9th Nov 2007 07:01
Electrocomponents PLC09 November 2007 HALF-YEARLY FINANCIAL REPORT Electrocomponents plc, the major international high service distributor ofelectronic, electrical and industrial supplies, today announces its results forthe half year ended 30 September 2007. SUMMARY RESULTS H1 2007/08 H1 2006/07Revenue £443.8m £422.4mProfit before tax - headline £40.4m £36.3mProfit before tax - reported £39.4m £35.6mEarnings per share - headline 6.1p 5.5pEarnings per share - basic 6.0p 5.4pInterim dividend per share 5.8p 5.8pGrowth in headline profit before tax at constantforeign exchange 13% 4% HIGHLIGHTS OF THE FIRST HALF * Group revenue growth of 7%.* The International business has continued to grow strongly with first half revenue growth of 11%.* The UK has maintained its revenue growth at 2%, which is its third successive half year of growth.* Headline profit before tax at constant foreign exchange rates has grown by 13%.* Further progress has been made on the Electronic and Electromechanical (EEM) strategy.* e-Commerce grew strongly at 22% and now represents 30% of the Group's revenue.* Gross margin stable across the half year's two quarters at 50.1%.* All businesses contributing to the Group's 1% point improvement in operating cost leverage.* The previously announced cost reduction programme substantially complete.* Strong cash flow performance with free cash flow of £36.4m, up £24.2m on the first half last year.* The roll-out of EBS within Europe now successfully completed and benefits are being delivered.* North American warehouse move completed.* The interim dividend maintained at 5.8p per share. FOCUS FOR THE SECOND HALF * Deliver further EEM strategy initiatives; October 2007 has seen a significant increase in the range of EEM products available in the new catalogues in all the major European markets.* Launch an improved e-Commerce offer providing world-leading functionality and enabling faster and continuous new product introductions.* Identify and drive for further cost reductions. HELMUT MAMSCH, CHAIRMAN COMMENTED: "During the first half of the year, the Group has maintained its strongfinancial performance. Overall Group sales growth was 7% with a strongperformance from the International business which delivered 11% growth and theUK delivering its third successive half year of growth. Headline profit beforetax growth was 13% at constant foreign exchange rates. Good progress continues to be made implementing our strategic development planwith the European EBS roll-outs and the previously announced cost reductionprogrammes being substantially complete. The focus is now on the rapidimplementation of the EEM and e-Commerce strategies." Enquiries:Helmut Mamsch, Chairman Electrocomponents plc 0207 567 8000*Ian Mason, Group Chief Executive Electrocomponents plc 0207 567 8000*Simon Boddie, Group Finance Director Electrocomponents plc 0207 567 8000*Diana Soltmann Flagship Consulting Ltd 0207 886 8440 * Available to 15:00 on 9 November, thereafter 01865 204000The results and presentation to analysts are published on the corporate websiteat www.electrocomponents.com. Definitions of terms: Unless otherwise stated, in order to reflect underlyingbusiness performance, comparisons of revenue between periods have been adjustedfor exchange rates and the number of trading days. Likewise, and unlessotherwise stated, changes in profit, cash flow, debt and share related measuressuch as earnings per share are at reported exchange rates. Enterprise Business System (EBS): In order to make clear the costs of the EBSproject and the underlying performance of the business, EBS costs (comprisingdepreciation and implementation costs) have been disclosed separately.Therefore, unless explicitly stated, measures based on operating costs,contribution and Process costs exclude EBS. Headline profit: A charge of £1.0m (H1 2006/07: £0.7m charge) was incurred inthe half year for items excluded from headline profit. Details of the items aregiven below the Income Statement. Key performance measures such as return onsales and EBITDA use headline profit figures. Safe Harbour: This half-yearly financial report contains certain statements,statistics and projections that are or may be forward-looking. The accuracy andcompleteness of all such statements, including, without limitation, statementsregarding the future financial position, strategy, projected costs, plans andobjectives for the management of future operations of Electrocomponents plc andits subsidiaries is not warranted or guaranteed. These statements typicallycontain words such as "intends", "expects", "anticipates", "estimates" and wordsof similar import. By their nature, forward-looking statements involve risk anduncertainty because they relate to events and depend on circumstances that willoccur in the future. Although Electrocomponents plc believes that theexpectations reflected in such statements are reasonable, no assurance can begiven that such expectations will prove to be correct. There are a number offactors, which may be beyond the control of Electrocomponents plc, which couldcause actual results and developments to differ materially from those expressedor implied by such forward-looking statements. Other than as required byapplicable law or the applicable rules of any exchange on which our securitiesmay be listed, Electrocomponents plc has no intention or obligation to updateforward-looking statements contained herein. CHAIRMAN'S STATEMENT INTRODUCTION During the first half of the year, the Group has maintained its strong financialperformance. Overall Group sales growth was 7% and headline profit before taxgrowth was 13% at constant foreign exchange. The International business grew at 11% with all regions showing growth. AsiaPacific has continued its strong performance from the second half of last yearmaintaining 16% sales growth. Europe grew at 9% and Allied, our North Americanbusiness, performed particularly well compared to the market, achieving 12%revenue growth. The UK has continued to grow at 2%, reporting a third successivehalf year of growth. The performance by Allied is all the more impressive since the business alsomanaged its office and warehouse move during the half year. In October, the moveand transfer of stock to the new warehouse was successfully completed. Gross margin was stable during the half year at 50.1% with the previous year'sselling price realignments in Europe largely completed and the product costsaving initiatives providing financial benefits. The Group's operating cost leverage has improved by 1% point of revenue withboth the International and UK businesses improving their cost leverage. Theresulting Group contribution increased by £6.5m. STRATEGIC DEVELOPMENT Good progress continues to be made implementing our strategic development plan. The implementation of the EEM strategy has gained momentum with investmentacross continental Europe of additional EEM sales resource and further expansionof the product range and marketing support. The process control and automation (PCA) range within Maintenance Repair andOperations (MRO) has again performed particularly well. This has been supportedby focused initiatives with strategic suppliers helping to extend the range ofproducts on offer and supporting increased joint promotions. A notable milestone event during the half year was the successful completion ofthe EBS roll-out across Europe. The business is now in a strong position todrive further benefits from this system across all the European businesses. The Group has now actioned cost reduction initiatives to achieve £9.2m ofannualised cost savings. Plans are in place to deliver the balance of thetargeted £10m annualised savings by the end of the current financial year anddrive for further reductions in the future. DIVIDEND The Board announced in 2005 that it would maintain the dividend for the 3 yearsto 31 March 2008, assuming no substantial deterioration in economic conditions.Accordingly, the interim dividend will be maintained at 5.8p per share. BOARD During the half year, Nick Temple retired after 10 years with the Group,latterly as Senior Non-Executive Director, and Rupert Soames joined the Board.Rupert is CEO of Aggreko plc and has significant and relevant internationalexperience. CURRENT TRADING AND OUTLOOK During October, Group revenue growth has been around 6% year on year. OurInternational business grew at around 9% and the UK at around 2%. In the second half of the financial year, the Group will continue to focus onthe implementation of our strategy. While we are watchful of the general macroeconomic conditions and those in North America in particular, the Board isconfident that this financial year will be another of good progress. Helmut Mamsch, Chairman9 November 2007 OPERATING REVIEW PROGRESS ON THE STRATEGIC PLAN In May 2005, the Group announced its plan to improve the financial performanceof the Group. This plan had three key elements: * Focus separately on two distinct customer groups: Electronic and Electromechanical (EEM) and Maintenance, Repair and Operations (MRO).* Implement the Enterprise Business System (EBS) in Europe and Asia Pacific.* Create a lower cost infrastructure. The two infrastructure elements of the plan are now largely complete. Therefore,the Group's focus has been to continue improving the EEM and MRO offers andbuild on the positive customer reaction to date. ELECTRONIC AND ELECTROMECHANICAL (EEM) The Group's EEM customers are primarily involved in electronics design and smallbatch production. This is a growing segment to serve, and 'catalogue' baseddistribution is the customers' preferred channel. Their primary need is toaccess as broad, deep and innovative a product range as possible. During the half year, the Group has progressed further in updating its EEMproduct range to provide a more competitive and compelling offer for customers.New technologies have been launched across many diverse areas, including thermalmanagement, embedded computing and power supplies, together with updates toprevious successful campaigns for wireless and solid state lightingtechnologies. In keeping with this product range increase, there has beensignificant investment in additional EEM sales heads and supplier-linkedmarketing support across Europe. MAINTENANCE, REPAIR AND OPERATIONS (MRO) To improve profitability, the MRO product range has been rationalised across theUK and Europe with 5,000 products being removed from the UK support range sinceOctober 2005 without adverse customer impact. This simplifies and improvescustomer product selection and reduces product costs. Within MRO there is an important customer segment, the automation engineer, thatprimarily uses process control and automation (PCA) products. PCA in particularhas shown strong growth in the UK and Continental Europe with the Group's broadproduct offer and high service delivery supporting the increased use ofautomation in the workplace. ENTERPRISE BUSINESS SYSTEM (EBS) The roll-out in Asia Pacific completed during the previous financial year. Theroll-out of EBS across Europe was completed successfully in May 2007. EBS nowsupports all the Group's operating companies in Europe: Austria, Benelux,France, Germany, Ireland, Italy, Scandinavia, Spain and the UK. The Group is nowable to drive further benefits both from the use of an integrated system and thesharing of best practices across the businesses. The increase in Group stockturn from 2.6 times in September 2006 to 2.8 times in September 2007 is anexample of EBS benefits being delivered across Europe. The timing of the roll out of EBS to Allied, our North American business, willbe reviewed early in the next calendar year. LOWER COST INFRASTRUCTURE During the half year, the Group has achieved cost leverage in all Internationalregions and in the UK, with the Group's operating costs reducing by 1% point ofrevenue compared to last year. These benefits have been achieved by both ongoingsales growth and the focus on cost reductions. During the first half of the year, cost reduction initiatives were taken todeliver £1.6m of annualised benefits with accompanying reorganisation costs of£1.0m. The majority of these costs: approximately £0.9m, related to headcountreductions. These activities crossed a number of functions with most of thesavings being made in administrative and support areas in the UK and Europe. Todate some £9.2m of the targeted £10m of annualised cost reductions have beenachieved and there are plans for the remaining balance to be actioned by the endof the financial year. E-COMMERCE The e-Commerce channel continues to grow confirming its increasing strategicimportance to the future of the Group. e-Commerce revenue is now 30% of theGroup's total revenue and is over 60% of the Japanese business. In support ofthe EEM strategy web site links have been established with key electronicssuppliers. The Group plans to launch an improved e-Commerce offer towards the end of thefinancial year in the UK, Europe and Asia Pacific. This will provideworld-leading functionality, enabling faster and continuous new productintroductions. FINANCIAL PERFORMANCE Group H1 2007/08 H1 2006/07Revenue £443.8m £422.4mGross margin 50.1% 50.7%Contribution £94.2m £87.7mGroup Process costs (£42.1m) (£41.1m)EBS costs (£8.0m) (£7.8m)Headline operating profit £44.1m £38.8mInterest (net) (£3.7m) (£2.5m)Headline profit before tax £40.4m £36.3mHeadline earnings per share 6.1p 5.5pInterim dividend per share 5.8p 5.8p Key performance indicators Group H1 2007/08 H1 2006/07Group revenue growth 7.3% 9.0%International 11.1% 15.5%UK 2.0% 0.9%e-Commerce proportion of revenue 30% 26%Headline Group return on sales 9.1% 8.6%Headline EBITDA (1) £57.2m £51.4mFree cash flow £36.4m £12.2mStock turn (per year) 2.8x 2.6x (1) Earnings before interest, tax, depreciation and amortisation (inc. govt. grants) The headline profit before tax was £40.4m, up £4.1m from the first half of lastyear. This 11.3% growth on last year (13.5% at constant foreign exchange rates)has been driven by four factors. The contributions of the International and theUK businesses have increased by £3.8m and £2.7m respectively. Offsetting thisimprovement have been increased Process and EBS costs of £1.2m and higherinterest costs of £1.2m. The Group's revenue increased by 7.3% (5.1% reported growth) to £443.8m. TheInternational business grew strongly during the half year by 11.1%. Within theInternational Business, Europe grew at 9.2%, North America at 12.1% and AsiaPacific at 15.8%. The UK business grew revenue by 2.0%, which is its third successive half year of growth. Revenue from the Group's e-Commerce channel grew by 22% and now accounts for 30%of Group revenue driven by continuing developments including dynamic links withkey suppliers' web sites. Gross profit increased by £8.5m over last year. Gross margin was stable betweenthe first and second quarters of the first half of the year at 50.1%. This was0.3% lower than the second half of the last year, and was caused by a 0.3%reduction in International and a 0.2% reduction in the UK. Within theInternational business the principle movement was in Europe due to the impact ofthe previous year's selling price realignments which were undertaken to improvecompetitiveness. In the UK higher customer discounts, particularly thoseassociated with the growing profitable larger order business, impacted thebusiness's gross margin. Process costs increased by £1.0m to £42.1m for the first half but reduced as apercentage of revenue from 9.7% to 9.5%. Headline EBITDA increased by £5.8m (11.3%) to £57.2m. The net interest charge was £3.7m, up £1.2m on the first half of last year dueto both higher interest rates and higher average net debt. Closing net debt was£154.2m, £18.0m higher than last year end but comparable with net debt at 30September 2006 (£151.2m). Reported profit before tax was £39.4m, up from £35.6m from the first half of thelast financial year comprising the £4.1m increase in headline profit before taxand offsetting £0.3m higher reorganisation costs. Free cash flow was £36.4m, an increase of £24.2m on last year due largely toincreased profit, improving stock turn (from 2.6 times first half last year to2.8 times first half this year) and lower capital expenditure associated withreduced requirements from both EBS and the North American warehouse build. International H1 2007/08 H1 2006/07Revenue £266.6m £248.7mRevenue growth % 11.1% 15.5%Gross margin 48.2% 48.8%Operating costs % of revenue (30.8%) (31.7%)Contribution £46.3m £42.5m% of revenue 17.4% 17.1% The International business is an increasingly important part of the Group,representing 60% of the Group's revenue and around 50% of the Group'scontribution. The business comprises Continental Europe (54% of the revenue inthe International business), North America (30%) and Asia Pacific (16%). The Business grew by 11.1% during the half year (on a reported basis at 7.2%). Gross margin is 0.6% lower than the first half of the last financial year, theprincipal underlying declines resting within Europe and Asia Pacific. In Europethe previous, now largely complete, selling price realignments to improvecompetitiveness have impacted margin; while in Asia Pacific foreign exchangemovements were significant. There has been ongoing cost leverage. Costs as a percentage of sales reducing by0.9% points compared to last year with all regions producing leverage during thehalf year. Contribution has increased by £3.8m (8.9%) in the period with all regionsshowing growth. Continental Europe H1 2007/08 H1 2006/07Revenue £144.4m £132.6mRevenue growth % 9.2% 10.3%Contribution £30.2m £27.3m% of revenue 20.9% 20.6% Continental Europe includes eight businesses. France, Germany and Italy are thelarger businesses, which together comprise around 75% of regional revenue. Thesmaller businesses (Austria, Benelux, Ireland, Scandinavia and Spain) representthe remainder. During the first half of the year, the EBS roll-out across Europe was completed,such that all the region's operating companies now operate from a singleintegrated platform with the UK business. All the businesses have shown good revenue growth in the period. This strongperformance has been supported by the ongoing strategy implementation, includingnew EEM technology introductions across all companies, further EEM sales forcerecruitments in France and Germany and continuing exploitation of the Alliedextended range. Within MRO the increasing relevance of the broad PCA productoffer, local supplier agreements to broaden product ranges and joint supplierpromotions have driven increased revenue. e-Commerce revenue grew at 19% on the first half of last year and now represents34% of total revenue. Local costs have reduced as a percentage of revenue and contribution hasimproved by 0.3% points to 20.9% of revenue. North America H1 2007/08 H1 2006/07Revenue £80.1m £77.7mRevenue growth % 12.1% 24.1%Contribution £11.4m £11.3m% of revenue 14.2% 14.5% Revenue in Allied (our North American business) has continued to grow during thehalf year at 12.1% (on a reported basis at 3.1%); e-Commerce revenue grew by 21%to nearly 10% of total revenue. The consistent growth strategy implemented within Allied is working well. Thestrategy is being reinforced by increasingly improved service levels tocustomers and further investments in sales personnel across the business'snational network of branches. The move to the new warehouse and office facility has been successfullycompleted. The office move was completed in May and the transfer of stock to thenew warehouse recently completed, to plan, in October. The one-off costsassociated with this move are approximately £1.5m with about £0.8m beingincurred in the first half of the year. The previous warehouse facility was struggling to meet the increasing customerdemand and the new facility will support the future growth of the business andgenerate scale benefits going forward. However, at current revenue levels, itwill result in higher operating costs of approximately £1m per annum startingduring the second half of the current financial year. Excluding the costs of the current facility move, Allied's contribution wouldhave increased by some £0.9m and by 0.7% points as a percentage of revenue whencompared to the first half of last year. Asia Pacific H1 2007/08 H1 2006/07Revenue £42.1m £38.4mRevenue growth % 15.8% 18.8%Contribution £4.7m £3.9m% of revenue 11.2% 10.2% Revenue in the Asia Pacific region has grown by 15.8% (on a reported basis at9.6%), with all the regions showing double digit growth. e-Commerce revenue grewat 35% during the half year now representing 31% of total revenue. In North Asia many of the previous year's revenue generating activities,including same day offer and sales force investment, have helped acceleraterevenue growth over the first half of last year. In South Asia revenue growthwas driven by customer acquisition, the new sales office in Thailand and theAllied extended range offer. In Japan, the business performed well, growingrevenue in a difficult local economic environment; e-Commerce now represents 62%of the Japanese business's revenue. In Australasia, revenue growth acceleratedas more opportunities were pursued in growing sectors of the regional economies. The business improved its operating cost leverage compared to the first half oflast year with contribution as a percentage of revenue improving by 1% point. United Kingdom H1 2007/08 H1 2006/07Revenue £177.2m £173.7mRevenue growth % 2.0% 0.9%Gross margin 53.0% 53.3%Operating costs % of revenue (26.0%) (27.3%)Contribution £47.9m £45.2m% of revenue 27.0% 26.0% The UK business grew revenue by 2.0% compared to last year whilst e-Commercerevenue continued to grow increasing its share to 36% of total UK revenue. The business has maintained its momentum implementing the Group's EEM strategy.This has involved the creation of a new sales team providing more EEMcustomer-oriented support and access to non-stocked product ranges. The businesshas developed relationships with a number of key EEM suppliers to improvecustomers' speed of access to new products. To date, this activity has beensuccessful in generating incremental revenue. Gross margin is 0.3% lower than the first half of the last financial year due tohigher customer discounts, particularly those associated with the growing andprofitable larger order business. Within MRO, the PCA product offer has grown particularly strongly. This is dueto both the business's broad and relevant offer, together with local initiativesfocusing on particular customers in conjunction with joint direct mail,e-Commerce and sales activities with larger supplier partners. The business improved its cost leverage during the half year by 1.3% points ofrevenue as the benefits of the previously announced cost reduction programmewere realised. In addition, the higher operating costs incurred following thebusiness's EBS go live last calendar year were reduced as well as EBS benefitsstarting to be realised. Contribution was £47.9m, an increase of £2.7m on the first half of last year.Contribution as a percentage of revenue has increased by 1% point to 27.0%. EBS financial impact EBS costs which comprise depreciation and system implementation costs were £8.0min the first half compared with £7.8m in the first half of last year. The slightyear on year increase was caused by higher depreciation and the implementationand post go live support in Europe during the first half of the year. Withinthis balance, depreciation was £5.4m, while project and local business costswere £2.6m. The cash flow impact of EBS in the first half was an outflow of£4.2m, a reduction of £4.1m from the first half last year principally due tolower capital expenditure. Future EBS development costs incurred post the implementation will not bedisclosed within EBS costs but instead will be disclosed within Process costs. For the current financial year, total EBS costs comprising depreciation, systemimplementation costs and the post implementation development costs referred toabove, is expected to be slightly lower than the previous financial year (£19m). For year ending 31 March 2009 and onwards, EBS costs will not be separatelydisclosed; instead they will be included within Process costs. Pensions The Group has defined benefit pension schemes in the UK, Ireland and Germany,all of which are now closed to new entrants. All other schemes are definedcontribution. Under IAS 19, the defined benefit schemes showed a combined deficit of £38.7m at31 March 2007 of which the deficit in the UK scheme was £31.9m. As at 30September 2007, the estimated deficit of the UK scheme was £12.0m. The principalreasons for the reduction in the deficit are the higher investment returnstogether with a higher discount rate. RISKS AND UNCERTAINTIES STATEMENT In line with the requirements of DTR 4.2.7R of the Disclosure and TransparencyRules the following sections provide a description of the principal risks anduncertainties for the remaining six months of the Group's financial year. In the Board's opinion, there are six key risks and uncertainties facing theGroup, comprising Group strategy implementation, pricing, people, IT andcommunication systems, the macro-economic environment and foreign exchangerates. These are summarised below: Group strategy implementation Considerable progress has been made on the implementation of the Group'sstrategy; the most significant risk to the Group strategy is that it does notdeliver the anticipated results. This is being responded to in many ways, focusing on effective and consistentcustomer communication, the development of the EEM and MRO ranges, supported byrobust customer research and dedicated sales teams in the larger Europeanmarkets. These should ensure the relevance and competitiveness of the offers inmeeting customer needs. The effectiveness of these actions are closely monitoredand assessed for their contribution to the success of the strategy. Further work to ensure an effective implementation has been driven by a highlysuccessful Group Communications meeting involving the Group's world wide seniormanagement team in June this year. Pricing To be successful, the Group must continue to improve its value for money ratingthrough market pricing, high service and effective customer communication. Therisk is that the service differential or price positioning with competitors isnot maintained, and that effective communication with customers is notdelivered. To address this risk, market developments and competitor pricing are monitored.Robust market pricing frameworks have been put in place to respond quickly anddecisively to these risks, with continuing activities to refine, improve andeffectively communicate the Group's service offer in each of its markets. People The successful implementation of the Group's strategy is ultimately dependent onthe expertise, commitment and strong support of its employees. Developing theappropriate skills and a high performing, supportive organisational culture aretherefore key on-going challenges. To ensure individuals have a clear understanding of their contribution to theGroup strategy, personal objectives and rewards are being aligned with Groupstrategy delivery to ensure that there is successful operational implementation.Technical skills and capabilities are being enhanced by the development ofinternal competencies and these are being supplemented by adding new expertisethrough external appointments. The values and culture activities continue to be promoted throughout the Groupemphasising the positive attributes of speed, flexibility and customer service.These values are being embedded into the UK organisation by a continuousimprovement approach to working where employee teams are encouraged to identify,develop and implement process improvements to customer experience and processefficiency. IT and communications systems There is a heavy dependency on data processing and communications systems tosupport the Group's worldwide distribution businesses. The EBS systemsimplementation in Europe, and the systems upgrade in the Asian businesses havesubstantially replaced the "Legacy" data processing systems and hassignificantly improved the Group's risk profile. The introduction of an integrated data network and infrastructure does, however,introduce new risks of region-wide dependencies on common systems solutions. Significant investments have been made in resilient systems infrastructure,systems knowledge and region-wide disaster recovery provision. These processesare subject to on-going testing and review with sharing of experiences andsolutions. Macro economic environment The Group operates within a wide variety of markets. Therefore the Group'sfinancial performance will be affected by changes in general macro economicenvironments. Local operating companies frequently monitor their respectivetrading environments by reviewing the relevant economic indicators. Foreign exchange rates The geographic spread of the Group means that its financial results can beaffected by movements in foreign exchange rates. The Group has significantoperations both in Europe and North America. Hence, by way of example, a 10 centweakening of both the Euro and US Dollar currencies against Sterling wouldcreate a translation exposure and reduce the Group's annual profit before tax byabout £3m and £1m respectively. The Group has a significant proportion of its borrowing denominated in Euros andUS Dollars, which provide a hedge against the Group's European and NorthAmerican investments. Ian Mason, Group Chief ExecutiveSimon Boddie, Group Finance Director9 November 2007 RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEARLYFINANCIAL REPORT We confirm that to the best of our knowledge: * The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; * The interim management report includes a fair review of the information required by: (a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and (b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so. Ian Mason, Group Chief ExecutiveSimon Boddie, Group Finance Director9 November 2007 Group Income Statement 6 months to 6 months to Year to 30.9.2007 30.9.2006 31.3.2007 Note (unaudited) (unaudited) (audited) £m £m £m -------- -------- --------Revenue 1 443.8 422.4 877.5Cost of Sales (221.3) (208.4) (434.0) -------- -------- --------Gross profit 222.5 214.0 443.5Distribution and marketing expenses (175.9) (172.1) (346.2)Administrative expenses (3.5) (3.8) (6.2) -------- -------- --------Operating profit 43.1 38.1 91.1Financial income 5.5 5.3 11.2Financial expenses (9.2) (7.8) (17.1) -------- -------- -------- Profit before tax 1 39.4 35.6 85.2 Income tax expense 2 (13.4) (12.1) (29.0) -------- -------- --------Profit for the period attributableto equity shareholders 26.0 23.5 56.2 ======== ======== ========Earnings per share - Basic 3 6.0p 5.4p 12.9pEarnings per share - Diluted 3 5.9p 5.4p 12.9p DividendsAmounts recognised in the period:Final dividend for the year ended 31 March 2007 4 12.6p 12.6p 12.6pInterim dividend for the yearended 31 March 2007 4 - - 5.8p -------- -------- -------- An interim dividend of 5.8p per share has been recognised since the period end. Headline profit Headline operating profitOperating profit 43.1 38.1 91.1Reorganisation costs (income) 1.0 0.7 (0.8) -------- -------- -------- 44.1 38.8 90.3 -------- -------- -------- Headline profit before taxProfit before tax 39.4 35.6 85.2Reorganisation costs (income) 1.0 0.7 (0.8) -------- -------- -------- 40.4 36.3 84.4 -------- -------- -------- Group Statement of Recognised Income and Expense 6 months to 6 months to Year to 30.9.2007 30.9.2006 31.3.2007 Note (unaudited) (unaudited) (audited) £m £m £m -------- -------- --------Foreign exchange translationdifferences 5 (3.2) (6.5) (11.6)Actuarial gain (loss) on definedbenefit pension schemes 5 17.9 - (0.4)(Loss) gain on cash flow hedges 5 (2.0) 2.2 1.0Tax on items taken directlyto equity 5 (5.8) - - -------- -------- --------Net income recognised directlyin equity 6.9 (4.3) (11.0)Profit for the period 26.0 23.5 56.2 -------- -------- --------Total recognised income and expensefor the period attributable to equity shareholders 32.9 19.2 45.2 ======== ======== ======== Group Balance Sheet Note 30.9.2007 30.9.2006 31.3.2007 (unaudited) (unaudited) (audited) £m £m £m -------- -------- --------Non-current assetsIntangible assets 188.7 201.3 196.7Property, plant and equipment 109.6 104.8 111.1Investments 0.4 0.3 0.3Other receivables 2.5 2.7 2.7Deferred tax assets 8.7 17.3 14.2 -------- -------- -------- 309.9 326.4 325.0 -------- -------- --------Current assetsInventories 161.1 162.9 160.6Trade and other receivables 164.6 157.1 171.0Income tax receivables 0.8 1.5 1.1Assets held for sale - 8.5 -Cash and cash equivalents 6 38.4 16.6 19.1 -------- -------- -------- 364.9 346.6 351.8 -------- -------- -------- Current liabilitiesTrade and other payables (134.3) (119.6) (132.9)Loans and borrowings (7.3) (34.1) (79.0)Tax liabilities (14.9) (13.9) (14.5) -------- -------- -------- (156.5) (167.6) (226.4) -------- -------- --------Net current assets 208.4 179.0 125.4 -------- -------- --------Total assets less currentliabilities 518.3 505.4 450.4 -------- -------- -------- Non-current liabilitiesOther payables (5.4) (6.5) (7.9)Retirement benefit obligations (18.8) (40.5) (38.7)Loans and borrowings (185.3) (133.7) (76.3)Deferred tax liabilities (24.8) (22.7) (22.9) -------- -------- --------Net assets 284.0 302.0 304.6 ======== ======== ======== EquityCalled-up share capital 43.5 43.5 43.5Share premium account 38.7 38.4 38.7Other reserves 201.8 220.1 222.4 -------- -------- --------Total equity attributable to theshareholders of the parent 5 284.0 302.0 304.6 ======== ======== ======== Group Cash Flow Statement Note 6 months to 6 months to Year to 30.9.2007 30.9.2006 31.3.2007 (unaudited) (unaudited) (audited) £m £m £m -------- -------- --------Cash flows from operating activitiesProfit before tax 39.4 35.6 85.2Depreciation and other amortisation 13.0 12.8 27.0Equity settled transactions 1.3 1.2 2.7Finance income and expense (net) 3.7 2.5 5.9 -------- -------- --------Operating profit before changesin working capital, interestand taxes 57.4 52.1 120.8(Increase) in inventories (0.4) (8.8) (7.7)Decrease (increase) in tradeand other receivables 5.9 5.4 (9.2)(Decrease) in trade and otherpayables (6.3) (8.8) - -------- -------- --------Cash generated from operations 56.6 39.9 103.9Interest received 5.5 5.3 11.2Interest paid (7.9) (7.8) (17.0)Income tax paid (10.4) (8.0) (22.0) -------- -------- --------Operating cash flow 43.8 29.4 76.1 Cash flows from investingactivitiesCapital expenditure andfinancial investment (7.4) (17.2) (42.4)Proceeds from sale ofproperty, plant andequipment - - 11.6 -------- -------- --------Net cash used in investingactivities (7.4) (17.2) (30.8) -------- -------- --------Free cash flow 36.4 12.2 45.3 -------- -------- -------- Cash flows from financingactivitiesProceeds from the issue ofshare capital - - 0.3New bank loans 64.6 26.4 30.3Repayment of bank loans (25.6) (11.1) (16.6)Equity dividends paid (54.8) (54.8) (80.0) -------- -------- --------Net cash used in financingactivities (15.8) (39.5) (66.0) -------- -------- --------Net increase (decrease) in cashand cash equivalents 20.6 (27.3) (20.7) -------- -------- --------Cash and cash equivalents at thebeginning of the period 17.2 38.0 38.0Effects of exchange rates on cash (0.3) 1.4 (0.1) -------- -------- --------Cash and cash equivalents at theend of the period 6 37.5 12.1 17.2 ======== ======== ======== BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES Electrocomponents plc (the "Company") is a company domiciled in the UK. Thecondensed set of financial statements as at, and for, the six months ended 30September 2007 comprises the Company and its subsidiaries (together referred toas the "Group") and the Group's interests in jointly controlled entities. The Group financial statements as at, and for, the year ended 31 March 2007 areavailable upon request from the Company's registered office at InternationalManagement Centre, 8050 Oxford Business Park North, Oxford, OX4 2HW. The comparative figures for the financial year ended 31 March 2007 are not theCompany's statutory accounts for that financial year. Those accounts have beenreported on by the Company's auditors and delivered to the registrar ofcompanies. The report of the auditors was (i) unqualified, (ii) did not includea reference to any matters to which the auditors drew attention by way ofemphasis without qualifying their report, and (iii) did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. Statement of complianceThe condensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with IAS 34 Interim Financial Reportingas adopted by the EU. The condensed set of financial statements do not includeall of the information required for full annual financial statements, and shouldbe read in conjunction with the Group financial statements as at, and for, theyear ended 31 March 2007. This condensed set of financial statements was approved by the Board ofDirectors on 9 November 2007. Significant accounting policiesThe accounting policies applied by the Group in this condensed set of financialstatements are the same as those applied by the Group in its financialstatements as at, and for, the year ended 31 March 2007. The following new standards, amendments to standards or interpretations aremandatory for the first time for the year ending 31 March 2008 and are relevantto the Group. IFRS 7 Financial Instruments: Disclosures, and IAS 1, Amendments to CapitalDisclosures, both effective for annual periods beginning on or after 1 January2007. The full IFRS 7 disclosures, including the sensitivity analysis to marketrisk and capital disclosures required by the amendment to IAS 1 will bedisclosed in the annual financial statements. The following new standards, amendments to standards or interpretations aremandatory for the first time for the financial year ending 31 March 2008 buthave no material impact on the Group. IFRIC 9 - Reassessment of Embedded Derivatives, effective for annual periodsbeginning on or after 1 June 2006. IFRIC 8 - Scope of IFRS 2 effective for annual periods beginning on or after 1May 2006. IFRIC 10 - Interims and Impairment, effective for annual periods beginning on orafter 1 November 2006. IFRIC 11, IFRS 2 - Group and Treasury Share Transactions effective for annualperiods beginning on or after 1 March 2007. The following new standards, amendments to standards and interpretations havebeen issued, but are not effective for the financial year ending 31 March 2008and have not been early adopted. IFRIC 12 - Service Concession Arrangements. IFRS 8 - Operating Segments. Estimates and judgementsThe preparation of a condensed set of financial statements requires managementto make judgements, estimates and assumptions that affect the application ofaccounting policies and the reported amounts of assets and liabilities, incomeand expense. Actual results may differ from these estimates. The significant judgements made by management in applying the Group's accountingpolicies and the key sources of uncertainty were the same as those that appliedto the Group financial statements as at 31 March 2007. Notes to the condensed set of financial statements 6 months to 6 months to Year to 30.9.2007 30.9.2006 31.3.2007 (unaudited) (unaudited) (audited)1 Segmental Reporting £m £m £m -------- -------- --------By geographical destinationRevenue: United Kingdom 169.6 166.7 341.5 Continental Europe 147.8 135.4 293.3 North America 78.2 76.9 155.6 Asia Pacific 48.2 43.4 87.1 -------- -------- -------- 443.8 422.4 877.5 ======== ======== ======== By geographical originRevenue: United Kingdom 177.2 173.7 356.2 Continental Europe 144.4 132.6 287.5 North America 80.1 77.7 157.2 Asia Pacific 42.1 38.4 76.6 -------- -------- -------- 443.8 422.4 877.5 ======== ======== ======== Profit beforetax: United Kingdom 47.9 45.2 95.9 Continental Europe 30.2 27.3 64.5 North America 11.4 11.3 23.4 Asia Pacific 4.7 3.9 8.4 -------- -------- -------- Headline contribution 94.2 87.7 192.2 Group Process costs (42.1) (41.1) (82.9) Enterprise Business System costs (8.0) (7.8) (19.0) -------- -------- -------- Headline operating profit 44.1 38.8 90.3 Net financial expense (3.7) (2.5) (5.9) -------- -------- -------- Headline profit before tax 40.4 36.3 84.4 Reorganisation (costs) income (1.0) (0.7) 0.8 -------- -------- -------- 39.4 35.6 85.2 ======== ======== ======== 6 months to 6 months to Year to 30.9.2007 30.9.2006 31.3.2007 (unaudited) (unaudited) (audited)2 Taxation on the profit of the Group £m £m £m -------- -------- --------United Kingdom taxation 6.3 5.3 11.7Overseas taxation 7.1 6.8 17.3 -------- -------- -------- 13.4 12.1 29.0 ======== ======== ======== 6 months to 6 months to Year to 30.9.2007 30.9.2006 31.3.2007 (unaudited) (unaudited) (audited)3 Earnings per share £m £m £m -------- -------- --------Profit for the period attributable toequity shareholderss 26.0 23.5 56.2Reorganisation costs (income) 1.0 0.7 (0.8)Tax impact of reorganisation costs (0.3) (0.3) 0.2 -------- -------- --------Headline profit for the periodattributable to equity shareholders 26.7 23.9 55.6 -------- -------- --------Weighted average number of shares 435.0m 434.9m 434.9mDiluted weighted average number of shares 437.1m 435.7m 436.4m Headline basic earnings per share 6.1p 5.5p 12.8pBasic earnings per share 6.0p 5.4p 12.9p Headline diluted earnings per share 6.1p 5.5p 12.7pDiluted earnings per share 5.9p 5.4p 12.9p ======== ======== ======== 6 months to 6 months to Year to 30.9.2007 30.9.2006 31.3.2007 (unaudited) (unaudited) (audited)4 Interim dividend £m £m £m -------- -------- --------Amounts recognised and paid in theperiod:Final dividend for the year ended31 March 2007 - 12.6p (2006: 12.6p) 54.8 54.8 54.8Interim dividend for the yearended 31 March 2007 - 5.8p - - 25.2 -------- -------- -------- 54.8 54.8 80.0 ======== ======== ========Amounts determined after the balancesheet date:Interim dividend for the yearended 31 March 2008 - 5.8p 25.2 The timetable for the payment of the interim dividend is: Ex-dividend date 12 December 2007Dividend record date 14 December 2007Dividend payment date 18 January 2008 6 months to 6 months to Year to 30.9.2007 30.9.2006 31.3.2007 (unaudited) (unaudited) (audited)5 Reconciliation of movements in equity £m £m £m -------- -------- --------Profit for the period 26.0 23.5 56.2Dividend (54.8) (54.8) (80.0) -------- -------- --------Retained loss (28.8) (31.3) (23.8)Foreign exchange translation differences (3.2) (6.5) (11.6)Actuarial gain (loss) on definedbenefit pension schemes 17.9 - (0.4)(Loss) gain on cash flow hedges (2.0) 2.2 1.0Tax impact on adjustments takendirectly to equity (5.8) - -Equity settled transactions 1.3 1.2 2.7New share capital subscribed - - 0.3 -------- -------- --------Net reduction in equity (20.6) (34.4) (31.8) -------- -------- --------Total equity attributable to shareholders ofthe parent at the beginning of the period 304.6 336.4 336.4 -------- -------- --------Total equity attributable to shareholders of the parent at the end of the period 284.0 302.0 304.6 ======== ======== ======== Within equity shareholders' funds is a cumulative translation reserve (deficit).The balance as at 30 September 2007 was £1.7m deficit (31 March 2007 £1.5mreserve and 30 September 2006 £6.6m reserve). 30.9.2007 30.9.2006 31.3.2007 (unaudited) (unaudited) (audited)6 Cash and cash equivalents £m £m £m -------- -------- --------Bank balances 8.2 9.7 16.1Call deposits and investments 30.2 6.9 3.0 -------- -------- --------Cash and cash equivalents in thebalance sheet 38.4 16.6 19.1Bank overdrafts (0.9) (4.5) (1.9) -------- -------- --------Cash and cash equivalents in the cashflow statement 37.5 12.1 17.2Current instalments of loans (6.4) (29.6) (77.1)Loans repayable after more than one year (185.3) (133.7) (76.3) -------- -------- --------Net debt (154.2) (151.2) (136.2) ======== ======== ======== 6 months to 6 months to Year to 30.9.2007 30.9.2006 31.3.20077 Principal exchange rates (unaudited) (unaudited) (audited) -------- -------- --------Average for the periodEuro 1.47 1.46 1.47United States Dollar 2.01 1.85 1.90Japanese Yen 239 213 221 -------- -------- -------- 30.9.2007 30.9.2006 31.3.2007 -------- -------- --------Period endEuro 1.43 1.48 1.47United States Dollar 2.04 1.87 1.96Japanese Yen 234 221 232 ======== ======== ======== INDEPENDENT REVIEW REPORT TO ELECTROCOMPONENTS PLC Introduction We have been engaged by the Company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30September 2007 which comprises the Group Income Statement, Balance Sheet, CashFlow Statement, the Statement of Recognised Income and Expense and the relatedexplanatory notes. We have read the other information contained in thehalf-yearly financial report and considered whether it contains any apparentmisstatements or material inconsistencies with the information in the condensedset of financial statements. This report is made solely to the Company in accordance with the terms of ourengagement to assist the Company in meeting the requirements of the Disclosureand Transparency Rules ("the DTR") of the UK's Financial Services Authority("the UK FSA"). Our review has been undertaken so that we might state to theCompany those matters we are required to state to it in this report and for noother purpose. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the Company for our review work forthis report, or for the conclusions we have reached. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the Directors. The Directors are responsible for preparing the half-yearlyfinancial report in accordance with the DTR of the UK FSA. The annual financial statements of the Group are prepared in accordance withIFRSs as adopted by the EU. The condensed set of financial statements includedin this half-yearly financial report has been prepared in accordance with IAS 34Interim Financial Reporting as adopted by the EU. Our responsibility Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410 Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity issued by the AuditingPractices Board for use in the UK. A review of half-yearly financial informationconsists of making enquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordance withInternational Standards on Auditing (UK and Ireland) and consequently does notenable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express anaudit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 30 September 2007 is not prepared, in allmaterial respects, in accordance with IAS 34 as adopted by the EU and the DTR ofthe UK FSA. KPMG Audit PlcChartered Accountants8 Salisbury Square, London 9 November 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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