MAKE MORE ELECTROCOMPONENTS - Full-year results for the year ended 31 March 2019
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ELECTROCOMPONENTS
Full-year results for the
year ended 31 March
2019
MAKE MORE
21 May 2019
2019 Full-year Results
POSSIBLE
SAFE HARBOUR This presentation 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. Front cover The image on the front cover represents Hyperloop, a futuristic transport system. RS Components is a major sponsor of the University of Edinburgh’s team, HYPED, in the 2019 SpaceX Hyperloop Pod Competition to revolutionise terrestrial transportation. 2019 Full-year Results 2
OVERVIEW
Above market,
8.3% like-for-like(1) Adjusted(2) 20.8% like-for-like(1)
sustainable growth and revenue growth, operating profit growth in adjusted
strong execution continuing to drive margin rose to profit before tax
share gains in 11.7% aided by and 26.8% growth
large, fragmented higher gross margin in adjusted
market and cost control earnings per share
Further IESA acquisition Continuing to
improvement in performing well – generate attractive
customer strong double-digit return on capital
experience – revenue growth employed of 27.7%
Group NPS(3) up and accretive to
5.1% Group margin
(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 2018 converted at 2019 average exchange rates. Revenue is also adjusted to eliminate the impact of
trading days year on year.
(2) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, asset
write-downs, one-off pension credits or costs, significant tax rate changes and associated income tax.
2019 Full-year Results (3) Rolling 12-month Net Promoter Score – a measure of customer satisfaction. 3
AGENDA
David Egan
CFO
1 FINANCIAL RESULTS
2 REGIONAL PERFORMANCE
Lindsley Ruth
3 HOW WE CAN CONTINUE TO DISRUPT AND CEO
ACCELERATE
4 CURRENT TRADING & OUTLOOK
2019 Full-year Results 4
1 FINANCIAL RESULTS Significant progress 2019 Full-year Results
FINANCIAL HIGHLIGHTS
Strong revenue growth > Improving profitability > EPS and dividend growth >
Like-for-like(1) revenue growth (%) Adjusted(2) operating profit (£m) Adjusted(2) EPS (p)
37.0
11.6 220.3 28.4
8.9 8.3 177.1
20.8% 26.8%
(1)
RS Pro Digital Group 2018 2019 Like-for-like change 2018 2019 Like-for-like(1) change
Gross margin (%) Adjusted(2) operating profit margin (%) Full-year dividend per share (p)(3)
14.80
44.0 44.5 11.7 13.25
10.4
0.2 pts 1.1pts 11.7%
(1) (1)
2018 2019 Like-for-like change 2018 2019 Like-for-like change 2018 2019 Change
Significant growth in profit and earnings per share
(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 2018 converted at 2019 average exchange rates. Revenue
is also adjusted to eliminate the impact of trading days year on year.
(2) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, asset write-downs, one-off pension credits or costs, significant tax rate changes and
associated income tax.
2019Proposed
Full-year Results 6
(3) full-year dividend to be approved at the AGM.
DRIVING OPERATIONAL EXCELLENCE – GROSS MARGIN
Progress > Going forward >
0.5 percentage point improvement to 44.5% Long term our aim remains to drive stable and where possible
– 0.4 percentage point accretion from acquisitions improved gross margin to support the delivery of our target of
mid-teen adjusted operating profit margin:
– 0.1 percentage points dilution from translational foreign
exchange Improving product mix:
– New product introductions at RS PRO
– 0.2 percentage point like-for-like improvement
– Driving faster growth in single-board computing via OKdo
Like-for-like improvement driven by our own actions to:
could provide offset
– Grow higher-margin products, strong growth at RS PRO
Controls and process – discipline on discounting
– Improve discount discipline – good progress at Allied
Dynamic pricing tool to be rolled out in APAC, the Americas
– Enhance pricing – dynamic pricing tool rolled out in EMEA Smarter purchasing – global sourcing initiatives
Continued focus on driving profitability
2019 Full-year Results 7
DRIVING OPERATIONAL EXCELLENCE – OPERATING PROFIT MARGIN
Operating profit margin
We are focused on driving towards a best-in-class mid-teen adjusted operating profit margin
Revenue growth, higher gross margin and improvement in adjusted operating profit conversion ratio to 26.3% (2018: 23.6%) drove a
1.3 percentage point improvement in adjusted operating profit margin to 11.7% (2018: 10.4%)
10.4% 0.2% 2.4% 0.2% (0.7)% (0.6)% (0.3)% 0.2% (0.1)% 11.7%
14%
13%
Adjusted operating
12%
profit margin
11%
10%
9%
8%
7%
6%
FY18 Acquisitions Revenue Gross Margin Inflation Digital People PIP 2 Other FY19
Growth
Disciplined investment – During 2019 adjusted operating costs
Revenue growth and gross margin grew at 5.7% on a like-for-like basis. 60% of the increase related to
improvement – Market growth and inflation and volume increases. The majority of the balance was
market share gains, plus improving driven by increased investment in digital, talent and innovation
product mix offset by the £4 million PIP 2 savings Adjusted operating costs as a
percentage of revenue fell to 32.8% (2018: 33.6%)
2019 Full-year Results 8SUMMARY INCOME STATEMENT
Highlights £m 2019 2018
Revenue saw a benefit from currency
(£1.3 million) and extra trading days Reported Adjustments Adjusted(1) Reported Adjustments Adjusted(1)
(£8.4 million)
Revenue 1,884.4 - 1,884.4 1,705.3 - 1,705.3
Net finance costs increased to £6.1 million
(2018: £4.0 million) Operating profit 201.0 19.3 220.3 172.6 4.5 177.1
Adjusted PBT excludes:
– £13.1 million primarily labour-related restructuring
Net finance costs (6.1) - (6.1) (4.0) - (4.0)
costs
Share of profit of JV 0.3 - 0.3 - - -
– £4.4 million amortisation of intangible assets arising
on acquisitions
Profit before tax 195.2 19.3 214.5 168.6 4.5 173.1
– £1.8 million one-off pension costs
2019 adjusted effective tax rate of 24% Income tax expense (47.1) (3.6) (50.7) (19.0) (28.8) (47.8)
(2018: 28%)
Profit for the period 148.1 15.7 163.8 149.6 (24.3) 125.3
Earnings per share (p) 33.4 3.6 37.0 33.9 (5.5) 28.4
(1) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, asset write-downs,
one-off pension credits or costs, significant tax rate changes and associated income tax.
2019 Full-year Results 9CASH FLOW
Highlights £m 2019 2018
Cash generated from operations increased EBITDA 232.9 198.4
to £184.2 million (2018: £168.9 million) Add back impairments and (profit) / loss on disposal of
2.3 1.7
Working capital as a percentage of sales non-current assets
increased by 2.0 percentage points to 22.2% Movement in working capital (64.8) (38.5)
– 0.8 percentage points of increase related to
acquisitions Movement in provisions 5.9 1.9
– Balance relates to investment in additional inventory Other 7.9 5.4
2019 capex was 1.8 times depreciation Cash generated from operations 184.2 168.9
(2018: 1.0 times) Net interest paid (6.1) (4.2)
Adjusted operating cash flow conversion(1)
Income tax paid (50.8) (37.8)
64.2% (2018: 83.1%)
Net debt increased to £122.4 million (2018: Net cash from operating activities 127.3 126.9
£65.0 million). Net debt to adjusted EBITDA of Net capital expenditure (50.8) (24.2)
0.5x (2018: 0.3x)
Free cash flow 76.5 102.7
Additional short-term investment of around
£26 million in fast-moving inventory in H2 to Add back cash effect of adjustments(2) 8.0 2.4
ensure we can maintain customer service Adjusted free cash flow 84.5 105.1
during the UK’s exit from the EU (1) Adjusted operating cash flow conversion is adjusted free cash flow before income tax and net interest paid as a percentage of adjusted
operating profit.
(2) Adjusted excludes the impact of substantial reorganisation cash flows.
2019 Full-year Results 102 REGIONAL PERFORMANCE We are focused on growing market share 2019 Full-year Results
REGIONAL PERFORMANCE – EMEA
Highlights Like-for-like(1)
£m 2019 2018
8.5% like-for-like revenue growth change
– Over two-thirds of growth market share gains
Northern Europe revenue 529.5 454.3 9.7%
– All sub-regions showing growth
Leadership and talent Southern Europe revenue 367.7 344.8 6.1%
– New country leaders in Italy, Spain and Austria
– Continued investment in talent
Central Europe revenue 265.1 238.8 10.3%
Driving new customer growth
– Brand awareness and digital marketing driving
customer count
Emerging markets revenue 47.7 45.6 5.0%
Growing our share of customer wallet
– Improvement of 5.5% in NPS
EMEA revenue 1,210.0 1,083.5 8.5%
– Strong growth in value-added solutions in
Northern Europe EMEA operating profit 193.5 161.0 16.2%
– Sales effectiveness training across region
16.2% like-for-like operating profit growth EMEA operating profit margin 16.0% 14.9% 0.9 pts
and further improvement in operating
(1) Like-for-like adjusted for currency and to exclude the impact of acquisitions; revenue also adjusted for trading days.
profit margin to 16.0%
Significant market share gains driving growth
2019 Full-year Results 12REGIONAL PERFORMANCE – Americas
Highlights Like-for-like(1)
£m 2019 2018
8.6% like-for-like revenue growth change
– Half market / half share gain
Revenue 483.6 440.8 8.6%
– Moderation in market growth in H2
Adding new customers Operating profit 62.1 51.4 19.4%
– Increased brand awareness and digital marketing
Selling more to existing customers Operating profit margin 12.8% 11.7% 1.1 pts
– Improved customer experience, NPS up 2.3%
– Range expansion – 25,000 new stocked products,
7,000 new RS PRO products online
– Focus on sales force effectiveness
Gross margin improvement
– Discount discipline
– RS PRO growth
19.4% like-for-like growth in operating profit,
further improvement in operating profit
margin to 12.8% (1) Like-for-like adjusted for currency; revenue also adjusted for trading days.
Strong growth, gross margin improvement and tight cost control
2019 Full-year Results 13REGIONAL PERFORMANCE – Asia Pacific
Highlights Like-for-like(1)
£m 2019 2018
6.2% like-for-like revenue growth change
– Market share gains: Australia / New Zealand,
South East Asia Revenue 190.8 181.0 6.2%
– Digital performance issues impacting growth in
China / Japan Operating profit / (loss) 3.0 (0.9)
We have fixed many of the basics
Operating profit / (loss) margin 1.6% (0.5)% 2.4 pts
– Customer experience NPS up 12.3%
– Improved efficiency - migrating activities into our
shared business centre of expertise in Foshan
We need to build our capabilities to be
successful in China and Japan
– Building leadership and capabilities - appointed
new leader for Greater China May 2019
– Working to improve local online experience
– Building local offer
Region now profitable – we will continue
to drive greater scale and are focused on
(1) Like-for-like adjusted for currency; revenue also adjusted for trading days.
improving our local offer
Profitable, building capabilities to drive faster growth
2019 Full-year Results 143 HOW WE CAN CONTINUE TO DISRUPT AND ACCELERATE 2019 Full-year Results
A SIGNIFICANT MARKET OPPORTUNITY
c.£300bn
Our market today Global Our market is large $155bn
Electronic Global A&C (4)
Large & highly fragmented component and highly market
market fragmented. We Source: Business
Our customers are looking for Source: Wire
DiscoverIE have significant
fewer partners:
scope to grow
– Digital partner market share $880bn
>$140bn US MRO (1) &
– One-stop shop US MRO (1) organically and via OEM (5) market
– Value-added solutions
Source: WESCO
market
Source: Fastenal
acquisition
Our competition
– Largely offline c.$1 trillion
US B2B (3)
– Small and regional e-commerce
c.$608bn c.£400bn market $343bn
– Single product / niche focus Global MRO (1)
Global MRO (1), Source: Forrester Semiconductor
HSE (2) market Research and IP&E (6)
(1) MRO is Maintenance, Repair and Operations. market Source:
Source: W.W. market
(2) HSE is High Service Electronics. Electrocomponents
Grainger Source: Avnet
(3) B2B is Business-to-Business.
(4) A&C is Automation and Control.
(5) OEM is an Original Equipment Manufacturer.
(6) IPE is Interconnect, Passive and Electromechanical.
Top 50 players represent around 30% of the global market
2019 Full-year Results 16WHAT WE HAVE DONE SO FAR
What? Key benefits? Outcome
1 Focused back on the customer 1 RS NPS(1), a measure of customer satisfaction,
has risen 34% since September 2015
2 Significantly accelerated digital 2 70,000 more visitors to our site each day than in
investment to around 4% of 2017, digital revenue growth of 9% in 2019 vs 6%
revenue per annum in 2015
Market share gain and
3 Further enhanced our offer 3 RS PRO, value-added solutions, OKdo, RS
Electronics margin improvement
4 Transformed leadership 4 New leaders for all three of our regions and six
out of eight of our sub-regions
5 Stabilised gross margin 5 Three consecutive years of gross margin
improvement
6 Improved efficiency and begun 6 11pts improvement in adjusted operating profit
to build lean and scalable model conversion over last 4 years
(1) NPS is defined as the rolling three-month RS Net Promoter Score.
(2) CAGR is defined as the compound annual growth rate.
2015-2019 like-for-like revenue CAGR(2) of 7% and adjusted operating profit CAGR(2) of 27%
2019 Full-year Results 17SUCCESSFULLY DRIVING MARKET SHARE
Strong revenue growth across board > Increasing average order value across existing and new customers >
Like-for-like revenue growth %
700,000 £200
Average order value (AOV) – we are
selling more to our customer base…
650,000 £190
Average order value
EMEA 8.5 Digital marketing
step-up
Customers
600,000 £180
Americas 8.6
550,000 £170
…and growing our customer count via
digital and more effective marketing
500,000 £160
Apr
Feb
Feb
Aug
Apr
Apr
Feb
Apr
Feb
Oct
Dec
Aug
Oct
Dec
Aug
Oct
Dec
Aug
Oct
Dec
Jun
Jun
Jun
Jun
Asia Pacific 6.2
FY2016 FY2017 FY2018 FY2019
Estimated market growth Estimated market share gains Average order value (AOV) B2B customer numbers
When we are first choice, our research shows customers spend 25% more with us
2019 Full-year Results 18WE HAVE SIGNIFICANT SCOPE TO ADD MORE CUSTOMERS
20 200,000
We have >170k customers in the
Multiple of UK manufacturing GDP
UK today and that number
continues to grow 15 150,000
Customers
Our customer count in the UK is
– > 2x that of the US 10 100,000
– > 2.5x that of Germany
5 50,000
– > 8x that of China
Manufacturing GDP shows the
market opportunity in these 0 0
territories is a multiple of that of UK Germany Japan US China
the UK Manufacturing GDP(1) Number of customers
Even in our largest market, the UK, our market share remainsAND TO SELL MORE TO CUSTOMERS BY GOING BROADER & DEEPER
Limited range Part range Full range
Competitors
Becoming first choice Using Europe as an example
BLE Industrial
Our customers are short of time and are 1 2 3 4 5 6 7
looking to consolidate their supplier base Semiconductors
BLE Passives
Our suppliers are looking for a partner Connectors
who can show more of their range
Electrical / Enclosures
Controls
Mechanical
We can sell more to our customer IA&C
Fluid Power
base Sensors & Switches
Cable
Deeper range – show more of our
Test & Measure
suppliers range either on a stocked or
Electromechanical
non-stocked basis IIT
Interconnect
Broader range – expand into new PPE
categories which our customers buy Hand tools
today from our competition Power tools
(1) BLE is Board-level electronics. TCFM Janitorial
(2) IA &C is Industrial automation & control.
(3) IIT is Industrial interconnect and test. Consumables
(4) TCFM is Tools, consumables and facilities maintenance.
Private label
The prize is large – we have significant scope to grow customer numbers and sell more to existing customers
2019 Full-year Results 20WHAT WE ARE DOING
Differentiating to disrupt Actions and investment Benefits
1 Digital leadership
Ease of use Continued investment in
‘Faster than real-time’ Digital leadership (around 4% of revenue Sustainable market share
Personalised per annum)
gains > 2x market growth
2 Transformation of our technology Increased capital expenditure
Scalable c. £20 million investment in
Product and content excellence
– Unrivalled choice – broader & deeper
Data and insight Progress towards
range focused on product and
3 Best-in-class supply chain content excellence
Scalable and automated
mid-teen adjusted
Customer centric – Transformation of our technology operating profit margin
4 Unrivalled choice c. £60 million investment to
Broader and deeper range
– Expand & automate supply chain –
Stocked and non-stocked
German distribution centre expansion Returns broadly
5 Value-added solutions
Design Continued rollout of consistent with
Procurement and inventory Value-added solutions across the globe – Group ROCE
management minimal investment required
Maintenance
We are focused on where we can go over the next five years
2019 Full-year Results 21DIGITAL LEADERSHIP
What? Key benefits?
Brand awareness: we are building our
brands to drive more traffic to our sites
Digital marketing: we are also investing in 1 Faster traffic growth
pay per click and search engine
optimisation
Mobile: we are investing to drive a Growing our customer
best-in-class mobile experience
count and improving
Website speed: we will continue to work to Best-in-class online experience – driving
make our sites faster and easier to use
2
improved conversion
average order size
Search: we are making it easier for our
customers to find the products they need
Data and personalisation: we will use our
data to personalise a customer’s online
3 Growth in average order value
journey – showing relevant products,
bundles and solutions
How we can continue to disrupt and accelerate
2019 Full-year Results 22TRANSFORMATION OF OUR TECHNOLOGY
What? Key benefits?
We are investing to future proof and simplify Future proofing our technology
our technology estate with focus in the
Scalability
following areas
Simplification – allowing us to make change
User experience – agile teams working on
quicker and more efficiently
search, mobile, website speed,
personalisation Flexibility
Product and content management Medium-term efficiencies
solution
To support growth and
Supply chain – DC management systems
drive improved returns
Data and technology infrastructure –
upgrades and replacement of legacy
systems
How we can continue to disrupt and accelerate
2019 Full-year Results 23BEST-IN-CLASS SUPPLY CHAIN
What? Key benefits?
Americas DC expansion on track for Scalability: ensuring we have the right capacity in
completion in summer 2020 the right place to support our five-year growth
plan
– > 2x capacity
Improved customer service
– Highly automated
New capabilities: in areas such as electronics,
Initiating two-year c. £60 million project to value-added solutions
expand German DC
Increased automation: Auto-pack, automated To support growth and
– > 2x capacity storage and retrieval improving DC efficiency
drive improved returns
– Highly automated Savings: We expect savings in areas such as
freight and labour as a by-product of our
– Will become replenishment hub for initiatives in this area
EMEA
Lean continuous improvement
Transport optimisation
How we can continue to disrupt and accelerate
2019 Full-year Results 24UNRIVALLED CHOICE
What? Key benefits?
We are building capabilities and Ability to sell our customers more
infrastructure to significantly scale our
range of products and solutions Improved data and content capabilities
Giving the Group scope to double our – Enhance customer experience
stocked range and significantly expand – Data driven decision making
our non-stocked range to offer broader
choice to customers Faster, automated product introduction
More efficient management of inventory and risk
Higher share of
How?
customer spend
Build a scalable product data
architecture – product information
management and document
management solution for EMEA / APAC
DC expansion
How we can continue to disrupt and accelerate
2019 Full-year Results 25VALUE-ADDED SOLUTIONS
Our brands Our solutions
What? Design tools
We are focused on making our Design OKdo design, prototyping and
customers’ lives easier cloud services
We are enhancing our range of solutions
across design, procurement, inventory eProcurement
management and maintenance phases
of our customers’ journey through the Procurement Purchasing manager
product lifecycle
We are expanding our current solutions
across the globe as well as looking for Store management
further opportunities to introduce new Inventory Vending solutions
solutions to customers management
ScanStock
Calibration
Maintenance Condition-monitoring
Predictive maintenance / IIoT(1)
(1) IIoT is Industrial Internet of Things.
How we can continue to disrupt and accelerate
2019 Full-year Results 264 CURRENT TRADING AND OUTLOOK Well positioned to show good progress in current financial year 2019 Full-year Results
AN ENCOURAGING START TO 2020
We have continued to April like-for-like revenue trends moderated to low
see like-for-like single-digit growth, impacted by holidays. However, May
revenue growth in the has started encouragingly with Group like-for-like revenue
growth closer to the trends seen during Q4 2019
first seven weeks of the
EMEA (64% of revenue) continues to see strong growth and
first half.
market share gains, more than offsetting softness in the
We remain confident of Americas (26% of revenue). Asia Pacific (10% of revenue) is
delivering another year seeing similar trends to Q4
of good progress. We are tightly managing our operating costs, while
investing to drive longer-term growth
We remain confident of delivering another year of good
progress
2019 Full-year Results 28IN A NUTSHELL
1 2 3 4
UNIQUELY POSITIONED IN DRIVING MARKET BUILDING A LEAN AND STRONG CASH AND
ATTRACTIVE MARKET SHARE GAINS SCALABLE MODEL ATTRACTIVE RETURNS
Global player in large fragmented marketplace We aim to grow at two times the market, driving We have made good progress to date High cash conversion
‒ Market valued at c. ￡400 billion share gains by: ‒ Stabilised and improved gross margin Reinvest cash to build scale and drive faster
‒ Market growing at GDP + Growing customer count ‒ Adjusted operating profit margin increase of growth
‒ Top 50 players account for c. 30% of the global ‒ Become first choice; grow promoter base 5.0 percentage points since 2015 Progressive dividend policy
market ‒ Drive more traffic to websites In the future we aim to drive scalability and lower Accelerate strategy via disciplined value-accretive
Uniquely positioned to take market share ‒ Increase online conversion by improving our cost to serve by: acquisitions to:
‒ One of few global players experience ‒ Simplifying technology estate ‒ Drive market share gains
‒ Leader in digital Selling more to existing customers ‒ Increasing the use of automation in supply ‒ Add new product verticals
‒ Providing one-stop shop for customers ‒ First choice customers spend 25% more chain ‒ Accelerate value-added solutions offer
‒ Scale range and add new product verticals ‒ Rolling out global shared services and
‒ Rollout value-added solutions proposition automation
‒ Sell the full offer; improve sales effectiveness Long-term aspiration is to achieve a mid-teen
adjusted operating profit margin
Mid-teen > 80%*
c. £400bn 2x adjusted operating profit margin adjusted operating cash flow
market opportunity market growth rate target conversion
* Our aim post-investment in strategic initiatives in
2020 and 2021.
2019 Full-year Results 295 Q&A Thank you for your continued interest in Electrocomponents 2019 Full-year Results
6 APPENDIX 2019 Full-year Results
BASIS OF PREPARATION
Unless otherwise stated:
Figures have been prepared using International Financial Reporting Standards as adopted by the
European Union
Adjusted measures of profitability and cash flow exclude amortisation of intangible assets arising on
acquisition of businesses, substantial reorganisation costs, asset write-downs, one-off pension credits
or costs, significant tax rate changes and associated income tax
Like-for-like change excludes the impact of acquisitions and the effects of changes in exchange
rates on translation of overseas operating results, with 2018 converted at 2019 average exchange
rates. Revenue is also adjusted to eliminate the impact of trading days year on year
Changes in profit, cash flow, debt and share-related measures such as earnings per share are,
unless otherwise stated, at reported exchange rates
Sign conventions: % changes in revenue and costs are positive if improving profit and negative if
reducing profit
A net charge of £19.3 million (2018: £4.5 million) was reported for items excluded from adjusted
profit before tax
2019 Full-year Results 32GUIDANCE POINTS
Trading days
Foreign exchange
Expect around £7 million positive
impact on revenue from additional Currency movements decreased 2019 adjusted profit before tax by
trading days in the year to March 2020 £0.1 million
Other guidance points If May rates persist we would expect around a £0.4 million benefit to
adjusted profit before tax in the full year *
Capex – c. £80 million in both 2020 and
2021 – capital expenditure to depreciation
of around 2.7x in both years
Inventory turn: similar to 2019
Foreign exchange rates (average for the period)
2020 effective tax rate: similar to 2019
Cash tax: In 2020 we will see around 2019 rates 2018 rates 2019 rates*
£11 million impact from timing of UK tax
payments
Euro 1.13 1.13 1.14
Remain committed to a progressive
dividend policy. In the normal course the
USD 1.31 1.33 1.28
interim dividend will be equivalent to 40%
of prior year full-year dividend
* 2019 adjusted profit before tax converted at 2020 forecast average rates, using 17 May 2019 closing rates extrapolated for rest of year.
2019 Full-year Results 33PERFORMANCE HAS BEEN GOOD BUT WE HAVE ROOM TO IMPROVE
Adjusted operating profit (£m) Return on Capital Employed (ROCE)
Over the last four years
performance has been good but 95.9 104.0
116.3
we still have room for 75.5 81.2
28.6%
57.7 27.7%
improvement 33.8
48.2 26.4%
25.2%
We have made a good step
22.0%
forward on customer experience
H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 H1 19 H2 19
and financial performance 17.6%
We have outperformed our Adjusted earnings per share (p) 14.5%
13.4%
market by digitally acquiring new
customers and driving a higher
share of wallet with existing 15.4 17.2
19.8
customers 9.1
11.9 13.0
7.4
We need to pick up the pace of 5.2
change if want to drive scale and
become the disruptor in our H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 H1 19 H2 19 H1 16 FY16 H1 17 FY17 H1 18 FY18 H1 19 FY19
market place
(1) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, asset write-downs,
one-off pension credits or costs, significant tax rate changes and associated income tax.
(2) ROCE is adjusted operating profit for 12 months expressed a percentage of net assets excluding net debt and retirement benefit obligations.
We are focused on where we can go over the next five years
2019 Full-year Results 34GROUP FINANCIAL HIGHLIGHTS
(£m) H1 2018 H1Like-for-
2017
2019 2018 Change like
Adjusted cash generated from operations 45.5 82.1
change
Revenue (£m) 1,884.4 1,705.3 10.5% 8.3%
Net interest paid (2.5) (2.6)
Gross profit (£m) 838.6 749.8 11.8% 9.2%
Income tax
Adjusted paid profit (£m)
operating 220.3 177.1 (16.2)24.4% (9.2)
20.8%
Adjusted
AdjustedPBT
net(£m)
cash inflow from operating activities214.5 173.1 26.823.9% 20.8%
70.3
Adjusted EPS (p) 37.0 28.4 30.3% 26.8%
Net capital expenditure (9.4) (8.4)
Adjusted free cash flow (£m) 84.5 105.1 (19.6)%
Adjusted (1) free cash flow
Net debt (£m) 122.4 65.0 17.4 61.9
Outflow related to restructuring (0.7) (3.0)
Like-for-like revenue growth (%) 8.3 12.8
Free cash flow post restructuring 16.7 58.9
Gross margin (%) 44.5 44.0 0.5 pts 0.2 pts
Net debtoperating profit margin (%)
Adjusted 11.7 10.4 (124.5)
1.3 pts (140.9)
1.1 pts
Adjusted operating profit conversion (%) 26.3 23.6 2.7 pts 2.5 pts
Adjusted operating cash flow conversion (%) 64.2 83.1
Net debt to adjusted EBITDA (x) 0.5 0.3
Return on capital employed (%) 27.7 28.6
2019 Full-year Results 35KEY PERFORMANCE INDICATORS
KPI changes 2019 2018 Change
Like-for-like revenue growth (%) 8.3 12.8
We have changed our Net
Group Net Promoter Score 54.0 51.4 5.1%
Promoter Score from RS to Group
Adjusted operating profit conversion (%) 26.3 23.6 2.7 pts
We have changed Group Lost
Time Accident frequency to All Adjusted operating profit margin (%) 11.7 10.4 1.3 pts
Accidents Adjusted EPS (p) 37.0 28.4 30.3%
Return on capital employed (%) 27.7 28.6
Adjusted operating cash flow conversion (%) 64.2 83.1
All Accidents 56 59
Driving an improved performance for
customers, suppliers and shareholders
2019 Full-year Results 36ADJUSTED OPERATING COSTS
Cost discipline
Like-for-like adjusted operating cost growth of 5.7%, less than revenue growth of 8.3%. Adjusted operating cost as percentage
of revenue fell to 32.8% (2018: 33.6%)
Improvement in adjusted operating profit conversion to 26.3% (2018: 23.6%)
Like-for-like change 2.3% 1.0% 2.1% 0.9% 0.1% (0.7)%
Adjusted operating cost (£m)
630
620
610
600
590
580
570
560
550
FY18 Acquisition Inflation Volume Digital People Other PIP Saving FY19
Inflation – 2.3% inflationary rises in Volume-related costs – During 2019 we Disciplined investment – We continue to
wages saw higher variable costs driven by invest in digital and talent to support future
revenue growth revenue growth
2019 Full-year Results 37NET DEBT MOVEMENTS
Strong balance sheet £m 2019 2018
Net debt rose to £122.4 million, with Net debt at 1 April (65.0) (112.9)
the increase largely due to the Adjusted free cash flow(1) 84.5 105.1
acquisition of IESA and associated
Acquisition of businesses (34.6) -
loans
Cash and cash equivalents acquired with businesses 1.3 -
In May 2018 the Group arranged a
Loans and finance leases acquired with businesses (42.1) -
new flexible two-year loan, which is
now £75 million Cash effect of adjustments(1) (8.0) (2.4)
Net debt: EBITDA 0.5x (2018: 0.3x) Equity dividends paid (58.9) (55.4)
New shares issued 2.6 1.7
Purchase of own shares by Employee Benefit Trust (2.3) (3.5)
Pension Translation differences 0.1 2.4
Net debt at 31 March (122.4) (65.0)
Combined deficit £83.6 million
(1) Adjusted excludes the impact of substantial reorganisation costs.
(March 2018: £72.4 million)
2019 Full-year Results 38IMPACT OF FOREIGN EXCHANGE
Translation Exposure Euro and USD movements to Sterling € to £ $ to £
Reported profit sensitivity to a one
1.50
cent movement in:
1.40
– Euro: £1.4 million 1.30
– USD: £0.5 million 1.20
1.10
1.00
Transaction Exposure
Group treasury maintains 3-7 month hedging to smooth impact of currency
movements
Key exposures: net buyer of US dollars, net seller of euros and other currencies
Gross margin impacted over time from weakening in sterling versus:
– USD: negative impact
– Euro and other currencies: positive impact
2019 Full-year Results 39You can also read
