PRELIMINARY RESULTS
Year ended 31 March 2010
2 June 2010
2
Agenda
Introduction Richard Moon
Operational review Nick Jefferies
Financial review Paul Neville
Strategy and current trading Nick Jefferies
3
A year of change and progress
Trading improves with return to profitability and growth in order book
Acquisition of BFi Optilas completed and will achieve > £4.4m p.a. (€5m) operational savings
Specialisation strategy progressively implemented across Electronics division and repositions the Group
Supply Chain stable following acquisition of SSE
Strong net cash position of £13.9m at end of March 2010
Maintained full year dividend of 7.0p (final 4.67p)
4
Agenda
Introduction Richard Moon
Operational review Nick Jefferies
Financial review Paul Neville
Strategy and current trading Nick Jefferies
5
Highlights
Second half much better than first half, return to profitability
Improving sales trends
Significant operational improvements
Positive operating cash flow, strong net cash position
BFi Optilas trading profitably from day one, integration proceeding well
Specialisation strategy making good progress
Continued trading improvement since the year end
6
Improved operating performance
H1 2009 H2 2009 H1 2010 H2 2010
Op Profit /Loss £m Sales £m
0.7
Return to profitability in second halfRecovery in volumes – 11% sequential (excluding BFi)
Benefit of cost savings made in H1
Return to year on year growthGroup Orders increased 16% in March
Group Sales increased 6% in March
Customer order pipeline up 22% (Electronics)
BFi Optilas included for 4 monthsProfitable from day one (£0.7m)Sales of £30.5m
Increasing sales, combined with decisive action to reduce operating expenses and working capital and increased gross margins, returns Group to profitability. Enhanced by BFi acquisition.
7
Improved gross margins
Gross margin increased 1.1% points year-on-year
Underlying margin stable in second half
BFi enhances Group gross margin by c.0.2%c.0.4% annualised
Specialisation strategy focuses on higher margin products
8
Reduced operating expenses
£m Operating expenses reduced by 12% on comparable basis, £5.9m year-on-year
£1.1m associated exceptional cost
H2 operating expenses maintained at H1 level despite increased volumes
Further cost reductions underway in Supply Chain
BFi expenses of £8m for the 4 months13% reduction year-on-year
Note: Operating Expenses (adjusted) are at constant exchange rates and include SSE for comparable periods
9
BFi Optilas integration proceeding to plan
Mid way through integrationPlan to complete by March 2011On track to achieve synergies p.a. > £4.4m (€5m), c.10% of combined cost base
Maintaining separate trading divisionsAcal Technology and BFi OptilasCommon warehouses, IT, F&A
Opportunities for additional revenueSelective cross selling of product offerIncreased attractiveness to new suppliers
Includes BFi on a like for like basis
10
Lower working capital
Working capital reduced by £10.1m, 38% since 31 March ’09
Reduced to 12.7% as a percentage of sales (including acquisitions)
Operating cash flow before exceptional and pension payments positive £9.5m
Specialisation strategy reduces requirements for uncommitted inventory
Working capital defined as net inventory, trade debtors plus other receivables less trade payables and other payable
£m
11
Agenda
Introduction Richard Moon
Operational review Nick Jefferies
Financial review Paul Neville
Strategy and current trading Nick Jefferies
12
Profit and Loss Account
£m H1 FY10 H2 FY10 FY 10 FY09 Change
Revenue- Existing- Acquisition – BFi
71.5
71.5
79.630.5
110.1
151.130.5
181.6
165.4
165.4
-8.6%
+9.8%
Gross Margin 27.4% 27.6% 27.6% 26.5% +1.1%
Operating (loss) / profit (adjusted) (1.7) 1.2 (0.5) 0.4
Exceptional items (0.4) (4.3) (4.7) (33.1)
Finance (cost)/income (excluding IAS19) (0.2) - (0.2) 0.5
(Loss) / profit before tax (adjusted) (1.9) 1.2 (0.7) 0.8
Loss before tax (2.7) (3.6) (6.3) (32.6)
Taxation (0.1) (0.2) (0.3) (4.4)
Basic loss per share excluding exceptional items (9.5p) 1.3p (8.2p) (3.8p)
Dividends per share relating to period 2.33p 4.67p 7.0p 7.0p
Operating performance (H2)
- Sales improvement (+11%)- Gross margin improvement (+0.2pts)- Operating expense reduction
Interest charge- H2 reduced to zero
Tax charge- Small charge reflects profits in UK and
unrelieved losses in mainland Europe. - £24m losses to c/fwd
EPS H2 to profit of 1.3p per share reducing loss for year to 8.2p per share
Dividend maintained at 7p per share
13
Divisional results - sales
£m H1 FY10
H2 FY10 FY10 FY09
AbsoluteChange
UnderlyingChange
Electronics (Acal) 39.4 42.5 81.9 103.7 -21.0% -23.5%
BFi 30.5 30.5
Electronics Total 39.4 73.0 112.4 103.7
Supply Chain 29.2 32.8 62.0 54.2 14.4% -5.6%
Medical 2.9 4.3 7.2 7.5 -4.0% -7.7%
Revenue (reported)
Revenue (exc. BFi)H2 on H1 increase
71.5
71.5
110.1
79.6
11.3%
181.6
151.1
165.4
165.4
9.8%
-8.6% -16.3%
H2 on H1 sales increase excl BFi of 11.3%- Electronics 8% excl BFi- Supply Chain 12%- Medical 48%
Year on year underlying decline 16.3%Absolute decline 8.6%
FX impact 2.5%
SSE acq’n in Jan 09 5.2%
Underlying decline 16.3%
Underlying revenue reflects:Electronics- Market decline 16%- Loss of Linear Tech franchise 8%
Supply Chain 6%Medical 8%
14
Divisional results – adjusted operating profit
£m H1 FY10 H2 FY10 FY10 FY09
Electronics (Acal) (1.5) 0.6 (0.9) 0.9
BFi 0.7 0.7
Electronics Total (1.5) 1.3 (0.2) 0.9
Supply Chain 0.6 0.6 1.2 1.1
Medical 0.3 0.5 0.8 1.0
Unallocated costs (1.1) (1.2) (2.3) (2.6)
Adjusted operating (loss)/ profit (1.7) 1.2 (0.5) 0.4
H2 operating profit of £1.2m reduces full year operating loss to £0.5m
- All divisions profitable in H2
Electronics profit in H2 of £1.3m includes £0.7m BFi for 4 months
- Sales in H2 increased 8% on H1- Opex reduced during year by £4.7m (18%)
Supply Chain profit up £0.1m
- Underlying sales 6% down after adj for SSE acquisition in prior year
Medical H2 improvement on H1 but delayed NHS expenditure gives lower full year result than prior year
Adjusted operating profit – operating profit before share-based payments, amortisation of intangible assets and exceptional items
15
Exceptional operating items
£m FY 2010
FY2009
Integration restructuring costs 2.4 -
Other restructuring costs 1.9 2.6
Goodwill impairment 0.3 41.8
Sale of investment in MessageLabs 0.1 (15.9)
Other - (0.8)
Operating exceptionals 4.7 27.7
Integration restructuring costs primarily relate to provision for closure of Netherlands warehouse and other office closures as well as certain termination costs
-Total synergy savings forecast p.a. > £4.4m (€5m)
Other restructuring costs relate to;- Expense reductions £1.1m- Director terminations /other £0.8m
Goodwill relates to impairment of ATM Parts Company Ltd in Supply Chain division
16
Balance sheet
£m 31 March2010
31 March 2009
Var
Prop, plant & equip 3.9 4.7 (0.8)
Intangible assets 16.5 15.0 1.5
Working capital 30.8 26.7 4.1
Tax (including deferred) (0.2) (2.6) 2.4
Provisions (7.5) (4.0) (3.5)
Pensions (5.5) (5.7) 0.2
Net cash 13.9 24.5 (10.6)
Net assets 51.9 58.6 (6.7)
Movements in net assets: £’m
Loss after tax (6.6)
Translation differences (0.6)
IAS 19 / LTIP (0.2)
Purchase of MI (0.4)
New share capital 2.7
Dividends (1.6)
(6.7)
• Balance sheet reflects BFi acquisition and maintains strong net cash balance of £13.9m
• Working capital – underlying reduction (31 March 2010 includes £14m for BFi)
• Provisions include certain synergy provisions for exceptional costs
17
Pension Update
IAS 19 pension liability £5.5 million (31 March 09: £5.7 million)
Update on Fund Actuarial Valuation
Triennial actuarial valuation at Dec 2009 agreed at £11.2m deficit (previous estimate £15m)
New funding from 1 April 2010
- for two years at reduced 50% rate of £0.65m from 1 April 2010
- followed by further 10 years starting at £1.5m indexed by 3% p.a. to £2.0m for y/e 2022
18
Working capital balances
Working capital- Underlying reduction of £8.6m (32%)
Inventories
- £8.0m (32%) reduction since 31 March 09
- Electronics reduced by 48% since 1 Jan 09
- Turns increased from 5.3 to 7.5
Receivables- Group Days Sales Outstanding maintained at 51 days
-Excluding BFi reduced by 5 days to 46 days
Working Capital as % of sales
Working capital as % of sales- Including BFi annualised is12.7% due to larger European debtors
19
Movement in net cash
£mFY10
Underlying FY10 FY09
Operational cash flow 5.2 8.2 (2.4)
Capital expenditure less disposals 0.3 (0.8) (1.2)
Proceeds from sale of investments 1.0 - 15.1
Acquisitions (11.7) - (4.4)
Interest (net)/associate dividends (0.2) (0.2) 0.8
Dividends paid (1.6) (2.0) (4.8)
Tax (3.1) (0.7) (3.4)
Net cash flow (10.1) 4.5 (0.3)
Exchange /other 0.5 (0.8)
Debt acquired (1.0) -
Net cash movement (10.6) (1.1)
Opening cash 24.5 25.8
Net cash at 31 March 13.9 24.5
Underlying net cash flow before exceptionals positive of £4.5m
20
Financial highlights
Strong net cash position at £13.9m
Operating cash inflow before pension and exceptionals of £9.5m
Underling net cash inflow of £4.5m
Working capital reduced giving significantly improved KPI’s
Triennial pension deficit valuation and funding resolved satisfactorily
21
Agenda
Introduction Richard Moon
Operational review Nick Jefferies
Financial review Paul Neville
Strategy and current trading Nick Jefferies
22
Strategy – Building Europe’s leading specialist electronics distributor
Competitive landscapeHigh Volume,Low Gross Margin
Global High ServiceRS, Farnell
Digikey
Global High VolumeArrowAvnetFuture
European SpecialistAcal / BFi Optilas
Low Volume,High Gross Margin
GM<10%
GM 30%
GM 50+%
Group Strategy
1. Specialised distributionDifferentiated, market niches
2. Higher marginsAvoids commodities
3. EuropeanInfrastructure scale
4. Organic and acquisitive growthComplementary Electronics
DifferentiatorsOperate in market nichesProduct rangeCustom value addTechnical knowledge of staff
General components Specialist components & systems
23
Operating in multiple niche markets
Magnetics & Power
Custom power solutions
EMI Shielding
Magnetic Components
Thermal Interface
Communication
RF & MW Components
Fibreoptic components
Wireless Modules
Imaging
IR Thermal Imagers
High Speed cameras
Modules
Software
Electromechanical
Cabling and assemblies
Advanced Connectors
Photonics
Lasers & DiodesOptics & Optical-MechanicsLaser Beam AnalysisScanners & ModulationSpectroscopyPhotometry
Speciality Semiconductors
Reprogrammable FPGAs
Solid state storage
Microcontrollers
Microsystems
Single board computers
Server blades
I/O boards
Sensors
Sensors & Transducers
Accelerometers
Rotary Signal Transmitters
24
Group profile has changed significantly with the acquisition of BFi Optilas
Before BFi With BFi
Electronics division accounts for 72% of Group sales
Increasing further since year end
Electronics maintains separate trading divisionsAcal TechnologyBFi OptilasOperating on one infrastructure
Six month sales Oct 09 to March 10
25
Electronics – Balanced geographic profile
With BFiBefore BFi
Common Group strategyDirection & objectivesEuropean business unitsLocal implementation
Six month sales Oct 09 to March 10
26
Strategy implementation – making progress one year on
The Electronics strategy is:
Increasing specialist product sales 55% 57% 78%(as a proportion of total)
Balancing product mix 33% 29% 21%(proportion of largest product group)
Building sales outside UK 54% 57% 70%
Increasing gross margin 26.5% 27.4% 27.8%(Group gross margin including Electronics)
Acal last yearYr ended Mar 09
Acal nowYr ended Mar 10
Acal+ BFi* nowYr ended Mar 10
* BFi included pro rata for 12 months
27
Electronics returning to growth
Pipeline of customer orders up 22% (at 31 March 2010)
Low point June 2009 (including acquisitions)
Further increase since year end
Growth rates will slow as comparator improvesSecond half
Includes acquisitions on a like for like basis
28
Current trading
Continued improvement in Group trading since year end
Sales increased by c.18% (underlying)
Supply Chain exit from major customer contract
Electronics division continues to improveSales increased by c.20%Continued strong customer order pipeline
Group underlying trading
Q1 FY10 = April + May 2009, Q1 FY11 = April + May 2010
Includes BFi on a like for like basis
29
Summary
Specialisation strategy creates clear competitive position by focusing on multiple niche markets
Implementation of strategy making good progress
Acquisition of BFi brings clear benefits, integration proceeding to plan
Improving sales trends and growing order book
Continued trading improvements since the year end
30
Appendices
31
Cost reductions
Overheads - £mFY10
FY 09 Underlying
(Reduction)/increase
VarianceExchange
VarianceOther
FY09Reported
Electronics excl BFi 21.9 26.6 (4.7) (1.0) - 25.6
Electronics incl BFi 29.9
Supply Chain 16.5 17.7 (1.2) (0.1) (3.8) 13.8
Medical 1.9 1.6 0.3 (0.1) - 1.5
Head Office 2.3 2.6 (0.3) - - 2.6
Total including BFi 50.6
Total excluding BFi 42.6 48.5 (5.9) (1.2) (3.8) 43.5
• Group savings of £5.9m (at constant exchange with comparable SSE), primarily in Electronics and Supply Chain
- Electronics 18% reduction, Supply Chain 7% reduction
• Further reductions in FY11 for synergies and Supply Chain restructuring
32
Operating cash flow
£m FY10 FY09
Operating loss before exceptionals (0.8) 0.3
Depreciation and amortisation 1.5 1.9
Working capital 8.6 (0.8)
Movement in provisions /other 0.2 (0.4)
Operating cash flow before pension and exceptionals 9.5 1.0
Pensions (1.3) (1.3)
Exceptional cash flows (3.0) (2.1)
Operating cash flow 5.2 (2.4)
Underlying operating flow before exceptionals and pension payments £9.5m
Operating cash flow positive at £5.2m compared to prior year outflow