Final Results
Electrocomponents PLC
31 May 2000
PRELIMINARY STATEMENT
Electrocomponents plc, the major electronic, electrical and industrial
supplies distribution Group, today announces its results for the year ended
31 March 2000.
Allied Electronics was acquired on 2 July 1999 and its results have been
consolidated for the 9 months since that date. The highlights of the Group
are as follows:
Sales £761.4m Up 12.5%
Operating profit* £118.8m Up 12.1%
Profit before tax* £115.3m Up 2.6%
Earnings per share* 19.0p Up 6.7%
Dividend per share 12.0p Up 14.3%
Net debt £95.8m
* Before amortisation of goodwill arising from the Allied acquisition.
Commenting on the results, Mr Roy Cotterill, the Chairman said:
'The improved sales trend of the second half has continued in the first weeks
of the new financial year in all of our major markets. The progress made in
North America and the clear acceptance of our concept in Japan continue to
delight us. Whilst our Continental European businesses are benefiting from
high economic growth in local markets, some concern must remain over the UK,
where manufacturers are finding it difficult to cope with the remarkable
strength of Sterling. We will continue to spend on key strategic developments
and indeed we are now accelerating investments in e-Commerce and in China
consistent with the rapid building of our global strategic positions.'
31 May 2000
Enquiries:
Roy Cotterill, Chairman Electrocomponents plc 0207 5678000*
Bob Lawson, Chief Executive Electrocomponents plc 0207 5678000*
Jeff Hewitt, Group Finance Director Electrocomponents plc 0207 5678000*
Diana Soltmann Flagship Group 0207 2991500
*Only available on this telephone number for 31 May 2000. Thereafter
available on 01865 204000.
The results and analyst briefing notes are published on the Corporate website
at www.electrocomponents.com
STATEMENT BY THE CHAIRMAN ON THE PRELIMINARY RESULTS
During the year under review, your Group has begun and progressed a number of
major strategic initiatives whilst maintaining the essential control over our
day to day job of satisfying fully our customers' needs.
In total and including Allied Electronics for nine months, sales have
increased by 12.5% to £761.4m and operating profit before amortisation of
goodwill has increased by 12.1% to £118.8m.
For many years, the Group has maintained significant cash resources and been
in receipt of interest, but this year the purchase of Allied using our own
resources and bank debt, has resulted in an interest charge. As a
consequence, profit before tax and amortisation of goodwill has increased by
2.6% to £115.3m.
The acquisition of Allied cost £241.6m which more than consumed the £120.6m
of cash held by the Group at the beginning of the year. Group net debt at
year end was down to £95.8m, demonstrating the continuing cash generative
power of our businesses. As a result of this and our confidence in future
profits, your Board has again decided to recommend an increase in the final
dividend of 14.5% to 8.3p, making a total of 12.0p for the year, an increase
of 14.3%. This will be the 32nd consecutive year of increase.
Initiatives
It would be difficult to overemphasise the importance of three major
initiatives, which marked the year under review. After a long watching brief,
we have entered the North American market through the purchase of Allied.
During the nine months that they have been part of Electrocomponents, the
Allied team has become very much a part of and contributor to the activities
of the Group and an excellent rapport has been established at all levels.
There have been improvements in customer service and sales have risen
substantially. We are very encouraged.
During the first full year of operation, Japan has exceeded our expectations
and shown very clearly that there is a place in that market for our kind of
high service distribution. The team is now entirely Japanese, a third
catalogue with 30,000 products has been launched and electronic trading has
begun. Again we are very encouraged.
We introduced electronic trading via the internet in the UK in March 1998.
Every month volume increases and the cost and value advantage to our
customers becomes clearer as new developments and refinements are added. Most
of our trading locations now have electronic trading and we plan to introduce
over the next 24 months the advanced functionality developed and proven in
the UK market. This form of business-to-business trading, whilst it presents
some challenges, creates many more opportunities for us. Once again we are
very encouraged.
Financial Performance
Group sales increased by 12.5% to £761.4m, and before goodwill amortisation
operating profit rose 12.1% to £118.8m, profit before tax rose 2.6% to
£115.3m and earnings per share rose 6.7% to 19.0p. The year included nine
months trading from Allied which contributed £84.6m to turnover and £13.8m to
operating profit before goodwill amortisation. Interest costs from financing
the acquisition amounted to £10.5m and goodwill amortisation was £8.0m and
hence before goodwill amortisation Allied enhanced earnings in the year.
Excluding Allied, sales were flat and operating profit declined by £1.0m as a
result of exchange rate movements and revenue investments.
The strengthening of Sterling had a negative translation effect on our
reported results. At constant exchange rates, sales (excluding Allied) would
have been £9.1m higher and operating profit (excluding Allied) would have
been £2.0m higher.
Adjusting for the number of trading days in the year and at constant exchange
rates the underlying sales growth was 0.8% excluding Allied, or 3.3%
including Allied.
The gross margin for the year was 48.4% and excluding Allied 49.7%, which was
slightly up on last year. This stability was encouraging given the trading
pressures.
Overall operating margins before amortisation of goodwill were maintained
despite further significant investments in the development of the Group. Most
notable were the substantial, but planned, first year trading losses in Japan
of £7.0m up from the £4.0m pre launch costs in the previous year. Total costs
of our e-Commerce development increased to £2.5m in the year from £1.6m. Pact
experienced trading difficulties for much of the year and its profit
contribution consequently declined to £0.5m from £2.8m.
The interest charge was £3.5m compared to income of £6.4m in the previous
year, due to the financing of the Allied acquisition. The tax rate of 29%,
based on profit before tax and goodwill amortisation, was lower than the
prior year 32%, as the profit generated by Allied was shielded from tax by
the tax deduction allowed for goodwill amortisation over 15 years in the
United States. In accordance with FRS10, the £214.8m of goodwill that arose
on the acquisition of Allied is being written off over 20 years, and for the
nine months since acquisition the amortisation was £8.0m.
Profit before tax and after goodwill amortisation was £107.3m and the
effective tax rate on this profit was 31.1%. After tax, the profit for the
year amounted to £73.9m, down 3.3%. Earnings per share before goodwill
amortisation increased 6.7% to 19.0p from 17.8p, but after goodwill
amortisation declined 3.9% to 17.1p. With the recommended final dividend of
8.3p per share, dividends will rise by 14.3% to 12.0p, which would be covered
1.6 times by earnings before goodwill amortisation.
Free cash flow for the year was a healthy £66.9m (£69.3m).
Working capital cash outflows amounted to £16.5m, compared to £3.6m last
year. Cash outflow on stocks was £21.7m, compared to £1.2m. Stocks were built
to support service levels as sales growth rates increased in the second half
and to reduce the impact of shortages of certain electronic components where
supply lead times lengthened. The stock turn was 2.4 times compared to 2.6
times. Debtors recorded an outflow of £13.6m, compared with an inflow of
£0.2m. Debtor days were 57.7 days, up from 55.1 days due to higher rates of
sales growth in the fourth quarter. There was a cash inflow on creditors of
£18.8m, compared to an outflow of £2.6m. Creditor days were 45.7, an increase
from last year due to the build up of stocks at year end.
Capital expenditures were lower at £16.8m, compared to £18.3m, as investments
in systems were deferred over the Millennium period. Looking forward, systems
investments will increase in this and in future years, though the successful
introduction of cross border fulfilment (centralised stock holding of slower
moving products) will again defer the need for major capacity increases in
our European facilities. The acquisition of Allied incurred a cash outlay of
£241.6m and after higher tax and dividend payments, the decrease in net funds
was £216.4m, giving year-end net debt of £95.8m.
Profit before tax (and after goodwill amortisation) on net assets was 28.7%,
down from 31.8% due to the incidence of goodwill and to the revenue
investments made in the year. These returns remain substantially higher than
the Group's cost of capital. Our total shareholder return over the year was
37.1%, reflecting the share price increase between the year ends, and this
was significantly above the 9.9% return on the Allshare index.
Operations
The year has been characterised by progressive improvement in the economies
in which we operate, though the UK remained difficult.
The major developments have been: the increased activity of e-Commerce in all
markets, the success of our first full year's trading in Japan, and finally
the evolution of Allied to be the North American arm of Electrocomponents.
The crucial importance of the information content made available to customers
through e-Commerce became much clearer to us as the year progressed. For
business-to-business users of internet services, the quality and richness of
the information has become paramount. Our Group, by virtue of its history, is
particularly well placed to understand the customer's requirement and then to
have the knowledge and resources to provide a solution. The foundation of our
evolving e-Commerce strategy is to build world class excellence in each of
our trading web sites, supported by the certainty of our fulfilment
capability. This combination provides the Group with a major differentiator,
particularly when compared to the newer e-Commerce players. From this base,
the Group will participate in the various e-Commerce formats that are of
interest to our customers and ourselves.
A new e-Commerce Team was formed during the year to formulate and drive a
co-ordinated e-Commerce strategy on a Groupwide basis. RSUK has had a fully
trading website (rswww.com) for over 2 years, which in March 2000 accounted
for c.4% of RS UK's sales. The site has been extensively developed over this
time and continues to be recognised as a world leading business-to-business
(B2B) website. In particular, the development of an 'e-Purchasing' programme
has proved a substantial success with customers of all sizes, providing them
with the facility to reduce their purchasing costs, while at the same time
empowering end-users to benefit from the rich content of the rswww.com site.
The reduction of purchasing costs in B2B internet transactions has become a
major target, and we are one company actually generating these savings for
our customers. A great strength of our position is that we are able to
combine leading edge e-Commerce skills with our fulfilment capability.
Over the past year we have developed our e-Commerce capabilities at a cost of
£2.5m, up from £1.6m the previous year. This included improvements to
rswww.com where the search facility has been improved considerably and access
to the data library (one of the most popular features) has been improved with
the addition of the 'Technical InfoZone' (a specific area for the acquisition
and exchange of technical data). These changes were made in response to
customer feedback and have been positively received. We continue to exploit
the one to one marketing capability of e-Commerce with increasing effect.
During the year we opened new trading sites in all our operations across the
world, including China and Japan. e-Commerce revenues have grown rapidly in
all markets, but it remains difficult to judge the incremental sales from
these sites. Plans are in place to enhance the European sites to the level of
the UK functionality and such developments, which will yield great benefits
in the future, are likely to triple our e-Commerce costs in the coming year.
We have worked closely with leading e-Procurement vendors over the year to
help them serve our customers who choose this route of trading with us and
recently we announced a non-exclusive marketing arrangement with Commerce One.
e-Commerce offers many exciting opportunities to our Group and we are
committed to remaining in a leadership position and hence look forward with
great optimism.
The inaugural year's trading in RS Japan has been a great success. This has
been achieved in a market in which the high service distribution concept is
new. The performance of the Japanese initiative is ahead of our plan though
our view of the timing of break-even remains unchanged as we are increasing
our marketing activities. The most significant achievement though is the
development and consolidation of an outstanding management team. Our team,
now exclusively Japanese, has the inherent capability to create a substantial
business from its market leading presence - a truly exciting prospect.
RS Japan has exceeded expectations with sales of £2.7m. More importantly, the
RS business model (50% Gross Margin, average order value c.£80), has been
shown to be effective in Japan.. A survey of our customers has shown that
they value the core benefits offered by RS: a wide product range, small order
capability and quick delivery. There is high demand for the RS catalogue in
both its paper and CD form and a fully trading Japanese language internet
site was launched late in the year with good customer reaction. Already c.5%
of RS Japan's sales are through the internet (one of the highest rates in the
Group), which re-emphasises the exciting potential of the internet for us in
Japan.
The customer base is expanding rapidly and we are encouraged to report that
RS Japan is attracting customers of a similar type to those seen in other RS
operations. There is already a good mix of 'bluechip', R&D, maintenance,
education, large and small businesses established as customers. Levels of
repeat orders are high, demonstrating that loyalty to RS Japan is enhanced
once customers experience our unique service. The product range has been
expanded by 4,500 new products to c30,000 in total and, since launch, service
levels have been maintained at over 90%. Japanese customers demand this level
of service and our ability to achieve it is testament to our commitment to
developing the Japanese market and ability to leverage from the existing
Group infrastructure.
This was the peak investment year in RS Japan with losses of £7.0m. Excellent
foundations have been laid to support the rapid growth of the business and
our strategy to grow the business in Japan remains unchanged.
Since the acquisition of Allied Electronics nine months ago, sales have grown
by 21% against the comparable period of the previous year on a like for like
basis. These maiden results demonstrate the fundamental quality of the
business. As indicated on acquisition last July, our plan was and is to
invest in Allied. The investment concentrates upon expanding the warehouse
infrastructure to support the sales growth, increasing the sales offices to
73, and extending the hours during which customers can place orders. With the
exchange of information across the Group, best practices are beginning to be
shared, most noticeably in a significant improvement in service level using
lessons from RS. Allied has proved to be an excellent addition to the Group
and we remain committed to the organic development of the business to ensure
that it becomes an even bigger player in the largest distribution market in
the world.
Our RS UK business has experienced an improving trend throughout the year
despite the unhelpful economic environment faced by many of our customers.
The remarkable strength of sterling in the final quarter of the year combined
with the growing concerns in the automotive sector have served to depress UK
manufacturing. These factors resulted in a slower recovery within our UK
business. In the first half, sales in the UK declined by 6% (adjusted for
trading days), which had improved to flat year on year sales for the second
half. For the year, total UK sales declined by 3% (adjusted) to £414.1m, but
contribution increased by 1% to £134.3m as the contribution margin improved
to 32.4% from 31.2%. The UK team managed the cost base particularly well in
these tough conditions whilst increasing investment in marketing initiatives,
thus optimising overall contribution. Products increased by 6% to 117,000 and
customers by 2% with higher growth within targeted segments. The outlook, as
reflected in current activities, is of continuing gradual improvement.
The marketing initiatives aimed at developing and strengthening relationships
with corporations and individual customers within businesses have
accelerated. RS UK has defined precisely targeted marketing messages to
specific clusters of customers, especially those in the service sector. These
'specialogues' are particularly valuable as they enable customers with
specific needs to create the solutions that they require with greater
effectiveness. Hence from March this year, the frequency for the UK catalogue
has been changed to twice per year to align the UK with the other main
European markets. Looking forward, the UK will continue to be the development
market for the Group with emphasis on evolving one to one marketing
capabilities and creating value from the mix of conventional and e-Commerce
initiatives. The year began with e-Commerce at c1.5% of sales, which had
accelerated to c4% of monthly sales by the year end and we continue to
monitor the implication of the trading patterns.
Sales in the Rest of Europe grew by 11.3% (at constant exchange rates and day
adjusted) to £177.5m and contribution by 18.2% to £31.8m. Throughout
Continental Europe, the trends were similar as sales progressively improved
throughout the year to give an exit growth rate in March of approximately
17%. Europe continues to demonstrate the power of the RS model as the
contribution margin improved by a further 1.8 percentage points.
Radiospares Composants remains our largest continental European business and
achieved sales growth of 11% (adjusted) with a strengthening performance in
the second half. The principal focus remains on market development through
the catalogue and increasingly specialogues, supported by the internet site
and the CD-Rom. Active customer numbers grew by 10% and products increased
14% to 77,500. Looking ahead, the emphasis will remain on the acquisition and
aggressive development of customers. RS Germany has grown sales by 13%
(adjusted) with the second half also growing at a faster rate. The primary
focus during the year has been on growing the corporate customer base and
this has increased by 12% within an overall customer base increase of 8%. The
product offer increased by 10% to 71,500 with mechanical components being
particularly positive. Cross border fulfilment was introduced during the year,
building on the success achieved in France and Italy. This has allowed
investment in additional warehouse capacity to be deferred. RS
Italy increased sales by 14% (adjusted) and also benefited from a
strengthening of the market in the second half. Active customers increased by
9% and products by 9% to 75,000. Our business with the base of existing
customers exhibited strong growth, reflecting the leading market position
occupied by RS in Italy.
In the smaller markets of Europe, our businesses in the high potential
markets of Benelux and Spain grew particularly well, with over 25% sales
growth (adjusted), and confirms our view that these will become major
businesses. The more developed markets of Austria and Ireland increased in
line with the overall European market. Denmark has become established as the
hub to serve the Scandinavian markets, though these suffered from tough
trading conditions relative to the other European markets.
In summary, the performance in the Rest of Europe indicates the potential
available to us. The infrastructure and skills are in place and our
development will be based upon European-wide initiatives being delivered
locally and simultaneously. Investment at the regional level will be focused
on two areas: the first and largest is to continue to develop the e-Commerce
trading capabilities. The second is in account management capability to
enable us to meet the needs of those customers who are now beginning to trade
across Europe in a more integrated way.
The Group's businesses in the Rest of World mainly comprise those in Asia.
Asia has benefited from the improvement in economic activity within the
region, which has propelled Rest of World sales growth by 11% (adjusted) and
the contribution by 24%. This again demonstrates the RS model in action.
In North Asia it was a year of continued investment, focused upon the huge
opportunity of the Chinese market. Whilst both Hong Kong and Taiwan
contributed to North Asia's sales growth of 17% (adjusted), the major
contribution was made by progress in China. On 1 April 2000 we launched the
first broad range catalogue in the Chinese language, which was accompanied by
Chinese versions of the CD-Rom and an internet trading site. Our Chinese
customers now have convenient access to our 60,000 product offer in their own
language and the initial response has been encouraging. Plans are well
advanced to establish our first fulfilment centre in Shanghai later this year.
South Asia achieved sales growth of 25% (adjusted) with each of the three
main markets; Singapore, Malaysia and the Philippines enjoying good growth.
Our major warehouse in Singapore continues to be developed as a Regional hub.
Further investment in stocks in North and South Asia has driven improvement
in service levels to our customers. In the Philippines a new management team
was established with good initial results.
Australasia had a difficult year during which we centralised our operations
and call centre activities in Sydney. As a consequence we are seeing
increased service levels and better response to customer requirements. A new
catalogue, CD-Rom and internet offer was launched on 1 April 2000. Early
indications suggest that these, together with increasing service levels, are
now beginning to be reflected in sales growth from the flat performance over
the last twelve months.
In Asia we have an excellent management team, confident and capable of
delivering rapid growth as RS establishes itself as the Region's clear market
leader in high service.
Pact, along with many of its retail customers, had a very difficult year with
sales down by 10% (adjusted) to £50.2m and profits declining to £0.5m. In
spite of these tough conditions, the opportunity has been taken to invest in
systems, to provide the improved information that is essential to success in
such volatile times. Costs have been carefully controlled whilst marketing
efforts remain focused on those sectors of the business that have been most
robust.
Groupwide Processes
In the year, the process activity moved from investment to delivery with
costs growing at a slower rate than in previous years.
The Supply Chain is now controlling stocks on a regional basis with a growing
capability to manage stocks globally. This development is particularly
important as it not only improves forecasting but more centralised stock
holding also makes it economically possible for the Group to supply slower
moving product to customers with a higher service level. Stocks have been
deliberately increased over the past year to support higher sales growth at
the required service level whilst also avoiding difficulties arising from
supply shortages.
Information Systems is the largest Groupwide process with costs at over £25m.
The emphasis remains on developing consistent Groupwide databases for
products, customers and suppliers. The importance of these has increased not
only in order to deliver the e-Commerce initiatives but also to supply the
required quality of detailed information to customers, suppliers and of
course management.
Now with over 300,000 products, Product Management is managing the complexity
of customer information needs and pricing across markets. A particular
feature of the last year has been the strengthening of regional structures to
ensure that the Group not only offers the most appropriate products to
customers but that they are procured from the most appropriate location. The
strategic alliance with Avnet is part of the Product Management
responsibility, and the first offer arising from the alliance is now being
sold in the main European markets. The entire range of semiconductors has
been overhauled and on average increased by 3,000 products. In addition, an
advanced semiconductor CD-Rom in each language is now in each of these
markets. This provides unequalled search facilities with very extensive data
representing a combination of Avnet and our own resources.
The challenge for Human Resources is to develop our people to respond to the
dynamic environment in which we operate. Over the last year, the key areas of
focus have been management planning, development and training, reward
strategies and communication.
We have to continue to find innovative ways to recruit, develop and retain
the energetic and creative talent that is the bedrock of the Group's future.
As the Group continues to grow, this will become ever more demanding. The
creation of the International Management Centre at Oxford, now fully
operational and successful, is an essential element in enabling us to develop
our human capital, irrespective of nationality. I believe that our single
greatest challenge is developing sufficient people for the Group to achieve
its strategic potential. This will continue to be an area of rising
investment.
Summary
The year under review was important for the Group with our strategic
development outside the UK taking major steps forward. The UK managed its
resources well in a tougher climate than expected. Looking ahead, our
geographic infrastructure is now largely complete and the emphasis is
shifting to driving market leadership, supported by world class processes. To
grow a business organically requires a continuing stream of investment, but
the sustainable returns from that investment continue to make
Electrocomponents an exciting place to be for our customers, our people and
our investors.
Current Trading
The improved sales trend of the second half has continued in the first weeks
of the new financial year in all of our major markets. The progress made in
North America and the clear acceptance of our concept in Japan continue to
delight us. Whilst our Continental European businesses are benefiting from
high economic growth in local markets, some concern must remain over the UK,
where manufacturers are finding it difficult to cope with the remarkable
strength of Sterling. We will continue to spend on key strategic developments
and indeed we are now accelerating investments in e-Commerce and in China
consistent with the rapid building of our global strategic positions.
Roy Cotterill
Chairman
31 May 2000
SUMMARISED CONSOLIDATED GROUP PROFIT AND LOSS ACCOUNT
For the year ended 31 March Note 2000 1999
£m £m
Turnover
Existing Operations 676.8 677.1
Acquisitions 84.6 -
----- -----
1 761.4 677.1
----- -----
Operating profit
Existing Operations 105.0 106.0
Acquisitions
before amortisation of goodwill 13.8 -
amortisation of goodwill 6 (8.0) -
------ -----
1 110.8 106.0
Net interest (payable) receivable (3.5) 6.4
------ -----
Profit on ordinary activities before taxation 107.3 112.4
-----------------------------------------------------------------------------
Profit before taxation and amortisation of goodwill 115.3 112.4
-----------------------------------------------------------------------------
Taxation on profit on ordinary activities 2 (33.4) (36.0)
------ ------
Profit on ordinary activities after taxation 73.9 76.4
Interim dividend (paid) (16.0) (13.9)
Final dividend (proposed) (35.9) (31.2)
------ -----
Retained profit for the financial year 22.0 31.3
------ -----
Earnings per share
Before amortisation of goodwill 3 19.0p 17.8p
After amortisation of goodwill 3 17.1p 17.8p
------ ------
Dividend per share
Interim (paid) 3.70p 3.25p
Final (proposed) 4 8.30p 7.25p
------ ----
12.0p 10.5p
------ ----
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Profit for the financial year 73.9 76.4
Translation differences (6.0) 1.7
----- ------
Total recognised gains and losses relating to the year 67.9 78.1
----- ------
The reconciliation of movements in shareholders' funds is at note 7.
SUMMARISED CONSOLIDATED GROUP BALANCE SHEET
As at 31 March Note 2000 1999
£m £m
Fixed assets
Intangible fixed assets - goodwill 6 205.7 -
Tangible fixed assets 126.9 129.7
Investments 0.2 0.3
----- -----
332.8 130.0
----- -----
Current assets
Stocks 164.7 129.5
Debtors 163.9 145.1
Short-term investment deposits 24.1 91.2
Cash at bank and in hand 17.2 33.3
------ ------
369.9 399.1
Creditors: amounts falling due within one year (206.7) (157.2)
------- -------
Net current assets 163.2 241.9
------- -------
Total assets less current liabilities 496.0 371.9
Creditors: amounts falling due after more than one (109.9) (6.5)
year
Provisions for liabilities and charges (11.6) (12.1)
------- -------
374.5 353.3
------- -------
Capital and reserves
Called-up share capital 43.3 43.1
Share premium account 31.2 22.7
Profit and loss account 300.0 287.5
----- -----
Equity shareholders' funds 7 374.5 353.3
----- -----
SUMMARISED CONSOLIDATED GROUP CASH FLOW STATEMENT
For the year ended 31 March Note 2000 1999
£m £m
Net cash inflow from operating activities 122.7 122.0
Returns on investments and servicing of finance (1.7) 5.9
Taxation (37.3) (40.3)
Capital expenditure and financial investment (16.8) (18.3)
------- -------
Free cash flow 66.9 69.3
Acquisitions (241.6) -
Dividends paid (47.2) (39.0)
------- -------
Cash (outflow)inflow before use of liquid (221.9) 30.3
resources and financing
Management of liquid resources 67.2 (27.1)
Financing
Shares 5.2 2.3
Loans 125.3 1.3
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(Decrease) increase in cash 8 (24.2) 6.8
------- ------
Reconciliation of operating profit to net cash
inflow from operating activities
Operating profit 110.8 106.0
Amortisation of goodwill 8.0 -
Depreciation and other amortisation 20.8 19.9
(Increase) in stocks (21.7) (1.2)
(Increase) decrease in debtors (13.6) 0.2
Increase (decrease) in creditors 18.8 (2.6)
----- ------
Continuing operations 123.1 122.3
Cashflow in respect of prior year closures (0.4) (0.3)
----- ------
Net cash inflow from operating activities 122.7 122.0
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NOTES TO THE PRELIMINARY STATEMENTS
1. Segmental analysis 2000 1999
£m £m
a. By class of business
Turnover
RS/Allied 711.2 621.2
Pact 50.2 55.9
----- -----
761.4 677.1
----- -----
Operating profit
RS/Allied 177.4 158.8
Pact 0.5 2.8
----- -----
Contribution - before amortisation of goodwill 177.9 161.6
Groupwide process costs (59.1) (55.6)
Amortisation of goodwill * (8.0) -
----- -----
110.8 106.0
----- -----
Net assets
RS/Allied 315.9 283.0
Pact 18.3 19.3
----- -----
Net operating assets 334.2 302.3
Net (debt) funds (95.8) 120.6
Unallocated net assets (liabilities) 136.1 (69.6)
----- ------
374.5 353.3
----- ------
Unallocated net assets (liabilities) comprise:
Intangible fixed assets - goodwill * 205.7 -
Corporation tax (22.1) (26.3)
Proposed dividend (35.9) (31.2)
Provision for liabilities and charges (11.6) (12.1)
------ ------
136.1 (69.6)
------ ------
* Goodwill relates to the acquisition of Allied Electronics Inc.
1. Segmental analysis continued 2000 1999
£m £m
b. By geographical destination
Turnover
United Kingdom 453.3 471.0
Rest of Europe 181.2 170.3
North America 84.5 -
Japan 2.8 -
Rest of World 39.6 35.8
----- -----
761.4 677.1
----- -----
c. By geographical origin
Turnover
United Kingdom 464.3 482.8
Rest of Europe 177.5 166.6
North America 84.6 -
Japan 2.7 -
Rest of World 32.3 27.7
----- -----
761.4 677.1
----- -----
Operating profit
United Kingdom 134.8 136.2
Rest of Europe 31.8 26.9
North America 15.2 -
Japan (7.0) (4.0)
Rest of World 3.1 2.5
------ ------
Contribution - before amortisation of goodwill 177.9 161.6
Groupwide process costs (59.1) (55.6)
Amortisation of goodwill * (8.0) -
------ ------
110.8 106.0
------ ------
* Goodwill relates to the acquisition of Allied Electronics Inc.
(North America segment)
1. Segmental analysis continued
2000 1999
£m £m
d. By geographical location
Net Assets
United Kingdom 234.0 224.9
Rest of Europe 44.8 51.5
North America 29.1 -
Japan 4.1 2.7
Rest of World 22.2 23.2
----- ----
Net operating assets 334.2 302.3
Net (debt) funds (95.8) 120.6
Unallocated net assets (liabilities) 136.1 (69.6)
----- -----
374.5 353.3
----- -----
2. Taxation on the profit of the Group
United Kingdom taxation 27.2 30.3
Overseas taxation 6.2 5.7
---- ----
33.4 36.0
---- ----
3. Earnings per share
Profit on ordinary activities after taxation 73.9 76.4
Amortisation of goodwill 8.0 -
---- ----
Profit on ordinary activities after taxation 81.9 76.4
and before goodwill ---- ----
Weighted average number of shares 431.4m 429.4m
Basic earnings per share
Before amortisation of goodwill 19.0p 17.8p
After amortisation of goodwill 17.1p 17.8p
4. 2000 final dividend
The timetable for the payment of any final dividend is:
Ex-dividend date 26 June 2000
Record date 30 June 2000
Annual General Meeting 21 July 2000
Dividend payment date 25 July 2000
5. Acquisition of Allied Electronics Inc.
Book Fair value Final fair
value at adjustments value
acquisition
Note £m £m £m
Tangible fixed assets 2.8 - 2.8
Stocks 17.8 (0.9) 16.9
Debtors 12.9 - 12.9
Creditors: amounts falling (5.8) - (5.8)
due within one year
------ ----- -----
Fair value of net assets acquired 27.7 (0.9) 26.8
------ -----
Goodwill acquired 6 214.8
-----
Cash consideration for subsidiary 241.6
undertakings -----
Allied Electronics Inc. was acquired on 2 July 1999.
The fair value adjustment represents an increase in the stock provision under
the Group's policy of provisioning and valuing stocks.
6. Goodwill arising on acquisition
The £214.8m of goodwill arising on the acquisition of Allied has been
capitalised and is being amortised over a period of twenty years. The charge
for the period from 2 July 1999 to 31 March 2000 was £8.0m.
7. Reconciliation of movements in shareholders' funds
2000 1999
£m £m
Profit for the financial year 73.9 76.4
Dividends (51.9) (45.1)
------ ------
Retained profit for the year 22.0 31.3
Translation differences (6.0) 1.7
New share capital subscribed (net of Quest) 5.2 2.3
Scrip dividends - 1.5
----- ------
Net addition to equity 21.2 36.8
Equity shareholders' funds at the beginning of the year 353.3 316.5
----- ------
Equity shareholders' funds at the end of the year 374.5 353.3
----- ------
8. Reconciliation of net cash flow to movement in net funds
2000 1999
£m £m
(Decrease) increase in cash (24.2) 6.8
Management of liquid resources (67.2) 27.1
Financing - loans (125.3) (1.3)
------- ------
Change in net funds relating to cash flows (216.7) 32.6
Translation differences 0.3 0.1
------- ------
Movement in net funds for the year (216.4) 32.7
Net funds at the beginning of the year 120.6 87.9
------- ------
Net (debt) funds at the end of the year (95.8) 120.6
------- ------
Net (debt) funds at the end of the year comprise:
Cash at bank and in hand 17.2 33.3
Overdrafts (8.2) (0.1)
Debts due within one year (25.4) (3.6)
Debts due after more than one year (103.5) (0.2)
Current asset investments 24.1 91.2
------- ------
(95.8) 120.6
------- ------
9. Principal exchange rates
2000 1999
Average Closing Average Closing
Australian Dollar 2.51 2.63 2.67 2.56
Deutschemark 3.07 3.26 2.90 2.92
French Franc 10.29 10.94 9.71 9.80
Italian Lire 3036 3228 2863 2893
Japanese Yen 178 164 213 191
US Dollar 1.61 1.60
Basis of preparation
The financial information has been prepared under the historical cost
convention and in accordance with applicable accounting standards, using the
accounting policies set out in the Annual Report for the year ended 31 March
1999.
The financial information set out above does not constitute the Group's
statutory accounts within the meaning of section 240 of the Companies Act
1985 for the years ended 31 March 2000 and 1999, but is derived from those
accounts. Statutory accounts for 1999 have been delivered to the Registrar of
Companies, and those for 2000 will be delivered following the Company's
Annual General Meeting. The auditors have reported on those accounts; their
reports were unqualified and did not contain statements under section 237(2)
or (3) of the Companies Act 1985.
Copies of the Annual Report and Accounts for the year ended 31 March 2000
will be available from 15 June 2000 from the Company Secretary,
Electrocomponents plc, International Management Centre, 5000 Oxford Business
Park South, Oxford OX4 2BH, United Kingdom. Telephone +44 (0)1865 204000. The
Report will also be published on the Corporate website at
www.electrocomponents.com.
The Annual General Meeting will be held at Electrocomponents plc,
International Management Centre, Oxford on 21 July 2000 at 12 noon.
Friday, 17th May 2024
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