Electrocomponents : Results for the half year ended 30 September 2017

Significant step forward in growth and profitability in H1

1. Underlying growth, unless otherwise stated, is adjusted for currency movements, in addition underlying revenue growth measures are also adjusted for trading days. Positive currency movements increased Group reported H1 revenue by around £35 million, whilst fewer trading days reduced Group revenues by around £16 million.
2. Gross margin has been re-presented: - the write-down of inventory to net realisable value had previously been included under distribution and marketing expenses, and has now been included as a cost of sales. There is no change in the underlying business and no impact on operating profit (see further details on Page 20).
3. Headline measures exclude net reorganisation costs of £3.3 million in 2018 and £0.6 million in 2017. For an explanation of these measures, see Basis of Preparation on Pages 18 to 20.
4. Positive currency movements increased headline profit before tax by around £5 million.

Financial highlights

Accelerating revenue growth

• Strong execution and a positive market backdrop drove underlying revenue growth of 13.3% (reported 16.6%).
• All five regions saw double-digit underlying revenue growth and market share gains.

Significant profitability increase whilst also investing to drive future growth

• Gross margin improved 0.6% points in H1 and we remain on track to deliver stable gross margins in the full year.
• Reported H1 PBT was £75.7m, up 38.9%, despite higher restructuring charges of £3.3m (H1 2017: £0.6m) which relates to the consolidation of our digital operations and head office into one location in London.
• Headline H1 PBT was £79.0m, up 43.4% or 31.3% on an underlying basis.
• Headline operating margin rose 1.7% points to 9.9% due to revenue growth, gross margin and cost control.

Growth in EPS and interim dividend

• Reported EPS was 12.4p up 37.8%. Headline EPS was 13.0p up 42.9% or 29.9% on an underlying basis.
• Interim dividend increased by 5% to 5.25p (2017: 5.0p).

Net Debt reduction year on year despite inventory investment to improve availability

• During H1 we increased inventory by £39.1 million to drive improved stock availability and support revenue growth, as a result headline free cash flow reduced to £17.4m (H1 2017: £61.9m).
• Despite higher investment and an increase in the dividend, net debt reduced to £124.5m (H1 2017 £140.9m).

Operational highlights

• Rolling 12-month Net Promoter Score rose by 8.4% to 43.8 demonstrating improved customer satisfaction.
• Digital marketing strategy and improved online experience drove 14% underlying growth in digital revenue.
• RS Pro underlying revenue growth of 10% in H1 with growth accelerating to 11% in Q2 versus 8% in Q1.
• Significant step forward in Asia, with all sub-regions in growth and losses reduced to £2.3 million (2017: £5.4m).
• On track to deliver £30 million of cumulative annualised cost savings by March 2018.

Current trading and prospects
We have made an encouraging start to the second half of the year, with all regions seeing continued strong underlying revenue growth in October. Our markets currently remain strong but as ever our forward visibility remains limited and our trading comparatives will toughen as the year progresses. As such, we are focused on driving market share gains by delivering an excellent customer experience and investing to support continued long-term growth of the business. We are on track to deliver annualised net cost savings of £30 million by March 2018 and work continues to identify further efficiencies in the way we do business. All these actions mean that we are well positioned to make strong progress in the current financial year.

Lindsley Ruth, Chief Executive Officer, commented:
'We delivered a strong performance in the first half with double-digit top line growth in all five of our regions, improved gross margins, and significant growth in profits. We are making good progress on our journey to become first choice for customers, suppliers and employees and the opportunity for further growth and improvement remains significant.

Today we have an energised business with real momentum, we are investing in our people, innovation and our brands and continue to focus on what our customers value. We remain committed to driving value for our shareholders and we are excited by the potential.'

Enquiries:

The results statement and presentation to analysts are published on the Electrocomponents website at www.electrocomponents.com.

Notes on financial terms:
In order to reflect underlying business performance, the Group uses a number of alternative performance measures, including headline and underlying performance measures. Comparisons of underlying revenue between periods (including by region, product group and channel) have been adjusted for currency and trading days (underlying revenue growth). For all alternative performance measures, refer to the Basis of Preparation and Principal Accounting Policies on pages 18 to 20.

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 disclosed as positive if improving profit and negative if reducing profit.

Notes to editors:
Electrocomponents, through its brands RS Components and Allied Electronics, is the global distributor for engineers. We offer more than 500,000 industrial and electronic products, sourced from 2,500 leading suppliers, and provide a wide range of value-added services to over one million customers. With operations in 32 countries, we trade through multiple channels and ship around 50,000 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.