Video transcript

In October 2006, the Group completed a strategic review of its activities and announced the results of that review. The strategy set out at that time was one of profitable growth through focus on our Electronic Design Engineer, or EDE, customer base, the on-going utilisation and development of our web proposition and the internationalisation of our business model as we expand into new higher growth international territories. In addition, in the strategy announcement we identified that we intended to sell our Buck Hickman in One business and this was completed successfully in April 2007. I will now provide you a summary of the strategy and a review of the progress that we have made in the last financial year.

The global EDE market consists of customers involved in the design of electronic products and components and is part of the catalogue addressable market estimated at £15 billion worldwide. EDE customers have similar service requirements wherever they are located – these include; a broad product offering, technical support, and reliable and prompt delivery. Our data indicates that over the period of the strategy that we expect demand for our products purchased by design engineers will grow in the range of 6-8%. This is approximately twice the growth we anticipate in the Maintenance, Repair and Operation, or MRO, part of our business.

During the current financial year, and as we have implemented the key proposition elements of our EDE strategy, we have seen an increase in revenue growth. This is particularly true of the increase in growth rates for our North American and Asian markets where our levels of EDE business are lower than the European business. In particular, sales into our small customer segment in North America, which are predominantly EDEs, were up 28% in the year. In APAC, we saw sales growth accelerate over the year as our Chinese business completed the migration away from its former MRO base and engaged with the growing EDE customer base in that market.

A key part of the proposition is the product range that we offer to EDEs. We announced last year that we intended to add approximately 70,000 products to our current stocked range (of approximately 300,000 products) with a further 500,000 lines to be available on demand. We have made good progress this year and have added 88,000 new products, before the deletions, into stock and have made a further 50,000 available on an as needed basis. Concurrently with this activity, we have continued our work managing out the RoHS non-compliant inventory in Europe and improving our product life cycle management to better align inventory availability with the demand for product.

We have set as a goal for this part of our strategy that 50% of MDD revenue will come from EDE customers by the end of year financial year 2010.

This part of our strategy is intended to provide design engineers and purchasing professionals with a fast and efficient channel to access our growing range of products and associated technical information. The web is a preferred channel for many EDE customers and offers a lower cost to serve channel as opposed to more traditional sales channels. This part of our strategy is a key element of our multi-channel end to end customer experience plan, which includes both our EDE and our MRO customer base.

We have set a goal for this part of the strategy that we will achieve at least 50% of our MDD revenue via eCommerce by the end of financial year 2010.

The Chinese market for small volume electronics is estimated at over £1 billion annually and growing at a rate faster than Chinese GDP. This market is highly fragmented, offering a significant growth opportunity and potential for us to achieve market leadership with the growing number of design engineers graduating from Chinese universities every year and engaging in design activities in their local industries.

We have made good progress this year with the launch of Premier Electronics in China. This business is focused on the local design community and is supported by the investments that we have made this year in inventory, with circa 28,000 stocked SKU’s in our warehouse in Shanghai, systems and marketing support, and next day delivery available in over 95 Chinese cities. Fourth quarter revenue growth was over 20% reflecting the benefit of these investments and we are planning on achieving at least these levels of revenue growth in FY2009.

The expansion of the European Union and the highly fragmented nature of these new markets also offer growth opportunities. During the current year we have launched web sites in several new languages as well as hiring dedicated technical and marketing support for these parts of Europe.

In January 2008, we successfully completed the acquisition of the high service distribution of Hynetics Ltd. in India. This business, which had sold the Farnell product range for over 6 years as a distributor, has offices in 8 locations and employs just over 30 staff. This business will be a platform for further investment in 2009 and 2010, into a market which also has a rapidly growing customer base of university graduates working in local design activities both for the Indian and the global market.

We have set as a goal for this part of the strategy that 20% of the Group’s revenue would be from International or emerging markets by FY 2010.

Through the flawless execution of this strategy, we will increase shareholder value.