Electrocomponents Plc
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Electrocomponents plc Electrocomponents Annual Report and Accounts for the year ended 31 March 2014 ended 31 March the year for Accounts and Annual Report The global distributor for engineers www.electrocomponents.com Electrocomponents plc Annual Report and Accounts for the year ended 31 March 2014 Stock Code: ECM 23079.04 - Proof 1 -30 May 2014 3:37 PM Electrocomponents Front AR 2013.indd 3 02/06/2014 09:24:39 ELECTROCOMPONENTS PLC Annual Report and Accounts for the year ended 31 March 2014 LSE Stock Code: ECM Welcome We are Electrocomponents, the global distributor for engineers. Below is a snapshot of who we are and how we operate. There are signposts below to key sections of this report that we hope will enable readers to understand our marketplace and business model, assess our most recent performance and learn about our strategies and growth ambitions for the future. We also discuss the risks the business is likely to face as it seeks to achieve these ambitions. Strong brands eCommerce driven marketing Large, locally-based sales force 58% 2,500 of sales via eCommerce sales people globally Watch the video online www.electrocomponents.com See page 12 for See page 22 for Our Strategy Business and Financial Review Leading global suppliers Broadest product range in industry Targeting engineers & their buyers Over Around More than 2,500 suppliers 500,000 products 1 million customers Read more online See page 10 for See page 08 for www.electrocomponents.com Business Model Marketplace Network of 17 distribution centres Sophisticated global IT network People at the heart of the business Delivering Around 50+ critical systems 44,000 parcels every day 6,300 employees See page 14 for See page 28 for See page 34 for Group Chief Executive’s Review Principal Risks and Uncertainties Corporate Responsibility ELECTROCOMPONENTS PLC www.electrocomponents.com Annual Report and Accounts for the year ended 31 March 2014 01 Our Business In this report Strategic Report Our Business Highlights 2014 04 Chairman’s Report 06 Business Model Marketplace 08 Business Model 10 1 2 Read more in this report Our Strategy 12 Supplier Offer management presentation 12 Our business model has existed for Our Performance over 75 years. It is designed to save Group Chief Executive’s Review 14 We start each our customers, principally engineers and day with minimal Key Performance Indicators 20 Our Performance orders and finish the day with minimal orders, buyers, time and money. For further 5 9 but in between we 3 Business and Financial Review 22 Reliable process and despatch delivery around 44,000 parcels information on our Business Model to customers Principal Risks and Uncertainties 28 and how we make money go to 3 Corporate Responsibility 34 Inventory management 6 4 Corporate Governance Order Page 10 receipt & management Board of Directors 42 Directors’ Report: 45 • Corporate Governance Report 48 • Audit Committee Report 58 • Nomination Committee Report 65 • Directors’ Remuneration Report 67 Our Strategy • Additional Information 88 Statement of Directors’ 90 Governance Corporate Read more in this report Responsibilities A new global strategy was introduced last year in order to put the business in Financial Statements the best possible shape to capture Independent Auditor’s Report 94 our growth opportunities. For further Group Income Statement 96 information on Our Strategy go to Consolidated Statement of 97 Comprehensive Income Group Balance Sheet 98 Page 12 Group Cash Flow Statement 99 Consolidated Statement of 100 Changes in Equity Notes to the Group Accounts 101 Company Balance Sheet 137 Notes to the Company 138 Financial Statements Visit us online at Accounts www.electrocomponents.com Shareholder Information Five Year Record 146 Registered office, advisers 147 and financial calendar Principal Locations IBC Look out for these icons: Watch the video online Read more online Shareholder Information Shareholder Read more in this report 23079.04 - Proof 1 -5 June 2014 3:02 PM ELECTROCOMPONENTS PLC Annual Report and Accounts for the year ended 31 March 2014 LSE Stock Code: ECM 02 Strategy in Action Working together to deliver an extraordinary customer experience Building a consistent global offer TE Connectivity (TE), a $13 billion world leader in connectivity with nearly 90,000 employees in over 50 countries, is our largest electronics supplier. TE designs and manufactures components saving time and money by accelerating the that are found in nearly every product design process and simplifying product in the world that uses electronics in sourcing and purchasing. industries including energy, industrial, Canda Carr, Vice President, Global broadband, consumer devices, automotive, Channel Sales at TE, commented: “TE aerospace and defence. is committed to the highest standards With their expertise and design of innovation, quality, availability, and capabilities, TE builds the connectors, service and support, underscored by a systems and solutions that engineers rely commitment to delivering an extraordinary on to transport power and data, helping customer experience. Electrocomponents to solve today’s biggest connectivity is aligned with this strategy through their challenges in new and creative ways. global level-up programme, making sure Investment in innovation allows TE to not their extensive range of TE products only meet, but anticipate, customers’ is consistently stocked and promoted. needs. Electrocomponents’ worldwide presence gives TE access to a large and diverse Electrocomponents’ vast engineering customer base, increasing exposure of our customer base, worldwide presence, products across new markets and ensuring eCommerce capabilities and free online customers benefit from the highest tools help ensure that TE’s unmatched service levels.” product portfolio is available to customers, Our Business Our Performance Corporate Governance Financial Statements Shareholder Information 03 ELECTROCOMPONENTS PLC ELECTROCOMPONENTS Annual Report and Accounts for the year ended 31 March 2014 ended 31 March the year for Accounts and Annual Report www.electrocomponents.com ELECTROCOMPONENTS PLC Annual Report and Accounts for the year ended 31 March 2014 LSE Stock Code: ECM 04 STRATEGIC REPORT > OUR BUSINESS > HIGHLIGHTS 2014 Highlights 2014 2014 was the first year of our new medium-term business plan. Below are the key financial and operational highlights of the year. Key numbers Headline profit before tax Group sales growth * eCommerce sales share £101.1 million 2.1% 58% (2013: £94.1 million †) (2013: 0.5%) (2013: 56%) Headline return on sales Headline return on capital employed Headline free cash flow 8.3% 20.9% £58.3 million † (2013: 8.1% ) (2013: 18.5% †) (2013: £56.1 million) * Adjusted for trading days and currency movements. † Restated for the changes in IAS 19R Employee Benefits. How are we progressing with our strategy? ELECTROCOMPONENTS 3% more customers THE LEADING 4% ‘Famous for‘ growth GLOBAL DISTRIBUTOR 6% eCommerce growth DesignSpark Mechanical TOP 5 DISTRIBUTORS Range globalisation begun SHARE 15% Improved website search Stable gross margin OF MARKET SAP system rollout in APAC HIGHLY FRAGMENTED Employee engagement up Business insight system 85%PROVIDES BIGGEST OPPORTUNITY See page 12 for Our Strategy 23079.04 - Proof 1 -5 June 2014 3:02 PM ELECTROCOMPONENTS PLC www.electrocomponents.com Annual Report and Accounts for the year ended 31 March 2014 05 Our Business Global sales Continental Europe £461m 36% of sales See page 24 UK £374m Our Performance Governance Corporate 29% of sales See page 26 North America £281m Asia Pacific 22% of sales £157m 13% of sales See page 25 See page 25 Operating companies Distributor companies Reasons to invest Well-established Structural growth Growing markets Ambitious targets global market leader opportunity Financial Statements Our two well-established The markets we operate The marketplace we We have raised our brands, RS Components in grow faster than GDP operate in is highly growth ambitions for (RS) and Allied Electronics on average. This is driven fragmented, with the Group. We expect (Allied), have existed for by electronic components numerous smaller that the execution of our more than 75 years and demand, which grows at competitors. There are global strategy will deliver have grown to produce around twice GDP through clear benefits to being a market share gains in our a Group that is a global the business cycle, with large, global competitor international markets, leader in its marketplace, continued innovation in this marketplace, leading to higher sales covering around 90% of increasing the proliferation meaning we are well growth and improved the world’s GDP. of electronic components placed to take a greater financial performance in everyday life. share of this fast-growing over the medium-term. market over time. Information Shareholder See page 10 for See page 08 for See page 12 for See page 20 for Business Model Marketplace Our Strategy Key Performance Indicators ELECTROCOMPONENTS PLC Annual Report and Accounts for the year ended 31 March 2014 LSE Stock Code: ECM 06 STRATEGIC REPORT > OUR BUSINESS > CHAIRMAN’S REPORT Chairman’s Report Welcome to the 2014 Electrocomponents Annual Report. search functions on our website and the initial steps taken to build a global offer by developing a consistent global range with strategic suppliers such as TE Connectivity and Omron. We have an ambitious plan, and the scale and complexity of what we have set out to do over the coming years is significant. As the strategy