TIDMECM
RNS Number : 6553Z
Electrocomponents PLC
25 May 2021
25 May 2021, 7.00 am
ELECTROCOMPONENTS PLC
RESULTS FOR YEARED 31 MARCH 2021
STRONG PERFORMANCE WITH FURTHER STRONG MARKET SHARE GAINS
LINDSLEY RUTH, CHIEF EXECUTIVE OFFICER, COMMENTED:
"Electrocomponents has delivered a strong performance in a
challenging year. We continue to drive market share gains, invest
in our organic growth opportunities and generate good cash flow. In
addition, we welcomed three high quality businesses into our Group
to accelerate our strategic aspirations. I am incredibly proud of
how well our people stepped up to the challenge, and I thank them
all.
While we remain mindful of external pressures including ongoing
cost inflation and potential supply chain shortages, we are
confident that we are well positioned for a rapidly changing world.
The Group has carried strong momentum into the new financial year,
and we are excited about the opportunities we see through our
Destination 2025 strategic roadmap to drive profitable market share
growth and operational efficiencies."
Like-for-like(1)
Highlights 2020/21 2019/20 Change change
Revenue GBP2,002.7m GBP1,953.8m 2.5% 1.4%
------------------------------- ----------- ----------- --------- ----------------
Adjusted(2) operating profit GBP188.3m GBP220.7m (14.7)% (16.2)%
Adjusted(2) operating profit
margin 9.4% 11.3% (1.9) pts (2.0) pts
Adjusted(2) profit before
tax GBP181.7m GBP215.0m (15.5)% (17.0)%
Adjusted(2) earnings per
share 31.3p 37.7p (17.0)% (18.4)%
------------------------------- ----------- ----------- --------- ----------------
Operating profit GBP167.2m GBP205.3m (18.6)% (19.4)%
Profit before tax GBP160.6m GBP199.6m (19.5)% (20.4)%
Earnings per share 27.7p 34.7p (20.2)% (21.1)%
Full-year dividend 15.9p 15.4p(3) 3.2%
------------------------------- ----------- ----------- --------- ----------------
Adjusted(2) free cash flow GBP145.4m GBP80.9m 79.7%
Net debt GBP122.0m GBP189.8m
Net debt to adjusted(2) EBITDA 0.5x 0.7x
Growth driven by improving momentum throughout the year and
strong market share gains
-- Revenue growth of 2.5%, with like-for-like up 1.4%,
reflecting strong market share gains in all key markets
-- Superior availability, product and service solutions and
being digitally-enabled has driven Group outperformance
-- RS PRO like-for-like revenue growth of 9.7%, due to greater
brand awareness and new product development
-- Web revenue grew 2.4% with total digital revenue accounting for 63% of Group revenue
-- Three strategic acquisitions performing in line with
expectations, with integration and cross-selling on track
-- Despite external challenges our Group Net Promoter Score(4)
remains high at 54.4 (2019/20: 55.7)
-- We continue to improve our environmental, social and
governance journey (ESG), driving higher external ratings(5)
Profitability affected by additional costs relating to COVID-19,
Brexit and inventory provisions
-- Gross margin of 42.7%, down 1.0 pts relating to increased
freight costs, inventory provisions and regional mix
-- Operating costs included c. GBP19 million relating to
COVID-19 and Brexit due to higher freight and cost to serve
-- RISE programme to simplify and streamline the Group delivered GBP7 million of cost benefits
-- Adjusted operating profit margin down 1.9 pts to 9.4% due to
gross margin reduction and additional costs
-- Adjusted profit before tax fell 17.0% on a like-for-like
basis, profit before tax lower by 19.5%
-- Adjusted EPS decreased 17.0%, down 18.4% on a like-for-like basis; EPS fell 20.2%
Growth in full-year dividend supported by strong balance sheet
and cash flow
-- 3.2% growth in full-year dividend, in line with progressive
dividend policy; adjusted dividend cover of 2.0 times
-- Strong adjusted free cash flow generation of GBP145.4 million
driven largely by our focus on conserving cash
-- Balance sheet strength, net debt to adjusted EBITDA of 0.5x
supports, organic and inorganic strategic expansion
Current trading shows strong start to the year due to COVID-19
comparatives
In the first seven weeks of 2021/22 we have seen very strong
revenue growth due to the weaker comparatives from the first
COVID-19 lockdowns. Looking at our performance on a two-year view,
like-for-like revenue growth remains robust and broadly in line
with our annual like-for-like revenue growth in H2 2020/21. Our
performance in Americas continues to benefit from a wider product
range due to the extended distribution centre and change in focus
by our sales teams. We are particularly pleased with the
performance in EMEA given ongoing lockdowns and the logistical
challenges presented by Brexit. Asia Pacific remains strong helped
by the buoyant electronics market.
Well positioned for accelerating our growth strategy organically
and inorganically
Our proposition is becoming increasingly differentiated as we
invest further in our product and service solutions, enhance our
digitally-enabled customer experience and expand our main
own-brand, RS PRO. External pressures continue, such as ongoing
additional costs and uncertainty relating to the pandemic, Brexit
frictions, potential supply chain shortages and the translational
impact from the strength of sterling. However, growth in our market
share and customer numbers demonstrate our proposition is
resonating with customers and we are excited about the
opportunities we see to drive further profitable market share
growth and deliver our medium-term goal of a mid-teen adjusted
operating profit margin. The Group has an active acquisition
pipeline and a strong balance sheet, although we will retain our
disciplined approach to assessing opportunities. We are well
positioned to make good progress in the current financial year and
our expectations for strong growth in 2021/22 remain unchanged.
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 2019/20 converted at 2020/21 average
exchange rates. Revenue is also adjusted to eliminate the impact of
trading days year on year. Acquisitions are only included once they
have been owned for a year, at which point they start to be
included in both the current and comparative periods for the same
number of months. Currency movements decreased revenue by GBP3.2
million, fewer trading days decreased revenue by GBP4.8 million.
Currency movements increased adjusted profit before tax by GBP1.5
million.
2. Adjusted excludes amortisation of intangible assets arising
on acquisition of businesses, acquisition-related items,
substantial reorganisation costs, substantial asset write-downs,
one-off pension credits or costs, significant tax rate changes and
associated income tax (refer to Note 10 on pages 24 to 28 for
reconciliations).
3. An additional interim dividend for the year ended 31 March
2020 of 9.5p, to replace the deferred final dividend, was paid on
18 December 2020. This is included in the 2019/20 dividend per
share.
4. Rolling 12-month NPS is a measure of customer satisfaction.
5. Main ESG ratings: MSCI ESG A rating, CDP Climate Change
leadership score A-, Sustainalytics negligible risk (6.2) 10 /
13,494 companies (3 / 540 in sector), FTSE4Good Index score 3.2 / 5
score, EcoVadis Gold medal rating.
6. Consensus for the year ending 31 March 2022 is adjusted
profit before tax of GBP241.2 million within a range of GBP225.1
million to GBP258.9 million (source:
Electrocomponents.com/investors/analyst-coverage).
LEI: 549300KVXDURRKVW7R37
Enquiries:
David Egan, Chief Financial Officer Electrocomponents plc 020 7239 8400
Lucy Sharma, VP Investor Relations Electrocomponents plc 020 7239 8427
Martin Robinson / Olivia Peters Tulchan Communications 020 7353 4200
There will be a presentation for analysts and investors today at
10.00am BST via an audio conference call and webcast. A replay of
the webcast will be provided shortly after the event via the
investor relations page of the
Electrocomponents website : https://www.electrocomponents.com/investors
Participant dial-in numbers
United Kingdom (Local): 020 3936 2999
All other locations: +44 20 3936 2999
Participant access code: 172201
Webcast link:
https://www.investis-live.com/electrocomponents/60940437a52baa1000253b26/grol
Notes to editors:
Electrocomponents plc is a global omni-channel provider of
product and service solutions for designers, builders and
maintainers of industrial equipment and operations. We stock more
than 650,000 industrial and electronic products, sourced from over
2,500 leading suppliers, and provide a wide range of product and
service solutions to over 1.2 million industrial customers. With
operations in 32 countries, we trade through multiple channels and
ship c. 60,000 parcels a day.
We support customers across the product life cycle, whether via
innovation and technical support at the design phase, improving
time to market and productivity at the build phase, or reducing
purchasing costs and optimising inventory in the maintenance phase.
We offer our customers tailored product and service propositions
that are essential for the successful operation of their businesses
and help them save time and money.
Electrocomponents plc is listed on the London Stock Exchange and
in the year ended 31 March 2021 reported revenue of GBP2.0 billion.
Electrocomponents plc has nine operating brands; RS Components,
Allied Electronics & Automation, RS PRO, OKdo, DesignSpark,
IESA, Synovos, Needlers and Liscombe.
CEO STRATEGIC REVIEW
This has been a difficult year for us all. The COVID-19 pandemic
has brought many tough challenges for everyone, both personally and
professionally. We responded early and flexibly which allowed us to
adapt our working practices quickly to a new normal. Our number one
priority is always the health, safety and wellbeing of our people,
none more so than during the pandemic. Everyone has worked together
to ensure this, allowing us to keep our distribution centres (DCs)
open to provide ongoing premium customer service, while those that
could work from home have transitioned smoothly as a result of our
technological capabilities. The result has been increased cohesion
across the Group with everyone supporting each other and a greater
understanding of how important a role we play in delivering
critical products and services especially within our communities. I
am immensely proud of our amazing people and all they have
achieved. Thank you.
We have also navigated the ending of the transition period
following the UK's exit from the EU (Brexit). We prepared well to
ensure as smooth a process as possible, from increasing inventory
going into the end of the transition period, updating our
technology, working closer with our customers, suppliers and
logistic partners and increasing flexibility within our supply
chain. This meant that all areas within our control ran fairly
smoothly. However, there were a number of issues that all operators
faced, such as longer customs controls, increased paperwork and
transport carriers stuck at borders, which made it more of a
challenge but which we have worked to mitigate. We look forward to
improving our service to Europe further when the extension to our
German DC opens in the early autumn of 2021.
We are a socially and environmentally responsible organisation
with high ethical and governance standards, which I am fully
responsible for implementing and maintaining and to which I am
wholly committed. This is a core target within our strategic
roadmap, Destination 2025. We are driving changes throughout the
Group; such as from sourcing more sustainable products and building
more energy-efficient operations and facilities, to educating and
training both our own people and broader communities. Additionally,
we support non-profit organisations that share our passions such as
Engineers Without Borders-International and The Washing Machine
Project. I am proud that our ESG work has gained recognition by
external agencies including a MSCI ESG A rating, a CDP Climate
Change leadership score of A-, 10th out of 13,494 companies with
Sustainalytics and a Gold medal rating by EcoVadis.
During the year we also welcomed three new businesses to our
Group: Needlers Holdings Limited, Synovos, Inc. and John Liscombe
Limited. Synovos is a leading player in integrated supply
solutions, based in Americas, and is very similar to our IESA
business. Needlers and Liscombe expand our product and service
solutions offer in safety, hygiene and personal protective
equipment (PPE) through their specialist product ranges, supply
base and expertise. The integration of a ll three businesses is on
track and they are performing in line with expectations. We can
accelerate our organic growth through acquisition targets that fit
strategically, culturally and generate value.
The challenges encountered during 2020/21 have stress-tested the
business materially, but the growth we delivered in market share
and customer numbers has demonstrated our resilience and strength.
We are building a strong foundation to accelerate future growth,
with our proposition well-positioned for this changing world. We
have an offer that is resonating and gaining traction with existing
and new customers but still have less than a 1% market share
globally, highlighting the opportunities we have.
Accelerating Destination 2025
Our Destination 2025 strategy, outlined over two years ago, sets
out five strategic priorities to deliver value for all our
stakeholders. There is no change to the overall plan, but we
believe we can accelerate delivery of these ambitions.
During 2020/21 we initiated RISE, our programme to streamline
our Group to build a leaner and more scalable business capable of
accelerating growth and driving higher sustainable returns. This
included flattening the regional management structure and expanding
the shared business services team to spread knowledge, expertise
and best practice across marketing , digital, innovation and
product and supplier management. This simpler operating model will
enable Electrocomponents to go faster, improve margins and operate
more efficiently.
We are also moving towards becoming a more environmentally
sustainable business. We are working with our supplier base to
reduce unnecessary transportation routes through restructuring the
network, both inbound as we receive product from suppliers, and
outbound as we distribute to our customers. This will result in
more deliveries direct from the manufacturing location, via sea
rather than air freight, growing the level of inventory held
locally and increasing regional sourcing options. This will
streamline our in-country operations, reduce costs and lead to
significantly lower carbon emissions from our supplier base and
third-party delivery network. Moving the product closer to the
customer will improve product availability, delivery times,
consistency and customer service levels. This is a large project as
we restructure decades of historic working, but one we are
passionate about delivering.
Driving sustainable growth through our differentiated offer
We have over 1.2 million customers and are delivering c. 60,000
parcels daily from over 2,500 suppliers of our stocked products.
The average order value is GBP191, with many being fast,
just-in-time purchases, illustrating that product availability,
security of supply and speed of delivery is crucial to our
customers' needs. Given our proposition and reach, there is an
enormous opportunity to become more connected with our customers,
increasing their average basket size through growing the amount of
product and services we offer, developing service solutions for
their procurement problems and generating growth through new
customers. Extending our depth with existing customers and widening
our breadth through new customers will deliver operational
leverage, profitability and environmental benefits for our
customers, our suppliers and the Group.
We believe that focusing on our key strengths will have the
greatest potential to accelerate delivery of Destination 2025 and
sustainable profitable market share growth. These areas of
differential are:
-- Customer experience and our omni-channel model : Customers
are increasingly expecting a fast, personal, efficient and
frictionless experience. Our digitally-enabled model allows us to
service customers whichever way is easiest for them and we continue
to invest in this area, adding a responsive web platform at RS
during 2020/21. Our digital channel participation at 63% of revenue
reflects how our customers are increasingly purchasing. However, we
also provide specialist technical support and advice through our
expert sales teams which, when combined with our digital
capabilities, give us a significant competitive advantage.
-- Product and service solutions offer : Our customers are
looking at ways to ease their procurement requirements. We provide
a portfolio of product and service solutions relating to design,
procurement, inventory, supply chain, engineering and maintenance.
Part of this offer is within the core RS and Allied brands and part
within our brands such as DesignSpark and our integrated supply
businesses, IESA and Synovos. The opportunity to personalise supply
solutions with ranges of associated products relevant to specific
customer uses is significant. Delivering this leads to stronger
customer relationships, improved loyalty and greater lifetime value
as we become increasingly more integrated with our customers.
-- Specialist product breadth, depth and expertise : The breadth
and depth of our product offering, underpinned by the strength of
our supplier relationships, continues to set us apart from our
competition. We are expanding our range of new and innovative
products further and growing our expertise in an increasing number
of product categories while our electronics offer drives
differentiation from industrial peers. The extensive digital and
customer data we have allows us to make informed decisions about
our range depending on customer demand. Where we already have the
supplier relationships and in-house expertise and experience, we
are building out specialist product ranges that our customers
require. Where there are opportunities to develop this faster in
categories where we are less well known, we are looking at
acquisitions.
-- Own-brand proposition : Our main own-brand, RS PRO, continues
to outperform the Group. We have a strong quality offering, sourced
from tier one level suppliers, that delivers value for money to our
customers and a more targeted product offer based on utilising our
data. Being able to identify new product opportunities and offer
full solutions such as test and measurement kits has been very
successful. We see significant opportunity to develop this further,
especially in Americas where penetration is low, increasing the
contribution and strengthening overall margins.
Driving operational efficiency
During the year, we have focused on continued investment in our
proposition, ensuring that we retain a strong service to drive
future profitable market share gains. Many of the fundamentals are
in place and, although we are obsessive about ongoing continued
investment to stay relevant, our model is now shaped for delivering
operational efficiency.
We have completed the doubling of our DC capacity in Fort Worth,
US, and are close to finishing a similar expansion at our DC in Bad
Hersfeld, Germany. These DCs are more sustainable, automated and
environmentally efficient with solar panels, decreased waste output
and improved packaging systems. The two extensions will allow us to
increase substantially the breadth of our product offering and also
expand our sales of RS PRO. Additionally, our German DC will drive
economic and environmental efficiencies in helping supply Europe
now that Brexit is complete.
We continue to spend c. 4% of Group revenue per annum on our
digital and technology offer so we remain industry leading. We are
utilising our data better for the benefit of our customers,
suppliers and our own-brand RS PRO offering. This has resulted in a
greater understanding of customer lifetime values and improved
returns from more targeted marketing spend.
Our RISE initiative will drive further operational efficiencies.
We have already seen the benefits of leveraging our central
expertise further and being able to focus on the higher returning
areas within our business model.
We continue to target organic growth in the key areas outlined
above. However, we see ways we can accelerate this inorganically
through acquisitions that fit strategically, culturally and
generate value. Delivering market share growth and operating
leverage will underpin our progress towards our goal of a mid-teen
adjusted operating profit margin.
Thank you to our amazing team
Key to the strength of Electrocomponents is our people. I am
incredibly proud of how strong our team is, both in the dedication
and care our people have shown each other, our customers, suppliers
and communities, and in how they have responded to this difficult
year. I thank everyone for their hard work, collaboration,
fortitude, positive attitude and humour, which continues to make
Electrocomponents the amazing business I am honoured to lead.
OVERALL RESULTS
Like-for-like(1)
2020/21 2019/20 Change change
----------------------------- ----------- -----------
Revenue GBP2,002.7m GBP1,953.8m 2.5% 1.4%
Gross margin 42.7% 43.7% (1.0) pts (1.1) pts
Operating profit GBP167.2m GBP205.3m (18.6)% (19.4)%
Adjusted(2) operating profit GBP188.3m GBP220.7m (14.7)% (16.2)%
Adjusted(2) operating profit
margin 9.4% 11.3% (1.9) pts (2.0) pts
Adjusted(2) operating profit
conversion 22.0% 25.8% (3.8) pts (4.0) pts
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 2019/20 converted at 2020/21 average
exchange rates. Revenue is also adjusted to eliminate the impact of
trading days year on year. Acquisitions are only included once they
have been owned for a year, at which point they start to be
included in both the current and comparative periods for the same
number of months.
2. Adjusted excludes amortisation of intangible assets arising
on acquisition of businesses, acquisition-related items,
substantial reorganisation costs, substantial asset write-downs and
one-off pension credits or costs (see Note 10 for
reconciliations).
Revenue
Group revenue increased by 2.5% to GBP2,002.7 million (2019/20:
GBP1,953.8 million). Adjusting for the year-on-year impact of
acquisitions (1.5%), fewer trading days and foreign exchange
movements, like-for-like revenue growth was 1.4%. The first half
was significantly impacted by the COVID-19 pandemic, with
like-for-like revenue falling by 7.3%. Trading momentum improved
going into the second half as restrictions eased, delivering 10.2%
like-for-like revenue growth, helped by weaker comparatives over
the last two weeks of the year. Industrial production data
indicates we gained market share as we widened our customer base.
RS PRO, our main own-brand range, which accounts for 14% of Group
revenue, continued to outperform the Group with like-for-like
revenue growth of 9.7%. Digital, which accounts for 63% of Group
revenue, recorded like-for-like revenue growth of 0.9%, slightly
behind the overall Group due to lower eProcurement revenue from
some larger corporate customers. Web sales grew by 2.4%. OKdo,
which represents 5% of Group revenue, saw like-for-like revenue
growth of 5.2%.
Gross margin
Group gross margin decreased by 1.0 percentage points to 42.7%
(2019/20: 43.7%). Excluding a negative impact of 0.1 percentage
points from acquisitions and a 0.2 percentage points favourable
impact from foreign exchange, the like-for-like decline was 1.1
percentage points. This includes a 0.6 percentage points impact
from inventory provisions relating to the decline in the price of
certain PPE products bought at the start of the pandemic. Higher
inbound freight costs and an adverse geographic and product mix
were offset partially by a higher contribution from our own-brand
RS PRO products and our continued focus on improving our product
margin.
Operating costs
Total operating costs, which include regional costs and central
costs, increased by 6.1%. Excluding substantial reorganisation
costs, amortisation of acquired intangibles, acquisition-related
items and 2019/20's substantial asset write-downs, total adjusted
operating costs increased by 5.3%, 4.1% on a like-for-like basis,
to GBP667.7 million (2019/20: GBP634.0 million).
Costs relating to COVID-19 were c. GBP17 million, significantly
above the GBP1 million COVID-19 related costs in 2019/20. These
costs included an additional GBP12 million of outbound freight,
GBP3 million labour operating costs and GBP2 million technology and
overhead costs. Although we have taken actions to mitigate these
where possible and have seen some improvements in the fourth
quarter, freight rates remain high and some costs will continue
into 2021/22.
Brexit added about c. GBP2 million of costs in 2020/21 as we
incurred increased brokerage and air freight costs, the latter as
we tried to minimise the impact on our customer service from the
disruption at the border. Some of these costs will continue into
2021/22 but will reduce as the new DC in Bad Hersfeld, Germany,
comes onstream.
The post-acquisition adjusted operating costs incurred by the
acquisitions were GBP8.2 million. Stripping out these costs and
those relating to COVID-19 and Brexit, leaves a remaining increase
of about 1% in adjusted operating costs year on year. This increase
was due to higher digital advertising spend to deliver revenue
improvements with a better return, depreciation starting to
increase following the completion of the expansion of our DC in
Fort Worth, US, and higher costs for performance-related incentives
and share-based payments due to our resilient performance.
Our focus remains on working to simplify our organisation and
drive a lean and scalable model through our RISE programme. We have
sought to streamline and flatten our operating model to serve
customers and suppliers better, delivering GBP7.0 million of
savings in 2020/21.
Adjusted operating costs as a percentage of revenue increased to
33.3% (2019/20: 32.4%). Adjusted operating profit conversion ratio
fell by 3.8 percentage points to 22.0% (2019/20: 25.8%) as a result
of both the lower gross margin and higher operating costs.
Items excluded from adjusted profit
To improve the comparability of information between reporting
periods and between businesses with similar assets that were
internally generated, we exclude certain items from adjusted profit
measures. The items excluded from 2020/21 are described below. In
2019/20 we also excluded substantial asset write-downs of GBP7.3
million related to British Steel Limited's receivables. See Note 10
for definitions and reconciliations of adjusted measures.
Substantial reorganisation costs
The Group incurred substantial reorganisation costs of GBP11.2
million during the year, primarily labour-related restructuring
costs to implement RISE. This cost is less than the cost booked in
the first half of GBP16.0 million due to stopping some plans due to
Brexit, more people with lower pay and less service than expected
leaving and redeploying a number of people from redundant roles
into vacant roles. The benefits were GBP7 million in 2020/21, with
a further GBP15 million expected in 2021/22 and another GBP3
million in 2022/23. We expect the total implementation cost to be
around GBP16 million.
Amortisation of acquired intangibles
Amortisation of acquired intangibles was GBP7.0 million
(2019/20: GBP5.4 million) and relates to the intangibles assets
arising from acquisitions.
Acquisition-related items
Acquisition-related items of GBP2.9 million relate to
transaction costs directly attributable to the acquisition of
businesses.
Operating profit
Operating profit was down 18.6% to GBP167.2 million (2019/20:
GBP205.3 million). Adjusted operating profit saw a decline of 14.7%
to GBP188.3 million. Excluding acquisitions and the positive
benefits of currency movements, adjusted operating profit saw a
like-for-like decline of 16.2%. Adjusted operating profit margin
fell by 1.9 percentage points, 2.0 percentage points on a
like-for-like basis, to 9.4% (2019/20: 11.3%).
Regional performance
The strength of our proposition was demonstrated by the
resilience of the revenue performance across all regions during
2020/21 despite the challenges that COVID-19 and Brexit presented.
We responded early and flexibly to the pandemic and were able to
adapt our working practices and business model quickly. Our teams
within our DCs operated with elevated controls and discipline,
safely ensuring our DCs remained open and our supply chains
operated effectively. Meanwhile, our technology capabilities meant
those people that could work from home had the right tools and
technology to continue collaborating virtually. It is a testament
to the strength of our people that product, geographic and vertical
teams work so successfully together.
We continued to grow ahead of the industrials market regionally,
as we grew market share, with particularly strong performance in
Americas, UK, France and smaller markets in Asia Pacific and EMEA.
All regions were able to react quickly to support changing customer
needs and priorities, deepening our relationship as a trusted
partner. The security of our strong product availability, as well
as our position as an omni-channel provider of product and service
solutions, has driven strong growth in our customer numbers across
2020/21.
We have increased collaboration across the Group to drive best
practice within our regions. This allows us to leverage resources
such as sales tools, supplier engagement, product and service
solutions and marketing materials across the Group to improve
service, accelerate performance, reduce duplication and increase
efficiency. Our regional heads adapt global expertise and best
practice to suit local needs. The investments we continually make
into areas such as product and service solutions, digital,
inventory and our DC infrastructure enabled us to successfully
navigate the COVID-19 challenges. The RISE programme streamlines
the operational structure of our business further, speeding up
management decisions and operational efficiencies in pursuit of our
Destination 2025 strategic ambitions. We continue to automate,
consolidate and simplify how we do business to improve operating
leverage further as we accelerate our market share growth and take
advantage of strategic opportunities.
Our product and service solutions offer provides a real
differentiation to our peers, driving stronger client
relationships. IESA won an increased number of new contracts over
the past year and, with the acquisition of Synovos based in
Americas, offers a global integrated supply solution to service our
customers' procurement, inventory and maintenance needs. The
acquisitions of Needlers and Liscombe expanded our product and
service solutions into PPE, safety and hygiene. DesignSpark, our
free online engineering community, grew members by 14% to over one
million.
Customer experience remains a core focus for the business. Our
Group rolling 12-month Net Promoter Score (NPS), a measure of
customer satisfaction, was 54.4 for 2020/21, down 2.3% over the
year (2019/20: 55.7). While we worked closely with our suppliers to
minimise service disruption from global supply chain constraints,
we were not able to fully mitigate the impact of product shortages
and longer lead times from the pandemic, the impact from Brexit and
customs delays in EMEA and extreme weather in Texas, US. Our teams
are working closely with suppliers and customers to address these
issues and this is a key metric within our performance targets. Our
online satisfaction score, CSAT, was in line with prior year at 71
(2019/20: 71).
EMEA
EMEA accounts for 64% of Group revenue and is managed across the
key markets of: UK and Ireland; France; Italy; Iberia; Germany,
Austria and Switzerland; and rest of EMEA which includes Benelux,
Eastern Europe, Scandinavia, South Africa and our export business
(covering 32 international distribution partners servicing 82
countries). RS, RS PRO, IESA, Needlers and Liscombe are our key
trading brands in EMEA. A broad range of products, high inventory
availability and specialist expert service are key priorities for
our customers. We differentiate our offering from our competition
by providing a best-in-class online experience, supported by a
knowledgeable salesforce, technical expertise, 24/7 customer
support and product and service solutions. Delivering on these
drives stronger customer relationships, higher average order values
and operational leverage.
Like-for-like
2020/21 2019/20 Change (1) change
------------------------ ----------- ----------- --------- -------------
Revenue GBP1,277.4m GBP1,239.8m 3.0% 1.0%
Operating profit(2) GBP172.6m GBP197.0m (12.4)% (14.5)%
Operating profit margin 13.5% 15.9% (2.4) pts (2.4) pts
1. Like-for-like adjusted for currency and to exclude the impact
of acquisitions; revenue also adjusted for trading days.
2. See Note 2 on page 21 for reconciliation to Group operating profit.
-- We saw a resilient performance across EMEA during a difficult
year with many challenges. Industrial production data shows that we
gained share in our core markets during the period as, especially
with the uncertainty presented by COVID-19, the security of our
offer, in terms of product availability and financial strength,
resonated with customers. We have provided ongoing service to our
customers and limited as much of the disruption from the pandemic
and Brexit that we can.
-- We prepared well for Brexit, testing our capabilities, adding
additional supply chain and technology resource, working closely
with our suppliers and bringing forward our inventory requirements
so we were well stocked prior to 31 December 2020. However,
increased and varied customs controls, greater paperwork and
transport operators stuck at borders were all issues out of our
control, leading to a slower service into Europe than we target. We
are mitigating as much of this as we can with increased air
freight, rerouting of transport, changes to our ordering patterns
and greater local sourcing.
-- The extension of our German DC is on track to be completed by
early autumn of 2021. This will allow us to broaden our product
range, offer service solutions and increase automation to improve
sustainability and efficiency. Additionally, it provides the Group
with a more substantial distribution platform for Europe post
Brexit.
-- Overall, EMEA revenue grew 3.0%, 1.0% on a like-for-like
basis, to GBP1,277.4 million (2019/20: GBP1,239.8 million). Revenue
fell 8.0% on a like-for-like basis in the first half due to the
pandemic, but we saw an improvement in the second half with growth
of 9.6% as conditions improved with COVID-19 restrictions easing
somewhat.
-- Digital, accounting for 73% of the region's revenue,
outperformed with 2.0% like-for-like revenue growth as greater
focus was placed on driving organic growth through search engine
optimisation (SEO) marketing, improving content and introducing a
mobile-responsive website. We saw lower contribution from
eProcurement business due to smaller participation from larger
customers.
-- RS PRO, which accounts for 19% of the region's revenue,
strongly outperformed with 9.5% like-for-like revenue growth due to
new product launches targeted to customer needs, more
product-specific marketing campaigns increasing brand equity and
sales incentives.
-- IESA has a large proportion of customers within the
automotive and aerospace sectors which suffered significant trading
pressure from COVID-19 affecting IESA's revenue. Costs were managed
accordingly, although we invested in developing capabilities in new
territories as a result of several international contract wins. We
have a strong pipeline of new business wins which are being rolled
out and implemented as local lockdowns ease.
-- The UK was most impacted by government-imposed lockdown
restrictions in the first quarter but its diverse customer base
meant it was relatively resilient and saw an improvement in
momentum across the year as industries returned to work.
-- We saw a quicker recovery in performance in France, Iberia
and Italy, aided by our ongoing investment in talent, more focused
salesforces, value-led selling and improved sales effectiveness.
This has led to a growth in RS PRO participation and gross margin
enhancement in those markets.
-- Our German business is heavily focused on original equipment
manufacturer (OEM), automotive and electronic subcontractor
segments, industries that were hugely impacted by reduced capital
budgets this year. We have a new country head and a refocused
salesforce, with signs of improvement seen in the fourth
quarter.
-- EMEA saw gross margin decline year on year largely relating
to inventory provisions on certain PPE products which were bought
at the start of the pandemic at inflated prices. Excluding the PPE
impact, the gross margin was more robust as our continued focus on
improving the product margin meant we were able to take actions to
mitigate the impact of higher inbound freight costs due to both
COVID-19 and Brexit.
-- Operating profit decreased 12.4%, down 14.5% on a
like-for-like basis, to GBP172.6 million (2019/20: GBP197.0
million).
-- Operating profit margin declined 2.4 percentage points to
13.5% (2019/20: 15.9%), from a lower gross margin and GBP13 million
of extra costs relating to COVID-19 and Brexit from higher outbound
freight costs and a greater cost to serve.
-- EMEA's rolling 12-month NPS was 55.5 (2019/20: 56.6).
Although our teams worked hard to mitigate any delays from COVID-19
and Brexit, there were unavoidable impacts on delivery lead times
and inventory availability.
-- The acquisitions of Needlers and Liscombe expand our products
and solutions in the safety, hygiene and PPE product category.
Integration into the Group is going well and trading is in line
with expectations. Revenue and operating profit contribution since
acquisition were GBP15.9 million and GBP1.6 million
respectively.
Americas
Americas accounts for 26% of Group revenue, with Allied, Synovos
and RS PRO our trading brands. We have operations in the US,
together with smaller operations in Canada, Mexico and Chile.
Americas has seen a significant amount of transformation over the
last two years, with the majority of the leadership team changing,
including the President and CFO, and more than doubling the
capacity of the DC to widen our product offering further into the
maintenance, repair and operations (MRO) market. The acquisition of
Synovos provides a significant opportunity to deliver
revenue-generating opportunities from cross-selling Synovos and
Allied products and expanding our RS PRO participation. We have
also implemented a field sales transformation programme, utilised
shared expertise across the Group and made a step change investment
in digital which is driving greater customer engagement and
marketing returns.
Like-for-like
2020/21 2019/20 Change (1) change
------------------------ --------- --------- --------- -------------
Revenue GBP517.0m GBP515.7m 0.3% 1.4%
Operating profit(2) GBP51.9m GBP57.8m (10.2)% (8.4)%
Operating profit margin 10.0% 11.2% (1.2) pts (1.0) pts
1. Like-for-like adjusted for currency and to exclude the impact
of acquisitions; revenue also adjusted for trading days.
2. See Note 2 on page 21 for reconciliation to Group operating profit.
-- Americas delivered a strong result with improving momentum
throughout the year, despite the severe weather in February 2021
significantly disrupting our DC. We continued to invest in our
salesforce and management and our teams are now better aligned to
revenue and margin growth as they form part of their incentive
plans. Field teams are now focused on customer acquisition and
retention as well as expanding our product proposition and RS PRO
participation, with a central customer service team providing
specialist support.
-- Americas revenue grew 0.3%, 1.4% on a like-for-like basis, to
GBP517.0 million (2019/20: GBP515.7 million). The impact of
COVID-19 led to like-for-like revenue falling 7.8% in the first
half before improving to deliver strong growth in the second half
of 11.1%. Entertainment as well as oil and gas remained
significantly down across the year, compensated by growth in
industries less impacted by COVID-19.
-- In February extreme cold weather conditions in Texas, US, led
to state-wide power grid failures. Our DC, based in Fort Worth, US,
was affected temporarily but we had the site back up and running
within a few days.
-- Digital revenue accounted for 39% of the region's revenue, growing 0.2% like-for-like and underperforming Americas' overall growth due to a smaller contribution from eProcurement orders from corporate clients heavily affected by the pandemic. However, pure web revenue participation was broadly flat, driven by stronger growth in the second half which benefited from investment in our digital platform to improve site speed and search engine optimisation.
-- RS PRO accounts for under 1% of the region's revenue but has
grown significantly and is expected to be a key beneficiary of the
extended DC, new sales incentive programme and the acquisition of
Synovos. This will drive revenue and gross margin enhancement.
-- Gross margin grew with higher inbound freight costs offset by
continued focus on improving our product margin through reducing
the level of sales discounting and price optimisation.
-- Operating profit declined 10.2%, down 8.4% on a like-for-like
basis, to GBP51.9 million (2019/20: GBP57.8 million) driven by
higher costs predominantly in the supply chain and a higher level
of depreciation reflecting the DC capital investment.
-- Operating profit margin declined 1.2 percentage points, down
1.0 percentage points on a like-for-like basis, to 10.0% (2019/20:
11.2%).
-- Americas' NPS score was strong across the year as it
continued to focus on driving improvements in both offline and
online customer experience. The rolling 12-month NPS remained the
highest of all the regions at 71.9 although longer delivery lead
times due to February's extreme weather conditions meant it was
down 0.4% year on year (2019/20: 72.2).
-- Synovos contributed GBP13.0 million to revenue and GBP0.5
million to operating profit since its acquisition in January 2021.
The integration of Synovos into the Group is going well and trading
is in line with expectations. IESA and Synovos present a
transatlantic integrated supply solution offer and are working
together on new business opportunities. We see further
revenue-generating synergies from an enhanced Americas customer
proposition of RS PRO, Allied and Synovos.
Asia Pacific
Asia Pacific accounts for 10% of Group revenue and consists of
Australia and New Zealand (ANZ), Greater China, Japan and South
East Asia. RS and RS PRO are our main trading brands in Asia
Pacific. Our broadening product offer, strong technical expertise,
omni-channel service and a growing range of service solutions
underpin our market share growth. This allows us to become
increasingly a one-stop-shop partner of choice for our
customers.
Like-for-like
2020/21 2019/20 Change (1) change
------------------------ --------- --------- --------- -------------
Revenue GBP208.3m GBP198.3m 5.0% 4.6%
Operating profit(2) GBP1.4m GBP3.7m (62.2)% (64.1)%
Operating profit margin 0.7% 1.9% (1.2) pts (1.3) pts
1. Like-for-like adjusted for currency; revenue also adjusted for trading days.
2. See Note 2 on page 21 for reconciliation to Group operating profit.
-- Asia Pacific revenue increased 5.0%, 4.6% on a like-for-like
basis to GBP208.3 million (2019/20: GBP198.3 million) with our
performance in the first quarter hit by COVID-19. The team quickly
adapted to the adverse environment and moved into growth as we
entered the second half with double-digit growth by the third
quarter which continued into the fourth quarter.
-- Performance has been mixed and varies by country depending on
the various COVID-19 related lockdown measures. Industry data
suggests strong market share gains in our industrial markets,
particularly ANZ, Greater China and most of South East Asia.
Greater China, excluding OKdo revenue, has seen growth every month,
even during the height of COVID-19, as it benefited from last
year's leadership change and a refocused salesforce. Meanwhile,
Japan struggled due to its electronics exposure and low brand
recognition, although a stronger performance of the electronics
market at the end of the year moved the country into positive
growth by the fourth quarter. South East Asia's performance has
fluctuated throughout the year reflecting various enforced
lockdowns in the sub-region but returned to mid-single digit growth
in the second half.
-- Digital, which accounts for 57% of the region's revenue, grew
4.4% like-for-like, mainly due to better performance within web and
purchasing manager functions. We have been adjusting our model to
focus on improving the efficiency of marketing spend which is
driving more traffic from similar costs.
-- RS PRO, which accounts for 13% of the region's revenue, saw
strong like-for-like revenue growth of 9.4%, outperforming the
region. This increase was driven by work to grow the brand's
penetration through distribution agreements with local resellers in
ANZ and strong and successful marketing campaigns (especially in
Thailand and Japan) driving higher margin product which saw an
overall increase in the RS PRO margin itself.
-- Gross margin declined year on year due to product and
geographic mix, with slower growth from higher gross margin
products such as interconnect and electromechanical, and increased
sales of lower gross margin products such as OKdo and PPE. Inbound
freight costs, additional customs and duties and negative exchange
rate movements also adversely impacted gross margin.
-- Operating profit declined 62.2%, down 64.1% on a
like-for-like basis, to GBP1.4 million (2019/20: GBP3.7 million),
due to higher outbound freight costs and customs duties relating to
COVID-19 on a small profit base which more than offset revenue
growth.
-- Operating profit margin declined 1.2 percentage points, down
1.3 percentage points on a like-for-like basis, to 0.7% (2019/20:
1.9%).
-- Asia Pacific's rolling 12-month NPS of 37.4 (2019/20: 38.3)
was impacted by longer supply lead times during the pandemic
lockdowns and our decision to implement delivery charges for some
small value orders which have low levels of profitability. We
remain committed to improving customer satisfaction and have
implemented a more focused salesforce across the region, especially
in Greater China.
Central costs
Central costs relate to Group head office costs and include the
Board, Group Finance and Group Professional Services and People
that cannot be attributed to region-specific activity.
Like-for-like
2021 2020 Change (1) change
-------------- ----------- ----------- ------ -------------
Central costs GBP(37.6)m GBP(37.8)m (0.5)% (0.5)%
1. Like-for-like adjusted for currency.
Central costs decreased by 0.5% to GBP37.6 million (2019/20:
GBP37.8 million) with higher performance-related incentives and
share-based payments more than offset by tighter cost control of
overheads and no recurrence of the OKdo launch costs incurred last
year.
FINANCIAL REVIEW
Net finance costs
Net finance costs increased to GBP6.8 million (2019/20: GBP5.9
million) with lower finance income on our cash and short-term
deposits as interest rates have fallen compared to last year.
Finance costs have not fallen as much as a high proportion of our
debt is at fixed interest rates and included GBP0.9 million of
costs relating to refinancing our revolving credit facility and our
COVID-19 liquidity buffer bank facility.
Profit before tax
Profit before tax was down 19.5% to GBP160.6 million (2019/20:
GBP199.6 million). Adjusted profit before tax was down 15.5% to
GBP181.7 million (2019/20: GBP215.0 million), down 17.0% on a
like-for-like basis.
Taxation
The Group's income tax charge was GBP35.1 million (2019/20:
GBP44.9 million). The adjusted income tax charge, which excludes
the impact of tax relief on items excluded from adjusted profit,
was GBP39.6 million (2019/20: GBP46.9 million), resulting in an
effective tax rate of 21.8% on adjusted profit before tax (2019/20:
21.8%). The effective tax rates for both 2020/21 and 2019/20 were
favourably impacted by c. one percentage points by one-off tax
credits which are not expected to recur. We expect the 2021/22
effective tax rate to increase due to corporate income tax rate
increases in the UK and US.
Earnings per share
Earnings per share was down 20.2% to 27.7p (2019/20: 34.7p).
Adjusting for items excluded from adjusted profit and associated
income tax effects, adjusted earnings per share of 31.3p (2019/20:
37.7p) was down 18.4% on a like-for-like basis.
Cash flow
GBPm 2020/21 2019/20
-------------------------------------------- ------- -------
Operating profit 167.2 205.3
Add back depreciation and amortisation 56.5 50.9
EBITDA 223.7 256.2
Add back impairments and (profit) / loss on
disposal of non-current assets 0.3 0.1
Movement in working capital (1.5) (51.2)
Movement in provisions 1.6 (5.3)
Other 7.0 3.4
Cash generated from operations 231.1 203.2
Net interest paid (8.3) (6.2)
Income tax paid (35.2) (49.9)
-------------------------------------------- ------- -------
Net cash from operating activities 187.6 147.1
Net capital expenditure (54.7) (74.7)
Free cash flow 132.9 72.4
Add back cash effect of adjustments(1) 12.5 8.5
Adjusted(1) free cash flow 145.4 80.9
-------------------------------------------- ------- -------
1. Adjusted excludes the impact of substantial reorganisation
and acquisition-related items cash flows.
We continued to demonstrate our strength as a robust cash
generative business despite the challenges our customers, suppliers
and teams have faced while keeping safe. During the year we took
actions to conserve cash due to the uncertainties caused by
COVID-19. As a result, cash generated from operations increased to
GBP231.1 million (2019/20: GBP203.2 million) with movements in
working capital being significantly less negative than last year
and only partially offset by lower EBITDA.
Net interest paid increased to GBP8.3 million (2019/20: GBP6.2
million) due to the higher net finance costs and the prepaid fees
for the refinancing of our revolving credit facility.
Income tax paid fell to GBP35.2 million (2019/20: GBP49.9
million) with utilisation of some overpayments from 2019/20 and
taxable profit being lower than 2019/20. In 2019/20 the changes in
timing of UK tax payments resulted in an increase in tax payments
in the first half offset by lower tax payments in the second half
partly due to the write off of the receivables from British Steel
Limited.
Net capital expenditure decreased to GBP54.7 million (2019/20:
GBP74.7 million) as we focused our investments on those key to
delivering Destination 2025, including our technology platforms
such as our new RS mobile-first responsive website and other
enhancements to our systems. Our expanded Fort Worth, US, DC was
completed in the first half and we continued to invest in expanding
our Bad Hersfeld, Germany, DC. Capital expenditure decreased to 1.7
times depreciation (2019/20: 2.6 times), moving more in line with
our typical maintenance capital expenditure levels of closer to 1.0
- 1.5 times depreciation. We anticipate capital expenditure in
2021/22 to be c. GBP65 million.
Given our focus on conserving cash, free cash flow increased to
GBP132.9 million (2019/20: GBP72.4 million) and is after an
additional GBP12.5 million deficit contribution paid into our UK
pension scheme during the year. Excluding cash outflows of GBP12.5
million (2019/20: GBP8.5 million) related to substantial
reorganisation costs and acquisition-related items, adjusted free
cash flow was GBP145.4 million (2019/20: GBP80.9 million).
Working capital
We have actively managed our working capital and, as a result,
working capital as a percentage of revenue decreased by 2.1
percentage points to 21.8% (2019/20: 23.9%).
We have had a particular focus on receivables collection, which
remains our greatest short-term liquidity sensitivity. We took
action to limit our exposure by tightening our credit policies,
including short payment terms and low credit limits for new
customers and seeking payment commitments for overdue balances
before releasing new orders to existing customers. So far, we have
seen limited adverse impact from the COVID-19 pandemic on our
receivables collection, however, we continue to monitor closely
collection metrics.
The acquisitions increased trade and other receivables by
GBP64.7 million and this, together with the significant increase in
March's revenue year on year, led to trade and other receivables
ending the year at GBP492.4 million (2019/20: GBP406.6 million).
Gross trade receivables increased to GBP435.2 million from GBP355.5
million at 31 March 2020. The great work our accounts receivables
teams have done in collecting overdue balances has meant the ageing
profile of our trade receivables has improved, with only 17%
overdue compared with 25% at 31 March 2020. Our trade receivables
impairment allowance increased to GBP7.4 million (2019/20: GBP6.9
million) as the acquisitions brought impairment allowances of
GBP0.7 million.
Gross inventories increased by GBP13.8 million to GBP460.4
million (2019/20: GBP446.6 million) with GBP10.9 million due to the
acquisitions and we also added some inventory into our newly
operational expanded DC in Fort Worth, US. Our inventory levels
were lower than we would have liked due to delays in receiving
inventory into the UK due to Brexit and the Suez Canal blockage. As
a result, annualised inventory turn was 2.7 times (2019/20: 2.6
times). Inventory provisions increased to GBP40.6 million (2019/20:
GBP27.6 million) due to the lower net realisable value of certain
personal PPE products bought at the start of the pandemic as a
result of significant falls in their selling prices.
Overall trade and other payables increased to GBP475.3 million
from GBP358.7 million at 31 March 2020 with the acquisitions
accounting for GBP67.5 million of this increase, mainly in trade
payables. Trade payables increased to GBP319.4 million (2019/20:
GBP241.1 million), while other payables have increased mainly in
accruals due to timing of invoicing for other costs and the pickup
in business during March.
Looking forward to 2021/22, we will continue to manage actively
our working capital position and remain focused on receivables
collection. We continue to manage actively our inventory position
to reduce excess wherever possible, while at the same time
investing in the right inventory to ensure we are well positioned
to maintain service levels and focus on opportunities as our
markets recover and we grow. We continue to pay our suppliers to
terms and have worked with some of our larger suppliers to improve
terms where possible.
Return on capital employed (ROCE)
We have updated the calculation of ROCE to be adjusted operating
profit for the 12 months ended 31 March 2021 expressed as a
percentage of the monthly average capital employed (net assets
excluding net debt and retirement benefit obligations) rather than
closing capital employed to prevent distortion due to the fact our
acquisitions were all completed towards the end of the year. ROCE
remained strong at 19.4%, although down 4.6 percentage points year
on year (2019/20 updated: 24.0%). Of this decline, 0.4 percentage
points was due to the acquisitions, 3.5 percentage points due to
lower adjusted operating profit and 0.7 percentage points due to
higher average capital employed year on year.
Net debt
During the last year of uncertainty, our cash generative
business model has enabled us to maintain a strong financial
position.
At 31 March 2021, net debt was GBP122.0 million, GBP67.8 million
lower than at 31 March 2020 when it was GBP189.8 million. Net debt
comprised gross borrowings of GBP321.0 million (2019/20: GBP391.6
million), including lease liabilities of GBP61.5 million (2019/20:
GBP56.3 million) offset by cash and short-term deposits of GBP197.9
million (2019/20: GBP200.8 million) and interest rate swaps with a
fair value of GBP1.1 million (2019/20: GBP1.0 million).
In December 2020, we successfully completed a GBP180 million
equity placing of ordinary shares to fund acquisitions and retain
financial flexibility. We were pleased with the strong support we
received from new and existing shareholders, including a number of
private shareholders via the retail offer. A total of 21,518,181
new ordinary shares were placed with institutional investors, while
private investors subscribed for a total of 300,000 new ordinary
shares. Together, the placing and retail offer comprised 21,818,181
new ordinary shares, approximately 5% of the existing issued
ordinary share capital, prior to the placing.
The equity placing raised GBP176.1 million, net of costs, and
free cash flow was GBP132.9 million, while acquisitions increased
net debt by GBP159.3 million and dividend payments were GBP71.2
million.
In November 2020, we completed the refinancing of our bank
facilities with a group of eight existing and new relationship
banks. The new increased facilities comprise a three-year revolving
credit facility of GBP300 million, with an accordion of up to a
further GBP100 million. The maturity of this facility may be
extended at the option of the Group for up to two further one-year
terms subject to individual lender approval. This refinancing
provides the Group with additional flexibility and reinforces
Electrocomponents' strong financial position.
These facilities were undrawn at 31 March 2021 and, together
with GBP147.3 million of private placement loan notes, form our
committed debt facilities of GBP447.3 million.
We cancelled our COVID-19 liquidity buffer bank facility at the
same time as we completed the refinancing of our bank facilities
and let lapse our eligibility to participate in the Bank of England
Covid Corporate Financing Facility (CCFF). Both were there for an
emergency and we did not use them.
The Group's financial metrics remain strong, with net debt to
adjusted EBITDA of 0.5x and EBITA to interest of 26.7x, leaving
significant headroom for the Group's banking covenants of net debt
to adjusted EBITDA less than 3.25 times and EBITA to interest
greater than 3 times.
We are emerging from this challenging year stronger and ready to
take advantage of, and accelerate, our growth ambitions.
Retirement benefit obligations
The Group has defined benefit pension schemes in the UK and
Europe, with the UK scheme being by far the largest. All these
schemes are closed to new entrants and in Germany and Ireland the
pension schemes are closed to accrual for future service.
Overall, the accounting deficit of the Group's defined benefit
schemes at 31 March 2021 was GBP55.7 million compared to GBP60.5
million at 30 September 2020 and GBP55.8 million at 31 March
2020.
The UK defined benefit scheme had an accounting deficit of
GBP41.2 million. At 31 March 2020, it had a small accounting
deficit of GBP2.1 million plus an additional liability of GBP41.2
million as the present value of the agreed future contributions
under the recovery plan was greater than the funded status. The
increase in the UK scheme's deficit was principally due to an
increase in liabilities caused by a decrease in the discount rate
falling by 0.3 percentage points and an increase of 0.7 percentage
points in inflation-linked assumptions, partly offset by an
increase in the value of the assets.
The triennial funding valuation of the UK scheme at 31 March
2019 showed a deficit of GBP44.7 million on a statutory technical
provisions basis. A new recovery plan was agreed with the trustee
of the UK scheme with deficit contributions paid with the aim that
the scheme is fully funded on a technical provisions basis by March
2022. These deficit contributions started in 2019/20 and consist of
an annual contribution of at least GBP10 million, increased each 1
April by the increase in the Retail Prices Index (RPI) for the year
to the preceding December, plus an additional contribution of GBP25
million. This additional contribution can be paid in instalments
and paid as and when we deem appropriate, provided the total
additional contribution has been paid no later than 31 March 2022.
Given our financial strength in 2020/21, we paid the first GBP12.5
million of this additional contribution.
Dividend
As highlighted in the Annual Report and Accounts for the year
ended 31 March 2020, the Board deferred the decision on the final
dividend for that year until the impact of COVID-19 on activity
levels and cash generation in the Group's key markets had become
clearer. We stated that the Board recognised the importance of its
progressive dividend policy to its shareholders and would therefore
review making an additional interim dividend payment related to the
year ended 31 March 2020 at the Group's half-year results in
November 2020.
In November 2020, as a result of the resilience the Group had
demonstrated, our robust trading position and strong balance sheet,
and after due care and consideration, the Board decided to pay a
final dividend for the year ended 31 March 2020 at the same level
as the March 2019 final dividend of 9.5p per share. As it was no
longer possible for this dividend to be approved by shareholders at
the Annual General Meeting, it was paid as an additional interim
dividend for the year ended 31 March 2020 in December 2020. An
interim dividend for the year ended 31 March 2021 of 6.1p per share
was paid in January 2021, equivalent to approximately 40% of the
prior year full-year dividend.
The Board proposes to increase the final dividend to 9.8p per
share. This will be paid on 23 July 2021 to shareholders on the
register on 18 June 2021. As a result, the proposed full-year
dividend for 2020/21 will be 15.9p per share (2019/20: 15.4p),
representing an increase of 3.2% over the 2019/20 full-year
dividend. Adjusted earnings dividend cover for 2020/21 was 2.0
times.
The Board intends to pursue a progressive dividend policy while
remaining committed to a healthy dividend cover over time by
driving improved results and stronger cash flow. In the normal
course, the interim dividend will be equivalent to approximately
40% of the full-year dividend of the previous year.
Foreign exchange risk
The Group does not hedge translation exposure on the income
statements of overseas subsidiaries. Based on the mix of
non-sterling denominated revenue and adjusted operating profit, a
one cent movement in the euro would impact annual adjusted profit
before tax by GBP1.5 million and a one cent movement in the US
dollar would impact annual adjusted profit before tax by GBP0.4
million.
The Group is also exposed to foreign currency transactional risk
because most operating companies have some level of payables in
currencies other than their functional currency. Some operating
companies also have receivables in currencies other than their
functional currency. Group Treasury maintains three to seven
months' hedging against freely tradable currencies to smooth the
impact of fluctuations in currency. The Group's largest exposures
related to euros and US dollars.
RISKS AND UNCERTAINTIES
The Board has overall accountability for the Group's risk
management, which is managed by the Senior Management Team (SMT)
and co-ordinated by the Group's risk team. The Group's risk
management process identifies, evaluates and manages the Group's
principal risks and uncertainties. These are reviewed by both the
SMT Risk Committee, comprising the Group's senior managers, and the
Board, which regularly discusses the principal risks and receives
risk reports covering risk mitigations and controls.
The Group has a defined risk appetite, which has been adopted by
the Board, and is considered across three risk categories:
strategic, regulatory / compliance and operational. These three
categories use both quantitative and qualitative criteria.
Principal risks and uncertainties
The Group has identified 10 principal risks, reduced from 11
disclosed last year, with the combining of two operational risks
related to failure in the business's critical infrastructure (key
locations and technology infrastructure) together with other minor
changes.
Strategic risk category
1. Prolonged effects of the ongoing COVID-19 pandemic
2. Prolonged effects of the UK's exit from the EU
3. Failure to respond to strategic market shifts e.g. changes in
customer demands / competitor activity and related stakeholder
requirements
4. The Group's revenue and profit growth initiative are not successfully implemented
Regulatory / compliance risk category
5. Failure to comply with international and local legal / regulatory requirements
Operational risk category
6. Failure in the business's critical infrastructure
7. Cyber security breach / information loss
8. UK defined benefit pension scheme cash requirements are in excess of the cash available
9. People resources unable to support the existing and future growth of the business
10. Impact on the business if the macroeconomic environment
deteriorates
Two of the Group's principal risks require further explanation:
the more prolonged effects of the ongoing COVID-19 pandemic and the
UK's exit from the EU.
COVID-19 pandemic
The Group is maintaining its operations and at present all our
DCs around the world are open and operating effectively. Our online
business model continues to differentiate us and is helping us to
continue to serve our customers. The pandemic continues to affect
some of our other, already identified, principal risks.
Uncertainties related to this risk
Since the pandemic has its own specific uncertainties we
continue to disclose it as a separate principal risk. These
include:
-- Changes in demand across our diverse customer base and
possible changed behaviours following the pandemic.
-- Potential impacts on cash flow, specifically the
recoverability of trade receivables which is a key liquidity
sensitivity.
-- Changes to sourcing inventory as suppliers' production
capabilities are affected by the pandemic and demand levels change
in any recovery phase.
-- Significant transport constraints and increased costs and how
quickly these will recover following the pandemic.
-- Uncertainty about the duration and later frequency of future disease control activities.
-- The difficulties managing the business's return to partial
office-based working as respective governments' restrictions on
people movement are eased.
-- When the pandemic passes, the speed and extent to which
industries can recover from the effects is unclear.
-- The longer-term effects of the pandemic on business activity,
government finances and related levels of public expenditure.
Mitigating actions
The business has several structural factors, including the
diverse nature of its customer base and strong online capabilities,
that have helped protect it from some effects of the pandemic.
These have enabled the business to continue to support customers
during the pandemic.
During the year the business took several mitigating actions,
many of which are still in place, including:
-- The majority of our office-based staff working from home and
enhanced PPE for our DC employees.
-- Appropriate cost actions taken to protect profit and focus on maintaining cash flow.
-- Improving the Group's balance sheet flexibility including
securing additional funding facilities.
-- Supporting employees' physical safety in our DCs and mental
wellbeing for those during extended periods of home working.
-- Maintained cyber monitoring and training reflecting the
changing business working environment and increased external
threats.
The effectiveness of the business's operational controls during
the COVID-19 pandemic have been reviewed by the Group's internal
audit team on a risk-based approach. These were initially focused
on COVID-19 effects whereas now these have been embedded within the
team's ongoing market and functional audits.
The UK's exit from the EU
The UK has formally left the EU and the agreed transition period
ended on 31 December 2020 and the principal risk that the Group was
working to mitigate has now crystallised. Our planning activities
leading up to this date meant that the business was largely able,
where possible, to mitigate the associated risks. Nonetheless, the
business is monitoring the risk of further unforeseen consequences
following the UK's exit from the EU. There is now a hard border
between the UK and the EU and this has led to more transactional
friction when moving goods across this border. As expected, the
business is experiencing more customs administration, tax, duty and
brokerage fees when moving products across this border. Further,
the customs clearance processes continue to evolve in some areas,
for example between Northern Ireland and Great Britain. For this
reason, we continue to track and monitor the effects of Brexit on
the operational activities of the business as a principal risk,
albeit that this risk is lower than the prior year.
Emerging risks
As part of the Board's Group risk reviews of developing risk
themes, climate change is identified as an important emerging
risk.
There are several more detailed and specific risks, and
opportunities, that the Group, as a global distributor, faces due
to climate change. These include physical risks with increased
likelihood of more extreme events such as storms, significant
rainfall episodes, droughts and heatwaves which could affect the
business's physical sites or its distribution process. Other risks
are more transition oriented, including regulatory change, often by
governments, designed to reduce greenhouse gas (GHG) emissions.
These may render certain products obsolete while increasing demand
for others. Other potential impacts include increases, for example,
in the costs of air transport of inventory to meet customer
demands. There is also reputation risk if the business is not seen
to be taking deliberate and tangible actions to reduce its GHG
emissions.
GROUP INCOME STATEMENT
For the year ended 31 March 2021
2021 2020
Notes GBPm GBPm
---------------------------------------------- ----- --------- ---------
Revenue 2 2,002.7 1,953.8
Cost of sales (1,146.7) (1,099.1)
---------------------------------------------- ----- --------- ---------
Gross profit 856.0 854.7
Distribution and marketing expenses (630.1) (596.2)
Administrative expenses (58.7) (53.2)
Operating profit 2 167.2 205.3
Finance income 1.8 3.3
Finance costs (8.6) (9.2)
Share of profit of joint venture 0.2 0.2
Profit before tax 2 160.6 199.6
Income tax expense (35.1) (44.9)
---------------------------------------------- ----- --------- ---------
Profit for the year attributable to owners of
the Company 125.5 154.7
============================================== ===== ========= =========
Earnings per share - Basic 4 27.7p 34.7p
Earnings per share - Diluted 4 27.5p 34.6p
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2021
2021 2020
GBPm GBPm
----------------------------------------------------- ------ -----
Profit for the year 125.5 154.7
------------------------------------------------------ ------ -----
Other comprehensive income
Items that will not be reclassified subsequently
to the income statement
Remeasurement of retirement benefit obligations (22.5) 21.1
Income tax on items that will not be reclassified
to the income statement 4.3 (1.9)
Items that may be reclassified subsequently to
the income statement
Foreign exchange translation differences of joint
venture (0.1) (0.1)
Foreign exchange translation differences (42.4) 20.5
Movement in cash flow hedges (4.5) 4.3
Income tax on items that may be reclassified
to the income statement 1.0 (0.5)
------------------------------------------------------ ------ -----
Other comprehensive (expense) / income for the
year (64.2) 43.4
------------------------------------------------------ ------ -----
Total comprehensive income for the year attributable
to owners of the Company 61.3 198.1
====================================================== ====== =====
GROUP BALANCE SHEET
As at 31 March 2021
2021 2020
Notes GBPm GBPm
------------------------------------------------ ----- ------- -------
Non-current assets
Intangible assets 468.9 329.6
Property, plant and equipment 170.2 167.5
Right-of-use assets 58.6 54.4
Investment in joint venture 1.1 1.0
Other receivables 2.9 0.9
Interest rate swaps 8 1.1 1.0
Retirement benefit net assets 9 0.8 1.9
Deferred tax assets 9.9 17.1
------------------------------------------------ ----- ------- -------
Total non-current assets 713.5 573.4
------------------------------------------------ ----- ------- -------
Current assets
Inventories 6 419.8 419.0
Trade and other receivables 7 492.4 406.6
Cash and cash equivalents - cash and short-term
deposits 8 197.9 200.8
Other derivative assets 2.2 4.3
Current income tax receivables 21.3 13.6
------------------------------------------------ ----- ------- -------
Total current assets 1,133.6 1,044.3
------------------------------------------------ ----- ------- -------
Total assets 1,847.1 1,617.7
------------------------------------------------ ----- ------- -------
Current liabilities
Trade and other payables (475.3) (358.7)
Cash and cash equivalents - bank overdrafts 8 (111.5) (166.0)
Other borrowings 8 (0.7) (7.5)
Lease liabilities 8 (17.4) (15.0)
Other derivative liabilities (2.0) (2.4)
Provisions (4.9) (2.6)
Current income tax liabilities (19.2) (18.2)
------------------------------------------------ ----- ------- -------
Total current liabilities (631.0) (570.4)
------------------------------------------------ ----- ------- -------
Non-current liabilities
Other payables (6.8) (5.8)
Retirement benefit obligations 9 (56.5) (57.7)
Borrowings 8 (147.3) (161.8)
Lease liabilities 8 (44.1) (41.3)
Provisions (1.6) (1.5)
Deferred tax liabilities (60.4) (59.3)
------------------------------------------------ ----- ------- -------
Total non-current liabilities (316.7) (327.4)
------------------------------------------------ ----- ------- -------
Total liabilities (947.7) (897.8)
------------------------------------------------ ----- ------- -------
Net assets 899.4 719.9
================================================ ===== ======= =======
Equity
Share capital 47.0 44.6
Share premium account 228.5 51.4
Hedging reserve (1.4) -
Own shares held by Employee Benefit Trust (EBT) (1.5) (0.7)
Cumulative translation reserve 39.0 81.5
Retained earnings 587.8 543.1
Equity attributable to owners of the Company 899.4 719.9
================================================ ===== ======= =======
GROUP CASH FLOW STATEMENT
For the year ended 31 March 2021
2021 2020
Notes GBPm GBPm
------------------------------------------------------- ----- ------- -------
Cash flows from operating activities
Profit before tax 160.6 199.6
Depreciation and amortisation 56.5 50.9
Loss on disposal of non-current assets 0.3 0.1
Equity-settled share-based payments 7.0 3.4
Net finance costs 6.8 5.9
Share of profit of and dividends received from
joint venture (0.2) (0.2)
Increase in inventories (4.4) (25.2)
(Increase) / decrease in trade and other receivables (32.6) 10.0
Increase / (decrease) in trade and other payables 35.5 (36.0)
Increase / (decrease) in provisions 1.6 (5.3)
------------------------------------------------------- ----- ------- -------
Cash generated from operations 231.1 203.2
Interest received 1.8 3.4
Interest paid (10.1) (9.6)
Income tax paid (35.2) (49.9)
------------------------------------------------------- ----- ------- -------
Net cash from operating activities 187.6 147.1
------------------------------------------------------- ----- ------- -------
Cash flows from investing activities
Acquisition of businesses 11 (157.5) (0.2)
Cash and cash equivalents acquired with businesses 11 22.0 -
Purchase of intangible assets, property, plant
and equipment (54.7) (74.7)
Net cash used in investing activities (190.2) (74.9)
Cash flows from financing activities
Proceeds from the issue of share capital 179.5 2.0
Purchase of own shares by EBT (1.6) (0.9)
Loans drawn down 8 - 162.7
Loans repaid 8 (24.3) (178.6)
Settlement of interest rate swap - 2.6
Payment of lease liabilities 8 (16.4) (14.8)
Dividends paid 5 (71.2) (68.5)
------------------------------------------------------- ----- ------- -------
Net cash generated from / (used in) financing
activities 66.0 (95.5)
------------------------------------------------------- ----- ------- -------
Net increase / (decrease) in cash and cash equivalents 63.4 (23.3)
Cash and cash equivalents at the beginning of
the year 34.8 51.1
Effects of exchange rate changes (11.8) 7.0
------------------------------------------------------- ----- ------- -------
Cash and cash equivalents at the end of the year 8 86.4 34.8
======================================================= ===== ======= =======
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2021
Share Own shares Cumulative
Share premium Hedging held by translation Retained
capital account reserve EBT reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- -------- -------- -------- ---------- ------------ --------- ------
At 1 April 2019 44.4 49.6 0.2 (1.2) 61.1 434.8 588.9
-------------------------------- -------- -------- -------- ---------- ------------ --------- ------
Profit for the year - - - - - 154.7 154.7
Remeasurement of retirement
benefit obligations - - - - - 21.1 21.1
Foreign exchange translation
differences - - - - 22.6 - 22.6
Fair value loss on net
investment hedges - - - - (2.2) - (2.2)
Net gain on cash flow
hedges - - 4.3 - - - 4.3
Taxation on other comprehensive
income - - (0.5) - - (1.9) (2.4)
-------------------------------- -------- -------- -------- ---------- ------------ --------- ------
Total comprehensive
income - - 3.8 - 20.4 173.9 198.1
Cash flow hedging gains
transferred to inventories - - (5.0) - - - (5.0)
Tax on cash flow hedging
gains transferred to
inventories - - 1.0 - - - 1.0
Dividends (Note 5) - - - - - (68.5) (68.5)
Equity-settled share-based
payments - - - - - 3.4 3.4
Settlement of share
awards 0.2 1.8 - 1.4 - (1.4) 2.0
Purchase of own shares
by EBT - - - (0.9) - - (0.9)
Tax on equity-settled
share-based payments - - - - - 0.9 0.9
-------------------------------- -------- -------- -------- ---------- ------------ --------- ------
At 31 March 2020 44.6 51.4 - (0.7) 81.5 543.1 719.9
Profit for the year - - - - - 125.5 125.5
Remeasurement of retirement
benefit obligations - - - - - (22.5) (22.5)
Foreign exchange translation
differences - - - - (44.7) - (44.7)
Fair value gain on net
investment hedges - - - - 2.2 - 2.2
Net loss on cash flow
hedges - - (4.5) - - - (4.5)
Tax on other comprehensive
income - - 1.0 - - 4.3 5.3
Total comprehensive
(expense) / income - - (3.5) - (42.5) 107.3 61.3
Cash flow hedging losses
transferred to inventories - - 2.7 - - - 2.7
Tax on cash flow hedging
losses transferred to
inventories - - (0.6) - - - (0.6)
Dividends (Note 5) - - - - - (71.2) (71.2)
Equity-settled share-based
payments - - - - - 7.0 7.0
Share placing, net of
transaction costs 2.2 173.9 - - - - 176.1
Settlement of share
awards 0.2 3.2 - 0.8 - (0.8) 3.4
Purchase of own shares
by EBT - - - (1.6) - - (1.6)
Tax on equity-settled
share-based payments - - - - - 2.4 2.4
-------------------------------- -------- -------- -------- ---------- ------------ --------- ------
At 31 March 2021 47.0 228.5 (1.4) (1.5) 39.0 587.8 899.4
================================ ======== ======== ======== ========== ============ ========= ======
NOTES TO THE CONDENSED GROUP ACCOUNTS
1. Basis of preparation
The financial information contained in this release does not
constitute the Company's statutory accounts for the years ended 31
March 2021 or 31 March 2020 but is derived from those accounts. The
accounts are prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006 and prepared in accordance with International Financial
Reporting Standards (IFRS) and interpretations issued by the IFRS
Interpretations Committee (IFRIC) adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union. Except as
described below, they have been prepared on the basis of the
accounting policies set out in the Annual Report and Accounts for
the year ended 31 March 2020. Statutory accounts for the year ended
31 March 2020 have been delivered to the Registrar of Companies and
those for the year ended 31 March 2021 will be delivered following
the Company's Annual General Meeting. The auditors have reported on
both of these sets of accounts. Their reports were unqualified, did
not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and
did not contain any statement under sections 498(2) or 498(3) of
the Companies Act 2006. The accounts for the year ended 31 March
2021 were approved by the Board of Directors on 24 May 2021.
Standards and interpretations adopted in the year
The Group adopted the following standards, amendments to
standards and interpretations on 1 April 2020.
Amendment to IFRS 16 'Covid-19-Related Rent Concessions'
With effect from 1 April 2020, the Group has early adopted
Amendment to IFRS 16 'Covid-19-Related Rent Concessions'. This
amendment allows lessees to elect not to treat a rent concession
occurring as a direct consequence of the COVID-19 pandemic that
reduces only payments before 30 June 2021 as a lease modification
and effectively credit any change in lease payments to operating
profit. There was no material impact on the reported results or
financial position of the Group.
Other
Conceptual Framework for Financial Reporting, Amendments to
References to the Conceptual Framework in IFRS Standards,
Amendments to IFRS 3 'Definition of a Business' and Amendments to
IAS 1 and IAS 8 'Definition of Material' were adopted in the year.
There was no material impact on the reported results or financial
position of the Group.
2. Segmental reporting
The Group's operating segments comprise three regions: EMEA,
Americas and Asia Pacific.
EMEA Americas Asia Pacific Group
GBPm GBPm GBPm GBPm
--------------------------------------- ------- -------- ------------ -------
Year ended 31 March 2021
Revenue from external customers 1,277.4 517.0 208.3 2,002.7
--------------------------------------- ------- -------- ------------ -------
Segmental operating profit 172.6 51.9 1.4 225.9
Central costs (37.6)
--------------------------------------- ------- -------- ------------ -------
Adjusted operating profit 188.3
Amortisation of acquired intangibles (7.0)
Acquisition-related items (Note 10) (2.9)
Substantial reorganisation costs (Note
3) (11.2)
--------------------------------------- ------- -------- ------------ -------
Operating profit 167.2
Net finance costs (6.8)
Share of profit of joint venture 0.2
--------------------------------------- ------- -------- ------------ -------
Profit before tax 160.6
======================================= ======= ======== ============ =======
Year ended 31 March 2020
Revenue from external customers 1,239.8 515.7 198.3 1,953.8
--------------------------------------- ------- -------- ------------ -------
Segmental operating profit 197.0 57.8 3.7 258.5
Central costs (37.8)
--------------------------------------- ------- -------- ------------ -------
Adjusted operating profit 220.7
Amortisation of acquired intangibles (5.4)
Substantial asset write-downs (Note
7) (7.3)
Substantial reorganisation costs (Note
3) (2.7)
--------------------------------------- ------- -------- ------------ -------
Operating profit 205.3
Net finance costs (5.9)
Share of profit of joint venture 0.2
--------------------------------------- ------- -------- ------------ -------
Profit before tax 199.6
======================================= ======= ======== ============ =======
As a result of the RISE programme the Group has streamlined its
operating model and now targets industrial customers with a wide
range of product and service solutions which mainly have similar
economic characteristics. The most significant difference in
economic characteristic is whether it is an own-brand product or
not and so, in the table below, revenue is now disaggregated by
own-brand or branded and sales channels. The Group's largest
own-brand is RS PRO and some of the Group's recent acquisitions
also sell own-brand products. GBP1,973.8 million of revenue is
recognised at a point in time (2019/20: GBP1,935.9 million) and
GBP28.9 million over time (2019/20: GBP17.9 million).
EMEA Americas Asia Pacific Group
GBPm GBPm GBPm GBPm
------------------------------------ ------- -------- ------------ -------
Year ended 31 March 2021
Own-brand / branded products
Own-brand products 248.5 3.6 27.7 279.8
Other product and service solutions 1,028.9 513.4 180.6 1,722.9
Group 1,277.4 517.0 208.3 2,002.7
------------------------------------ ------- -------- ------------ -------
Sales channel
Digital 932.3 203.2 118.6 1,254.1
Offline 345.1 313.8 89.7 748.6
------------------------------------ ------- -------- ------------ -------
Group 1,277.4 517.0 208.3 2,002.7
==================================== ======= ======== ============ =======
Year ended 31 March 2020
Own-brand / branded products
Own-brand products 220.4 3.0 25.2 248.6
Other product and service solutions 1,019.4 512.7 173.1 1,705.2
Group 1,239.8 515.7 198.3 1,953.8
------------------------------------ ------- -------- ------------ -------
Sales channel
Digital 906.5 210.4 112.8 1,229.7
Offline 333.3 305.3 85.5 724.1
------------------------------------ ------- -------- ------------ -------
Group 1,239.8 515.7 198.3 1,953.8
==================================== ======= ======== ============ =======
3. Substantial reorganisation costs
In September 2020 the Group launched RISE to enable it to move
faster to accelerate the delivery of its Destination 2025 strategy.
Some small elements, which did not require consultation with
collective bodies such as the Group's European Works Council, were
initiated before then. It is a two-year evolutionary programme to
simplify the Group's operating model, accelerate growth and reduce
the cost to serve. Redundancy and associated costs of GBP11.2
million were incurred in the year ended 31 March 2021. These costs
have been excluded from adjusted performance measures.
The conclusion of the second phase of the Performance
Improvement Plan gave rise to substantial reorganisation costs of
GBP2.7 million in the year ended 31 March 2020 which were excluded
from adjusted performance measures.
4. Earnings per share
2021 2020
Number Number
------------------------------------------ ----------- -----------
Weighted average number of shares 453,851,022 445,325,071
Dilutive effect of share-based payments 2,069,427 2,303,406
------------------------------------------ ----------- -----------
Diluted weighted average number of shares 455,920,449 447,628,477
========================================== =========== ===========
Basic earnings per share 27.7p 34.7p
Diluted earnings per share 27.5p 34.6p
========================================== =========== ===========
5. Dividends
2021 2020
GBPm GBPm
-------------------------------------------------- ---- ----
Final dividend for the year ended 31 March 2020 -
nil p (2019: 9.5p) - 42.1
Additional interim dividend for the year ended 31
March 2020 to replace deferred final
dividend - 9.5p 42.6 -
Interim dividend for the year ended 31 March 2021
- 6.1p (2020: 5.9p) 28.6 26.4
-------------------------------------------------- ---- ----
71.2 68.5
================================================== ==== ====
A proposed final dividend for the year ended 31 March 2021 of
9.8p is subject to approval by shareholders at the Annual General
Meeting on 15 July 2021 and the estimated amount to be paid of
GBP46.0 million has not been included as a liability in these
accounts. This will be paid on 23 July 2021 to shareholders on the
register on 18 June 2021.
6. Inventories
2021 2020
GBPm GBPm
--------------------- ------ ------
Gross inventories 460.4 446.6
Inventory provisions (40.6) (27.6)
--------------------- ------ ------
Net inventories 419.8 419.0
===================== ====== ======
GBP21.1 million (2019/20: GBP6.4 million) was recognised as an
expense relating to the write-down of inventories to net realisable
value. This includes GBP12.7 million related to PPE products bought
at the start of the COVID-19 pandemic as a result of their
significant decline in selling price.
Currently the Group does not expect any reasonably likely
changes, including any further impacts of the COVID-19 pandemic, to
have a material impact on the net realisable value of
inventories.
7. Trade and other receivables
2021 2020
GBPm GBPm
------------------------------------------------------ ----- -----
Gross trade receivables 435.2 355.5
Impairment allowance (7.4) (6.9)
------------------------------------------------------ ----- -----
Net trade receivables 427.8 348.6
Other receivables (including prepayments and contract
assets) 64.6 58.0
------------------------------------------------------ ----- -----
Trade and other receivables 492.4 406.6
====================================================== ===== =====
Trade receivables are written off when there is no reasonable
expectation of recovery, for example when a customer enters
liquidation or the Group agrees with the customer to write off an
outstanding invoice. Except for the 2019/20 British Steel Limited
receivable, as described below, the Group has historically
experienced very low levels of trade receivables not being
recovered, including those significantly past due. In 2019/20, with
the worsening macroeconomic environment due to COVID-19, the Group
increased its expected loss rates for those markets and industries
that were most affected. The Group took action to limit its
exposure by tightening its credit policies, including short payment
terms and low credit limits for new customers and seeking payment
commitments for overdue balances before releasing new orders to
existing customers. During the year, the Group has continued to
experience very low levels of trade receivables not being recovered
and has managed to recover a higher proportion of past due
receivables than in prior years. However, with the COVID-19
pandemic continuing and the potential impact on companies when the
various government support schemes around the world end, the Group
remains cautious about its exposure and so has carefully reviewed,
and maintained at a higher level, its expected loss rates for those
markets and industries that are most affected .
During 2019/20, the Group wrote off GBP7.3 million of
receivables which were no longer recoverable as they related to
transactions with British Steel Limited before 22 May 2019 when it
entered compulsory liquidation. This write off was excluded from
adjusted performance measures.
8. Net debt
2021 2020
GBPm GBPm
--------------------------------------------------- ------- -------
Cash and short-term deposits 197.9 200.8
Bank overdrafts (111.5) (166.0)
--------------------------------------------------- ------- -------
Cash and cash equivalents 86.4 34.8
Bank facilities repayable after more than one year - (0.4)
Private placement loan notes repayable after more
than one year (147.3) (161.4)
Non-current interest rate swaps designated as fair
value hedges 1.1 1.0
Secured bank loans repayable within one year (0.7) -
Money market loans repayable within one year - (7.5)
Current lease liabilities (17.4) (15.0)
Non-current lease liabilities (44.1) (41.3)
Net debt (122.0) (189.8)
=================================================== ======= =======
Movements in net debt were:
Total liabilities
from financing Interest Cash and
Borrowings Lease liabilities activities rate swaps cash equivalents Net debt
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ---------- ----------------- ----------------- ----------- ----------------- --------
Net debt at 1 April
2019 (175.3) (53.3) (228.6) 1.8 51.1 (175.7)
Cash flows 15.9 14.8 30.7 (2.6) (23.3) 4.8
Net lease additions - (17.7) (17.7) - - (17.7)
(Loss) / gain in fair
value in year (1.8) - (1.8) 1.8 - -
Translation differences (8.1) (0.1) (8.2) - 7.0 (1.2)
------------------------- ---------- ----------------- ----------------- ----------- ----------------- --------
Net debt at 31 March
2020 (169.3) (56.3) (225.6) 1.0 34.8 (189.8)
Cash flows 24.3 16.4 40.7 - 63.4 104.1
Acquired with businesses
(Note 11) (16.9) (6.9) (23.8) - - (23.8)
Net lease additions - (15.2) (15.2) - - (15.2)
(Loss) / gain in fair
value in year (0.1) - (0.1) 0.1 - -
Translation differences 14.0 0.5 14.5 - (11.8) 2.7
Net debt at 31 March
2021 (148.0) (61.5) (209.5) 1.1 86.4 (122.0)
========================= ========== ================= ================= =========== ================= ========
9. Retirement benefit obligations
The Group operates defined benefit schemes in the United Kingdom
and Europe.
2021 2020
GBPm GBPm
Fair value of scheme assets 580.9 542.4
Present value of defined benefit obligations (636.6) (557.0)
Effect of asset ceiling / onerous liability - (41.2)
--------------------------------------------------- ------- -------
Retirement benefit obligations (55.7) (55.8)
--------------------------------------------------- ------- -------
Amount recognised on the balance sheet - liability (56.5) (57.7)
Amount recognised on the balance sheet - asset 0.8 1.9
=================================================== ======= =======
Based on the UK scheme's rules, the Group does not have an
unconditional right to any surplus that may arise on the scheme and
so IFRIC 14 applies. At 31 March 2020, the present value of the
contributions due under the recovery plan to the UK scheme was
greater than the funded status and so the Group recognised an
additional liability of GBP41.2 million. At 31 March 2021, this was
no longer the case and the minimum funding requirements were lower
than the accounting deficit and so no adjustments were
required.
10. Alternative Performance Measures (APMs)
The Group uses a number of APMs in addition to those measures
reported in accordance with IFRS. Such APMs are not defined terms
under IFRS and are not intended to be a substitute for any IFRS
measure. The Directors believe that the APMs are important when
assessing the underlying financial and operating performance of the
Group. The APMs are used internally for performance analysis and in
employee incentive arrangements, as well as in discussions with the
investment analyst community.
The APMs improve the comparability of information between
reporting periods by adjusting for factors such as fluctuations in
foreign exchange rates, number of trading days and items, such as
reorganisation costs, that are substantial in scope and impact and
do not form part of operational or management activities that the
Directors would consider part of underlying performance. As a
result of acquisitions of businesses in the year, the Group has
updated its adjusted measures to exclude acquisition-related items
as well as amortisation of intangible assets arising on acquisition
of businesses. The Directors believe that excluding recent
acquisitions and acquisition-related items aid comparison of the
underlying performance between reporting periods and between
businesses with similar assets that were internally generated.
Base business
The Group's base business excludes acquisitions in the relevant
years until they have been owned for a year, at which point they
start to be included in both the current and comparative periods
for the same number of months.
2021
Base business Acquisitions Group
GBPm GBPm GBPm
------------------------------------ ------------- ------------ -------
Revenue
EMEA 1,261.5 15.9 1,277.4
Americas 504.0 13.0 517.0
Asia Pacific 208.3 - 208.3
Group 1,973.8 28.9 2,002.7
===================================== ============= ============ =======
Segmental operating profit
EMEA 171.0 1.6 172.6
Americas 51.4 0.5 51.9
Asia Pacific 1.4 - 1.4
Segmental operating profit 223.8 2.1 225.9
Central costs (37.6) - (37.6)
------------------------------------- ------------- ------------ -------
Adjusted operating profit 186.2 2.1 188.3
------------------------------------- ------------- ------------ -------
Adjusted profit before tax 179.7 2.0 181.7
Adjusted earnings per share 31.0p 0.3p 31.3p
Adjusted diluted earnings per share 30.8p 0.3p 31.1p
===================================== ============= ============ =======
The principal exchange rates applied in preparing the Group
accounts and in calculating the following like-for-like measures
are:
2021 2021 2020 2020
Average Closing Average Closing
US dollar 1.308 1.377 1.271 1.242
Euro 1.121 1.174 1.144 1.132
========== ======= ======= ======= =======
Like-for-like revenue change
Like-for-like revenue change is change in revenue adjusted to
eliminate the impact of acquisitions and changes in exchange rates
and trading days year on year. It is calculated by comparing the
revenue of the base business for the current year with the prior
year's revenue converted at the current year's average exchange
rates and pro-rated for the same number of trading days as the
current year. This measure enables management and investors to
track more easily, and consistently, the underlying revenue
performance.
2020 at
2021
rates
2021 base and trading Like-for-like
business 2020 days change
GBPm GBPm GBPm %
---------------------- --------- ------- ------------ -------------
EMEA 1,261.5 1,239.8 1,249.6 1.0%
Americas 504.0 515.7 497.1 1.4%
Asia Pacific 208.3 198.3 199.1 4.6%
Group's base business 1,973.8 1,953.8 1,945.8 1.4%
====================== ========= ======= ============ =============
GBPm
----------------------------------- -------
Revenue for 2020 1,953.8
Effect of exchange rates (3.2)
Effect of trading days (4.8)
-------
Revenue for 2020 at 2021 rates and
trading days 1,945.8
====================================== =======
Gross margin and like-for-like gross margin change
Gross margin is gross profit divided by revenue. Like-for-like
change in gross margin is calculated by taking the difference
between gross margin for the base business for the current year and
gross margin for the prior year with revenue and gross profit
converted at the current year's average exchange rates.
2020 at
2021 2021 base 2021 Like-for-like
Group business 2020 rates change
GBPm GBPm GBPm GBPm pts
------------- ------- --------- ------- ------- -------------
Revenue 2,002.7 1,973.8 1,953.8 1,950.6
Gross profit 856.0 845.7 854.7 855.5
Gross margin 42.7% 42.8% 43.7% 43.9% (1.1) pts
============= ======= ========= ======= ======= =============
Working capital as a percentage of revenue
Working capital is inventories, current trade and other
receivables and current trade and other payables.
2021 2020
GBPm GBPm
------------------------------------------- ------- -------
Inventories 419.8 419.0
Current trade and other receivables 492.4 406.6
Current trade and other payables (475.3) (358.7)
------------------------------------------- ------- -------
Working capital 436.9 466.9
Revenue 2,002.7 1,953.8
Working capital as a percentage of revenue 21.8% 23.9%
=========================================== ======= =======
Adjusted profit measures
These are the equivalent IFRS measures adjusted to exclude
amortisation of intangible assets arising on acquisition of
businesses, acquisition-related items, substantial reorganisation
costs, substantial asset write-downs, one-off pension credits or
costs, significant tax rate changes and, where relevant, associated
tax effects.
Basic Diluted
Operating Operating Profit Profit earnings earnings
Operating Operating profit profit before for the per per
costs(1) profit margin(2) conversion(3) tax year share share
GBPm GBPm % % GBPm GBPm p p
--------------------------- --------- --------- ---------- -------------- ------- -------- --------- ---------
Year ended 31 March
2021
Reported (688.8) 167.2 8.3% 19.5% 160.6 125.5 27.7p 27.5p
Amortisation of acquired
intangibles 7.0 7.0 7.0 5.6 1.2p 1.2p
Acquisition-related
items 2.9 2.9 2.9 2.5 0.5p 0.5p
Substantial reorganisation
costs (Note 3) 11.2 11.2 11.2 8.5 1.9p 1.9p
--------------------------- --------- --------- ---------- -------------- ------- -------- --------- ---------
Adjusted (667.7) 188.3 9.4% 22.0% 181.7 142.1 31.3p 31.1p
--------------------------- --------- --------- ---------- -------------- ------- -------- --------- ---------
Year ended 31 March
2020
Reported (649.4) 205.3 10.5% 24.0% 199.6 154.7 34.7p 34.6p
Amortisation of acquired
intangibles 5.4 5.4 5.4 5.2 1.2p 1.2p
Substantial asset
write-downs
(Note 7) 7.3 7.3 7.3 5.9 1.3p 1.3p
Substantial reorganisation
costs (Note 3) 2.7 2.7 2.7 2.3 0.5p 0.5p
--------------------------- --------- --------- ---------- -------------- ------- -------- --------- ---------
Adjusted (634.0) 220.7 11.3% 25.8% 215.0 168.1 37.7p 37.6p
=========================== ========= ========= ========== ============== ======= ======== ========= =========
1. Operating costs are distribution and marketing expenses and administrative expenses.
2. Operating profit margin is operating profit expressed as a percentage of revenue.
3. Operating profit conversion is operating profit expressed as
a percentage of gross profit.
Acquisition-related items comprise transaction costs directly
attributable to the acquisition of businesses and deferred
consideration payments relating to the retention of former owners
of businesses acquired.
Like-for-like profit change
Like-for-like change in profit is adjusted to exclude the
effects of changes in exchange rates on translation of overseas
profits. The change is calculated by comparing the base business
for the current year with the prior year converted at the current
year's average exchange rates.
2021 base 2020 at Like-for-like
business 2020 2021 rates change
GBPm GBPm GBPm %
------------------------------------- --------- ------ ----------- -------------
Segmental operating profit for base
business
EMEA 171.0 197.0 200.0 (14.5)%
Americas 51.4 57.8 56.1 (8.4)%
Asia Pacific 1.4 3.7 3.9 (64.1)%
Segmental operating profit for base
business 223.8 258.5 260.0 (13.9)%
Central costs (37.6) (37.8) (37.8) 0.5%
-------------------------------------- --------- ------ -----------
Adjusted operating profit for base
business 186.2 220.7 222.2 (16.2)%
-------------------------------------- --------- ------ -----------
Adjusted profit before tax for base
business 179.7 215.0 216.5 (17.0)%
Adjusted earnings per share for base
business 31.0p 37.7p 38.0p (18.4)%
====================================== ========= ====== =========== =============
Return on capital employed (ROCE)
As a result of the acquisitions in the year, the calculation of
ROCE has been updated to be based on the monthly average capital
employed rather than the closing capital employed. Therefore, ROCE
is now adjusted operating profit expressed as a percentage of the
monthly average net assets excluding net debt and retirement
benefit obligations. The comparative has also been updated.
2021 2020
GBPm GBPm
-------------------------------------------------- ----- -----
Average net assets 791.0 650.9
Add back: average net debt 127.2 197.7
Add back: average retirement benefit net (assets)
/ obligations 53.8 69.2
-------------------------------------------------- ----- -----
Average capital employed 972.0 917.8
Adjusted operating profit 188.3 220.7
ROCE 19.4% 24.0%
================================================== ===== =====
Earnings before interest, tax, depreciation and amortisation
(EBITDA) and net debt to adjusted EBITDA
EBITDA is operating profit excluding depreciation and
amortisation. Net debt to adjusted EBITDA is the ratio of net debt
to EBITDA excluding acquisition-related items, substantial
reorganisation costs, substantial asset write-downs and one-off
pension credits or costs.
2021 2020
GBPm GBPm
------------------------------------------- ----- -----
Operating profit 167.2 205.3
Add back: depreciation and amortisation 56.5 50.9
------------------------------------------- ----- -----
EBITDA 223.7 256.2
Add back: substantial asset write-downs - 7.3
Add back: substantial reorganisation costs 11.2 2.7
Add back: acquisition-related items 2.9 -
------------------------------------------- ----- -----
Adjusted EBITDA 237.8 266.2
Net debt (Note 8) 122.0 189.8
Net debt to adjusted EBITDA 0.5x 0.7x
=========================================== ===== =====
Earnings before interest, tax and amortisation (EBITA) and EBITA
to interest
EBITA is adjusted EBITDA after depreciation. EBITA to interest
is the ratio of EBITA to finance costs including capitalised
interest less finance income.
2021 2020
GBPm GBPm
------------------------------- ------ ------
Adjusted EBITDA 237.8 266.2
Less: depreciation (32.5) (27.6)
------------------------------- ------ ------
EBITA 205.3 238.6
------------------------------- ------ ------
Finance costs 8.6 9.2
Less: finance income (1.8) (3.3)
Add back: capitalised interest 0.9 1.2
------------------------------- ------ ------
Interest (per debt covenants) 7.7 7.1
------------------------------- ------ ------
EBITA to interest 26.7x 33.6x
=============================== ====== ======
Ratio of capital expenditure to depreciation
Ratio of capital expenditure to depreciation is capital
expenditure divided by depreciation and amortisation excluding
amortisation of acquired intangibles and depreciation of
right-of-use assets.
2021 2020
GBPm GBPm
--------------------------------------------- --------- ---------
Depreciation and amortisation 56.5 50.9
Less: amortisation of acquired intangibles (7.0) (5.4)
Less: depreciation of right-of-use assets (17.1) (15.6)
--------------------------------------------- --------- ---------
Adjusted depreciation and amortisation 32.4 29.9
Capital expenditure 56.2 78.6
Ratio of capital expenditure to depreciation 1.7 times 2.6 times
============================================= ========= =========
Inventory turn
Inventory turn is cost of sales divided by inventories.
2021 2020
GBPm GBPm
--------------- ------- -------
Cost of sales 1,146.7 1,099.1
Inventories 419.8 419.0
Inventory turn 2.7 2.6
=============== ======= =======
Free cash flow, adjusted free cash flow and adjusted operating
cash flow conversion
Free cash flow is the net movement in cash and cash equivalents
before net cash used in financing activities, acquisition of
businesses and cash and cash equivalents acquired with businesses.
Adjusted free cash flow is free cash flow adjusted for the impact
of substantial reorganisation and acquisition-related items cash
flows. Adjusted operating cash flow conversion is adjusted free
cash flow before income tax and net interest paid, expressed as a
percentage of adjusted operating profit.
2021 2020
GBPm GBPm
--------------------------------------------------------- ------ ------
Net increase / (decrease) in cash and cash equivalents 63.4 (23.3)
Add back: cash (generated from) / used in financing
activities (66.0) 95.5
Add back: cash used in acquisition of businesses 157.5 0.2
Less: cash and cash equivalents acquired with businesses (22.0) -
--------------------------------------------------------- ------ ------
Free cash flow 132.9 72.4
Add back: impact of substantial reorganisation cash
flows 9.6 8.5
Add back: impact of acquisition-related items cash
flows 2.9 -
--------------------------------------------------------- ------ ------
Adjusted free cash flow 145.4 80.9
Add back: income tax paid 35.2 49.9
Add back: net interest paid 8.3 6.2
--------------------------------------------------------- ------ ------
Adjusted free cash flow before income tax and net
interest paid 188.9 137.0
Adjusted operating profit 188.3 220.7
Adjusted operating cash flow conversion 100.3% 62.1%
========================================================= ====== ======
11. Acquisitions
On 9 December 2020 the Group acquired 100% of the issued share
capital of Needlers Holdings Limited and subsidiaries (Needlers), a
leading UK provider of safety products and PPE. Needlers expands
the Group's products and solutions in safety, hygiene and PPE. The
goodwill is attributable to the synergies which are expected to
arise from opportunities to accelerate growth in revenue by
increasing the Group's range of PPE products and using the Group's
platform to accelerate Needlers's growth in private label, digital
and beyond the UK, plus opportunities for the Group to benefit from
Needlers's strong sourcing capabilities and differentiated service
proposition in safety products and PPE.
On 12 January 2021 the Group acquired 100% of the issued share
capital of Synovos, Inc. and its subsidiaries (Synovos), a leading
player in integrated supply solutions in the Americas. Synovos
accelerates the Group's delivery of a global integrated supply
proposition and strengthens the Group's Americas business. The
goodwill is attributable to the synergies which are expected to
arise from opportunities for Synovos and IESA to create a global
integrated supply proposition in the growing market for product and
service solutions, opportunities to accelerate growth in revenue by
increasing the Group's penetration with Synovos's customers, plus
opportunities for Synovos to grow through benefiting from the
Group's global presence.
On 28 February 2021 the Group acquired 100% of the share capital
of John Liscombe Limited and its subsidiary (Liscombe), a leading
supplier of industrial safety products and PPE. Combined with
Needlers, Liscombe expands the Group's products and solutions in
safety, hygiene and PPE across more industries. The goodwill is
attributable to the synergies which are expected to arise from
opportunities to accelerate growth in revenue by further increasing
the Group's range of PPE products and using the Group's platform to
accelerate Liscombe's growth.
The fair value of the net assets acquired, consideration paid
and goodwill arising, plus transaction costs and contribution to
the Group's results since acquisition were:
Needlers Synovos Liscombe Total
GBPm GBPm GBPm GBPm
------------------------------------------- -------- ------- -------- ------
Intangible assets 21.0 40.8 1.9 63.7
Property, plant and equipment 0.4 0.7 0.7 1.8
Right-of-use assets 2.3 3.8 0.5 6.6
Non-current other receivables - 1.3 - 1.3
Working capital 3.5 (1.8) 6.4 8.1
Derivative liabilities - - (0.1) (0.1)
Lease liabilities (2.2) (4.2) (0.5) (6.9)
Cash and cash equivalents - cash and
short-term deposits 4.6 11.3 6.1 22.0
Borrowings - (12.7) (4.2) (16.9)
Provisions (0.1) (0.6) - (0.7)
Current income tax assets / (liabilities) 0.1 0.7 (0.4) 0.4
Deferred tax liabilities (4.0) (9.6) (0.4) (14.0)
-------- ------- -------- ------
Net assets acquired 25.6 29.7 10.0 65.3
Goodwill 16.8 71.4 1.8 90.0
-------------------------------------------- -------- ------- -------- ------
Consideration paid - cash 42.4 103.6 11.5 157.5
Consideration payable / (refundable)
- accrued, due on agreement of completion
accounts - (2.5) 0.3 (2.2)
============================================ ======== ======= ======== ======
The goodwill arising on all acquisitions completed during the
year will not be deductible for tax purposes. The fair values of
tax balances and working capital for Synovos are provisional while
the Group continues to assess the liabilities acquired.
SAFE HARBOUR
This financial report 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.
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