ECM.L Regulatory News (ECM)

6 Nov 2006 07:01

Electrocomponents PLC06 November 2006 INTERIM STATEMENT Electrocomponents plc, the major international high service distributor ofelectronic, electrical and industrial supplies, today announces its results forthe half year ended 30 September 2006. SUMMARY RESULTS H1 2006/07 H1 2005/06Revenue £422.4m £396.8mProfit before tax - headline* £36.3m £35.3mProfit before tax - reported £35.6m £33.6mEarnings per share - headline 5.5p 5.4pEarnings per share - basic 5.4p 5.2pInterim dividend per share 5.8p 5.8p* Growth in headline profit before tax, adjusted fortrading days 16% HIGHLIGHTS OF THE FIRST HALF * The strong revenue growth of our International business has continued with first half growth of 15% and all regions showing double digit growth. International revenue is now almost 60% of the Group.* The UK has returned to revenue growth and the new strategic direction is being implemented.* The headline profit growth, adjusting for the £4m impact of there being fewer trading days this half year, was 16%.* Further progress has been made on the Electronic and Electromechanical (EEM) strategy with the roll out of the Allied extended range to Asia Pacific, and the highly successful launch of leading-edge wireless and displays technologies in Europe.* The percentage gross margin was flat compared with the second half of the last financial year, after allowing for the change in business mix, due to the strong growth of our North American business with its lower gross margin.* Good operating cost leverage has been achieved in the International business and contribution increased by £4m.* Actions taken to reduce the cost base will achieve annualised savings of £6m out of the planned total of £10m by 2008. This includes £1m per annum benefit from the sale of the Head Office, which will also generate a £10m cash inflow in the second half.* The upgrade of the French enterprise business system was successfully concluded in September.* The interim dividend is maintained at 5.8p per share. FOCUS FOR THE SECOND HALF * Roll out EBS across the European markets.* Continue to deliver more EEM strategy initiatives; October 2006 has seen a significant increase in the range of EEM products available in the new catalogues in the major European markets.* Implement the MRO strategy focused initially on the UK.* Continue implementation of the cost reduction plans. Enquiries:Ian Mason, Chief Executive Electrocomponents plc 0207 567 8000*Simon Boddie, Finance Director Electrocomponents plc 0207 567 8000*Diana Soltmann Flagship Consulting Ltd 0207 886 8440 * Available to 15:00 on 6 November, thereafter 01865 204000 The results and analyst presentation are published on the corporate website atwww.electrocomponents.com. Definitions of terms: In order to reflect underlying business performance,comparisons of revenue between periods have been adjusted for exchange rates andthe number of trading days. Changes in profit, cash flow, debt and share relatedmeasures such as earnings per share are at reported exchange rates. Enterprise Business System (EBS): In order to make clear the costs of the EBSproject and the underlying performance of the business, EBS costs have beendisclosed separately. Therefore, unless explicitly stated, measures based onoperating costs, contribution and process costs exclude EBS. Headline profit: A charge of £0.7m (2005/06: £1.7m) was incurred in the halfyear for items excluded from headline profit. Details of the items are givenbelow the Income Statement. Key performance measures such as return on sales andEBITDA use headline profit figures. Where profit growth is shown adjusted forthere being fewer trading days the adjustment is made to the prior year. Safe Harbour: Our interim statement contains certain statements, statistics andprojections that are or may be forward-looking. The accuracy and completeness ofall such statements, including, without limitation, statements regarding thefuture financial position, strategy, projected costs, plans and objectives forthe management of future operations of Electrocomponents plc and itssubsidiaries is not warranted or guaranteed. These statements typically containwords such as "intends", "expects", "anticipates", "estimates" and words ofsimilar import. By their nature, forward-looking statements involve risk anduncertainty because they relate to events and depend on circumstances that willoccur in the future. Although Electrocomponents plc believes that theexpectations reflected in such statements are reasonable, no assurance can begiven that such expectations will prove to be correct. There are a number offactors, which may be beyond the control of Electrocomponents plc, which couldcause actual results and developments to differ materially from those expressedor implied by such forward-looking statements. Other than as required byapplicable law or the applicable rules of any exchange on which our securitiesmay be listed, Electrocomponents plc has no intention or obligation to updateforward-looking statements contained herein. CHAIRMAN'S STATEMENT Introduction In the first half of this year, the Group has shown good progress in improvingits financial performance. Sales growth was 9% and headline profit growth,adjusting for the £4m impact of there being fewer trading days this half year,was 16%. Sales growth in the International business remained at the high level of 15%experienced in the second half of the last financial year with all regionsshowing double digit growth. It is also pleasing to see that the UK has returnedto growth of 1%, benefiting from the new strategic direction being implemented. Gross margin was flat compared with the second half of the last financial year,after allowing for the change in business mix, due mainly to the strong growthof Allied, our North American business, with its lower gross margin. Good operating cost leverage has been achieved in the International businesswhere contribution increased by £4m. Where costs increased, they were generallyin customer facing areas and were closely linked to the strategy implementation. Overall, in my first few months with Electrocomponents, I have been impressed byhow this well-focused Group and its committed employees are determined to raisethe performance of the business. Strategic Development This is the second year of our 3 year strategic development plan and goodprogress has continued to be made in implementing the strategy. The implementation of the EEM strategy has continued. Allied products have beenmade available in Asia Pacific and the launch of leading edge wireless anddisplays technologies in Europe has been highly successful. The Group continues to focus on the roll out of its Enterprise Business System(EBS) to the rest of Europe with the successful upgrade in France having takenplace in the first half. The Group has implemented actions to achieve over £6m p.a. of cost savings andfurther actions are planned to deliver the rest of the 2007/08 target of £10mp.a. cost savings. Interim Dividend The interim dividend has been maintained at 5.8p. When the 3 year strategicdevelopment plan was announced in May 2005, the Board decided that, assumingthere was no substantial deterioration in economic conditions, it shouldmaintain the current level of dividend for the following three years. Board During the half year, three Directors left the Group. Dieter Lennertz and KevinAbbott left in July, whilst Bob Lawson, the former Chairman, retired in Octoberafter 26 years with the business. Throughout this time, Bob made an enormouscontribution to the Group and provided the leadership needed to grow theInternational business to its current size. On behalf of the Board, I wish toexpress our thanks to Bob, Dieter and Kevin. Current Trading and Outlook In October, Group revenue growth has been around 9% year on year. Growth in ourInternational business was around 15% and the UK growth was around 1%. In the second half of the financial year, the Group will focus on delivering asuccessful European EBS implementation. The Board is confident of deliveringprofit growth through implementing the new strategy. Helmut Mamsch, Chairman6 November 2006 OPERATING REVIEW Progress on 3 Year Plan In May 2005, the Group announced a 3 year plan to substantially improve thefinancial performance of the Group. This plan comprised three key elements: * Focus separately on two distinct customer groups (EEM and MRO)* Implement the Enterprise Business System (EBS)* Create a lower cost infrastructure We are now half way through the three year period and good progress has beenmade with all three elements. Electronic and Electromechanical (EEM)The Group competes for EEM customers across the product lifecycle, from researchand development (R&D), through pre-production and small scale production, tomaintenance. The business supplies a broad range of products and is a primarysupplier for customers' product needs. The market for low volume component distribution is around £12bn worldwide plusthe value of electromechanical and other associated 'pull through' products.This market is highly fragmented and the proportion served by distribution isgrowing with R&D customers and new technologies driving this growth. The Grouphas only around 3% of the global low volume distribution market so there aresignificant growth opportunities for the Group across the world. The EEM market is currently undergoing fundamental change, with the geographicalseparation of R&D from production, technology proliferation and increasing useof the e-Commerce channel. This is creating a more fragmented customer base withdifferent requirements. Customers increasingly demand technology solutions aswell as individual products and need more product support. The Group's offer is ideally suited to these customers by providing an economicway to serve these needs and leveraging the core strengths of the RS brand. Inthis way, RS is building a differentiated and attractive competitive position toserve the EEM market. The main elements of our EEM strategy implementation are to: * focus the business on EEM by recruiting new skills to the Group and creating a new EEM division and sales teams* improve our offer for R&D engineers through updating our component ranges, widening product availability and new technology solutions beyond the wireless and displays range that was launched successfully in the main European markets in the first half* develop our pre-production sales model with pilots underway in Europe* develop new capabilities needed to serve EEM customers Early results of these actions have been positive. Sales of the extended rangeof 75,000 products from Allied (our North American company) have grown stronglymonth on month. This range of EEM products was launched in the major Europeanmarkets last financial year, rolled out to Asia Pacific during the half year andwill be made available in the other European markets in the second half.Similarly, the web-only wireless and displays launch was highly successful andthe range was included in the October catalogues. Maintenance, Repair and Operations (MRO)Our MRO offer is aimed primarily at maintenance engineers at the end of theproduct lifecycle. These customers value a broad range of products andtechnologies and they view RS as a secondary supplier of these products, as weare particularly strong at fulfilling convenient or urgent needs for infrequentor hard-to-find products. The largest MRO business within the Group is in the UK and this business isdeveloping the MRO strategy on behalf of the Group. The main elements of our MRO strategy are to: * focus on existing strong technologies within MRO with the creation of a Process Control and Automation (PCA) operating unit and the offer of an extended PCA range from key suppliers* rationalise the MRO support product range starting with a planned 20% reduction in the UK* increase the proportion of RS own-brand products in the UK by 30%* build maintenance related services such as the UK Call and Collect facilities We are achieving strong PCA growth in the UK and Europe. Common ActionsThese EEM and MRO strategies build upon RS core strengths of broad productrange, reliable delivery, order facilitation and broad customer base. They alsobenefit from increased price flexibility via larger order promotions andtargeted discounts for large customers. These programmes are supported by common infrastructure, processes and systemsincluding EBS and e-Commerce. e-Commerce, which represented 26% of Group sales in the first half, is a key enabler of the strategy implementation allowing theglobal availability of web-only products coupled with rapid price and offer changes. Consequently, the Group continues to invest in and develop the e-Commerce channel with an improved search facility, a more relevant offer to EEM and MRO customers and an enhanced large customer offer through e-Procurement. Enterprise Business System (EBS)The Enterprise Business System is supporting the UK business, France and theInternational supply activities well. During the half year, there was an updateto bring France onto the same EBS version as the UK. This was achievedsuccessfully. The roll out of EBS to the other European businesses remains on schedule and isexpected to be largely complete by the end of this financial year. The EBSsystem was successfully rolled out to China in October. The European roll out is a major focus for the second half and, although itpresents a significant challenge, we are confident of success. The timing of theroll out of EBS to Allied in North America is still to be determined and will beconsidered after the completion of EBS in Europe and the warehouse move in NorthAmerica, which is scheduled for mid 2007/08. Following the European roll out, the Group will focus on the delivery ofbenefits, including higher stock turn in Europe from regional inventoryplanning, the enablement of further cost savings and increased revenue. InfrastructureDuring the half year, the Group has achieved good cost leverage in allInternational regions, driven by strong sales growth and cost reductioninitiatives. In 2005/06, actions were taken to deliver £4.4m of annualised cost savings. Inthe first half of 2006/07, action was taken to deliver further cost savings of£0.9m with a reorganisation cost of £0.7m. In September, the sale of the International Management Centre building in Oxfordwith an associated move to a smaller rented building was agreed. The move willgenerate a cash flow benefit of around £10m in the second half of the financialyear. The lower running costs of the new building and interest benefit on thecash received will give an annualised benefit of around £0.8m per year. As part of the 3 year plan, the Group plans to achieve infrastructure savings of£10m p.a. through cost reduction initiatives by 2007/08. To date, actions havebeen taken to deliver annual cost savings of £6.1m, including the Head Officesaving. Financial PerformanceThe headline profit before tax was £36.3m, up £1.0m from last year. Thisincrease has been driven by five main factors. The contribution of theInternational business has increased by £3.5m and EBS costs have reduced by£2.5m. Against this, UK contribution has declined by £2.4m, process costs haveincreased by £1.4m and interest has increased by £1.2m. The profit growth was16%, after adjusting for the £4m impact of there being fewer trading days thishalf year, principally as a result of the timing of Easter relative to the yearend. Revenue for the Group increased by 9.0% to £422.4m. The International businessgrew at 15.5% and the UK business returned to growth at 0.9%. Growth in theInternational business was maintained at the same high level as the second halfof the last financial year with Europe growing at 10.3%, North America at 24.1%and Asia Pacific at 18.8%. Revenue via e-Commerce grew by 21% and now accountsfor 26% of Group revenue. Gross profit increased by £7.7m over the first half of last year. Gross marginwas flat compared with the second half of last year, after allowing for thechange in geographic mix caused by the particularly fast growth of the lowermargin North American business. Market contribution increased to £87.7m from £86.6m in the first half of lastyear. The increase in International (up £3.5m) has been partially negated by thefall in the UK (down £2.4m). Headline EBITDA increased by £3.9m (8.2%) to £51.6m. Process costs have increased to £41.1m from £39.7m last year but have reduced asa percentage of revenue from 10.0% to 9.7%. The cost increase is caused, inpart, by the higher sales demand. EBS costs were £7.8m, £2.5m below last yeardue to the European EBS roll out being focused on the second half. The interest charge was £2.5m, up £1.2m on the first half of last year due toincreased net debt. Closing net debt was £151.2m, £30.4m higher than last yearend. The financial ratios remain strong with interest cover of around 15 times. Reported profit before tax was £35.6m, up from £33.6m last year due to the £1.0mincrease in headline profit before tax and £1.0m lower reorganisation costs.Free cash flow was £12.2m, down £5.9m on last year due largely to the previouslyannounced higher capital expenditure on the North American warehouse and thereduction in creditors from the unusually high level in September 2005 whichrelated to the EBS go-live. Group H1 2006/07 H1 2005/06Revenue £422.4m £396.8mGross margin 50.7% 52.0%Contribution £87.7m £86.6mGroup process costs (£41.1m) (£39.7m)EBS costs (£7.8m) (£10.3m)Headline operating profit £38.8m £36.6mInterest (net) (£2.5m) (£1.3m)Headline profit before tax £36.3m £35.3mHeadline earnings per share 5.5p 5.4pInterim dividend per share 5.8p 5.8p Key performance indicatorsGroup H1 2006/07 H1 2005/06Group sales growth 9.0% 2.9%International 15.5% 8.7%UK 0.9% (3.6)%Headline Group return on sales 8.6% 8.9%Headline EBITDA (1) £51.6m £47.7mFree cash flow £12.2m £18.1m(1) Earnings before interest, tax, depreciation and amortisation Gross marginGroup gross profit increased by £7.7m year on year. Gross margin was 50.7% inthe period for the Group, being 1.3% points below the prior year. In the UK, the gross margin was 53.3%, level with the first half of last year.The majority of the selling price realignment has now been completed and thebusiness is getting the benefits of the action taken to reduce product coststhrough better buying. In the International business, where gross profit increased by £9.0m, grossmargin has been reduced by 2.2% points from the first half of the last financialyear. This was due to price realignment actions and increased customer and largeorder discounts in Europe and Asia Pacific as well as the geographical miximpact of the rapid North American revenue growth. In North America, grossmargin continues to be stable at around 36%. The Group is focused on driving gross profit through the implementation of theEEM strategy, increasing large customer and larger order business and reducingproduct cost. Costs will be reduced by better buying, rationalising the MROproduct range and increasing the sales of higher margin RS own-brand product. Inthe second half of the financial year the International business will benefitfrom the actions taken to reduce product cost that were seen in the UK earlierbecause of its higher stock turn. The Group gross margin was flat compared with the second half of the lastfinancial year, after allowing for the change in business mix, due mainly to thestrong growth of our North American business with its lower gross margin. International H1 2006/07 H1 2005/06Revenue £248.7m £220.5mRevenue growth % 15.5% 8.7%Gross margin 48.8% 51.0%Operating costs % of revenue (31.7)% (33.3)%Contribution £42.5m £39.0m% of revenue 17.1% 17.7% The International business now accounts for 59% of Group revenue and 48% ofGroup contribution. It comprises Continental Europe (53% of the revenue in theInternational business), North America (31%) and Asia Pacific (16%). Revenuegrowth, at 15.5%, remained at the high level experienced in the second half ofthe last financial year. All of the regions delivered double digit revenuegrowth in the period. There has been good cost leverage with costs as a percentage of sales reducingby 1.6% points with improvements in all regions. Contribution has increased by£3.5m (9.0%) in the period with all regions increasing contribution. Continental Europe H1 2006/07 H1 2005/06Revenue £132.6m £122.8mRevenue growth % 10.3% 5.1%Contribution £27.3m £27.1m% of revenue 20.6% 22.1% Continental Europe includes eight businesses. France, Germany and Italy are thelarger businesses, together comprising around 75% of regional revenue. Thesmaller businesses (Austria, Benelux, Ireland, Scandinavia and Spain) comprisethe remainder. All of the businesses have had revenue growth in the period and, in particular,growth has been maintained at double digit level in the larger markets. Thisgrowth has been supported by the EEM strategy implementation, in particular therevenue from the Allied extended range and from the increased flexibilityoffered to customers for larger orders. In addition, there has been more sharingof best practice between the European markets and the successful joint suppliermarketing programme from Allied has been adopted. e-Commerce is an important enabler of the strategy, and its success isillustrated by the fact that e-Commerce revenue is up 30% on the first half of last year and now represents 31% of total revenue. Despite the rise in revenue, and the local cost leverage, the contribution as a% of revenue has fallen 1.5% points from last year due to the reduction in grossmargin. North America H1 2006/07 H1 2005/06Revenue £77.7m £64.1mRevenue growth % 24.1% 14.0%Contribution £11.3m £8.6m% of revenue 14.5% 13.4% The revenue in Allied (our North American business) has continued to growstrongly at 24.1%. e-Commerce revenue was 9% of total revenue. This is the sixthhalf year in succession with revenue growth of more than 10%. Over a three yearperiod, sales have increased by around three quarters and the contribution hasmore than doubled. The growth strategy is working with the reinforcement of the strong network of55 branches providing the local presence that our North American customersvalue, and increased sales training and technical knowledge. The expansion ofour product range with additional key brands and the decision to improve theservice levels offered to customers has also had a positive impact. The new warehouse and office remains on track (go-live mid 2007/08) and onbudget (£22m in capital expenditure). Contribution as a percentage of revenue has increased by over 1% point in theperiod. Asia Pacific H1 2006/07 H1 2005/06Revenue £38.4m £33.6mRevenue growth % 18.8% 12.6%Contribution £3.9m £3.3m% of revenue 10.2% 9.8% Revenue growth in the Asia Pacific region has increased to 18.8%. e-Commercerevenue was 27% of total revenue, including 56% in Japan. In China, where revenue grew by 21% over the first half of last year, the growthacceleration plans have started with the driving of the Same Day Offer and thesuccessful EBS implementation in October 2006. The Chinese equivalent of RoHS isto be introduced in March 2007 and we are planning for this introduction. Revenue in South Asia grew by 42% over the first half of last year. Economicindicators are positive, particularly in Singapore and Malaysia. The new salesoffice in Thailand and the Allied extended range availability have alsocontributed to the growth. Revenue growth in Japan has continued to recover with growth of 16% followingthe weaker performance in the first half of last year. The Group plans to leasemore warehouse space to cope with this additional growth. In Australasia, revenue growth was 7% despite the weak industrial growth in thecountry. Contribution as a % of revenue in the region improved by 0.4% points. United Kingdom H1 2006/07 H1 2005/06Revenue £173.7m £176.3mRevenue growth % 0.9% (3.6)%Gross margin 53.3% 53.3%Operating costs % of revenue (27.3)% (26.3)%Contribution £45.2m £47.6m% of revenue 26.0% 27.0% The aim of the UK business is to generate a sustainable profit and enable futuregrowth. The UK business is moving from a 'one size fits all' offer to two targetedoffers: EEM and MRO. These two targeted offers will be supported by commonsystems, processes and infrastructure. The UK will adopt the Group EEM strategy and will develop the MRO strategy onbehalf of the Group. This will involve two sales forces (EEM and MRO), and onecatalogue with two distinct books. The UK will become an increasinglyweb-centric business with, in the medium term, more than 50% of its revenuebeing through the e-Commerce channel. The web will allow a more dynamic offer tocustomers. The UK will exploit EBS benefits to reduce its operating costs and itwill move towards a continuous improvement and change orientated culture. The UK business, supported by EBS, has returned to revenue growth (of 0.9%) andmaintained its gross margin with the success of the larger order business andkey account wins. e-Commerce revenue increased to 30% of total revenue. Contribution was £45.2m, down £2.4m on the first half of last year. Thecontribution as a percentage of revenue has fallen by 1% point to 26.0% due tothere being fewer trading days, principally as a result of Easter, and anincrease in costs of around 2%. Restriction of Hazardous Substances (RoHS)RoHS is a European Directive introduced in July 2006 for components used inproduction. It has become a de facto world standard. The Group offers around100,000 RoHS compliant products in Europe and around 100,000 in North America.All new products introduced into the Group are RoHS compliant. The Group is currently dual stocking around 2,000 products where there has beensignificant demand for both compliant and non-compliant product. The net impact on sales has not been significant. EBS financial impactEBS costs were £7.8m in the first half compared with £10.3m in the first half oflast year. Within this, depreciation increased by £2.7m to £5.3m, while projectand local business costs declined by £5.2m to £2.5m following the UKimplementation. The expected full year cost, in the low £20m's, is againweighted towards the second half, in line with the planned roll out in the restof Europe in the second half. The cash flow impact of EBS in the first half was £8.3m, a reduction of £2.5mfrom the prior year. PensionsThe Group has defined benefit pension schemes in the UK, Ireland and Germany,all of which are now closed to new entrants and have been replaced by definedcontribution schemes. All other schemes are defined contribution. Under IAS 19, the defined benefit schemes showed a combined deficit of £41.8m at31 March 2006 of which the deficit in the UK scheme was £35.0m. As at 30September 2006, the estimated deficit of the UK scheme was £36m, based onsubstantially similar assumptions to those used at the year end. Ian Mason, Group Chief ExecutiveSimon Boddie, Group Finance Director 6 November 2006 Group Income Statement 6 months to 6 months to Year to 30.9.2006 30.9.2005 31.3.2006 (unaudited) (unaudited) (audited) Note £m £m £m __________ __________ __________Revenue 1 422.4 396.8 828.5 __________ __________ __________Gross profit 214.0 206.3 426.4 Operating profit 38.1 34.9 68.5Financial income 5.3 2.3 6.9Financial expenses (7.8) (3.6) (10.3) __________ __________ __________Profit before tax 1 35.6 33.6 65.1 Income tax expense 2 (12.1) (11.1) (21.5) __________ __________ __________Profit for the periodattributable to equityshareholders 23.5 22.5 43.6 __________ __________ __________Earnings per share - Basic 3 5.4p 5.2p 10.0pEarnings per share - Diluted 3 5.4p 5.2p 10.0p DividendsAmounts recognisedin the period:Final dividend for the yearended 31 March 2006 4 12.6p 12.6p 12.6pInterim dividend for the year ended 31 March 2006 4 - - 5.8p __________ __________ __________ An interim dividend of 5.8p per share has been recognised since the period end. Headline profit Headline operating profitOperating profit 38.1 34.9 68.5Provision for RoHS - - 4.0Reorganisation costs 0.7 1.7 3.7 __________ __________ __________ 38.8 36.6 76.2 __________ __________ __________Headline profit before taxProfit before tax 35.6 33.6 65.1Provision for RoHS - - 4.0Reorganisation costs 0.7 1.7 3.7 __________ __________ __________ 36.3 35.3 72.8 __________ __________ __________ Group Statement of Recognised Income and Expense Note 6 months to 6 months to Year to 30.9.2006 30.9.2005 31.3.2006 (unaudited) (unaudited) (audited) £m £m £m __________ _________ __________Foreign exchange translationdifferences 6 (6.5) 8.3 11.6Actuarial gain on definedbenefit pension schemes 6 - - 4.2Gain (loss) on cash flow hedges 6 2.2 0.3 (1.0)Tax on items taken directly toequity 6 - - (1.3) __________ _________ ___________Net income recognised directlyin equity (4.3) 8.6 13.5Profit for the period 23.5 22.5 43.6 __________ _________ ___________Total recognised income andexpense for the periodattributable to equityshareholders before openingbalance sheet adjustment 19.2 31.1 57.1Opening balance sheetadjustment: adoption of IAS32and IAS39 - 0.9 0.9 __________ _________ __________Total recognised income andexpense for the periodattributable to equityshareholders 19.2 32.0 58.0 __________ _________ ___________ Group Balance Sheet 30.9.2006 30.9.2005 31.3.2006 (unaudited) (unaudited) (audited) Note £m £m £m ____________ _________ __________Non-current assetsIntangible assets 201.3 203.8 208.2Property, plant and equipment 104.8 112.4 112.8Investments 0.3 0.2 0.3Trade and other receivables 2.7 2.5 3.2Deferred tax asset 17.3 18.2 17.5 ____________ _________ __________ 326.4 337.1 342.0 ____________ _________ __________ Current assetsInventories 162.9 157.3 158.6Trade and other receivables 157.1 148.0 162.3Income tax receivables 1.5 0.3 1.0Assets held for sale 5 8.5 - -Cash and cash equivalents 16.6 58.2 39.4 ____________ _________ __________ 346.6 363.8 361.3 ____________ _________ __________Current liabilitiesTrade and other payables (119.6) (120.5) (123.5)Loans and borrowings (34.1) (22.8) (23.0)Tax liabilities (13.9) (12.8) (13.3) ____________ _________ __________ (167.6) (156.1) (159.8) ____________ _________ __________Net current assets 179.0 207.7 201.5 ____________ _________ __________Total assets less currentliabilities 505.4 544.8 543.5 ____________ _________ __________ Non-current liabilitiesTrade and other payables (6.5) (11.1) (7.8)Retirement benefit obligations (40.5) (45.9) (41.8)Loans and borrowings (133.7) (131.7) (137.2)Deferred tax liability (22.7) (21.6) (20.3) ____________ _________ __________Net assets 302.0 334.5 336.4 ____________ _________ __________EquityCalled-up share capital 43.5 43.5 43.5Share premium account 38.4 38.4 38.4Retained earnings 220.1 252.6 254.5 ____________ _________ __________Total equity available to theshareholders of the parent 6 302.0 334.5 336.4 ____________ _________ __________ Group Cash Flow Statement 6 months to 6 months to Year to 30.9.2006 30.9.2005 31.3.2006 (unaudited) (unaudited) (audited) Note £m £m £m ____________ _________ __________Cash flows from operatingactivitiesProfit before tax 35.6 33.6 65.1Depreciation and other 12.8 11.1 24.1amortisationEquity settled transactions 1.2 1.6 2.7Finance income and expense (net) 2.5 1.3 3.4 ____________ _________ __________Operating profit before changesin working capital, interestand taxes 52.1 47.6 95.3Increase in inventories (8.8) (12.7) (12.8)Decrease (increase) in tradeand other receivables 5.4 (0.1) (14.6)(Decrease) increase in tradeand other payables (8.8) 12.6 13.2 ____________ _________ __________Cash generated from operations 39.9 47.4 81.1Interest received 5.3 2.3 6.8Interest paid (7.8) (3.6) (10.1)Income tax (8.0) (13.8) (25.8) ____________ _________ __________Operating cash flow 29.4 32.3 52.0 Cash flows from investingactivitiesCapital expenditure andfinancial investment (17.2) (14.2) (25.1) ____________ _________ __________Net cash used in investingactivities (17.2) (14.2) (25.1) ____________ _________ __________Free cash flow 12.2 18.1 26.9 ____________ _________ __________Cash flows from financingactivitiesLoans 15.3 28.9 28.7Dividends paid (54.8) (54.8) (80.0) ____________ _________ __________Net cash used in financingactivities (39.5) (25.9) (51.3) ____________ _________ __________Net movement in cash and cashequivalents (27.3) (7.8) (24.4) ____________ _________ __________Cash and cash equivalents atthe beginning of the period 38.0 62.6 62.6Effects of exchange rates oncash 1.4 1.8 (0.2) ____________ _________ __________Cash and cash equivalents atthe end of the period 7 12.1 56.6 38.0 ____________ _________ __________ Basis of Preparation and Principal Accounting Policies Electrocomponents plc (the "Company") is a company domiciled in the UK. TheGroup interim financial statements as at, and for, the six months ended 30September 2006 comprise the Company and its subsidiaries (together referred toas the "Group") and the Group's interests in jointly controlled entities. The Group financial statements for the year ended 31 March 2006 are availableupon request from the Company's registered office at International ManagementCentre, 5000 Oxford Business Park South, Oxford, OX4 2BH. The comparative figures for the financial year ended 31 March 2006 are not theCompany's statutory accounts for that financial year. Those accounts have beenreported on by the Company's auditors and delivered to the registrar ofcompanies. The report of the auditors was (i) unqualified, (ii) did not includea reference to any matters to which the auditors drew attention by way ofemphasis without qualifying their report, and (iii) did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. Statement of complianceThese interim financial statements have been prepared in accordance withInternational Accounting Standards. They do not include all of the informationrequired for full annual financial statements, and should be read in conjunctionwith the Group financial statements for the year ended 31 March 2006. These interim financial statements were approved by the Board of Directors on 6November 2006. Significant accounting policiesThe accounting policies applied by the Group in these financial statements arethe same as those applied by the Group in its financial statements for the yearended 31 March 2006. Estimates and judgementsThe preparation of interim financial statements requires management to makejudgements, estimates and assumptions that affect the application of accountingpolicies and the reported amounts of assets and liabilities, income and expense.Actual results may differ from these estimates. The significant judgements made by management in applying the Group's accountingpolicies and the key sources of uncertainty were the same as those that appliedto the Group financial statements as at 31 March 2006. We view the onlysignificant judgement made in the financial statements for the year ended 31March 2006, surrounds the capitalisation of the Enterprise Business Systemasset. During the development of the software, judgements were required as towhether expenditure met the criteria for capitalisation in IAS38. In December2005, the Enterprise Business System was implemented successfully in the UK and,in the half year, there was an update to bring France on to the same version asthe UK. Notes to the Interim Statement 6 months to 6 months to Year to 30.9.2006 30.9.2005 31.3.2006 (unaudited) (as restated) (audited) (unaudited)1 Segmental Reporting £m £m £m By geographical destinationRevenue: United Kingdom 166.7 169.4 339.9 Continental Europe 135.4 124.9 272.5 North America 76.9 63.2 135.9 Asia Pacific 43.4 39.3 80.2 ____________ _________ _________ 422.4 396.8 828.5 ____________ _________ _________By geographical originRevenue: United Kingdom 173.7 176.3 353.6 Continental Europe 132.6 122.8 267.9 North America 77.7 64.1 137.5 Asia Pacific 38.4 33.6 69.5 ____________ _________ _________ 422.4 396.8 828.5 ____________ _________ _________Profitbeforetax: United Kingdom 45.2 47.6 96.9 Continental Europe 27.3 27.1 59.9 North America 11.3 8.6 19.2 Asia Pacific 3.9 3.3 7.2 ____________ _________ _________ Headline contribution 87.7 86.6 183.2 Group process costs (41.1) (39.7) (81.9) Enterprise Business System costs (7.8) (10.3) (25.1) ____________ _________ _________ Headline operating profit 38.8 36.6 76.2 Net financial expense (2.5) (1.3) (3.4) ____________ _________ _________ Headline profit before tax 36.3 35.3 72.8 Provision for RoHS - - (4.0) Reorganisation costs (0.7) (1.7) (3.7) ____________ _________ _________ 35.6 33.6 65.1 ____________ _________ _________ The results for the 6 months to 30 September 2005 have been restated to includeJapan within Asia Pacific rather than reporting it as a separate segment as thisreflects the increasing alignment of the Group's management of these businesses.Profit before tax has also been restated to show the costs relating to theEnterprise Business System separately. The impact of this is: 6 months to Restatement 6 months to 30.9.2005 as 30.9.2005 as originally stated restated £m £m £m Headline contribution 85.1 1.5 86.6Group process costs (48.5) 8.8 (39.7)costsEnterprise Business System costs - (10.3) (10.3) ____________ _________ _________Headline operating profit 36.6 - 36.6 ____________ _________ _________ Within headline contribution theregional impact is: United Kingdom contribution 46.5 1.1 47.6Continental Europe contribution 26.7 0.4 27.1 ____________ _________ _________ 6 months to 6 months to Year to 30.9.2006 30.9.2005 31.3.2006 (unaudited) (unaudited) (audited)2 Taxation on the profit of the Group £m £m £m United Kingdom taxation 5.3 4.3 8.8Overseas taxation 6.8 6.8 12.7 ____________ _________ _________ 12.1 11.1 21.5 ____________ _________ _________ 6 months to 6 months to Year to 30.9.2006 30.9.2005 31.3.2006 (unaudited) (unaudited) (audited)3 Earnings per share £m £m £m Profit for the year attributableto equity shareholders 23.5 22.5 43.6Provision for RoHS - - 4.0Reorganisation costs 0.7 1.7 3.7Tax impact of provision for RoHSand reorganisation costs (0.3) (0.6) (2.4) ____________ _________ _________Headline profit for the yearattributable to equity shareholders 23.9 23.6 48.9 ____________ _________ _________ Weighted average number of shares 434.9m 434.9m 434.9mDiluted weighted average numberof shares 435.7m 435.2m 435.3m Headline basic earnings per share 5.5p 5.4p 11.2pBasic earnings per share 5.4p 5.2p 10.0p Headline diluted earnings per share 5.5p 5.4p 11.2pDiluted earnings per share 5.4p 5.2p 10.0p ____________ _________ _________ 6 months to 6 months to Year to 30.9.2006 30.9.2005 31.3.2006 (unaudited) (unaudited) (audited)4 Interim dividend £m £m £mAmounts recognised in the period:Final dividend for the yearended 31 March 2006 - 12.6p(2005: 12.6p) 54.8 54.8 54.8Interim dividend for the yearended 31 March 2006 - 5.8p - - 25.2 ____________ _________ _________ 54.8 54.8 80.0 ____________ _________ _________Amounts determined after the balancesheet date:Interim dividend for the yearended 31 March 2007 - 5.8p 25.2 The timetable for the payment of theinterim dividend is: Ex-dividend date 13 December 2006Dividend record date 15 December 2006Dividend payment date 18 January 2007 5 Assets held for saleThe Group has agreed to sell its office building in Oxford and move intoalternative accommodation nearby. In accordance with IFRS 5 (Non-current AssetsHeld for Sale and Discontinued Operations), the value of the building (£8.5m)has been reclassified from Property, Plant and Equipment to current assets. Thesale will be completed prior to 31 March 2007. 6 months to 6 months to Year to 30.9.2006 30.9.2005 31.3.2006 (unaudited) (unaudited) (audited)6 Reconciliation of movements in equity £m £m £mProfit for the period 23.5 22.5 43.6Dividends (54.8) (54.8) (80.0) ____________ _________ _________Loss for the period (31.3) (32.3) (36.4)Foreign exchange translation differences (6.5) 8.3 11.6Actuarial gain on defined benefitpension scheme - - 4.2Gain (loss) on cash flow hedges 2.2 0.3 (1.0)Tax on items taken directly to equity - - (1.3)Equity settled transactions 1.2 1.6 2.7 ____________ _________ _________Net reduction in equity (34.4) (22.1) (20.2) ____________ _________ _________Equity shareholders' funds at thebeginning of the period 336.4 355.7 355.7Opening balance sheet adjustment: IAS 39 - 0.9 0.9Equity shareholders' funds at thebeginning of the period as restated 336.4 356.6 356.6 ____________ _________ _________Equity shareholders' funds at the endof the period 302.0 334.5 336.4 ____________ _________ _________ 30.9.2006 30.9.2005 31.3.2006 (unaudited) (unaudited) (audited)7 Cash and cash equivalents £m £m £mBank balances 9.7 5.5 15.4Call deposits and investments 6.9 52.7 24.0 ____________ _________ _________Cash and cash equivalents in thebalance sheet 16.6 58.2 39.4Bank overdrafts (4.5) (1.6) (1.4) ____________ _________ _________Cash and cash equivalents in the cashflow statement 12.1 56.6 38.0Current instalments of loans (29.6) (21.2) (21.6)Loans repayable after more than oneyear (133.7) (131.7) (137.2) ____________ _________ _________Net debt (151.2) (96.3) (120.8) ____________ _________ _________ 8 Principal exchange rates 6 months to 6 months to Year to 30.9.2006 30.9.2005 31.3.2006 (unaudited) (unaudited) (audited)Average for the periodEuro 1.46 1.47 1.46United States Dollar 1.85 1.82 1.79 ____________ _________ _________ 30.9.2006 30.9.2005 31.3.2006Period endEuro 1.48 1.47 1.43United States Dollar 1.87 1.76 1.74 ____________ _________ _________ Independent Review Report to Electrocomponents plc IntroductionWe have been instructed by the Company to review the financial information forthe six months ended 30 September 2006 which comprises the Group incomestatement, balance sheet, cash flow statement, the statement of recognisedincome and expense, and basis of preparation and principal accounting policiesand notes 1 to 8. We have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company in accordance with the terms of ourengagement to assist the Company in meeting the requirements of the ListingRules of the Financial Services Authority. Our review has been undertaken sothat we might state to the Company those matters we are required to state to itin this report and for no other purpose. To the fullest extent permitted by law,we do not accept or assume responsibility to anyone other than the Company forour review work, for this report, or for the conclusions we have reached. Directors' responsibilitiesThe interim report, including the financial information contained therein, isthe responsibility of and has been approved by the Directors. The Directors areresponsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual financial statements exceptwhere any changes, and the reasons for them, are disclosed. Review work performedWe conducted our review in accordance with guidance contained in Bulletin 1999/4Review of interim financial information issued by the Auditing Practices Boardfor use in the UK. A review consists principally of making enquiries of groupmanagement and applying analytical procedures to the financial information andunderlying financial data and, based thereon, assessing whether the accountingpolicies and presentation have been consistently applied unless otherwisedisclosed. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. A review is substantiallyless in scope than an audit performed in accordance with International Standardson Auditing (UK and Ireland) and therefore provides a lower level of assurancethan an audit. Accordingly, we do not express an audit opinion on the financialinformation. Review conclusionOn the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2006. KPMG Audit PlcChartered Accountants8 Salisbury SquareLondonEC4Y 8BB 6 November 2006 This information is provided by RNS The company news service from the London Stock Exchange