Half-year Report

RS Group plc

Nov 12 2019 07:00 GMTSource: RNS

RNS Number : 0400T

Electrocomponents PLC

12 November 2019

12 November 2019, 7.00 am

ELECTROCOMPONENTS PLC

RESULTS FOR THE HALF YEAR ENDED 30 SEPTEMBER 2019

CONTINUED REVENUE GROWTH AND MARKET SHARE GAINS

Highlights	H1 2020	H1 2019	Change	Like-for-like¹ change
Revenue	£978.7m	£911.8m	7.3%	4.5%
Adjusted² operating profit	£105.6m	£104.0m	1.5%	(2.1)%
Adjusted² operating profit margin	10.8%	11.4%	(0.6) pts	(0.8) pts
Adjusted² profit before tax³	£103.4m	£100.2m	3.2%	(0.4)%
Adjusted² earnings per share	17.8p	17.2p	3.5%	(0.6)%
Operating profit	£91.2m	£96.8m	(5.8)%
Profit before tax	£89.0m	£93.0m	(4.3)%
Earnings per share	15.2p	15.9p	(4.4)%
Interim dividend	5.9p	5.3p	11.3%
Adjusted² free cash flow	£13.9m	£34.0m	(59.1)%
Net debt	£220.7m	£139.0m
Net debt to adjusted² EBITDA	0.9x	0.6x

Growth driven by market share gains

· Revenue growth of 7.3%, like-for-like up 4.5%, driven by strong market share gains

· Continued outperformance from RS PRO with like-for-like revenue growth of 9.7%

· Further improvements made to our offer - electronics franchise expansion, value-added solutions, OKdo

· Another step towards best-in-class customer experience - Group Net Promoter Score (NPS)⁴ rose 4.2% to 54.7

Increasing investment to improve offer and drive scalability

· Good progress on strategic initiatives in technology and supply chain which will drive growth and higher returns

· Gross margin of 43.7%, down 0.7 pts in line with guidance, primarily impacted by product mix and OKdo

· Adjusted operating profit margin down 0.6 pts due to gross margin reduction and increased strategic investment

· Profit before tax (PBT) fell 4.3% due to British Steel asset write-downs; adjusted PBT down 0.4% like-for-like

Growth in interim dividend supported by strong balance sheet

· Adjusted EPS up 3.5%, down 0.6% on a like-for-like basis; EPS down 4.4%

· 11.3% growth in interim dividend, in line with policy

· Strong balance sheet with net debt to adjusted EBITDA of 0.9x

Current Trading

Over the first six weeks of H2 we have continued to outperform, delivering modest growth despite weakness in some of our key underlying markets. We saw market share gains in Industrial and strong growth in RS PRO, which were largely offset by ongoing softness in Electronics. We are continuing to invest for the longer term in supply chain and technology to drive further differentiation and share gains, while accelerating cost actions to support near-term performance. We remain well positioned to deliver good progress.

PETER JOHNSON, CHAIR, COMMENTED:

"In recent years our executive management team of Lindsley Ruth and David Egan have brought together a strong leadership team, who are executing well on a clear strategy. The first half saw good revenue growth and strong market share gains in spite of an uncertain market backdrop. We will continue to drive share and actively manage our operating costs while increasing investment in strategic initiatives to position the business for the significant longer-term market opportunity."

(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 for the period. Revenue is also adjusted to eliminate the impact of trading days year on year. Acquisitions are only included once they have been owned for a year, at which point they start to be included in both the current and comparative periods for the same number of months. Currency movements increased revenue by £17.6 million, extra trading days increased revenue by £1.0 million during the period.

(2) Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, asset write-downs, one-off pension credits or costs, significant tax rate changes and associated income tax (see Note 11 on pages 22 to 25 for reconciliations).

(3) Currency movements increased adjusted profit before tax by £2.5 million.

(4) Rolling 12-month NPS is a measure of customer satisfaction. It excludes our recent acquisitions, IESA and Monition, as they do not measure NPS.

(5) IFRS 16 has been adopted as at 1 April 2019, prior year comparatives have not been restated (see Note 1 on pages 16 and 17 for more detail on the impact).

LEI: 549300KVXDURRKVW7R37

Enquiries:

David Egan, Chief Financial Officer	Electrocomponents plc	020 7239 8400
Polly Elvin, Head of Investor Relations	Electrocomponents plc	020 7239 8427
Martin Robinson / Lisa Jarrett Kerr	Tulchan Communications	020 7353 4200

There will be an analyst presentation today at 10.30am at UBS, 5 Broadgate, London EC2M 2QS. We will also provide an audio webcast, which can be accessed live and later as a recording on the Electrocomponents website at www.electrocomponents.com.

Notes to editors:

Electrocomponents plc is a global multi-channel provider of industrial and electronic products and solutions. We offer more than 500,000 industrial and electronic products, sourced from over 2,500 leading suppliers, and provide a wide range of value-added services to over one million customers. With operations in 32 countries, we trade through multiple channels and ship over 50,000 parcels a day.

We support customers across the product life cycle, whether via innovation and technical support at the design phase, improving time to market and productivity at the build phase, or reducing purchasing costs and optimising inventory in the maintenance phase. We offer our customers tailored product and service propositions that are essential for the successful operation of their businesses and help them save time and money.

Electrocomponents plc is listed on the London Stock Exchange and in the last financial year ended 31 March 2019 reported revenue of £1.88 billion. Electrocomponents plc has seven operating brands; RS Components, Allied Electronics & Automation, RS PRO, OKdo, DesignSpark, IESA and Monition.

OVERALL RESULTS

	H1 2020	H1 2019	Change	Like-for-like¹ change
Revenue	£978.7m	£911.8m	7.3%	4.5%
Gross margin	43.7%	44.4%	(0.7) pts	(0.7) pts
Adjusted² operating profit	£105.6m	£104.0m	1.5%	(2.1)%
Adjusted² operating profit margin	10.8%	11.4%	(0.6) pts	(0.8) pts
Adjusted² operating profit conversion	24.7%	25.7%	(1.0) pts	(1.2) pts

Revenue

Group revenue increased by 7.3% to £978.7 million (H1 2019: £911.8 million). During the first half the Group saw positive impacts of £1.0 million from additional trading days and £17.6 million from foreign exchange movements. Excluding these factors, like-for-like revenue growth was 4.5%, with continued strong growth in Industrial more than offsetting a weaker performance in Electronics. All three geographic regions - EMEA, the Americas and Asia Pacific - saw like-for-like revenue growth in H1. RS PRO, our own-brand range, which accounts for around 12% of Group revenue, outperformed the Group growth rate with like-for-like revenue growth of 9.7%. Digital, which accounts for around 62% of Group revenue, saw like-for-like revenue growth broadly in line with the Group at 4.1%. OKdo, the Group's single-board computing (SBC) and Internet of Things (IoT) business, which accounts for around 4% of Group revenue, outperformed Group revenue growth, with growth heavily skewed to Q2, as anticipated, following the launch of Raspberry Pi 4 in June 2019.

Gross margin

Group gross margin was down by 0.7 percentage points to 43.7% (H1 2019: 44.4%) on a reported and like-for-like basis as a negative impact from foreign exchange of 0.2 percentage points was offset by a positive impact from last year's acquisitions. The 0.7 percentage points decline in gross margin was primarily driven by mix and related to two key factors:

· Lower growth in higher margin product areas such as connectors and electromechanical and faster growth in lower margin products.

· The impact of repositioning our electronics business and the launch and growth of OKdo, one of our lower gross margin businesses.

We expect a more modest year-on-year decline in H2 gross margin with strong growth in OKdo to be partially offset by purchasing and pricing actions. We continue to focus on stabilising and where possible improving the gross margin in the base business over the long term.

Operating costs

Over the last four years we have consistently increased efficiency and simplification to convert a higher proportion of gross profit into operating profit. During the first half, we have made continued progress on driving underlying operating efficiencies, while significantly stepping up operating expenditure in areas such as IT, talent, training and software to support our strategic initiatives. We estimate this incremental strategic operating expenditure was around £8 million during H1.

Total adjusted operating costs, which include regional costs and central costs (and exclude substantial reorganisation costs, amortisation of acquired intangibles and asset write-downs), increased by 7.1%, 4.6% on a like-for-like basis, to £322.1 million (H1 2019: £300.8 million). Stripping out the impact of the incremental strategic operating expenditure, we saw modest underlying adjusted operating cost growth with efficiencies from the second phase of our Performance Improvement Plan (PIP) and lower incentive costs largely offsetting increases in other costs related to volume, wage inflation and digital advertising.

Given the increase in strategic operating expenditure, our adjusted operating profit conversion ratio decreased by 1.0 percentage point to 24.7% (H1 2019: 25.7%). However, over the medium term we remain highly focused on continuing to improve this ratio in order to achieve our aspiration of a mid-teen adjusted operating profit margin. Adjusted operating costs as a percentage of revenue remained broadly stable at 32.9% (H1 2019: 33.0%). We continue to focus on efficiency measures and during H2 we expect a higher proportion of strategic investment to be funded by cost-savings initiatives.

Substantial reorganisation costs

The Group incurred substantial reorganisation costs of £1.3 million (H1 2019: £5.4 million), which were labour-related restructuring costs.

Asset write-downs

As a result of British Steel Limited entering compulsory liquidation on 22 May 2019, the Group has written down £10.4 million of assets. This includes £7.2 million for receivables still outstanding relating to transactions with British Steel before 22 May 2019 and £3.2 million against inventory recovered from British Steel.

Amortisation of acquired intangibles

Amortisation of acquired intangibles was £2.7 million (H1 2019: £1.8 million) and relates to the intangible assets arising on the acquisitions of IESA and Monition.

Operating profit

Operating profit declined 5.8% to £91.2 million (H1 2019: £96.8 million). Excluding substantial reorganisation costs, asset write-downs and amortisation of acquired intangibles, adjusted operating profit increased by 1.5% to £105.6 million. Excluding the year-on-year impact from acquisitions and positive benefits from currency movements, adjusted operating profit was down 2.1% on a like-for-like basis. Adjusted operating profit margin decreased by 0.6 percentage points, 0.8 percentage points on a like-for-like basis, to 10.8% (H1 2019: 11.4%).

Regional performance

Across the first half of the year we have continued to deliver good growth and market share gains in spite of a tougher than expected market backdrop. We have grown ahead of the market in key markets such as the UK, France, the Americas as well as in smaller markets such as Scandinavia, Switzerland, Eastern Europe, Australia and New Zealand (ANZ) and South East Area. All three of our regions saw growth in customer count. The investments made over the past four years have improved customer experience and our offer and driven digital leadership and salesforce effectiveness, which have been key in driving this continued outperformance.

During H1 we continued to make strong progress in improving customer satisfaction. Our Group Net Promoter Score (NPS) rose a further 4.2% to 54.7 (H1 2019: 52.5), with improvement seen across all the regions as we continued to relentlessly focus on customer experience.

We continue to focus on driving further differentiation into our offer. We are making good progress on our transformation from a product-led catalogue distributor to a digital provider of solutions, however, some regions of the world are more advanced and in other regions we still have significant work to do. During H1 we have therefore accelerated investments in areas such as digital, technology, talent, value-added solutions and inventory to broaden our offer and in particular improve our position in the electronics market in anticipation of a recovery in this marketplace. We believe these investments will be key to driving continued growth and outperformance over the medium term.

EMEA

EMEA accounts for 63% of Group revenue and breaks down into four sub-regions: Northern Europe, Southern Europe, Central Europe and our emerging market operations. IESA's and Monition's results are included within Northern Europe. RS, RS PRO, IESA and Monition are our key trading brands in EMEA. Our largest offering of value-added solutions sits in EMEA, helping to make our customers' lives easier. A broad range of products and high inventory availability are key priorities for our customers. We differentiate our offering from that of the competition by providing a best-in-class online experience, supported by a knowledgeable salesforce, technical expertise, 24/7 customer support and value-added solutions.

	H1 2020	H1 2019	Change	Like-for-like¹ change
Revenue	£615.0m	£575.7m	6.8%	5.4%
Operating profit	£96.8m	£89.1m	8.6%	7.5%
Operating profit margin	15.7%	15.5%	0.2 pts	0.3 pts

(1) Like-for-like adjusted for currency and to exclude the impact of acquisitions; revenue also adjusted for trading days.

· Overall, EMEA revenue increased by 6.8%, 5.4% on a like-for-like basis, to £615.0 million (H1 2019: £575.7 million), driven primarily by market share gains against a weaker market backdrop. The region saw broadly consistent growth across the two quarters with 5.4% and 5.5% like-for-like revenue growth in Q1 and Q2 respectively. All four sub-regions within EMEA saw like-for-like revenue growth.

· EMEA rolling 12-month NPS rose by 5.0% to 56.3 as online customer experience continued to be a focus.

· Digital, which accounts for 72% of the region's revenue, outperformed with like-for-like revenue growth of 5.9%.

· RS PRO, which accounts for 17% of the region's revenue, also significantly outperformed with 9.6% like-for-like revenue growth.

· EMEA gross margin saw a year-on-year decline in H1, primarily driven by product mix and an impact from lower margin single-board computing business.

· Operating profit margin rose 0.2 percentage points, 0.3 percentage points on a like-for-like basis, to 15.7% (H1 2019: 15.5%), driven by strong revenue growth and tight cost control.

· Operating profit rose 8.6%, 7.5% on a like-for-like basis, to £96.8 million (H1 2019: £89.1 million).

Sub-regional revenue performance

	H1 2020	H1 2019	Change	Like-for-like¹ change
Northern Europe	£273.9m	£254.2m	7.7%	5.2%
Southern Europe	£181.6m	£171.7m	5.8%	4.7%
Central Europe	£130.3m	£126.0m	3.4%	2.1%
Emerging markets	£29.2m	£23.8m	22.7%	33.3%
Total EMEA revenue	£615.0m	£575.7m	6.8%	5.4%

(1) Like-for-like adjusted for currency, trading days and to exclude the impact of acquisitions.

All the sub-regions within EMEA saw like-for-like revenue growth during the first half:

· Northern Europe (45% of EMEA revenue) is the largest sub-region within EMEA and consists of the UK, Ireland and Scandinavia. The UK is the main market in this sub-region, accounting for around 90% of the revenue. Northern Europe's revenue increased by 5.2% on a like-for-like basis, to £273.9 million (H1 2019: £254.2 million). Revenue growth was predominantly driven by market share gains in spite of ongoing uncertainty around the UK's exit from the European Union, with customer count growth in Northern Europe continuing to be strong. The rollout of value-added solutions is most advanced in this sub-region and we continue to see strong growth in areas such as calibration, RS Local and ScanStock, an inventory management solution. We continue to be successful at winning new business at IESA both in the UK and overseas with client wins in H1 including Nestlé and 3M. We are also piloting and rolling out new value-added solutions in areas such as vending, predictive maintenance and procurement - with solutions such as ConnectPoint^TM. We believe these initiatives will continue to drive growth and a stickier relationship with our customers in the future.

· Southern Europe (29% of EMEA revenue) consists of our operations in France, Italy and Iberia (Spain and Portugal). France is the main market in the sub-region accounting for approximately two-thirds of its revenue. Southern Europe's revenue increased by 4.7% on a like-for-like basis with growth broadly consistent across the two quarters - Q1 4.7%, Q2 4.8%. Growth was driven by continued outperformance in France. We continued to drive market share gains in France with strong growth in RS PRO and salesforce programmes focused on sales effectiveness and value-led selling as well as providing continuous learning and development across sales competences. Italy and Iberia saw low single digit like-for-like revenue growth. We continue to invest to build our offer and strengthen our talent and salesforce in these markets to support future growth and share gains.

· Central Europe (21% of EMEA revenue) consists of our operations in Germany, Austria, Benelux, Switzerland and Eastern Europe. Germany is the main market in the sub-region accounting for approximately 60% of the revenue. Overall, Central Europe saw 2.1% like-for-like revenue growth, with a strong performance from the smaller markets, such as Switzerland and Eastern Europe, more than offsetting a slower performance in Germany which was impacted by a tougher macroeconomic backdrop. We are making some important changes in the sub-region to build the right culture, talent and infrastructure capable of delivering market outperformance. During H1 we opened a new office in Frankfurt, relocated our customer service activities to Austria (voice) and UK (back office) and took the first steps to invest and strengthen our sales resource in the sub-region with a focus on building a more value-led sales culture. We have also appointed a new Head of Product & Supplier Management who will be responsible for broadening our product range with the distribution centre (DC) expansion underway in Germany.

· Emerging market operations (5% of EMEA revenue) has operations in South Africa and third-party distributors in other territories. During H1, our emerging market operations saw 33.3% like-for-like revenue growth driven by strong growth in South Africa aided by a strong focus on RS PRO. We also saw significant growth in OKdo, particularly in Q2 post the launch of Raspberry Pi 4.

Americas

The Americas accounts for 27% of Group revenue. Allied Electronics & Automation (Allied) is our main trading brand in the Americas, where we have operations in the US, together with smaller operations in Canada, Mexico and Chile. Allied's key focus remains on the automation and control market, offering a broad range of national franchises to customers. Its strong digital presence and technical expertise differentiate Allied from competitors that are primarily niche focused and digitally immature.

	H1 2020	H1 2019	Change	Like-for-like¹ change
Revenue	£263.7m	£240.2m	9.8%	3.4%
Operating profit	£31.3m	£31.4m	(0.3)%	(7.1)%
Operating profit margin	11.9%	13.1%	(1.2) pts	(1.3) pts

(1) Like-for-like adjusted for currency; revenue also adjusted for trading days.

· The Americas revenue increased by 9.8%, with like-for-like revenue up 3.4%, to £263.7 million (H1 2019: £240.2 million). Like-for-like revenue growth significantly improved to 6.5% in Q2 versus 0.4% in Q1 as we saw the early benefits of our efforts to reinvest and reinvigorate our salesforce in the region. We have recruited 30 additional sales personnel and developed new programmes to measure and improve salesforce effectiveness.

· The Americas rolling 12-month NPS score rose to 70.9, growing 3.1%. It remained the highest of our three regions as the team continues to focus on delivering an excellent customer experience.

· RS PRO continued to grow strongly from a low base. There is continued focus on the RS PRO range, with new dedicated content and sales team personnel, and this remains an area where we see significant potential in the future.

· Digital revenue, which accounts for 41% of revenue in the region, was flat for the half on a like-for-like basis due primarily to mix with faster growth in reseller business and slower growth in some of the more digitally driven electronics categories.

· The DC expansion continues to progress well and is on track for completion in summer 2020. This will continue to support initiatives to broaden product range offering scope, over time, to double the region's stocked range.

· Gross margin reduced during H1 primarily due to product mix, with slower growth from higher margin products, such as connectors and electromechanical.

· Operating profit margin was down 1.3 percentage points on a like-for-like basis to 11.9%, with weaker gross margin and investment in salesforce offsetting revenue growth.

· Operating profit was down 0.3%, down 7.1% on a like-for-like basis, to £31.3 million (H1 2019: £31.4 million).

Asia Pacific

Asia Pacific accounts for 10% of Group revenue and consists of four similarly sized sub-regions: ANZ, Greater China, Japan and South East Asia. RS and RS PRO are our key trading brands in Asia Pacific. Similar to EMEA, there is great potential for our Asia Pacific region to become the one-stop-shop partner of choice for industrial customers, offering a broad, localised range with strong technical expertise, a multi-channel approach and a growing range of value-added solutions.

	H1 2020	H1 2019	Change	Like-for-like¹ change
Revenue	£100.0m	£95.9m	4.3%	1.7%
Operating profit	£0.1m	£0.7m	(85.7)%	(91.7)%
Operating profit margin	0.1%	0.7%	(0.6) pts	(1.1) pts

(1) Like-for-like adjusted for currency; revenue also adjusted for trading days.

· Asia Pacific revenue increased 4.3%, 1.7% on a like-for-like basis. ANZ and South East Asia continued to see double-digit growth driven by market share gains. This more than offset declines seen in both Greater China and Japan, due to ongoing web performance issues as well as our high exposure to board level electronics in Japan.

· We continue to make strong progress on our journey to improve customer experience in the region. As a result, our Asia Pacific NPS took a further step forward in H1 with the 12-month rolling score up 4.6% to 36.7. It still remains below our other regions and we remain committed to continuing to drive improvements in the service we offer to our customers.

· Digital revenue, which accounts for 58% of revenue in the region, was down 2.1% on a like-for-like basis as we continued to see web performance issues in Japan and Greater China.

· RS PRO revenue, which accounts for 13% of revenue in the region, grew at 9.0% on a like-for-like basis. During the first half, we signed distribution agreements with local resellers to improve RS PRO's coverage in ANZ and, in time, these initiatives should aid longer-term growth.

· We believe the greatest single opportunity in Asia Pacific remains China. The October 2018 opening of our regional centre of expertise in Foshan has been an important step to build a scalable business in this market place. During H1, we continued to relocate back office and non-voice customer service activities from markets such as Japan and South East Asia into Foshan to improve service levels and increase efficiency. We also relocated more of our digital activities and voice services into our regional centre of expertise. We continue to focus on the needs of the local customer base and are tailoring our offer and go-to-market approach as we invest to build our capabilities in areas such as product and inventory management and digital. The focus on building a more localised digital experience in Asia Pacific and making our online content and product offer more relevant to the local market will take our business forward in China at a faster pace. We also believe these initiatives are key to driving the growth and scale we need to improve profitability in this region in the longer term.

· We saw broadly stable gross margin in the Asia Pacific during H1, with good growth in RS PRO offsetting the impact from OKdo.

· Asia Pacific's operating profit was £0.1 million (H1 2019: £0.7 million). Higher revenue was offset by increased operating costs with investment in areas such as digital, talent and product.

Central Costs

Central costs are Group head office costs and include Board, Group Finance, Group Professional Services and People that cannot be attributed to region-specific activity.

	H1 2020	H1 2019	Change	Like-for-like¹ change
Central costs	£(22.6)m	£(17.2)m	(31.4)%	(31.4)%

(1) Like-for-like adjusted for currency.

· Central costs increased 31.4% to £22.6 million (H1 2019: £17.2 million).

· Approximately half of the increase in central costs relates to the investment in OKdo which was launched during the first half. A large part of the balance relates to investment in talent and people development as we continue to build a high performance culture.

· We expect central costs in H2 2020 to be similar to H2 2019.

FINANCIAL REVIEW

Net finance costs

Net finance costs in H1 decreased to £2.3 million (H1 2019: £3.9 million).

Profit before tax

Profit before tax was down 4.3% to £89.0 million (H1 2019: £93.0 million). Excluding substantial reorganisation costs, asset write-downs and amortisation of acquired intangibles, adjusted profit before tax was up 3.2%, down 0.4% on a like-for-like basis to £103.4 million (H1 2019: £100.2 million).

Taxation

The Group's tax charge was £21.4 million (H1 2019: £23.0 million). The adjusted tax charge, which excludes the impact of tax relief on substantial reorganisation costs, asset write-downs and amortisation of acquired intangibles, was £24.1 million (H1 2019: £24.2 million), resulting in an effective tax rate of 23.3% on adjusted profit before tax (H1 2019: 24.2%).

Earnings per share

Earnings per share was down 4.4% to 15.2p (H1 2019: 15.9p). Excluding substantial reorganisation costs, asset
write-downs and amortisation of acquired intangibles, adjusted earnings per share of 17.8p (H1 2019: 17.2p) was up 3.5%, down 0.6% on a like-for-like basis.

Adoption of IFRS 16

The Group adopted International Financial Reporting Standard (IFRS) 16 'Leases' on 1 April 2019 with no restatement of comparatives. This increased operating profit by only £0.4 million but increased EBITDA by £7.8 million due to £7.4 million of depreciation of right-of-use assets. Also, the definition of net debt has been updated to include lease liabilities which has led to a £59.6 million increase in net debt and reduced return on capital employed by 1.5 percentage points. The adoption of IFRS 16 has increased the Group's free cash flow and adjusted free cash flow by £7.0 million for the six months ended 30 September 2019 and increased the Group's adjusted operating cash flow conversion by 6.9 percentage points (see Note 1 on pages 16 and 17 for more detail).

Cash flow

£m	H1 FY20	H1 FY19
Operating profit	91.2	96.8
Add back depreciation and amortisation	24.5	15.0
EBITDA	115.7	111.8
Movement in working capital	(38.2)	(49.1)
Movement in provisions	(3.1)	2.2
Other	3.4	3.9
Cash generated from operations	77.8	68.8
Net interest paid	(2.7)	(3.2)
Income tax paid	(28.1)	(20.3)
Net cash from operating activities	47.0	45.3
Net capital expenditure	(37.2)	(14.5)
Free cash flow	9.8	30.8
Add back cash effect of adjustments¹	4.1	3.2
Adjusted¹ free cash flow	13.9	34.0

(1) Adjusted excludes the impact of substantial reorganisation cash flows.

In May 2019 we announced plans to invest in building the right inventory, DC infrastructure and technology to enable us to scale our business and drive faster share gains and improved efficiency in the medium term. During the first half, we have accelerated investment in these strategic initiatives which has impacted cash generation during the period.

Cash generated from operations increased to £77.8 million (H1 2019: £68.8 million), with higher EBITDA more than offsetting continued inventory investment to support revenue growth, protect service levels in the event of any potential disruption around the UK's exit from the European Union (EU) and reposition our electronics business for the medium term. Working capital as a percentage of revenue increased by 1.2 percentage points to 23.9% (H1 2019: 22.7%). Stock turn reduced to 2.5 times (H1 2019: 2.7 times), reflecting the investment in inventory and product mix.

Net interest paid was lower at £2.7 million (H1 2019: £3.2 million). Income tax paid rose to £28.1 million (H1 2019: £20.3 million), as the impact of a lower underlying tax rate was more than offset by changes in the timing of UK income tax payments which meant we paid an additional £11.5 million of tax during the first half.

Net capital expenditure in the first half rose to £37.2 million (H1 2019: £14.5 million) with over two thirds of this spend focused on our strategic initiatives to build a scalable DC infrastructure and transform our technology. The DC expansion projects in the Americas and Germany are both progressing well and running on time and to budget. The American DC project is well advanced and is on track to open in summer 2020. The German DC project was initiated during the first half and is due to complete in summer 2021. We are also investing in our technology platforms, removing legacy systems and building a scalable product and content capability to ensure we can move at pace and continue to scale our business. The new product and content capability will enable us to introduce new products quicker and automate our decision making as well as help gather, process and analyse large volumes of data and content - offering more valuable insights to our suppliers. We are making good progress on this initiative and have recently launched a new document management system which will provide an integrated solution to our suppliers so we can introduce new product content and documentation in a scalable and efficient way. Capital expenditure was 2.6 times depreciation (H1 2019: 0.9 times). We would expect a higher weighting of capital expenditure to H2 as the German DC project gathers pace. We continue to expect capital expenditure to depreciation for the full year to be around 2.7 times.

The increase in strategic investments led to lower free cash flow at £9.8 million (H1 2019: £30.8 million). Adjusted free cash flow was £13.9 million (H1 2019: £34.0 million) and excludes a net cash outflow related to substantial reorganisation activities of £4.1 million (H1 2019: £3.2 million) relating to labour restructuring charges. Adjusted operating cash flow conversion, which is defined as adjusted free cash flow before income tax and net interest paid as a percentage of adjusted operating profit and is one of our eight KPIs, was 42.3% (H1 2019: 55.3%).

Return on Capital Employed (ROCE)

Net assets at the end of the first half were £662.6 million (H1 2019: £551.5 million). ROCE, calculated using adjusted operating profit for the 12 months ended 30 September 2019 and period-end net assets excluding net debt and retirement benefit obligations, was 23.5% (H1 2019: 26.4%). Of this decrease, 1.5 percentage points was due to the adoption of IFRS 16 on 1 April 2019 and the balance was due to increased strategic investment in inventory, technology and DC infrastructure.

Net debt

At 30 September 2019 net debt was £220.7 million. This was £98.3 million higher than at 31 March 2019. The inclusion of lease liabilities as a result of IFRS 16 increased net debt by £59.6 million, the balance of the increase was due to the 2019 final dividend payment of £42.1 million being only partially offset by adjusted free cash flow of £13.9 million as a result of higher strategic investment during the period.

Net debt comprised gross borrowings of £317.1 million offset by cash and short-term deposits of £93.7 million and cross currency and other interest rate swaps with a fair value of £2.7 million.

The Group's committed debt facilities (excluding lease liabilities) of £347 million, of which £139 million was undrawn as at 30 September 2019, are comprised of a c. £190 million syndicated multi-currency bank facility which has a maturity of August 2022, a £75 million term loan maturing in May 2020 together with US$100 million private placement loan notes maturing in June 2020. During July 2019, the Group signed US$165 million plus €31 million private placement loan notes consisting of five tranches of notes with maturities ranging between 7 and 12 years starting between October 2019 and March 2020. Once the first tranche of private placement loan notes was received in October 2019, the old US$100 million private placement loan notes were prepaid.

As a result of the adoption of IFRS 16 net debt to adjusted EBITDA rose by 0.3 to 0.9x based upon the 12 months ended 30 September 2019. The Group's financial metrics remain strong with significant headroom to the Group's banking covenants.

Pension

The Group has defined benefit schemes in the UK and Europe, with the UK scheme being by far the largest. All these schemes are closed to new entrants and in Germany and Ireland the pension schemes are closed to accrual for future service.

The combined accounting deficit of the Group's defined benefit schemes at 30 September 2019 was £59.9 million; this compares to £83.6 million at 31 March 2019 and £66.1 million at 30 September 2018. The UK defined benefit scheme's deficit at 30 September 2019 was £45.3 million, which compares to £69.4 million at 31 March 2019 and £51.6 million at 30 September 2018. The decrease in the UK defined benefit scheme's deficit at 30 September 2019 was due to a larger increase in the value of the assets than the increase in liabilities. The increase in the liabilities was caused by the discount rate falling by 0.6% from 2.4% to 1.8%, partially offset by a decrease in the inflation-linked assumptions and a change in mortality assumptions in line with the basis agreed for the triennial funding valuation at 31 March 2019.

The triennial funding valuation of the UK scheme at 31 March 2019 showed a deficit of £44.7 million on a statutory technical provisions basis. A new recovery plan, which replaces the previous recovery plan, has been agreed with the trustee of the UK scheme and deficit contributions will be paid with the aim that the scheme is fully funded on a technical provisions basis by 2022. These deficit contributions consist of an annual contribution of at least £10 million, increased each 1 April by the increase in the Retail Prices Index (RPI) for the year to the preceding December, and an additional contribution of £25 million. This contribution can be paid in instalments and paid as and when we deem appropriate, provided the total additional contribution has been paid no later than 31 March 2022. Under the previous recovery plan we had expected to pay an annual deficit contribution of £7.7 million in the year ending 31 March 2020.

Dividend

The Board intends to continue to pursue a progressive dividend policy whilst remaining committed to a healthy dividend cover over time by driving improved results and stronger cash flow.

In the normal course, the interim dividend is equivalent to approximately 40% of the prior year full-year dividend. As such, the Board proposes an interim dividend of 5.9p per share. This will be paid on 8 January 2020 to shareholders on the register on 29 November 2019.

Foreign exchange risk

The Group does not hedge translation exposure on the income statements of overseas subsidiaries. Based on the mix of non-sterling denominated revenue and adjusted operating profit, a one cent movement in the euro would impact annual adjusted profit before tax by £1.4 million and a one cent movement in the US dollar would impact annual adjusted profit before tax by £0.5 million.

The Group is also exposed to foreign currency transactional risk because most operating companies have some level of payables in currencies other than their functional currency. Some operating companies also have receivables in currencies other than their functional currency. Group Treasury maintains three to seven month hedging against freely tradable currencies to smooth the impact of fluctuations in currency. The Group's largest exposures relate to euros and US dollars.

RISKS AND UNCERTAINTIES

The Group's risk management process identifies, evaluates and manages the Group's principal risks and uncertainties. These are reviewed by both the Group's Risk Committee, comprising the Group's senior managers, and the Board, which regularly discusses the principal risks and receives risk reports covering risk mitigations and controls.

The Group has a defined risk appetite, which has been adopted by the Board, and is considered across three risk categories: strategic, operating and regulatory / compliance. These categories use both quantitative and qualitative criteria.

Principal risks and uncertainties

The principal risks and mitigations disclosed in the 2019 Annual Report and Accounts continue to be valid and are summarised below:

Strategic risk category

1. Consequences on the organisation of the UK exit from the EU

2. Fail to respond to strategic market shifts e.g. changes in customer demands and / or competitor activity

3. The Group's revenue and profit growth initiatives are not successfully implemented

Regulatory / compliance risk category

4. Failure to comply with international and local legal / regulatory requirements

Operating risk category

5. Failure in supply chain infrastructure

6. Prolonged system outage

7. Information loss / cyber breach

8. UK defined benefit pension scheme cash requirements are in excess of cash available

9. People resources unable to support the existing and future growth of the business

10. Macroeconomic environment deteriorates

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEAR FINANCIAL REPORT

The Directors confirm that these condensed Group accounts have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union and that the interim management report includes a fair review of the information required by Disclosure and Transparency Rules (DTR) 4.2.7 and DTR 4.2.8, namely:

· An indication of important events that have occurred during the first six months and their impact on the condensed set of accounts, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· Material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

The Directors of Electrocomponents plc are listed in the Electrocomponents Annual Report and Accounts for the year ended 31 March 2019. A list of current Directors is maintained on the Electrocomponents plc website: www.electrocomponents.com.

David Egan, Group Finance Director

11 November 2019

SAFE HARBOUR

This financial report 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.

GROUP INCOME STATEMENT

For the six months ended 30 September 2019

		Six months ended		Year ended
		30.9.2019	30.9.2018	31.3.2019
	Notes	£m	£m	£m
Revenue	2	978.7	911.8	1,884.4
Cost of sales		(551.0)	(507.0)	(1,045.8)
Gross profit		427.7	404.8	838.6
Distribution and marketing expenses		(298.8)	(283.6)	(580.0)
Administrative expenses		(37.7)	(24.4)	(57.6)
Operating profit	2	91.2	96.8	201.0
Finance income		2.2	2.2	3.5
Finance costs		(4.5)	(6.1)	(9.6)
Share of profit of joint venture		0.1	0.1	0.3
Profit before tax	2	89.0	93.0	195.2
Income tax expense		(21.4)	(23.0)	(47.1)
Profit for the period attributable to owners of the Company		67.6	70.0	148.1

Earnings per share - Basic	4	15.2p	15.9p	33.4p
Earnings per share - Diluted	4	15.2p	15.7p	33.2p

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 September 2019

	Six months ended		Year ended
	30.9.2019	30.9.2018	31.3.2019
	£m	£m	£m
Profit for the period	67.6	70.0	148.1

Other comprehensive income
Items that will not be reclassified subsequently to the income statement
Remeasurement of retirement benefit obligations	22.0	4.4	(15.1)
Income tax on items that will not be reclassified to the income statement	(3.7)	(0.7)	2.7

Items that may be reclassified subsequently to the income statement
Foreign exchange translation differences	24.8	24.4	20.0
Movement in cash flow hedges	3.1	1.2	3.8
Income tax on items that may be reclassified to the income statement	(1.3)	(0.3)	(1.4)
Other comprehensive income for the period	44.9	29.0	10.0
Total comprehensive income for the period attributable to owners of the Company	112.5	99.0	158.1

GROUP BALANCE SHEET

As at 30 September 2019

		30.9.2019	30.9.2018	31.3.2019
	Notes	£m	£m	£m
Non-current assets
Intangible assets		332.5	318.9	320.9
Property, plant and equipment		143.9	100.5	119.6
Right-of-use assets		58.1	-	-
Investment in joint venture		1.1	0.9	0.9
Other receivables		1.3	6.1	4.3
Cross currency interest rate swap	8	-	1.6	1.8
Fair value hedged firm commitment	8	0.1	-	-
Deferred tax assets		19.7	20.3	15.6
Total non-current assets		556.7	448.3	463.1
Current assets
Inventories	6	428.3	369.1	387.2
Trade and other receivables	7	396.6	404.3	414.7
Cash and cash equivalents - cash and short-term deposits	8	93.7	129.2	129.2
Cross currency interest rate swap	8	2.8	-	-
Other derivative assets		4.5	1.8	2.7
Current income tax receivables		12.8	1.2	2.1
Total current assets		938.7	905.6	935.9
Total assets		1,495.4	1,353.9	1,399.0
Current liabilities
Trade and other payables		(358.5)	(367.2)	(384.5)
Cash and cash equivalents - bank overdrafts	8	(50.2)	(97.3)	(78.1)
Borrowings	8	(156.3)	-	-
Lease liabilities	8	(16.0)	-	-
Other derivative liabilities		(0.6)	(0.7)	(0.8)
Provisions		(4.6)	(3.8)	(6.9)
Current income tax liabilities		(20.5)	(23.2)	(17.2)
Total current liabilities		(606.7)	(492.2)	(487.5)
Non-current liabilities
Other payables		(7.8)	(11.3)	(11.4)
Retirement benefit obligations	10	(59.9)	(66.1)	(83.6)
Borrowings	8	(51.1)	(172.5)	(175.3)
Lease liabilities	8	(43.6)	-	-
Interest rate swaps	8	(0.1)	-	-
Provisions		(1.0)	(1.2)	(1.6)
Deferred tax liabilities		(62.6)	(59.1)	(50.3)
Total non-current liabilities		(226.1)	(310.2)	(322.2)
Total liabilities		(832.8)	(802.4)	(809.7)
Net assets		662.6	551.5	589.3
Equity
Share capital		44.6	44.3	44.4
Share premium account		50.9	49.1	49.6
Hedging reserve		1.5	0.4	0.2
Own shares held by Employee Benefit Trust (EBT)		-	(0.4)	(1.2)
Cumulative translation reserve		85.9	65.5	61.1
Retained earnings		479.7	392.6	435.2
Equity attributable to owners of the Company		662.6	551.5	589.3

GROUP CASH FLOW STATEMENT

For the six months ended 30 September 2019

		Six months ended		Year ended
		30.9.2019	30.9.2018	31.3.2019
	Notes	£m	£m	£m
Cash flows from operating activities
Profit before tax		89.0	93.0	195.2
Depreciation and amortisation		24.5	15.0	31.9
Impairment of intangible assets		-	-	2.2
Loss on disposal of non-current assets		-	-	0.1
Equity-settled share-based payments		3.4	3.9	7.7
Net finance costs		2.3	3.9	6.1
Share of profit of and dividends received from joint venture		(0.1)	(0.1)	(0.1)
Increase in inventories		(32.3)	(30.6)	(50.7)
Decrease / (increase) in trade and other receivables		26.5	(16.5)	(28.7)
(Decrease) / increase in trade and other payables		(32.4)	(2.0)	14.6
(Decrease) / increase in provisions		(3.1)	2.2	5.9
Cash generated from operations		77.8	68.8	184.2
Interest received		2.3	2.2	3.8
Interest paid		(5.0)	(5.4)	(9.9)
Income tax paid		(28.1)	(20.3)	(50.8)
Net cash from operating activities		47.0	45.3	127.3

Cash flows from investing activities
Acquisition of businesses		(0.2)	(30.9)	(34.6)
Cash and cash equivalents acquired with businesses		-	1.0	1.3
Purchase of intangible assets, property, plant and equipment		(37.2)	(14.5)	(50.8)
Net cash used in investing activities		(37.4)	(44.4)	(84.1)

Cash flows from financing activities
Proceeds from the issue of share capital		1.5	2.1	2.6
Purchase of own shares by EBT		(0.2)	-	(2.3)
Loans drawn down	8	27.3	95.0	97.7
Loans repaid	8	-	(70.5)	(70.5)
Payment of lease liabilities	8	(7.0)	-	-
Dividends paid	5	(42.1)	(35.4)	(58.9)
Net cash used in financing activities		(20.5)	(8.8)	(31.4)

Net (decrease) / increase in cash and cash equivalents		(10.9)	(7.9)	11.8
Cash and cash equivalents at the beginning of the period		51.1	35.4	35.4
Effects of exchange rate changes		3.3	4.4	3.9
Cash and cash equivalents at the end of the period	8	43.5	31.9	51.1

GROUP STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2019

	Share capital	Share premium account	Hedging reserve	Own shares held by EBT	Cumulative translation reserve	Retained earnings	Total
	£m	£m	£m	£m	£m	£m	£m
At 1 April 2018	44.2	47.1	(0.5)	(4.2)	41.1	354.8	482.5
Profit for the period	-	-	-	-	-	70.0	70.0
Remeasurement of retirement benefit obligations	-	-	-	-	-	4.4	4.4
Foreign exchange translation differences	-	-	-	-	24.4	-	24.4
Net gain on cash flow hedges	-	-	1.2	-	-	-	1.2
Taxation on other comprehensive income	-	-	(0.3)	-	-	(0.7)	(1.0)
Total comprehensive income	-	-	0.9	-	24.4	73.7	99.0
Dividends (Note 5)	-	-	-	-	-	(35.4)	(35.4)
Equity-settled share-based payments	-	-	-	-	-	3.9	3.9
Shares allotted in respect of share awards	0.1	2.0	-	3.8	-	(3.8)	2.1
Tax on equity-settled share-based payments	-	-	-	-	-	(0.6)	(0.6)
At 30 September 2018	44.3	49.1	0.4	(0.4)	65.5	392.6	551.5
Profit for the period	-	-	-	-	-	78.1	78.1
Remeasurement of retirement benefit obligations	-	-	-	-	-	(19.5)	(19.5)
Foreign exchange translation differences	-	-	-	-	(4.4)	-	(4.4)
Net gain on cash flow hedges	-	-	2.6	-	-	-	2.6
Taxation on other comprehensive income	-	-	(1.1)	-	-	3.4	2.3
Total comprehensive income / (expense)	-	-	1.5	-	(4.4)	62.0	59.1
Cash flow hedging gains transferred to inventories	-	-	(2.6)	-	-	-	(2.6)
Tax on cash flow hedging gains transferred to inventories	-	-	0.9	-	-	-	0.9
Dividends (Note 5)	-	-	-	-	-	(23.5)	(23.5)
Equity-settled share-based payments	-	-	-	-	-	3.8	3.8
Shares allotted in respect of share awards	0.1	0.5	-	1.5	-	(1.6)	0.5
Purchase of own shares by EBT	-	-	-	(2.3)	-	-	(2.3)
Tax on equity-settled share-based payments	-	-	-	-	-	1.9	1.9
At 31 March 2019	44.4	49.6	0.2	(1.2)	61.1	435.2	589.3
Effect of transition to IFRS 16 (Note 1)	-	-	-	-	-	(1.1)	(1.1)
Effect of transition to IFRIC 23 (Note 1)	-	-	-	-	-	0.7	0.7
At 1 April 2019	44.4	49.6	0.2	(1.2)	61.1	434.8	588.9
Profit for the period	-	-	-	-	-	67.6	67.6
Remeasurement of retirement benefit obligations	-	-	-	-	-	22.0	22.0
Foreign exchange translation differences	-	-	-	-	24.8	-	24.8
Net gain on cash flow hedges	-	-	3.1	-	-	-	3.1
Taxation on other comprehensive income	-	-	(1.3)	-	-	(3.7)	(5.0)
Total comprehensive income	-	-	1.8	-	24.8	85.9	112.5
Cash flow hedging gains transferred to inventories	-	-	(1.0)	-	-	-	(1.0)
Tax on cash flow hedging gains transferred to inventories	-	-	0.5	-	-	-	0.5
Dividends (Note 5)	-	-	-	-	-	(42.1)	(42.1)
Equity-settled share-based payments	-	-	-	-	-	3.4	3.4
Shares allotted in respect of share awards	0.2	1.3	-	1.4	-	(1.4)	1.5
Purchase of own shares by EBT	-	-	-	(0.2)	-	-	(0.2)
Tax on equity-settled share-based payments	-	-	-	-	-	(0.9)	(0.9)
At 30 September 2019	44.6	50.9	1.5	-	85.9	479.7	662.6

NOTES TO THE CONDENSED GROUP ACCOUNTS

1. Basis of preparation

These condensed Group accounts were approved by the Board of Directors on 11 November 2019 and are unaudited but have been reviewed by the auditor. They do not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006, but have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union (EU) and the Disclosure and Transparency Rules of the UK's Financial Conduct Authority. The Directors consider it appropriate to continue to adopt the going concern basis in preparing these condensed Group accounts. Except as described below, they have been prepared on the basis of the accounting policies set out in the Annual Report and Accounts for the year ended 31 March 2019, which were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain any statement under section 498(2) or 498(3) of the Companies Act 2006.

The significant judgements made by the Group in applying its accounting policies and the key sources of estimation uncertainty were the same as those applied to the Group accounts for the year ended 31 March 2019, except for the adoption of IFRS 16 as described below and that there were no acquisitions in the six months ended 30 September 2019 so no significant estimates were needed to calculate their fair values.

Changes in significant accounting policies

IFRS 16 'Leases' has a material effect on the Group's financial position as explained below. The Group has also adopted International Financial Reporting Interpretations Committee (IFRIC) 23 'Uncertainty over Income Tax Treatments' as explained below. There are no other new standards or amendments to standards that have been adopted that have a material impact on the reported results or financial position of the Group.

IFRS 16 'Leases'

The Group adopted IFRS 16 'Leases' on 1 April 2019 which resulted in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases has been removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals discounted to present value are recognised. The only exceptions are short-term leases and leases of low-value assets which are both recognised on a straight-line basis over the lease term as an operating expense. Initial adoption resulted in the recognition of
right-of-use assets of £52.3 million and lease liabilities of £53.3 million with a weighted average incremental borrowing rate of 2.0% at 1 April 2019.

The Group has applied the new standard retrospectively with the cumulative effect of applying the new rules recognised in equity as an adjustment to the opening balance of retained earnings on 1 April 2019 and with no restatement of comparative information. Lease liabilities were measured at the present value of the remaining lease payments discounted at the relevant incremental borrowing rate at 1 April 2019. The Group elected on a lease by lease basis whether to measure the right-of-use asset at its carrying amount as if IFRS 16 had applied since the start of the lease discounted using the relevant incremental borrowing rate at 1 April 2019, or at the same value as the lease liability adjusted for any prepaid or accrued lease payments.

In applying IFRS 16 for the first time, the Group has used the following practical expedients:

• to apply this standard to contracts that were previously identified as leases under IAS 17 'Leases' and IFRIC 4 'Determining whether an Arrangement contains a Lease' and not to apply IFRS 16 to leases which were not identified as containing a lease under IAS 17 or IFRIC 4

• to treat leases with a remaining lease term of less than 12 months at 1 April 2019 as short-term leases

• to exclude initial direct costs from the measurement of the right-of-use assets at 1 April 2019, applied on a
lease-by-lease basis

• to use hindsight in determining the lease term where the lease contains an extension or termination clause

Judgements were made in calculating the initial impact of adoption including determining the lease term where extension or termination options exist. In such instances, all facts and circumstances that may create an economic incentive to exercise an extension option, or not exercise a termination option, were considered to determine the lease term. Extension periods (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

1. Basis of preparation (continued)

The impact of the adoption of IFRS 16 on the opening balance sheet as at 1 April 2019 is:

	As at 31.3.2019	Impact of IFRS 16	As at 1.4.2019
	£m	£m	£m
Right-of-use assets	-	52.3	52.3
Non-current other receivables	4.3	(3.4)	0.9
Deferred tax assets	15.6	0.3	15.9
Trade and other receivables	414.7	(0.6)	414.1
Trade and other payables	(384.5)	1.3	(383.2)
Current lease liabilities	-	(13.8)	(13.8)
Non-current other payables	(11.4)	2.3	(9.1)
Non-current lease liabilities	-	(39.5)	(39.5)
Equity	(589.3)	1.1	(588.2)

The accounting for leases under IFRS 16 has resulted in higher operating profit, with a lower lease expense partly offset by depreciation of the right-of-use asset, and higher finance costs due to the unwinding of the discount on the present value of the liability. This is immaterial with operating profit for the six months ended 30 September 2019 increasing by £0.4 million and finance costs increasing by £0.5 million, with a net decrease to profit before tax of £0.1 million.

Depreciation of right-of-use assets was £7.4 million and so EBITDA increased by £7.8 million. The definition of net debt has been updated to include lease liabilities as a result of IFRS 16 and so net debt increased by £59.6 million at 30 September 2019. As a result, net debt to adjusted EBITDA increased by 0.3. The covenants of the existing private placement loan notes and bank facilities are on frozen GAAP and so IFRS 16 has no impact. Return on capital employed decreased by 1.5 percentage points.

There is no net cash flow impact arising from the adoption of IFRS 16, although payment of lease liabilities has moved from operating activities to financing activities and so some of the Group's alternative performance measures have been affected. Under IFRS 16 the Group's free cash flow and adjusted free cash flow for the six months ended 30 September 2019 have increased by £7.0 million and adjusted operating cash flow conversion increased by 6.9 percentage points.

IFRIC 23 'Uncertainty over Income Tax Treatments'

The Group adopted IFRIC 23 'Uncertainty Over Income Tax Treatments' on 1 April 2019 and has consequently measured the effect of uncertainty on income tax positions using either the most likely amount or the expected value amount depending on which method is expected to better reflect the resolution of the uncertainty.

The Group has applied the new interpretation retrospectively with the cumulative effect of applying the new rules recognised in equity as an adjustment to the opening balance of retained earnings on 1 April 2019 and with no restatement of comparative information. This increased current income tax assets by £4.8 million and current income tax liabilities by £4.1 million at 1 April 2019 with a corresponding increase to retained earnings of £0.7 million.

2. Segmental reporting

The Group's operating segments comprise three regions: EMEA, the Americas and Asia Pacific.

	EMEA	Americas	Asia Pacific	Group
	£m	£m	£m	£m
Six months ended 30 September 2019
Revenue from external customers	615.0	263.7	100.0	978.7
Segmental operating profit	96.8	31.3	0.1	128.2
Central costs				(22.6)
Adjusted operating profit				105.6
Amortisation of acquired intangibles				(2.7)
Asset write-downs (Notes 6 and 7)				(10.4)
Substantial reorganisation costs (Note 3)				(1.3)
Operating profit				91.2
Net finance costs				(2.3)
Share of profit of joint venture				0.1
Profit before tax				89.0

Six months ended 30 September 2018
Revenue from external customers	575.7	240.2	95.9	911.8
Segmental operating profit	89.1	31.4	0.7	121.2
Central costs				(17.2)
Adjusted operating profit				104.0
Amortisation of acquired intangibles				(1.8)
Substantial reorganisation costs (Note 3)				(5.4)
Operating profit				96.8
Net finance costs				(3.9)
Share of profit of joint venture				0.1
Profit before tax				93.0

Year ended 31 March 2019
Revenue from external customers	1,210.0	483.6	190.8	1,884.4
Segmental operating profit	193.5	62.1	3.0	258.6
Central costs				(38.3)
Adjusted operating profit				220.3
One-off pension costs				(1.8)
Amortisation of acquired intangibles				(4.4)
Substantial reorganisation costs (Note 3)				(13.1)
Operating profit				201.0
Net finance costs				(6.1)
Share of profit of joint venture				0.3
Profit before tax				195.2

In the following table, revenue is disaggregated by major products / services and sales channels. Of Electronic products / services' revenue £184.3 million is recognised at a point in time and £0.6 million over time (six months ended 30 September 2018: all at a point in time; year ended 31 March 2019: £369.6 million recognised at a point in time and £1.4 million over time). Of Industrial products / services' revenue £785.2 million is recognised at a point in time and £8.6 million over time (six months ended 30 September 2018: £723.5 million recognised at a point in time and £3.6 million over time; year ended 31 March 2019: £1,497.3 million recognised at a point in time and £16.1 million over time).

2. Segmental reporting (continued)

	EMEA	Americas	Asia Pacific	Group
	£m	£m	£m	£m
Six months ended 30 September 2019
Major products / services lines
Industrial products / services	501.6	222.9	69.3	793.8
Electronic products / services	113.4	40.8	30.7	184.9
Group	615.0	263.7	100.0	978.7

Sales channel
Digital	444.8	107.6	57.9	610.3
Offline	170.2	156.1	42.1	368.4
Group	615.0	263.7	100.0	978.7

Six months ended 30 September 2018
Major products / services lines
Industrial products / services	467.1	198.4	61.6	727.1
Electronic products / services	108.6	41.8	34.3	184.7
Group	575.7	240.2	95.9	911.8

Sales channel
Digital	395.5	101.5	56.7	553.7
Offline	180.2	138.7	39.2	358.1
Group	575.7	240.2	95.9	911.8

Year ended 31 March 2019
Major products / services lines
Industrial products / services	982.2	406.4	124.8	1,513.4
Electronic products / services	227.8	77.2	66.0	371.0
Group	1,210.0	483.6	190.8	1,884.4

Sales channel
Digital	846.2	202.9	111.9	1,161.0
Offline	363.8	280.7	78.9	723.4
Group	1,210.0	483.6	190.8	1,884.4

3. Substantial reorganisation costs

The Group launched a second phase to the Performance Improvement Plan (PIP) in May 2018 which has given rise to substantial reorganisation costs in several of the Group's regions and activities. Substantial reorganisation costs are excluded from adjusted performance measures.

	Six months ended		Year ended
	30.9.2019	30.9.2018	31.3.2019
	£m	£m	£m
Redundancy and associated costs	1.3	5.4	13.8
Dilapidation costs for leased buildings	-	-	0.1
Onerous lease credits	-	-	(0.8)
Total substantial reorganisation costs	1.3	5.4	13.1

4. Earnings per share

	Six months ended		Year ended
	30.9.2019	30.9.2018	31.3.2019
	m	m	m
Weighted average number of shares	444.4	441.3	442.9
Dilutive effect of share-based payments	1.7	3.4	3.4
Diluted weighted average number of shares	446.1	444.7	446.3

Basic earnings per share	15.2p	15.9p	33.4p
Diluted earnings per share	15.2p	15.7p	33.2p

5. Dividends

	Six months ended		Year ended
	30.9.2019	30.9.2018	31.3.2019
	£m	£m	£m
Final dividend for the year ended 31 March 2019: 9.5p (2018: 8.0p)	42.1	35.4	35.4
Interim dividend for the year ended 31 March 2019: 5.3p	-	-	23.5
	42.1	35.4	58.9

An interim dividend of 5.9p will be paid on 8 January 2020 to shareholders on the register on 29 November 2019 with an ex-dividend date of 28 November 2019 and the estimated amount to be paid of £26.3 million has not been included as a liability in these accounts.

6. Inventories

	30.9.2019	30.9.2018	31.3.2019
	£m	£m	£m
Gross inventories	459.4	395.3	415.0
Inventory provisions	(31.1)	(26.2)	(27.8)
Net inventories	428.3	369.1	387.2

Inventory provisions include £3.2 million against inventories recovered from British Steel Limited on it entering compulsory liquidation on 22 May 2019. This has been excluded from adjusted performance measures.

As a result of the Group's strategic investments in electronics inventory, the methodology used to estimate the net realisable value of inventories was updated in order for it to continue to reflect commercial reality. The overall effect on the estimation of net realisable value as a result of these investments and updating the methodology was not material.

During the six months ended 30 September 2019 £5.5 million (six months ended 30 September 2018: £4.3 million; year ended 31 March 2019: £8.0 million) was recognised as an expense relating to the write-down of inventories to net realisable value.

7. Trade and other receivables

	30.9.2019	30.9.2018	31.3.2019
	£m	£m	£m
Gross trade receivables	342.9	344.1	365.2
Impairment allowance	(11.2)	(4.8)	(3.5)
Net trade receivables	331.7	339.3	361.7
Other receivables (including prepayments and accrued income)	64.9	65.0	53.0
Trade and other receivables	396.6	404.3	414.7

With British Steel Limited entering compulsory liquidation on 22 May 2019, the Group has set up an impairment allowance of £7.2 million for receivables still outstanding at 30 September 2019 relating to transactions with British Steel Limited before 22 May 2019. This impairment allowance has been excluded from adjusted performance measures.

8. Net debt

	30.9.2019	30.9.2018	31.3.2019
	£m	£m	£m
Cash and short-term deposits	93.7	129.2	129.2
Bank overdrafts	(50.2)	(97.3)	(78.1)
Cash and cash equivalents	43.5	31.9	51.1
Bank facilities repayable within one year	(75.0)	-	-
Bank facilities repayable after more than one year	(51.1)	(96.1)	(98.7)
Private placement loan notes repayable within one year	(81.3)	-	-
Private placement loan notes repayable after more than one year	-	(76.4)	(76.6)
Cross currency interest rate swap - fair value hedges - current asset	2.8	-	-
Cross currency interest rate swap - fair value hedges - non-current asset	-	1.6	1.8
Interest rate swaps - fair value hedges - non-current liabilities	(0.1)	-	-
Fair value hedged firm commitment	0.1	-	-
Current lease liabilities	(16.0)	-	-
Non-current lease liabilities	(43.6)	-	-
Net debt	(220.7)	(139.0)	(122.4)

The Group has arranged new 7, 10 and 12 year private placement loan notes totalling US$165 million and €31 million starting in October 2019, December 2019 and March 2020.

	Six months ended		Year ended
	30.9.2019	30.9.2018	31.3.2019
Movement in net debt	£m	£m	£m
Net debt at 1 April	(122.4)	(65.0)	(65.0)
Lease liabilities at 1 April 2019 on adoption of IFRS 16 (Note 1)	(53.3)	-	-
Net (decrease) / increase in cash and cash equivalents	(10.9)	(7.9)	11.8
Loans and finance leases acquired with businesses	-	(42.0)	(42.1)
Loans drawn down	(27.3)	(95.0)	(97.7)
Loans repaid	-	70.5	70.5
New leases	(13.3)	-	-
Payment of lease liabilities	7.0	-	-
Translation differences	(0.5)	0.4	0.1
Net debt at end of period	(220.7)	(139.0)	(122.4)

9. Fair values of financial instruments

For all financial assets and liabilities, fair value approximates the carrying amounts shown in the balance sheet except for the following:

	30.9.2019		30.9.2018		31.3.2019
	Carrying amounts	Fair value	Carrying amounts	Fair value	Carrying amounts	Fair value
	£m	£m	£m	£m	£m	£m
Private placement loan notes	(81.3)	(81.3)	(76.4)	(75.6)	(76.6)	(76.1)

The other derivatives, cross currency interest rate swap and the fair value of the private placement loan notes it is hedging, and the interest rate swaps and the firm commitment they are hedging are measured at fair value using Level 2 inputs. These are estimated by discounting future cash flows using appropriate market-sourced data at the balance sheet date.

10. Retirement benefit obligations

The Group operates defined benefit schemes in the United Kingdom and Europe.

	30.9.2019	30.9.2018	31.3.2019
	£m	£m	£m
Fair value of scheme assets	596.9	496.6	532.4
Present value of defined benefit obligations	(655.7)	(562.7)	(616.0)
Effect of asset ceiling / onerous liability	(1.1)	-	-
Retirement benefit obligations	(59.9)	(66.1)	(83.6)

11. Alternative Performance Measures (APMs)

The Group uses a number of APMs in addition to those measures reported in accordance with IFRS. Such APMs are not defined terms under IFRS and are not intended to be a substitute for any IFRS measure. The Directors believe that the APMs are important when assessing the underlying financial and operating performance of the Group. The APMs are used internally for performance analysis and in employee incentive arrangements, as well as in discussions with the investment analyst community.

The APMs improve the comparability of information between reporting periods by adjusting for factors such as fluctuations in foreign exchange rates, number of trading days and items, such as reorganisation costs, that are substantial in scope and impact and do not form part of operational or management activities that the Directors would consider part of underlying performance. The Directors also believe that excluding recent acquisitions and acquisition-related items aid comparison of the underlying performance between reporting periods and between businesses with similar assets that were internally generated.

Base business

The Group's base business excludes acquisitions in the relevant periods until they have been owned for a year, at which point they start to be included in both the current and comparative periods for the same number of months.

		Six months ended 30.9.2019
		Base business	Acquisitions	Group
		£m	£m	£m
Revenue
	EMEA	608.4	6.6	615.0
	Americas	263.7	-	263.7
	Asia Pacific	100.0	-	100.0
Group		972.1	6.6	978.7

Segmental operating profit
	EMEA	95.5	1.3	96.8
	Americas	31.3	-	31.3
	Asia Pacific	0.1	-	0.1
Segmental operating profit		126.9	1.3	128.2
Central costs		(22.6)	-	(22.6)
Adjusted operating profit		104.3	1.3	105.6
Adjusted profit before tax		102.3	1.1	103.4
Adjusted earnings per share (EPS)		17.6p	0.2p	17.8p
Adjusted diluted EPS		17.6p	0.2p	17.8p

Like-for-like revenue growth

Like-for-like revenue growth is growth in revenue adjusted to eliminate the impact of acquisitions and changes in exchange rates and trading days year on year. It is calculated by comparing the revenue of the base business for the current period with the prior period converted at the current period's average exchange rates and pro-rated for the same number of trading days as the current period. This measure enables management and investors to track more easily, and consistently, the underlying revenue performance of the Group.

	Six months ended		H1 2019 at H1 2020 rates and	Like-for-like
	30.9.2019	30.9.2018	trading days	growth
	£m	£m	£m	%
EMEA	608.4	575.7	577.1	5.4%
Americas	263.7	240.2	255.0	3.4%
Asia Pacific	100.0	95.9	98.3	1.7%
Group's base business	972.1	911.8	930.4	4.5%

				£m
Revenue for H1 2019				911.8
Effect of exchange rates				17.6
Effect of trading days				1.0
Revenue for H1 2019 at H1 2020 rates and trading days				930.4

11. Alternative Performance Measures (APMs) (continued)

Like-for-like profit growth rates

Like-for-like growth rates are adjusted to exclude the effects of changes in exchange rates on translation of overseas profits. The rates are calculated by comparing the base business for the current period with the prior period converted at the current period's average exchange rates.

		Six months ended		H1 2019 at	Like-for-like
		30.9.2019	30.9.2018	H1 2020 rates	growth
		£m	£m	£m	%
Segmental operating profit for base business
	EMEA	95.5	89.1	88.8	7.5%
	Americas	31.3	31.4	33.7	(7.1)%
	Asia Pacific	0.1	0.7	1.2	(91.7)%
Segmental operating profit for base business		126.9	121.2	123.7	2.6%
Central costs		(22.6)	(17.2)	(17.2)	31.4%
Adjusted operating profit for base business		104.3	104.0	106.5	(2.1)%
Adjusted profit before tax for base business		102.3	100.2	102.7	(0.4)%
Adjusted EPS for base business		17.6p	17.2p	17.7p	(0.6)%

The principal exchange rates applied in preparing the Group accounts and in calculating the above like-for-like measures are:

	Average for six months ended		Closing
	30.9.2019	30.9.2018	30.9.2019	30.9.2018
US dollar	1.26	1.33	1.23	1.30
Euro	1.13	1.13	1.13	1.12

Adjusted measures

These are the equivalent IFRS measures adjusted to exclude amortisation of intangible assets arising on acquisition of businesses, substantial reorganisation costs, asset write-downs, one-off pension credits or costs, significant tax rate changes and, where relevant, associated tax effects.

	Six months ended 30.9.2019					Six months ended 30.9.2018
Reported		Amortisation of acquired intangibles	Asset write-downs (Notes 6, 7)	Substantial reorganisation costs (Note 3)	Adjusted	Reported	Amortisation of acquired intangibles	Substantial reorganisation costs (Note 3)	Adjusted
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Operating profit	91.2	2.7	10.4	1.3	105.6	96.8	1.8	5.4	104.0
Operating profit margin¹	9.3%				10.8%	10.6%			11.4%
Operating profit conversion²	21.3%				24.7%	23.9%			25.7%
Profit before tax	89.0	2.7	10.4	1.3	103.4	93.0	1.8	5.4	100.2
Profit for the period	67.6	2.2	8.4	1.1	79.3	70.0	1.5	4.5	76.0
Basic EPS	15.2p	0.5p	1.9p	0.2p	17.8p	15.9p	0.3p	1.0p	17.2p
Diluted EPS	15.2p	0.5p	1.9p	0.2p	17.8p	15.7p	0.3p	1.0p	17.0p

⁽¹⁾Operating profit margin is operating profit expressed as a percentage of revenue.

⁽²⁾Operating profit conversion is operating profit expressed as a percentage of gross profit.

11. Alternative Performance Measures (APMs) (continued)

Free cash flow, adjusted free cash flow and adjusted operating cash flow conversion

Free cash flow is the net movement in cash and cash equivalents before net cash used in financing activities, acquisition of businesses and cash and cash equivalents acquired with businesses. Adjusted free cash flow is free cash flow adjusted for the impact of substantial reorganisation cash flows. Adjusted operating cash flow conversion is adjusted free cash flow before income tax and net interest paid, expressed as a percentage of adjusted operating profit.

	Six months ended		Year ended
	30.9.2019	30.9.2018	31.3.2019
	£m	£m	£m
Net (decrease) / increase in cash and cash equivalents	(10.9)	(7.9)	11.8
Add back: cash used in financing activities	20.5	8.8	31.4
Add back: cash used in acquisition of businesses	0.2	30.9	34.6
Less: cash and cash equivalents acquired with businesses	-	(1.0)	(1.3)
Free cash flow	9.8	30.8	76.5
Add back: impact of substantial reorganisation cash flows	4.1	3.2	8.0
Adjusted free cash flow	13.9	34.0	84.5
Add back: income tax paid	28.1	20.3	50.8
Add back: net interest paid	2.7	3.2	6.1
Adjusted free cash flow before income tax and net interest paid	44.7	57.5	141.4
Adjusted operating profit	105.6	104.0	220.3
Adjusted operating cash flow conversion	42.3%	55.3%	64.2%

Earnings before interest, tax, depreciation and amortisation (EBITDA), net debt and net debt to adjusted EBITDA

EBITDA is operating profit excluding depreciation and amortisation. Net debt is defined and reconciled in Note 8.
Net debt to adjusted EBITDA is the ratio of net debt to annualised EBITDA excluding one-off pension costs, asset
write-downs and substantial reorganisation costs for the preceding twelve-month period.

	30.9.2019	30.9.2018	31.3.2019
	£m	£m	£m
Operating profit	91.2	96.8	201.0
Add back: depreciation and amortisation	24.5	15.0	31.9
EBITDA	115.7	111.8	232.9
Add back: one-off pension costs	-	-	1.8
Add back: asset write-downs	10.4	-	-
Add back: substantial reorganisation costs	1.3	5.4	13.1
Adjusted EBITDA for this period	127.4	117.2	247.8
Adjusted EBITDA for prior year	247.8	202.9
Less: adjusted EBITDA for prior first half	(117.2)	(94.0)
Annualised adjusted EBITDA	258.0	226.1	247.8
Net debt	220.7	139.0	122.4
Net debt to adjusted EBITDA	0.9x	0.6x	0.5x

Return on capital employed (ROCE)

ROCE is annualised adjusted operating profit expressed as a percentage of net assets excluding net debt and retirement benefit obligations.

	30.9.2019	30.9.2018	31.3.2019
	£m	£m	£m
Net assets	662.6	551.5	589.3
Add back: net debt	220.7	139.0	122.4
Add back: retirement benefit obligations	59.9	66.1	83.6
Capital employed	943.2	756.6	795.3
Adjusted operating profit for this period	105.6	104.0	220.3
Adjusted operating profit for prior year	220.3	177.1
Less: adjusted operating profit for prior first half	(104.0)	(81.2)
Annualised adjusted operating profit	221.9	199.9	220.3
ROCE	23.5%	26.4%	27.7%

11. Alternative Performance Measures (APMs) (continued)

Working capital as a percentage of revenue

Working capital is inventories, current trade and other receivables and current trade and other payables. Working capital as a percentage of revenue is working capital expressed as a percentage of annualised revenue.

	30.9.2019	30.9.2018	31.3.2019
	£m	£m	£m
Inventories	428.3	369.1	387.2
Current trade and other receivables	396.6	404.3	414.7
Current trade and other payables	(358.5)	(367.2)	(384.5)
Working capital	466.4	406.2	417.4
Revenue for this period	978.7	911.8	1,884.4
Revenue for prior year	1,884.4	1,705.3
Less: revenue for prior first half	(911.8)	(823.8)
Annualised revenue	1,951.3	1,793.3	1,884.4
Working capital as a percentage of revenue	23.9%	22.7%	22.2%

Inventory turn

Inventory turn is annualised cost of sales divided by inventories.

	30.9.2019	30.9.2018	31.3.2019
	£m	£m	£m
Cost of sales for this period	551.0	507.0	1,045.8
Cost of sales for prior year	1,045.8	955.5
Less: cost of sales for prior first half	(507.0)	(466.4)
Annualised cost of sales	1,089.8	996.1	1,045.8
Inventories	428.3	369.1	387.2
Inventory turn	2.5	2.7	2.7

Ratio of capital expenditure to depreciation

Ratio of capital expenditure to depreciation is capital expenditure divided by depreciation and amortisation excluding amortisation of acquired intangibles and depreciation of right-of-use assets.

	Six months ended		Year ended
	30.9.2019	30.9.2018	31.3.2019
	£m	£m	£m
Depreciation and amortisation	24.5	15.0	31.9
Less: amortisation of acquired intangibles	(2.7)	(1.8)	(4.4)
Less: depreciation of right-of-use assets	(7.4)	-	-
Adjusted depreciation and amortisation	14.4	13.2	27.5
Capital expenditure	37.1	11.3	49.2
Ratio of capital expenditure to depreciation	2.6 times	0.9 times	1.8 times

12. Related party transactions

There has been no material change in related party relationships in the six months ended 30 September 2019. There were no significant related party transactions which have materially affected the financial position or performance of the Group during that period.

13. Capital commitments

As at 30 September 2019, the Group is contractually committed to, but has not provided for, future capital expenditure of £27.7 million.

INDEPENDENT REVIEW REPORT TO ELECTROCOMPONENTS PLC

Report on the condensed Group accounts

Our conclusion

We have reviewed Electrocomponents plc's condensed Group accounts (the 'interim financial statements') in the
half-year financial report of Electrocomponents plc for the 6 month period ended 30 September 2019. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

· the Group balance sheet as at 30 September 2019;

· the Group income statement and Group statement of comprehensive income for the period then ended;

· the Group cash flow statement for the period then ended;

· the Group statement of changes in equity for the period then ended; and

· the explanatory notes to the interim financial statements.

The interim financial statements included in the half-year financial report have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in Note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the Directors

The half-year financial report, including the interim financial statements, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-year financial report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the half-year financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the half-year financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

London

11 November 2019

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

IR FFUESFFUSELF

Company Announcements

Half-year Report

12 November 2019, 7.00 am

ELECTROCOMPONENTS PLC