preliminary Results 2005/06 10 BUSINESS PORTFOLIO Revenue % of Group Contribution % of revenue Europe £268m 32% 22.4% US £138m 17% 14.0% Asia Pacific £69m 8% 10.4% International £475m 57% 18.2% UK £354m 43% 27.4% Group £829m 100% 22.1%

11 Electrocomponents plc Preliminary Results 2005/06 11 INTERNATIONAL Revenue growth full year:12% second half:15% current trading:15% Improvements in all regions Gross margin reduction Good operating cost leverage Contribution increased by £9m

12 Electrocomponents plc Preliminary Results 2005/06 12 EUROPE Revenue growth full year: 8% second half: 11% current trading: 12% Improvements throughout Europe especially France, Germany and Italy EEM strategy implementation extended range sales growth realigning marketing spend to EEM halo effect on existing products Successful MRO trial in Germany Addressing key customer barriers price perception flexibility

13 Electrocomponents plc Preliminary Results 2005/06 13 GROSS MARGIN POSITION Targeted price reductions and increased discount flexibility to improve the competitiveness maintained overall price position and fixed price catalogue continued to implement and develop market price framework –eg pass on commodity price increases quickly specific customer and large order discounts delivering growth Significant net cost price reductions achieved supplier negotiation and range rationalisation particularly in MRO ongoing programme of margin recovery Net impact is a reduction in gross margin high US growth and product mix have also impacted gross margin Managing trade-off between gross margin, sales and gross profit greater focus on increasing gross profit rate of gross margin decline will slow as competitive position adjusted

14 Electrocomponents plc Preliminary Results 2005/06 14 IMPROVING COMPETITIVENESS Product Range Operating Company

15 Electrocomponents plc Preliminary Results 2005/06 15 US Revenue growth full year:18% second half: 22% current trading: 22% Continuation of proven growth strategy expansion of field sales 55 local branches expansion of product range marketing programmes developed with suppliers improved customer service levels Gross margin stabilised in H2 at 36% New warehouse on track for mid 2007

16 Electrocomponents plc Preliminary Results 2005/06 16 ASIA PACIFIC (INCLUDING JAPAN) Revenue growth full year:14% second half: 16% current trading : 17% Strong growth in all regions N Asia 21%, S Asia 19%, Australasia 12%, Japan 11% Japan sales growth recovered well in H2 Thailand sales office to open in mid 2006 Solid foundations built across the Asia Pacific region potential to accelerate growth in China

17 Electrocomponents plc Preliminary Results 2005/06 17 CHINA ACCELERATION RS currently has a leading position in China Same Day Offer in Shanghai, Beijing and Wuhan high intangible value from official permissions and relationships Research with RS customers identified they have three primary customer needs wide range of products assured delivery knowledgeable local sellers Four point plan for meeting these needs and driving growth in China: product range expansion increased stock levels to improve delivery service further sales offices and resource to enhance face to face selling marketing investment to drive customer acquisition Additional P&L investment of £1.5m in 2006/07

18 Electrocomponents plc Preliminary Results 2005/06 18 UK Revenue change full year: -3% second half: -2% current trading: flat Successful implementation of EBS Continued manufacturing decline Increased discount flexibility strong large order growth several large account wins Strong e-Commerce growth and now 28% of sales

19 Electrocomponents plc Preliminary Results 2005/06 19 UK STRATEGY Objective is to generate a sustainable profit and enable future growth The objective will be realised through the implementation of the Group strategy built on core strengths: range, availability, order facilitation and reliable delivery develop new MRO strategy on behalf of the Group 2 shop fronts leveraged off a common infrastructure Significant changes to the operational approach to deliver the strategy rationalisation of MRO offer with increased RS own-brand greater price and discount flexibility with gross profit focus migration of business to web and reduce other channel costs changing role of the salesforce Cost base will be reduced through targeted initiatives, reducing complexity and EBS benefits Getting on with implementation

20 Electrocomponents plc Preliminary Results 2005/06 20 PROCESSES Product Management reorganised to align with the strategy developing EEM and rationalising MRO ranges effective cost price management IS aligned structure to post-EBS world upgraded supporting infrastructure Supply Chain good stock and service level control MPP continued catalogue and production process cost reduction HR culture change programme more customer focused and quicker to act

21 Electrocomponents plc Preliminary Results 2005/06 21 e-COMMERCE Revenue growth: 29% Germany now c.40% e-Commerce particularly strong e-Procurement growth e-Commerce is enabling the strategy implementation allows low cost offer of extended range allows rapid product introduction, discontinuation and price change enables global availability of products % revenue:Group25% Asia Pacific27% UK28% (including Japan53%) Europe28% US 8%

22 Electrocomponents plc Preliminary Results 2005/06 22 SIMON BODDIE GROUP FINANCE DIRECTOR

23 Electrocomponents plc Preliminary Results 2005/06 23 Unless otherwise stated This has been prepared using International Financial Reporting Standards (IFRS) Changes in revenue are adjusted for exchange rates and the number of trading days Changes in profit, cash flow, debt and share related measures, such as earnings per share, are at reported exchange rates In order to make clear the costs of the EBS project and the underlying performance of the business, EBS costs have been disclosed separately. Therefore, unless explicitly stated, measures based on operating costs, contribution and process costs exclude EBS A charge of £7.7m was incurred in the year for items excluded from headline profit. Key performance measures such as return on sales, EBITDA and ROCE use headline profit figures

24 Electrocomponents plc Preliminary Results 2005/06 24 INCOME STATEMENT 1

25 Electrocomponents plc Preliminary Results 2005/06 25 THE 5 MAIN MOVEMENTS IN PROFIT £100m £9m£(10)m £(16)m £(8)m £(2)m £73m

26 Electrocomponents plc Preliminary Results 2005/06 26 INTERNATIONAL Contribution growth: Europe £3.6m, US £3.5m and Asia Pacific £1.7m

27 Electrocomponents plc Preliminary Results 2005/06 27 UK

28 Electrocomponents plc Preliminary Results 2005/06 28 EBS Profit and loss accountCash flow (£m)2005/06Change(£m)2005/06Change Depreciation (6.8) (1.2)Profit and loss account (25.1) (15.9) Project and support (12.4) (10.5)Depreciation 6.8 1.2 Local business costs (5.9) (4.2)Stock (7.0) (25.1) (15.9)Capital expenditure (12.7) 0.3 Cash flow impact (38.0) (21.4) (£m)2006/07(£m)2006/07 Estimatedlow 20sEstimated c(20) capex similar to 2005/06 half of 2005/06 stock unwinds due to European roll out

29 Electrocomponents plc Preliminary Results 2005/06 29 GROUPWIDE PROCESS COSTS One-off IS costs: groupwide technology upgrade, IS restructuring

30 Electrocomponents plc Preliminary Results 2005/06 30 INCOME STATEMENT 2

31 Electrocomponents plc Preliminary Results 2005/06 31 RoHS: THE IMPACT Takes effect from 1 July 2006 for products used in production 70,000 RoHS compliant products currently available in Europe RS among the first to achieve BSI RoHS trusted kitemark (in UK and Benelux) Limited examples of dual stocking where customer demand for compliant stock is particularly strong Additional provision of £4m made in 2005/06

32 Electrocomponents plc Preliminary Results 2005/06 32 CASH FLOW 1

33 Electrocomponents plc Preliminary Results 2005/06 33 WORKING CAPITAL (£m) 2005/06 2004/05 Stock(12.8)(13.6) Stock turn maintained at 2.5 times despite EBS stock £7m Debtors(14.6)9.3Higher sales and timing of Easter Creditors13.2(3.7) Higher purchases and accruals (eg reorganisation costs) Movement in working capital (14.2)(8.0)

34 Electrocomponents plc Preliminary Results 2005/06 34 CAPITAL EXPENDITURE (£m)2005/06 2004/05 EBS12.713.0 Other computer systems4.05.5 Other8.45.3 Net capital expenditure25.123.8 Net capex / depreciation1.0x1.1x 2006/07 outlook £40m+ : European EBS roll out and US warehouse

35 Electrocomponents plc Preliminary Results 2005/06 35 CASH FLOW 2 Financial ratios remain strong with high interest cover (£m) 2005/06 2004/05 Free cash flow26.961.1 Dividends paid (80.0) Cash outflow(53.1)(18.9) Exchange differences(7.2)(2.0) New finance lease liabilities(5.1)- Increase in net debt(65.4)(20.9) Net debt(120.8)(55.4) Pension deficit (net of deferred tax)(29.7)(32.4)

36 Electrocomponents plc Preliminary Results 2005/06 36 PENSIONS UPDATE Defined benefit schemes in UK, Ireland and Germany all closed to new entrants all other schemes are defined contribution Under IAS 19, combined gross deficit of £41.8m at 31 March 2006 of which UK £35.0m UK deficit lower than last year improving bond yields greater than impact of people living longer

37 Electrocomponents plc Preliminary Results 2005/06 37 IMPROVING PERFORMANCE To substantially improve the Groups medium term financial performance need to grow profit and cash in 2006/07 Plans in place and management committed to deliver International growth and cost leverage sustainable profit and enable future growth in the UK lower cost infrastructure enabled by EBS improved cash delivery to restore a covered dividend

38 Electrocomponents plc Preliminary Results 2005/06 38 SAFE HARBOUR STATEMENT 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.

39 Electrocomponents plc Preliminary Results 2005/06 39 QUESTIONS

40 Electrocomponents plc Preliminary Results 2005/06 40 APPENDIX

41 Electrocomponents plc Preliminary Results 2005/06 41 CONTINENTAL EUROPE (£m)2005/062004/05Change Revenue 267.9 243.5 8.3% Contribution 59.9 56.3 3.6 % of revenue 22.4% 23.1% (0.7)% points

42 Electrocomponents plc Preliminary Results 2005/06 42 NORTH AMERICA (£m)2005/062004/05Change Revenue 137.5 112.8 18.0% Contribution 19.2 15.7 3.5 % of revenue 14.0% 13.9% 0.1% points

43 Electrocomponents plc Preliminary Results 2005/06 43 ASIA PACIFIC (INCLUDING JAPAN) (£m)2005/062004/05Change Revenue 69.5 58.8 14.5% Contribution 7.2 5.5 1.7 % of revenue 10.4% 9.4% 1.0% points

44 Electrocomponents plc Preliminary Results 2005/06 44 JAPAN (£m)2005/062004/05Change Revenue 18.6 17.0 11.2% Contribution 1.8 1.5 0.3 % of revenue 9.7% 8.8% 0.9% points

45 Electrocomponents plc Preliminary Results 2005/06 45 ASIA PACIFIC (EXCLUDING JAPAN) (£m)2005/062004/05Change Revenue 50.9 41.8 15.8% Contribution 5.4 4.0 1.4 % of revenue 10.6% 9.6% 1.0% points


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