- Well-established global market leader
- The markets we operate in grow faster than GDP through the cycle
- We are well-placed to take a greater share of the highly fragmented, fast-growing market in which we operate from our numerous smaller competitors
- We have evolved to a common global strategy to increase the pace of market share gains in our international markets
- We have raised our growth ambitions, targeting faster medium-term sales growth and improved medium-term profitability
We are the world's leading high service distributor in large, growing and highly fragmented markets. We estimate that the global market in which we operate is worth around £30 billion, split evenly between electronics and maintenance products growing at around twice GDP and around GDP respectively.
There are five large international high service distributors, including Electrocomponents, and together this group has an estimated market share of around 15%.
Since 2006 we have taken market share from smaller competitors, demonstrating the structural growth opportunity that exists for us.
We believe that our customer proposition and global scale and reach give us an advantage over the numerous small local and regional distributors against whom we primarily compete, allowing us to take market share from them.
There are clear benefits to being a large, global competitor in this marketplace. Customer needs are similar everywhere, leading suppliers in our industry are global and the internet enables global marketing. We have the global footprint, relationships with suppliers and eCommerce capabilities to take advantage of these trends.
We have evolved to a common global strategy to capture these significant opportunities.
We believe that our global organisation and strategy will enable us to extend our advantages over our numerous smaller competitors and accelerate the rate at which we gain market share over the medium term.
Our common global strategy is expected to deliver improved medium-term financial performance.
We are targeting an average Group sales growth rate of 5% to 8% per annum through the cycle. This represents a significant improvement over our historical average Group sales growth performance of 4% per annum.
Cost and gross margin actions, including operating leverage, process cost leverage and our global pricing strategy, are expected to result in a medium-term Group operating margin range of between 9% and 11%. This is an improvement on our historical performance of 7% to 10%, adjusted to reflect a 75:25 International:UK sales mix.
Over the past seven years the Group's return on capital employed (including goodwill) has ranged between 15% and 25%, significantly above the Group's weighted average cost of capital. We are targeting to raise this range to between 20% and 30% as the benefits of faster sales growth and continued strong cash flow generation are realised.
Our global strategy is being supported by additional investment. Combined with a slight improvement in stock turns and improved profitability we are targeting medium-term Group headline free cash flow to sales to range between 4% and 6%.
The Group's free cash flow should enable the Board to maintain and grow the dividend over the medium term.
(1) Underlying sales growth, adjusting for trading days and currency movements. Target range includes estimated market growth of 3.5%, historic includes market growth of 2.5%