Video transcript

The past 12 months have been a very exciting time for us as we have worked to implement and embed our strategy globally. We have made huge strides forward in the major areas of the strategy, without ever losing sight of the absolute fundamentals of what our customers expect from a high service distributor – that’s great service, the right products, and superior logistics that get the right goods to the right place at the right time, again and again.

I believe our strong financial performance for the year is a healthy indication that we have the right strategy for the future. Our changes are clearly beginning to deliver greater value judging by the high numbers of new customers and suppliers we have attracted during the year. The rapidly gaining momentum across the business is hugely encouraging.

Our sales have accelerated globally through the year as we have continued to outperform the market and drive profitability, despite currency and market fluctuations. We have delivered our second full year of gross margin stability, nine quarters in total, which is industry differentiating. Indeed all of our financial metrics have improved year on year.

Our focus for the year has been on rigorous implementation of the strategy and really listening to the voice of our customers and suppliers. There are many differences clearly evident from 12 months ago.

Our service offering to electronic design engineers is vastly improved as we continue to expand our offering of world class suppliers and technology specialists to meet their needs and improve our data, support and information services too. Since we began our strategic evolution we have added 62 new suppliers to our portfolio and over 138,000 lines of product, along with some exciting new tools and services.

Also during the year we launched our new world class web platform across Europe and Asia, following its successful launch in the USA in December 2006, creating a truly global database. We have continued to invest and enhance our web offering and have many more local language websites now than a year ago, with ever improving speed and search capabilities.

We have expanded our business operations significantly and have launched businesses in China, India, and Eastern Europe over the last 12 months. In April 2007 we disposed of BuckHickman to the BSS Group as we did not anticipate the business would be capable of achieving the target we expected. In the longer term the investments we were making in our core strategy would have been unlikely to benefit this business.

Investment in our people has also been a significant pillar of our strategy. As an intermediary, service excellence is key to our success and knowledgeable, engaged people are critical to a positive customer experience. We have made enormous progress in this area and significant investments to develop our internal talent. At the same time we have attracted industry experienced talent to our leadership teams in all businesses in all regions. We now have strong succession plans in place across the organisation, covering most of the senior management positions, with further bench-strength developing all the time. Together we are determined to build a high performance culture where everyone is constantly working to raise the bar of their own performance and delight customers.

So much has happened and changed this year – everything from the creation of a carbon reduction plan to new technology initiatives which all feel very different, and better.

Undoubtedly the major highlight for the year has been our robust financial performance which sees us end the year in a strong position of sales growth, margin stability, increased profitability and costs as a percentage of sales decreasing despite our ongoing investment in the strategy.

We have the people and plans in place to deliver the strategy and although the first year has seen us make significant progress there is still much to do and we have a number of plans to further differentiate ourselves. It is critical that we continue to listen to the voice of our customers and continue to innovate to meet their needs and requirements.

Each of the regions of our Marketing and Distribution Division (MDD) business began the year from a different place and so despite progress across the board, our transformation plans must continue with the same vigour in the coming year. We have plans in place to address the parts of the business where growth has not been as fast as necessary and have made some very powerful changes to our customer proposition already that we believe will further differentiate us.

Our Industrial Products Division has had a very strong year, delivering stellar results. The growth has come largely from their strategic progress, most notably the continued diversification into new industry segments and international markets.

With aggressive customer acquisition plans in place we feel optimistic about what we must deliver in year two of the strategy.

The electronic design engineering segment globally is conservatively estimated to be growing at between 6-8%, and this growth will only accelerate with the increasing demands we, as consumers, place on our designers for products that are smaller, look better and are kinder to the environment. Aesthetics and environmental considerations now play a critical part in design. Our customer base is quite brilliant in some of the work they are doing, pushing the boundaries of science and technology forward –creating, solving world problems, innovating and demanding more from their electronics suppliers. Whether creating the latest medical equipment, PC or environmental control products our designers need us to be equally brilliant and responsive. It is critical that we listen to their needs and exceed their expectations consistently.

The web is the primary research channel for this community as they continue to transform and shape the world in which we’ll live –so our web strategy must constantly evolve to meet their needs.

Internationally the needs of the EDE market are very similar and expansion is truly global. Every year hundreds of thousands of engineers leave universities around the world, more in China and India than anywhere else, hence our critical focus in these new markets.

Our suppliers recognise our strength in seeding their new technologies to the design community and are keen to partner with us ever more closely on specialist programmes and activities. Having the right suppliers and technology offering remains key to our design engineering community and we’ve added over 60 new suppliers, all keen to be a part of our market differentiating customer proposition.

For design engineers immediate access to products that enable them to meet their own ‘time to market’ challenges is critical and with our ability to offer next day delivery to most parts of the globe and our extensive range of stocked parts we really do have an industry leading proposition globally.

It may be relatively simple to start a basic website but it is what lies behind it that will also make the difference to our customers. Our web channel is evolving constantly, requiring significant investment in tools, resources and technology to continue to meet our customer needs as a part of our multi channel customer experience. The levels of sophistication of search, speed and simplicity we have achieved require investment, time and expertise. Then, beyond the web investment, the quality of service to the customer will be based on the established distribution principles of the right products, stock, logistics excellence and next day delivery. The availability of quality data is also critical –every product needs full and accurate technical and environmental parameters.

Momentum from the implementation of the new web front end across the business continues to build, with web sales up 33% in the year. Some countries are already performing well above our target to transact 50% of our business via the web, and a goal of transacting 50-70% of our business via the web now seems more realistic. The levels of activity we’re seeing in mainland Europe for example, now equate to us receiving an order via the web every 10 seconds! Engineers want to be able to place orders at anytime that suits them and our web sites make this very possible. We have also seen a significant increase in organic search, progressive and increasing average order values; and a significant increase in both new customer and repeat visits over the year. The completed integration of sophisticated new customer and web analytics software, supporting the continued enhancements and improvements we are making to our customer experience, underpins much of our recent growth, as we continue to build on the investments made.

Our multi-channel approach will be enhanced by the imminent launch of new catalogues across Europe and Asia offering extended product ranges, carefully selected to meet customer demand. As a group we distribute over a million catalogues in over 50 language, country and price variations, not to mention our extensive direct mail programmes – both electronic and postal. Customers value our multi-channel offering and with our call centres, branch network and trade counters offering extended hours and our sales force continuing to grow we are doing everything we can to ensure our customers can reach us via whichever channel they choose.

Our Internationalisation plans are certainly well on track, starting with the launch of Premier Electronics in China last year, a business that is starting to show strong growth as it continues to transition from its former Maintenance, Repair and Operations (MRO), lower margin, customer base to focus closely on the faster growing, profitable EDE segment.

We are now active in four East European countries as we invest in local language websites, catalogues and resources in Poland, Hungary, Czech Republic and Slovakia. Further growth in this vibrant market is planned.

We are now starting to build on the power and reputation of our brand in the fast growing Indian market from the eight office locations now in place. Driving value from all of our new markets will be a feature of the year ahead. In 2007 we organised a unique environmental design challenge called Live Edge and had participation from design engineers in 102 countries so there is certainly scope for further internationalisation plans.

We intend to establish an early leadership position in our focus markets of China, India and Eastern Europe.

The Board remains open to acquisition opportunities if they are the right ones and complement our existing offering.

We established a strong leadership position through RoHS, supporting our customers globally with RoHS compliant products, information and support to enable them to comply with the requirements and legislation in their own countries. We have continued to support our customers through the growing range of environmental legislation, including REACH and WEEE, with product, information and advice. We believe that responsible design is critical for the future of our world and will play our part in encouraging it. Indeed, our Live Edge challenge encouraging environmentally friendly design and product was such a huge success, attracting, over 3,500 entrants, that we will be running it again this year, as part of our commitment.

We are serious about Corporate Social responsibility as I hope our CSR report demonstrates and view our commitments to the environment and society as an important aspect of our business.

We have also developed our own three-year plan to reduce our carbon emissions globally to the lowest practical level for our business. We have many other initiatives taking place across the world, including a focus on sustainable procurement and ethical trading practices. I am very proud of the way our employees embrace multiple opportunities to help us fulfil our responsibilities to become an even better corporate citizen.

Absolutely not! We have been committed from the outset of our strategic review to continue our extensive offering and support to this important customer base. The maintenance and repair segment is growing more slowly than the EDE space but continues to be profitable and therefore remains a key part of our business. We have added new franchises and products to support this segment throughout the year and will continue to do so. Indeed, many products like test equipment are used by engineers from both our principal segments.

As another exciting challenge as we drive the flawless execution of a good strategy!

We have much to do but I believe that we have the strategy, the people and the focus needed to really drive the business forward with even greater momentum than we have achieved this year. As I have said before, our strategy is not a one-off event but a journey, constantly moving us closer to where we want and need to be for our employees, our customers, our suppliers and shareholders.