16 Jun 2009 14:35
ELECTROCOMPONENTS PLC
ANNUAL REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2009
NOTICE OF 2009 ANNUAL GENERAL MEETING
In accordance with Listing Rule 9.6.1, Electrocomponents plc has today submitted two copies of each of the above documents to the UK Listing Authority which have been posted today to shareholders. These documents will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility, which is situated at:
Financial Services Authority
25 The North ColonnadeCanary WharfLondon
E14 5HS
Tel. no. + 44 (0) 20 7066 1000
The Annual Report and Accounts and Notice of Annual General Meeting, which includes explanatory notes on proposed resolutions, are also available on the Electrocomponents plc website at www.electrocomponents.com/annualreport.
The Notice of Annual General Meeting for 2009 includes a resolution to adopt a new set of Articles of Association. Explanatory notes of principle changes to the Articles of Association are set out in the Notice of Annual General Meeting, and a copy of the new Articles of Association is available for inspection at the Company's registered office.
In accordance with paragraph 6.1.2 of the Disclosure and Transparency Rules, two draft copies of the Articles incorporating the amendments to be proposed at the AGM, as per resolution 11, and to take effect from 1 October 2009, have also been submitted to the UKLA. In addition, a full set of the Articles highlighting the amendments is available for inspection until the close of the AGM at the Company's registered office.
Electrocomponents plc announced its Preliminary Results for the year ended 31 March 2009 on 29 May 2009. The Preliminary Results announcement included a summary of the Group's financial results and management report. The information contained in this announcement, together with the extracts of the statements of Related Party Transactions, Risks and Directors'
Responsibilities below, constitute the material required to be disclosed by DTR 6.3.5. This material is not a substitute for reading the full 2009 Annual report.
RELATED PARTY TRANSACTIONS
The Company has a related party relationship with its subsidiaries as disclosed in note 15 to the Group accounts and with its key management personnel. The key management personnel of the Group are the Executive Directors. Compensation of key management personnel was:
| 2009 | 2008 | |
| £m | £m | |
| Remuneration | 1.1 | 1.5 |
| Social security costs | - | 0.1 |
| Equity-settled transactions | 0.2 | - |
| Pension costs | 0.3 | 0.2 |
|
| 1.6 | 1.8 |
Details of transactions with the jointly controlled entity are given in note 15 to the Group accounts.
RS Components & Controls (India) Limited (RSCC) is a jointly controlled entity with Controls & Switchgear Company Limited, a company registered in India. The authorised share capital of this company is Rs20m, of which Rs18m is issued and owned in equal shares by Electrocomponents UK Limited and its partner. RS Components Limited supplies product and catalogues to RSCC, while office space and distribution network are provided by Controls & Switchgear. During the year ended 31 March 2009 the Group made sales of £0.9m (2008 £0.8m) to RSCC and supplied catalogues at a cost to RSCC of £0.1m (2008: £0.1m). RSCC is treated in the accounts as an associated undertaking.
RISKS
Electrocomponents has well established risk management procedures for the identification, assessment and management of risks to achieve the Group's strategic objectives.
The Board and Group Executive Committee receive regular reports covering risks and mitigating actions arising from external factors, key dependencies, project delivery and corporate responsibility factors. Our key business risks, which the Group has identified, are as follows:
Macroeconomic Environment
The uncertain economic outlook presents significant challenges to the Group's financial performance going forward.
The Group aims to mitigate and manage these effects through the close monitoring of trading environments and driving growth opportunities across the Group's markets through its electronics and maintenance offers and e-Commerce channel. The business model remains broad based with 450,000 products being sold to 1.5m customers globally with an average order value of approximately £100. The business is geographically spread operating directly in 27 countries with the International business contributing 65% of Group revenue.
Costs continue to be tightly controlled, with actions taken during the year to deliver £18m of annualised cost savings. These include a net reduction of around 500 employees which represents around 8% of the total Group headcount. The cost actions were enabled by the increasing e-Commerce channel share, strong control over discretionary spend, redistribution of activity between the Group's two UK warehouses and exploiting the benefits of the Group's systems infrastructure.
The business remains highly cash generative with significant headroom to the Group's banking covenants. The vast majority of the Group's committed facilities available at 31 March 2009 have a maturity date of September 2012.
Group Strategy Implementation
The implementation of the Group's strategy was accelerated during the year. However the risk remains that it may not deliver the expected results. To address the risk, we have focussed on developing our customer communications supported by robust customer research and dedicated sales and organisational resources.
Our priority will remain the development of the electronics and maintenance offers including accelerating new product introductions, strengthening partnerships with our key suppliers, developing our price competitiveness and exploiting the full potential of our e-Commerce platform. The recent restructuring of the regional organisations in Continental Europe and Asia Pacific will support the delivery of the strategic objectives across those markets.
Information and Communications Systems
We are dependent on the quality and resilience of our information and communications infrastructure to support our worldwide distribution business. This infrastructure underpins the Group's new product initiatives and development of the electronics strategy. A major failure affecting these systems would cause significant disruption to our operations.
The recent upgrades to business systems in Europe and Asia Pacific, including investments in resilient infrastructure, systems knowledge and regional disaster recovery provision, have significantly reduced the risks in these areas.
We will continue to improve our information and communications infrastructure with the targeted introduction of supplementary technologies to support the achievement of the Group's strategic objectives, particularly in our e-Commerce capabilities.
Pricing
To ensure our success in the market, customers must be provided with "value for money" by competitive market pricing, high service levels and effective customer communications. There is a risk that in an economic recession, the market becomes increasingly price driven with the high service business model becoming less valued by our customers.
To address this we have robust pricing frameworks in place to allow us to respond quickly to market and competitor pricing developments. During the year we reduced the prices on a significant number of electronics products to improve our competitiveness. Also the expansion of our own brand ranges further supports our ability to compete on price in the current business environment.
Our use of targeted discounting, application of the pricing model and product sourcing strategies have contributed to the gross margin increasing between the first half and second half of the year in tough market conditions. These actions aim to ensure that we will remain competitive in the current tough market conditions, whilst our service offer with products "in stock" provides us with an advantage over many of our competitors.
People
The skills, expertise and commitment of our employees are important to the success of the Group strategy. A significant risk to strategy implementation is that the business is unable to attract or retain high performing employees, or that staff are not fully engaged in the strategy.
This risk is progressively addressed through the development of our internal competencies, supplemented with new expertise through external appointments. Employee commitment is encouraged through our appraisal processes, with personal objectives being aligned in support of the strategic objectives.
Our continuous improvement initiatives encourage employee involvement in identifying and implementing changes to improve customer experience and deliver greater efficiency.
The Group Executive Committee regularly spends time considering personal development and career progression opportunities for employees in the business. The annual Group meetings also involve the wider senior management engaging further in the Group strategy.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL REPORT AND ACCOUNTS
The Annual Report contains a responsibility statement in compliance with DTR 4.1.12 signed on behalf of the Board by Ian Mason, Chief Executive Officer and Simon Boddie, Group Finance Director. This states that on 29 May 2009, the date of approval of the Annual Report, the Directors confirm that to the best of their knowledge:
We confirm that to the best of our knowledge:
The accounts, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and
The Directors' report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Ian Mason, Simon Boddie,
Group Chief Executive Group Finance Director
29 May 2009
This announcement 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.