Electrocomponents plc F IN A NCIAL HIGH LIGH T S Revenue £2005: £773.9m828.5 m Head l i ne operati ng profit £2005: £100.8m76.2m Head l i ne profit bef ore ta x £2005: £99.9m72.8m Head l i ne ea rn i ngs per sha r e 12005: 15.5p .2p D i v idend DEFINITIONS OF TERMS: In order to reflect under ly i ng bus i ness perf or ma n ce, compa r i sons of revenue be tween per io ds have been ad justed for excha nge rates and the nu m ber of 2005: 18.4p p trad i ng days. Cha nges in profit, cash flow, debt and share related measu r es 18.4 such as ea rn i ngs per share are at reported excha nge rates. E nterpr i se Bus i ness System (EBS): In order to ma ke clear the costs Head l i ne retu rn on sa les of the EBS project and the under ly i ng perf or ma n ce of the bus i ness, EBS costs have been disclosed sepa rately. Ther ef or e, unless ex pl icit ly stated, measu r es based on operati ng costs, contr i bu tion and pro cess costs excl ude EBS. Head l i ne profit: A cha rge of £7.7m (20 05: £nil) was incu r r ed in the year for items excl uded from head l i ne profit. De tails of the items are given in the Income Statement on page 26 of this report. Key perf or ma n ce measu r es 2005: 12.9% such as retu rn on sa les, EBIT DA and ROCE use head l i ne profit fig u r es. 8.8% Electrocomponents plc Annual Report and Accounts 2006 1 Our strateg ic developments are cr itical and shou ld ensure that future grow th is susta i nable over ti me. C H A IR M A N ’S STAT E M E N T NBoamb Leawson TChitlaire man IN TRODUCTION econom ic cond itions, it shou ld ma i ntain the dividend Profitabi l ity in this year has been heav i ly impacted f or this 3 year per io d, and hen ce the dividend will be by the costs of the Enterpr i se Bus i ness System 18.4p per share for the full yea r. i mplementation and the decl i ne in UK sa les caused OUR PEOPLE by the huge dema nds of EBS and the conti nu i ng Ma ny people both in the UK and internationa l ly pr essure on ma nu factu r i ng customer s. wor ked extr emely ha rd at great per sonal cost to O ver the Ch r i st mas per iod EBS was lau n ched i nstall EBS, which supports both the UK bus i ness and success f u l ly and has supported the UK and ou r I nternational supply acti v ities. In add ition, all ou r I nternational supply acti v ities effecti vely since then. people have driven the perf or ma n ce of their ma r ke ts UK ma nagement is now fr ee to ma ke the necessa ry as ev iden ced by the sa les prog r ess. On behalf of the cha nges to del i ver a susta i nable profit and enable Boa rd I do thank everyone. f u ture grow th. Over the Christmas period EBS was launched As annou n ced, Jeff Hew itt reti r ed as Group successfully and has supported the UK and The International bus i ness, which now Fi na n ce Director and Simon Bo dd ie took over af ter a our International supply activities effectively r epr esents 57% of total revenue, has conti nued to very successful ca r eer at Diageo. Simon has broug ht since then. str eng then with sa les up 15% in the second ha l f, much relev a nt international and perf or ma n ce g i v i ng overall grow th of 12% for the full year and S i n ce the year end, Group revenue grow th ma nagement skills to the Boa rd and we look forw a rd generati ng good operati ng cost leverage. has rema i ned strong at arou nd 9%. The to him conti nu i ng to ma ke a sig n i fica nt impact on the I nternational bus i ness has grown by arou nd 15% and the UK bus i ness has been flat. As STR AT EGIC DEV E LOPM E N T Group’s acti v ities. pla n ned, gross ma rg i ns are lower than the This is the fir st year of our 3 year strateg ic Richa rd Bu t ler res ig ned from the Boa rd equ i v a lent per iod last yea r, la rgely due to development plan and good prog r ess has been a nd the Compa ny af ter 18 yea r s’ serv ice. Richa rd actions ta ken to improve compe titi veness. ach ieved in implementi ng the strateg y. As well as i n fluen ced much of our orga n i sational and As ia n E BS, our pro duct offer has been cons iderably development acti v ities, and we wish him wel l. en ha n ced for our EEM customer s, which has D ie ter Len nertz will be reti r i ng at the AGM contr i bu ted to accelerati ng International grow th, and af ter 10 years on the Boa rd. Die ter broug ht to the the fir st tra n che of cost sav i ngs have been del i ver ed. Boa rd very extens i ve Conti nental Eu ropean ex per ien ce The successful implementation of EBS in the a nd has been a tr emendous support du r i ng th i s UK has been a great ach ievement and we are now decade of international development. We will miss his rol l i ng out EBS into the rest of Eu rope with added cons ider ed inpu ts to our Boa rd debates and wish him con fiden ce. Ea r ly success of the new strategy ma kes a nd his wife ma ny happy years in reti r ement. us well placed to develop the opportu n ities generated CURRENT TR A DING by our strategy implementation in the year ahead. S i n ce the year end, Group revenue grow th has DI V IDE N D r ema i ned strong at arou nd 9%. The Internationa l These strateg ic developments are cr itical and shou ld bus i ness has grown by arou nd 15% and the UK ensure that future grow th is susta i nable over ti me. bus i ness has been flat. As pla n ned, gross ma rg i ns It is for these reasons that the Boa rd annou n ced last are lower than the equ i v a lent per iod last yea r, la rgely year that, assu m i ng no substa ntial de ter ioration in due to actions ta ken to improve compe titi veness. 2 Electrocomponents plc Annual Report and Accounts 2006 Group overview Electrocomponents plc is the leading international high service distributor of electronic, electrical and industrial supplies. GROUP PERFORMANCE Sales growth 5% Headline return on sales 9% Headline EBITDA £100m Free cash flow £27m Headline ROCE 17% International UK % of total sales 57%43% Sales growth 12% (3%) For more information please visit our website www.electrocomponents.com Electrocomponents plc Annual Report and Accounts 2006 3 new strategy across our businesses. businesses. our across strategy new the implementing arerapidly we and focus our remains growth International Co No ntinen rth Am tal er E ica ur s op a e le 0 0 s 3 3 s 224.3 a 103.4 £ l e m s 0 0 4 4 241.1 £ 102.8 m 0 0 5 5 243.5 112.8 06 06 267.9 137.5 D O per istr ati ibu ng tor ne com two pan rk ies 82% by operating companies companies operating by covered GDP global of 26 distributors in many more inmany distributors with operations our by covered countries 25% sales via e-Commerce via sales 29% e-Commerce sales sales e-Commerce in growth RS v at ECMOD awards 2005 awards ECMOD at Website Transactional Asia Pa UKsale cifi s £ c s m o a le t s e 0 0 £ 3 3 m d 49.1 366.9 Best 0 0 4 4 54.4 361.0 0 0 5 5 58.8 358.8 06 06 69.5 353.6 Our 3 year plan announced May 2005 STRATEGY PROGRESS TO DATE ps rou Focus separately on two rg e m distinct customer groups o t s u C 90,000 extra products available 1 in Europe ssSy sine stem Bu Implement the Enterprise se ri p Business System r e t n E ‘Go-live’ was successful in UK 2 over Christmas 2005 e ur Create a lower cost Actions taken to deliver ct ru t infrastructure s a r f n I £4m 3 of cost reductions For more information please visit our website www.electrocomponents.com 6 Electrocomponents plc Annual Report and Accounts 2006 During the year, good progress has been made on the implementation of the 3 year plan, with the EBS ‘go-live’ in the UK being a major milestone.