NORTH AMERICAN INVESTOR SITE VISIT 3 DECEMBER 2012 FORT WORTH, TEXAS

Transcription

1 NORTH AMERICAN INVESTOR SITE VISIT 3 DECEMBER 2012 FORT WORTH, TEXAS

2 Agenda Group Overview Ian Mason Allied Overview Lee Davidson & Team Q&A All Lunch All Allied Operations & Site Tour Kenneth Bradley Q&A All

3 Electrocomponents: who we are Strong Brands 800K Catalogues 54% ecommerce 2,500 Major Suppliers > 550,000 Products > 1m Customers 17 Distribution Centres 44,000 Parcels Daily 90+% of World GDP The World s distributor of choice 3

4 Electrocomponents: our customers Our key customer groups: Buyers Nature of demand: Electronics Design Engineers Maintenance Engineers Average order value c. 140 / c. $220 Average order size is 3 to 4 product lines Customers usually purchase different lines each order Stages of the product lifecycle Over 1 million customers across wide range of sectors 4

5 Electrocomponents: where we operate % of Contribution Number of H1 FY13 Group as % of Market distribution revenue revenue position centres Continental Europe 33% 19% No. 1 6 North America 22% 14% No. 3 1 Asia Pacific 14% 6% No. 1 8 International 69% 14% No UK 31% 28% No. 1 2 Group 100% 19% No A well-invested global footprint, opportunity to drive higher International returns 5

6 Structural growth opportunity theory NOW (1) FUTURE (1) Growing markets c. 30bn/c.$45bn available market Electronics 2 x GDP Maintenance GDP Emerging markets Growing market share Highly fragmented markets (ca. 85%) Market share gains by 5 main players We are the leading global distributor Increasing competitive advantages Growing share of growing markets (1): Illustrative market shares 6

7 CAGR, FY03 - FY12 Structural growth through the cycle in practice International Sales CAGR Development, FY03 - FY12 8% 6% 3.4% 4% 0.9% 8.0% 2% 3.8% 4.7% 0% Nominal GDP grow th (1) Electronics (2) Market Grow th Share Gains Sales CAGR (1) Nominal GDP grow th w eighted to Electros geographic split (2) Weighted for exposure to faster Electronics grow th International growth driven by share gains and underlying market growth 7

8 Our competitive advantages vs. smaller players Sales & marketing Offer Global customer reach Service accuracy ecommerce capabilities Product range & availability Multi-channel approach Partnerships with leading global suppliers Structural trends favour larger, global competitors 8

9 Group strategy Vision The world s distributor of choice Strategy International growth Electronics and Maintenance ecommerce Operating leverage UK profitability Priorities Focus on core strengths Global approach, delivered locally Accelerating implementation 9

10 New global organisation structure in place Strong forces driving globalisation Global Operating Model Reorganised whole of business in 6 months STRATEGY From country-based to function-based OFFER MARKETING SALES Faster implementation of strategy and increased efficiency IT FINANCE HR Significant change to how we run the business 10

11 Single, global product offer Integration of electronics, maintenance and supply chain Five product categories Industry-leading product range and Famous for Electronics (semiconductors, passives & electromechanical) Electronics (semiconductors, passives & electromechanical) Automation & Control Automation & Control service available globally Known Test & Measurement for Electrical Dynamic pricing to transform value for money perception Also sell Support Drive higher return on stock Improving the profitability of our offer 11

12 Sales: focused on growing target customers Targeting 4 contact groups Focused, local sales approach Electronic Design Engineers Machine & Panel Builders Maintenance Engineers Develop and grow existing customers Electronics (semiconductors, passives & electromechanical) Automation & Control Test & Measurement Deliver the best customer experience Electrical Share best practice, improve efficiency Buyers Human touch to develop existing customers 12

13 Customer spend / potential New global marketing approach Single global effort across contact lifecycle Awareness Acquisition Nursery Development Brand awareness First purchase First 4 months Beyond 4 months Contacts know who we are Build the brand Acquire contacts in both new and existing customers Drive average purchases higher Spot the winners and nurture them Drive breadth of purchase and average order f requency Human Touch ecommerce machine Single global function, balanced lifecycle approach 13

14 Conversion of net profit to free cash flow Net debt to EBITDA (x) pence ROCE Highly attractive financial characteristics EPS Growth High return on capital employed % CAGR through the global economic recession 30% % 5-yr avge 21.6% % FY08 FY09 FY10 FY11 FY12 0% FY08 FY09 FY10 FY11 FY12 Strong cash conversion Strong balance sheet 140% % 100% 5-yr average 101% yr average 1.3x 80% 60% % % 0% FY08 FY09 FY10 FY11 FY FY08 FY09 FY10 FY11 FY12 A result of our business model and market position 14

15 Return on Sales % Proforma return on sales range of 8% - 12% Proforma Group Return on Sales (%) * 12% 11.4% 11.1% 10% 10.2% 10.2% 9.5% 10.2% 9.0% 10.0% 10.1% 8% 7.9% 7.8% 6% 4% 2% 0% FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 * Based on historical performance adjusted for FY12 International:UK sales mix Strong margins delivered through the cycle 15

16 Performance framework KPIs Medium-term target FY12 International sales growth 7% - 10% p.a. 8.7% UK contribution Stable Increasing Sales via e-commerce 70% 54% Underlying gross margin Stable Stable in yr Cost as % of sales Reducing Reducing Return on capital employed (1) 25%+ 24.6% (1) Operating profit expressed as a % of net assets plus net debt Sustained growth at attractive returns 16

17 Recent trading: key themes Difficult market conditions during H1 FY13, particularly in electronics Significant impact on H1 FY13 financial performance Decisive actions taken and expect stronger H2 FY13 New organisation structure to accelerate strategy and drive efficiencies Structural growth opportunity from advantages over smaller competitors Short-term and long-term performance improvement 17

18 Recent sales growth performance Underlying sales growth (1) FY12 Q1 Q2 H1 October Continental Europe 1% (1)% 0% 1% North America (4)% (6)% (5)% (6)% Asia Pacific (3)% 3% 0% (1)% International (2)% (2)% (2)% (2)% UK 5% 5% 5% 3% Group 0% 0% 0% 0% October Group sales trends consistent with H1 (1) Adjusted for currency and trading days 18

19 Sales per day UK sales per day 1,700 1,500 1,300 Group sales per day 1, , , ,500 4,000 3,500 ƒ 000 sales per trading day (constant currency) 4,000 International sales per day 3,000 3, sales per trading day (constant currency) 3,000 2,500 2,000 1, sales per trading day (constant currency) Q2 Group sales 17% above 2008 levels (1) (1) Constant currency 19

20 Summary We are a strong and well-invested global business Through the last 5 years we have taken market share from smaller competitors and demonstrated that the structural growth opportunity exists Our global scale and reach, broad product range, high customer service level and ecommerce capabilities are key differentiators We have a clear and consistent strategy and are now evolving to a global operating model to increase pace and effectiveness of strategy implementation The business has highly attractive financial characteristics Targeting International sales growth of 7% - 10% pa Leveraging competitive advantages to gain market share 20

21 Agenda Group Overview Ian Mason Allied Overview Lee Davidson & Team Q&A All Lunch All Allied Operations & Site Tour Kenneth Bradley Q&A All

22 Allied: proud of our heritage Founded in 1928 as Allied Radio Began as the radio parts distribution arm of Columbia Radio Corporation Acquired by Electrocomponents in 1999 A long legacy of excellent customer service 22

23 Sales $m Allied sales history Sales CAGR since FY95 = 9% Last 10 years sales CAGR = 11% FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 A strong track record of sales growth 23

24 Allied key facts Sales facts: 6,000+ inbound calls per day 4,500+ orders shipped per day 9,000+ lines billed/shipped per day $375-$400 average order size 200k+ annual catalogue production 33%+ ecommerce share Product facts: 300+ suppliers Over 115k SKU s in inventory Employee facts: c.800 employees 400 sales 200+ front office 180 warehouse Delivering a broad product range and service excellence 24

25 Allied: a strong platform for growth Systems investment: 2012: SAP ERP infrastructure c.$20m New sales tool to allow sales to work more effectively Infrastructure to support back-office processes efficiently Improved data analytics to support ecommerce growth Warehouse investment: 2007: New warehouse c.$40m Capacity to expand Inventory investment: -- Doubled inventory levels to over $95m in last 7 years, tripled since 2002 People investment: Employee base of 800, strong culture to support growth Increase in employee numbers of 300 over last 10 years A well-invested business 25

26 US Industrial Production Growth Market environment: Industrial Production key lead indicator Allied Daily Sales Growth Growth in US Industrial Production compared to daily sales growth : from Jan % 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% -14% -16% -18% -20% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% -70% US Industrial Production Growth Allied Sales Growth Correlation to the industrial business cycle 26

27 Allied sales and operating margin performance Sales and Return on Sales % 16% % 12% % 8% 6% Sales ROS % 100 4% 2% 0 FY08 FY09 FY10 FY11 FY12 0% Increased scale leading to higher operating margins 27

28 Return on capital employed Conversion of net profits to free cash flow Allied return on capital and cash conversion Return on Capital Cash Conversion Ratio 40% 250% 30% Average 30% 200% 20% 150% Average 110% 100% 10% 50% 0% FY08 FY09 FY10 FY11 FY12 0% FY08 FY09 FY10 FY11 FY12 Attractive financial characteristics 28

29 Sales: Allied s local presence 300 Inside Sales Reps 50+ Outside Sales Reps 53 sales offices across North America 40+ National Sales Center Reps & sales support staff 7 Regional Directors 5 National Account Managers Recognising the value of local sales offices 29

30 Allied customer segments Machine and Panel Builders Design, development & production support at small/medium-sized OEMs/CMs Board level & control cabinet applications Emergency/shortage support Maintenance Engineers Routine supply room support Scheduled maintenance Support emergency/unplanned needs Industrial-focus, multiple end-markets Buyers Customer split by contact type Electronics Design Engineers Maintenance Engineers Electronic Design Engineers Government driven/supported True R&D/High-tech Universities Machine and Panel Builders All key customer segments served 30

31 Allied product mix by technology Test & Measurement Other Automation & Control Passive/Active/ Opto Wire & Cable Interconnect Electromechanical Power Focused on electronics & automation and control 31

32 Supplier and portfolio management Supplier Relationship Execution & Feedback Strategic Planning Market Positioning Portfolio Evaluation Win-win supplier relationships a key competitive advantage 32

33 Supplier focus drives growth Top 20 Suppliers drive 43% of sales Strategic and Tactical suppliers combine to account for 66% of sales Prioritised approach to managing suppliers 33

34 Print marketing Reaching over 20 million customers per year 34

35 Online marketing Over 70 million customer touch points per year 35

36 Internal marketing A closed loop marketing communication strategy 36

37 Extensive SEM presence Website traffic drivers Campaigns Direct traffic Referral traffic Search traffic Search a key driver of website traffic 37

38 Engaging program Targeted and relevant campaigns 38

39 Conclusion Business has a good financial characteristics Strong cash flow and returns Ability to leverage cost base to deliver return to bottom line Solid financial investment base to support growth Focused business with strong local sales presence within a clear global strategy Win-win partnerships with key suppliers Market fundamentals supporting a multi-channel marketing approach Well-invested business, confidence in the future Committed to delivering a great experience 39

40 Agenda Group Overview Ian Mason Allied Overview Lee Davidson & Team Q&A All Lunch All Allied Operations & Site Tour Kenneth Bradley Q&A All

41 Agenda Group Overview Ian Mason Allied Overview Lee Davidson & Team Q&A All Lunch All Allied Operations & Site Tour Kenneth Bradley Q&A All

42 Agenda Group Overview Ian Mason Allied Overview Lee Davidson & Team Q&A All Lunch All Allied Operations & Site Tour Kenneth Bradley Q&A All

43 Warehouse operations: our facility Distribution center opened in Sept k square foot warehouse 180 employees 115k unique stocked materials Capacity utilization Forward pick face 63% High bay 75% Pallet 88% Work environment Quiet environment Solar tube lighting Climate controlled Best in class Health & Safety record A modern facility to support future growth 43

44 Warehouse operations: technical solutions Warehouse management system Warehouse conveyor system RF technology Paperless picking Conveyor PLC OSR Inbound receiving Recent investment in systems to drive efficiency 44

45 Warehouse operations: service delivery Order processing 4,500+ Daily orders 9,000+ Daily order lines 90% Domestic / 10% Export 99.9% Orders Inducted Shipped the Same Day 94.0% Stocked Product Linefill Hours of Operation: Monday to Friday 4am to 10.30pm Delivering reliable and accurate service 45

46 Warehouse operations: facility layout 46

47 Agenda Group Overview Ian Mason Allied Overview Lee Davidson & Team Q&A All Lunch All Allied Operations & Site Tour Kenneth Bradley Q&A All

48 Appendix Allied Electronics Committed to Delivering a Great Customer Experience

49 Allied Executive Team Lee Davidson President (10 years) Kenneth Bradley VP Supply Chain (9 years) Dennis Cash VP HR/Admin (9 years) Andy Jackson VP CIO (2 years) Ken Kempker Chief Financial Officer (4 years) Scott McLendon VP Marketing & Product Mgt (6 years) Mark Simon VP Sales (8 years) 49

50 ecommerce grown rapidly since FY09 ecommerce strategy began 2008 Rapid growth Temporary decline in % 40% 35% 30% 25% 20% 15% 10% 5% 0% ecommerce as a % of Sales FY07 FY08 FY09 FY10 FY11 H1 FY12 FY12 ecommerce will become the channel of choice 50