2020 Full-year Results
Internal
ELECTROCOMPONENTS
Full-year results for
the year ended
31 March 2020
2 June 2020
2020 Full-year Results
Internal
SAFE HARBOUR
This presentation 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.
2
Front cover
Across the year our people have gone above and beyond ‘making amazing
happen’ – our purpose. It remains our customer-centric people and culture
that really differentiate us.
2020 Full-year Results
Internal
Lindsley Ruth
CEO
AGENDA
1
2
3
WELL POSITIONED TO EMERGE STRONGLY
OVERVIEW AND COVID-19 UPDATE
4
2020 PERFORMANCE
CURRENT TRADING AND PRIORITIES
3
David Egan
CFO
Lindsley Ruth
CEO
2020 Full-year Results
Internal
2020 Full-year Results
OVERVIEW AND COVID-19 UPDATE
1
Resilient business well positioned for future opportunities
2020 Full-year Results
Internal
OVERVIEW OF 2020
Strong performance in
uncertain marketsContinued revenue
growth and market
share gains in all
three regions
Outperformance in
industrial and RS PRO,
offsetting cyclical
decline in electronics
Adjusted(2) profit
broadly flat including
£14 million of
operating
expenditure on
strategic initiatives
Another step forward
in customer
experience, NPS(1) up
3.1%
Improved offer – RS
mobile-first
responsive website,
range expansion,
value-added
solutions
Strong progress
towards building lean
and scalable
infrastructure to
support growth plan
(1) Rolling 12-month Net Promoter Score – a measure of customer satisfaction.
(2) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs,
substantial asset write-downs, one-off pension credits or costs, significant tax rate changes and associated income tax.
5
2020 Full-year Results
Internal
We are balancing the needs of all our stakeholders as we respond to the COVID-19 crisis
RESILIENT BUSINESS IN RESPONSE TO COVID-19
Home working for all roles that can do so
New safety measures in DCs which continue to operate effectively
Setting up our facilities to allow our people to return to work safely
Providing support and wellbeing resources for our people
Not currently accessing UK government support for furloughing
employees
Ensure our people remain safe and healthy >
Providing a reliable service to customers and suppliers
All our DCs are operational and are keeping critical industries running
Committed to paying our suppliers to agreed terms
Investing further to drive a best-in-class experience for our customers
and suppliers
Continue to service our customers and suppliers >
Supporting ventilator manufacture
Launched 3D printing farms in the UK and the Americas to provide
PPE for frontline health workers
Launched ‘Kits for Kids’ to support parents educating kids at home
Supporting broader distribution industry with distributor hotline initiative
Support our communities and play our part >
6
Tactical actions to conserve cash, protect profit and strengthen
balance sheet
Accelerating action to take advantage of short-term opportunities
Commitment to longer-term Destination 2025 growth agenda
Continuing to simplify the way we operate to drive efficiencies
The Board recognises the importance of the dividend, but has
decided it is prudent to defer the final dividend decision until there is
greater clarity on the outlook
Deliver value for our shareholders >
2020 Full-year Results
Internal
WELL POSITIONED FOR FUTURE OPPORTUNITIES
We are seeing the benefits of investment in a differentiated and adaptable model
– Broader range & diverse customer base
– Digitally led omni-channel offer demanded by customers
– Global and flexible DC network has ensured supply chain continuity
– Value-added solutions capabilities can meet the need for efficiency & convenience
We are demonstrating that our simplified organisation is extremely responsive
– Collaborative – across function / region to focus on new areas of opportunity
– Increased agility and innovation
We have continued to gain market share, outperforming in lockdown markets
– Group revenue down 14% over the last 8 weeks
We are increasingly confident in our Destination 2025 strategy to drive sustained growth
– Strong progress on scalable infrastructure, improved offer and collaboration
– Looking at short-term opportunities to accelerate performance
7
Investment in our
business has made it
more adaptable and responsive
2020 Full-year Results
Internal
2020 Full-year Results
2020 PERFORMANCE
2
A year of good strategic and operational progress
2020 Full-year Results
Internal
Resilient business well positioned for future opportunities
FINANCIAL HIGHLIGHTS
Market outperformance Profitability maintained Robust balance sheet
37.0 37.7
2019 2020 Like-for-like change
Adjusted(2) EPS (p)
0.20.5
0.7
2019 2020
Net debt / adjusted(2) EBITDA (x)
(1) Like-for-like change excludes the impact of acquisitions and the effects of changes in exchange rates on translation of overseas operating results, with 2019 converted at 2020 average exchange rates. Revenue
is also adjusted to eliminate the impact of trading days year on year.
(2) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, substantial asset write-downs, one-off pension credits or costs, significant tax rate changes
and associated income tax.
> > >
44.5 43.7
2019 2020 Like-for-like change
Gross margin (%)
(0.8) pts
8.9
1.9 2.2
RS PRO Digital Group
Like-for-like(1) revenue growth (%)
220.3 220.7
2019 2020 Like-for-like change
Adjusted(2) operating profit (£m)
(0.5)%
9
(1)
(1) (1)
56.3122.4
189.8
2019 2020
Net debt (£m)
1.1%
IFRS 16 impact
2020 Full-year Results
Internal
SUMMARY INCOME STATEMENT
(1) Like-for-like change excludes the impact of acquisitions and the effects of changes in exchange rates on translation of overseas operating results,
with 2019 converted at 2020 average exchange rates. Revenue is also adjusted to eliminate the impact of trading days year on year.
(2) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, substantial asset write-
downs, one-off pension credits or costs, significant tax rate changes and associated income tax.
Highlights
Revenue saw a benefit from currency (£10.9 million) and extra trading days (£9.3 million)
Gross margin of 43.7%, down 0.8 percentage points due to product mix and OKdo growth
Like-for-like adjusted operating cost growth of 1.6% less than revenue growth of 2.2%
Excluding strategic investment of £14 million underlying adjusted operating costs declined
Adjusted operating profit conversion 25.8% (2019: 26.3%)
Adjusted operating profit margin fell 0.3 percentage points on a like-for-like basis to 11.3% (2019: 11.7%)
Adjusted PBT excludes £15.4 million of substantial asset write-downs, amortisation of acquired intangibles and substantial reorganisation costs
2020 adjusted effective tax rate of 21.8% (2019: 23.6%)
10
£m 2020 2019 ChangeLike-for-like(1)
change
Revenue 1,953.8 1,884.4 3.7% 2.2%
Gross margin (%) 43.7% 44.5% (0.8) pts (0.8) pts
Operating profit 205.3 201.0 2.1% 1.8%
Adjusted2 operating profit 220.7 220.3 0.2% (0.5)%
Adjusted2 operating profit margin (%) 11.3% 11.7% (0.4) pts (0.3) pts
Adjusted2 operating profit conversion (%) 25.8% 26.3% (0.5) pts (0.4) pts
Profit before tax 199.6 195.2 2.3% 1.9%
Adjusted2 profit before tax 215.0 214.5 0.2% (0.5)%
Earnings per share (p) 34.7p 33.4p 3.9% 3.6%
Adjusted2 earnings per share (p) 37.7p 37.0p 1.9% 1.1%
2020 Full-year Results
Internal
REGIONAL PERFORMANCE
11
Revenue (£m)Adjusted(2) operating
profit (£m)
Adjusted(2) operating
profit margin (%)Highlights
2020Like-for-
like(1)
change2020
Like-for-like(1)
change2020
Like-for-like(1)
change
EMEA 1,239.8 2.2% 197.0 2.1% 15.9 (0.1) pts
Strong performance driven almost entirely by share gains
Like-for-like revenue growth of 2.2% (H1: 5.4%; H2: (0.7)%)
Continued growth in profit driven by share gain and efficiency
Americas 515.7 2.1% 57.8 (10.2)% 11.2 (1.7) pts
Like-for-like revenue growth of 2.1% (H1: 3.4%; H2: 0.8%)
Profit impacted by lower gross margin and investment
New leadership focused on driving improved performance
Asia Pacific 198.3 2.7% 3.7 23.3% 1.9 0.4 pts
Growth improved in H2 driven by rebound in Greater China
Like-for-like revenue growth of 2.7% (H1: 1.7%; H2: 3.4%)
Significant step up in H2 profit
Central costs - - (37.8) 1.6% - -
Group 1,953.8 2.2% 220.7 (0.5)% 11.3 (0.3) pts
COVID-19 impact in March in all regions reduced Group like-for-
like revenue growth by around one percentage point
Resilient profit performance including investment in Destination
2025 strategy
(1) Like-for-like change excludes the impact of acquisitions and the effects of changes in exchange rates on translation of overseas operating results, with 2019 converted at 2020 average exchange rates.
Revenue is also adjusted to eliminate the impact of trading days year on year.
(2) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, substantial asset write-downs and one-off pension credits or costs.
2020 Full-year Results
Internal
CASH FLOW
Highlights £m 2020 2019
EBITDA 256.2 232.9
Add back impairments and (profit) / loss on disposal of
non-current assets0.1 2.3
Movement in working capital (51.2) (64.8)
Movement in provisions (5.3) 5.9
Other 3.4 7.9
Cash generated from operations 203.2 184.2
Net interest paid (6.2) (6.1)
Income tax paid (49.9) (50.8)
Net cash from operating activities 147.1 127.3
Net capital expenditure (74.7) (50.8)
Free cash flow 72.4 76.5
Add back cash effect of adjustments(2) 8.5 8.0
Adjusted free cash flow 80.9 84.5
(1) Adjusted operating cash flow conversion is adjusted free cash flow before income tax and net interest paid as a percentage of adjusted
operating profit.
(2) Adjusted excludes the impact of substantial reorganisation cash flows.
Free cash flow marginally lower driven
by accelerated strategic investment
We have invested in inventory
– Repositioned electronics and
launched OKdo
– Expanded RS PRO range
Inventory turn reduced to 2.6 times
(2019: 2.7 times)
Higher capex with over two thirds
focused on strategic initiatives
– DC expansion in Americas and EMEA
– New enhanced product and
content technology
Adjusted operating cash flow
conversion(1) 62.1% (2019: 64.2%)
12
2020 Full-year Results
Internal
ROBUST BALANCE SHEET
13
We enter this period of
uncertainty in a strong
financial position with a
cash generative
business model
Net debt on 31 March was £189.8 million (including £56.3 million of lease liabilities)
The Group’s financial metrics remain strong, with net debt to adjusted EBITDA of 0.7x and
EBITA to interest of 33.6x
This leaves significant headroom to the Group’s banking covenants of net debt to
adjusted EBITDA < 3.25 times and EBITA to interest of > 3 times
At 31 March 2020, the Group had committed debt facilities and loans (excluding lease
liabilities) of £350.0 million, of which £189.2 million was undrawn. These debt facilities
comprise of:
– £189.6 million syndicated multi-currency bank facility which has a maturity of August
2022
– £160.4 million of private placement loan notes with maturities ranging between
October 2026 and October 2031
Since the year end, to increase liquidity, the Group is securing additional contingency
funding facilities which include:
– New short-term finance facilities with the Group’s relationship banks
– Eligibility to participate in the Bank of England CCFF
These additional contingency facilities have not been included in our viability stress tests
2020 Full-year Results
Internal
2020 Full-year Results
CURRENT TRADING AND PRIORITIES
3
Driving efficiency and scalability as we continue to focus on managing our cash flow and liquidity
2020 Full-year Results
Internal
CURRENT TRADING
15
Summary
Group like-for-like revenue growth declined
14% over first eight weeks of year
At a Group level the rate of revenue
decline moderated slightly during May as
lockdown restrictions began to ease in
some of our key markets
We continue to focus on measures to
stabilise and improve gross margin
The drop through impact of lost revenue to
adjusted operating profit for our business is
typically in the mid-thirties, pre mitigating
actions
Like-for-like change
Northern Europe (19)%
Southern Europe (21)%
Central Europe (13)%
Emerging markets (12)%
EMEA (18)%
Americas (10)%
Asia Pacific (2)%
Group (14)%
2020 Full-year Results
Internal
KEY PRIORITIES – EFFICIENCY AND SCALABILITY
Short term – we will proactively manage our cost base
– Tight control of discretionary costs while protecting core business to take advantage of market opportunities
– Not currently accessing UK government support for furloughing employees
– We will ensure we take the best practice of new ways of working under COVID-19 to ensure we remain efficient and nimble
Longer term our work continues to drive a market–beating disruptive offer and a lean and scalable operating model
– During the year we made progress with our regions now aligned around a common go-to-market approach
– This aligned approach allows us to accelerate progress and remove duplication
– Ongoing simplification in operating model to allow us to move faster and drive further significant savings
16
We will proactively
manage our cost base,
while continuing to
advance our strategy to
simplify and scale
50%
20%
10%
20%People
Variable
Discretionary
Fixed
Approximate operating costs break down:
2020 Full-year Results
Internal
KEY PRIORITIES – LIQUIDITY AND CASH
Sufficient liquidity under demanding stress test scenarios
We have performed stress tests under a range of potential scenarios of different duration and severity – relating to COVID-19
The additional contingency facilities and CCFF have not been included in our stress test analysis
Our stress tests show that even in the event that a second wave of COVID-19 strikes during H2 of our financial year, we will continue to operate within our current banking facilities and financial covenants
We are taking actions to conserve cash and manage our liquidity
Working capital: closely monitoring receivables collection and carefully managing inventory levels
Capex: Reducing 2021 capex from the £80 million previously planned to around £60 million
Dividend: The Board believes it is prudent to defer the decision on the final dividend for the year ended 31 March 2020 until it has greater visibility. It will review making an additional interim payment related to 2020 at the half-year results in November 2020
17
We are highly focused
on managing cash
flow and liquidity
2020 Full-year Results
Internal
2020 Full-year Results
WELL POSITIONED TO EMERGE STRONGLY
4
We remain focused on growing market share
2020 Full-year Results
Internal
EMERGING THEMES IN A POST COVID-19 WORLD
19
Businesses
working digitallyIncreased focus on
convenience and efficiency
Supply chain continuity
even more critical
Safety in the
workplace
£1.2bn digital business Value-added solutions
Building scalable infrastructure Range expansion
2020 Full-year Results
Internal
WELL POSITIONED – EXECUTING UPON A CLEAR STRATEGY
We are driving a differentiated offer
– More choice – RS PRO, OKdo, range expansion, solutions capabilities
– Improving user experience – RS mobile-first responsive website to
launch H1
We are making good progress on building a scalable infrastructure
– Automation and expansion of DCs in Americas and Germany
– Global shared business services and automation strategy
– Product and content technology
Greater collaboration across our regions is enabling us to move faster
and extract benefits of scale in areas such as
– Customer segmentation
– Go-to-market approach
– Product and supplier
20
Strong progress to date
on Destination 2025
2020 Full-year Results
Internal
WELL POSITIONED – A LEADER IN DIGITAL
21
£1.2 billion digital business
We have invested to transform online
experience and build a strong talent pool
Digital is a unique differentiator versus our
traditional offline competitor base
Competitor 1 Competitor 2 Competitor 3
63% 18% 64% 14%
Digital as a percentage of revenue versus key listed competitors
Electrocomponents digital revenue as a percentage of Group revenue
0%
10%
20%
30%
40%
50%
60%
70%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Our current position
Moving forward
Ongoing enhancement in experience
– Rebuilt RS mobile-first responsive website
will drive step change in EMEA / Asia
Pacific
– New digital leader driving improvement
programme in the Americas
Improve conversion
– New technologies to optimise acquisition
– Maximise returns with a focus on
customer value
Step change personalisation &
customer retention marketing
– Increase AOV and retain new customers
% o
f re
ve
nu
e
2020 Full-year Results
Internal
WELL POSITIONED – TARGETED RANGE EXPANSION
22
Our current position
Moving forward Pivoting our offer to expand in high growth areas such as PPE, janitorial and education
Launching RS PRO kits in areas of high demand such as safety in the workplace
Collaborating across the Group to identify sourcing for in-demand products
Using Group data to identify new adjacent segments we can disrupt
Expanding Allied's range into higher margin MRO using RS's supply chain
Greater collaboration across the Group to:
– Extend supplier relationships
– Extract best practice and benefits of scale on purchasing
– Provide a more joined up approach to our strategic suppliers
Broad offer appealing to wide customer and sector spread
Strong supplier relationships
High inventory availability with over £400 million of inventory in stock across our global network
Fast growing own-brand business, RS PRO offering value and choice
Strong data and insights
Enhanced product and content capabilities
We are collaborating
across the Group,
pivoting our offer to take
advantage of new
opportunities
2020 Full-year Results
Internal
WELL POSITIONED – VALUE-ADDED SOLUTIONS
23
Grow Evolve Innovate
VendStockTM
ScanStockTM
ConnectPointTM
Showpad
eProcurement
Purchasing ManagerTM
RS Local branches
Laboratory services
eProcurement
Purchasing ManagerTM
Laboratory services
We have improved existing services and evolved offering – with a renewed focus on value-added solutions.
Launched in Q4 FY20
Launched in Q3 FY20
Launched 18 months ago
Launched 2 years ago
RS Plus
To be launched
FY21
Well positioned in an environment where
customers need to reduce costs and lower
total cost of ownership
Complete suite of solutions across design,
procurement, inventory management and
maintenance
Our current position
Moving forward
We will move at pace to rollout our
solutions globally
Accelerating activity to develop an IESA-
like service, RS Plus for RS and Allied
customers
– Combines the strengths of IESA’s cloud-
enabled proprietary marketplace
solution, MyMRO, with RS value-added
solutions
2020 Full-year Results
Internal
SUMMARY
A year of good strategic and operational progress during 2020
Rapid COVID-19 response to support the needs of all stakeholders
Business model proving highly adaptable and resilient
Taking the right short-term actions to protect performance
Strong balance sheet and sufficient liquidity under range of
demanding stress tests
We are making good progress on Destination 2025
The investments we have made over the last five years position us
well to win in the current environment
Well positioned to emerge from current downturn strongly with
enhanced share
24
Well positioned to
continue to drive
sustainable growth and
superior returns for
shareholders
2020 Full-year Results
Internal
2020 Full-year Results
Q&A
5
Thank you for your continued interest in Electrocomponents
2020 Full-year Results
Internal
2020 Full-year Results
APPENDIX
6
2020 Full-year Results
Internal
BASIS OF PREPARATION
Unless otherwise stated:
Figures have been prepared using International Financial Reporting Standards as adopted by the European Union
Adjusted measures of profitability and cash flow exclude amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, substantial asset write-downs, one-off pension credits or costs, significant tax rate changes and associated income tax
Like-for-like change excludes the impact of acquisitions and the effects of changes in exchange rates on translation of overseas operating results, with 2019 converted at 2020 average exchange rates. Revenue is also adjusted to eliminate the impact of trading days year on year
Changes in profit, cash flow, debt and share-related measures such as earnings per share are, unless otherwise stated, at reported exchange rates
A net charge of £15.4 million (2019: £19.3 million) was reported for items excluded from adjusted profit before tax
27
2020 Full-year Results
Internal
FOUR KEY REASONS TO INVEST
28
1UNIQUELY POSITIONED IN ATTRACTIVE MARKET▪ Global player in large fragmented marketplace‒ Market valued at c. £400 billion‒ Market typically grows at GDP+‒ Top 50 players account for c. 30% of the global
market▪ Uniquely positioned to take market share‒ Global scale and distribution network‒ Customer-centric people and expertise‒ Strong supplier relationships‒ Broad range and value-added solutions
proposition‒ Leader in digital
2DRIVING MARKET SHARE GAINSWe aim to grow at greater than two times the market, driving share gains by:▪ Growing customer count‒ Become first choice; grow promoter base‒ Drive more traffic to websites‒ Increase online conversion by improving
experience▪ Selling more to existing customers‒ First choice customers spend 25% more‒ Scale range and add new product categories‒ Roll out value-added solutions proposition‒ Sell the full offer; improve sales effectiveness
3BUILDING A LEAN AND SUSTAINABLE MODEL▪ We have made good progress to date‒ Stabilising gross margin‒ Improving adjusted operating profit margin
from 6.7% in 2015 to 11.3% in 2020▪ We aim to drive sustainability and scalability and
lower our cost to serve by:‒ Simplifying our technology estate‒ Building a sustainable and scalable supply chain‒ Rolling out global shared services and
automation▪ Long-term aspiration to achieve a mid-teen
adjusted operating profit margin
4STRONG BALANCE SHEET AND ATTRACTIVE CASH FLOW▪ We have a strong balance sheet▪ Cash generative▪ We will reinvest cash to drive faster share gains▪ Accelerate strategy via disciplined value-accretive
bolt-on acquisitions to:‒ Drive market share gains‒ Add new product categories‒ Accelerate value-added solutions offer
c. £400bnmarket opportunity
>2xmarket growth rate target
Mid-teenadjusted operating profit margin target
> 80%*
adjusted operating cash flow conversion target
* Our aim post-investment in strategic initiatives.
2020 Full-year Results
Internal
IMPACT OF ADOPTION OF IFRS 16
29
The Group adopted IFRS 16 ‘Leases’ on
1 April 2019 with no restatement of
comparatives
Definition of net debt has been updated
to include lease liabilities
No impact on the covenants of the
private placement loan notes and bank
facilities that existed at 1 April 2019 as
they are on frozen GAAP
No impact on net cash flow
– Payment of lease liabilities has
moved from operating activities to
financing activities
£0.2 million net increase to PBT
– £1.3 million increase in operating profit
– £1.1 million increase in finance costs
£16.9 million increase in EBITDA
– £15.6 million of depreciation of
right-of-use assets
Income statement
Balance sheet
>
£56.3 million increase in net debt
0.2 increase in net debt to adjusted EBITDA
1.2 percentage point reduction in return on capital employed
Cash flow
£14.8 million increase in free cash flow
and adjusted free cash flow
6.9 percentage point increase in
adjusted operating cash flow conversion
>
>
2020 Full-year Results
Internal
GUIDANCE POINTS
Trading days
Expect around £2.8 million negative
impact on revenue from fewer trading
days in the year to March 2021
Other guidance points
Capex – lowered capex for 2021 to £60
million versus the £80 million previously
planned, as we defer some projects
Dividend
– The Board believes it is prudent to defer
the decision on a final dividend until we
have greater visibility
– We recognise the importance of our
progressive dividend policy to
shareholders and will therefore review
making an additional interim dividend
payment relating to the year ended 31
March 2020 at the Group’s half-year
results in November 2020
Foreign exchange
Foreign exchange rates (average for the period)
2020 rates 2019 rates 2021 rates*
Euro 1.144 1.134 1.125
USD 1.271 1.313 1.234
* 2020 adjusted profit before tax converted at 2021 forecast average rates, using 26 May 2020 closing rates extrapolated for rest of year.
30
Currency movements increased 2020 adjusted profit before tax by
£0.4 million
If May rates persist we would expect around a £4.3 million benefit to
adjusted profit before tax in the full year *
2020 Full-year Results
Internal
Like-for-like adjusted operating cost growth of 1.6%, less than revenue growth of 2.2%. Stripping out investment in strategic
initiatives of £14 million, underlying adjusted operating costs modestly declined
Adjusted operating costs as a percentage of revenue fell to 32.4% (2019: 32.8%), adjusted operating profit conversion 25.8%
(2019: 26.3%), operating profit margin fell 0.4 percentage points to 11.3% (2019: 11.7%)
DRIVING OPERATIONAL EFFICIENCY A
dju
ste
d o
pe
ratin
g c
ost
(£
m)
Cost discipline
Modest underlying decline in adjusted operating costs – with efficiencies from global shared business services strategy and lower incentive costs more than offsetting increases in volume, wage inflation, talent and digital advertising costs
31
Strategic operating expenditure of c.£14 million in areas such as IT, talent, training and software to support strategic initiatives
Change 2.2% 1.2% (1.4)%0.2% (2.1)%1.0%0.4% 0.6% 0.5%
550.0
575.0
600.0
625.0
650.0
675.0
700.0
FY19 FX Acquisitions Strategic Inflation Volume People Digital
advertising
Incentives Other FY20
2020 Full-year Results
Internal
KEY PERFORMANCE INDICATORS
KPI changes
This year, we have included five
additional non-financial KPIs to help
measure progress against our strategy.
The additional KPIs are focused on
areas of key importance to our
stakeholders and include our people
and the environment alongside our
existing safety and customer-related
non-financial KPIs.
FINANCIAL 2020 2019 Change
Like-for-like revenue growth (%) 2.2 8.3
Adjusted operating profit conversion (%) 25.8 26.3 (0.5) pts
Adjusted operating profit margin (%) 11.3 11.7 (0.4) pts
Adjusted EPS (p) 37.7 37.0 1.9%
Return on capital employed (%) 22.9 27.7
Adjusted operating cash flow conversion (%) 62.1 64.2
32
NON-FINANCIAL 2020 2019 Change
Group rolling 12-month Net Promoter Score 55.7 54.0 3.1%
Employee engagement 72 71 1.4%
All Accidents (per 200,000 hours) 0.69 0.88 (21.6)%
CO2 emissions (tonnes CO2e / £m revenue) 5.3 5.6 (5.4)%
Packaging (tonnes / £m revenue) 2.48 2.74 (9.5)%
Waste (tonnes / £m revenue) 1.51 1.58 (4.4)%
Percentage waste to landfill 7% 10% (3.0) pts
2020 Full-year Results
Internal
£m 2020 2019
Net debt at 1 April (122.4) (65.0)
Lease liabilities at 1 April 2019 on adoption of IFRS 16 (53.3) -
Adjusted free cash flow(1) 80.9 84.5
Acquisition of businesses (0.2) (34.6)
Cash and cash equivalents acquired with businesses - 1.3
Loans and finance leases acquired with businesses - (42.1)
Cash effect of adjustments(1) (8.5) (8.0)
Equity dividends paid (68.5) (58.9)
New shares issued 2.0 2.6
Purchase of own shares by Employee Benefit Trust (0.9) (2.3)
New leases (18.4) -
Disposal of leases 0.7 -
Translation differences (1.2) 0.1
Net debt at 31 March (189.8) (122.4)
NET DEBT MOVEMENTS
Strong balance sheet
Net debt rose to £189.8 million, due
primarily to the inclusion of lease
liabilities of £56.3 million as a result of
the adoption of IFRS 16
Net debt: adjusted EBITDA 0.7x
(2019: 0.5x)
Pension
Group net deficit £55.8 million
(March 2019: £83.6 million)
(1) Adjusted excludes the impact of substantial reorganisation costs.
33
2020 Full-year Results
Internal
IMPACT OF FOREIGN EXCHANGE
Translation Exposure
Reported profit sensitivity to a one
cent movement in:
– Euro: £1.4 million
– USD: £0.5 million
Transaction Exposure Group Treasury maintains 3-7 month hedging to smooth impact of currency
movements
Key exposures: net buyer of US dollars, net seller of euros and other currencies
Gross margin impacted over time from weakening in sterling versus:
– USD: negative impact
– Euro and other currencies: positive impact
34
1.00
1.10
1.20
1.30
1.40
1.50
Euro and USD movements to Sterling € to £ $ to £
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