REG - RS Group PLC - Final Results
22/05/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240522:nRSV3733Pa&default-theme=true
RNS Number : 3733P RS Group PLC 22 May 2024
22 May 2024
RS GROUP PLC
RESULTS FOR THE YEAR ENDED 31 MARCH 2024
SIMON PRYCE, CHIEF EXECUTIVE OFFICER, COMMENTED:
"Our financial performance in 2023/24 reflected weakness in global industrial
production and the unwinding of unusual post-pandemic trading tailwinds. The
more difficult trading environment also highlighted the need for increased
focus and alignment, better prioritisation and execution, greater agility, and
a more efficient and flexible cost structure. We have aligned our strategic
actions, simplified our operating model, enhanced our leadership team and
clarified accountabilities. We are also reducing our cost base and see the
opportunity for significant efficiency improvements in the future.
Furthermore, I am particularly pleased with the strategic acceleration our
recent acquisitions are delivering.
Looking to the future, I am confident about the opportunity at RS. We are a
leading global MRO(1) distributor with real competitive advantage. The actions
we are taking are improving the fundamentals of the business and will support
stronger and more sustainable outperformance when markets return to growth,
which will deliver excellent, first choice outcomes for all our stakeholders."
2024 2023 Change Like-for-like(2) change
Highlights
Revenue £2,942m £2,982m (1)% (8)%
Adjusted operating profit(2) £312m £402m (22)% (25)%
Adjusted operating profit margin(2) 10.6% 13.5% (2.9) pts (2.2) pts
Adjusted profit before tax(2) £281m £391m (28)% (30)%
Adjusted earnings per share(1) 43.8p 63.6p (31)% (34)%
Operating profit £280m £383m (27)% (25)%
Profit before tax £249m £372m (33)% (31)%
Earnings per share 38.8p 60.4p (36)% (34)%
Full-year dividend 22.0p 20.9p 5%
Adjusted free cash flow(2) £151m £264m (43)%
Cash generated from operations £301m £413m (27)%
Net debt(2) £418m £113m
Net debt to adjusted(2) EBITDA 1.1x 0.2x
Performance in line
· Results in line with market expectations(3), revenue down 1% with 8%
like-for-like decline, 10% acquisition benefit and 2% negative currency impact
· Growth accelerators outperformed: RS PRO and service solutions
like-for-like revenue grew 3%, digital down 6%
· Gross margin of 43.0% decreased 1.1 pts like-for-like as anticipated due
to the reversal of inflation benefits
· Adjusted operating profit margin of 10.6% reflects gross profit decline
and active cost management
· Accelerated integration of Distrelec to generate material cost savings;
Risoul strong operational outperformance
· Final dividend maintained at 13.7p; full-year dividend increased 5% to
22.0p
Significant underlying progress
· Continued investment in growth accelerators and technology
· Increased operational focus, in excess of £30 million annualised
savings
· Further significant potential efficiencies over time
· £8 million Trident acquisition, expands already strong Australian
business, completed post year end
· Improved cash management and focus in H2; net debt to adjusted EBITDA of
1.1x post acquiring Distrelec
Financial considerations for 2024/25 and 2025/26
Demand is stabilising, but remains subdued, with limited short-term
visibility. Whilst lead indicators suggest some market improvement in the
second half of 2024/25, we are focusing on improving our operating efficiency
and leverage and investing where we can accelerate our growth. During this
period of investment, we expect some
short-term dilution to our operating profit margin reflecting a partial
resumption of our employee annual incentive, ongoing cost inflation,
annualisation of Distrelec costs and the additional c. £15 million organic
investment announced today. We expect our pricing strategy to offset the costs
of goods sold inflation.
Looking ahead to 2025/26, we anticipate organic investment to continue at
elevated levels as we invest further to support our efficiency improvement
initiatives. These investments will ensure that once markets return to growth,
RS is best placed to deliver on its medium-term objective of growing revenues
at twice the market with mid-teens adjusted operating margins, high cash
conversion and over 20% return on capital employed.
Investor Event - 24 September 2024
We will host an Investor Event on 24 September 2024 in London to outline our
investment proposition, the customers and suppliers we serve, what makes us
different and our strategic action plan to improve the business further to
generate sustainable through-cycle growth and returns.
1. Maintenance, repair and operations (MRO).
2. See Note 10 for definitions and reconciliations of all
alternative performance measures, including like-for-like change and adjusted
measures.
3. Consensus for the year ended 31 March 2024 is revenue of
£2,931 million, adjusted operating profit of £312 million and adjusted
profit before tax of £283 million. Source:
rsgroup.com/investors/analyst-consensus/.
Enquiries:
Kate Ringrose Chief Financial Officer 020 7239 8426
Lucy Sharma VP Investor Relations 020 7239 8427
Martin Robinson / Olivia Peters Teneo 020 7353 4200
There will be an analyst presentation today at 9am (UK time) at the London
Stock Exchange, 10 Paternoster Square, London EC4M 7LS. We will also provide a
video webcast, which can be accessed live and later as a recording on the RS
Group website at www.rsgroup.com (http://www.rsgroup.com) .
Webcast link: www.investis-live.com/rsgroup/663a523b7e7bb30d0010c16b/jdhy
It is advisable to pre-register early to avoid any delays in joining the
webcast. To ask a question, participants will need to be connected by phone.
Participant dial-in numbers
United Kingdom (Local): +44 20 4587 0498
All other locations: Global Dial-In Numbers
(https://protect-eu.mimecast.com/s/ldnxCql8AToyWOmhXM-ba?domain=netroadshow.com)
Participant access code: 192401
Presentation timing
Date: Wednesday, 22 May 2024
Time: 9am UK time
Venue: London Stock Exchange, 10 Paternoster Square, London EC4M 7LS
Notes to editors:
RS Group plc is a digitally enabled global distributor of product and service
solutions, helping 1.1million customers globally maintain, repair and operate
industrial equipment and operations, safely and sustainably. We stock more
than 750,000 industrial and associated electronic products, sourced from over
2,500 leading suppliers, enhancing customer experience, delivering operational
excellence and simplifying the supply chain at every step.
RS Group plc is listed on the London Stock Exchange with stock ticker RS1 and
in the year ended 31 March 2024 reported revenue of £2,942 million.
BUSINESS REVIEW
2023/24 was a challenging year. Markets were difficult with weak global
industrial demand, change from peak to trough electronics cycle and
geopolitical tension impacting confidence just as supply constraints began to
ease. In addition, a deeper analysis of our performance in 2021/22 and 2022/23
identified that RS was a major beneficiary of unusual post-pandemic trading
tailwinds, particularly in electronics. At a time of pent-up demand and supply
chain challenges, our strong inventory investment, supplier relationships and
long-tail product offering allowed us to provide industry-leading product
availability. As a result, we saw significant revenue growth, in part as core
customers increased their order quantities to address concerns over market
availability and in part through sales of scarce parts to resellers and
one-off transitory customers. This was at a time when supplier and therefore
product price inflation, particularly on long-tail products, resulted in
short-term gross margin improvement. We are making material improvements to
our performance management systems to improve transparency and identify such
trading dynamics better in the future.
We estimate that the 2022/23 benefit of these tailwinds was c. £95 million
revenue and c. £60 million of operating profit (higher than previously
reported as it now includes uplift from gross margin benefit as well as
revenue). Towards the end of 2022/23 and throughout 2023/24 these tailwinds
began to dissipate, with average order values returning to previous levels and
supply chains normalising. This resulted in less demand from resellers and
transient customers, general destocking and the unwinding of inflation-related
benefits.
This more difficult trading environment highlighted the importance of more
focus and alignment, better prioritisation and execution, greater agility and
more operational rigour across the RS Group. Thanks to the exceptional efforts
of our passionate and committed people, we made good progress in addressing
these issues whilst reducing our cost base and we are particularly pleased
with the strategic acceleration our recent acquisitions are delivering.
As a result, and despite a challenging macroeconomic environment, 2023/24 was
also a year of significant strategic and operational progress for RS.
Our 2023/24 financial performance
During 2023/24 our revenue reflected the change in the electronics cycle and
unwind of associated post-pandemic trading tailwinds as well as softness in
industrial production. Our level of organic investment and our operating cost
base had grown over the last two years to meet inflated post-pandemic demand
and had limited immediate flexibility to reduce significantly as this demand
reduced. This had a significant impact on the Group's operating profit margin
in 2023/24. We partially addressed this by taking cost reduction actions in
the functions and regions, accelerating the integration of Distrelec and
reducing discretionary spend. This also included the write down of
underperforming software and inventory investments.
Our business in EMEA delivered a robust performance. We delivered a 5% decline
in like-for-like revenue, due to the overall market weakness, specifically in
the electronics category and within those markets where we sell a
higher-than-average proportion of on-board electronics such as Germany,
together with the unwind of c. £35 million of revenue from post-pandemic
trading tailwinds. The growth accelerators of digital, service solutions and
RS PRO (our main own brand) outperformed the region. Like-for-like operating
profit declined 9%. When excluding restructuring, write-offs and integration
costs of the acquisition of Distrelec, it declined 3% benefiting from in year
cost action. EMEA remains our most developed business and one where we see
significant benefit from effective and more progressed implementation of our
strategy.
After a compound annual growth rate (CAGR) of 19% over the previous two years,
our like-for-like revenue in Americas declined by 13%. This region has high
exposure to automation and control (A&C) and other products correlated to
the electronics cycle, as well as a higher proportion of original equipment
manufacturers. Both are factors in increasing Americas' sensitivity to the
rapid turn in the electronics cycle. The estimated revenue gain in 2022/23
from post-pandemic trading was c. £50 million. Americas continues to focus on
expanding both share of wallet and the industry verticals that it supports
leveraging the Group's capability and investment in digital channels,
expanding service solutions and accelerating RS PRO sales.
Profitability in Asia Pacific reduced significantly with a reduction in sales
volumes combined with a 6.5 percentage point decline in gross margin. Nearly
half of the decline is attributed to the unwind in the post-pandemic tailwinds
which elevated prices, and the remainder due to its high electronics exposure
notably in Japan and China. Australia and New Zealand delivered growth while
South East Asia significantly outperformed the region. Asia Pacific continues
to be a developing region for RS where in many countries we are building
critical mass as their industrial base develops through the rollout of a more
differentiated offer, focused on industrial and service solutions, to drive
volumes and operational leverage.
Significant strategic and operational work during 2023/24
During the year we made good progress in addressing the issues highlighted by
the change in trading environment. These actions are improving the underlying
quality of our business to support the Group's significant growth opportunity
and to ensure we are better placed to benefit as markets improve. We are
focused on driving operational effectiveness and execution, improving
operating leverage and investing in our strategic growth accelerators.
Bringing more focus to the Group's strategy
RS has a clear identity - we are a differentiated distributor of product and
service solutions. During the year, we brought clarity to the Group strategy,
reduced complexity and created alignment around key strategic actions:
· We are customer focused and will deliver greater value by meeting
the maintenance, repair and operations needs, often technically complex and
low volume, of high lifetime value industrial customers.
· We are product experts, providing automation and control,
electrical and other technically differentiated product solutions as part of a
broad but curated product range with high availability.
· Our solutions deepen customer relationships through selected
scalable service solutions that generate core product pull through.
· Our customer experience is digitally enabled and is becoming
increasingly customised.
· We drive operational excellence to deliver efficient and
well-invested physical, digital and process infrastructure, sustainably and
with great people.
We have developed and aligned actions across the Group to deliver this
strategy better.
1. Driving operational effectiveness
Following a review of the way we operate, we took a number of tangible actions
during the year to reduce complexity and improve effectiveness and efficiency,
putting in place the capabilities to deliver our multi-year strategic action
plan.
We enhanced our senior leadership experience and capability by streamlining
our senior management team into an empowered leadership Executive Committee
(ExCo). This committee is chaired by the CEO and is comprised of the Chief
Financial Officer (CFO), the Chief People Officer (CPO), the Chief Information
Officer, the Chief of Corporate Services and Company Secretary and our three
Regional Presidents. Effective from 1 April 2024, we also created three new
roles to lead our growth accelerators of Customer Experience, Product and
Supply Chain, and Solutions and Services. We strengthened our functional
capability through strong external CFO and CPO appointments and made internal
appointments into growth accelerator roles. This team is already driving
needed changes in our strong culture, aligning the organisation behind a clear
purpose, strategy and new set of corporate values "We are one team. We deliver
brilliantly. We do the right thing. We make every day better."
This ExCo reflects our simplified operating model that empowers teams closest
to the supplier and customer to make rapid and effective decisions within
clear guidelines. This model is designed to drive sustainable growth by
clarifying accountabilities and supporting local decision making, providing
support for our growth accelerators underpinned by cost efficient enabler
functions (people, technology, finance and corporate services).
Already we are making quicker decisions and making positive progress. This
includes treating our electronics offering as a strategic product category,
not a separate business, and shifting our single board computing and internet
of things (IoT) solutions proposition (OKdo) away from consumers to our core
industrial customer base.
Importantly, we also enhanced our performance management process to improve
visibility, accountability, agility and to drive better operational and
functional delivery.
2. Improving operating leverage
We are a well invested distribution business spanning 35 countries globally
with considerable physical, digital and process infrastructure. However, we
see significant opportunities to improve our productivity and operating
leverage through the better coordination across, and utilisation of, our
physical infrastructure and standardising our systems and processes where
there is no value in differentiation. This includes consolidating and
upgrading our technology and digital platforms and greater harmonisation
across our administrative processes.
We are already improving the operational performance of our physical
infrastructure. In 2023/24, we increased the efficiency of our regional
distribution centre (DC) in Germany through upgrading and tuning our warehouse
management system and removing waste utilising our continuous improvement
toolbox. We closed a small local fulfilment centre (FC) in Newport, UK
absorbing product into our Nuneaton and Corby facilities. We began upgrading
our warehouse management system in the UK and we opened an expanded FC in
Spain, as well as three small, customer FCs operated by third party providers
in Malaysia, Philippines and New Zealand.
We continue to simplify and upgrade our technology infrastructure. During the
year we migrated the majority of our datacentres to the cloud, improved our
digital procurement capabilities, began converging our Microsoft estate and
designed a high-level roadmap to modernise and harmonise key processes and
systems.
During the year, and in response to the challenging trading environment, we
also identified and commenced sustainable cost reduction actions, including
accelerating the integration of Distrelec. Together, these actions will
deliver in excess of £30 million of annualised cost savings (with £9
million delivered in 2023/24 and additional
c. £22 million in 2024/25). During the year there was £13 million of costs
associated with the reduction and Distrelec integration.
We have identified significant further cost and efficiency benefits which we
will pursue over time. These will be realised through standardising a number
of back office support processes, better leveraging our functional expertise
across the Group and more effective management of our cost to serve and sales
channels.
3. Growth accelerators
We also continued to invest in our growth accelerators that will drive
increased customers and share of wallet:
· Customer experience: During the year we made selective investments
in our digital capabilities to enhance the customer experience, embedding AI
powered search capability in our websites to 27 markets, launching a new
transactional website in Latin America, introducing an integrated customer
relationship management tool and customised web pages for specific industry
verticals.
· Product and supply chain: Within product we are developing a more
relevant RS PRO offer in Americas, deepening our offer with technical
specialist brands and expanding our Better World sustainable range (now c.
30,000 products available globally). In supply chain we are investing in
better inventory management, including a new digital product management system
in Americas, and product adoption systems to improve product ingestion, order
tracking and delivery accuracy.
· Solutions and services: We continue to expand our service solutions
portfolio, rolling out supplier and digitally enabled procurement solutions
across Europe and America, focusing on services that pull through product
revenue and generate customer loyalty. We expanded this offer further
throughout EMEA and invested in experienced sales teams in Americas. Within RS
Integrated Supply we are standardising our service provision across the UK and
US to deliver profitability and scalability.
We see the opportunity to accelerate value creation by investing further in
our technology platform to personalise our digital customer experience,
utilise better our customer database and manage our product and service
solutions offer more cost effectively. This is the main focus of the
additional c. £15 million of organic investment planned in both 2024/25 and
2025/26.
Acquisitions that accelerate our strategy
The large, fragmented markets in which we operate provide significant
opportunity for consolidation. We create value from bolt-on acquisitions
through being price disciplined and by targeting high quality businesses that
increase our presence in key markets, strengthen our product specialisation,
expand our solutions and services portfolio and / or create the opportunity to
accelerate operating leverage.
In June 2023, we completed the acquisition of Distrelec, a strong fit with RS
in EMEA. The acquisition delivers increased revenue in Germany, Scandinavia
and Switzerland where it also adds a FC that is complementary to our existing
European footprint. Distrelec's proposition is closely aligned to RS and we
will operate through one set of physical, digital and process infrastructure.
We are accelerating our initial integration plans with our expected cost
savings already exceeding those anticipated when we made the initial
acquisition. Therefore, despite weaker trading in 2023/24, in line with RS's
relevant European markets, we expect to at least cover our cost of capital by
the third year with the longer-term benefits of the acquisition remaining very
exciting.
Risoul, which we acquired in January 2023, has outperformed our expectations
reflecting strong market conditions in Mexico and Risoul's specialist
technical service offer. We are beginning to realise the significant synergy
opportunities from the combination as we introduce RS's digital capabilities
and own-brand products into Risoul and use the Risoul service approach to
enhance our service offering across our Americas region.
We continue to have an active pipeline of acquisition opportunities and after
the year end acquired Trident Australia Pty Ltd (Trident) for c. £8 million.
Trident is a specialist MRO distribution and service partner for the energy
and natural resource industry in Western Australia. It adds to our Australian
presence by increasing RS's access to the energy and natural resources sector
with associated customer and product synergies and provides distribution
infrastructure and service capacity in Western Australia.
For a Better World
We continued to make good progress towards our 2030 ESG action plan by
improving sustainability in our operations, packaging and logistics and
collaborating with our suppliers to offer our customers more sustainable
product and service solution choices to operate more responsibly.
This year, we received validation of our Scope 1, 2 and 3 carbon reduction
targets from the Science Based Targets initiative. We are progressing well
towards these, having reduced our direct carbon emissions by 61% since our
2019/20 baseline excluding acquisitions completed in 2022/23 and 2023/24.
We were again recognised with a Platinum EcoVadis rating, which is used by
many of our customers and suppliers to make ESG-based procurement decisions
and select business partners.
Exciting long-term potential
We have a distinct competitive advantage at RS as the critical link between
some of the world's leading suppliers of industrial products and a diverse
customer base that want to purchase in small volumes and demand high service
levels. We have a global presence and scale, a strong digital platform and
distribution infrastructure and increasingly have a solutions and service
orientation that drives customer loyalty and share of wallet growth.
The strength of our offer can be seen in our outperformance over time. RS has
delivered 6% revenue CAGR over the last five years excluding all acquisitions
completed 2018/19 onwards. This is stronger than the growth rate of industrial
production over the same period. Our outperformance in EMEA, even with a
difficult market, indicates the strength of our proposition. We have focused
action plans in place to accelerate deployment of our differentiated offer
into our operations in Americas and Asia Pacific which supports our
longer-term growth opportunity.
We operate within attractive and highly fragmented industrial MRO markets
which demonstrate good through-cycle growth and we continue to invest to
extend our record of industrial production outperformance. We are pursuing
significant opportunities to improve our operating leverage and the efficiency
of our physical, digital and process infrastructure. We also have a strong
balance sheet and generate good cash flow which we will continue to deploy if
we see the opportunity for accelerated value creation.
With improved focus and a clear action plan, supported by targeted investments
to enhance our capability, RS is well positioned to deliver on its growth
potential and first choice outcomes for all stakeholders over the longer term.
REGIONAL PERFORMANCE
EMEA
2024 2023 Change Like-for-like(1) change
Revenue £1,795m £1,769m 1% (5)%
Operating profit(2) £256m £276m (7)% (9)%
Operating profit margin 14.2% 15.6% (1.4) pts (0.6) pts
Digital revenue(3) £1,322m £1,311m 1% (3)%
RS PRO revenue(3) £346 £338m 2% 3%
Service solutions revenue(3) £532m £506m 5% 5%
1. Like-for-like adjusted for currency and to exclude the impact
of acquisitions; revenue also adjusted for trading days.
2. See Note 2 for reconciliation to Group operating profit.
3. See Note 2 for disaggregation of revenue analysis and
reconciliations to region's revenue.
Revenue increased 1% including the acquisition of Distrelec. Like-for-like
revenue declined 5% due to the electronics downcycle and low levels of
industrial production across the region. Purchasing Manager Index (PMIs) have
been below 50 (which represents a contraction) in all major countries
throughout the year. Revenue decline was concentrated in Germany given its
electronic exposure. We estimate the post-pandemic trading tailwinds
contributed c. £35 million of revenue in EMEA during 2022/23 which, as it
unwound, reduced our like-for-like revenue by c. 2% during 2023/24.
Our industrial product ranges performed well with 1% like-for-like growth
especially within maintenance, mechanical and fluid power, and safety and
protection as we continue to focus our sales and marketing efforts on core
industrial categories. Demand for electronics reduced at a time when there was
excessive inventory and industry destocking. The A&C industrial category
is also closely correlated to the electronics cycle and, whilst growth was
negative, we outperformed the electronics market.
We have focused our marketing efforts on high lifetime value customers and
have seen strong performance from our corporate accounts where revenue grew as
that market segment consolidated their distribution partners across multiple
categories. Additionally, we are improving the profitability of small value
transactions by applying appropriate handling charges. There has been a
decrease in small transitory customers, gained during supply shortages and are
not our target customers, who have now reverted to their normal distribution
channels.
UK and Ireland, which accounts for 38% of the region's revenue, saw a small
revenue decline reflecting market weakness and less demand from mid-sized
customers. France saw low single digit growth delivering solid performance in
our industrial product categories, especially where we have worked closely
with our suppliers on specific promotions. Germany suffered from weak PMI data
and a high exposure to electronics products, leading to a
double-digit revenue decline.
Digital delivered good growth in our eProcurement and purchasing manager
solutions. These solutions are integrated within our customers' systems,
pulling through product revenue and generating customer loyalty and recurring
revenue. Web revenue has been impacted by reduced demand from small and
medium-sized customers.
Our service solutions, which are associated with 30% of EMEA's revenue,
benefited from greater participation of our digital solutions as we actively
migrated higher-value customers from the web. RS Integrated Supply in EMEA
continues to win new contracts and has a strong retention rate for existing
customers, however the operational investment required in the early years of
contract rollout continued to impact financial performance and depress
profitability.
RS PRO increased as customers respond to a lower price point, high quality
alternative, and as we rebranded our own-brand Safety Solutions products to RS
PRO. We launched RS PRO into the Distrelec ecommerce platforms and saw early
success especially in markets where Distrelec has a higher presence than RS
such as Switzerland.
Distrelec contributed £135 million to revenue and £6 million to EMEA's
operating profit since its acquisition on 30 June 2023. Trading in Distrelec
has been similarly impacted by market conditions notably in its electronics
exposure in Germany and eastern Europe. However, integration plans have been
accelerated which, combined with further cost savings identified, will deliver
returns that will cover the Group's cost of capital within three years.
EMEA's like-for-like gross margin was flat due to disciplined control of
discounts and some buying efficiencies offsetting the unwinding of the
post-pandemic trading benefits (c. 0.7 percentage points impact).
Operating costs fell by 4% like-for-like. Cost measures were offset by
inflationary pressures, redundancy charges relating to our cost action
programme (including the closure of the FC in Newport, UK and initial steps
integrating Distrelec) and impairments on some software and technology
products. EMEA's operating profit margin fell by 0.6 percentage points
like-for-like to 14.2%. We estimate c. £25 million of operating profit
associated with the post-pandemic trading benefit did not repeat in 2023/24.
EMEA's rolling 12-month NPS was 50.9, up from 49.2 in 2022/23. We continued to
improve inventory availability as lead times reduced, while inventory
investments in our expanded regional DC in Germany and our new FC in Spain
have also improved service levels to customers.
Americas
2024 2023 Change Like-for-like(1) change
Revenue £934m £946m (1)% (13)%
Operating profit(2) £101m £149m (32)% (37)%
Operating profit margin 10.9% 15.7% (4.8) pts (4.2) pts
Digital revenue(3) £336m £405m (17)% (13)%
RS PRO revenue(3) £7m £7m (6)% (2)%
Service solutions revenue(3) £133m £133m 0% (2)%
1. Like-for-like adjusted for currency and to exclude the impact
of acquisitions; revenue also adjusted for trading days.
2. See Note 2 for reconciliation to Group operating profit.
3. See Note 2 for disaggregation of revenue analysis and
reconciliations to region's revenue.
Revenue declined 1% with like-for-like revenue down 13% excluding Risoul,
exchange rate movements and the impact of trading days. This performance
reflects the change in the electronics cycle and the very strong comparatives
in the prior period where we benefited from strong inventory availability.
This was enabled by the expansion of our regional DC in Fort Worth, US
completed during 2020/21. We estimate the post-pandemic trading benefit
contributed c. £50 million of revenue in Americas during 2022/23 which, as it
unwound, reduced our like-for-like revenue by c. 5% during 2023/24.
Our performance reflected the soft economic backdrop, PMI data and change in
the electronics cycle. Our business has a strong correlation to the build
cycles in the electronics market given the additional high exposure to A&C
industrial products (70% of the region's revenue versus 42% across the Group)
and so was impacted by the decrease in demand and oversupply within the
electronics industry more acutely. Additionally, our customer spend in
Americas has a greater proportion of direct material and project-related
expenditure, with less of a MRO demand than the rest of the Group, and
therefore was more affected by customers reducing demand and destocking.
Revenue from digital declined by 13% like-for-like, in line with the region's
performance. Our rebranding in February 2023 impacted our search engine
optimisation (SEO) and smaller, transactional customer accounts who have less
interactions with our sales team. Additionally, the lack of digital sales in
Risoul diluted the region's digital revenue participation.
RS Integrated Supply in Americas has undergone several changes as we placed
more focus on higher lifetime value customers and put in place processes that
will allow the business to scale more quickly and efficiently. We have signed
several new contracts with multinational customers and are focusing on driving
cross-selling opportunities with RS PRO. Our other service solutions were
impacted by lower procurement solution transactions in the declining market.
RS PRO still accounts for only 1% of the region's revenue and is a key focus
for our sales and leadership teams. We expect improved revenue participation
from our rebranding (RS in Americas having previously traded under the Allied
name) and tailoring our product offering to be more appropriate for our
customers in the region. We expect participation as a percentage of the
region's revenue to increase as we start offering RS PRO products in Risoul.
Risoul had a strong year of growth partially offset by foreign exchange
movements on an appreciating Mexican peso. We launched a transactional website
in February 2024 to support the future expansion of the business and are
introducing a broader product range and enhanced procurement solutions.
Americas' gross margin fell by 2.8 percentage points on a like-for-like basis
as the post-pandemic trading tailwinds unwound (accounting for c. 1.4
percentage points) and some increased price competition from the wider
availability of products in the market.
Operating profit and operating profit margin declined due to reduced revenue
and the resulting gross profit decline. We reduced our operating costs by 8%
like-for-like reflecting the restructuring of our teams in the first half of
the year and reduced discretionary costs. We continue to invest in initiatives
focused on customer growth, digital and our service solutions offering. We
estimate c. £25 million of operating profit associated with the post-pandemic
trading benefit did not repeat in 2023/24.
Americas' rolling twelve-month NPS was 64.8, down from 65.9 in 2022/23 but
still the highest in our Group. This is a strong performance given competitive
pricing pressure, lag effect of the rebrand and temporary impact of disrupted
relationships from the restructuring of sales teams to better serve our broad
customer base. Our focus remains on delivering a strong customer experience
through timely response and consistent service.
Asia Pacific
2024 2023 Change Like-for-like(1) change
Revenue £214m £268m (20)% (15)%
Operating profit(2) £4m £38m (90)% (89)%
Operating profit margin 1.8% 14.3% (12.5) pts (11.7) pts
Digital revenue(3) £123m £161m (23)% (17)%
RS PRO revenue(3) £33m £37m (11)% (4)%
Service solutions revenue(3) £43m £46m (6)% 0%
1. Like-for-like adjusted for currency and to exclude the impact
of acquisitions; revenue also adjusted for trading days.
2. See Note 2 for reconciliation to Group operating profit.
3. See Note 2 for disaggregation of revenue analysis and
reconciliations to region's revenue.
Asia Pacific's revenue declined by 20% including currency movements.
Like-for-like revenue decreased by 15% reflecting a significant market
slowdown and subsequent contraction in the electronics market demand coupled
with the easing of supply constraints. We estimate the post-pandemic trading
tailwinds contributed c. £10 million of revenue in Asia Pacific during
2022/23 which, as it unwound, reduced our like-for-like revenue by c. 4%
during 2023/24. Despite the challenges in the region, we believe that with the
expansion of capability and geographic footprint capacity over the last year,
RS in Asia Pacific will grow to be a differentiated and market-leading,
solution-based distributor in the coming years. We have built an extensive
geographic operational footprint that separates us from our competitors within
the region.
Japan generates over 55% of its revenue from electronics and its customers are
largely electronics focused. Greater China, representing 23% of the region's
revenue, faced uniquely challenging trading conditions due to reduced external
investment as trade shifted outside China's borders and trading sanctions
reduced our customer base.
Australia and New Zealand, which accounts for 33% of the region's revenue,
maintained low single digit like-for-like revenue growth with targeted
marketing to large corporate customers offsetting the market decline. We saw
robust trading from large industrial customers and have a lower exposure to
electronics customers. Since the year end we have completed a small
acquisition, Trident, in Perth, Australia, that expands our service,
warehousing and local support in a major resource hub in Asia Pacific.
South East Asia, which contributes 31% of the region's revenue, saw a high
single digit like-for-like decline in revenue mainly due to electronics
weakness. Our strategic investments in local inventory capacity, including an
upgrade to our FC in Thailand and leasing new FCs in Malaysia, Philippines and
New Zealand, improved lead times and supported second half recovery.
Digital like-for-like revenue performance reflected weaker market demand. In
the second half, we saw a substantial improvement in both paid and SEO
performance. This was driven by better alignment of our marketing to focus on
locally stocked products and a new team improving our content and value-add
functionality. We also launched several local digital initiatives in the
second half, including search engine enhancements.
RS PRO like-for-like revenue decline outperformed the region performance,
supported by an enhanced go-to-market strategy, including targeted product
marketing campaigns and competitive pricing.
Our gross margin decreased on a like-for-like basis by 6.5 percentage points
almost half of which was the unwind of price inflation benefits related to
post-pandemic trading. Additionally, we saw heightened competitive pricing as
supply chain constraints eased, order books unwound and excess inventory was
available in the market.
Our operating profit margin decline reflected the negative operational gearing
impact of the lower volumes and gross margin on our cost base. We adjusted our
cost base, which delivered some financial benefits in the second half. Over
the full year, our operating costs fell like-for-like by 3%. We are focused on
operating a more appropriate and flexible cost structure in the region, moving
to more local sourcing and increasing our local fulfilment capacity in South
East Asia and New Zealand, which is improving our speed to market, reducing
delivery times and improving our customer service significantly. We estimate
that c. £10 million of operating profit associated with the post-pandemic
trading (revenue and gross margin) benefit did not repeat in 2023/24.
Despite the challenges in the region, our focus remains on delivering a strong
customer experience. Our rolling twelve-month NPS for Asia Pacific improved to
21.8, compared with 20.2 in 2022/23.
FINANCIAL REVIEW
2024 2023 Change Like-for-like(1) change
Revenue £2,942m £2,982m (1)% (8)%
Gross profit £1,264m £1,352m (7)% (11)%
Gross margin 43.0% 45.3% (2.3) pts (1.1) pts
Operating profit £280m £383m (27)% (25)%
Adjusted operating profit(1) £312m £402m (22)% (25)%
Adjusted operating profit margin(1) 10.6% 13.5% (2.9) pts (2.2) pts
Adjusted operating profit conversion(1) 24.7% 29.7% (5.0) pts (4.4) pts
Digital revenue(2) £1,782m £1,877m (5)% (6)%
RS PRO revenue(2) £386m £382m 1% 3%
Service solutions revenue(2) £709m £685m 3% 3%
1. See Note 10 for definitions and reconciliations of all
alternative performance measures, including like-for-like change and adjusted
measures.
2. See Note 2 for disaggregation of revenue analysis and
reconciliations.
Revenue
Group revenue decreased by 1% to £2,942 million. Like-for-like revenue
declined 8% after adjusting for the £282 million contribution from
acquisitions, £57 million from adverse exchange rate movements and a negative
impact of £24 million from fewer trading days. Trading performance was
affected by the challenging macroeconomic environment and the unwinding of our
post-pandemic trading tailwinds.
RS benefited from strong post-pandemic trading that boosted our financial
performance in 2021/22 and 2022/23 due to excellent product availability when
global supply chains were constrained, enhancing our revenue and profit over
the two-year period. We estimate this benefit contributed c. £95 million of
revenue during 2022/23 which has since unwound as global supply chain issues
eased and our customers reduced their high inventory levels, reducing our
like-for-like revenue by c. 3% during 2023/24. The unwind of the tailwinds is
most evident in electronics and A&C categories and through the reduction
in the number of one-off, low-value and transitory customers.
Customer numbers were flat at 1.1 million but on a like-for-like basis
decreased by 0.1 million, the majority of which were one-off, low-value
customers that we attracted during the post-pandemic trading and have now
returned to their normal procurement channels. Larger corporate and key
account customer numbers were stable. Our average order value (AOV) (excluding
RS Integrated Supply's pass-through sales orders) grew marginally to £257
from £255. This reflected Risoul's higher AOV, a small increase in EMEA,
and a reduction in Americas which was impacted by customer destocking.
Our industrial product and service solutions ranges, which account for 81% of
Group revenue, decreased by 4%
like-for-like. This was a function of a weak A&C product category (42% of
Group revenue), where performance is most correlated with the electronics
cycle, offsetting growth in all other categories as the post-pandemic trading
tailwinds, especially in Americas, unwound. The macroeconomic environment was
challenging as illustrated by the deteriorating PMI and industrial production
figures across our main markets.
Our electronics product and service solutions range accounts for 18% of Group
revenue. Like-for-like electronics revenue decreased by 22% reflecting the
tough comparatives in the prior period due to the very strong performance over
the last two years and the unwind of price inflation.
Digital, accounting for 61% of Group revenue, performed slightly ahead of the
Group overall with a like-for-like revenue decline of 6%. The flat
like-for-like performance from eProcurement and purchasing manager, which
drives product pull through and customer loyalty, demonstrates the benefit of
targeting higher lifetime value customers. Web revenue decreased by 9% on a
like-for-like basis, reflecting less traffic from more transitory customers.
RS PRO, our main own-brand product range, accounts for 13% of Group revenue
and grew by 3% like-for-like as the brand extended its product breadth by c.
8,000 and focused its end-to-end sales and marketing in the regions. It also
benefited from the rebadging of our safety solutions own brands to RS PRO. Our
competitively priced offer continues to gain traction as a quality alternative
to branded ranges with quality assurance qualifications, in-house design and
testing facilities.
Service solutions revenue, associated with 24% of our Group revenue, increased
by 3% like-for-like. This is mainly due to a 2% like-for-like increase in
procurement solutions and, in addition, 6% growth in RS Integrated Supply
like-for-like revenue reflecting additional contract wins and ongoing strong
customer retention.
Gross margin
Group gross margin decreased 2.3 percentage points to 43.0%, of which 1.2
percentage points was a function of the dilutive impact from our recent
acquisitions due to their lower digital and own-brand product participation
compared to the rest of the Group. Like-for-like gross margin decreased
1.1 percentage points as post-pandemic trading benefits reversed and
inflation gains unwound, especially within electronics products. There was an
additional inventory impairment for slow moving product within OKdo.
Gross profit fell by 11% on a like-for-like basis. The combined effect of the
post-pandemic trading benefit in like-for-like revenue and short-term gross
margin improvement led to c. £70 million benefit to our gross profit in
2022/23 which reduced our like-for-like gross profit by c. 5% during 2023/24.
Operating costs
Operating costs, including regional and central costs, increased by 2%.
Excluding the impact of acquisitions, the benefit of currency movements,
amortisation and impairment of acquired intangibles and acquisition-related
items, adjusted operating costs reduced by 6% like-for-like with lower
variable supply chain costs and annual incentive accruals more than offsetting
salary cost increases and inflation in rates and utilities.
A large proportion of our operating costs relates to our people. We awarded a
mid-single digit pay increase across the Group which included an above average
increase for our non-management employees in most markets in recognition of
the greater impact of inflationary pressures. Given our financial performance
during 2023/24, our annual incentive accruals and share-based payments reduced
and there was no repeat of the £10 million ad hoc cost-of-living payments
made in the prior year, equating to a £47 million total reduction. We
anticipate 2024/25 to include improved employee annual incentives.
We continue to invest in our processes, systems and infrastructure to both
support growth and efficiency. We invested £24 million during the year and
will continue to improve our digital and commercial capabilities, customer
experience and data analytics. We are also simplifying our technology platform
to support standardised processes. We expect to invest an incremental £15
million, a total of c. £40 million during 2024/25, as we continue to widen
our differential with our competitors. There was an additional £5 million of
costs relating to technology impairments.
The capital investment we have made in recent years in our supply chain
network and regional DC expansions in Fort Worth, US and Bad Hersfeld,
Germany, continue to see improved operational efficiency and reduced cost to
serve. Our freight costs in continental Europe (excluding Distrelec) have
reduced due to lower volumes and optimised inventory sourcing and stocking.
We are taking action to manage our operating costs more effectively. In
November 2023 we identified over £30 million of annualised savings. We
delivered £9 million of savings during the year with £8 million of
associated costs incurred and a further £5 million of integration costs for
the Distrelec acquisition. During 2024/25 we expect to spend a further c. £13
million to deliver further in-year benefits of c. £22 million.
Central costs (Group strategic investment, Board, Group Finance and Group
Professional Services and People costs) decreased by £11 million to £49
million. This is largely because of lower share-based payments and annual
incentive costs highlighted earlier. We are reassessing the definition of
central costs and will limit it to Group Head Office activity which will
result in some of our central costs being attributed to the regions in
2024/25.
Adjusted operating costs as a percentage of revenue increased by 0.5
percentage points to 32.4%. Excluding the impact of acquisition integration
costs, impairments and restructuring costs, adjusted operating costs as a
percentage of revenue would have been 31.8% (2022/23: 31.9%). Adjusted
operating profit conversion is 5.0 percentage points lower at 24.7%.
Operating profit
Operating profit decreased by 27% to £280 million. Excluding the impact of
acquisitions and the adverse impact of currency movements, adjusted operating
profit saw a like-for-like decrease of 25%. We estimate that 2022/23 operating
profit benefited by c. £60 million from the post-pandemic trading tailwinds
which unwound during 2023/24 contributing c. 14% of the like-for-like adjusted
operating profit decrease. This is c. £25 million higher than reported at the
first half results (November 2023) as we estimate there was also a gross
margin benefit across our total Group revenue from price inflation. Adjusted
operating profit margin declined by 2.9 percentage points to 10.6%.
Items excluded from adjusted profit
To improve the comparability of information between reporting periods and
between businesses with similar assets that were internally generated, we
exclude certain items from adjusted profit measures. The items excluded are
described below (see Note 10 for definitions and reconciliations of adjusted
measures).
Amortisation and impairment of acquired intangibles
Amortisation of acquired intangibles was £27 million (2022/23 amortisation
and impairment of acquired intangibles: £17 million) and relates to the
intangible assets arising from acquisitions.
Acquisition-related items
Acquisition-related items of £5 million are predominantly transaction costs
which are directly attributable to the acquisition of Distrelec.
Net finance costs
Net finance costs were £32 million, up from £12 million mainly due to the
impact of increased net debt resulting from the acquisitions of Distrelec and
Risoul and higher interest rates. At 31 March 2024, 26% of the Group's gross
borrowings excluding lease liabilities (2022/23: 49%) were at fixed rates,
with surplus cash deposited at variable rates.
Profit before tax
Profit before tax declined 33% to £249 million. Adjusted profit before tax
was down 28% to £281 million, 30% on a like-for-like basis.
Taxation
The Group's income tax charge was £65 million (2022/23: £87 million). The
adjusted income tax charge, which excludes acquisition-related tax items and
the impact of tax relief on items excluded from adjusted profit before tax,
was £73 million (2022/23: £91 million), resulting in an effective tax rate
of 26.1% on adjusted profit before tax (2022/23: 23.2%). This reflected the
change in the UK tax rate from 19% to 25% effective from 1 April 2023. Going
forward we expect the 2024/25 effective tax rate on adjusted profit before tax
to be c. 26%.
Earnings per share
Earnings per share declined by 36% to 38.8p. Adjusting for items excluded from
adjusted profit and associated income tax effects, adjusted earnings per share
of 43.8p declined 34% on a like-for-like basis.
Cash flow
£m 2024 2023
Operating profit 280 383
Add back depreciation and amortisation 84 65
EBITDA(1) 364 448
Add back impairments and loss on disposal of non-current assets 7 12
Movement in working capital (69) (49)
Defined benefit retirement contributions in excess of charge (10) (11)
Movement in provisions 1 (1)
Other 8 15
Cash generated from operations 301 413
Net capital expenditure (52) (46)
Operating cash flow 249 367
Add back cash effect of adjustments(1) 6 3
Adjusted operating cash flow(1) 256 370
Net interest paid (31) (13)
Income tax paid (73) (94)
Adjusted free cash flow(1) 151 264
1. See Note 10 for definitions and reconciliations of all
alternative performance measures.
Lower EBITDA (earnings before interest, tax, depreciation and amortisation)
was compounded by a substantial outflow in payables of £82 million. This
decrease in payables was due to high balances at March 2023 relating to
2022/23's increase in inventory, and lower accruals due to the slowdown in the
business and lower annual incentive accruals at March 2024. As a result, cash
generated from operations was £301 million (2022/23: £413 million) with a
10.1 percentage point fall in adjusted operating cash flow conversion to
81.9%.
Net capital expenditure increased from £46 million to £52 million as we
continued to invest in optimising our distribution sites, implementing new
product management systems, augmenting digital commerce capabilities and
strengthening our technology platforms.
Capital expenditure remained at 1.3 times depreciation in line with our
typical maintenance capital expenditure levels of 1.0 - 1.5 times
depreciation. We anticipate capital expenditure in 2024/25 to be c.
£50 million including planned spend to deliver our 2030 ESG action plan such
as continuing to decarbonise our regional DC in Beauvais, France, and starting
at Bad Hersfeld, Germany, and Fort Worth, US. We anticipate a further c. £7
million of depreciation charges in 2024/25 relating to the capital expenditure
on our product and delivery information systems.
Net interest paid increased by £18 million to £31 million due to increased
net debt resulting from the acquisitions of Distrelec and Risoul and higher
interest rates.
Income tax paid fell to £73 million reflecting lower taxable profit, timing
differences and utilisation of losses.
Adjusted free cash flow fell to £151 million following the decrease in
operating profit and the unwind of elevated payables from March 2023 as a
consequence of large inventory orders during 2022/23.
Working capital
Trade and other receivables have increased by £9 million to £701 million,
with the acquisition of Distrelec increasing receivables by £27 million. As
the fall in revenue is partly related to the reduction in one-off, low value
customers it has a smaller effect on receivables as these customers typically
transact using credits cards or with shorter payment terms.
Gross inventories were £725 million, an increase of £65 million with the
acquisition of Distrelec accounting for £52 million and the remainder in
continental Europe as we continue to add inventory into our extended regional
DC in Bad Hersfeld, Germany. Our inventory levels increased in the first half
due to the easing of global supply chain issues resulting in the improvement
in performance of suppliers fulfilling new orders and the receipt of inventory
previously on long lead times. As expected, this unwound in the second half
due to our actions to reduce inventory levels in response to declining volumes
and, as a result, our inventory turn was flat at 2.6 times year on year.
Inventory provisions have increased by £25 million to £69 million, due to
the continued sales slowdown pushing inventory into excess, particularly of
electronics products where minimum order quantities are high and single-board
computing products which are slow moving.
Overall trade and other payables decreased to £603 million from £659 million
with the acquisition of Distrelec increasing payables by £36 million. The
overall reduction reflects the timing of payments for inventories with high
balances outstanding at March 2023 relating to 2022/23's increase in inventory
plus the slowdown in the business this year reducing accruals, including those
for annual incentives.
Net debt
Our net debt has increased to £418 million from £113 million (see Note 8)
with the acquisition of Distrelec increasing net debt by £333 million.
The acquisition was in part funded by a new three-year term loan of €150
million and drawing down part of our £400 million sustainability-linked loan
(SLL) facility. The SLL, term loan and the private placement loan notes form
our committed debt facilities of £685 million, of which £245 million was
undrawn at the year end. In October 2023, our request to take up one of the
one-year term extensions to the SLL was approved by the lenders and so this
facility now matures in October 2028, with a further one-year extension option
and a lender option accordion of up to a further £100 million remaining.
The Group's financial metrics remain strong, with net debt to adjusted EBITDA
of 1.1x and EBITA to interest of 10.5x, leaving significant headroom for the
Group's banking covenants of net debt to adjusted EBITDA less than 3.25 times
and EBITA to interest greater than 3 times.
Return on Capital Employed (ROCE)
ROCE is the adjusted operating profit for the 12 months ended 31 March 2024
expressed as a percentage of the monthly average capital employed (net assets
excluding net debt and retirement benefit obligations). ROCE was 17.4%
compared to 30.8% last year, due to the impact of acquisitions
(5.1 percentage points) and the decline in adjusted operating profit
(8.7 percentage points), partly offset by a decrease in monthly average
capital employed (0.4 percentage points).
Retirement benefit obligations
Retirement benefit net obligations of the Group's defined benefit schemes were
£26 million compared to £36 million at 31 March 2023. The UK defined benefit
scheme (our largest scheme) had a net obligation of £16 million under
International Accounting Standard 19 'Employee Benefits', being the present
value of the agreed future deficit contributions agreed following the March
2022 triennial funding valuation and payable to September 2025.
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. The Board proposes to maintain the final
dividend at 13.7p per share. This will be paid on 19 July 2024 to shareholders
on the register on 14 June 2024. As a result, the total proposed dividend for
2023/24 will be 22.0p per share, representing an increase of 5% over the
2022/23 full-year dividend. Adjusted earnings dividend cover for 2023/24 is
2.0 times.
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 £2.0 million and a one cent movement in
the US dollar would impact annual adjusted profit before tax by £0.7 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. On their behalf, Group
Treasury maintains three to seven months hedging against freely tradable
currencies to smooth the impact of fluctuations in currency. For Risoul,
hedges can extend out to 11 months for US dollar trading projections. The
Group's largest exposures related to euros and US dollars.
2030 ESG ACTION PLAN - NON-FINANCIAL KEY PERFORMANCE INDICATORS (KPIs)
We have eight reported non-financial KPIs to measure progress against the
commitments of our 2030 ESG action plan - For a Better World. To provide
greater transparency on our performance in the period, a summary of our
progress is included below with further details available in the ESG section
on our website: www.rsgroup.com (http://www.rsgroup.com) /sustainability.
2024 2023
Carbon intensity (1,2,3) 2.3 1.9
(tonnes of CO(2)e due to Scope 1 and 2 emissions / £m revenue)
Carbon emissions(1,2,3) 6,800 5,700
(tonnes of CO(2)e due to Scope 1 and 2 emissions)
Packaging intensity(1,2) (tonnes / £m revenue) 1.57 1.70
Waste(1) (% of waste recycled) 82% 76%
Group rolling 12-month Net Promoter Score (NPS) 50.6 49.6
Employee engagement 75 78
Percentage of management that are women 34% 30%
All accidents (per 200,000 hours) 0.37 0.40
1. Includes post-acquisition data from businesses acquired in
2022/23 and 2023/24.
2. KPI is on a constant exchange rate basis and updated to reflect
changes in reporting methodology and emissions factors.
3. Scope 2 emissions calculated with electricity purchased from
renewable sources at zero CO(2)e per kWh and grid average CO(2)e per kWh for
all other sources.
RISKS AND UNCERTAINTIES
The Board has overall accountability for the Group's risk management, which is
delegated to the ExCo and supported by the Group's risk team. The principal
elements of the process are: identifying potential risks, assessing the risk,
determining and treating the risk and then monitoring and reviewing these
risks.
The Group has a defined risk appetite, which has been agreed by ExCo and the
Board.
Principal risks and uncertainties
The principal risks and mitigations disclosed in the 2024 Annual Report and
Accounts (pages 34 to 37) were:
1. Cyber security
2. Change initiatives
3. M&A activity
4. Talent and capability
5. Geopolitical environment
6. Market disruption
7. Business resilience
8. Climate change
9. Access to debt and capital markets
10. Legal and regulatory compliance
FORWARD-LOOKING STATEMENTS
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 RS Group 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 RS Group 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 RS Group 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, RS
Group plc has no intention or obligation to update forward-looking statements
contained herein.
GROUP INCOME STATEMENT
For the year ended 31 March 2024
2024 2023
Notes £m £m
Revenue 2 2,942.4 2,982.3
Cost of sales (1,678.5) (1,630.1)
Gross profit 1,263.9 1,352.2
Operating costs (983.8) (969.2)
Operating profit 2 280.1 383.0
Finance income 4.8 2.0
Finance costs (36.7) (14.2)
Share of profit of joint venture 0.6 0.7
Profit before tax 2 248.8 371.5
Income tax expense (65.1) (86.7)
Profit for the year attributable to owners of the Company 183.7 284.8
Earnings per share attributable to owners of the Company
Basic 3 38.8p 60.4p
Diluted 3 38.7p 60.2p
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2024
2024 2023
£m £m
Profit for the year 183.7 284.8
Other comprehensive income
Items that will not be reclassified subsequently to the income statement
Remeasurement of retirement benefit obligations 0.8 (34.2)
Related income tax (0.1) 7.9
Items that may be reclassified subsequently to the income statement
Foreign exchange translation differences of joint venture (0.2) (0.1)
Foreign exchange translation differences (3.9) 43.1
Fair value gain on net investment hedges 3.4 5.4
Movement in cash flow hedges (0.1) 3.9
Related income tax - (0.7)
Other comprehensive (expense) / income for the year (0.1) 25.3
Total comprehensive income for the year 183.6 310.1
Total comprehensive income is attributable to:
Owners of the Company 183.7 310.1
Non-controlling interests (0.1) -
Total comprehensive income for the year 183.6 310.1
GROUP BALANCE SHEET
As at 31 March 2024
2024 2023
Notes £m £m
Non-current assets
Intangible assets 982.6 704.8
Property, plant and equipment 180.9 186.3
Right-of-use assets 72.8 46.9
Investment in joint venture 1.3 1.5
Other receivables 8.4 6.5
Retirement benefit net assets 5 1.5 0.8
Deferred tax assets 9.5 6.9
Total non-current assets 1,257.0 953.7
Current assets
Inventories 6 656.0 616.3
Trade and other receivables 7 701.4 692.0
Cash and cash equivalents - cash and short-term deposits 8 258.7 260.3
Derivative assets 2.6 1.8
Current income tax receivables 22.7 19.9
Total current assets 1,641.4 1,590.3
Total assets 2,898.4 2,544.0
Current liabilities
Trade and other payables (602.7) (658.9)
Cash and cash equivalents - bank overdrafts 8 (162.7) (139.8)
Lease liabilities 8 (16.0) (14.6)
Derivative liabilities (1.1) (1.7)
Provisions (5.0) (1.8)
Current income tax liabilities (27.8) (22.1)
Total current liabilities (815.3) (838.9)
Non-current liabilities
Other payables (17.3) (9.3)
Retirement benefit obligations 5 (27.2) (37.2)
Borrowings 8 (440.3) (184.6)
Lease liabilities 8 (57.9) (34.3)
Provisions (4.2) (4.7)
Deferred tax liabilities (103.3) (90.1)
Total non-current liabilities (650.2) (360.2)
Total liabilities (1,465.5) (1,199.1)
Net assets 1,432.9 1,344.9
Equity
Share capital and share premium 286.9 283.3
Own shares held by Employee Benefit Trust (EBT) (1.8) (2.2)
Other reserves 108.3 108.8
Retained earnings 1,038.9 954.3
Equity attributable to owners of the Company 1,432.3 1,344.2
Non-controlling interests 0.6 0.7
Total equity 1,432.9 1,344.9
GROUP CASH FLOW STATEMENT
For the year ended 31 March 2024
2024 2023
Notes £m £m
Cash flows from operating activities
Profit before tax 248.8 371.5
Depreciation and amortisation 83.7 64.6
Impairment of intangible assets 4.6 7.1
Impairment of right-of-use assets 0.4 -
Loss on disposal of non-current assets 1.6 4.4
Equity-settled share-based payments 7.8 14.2
Net finance costs 31.9 12.2
Share of profit of and dividends received from joint venture - (0.1)
Decrease / (increase) in inventories 4.9 (44.3)
Decrease / (increase) in trade and other receivables 8.1 (37.8)
(Decrease) / increase in trade and other payables (82.2) 33.2
Increase / (decrease) in provisions 1.1 (1.4)
Defined benefit retirement contributions in excess of charge (9.8) (10.6)
Cash generated from operations 300.9 413.0
Interest received 4.8 2.0
Interest paid (35.8) (14.6)
Income tax paid (73.3) (93.9)
Net cash from operating activities 196.6 306.5
Cash flows from investing activities
Acquisition of businesses 9 (313.1) (237.2)
Cash and cash equivalents acquired with businesses 9 9.0 12.7
Total cash impact on acquisition of businesses (304.1) (224.5)
Purchase of intangible assets (35.7) (27.5)
Purchase of property, plant and equipment (15.9) (18.6)
Proceeds on sale of property, plant and equipment - 0.1
Net cash used in investing activities (355.7) (270.5)
Cash flows from financing activities
Proceeds from the issue of share capital 3.6 4.8
Purchase of own shares by EBT (1.5) (2.1)
Loans drawn down 8 286.7 83.2
Loans repaid 8 (27.3) (58.1)
Principal elements of lease payments 8 (18.5) (18.8)
Dividends paid 4 (104.1) (88.6)
Net cash from/ (used in) financing activities 138.9 (79.6)
Net decrease in cash and cash equivalents (20.2) (43.6)
Cash and cash equivalents at the beginning of the year 120.5 158.4
Effects of exchange rate changes (4.3) 5.7
Cash and cash equivalents at the end of the year 8 96.0 120.5
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2024
Attributable to owners of the Company
Share capital and share premium Own shares held by EBT Other reserves Retained earnings Total Non-controlling interests Total equity
£m £m £m £m £m £m £m
At 1 April 2022 278.5 (3.0) 60.2 772.8 1,108.5 - 1,108.5
Profit for the year - - - 284.8 284.8 - 284.8
Other comprehensive income - - 51.6 (26.3) 25.3 - 25.3
Total comprehensive income - - 51.6 258.5 310.1 - 310.1
Cash flow hedging gains transferred to inventories - - (3.7) - (3.7) - (3.7)
Tax on cash flow hedging gains transferred to inventories - - 0.7 - 0.7 - 0.7
Dividends (Note 4) - - - (88.6) (88.6) - (88.6)
Equity-settled share-based payments - - - 14.2 14.2 - 14.2
Settlement of share awards 4.8 2.9 - (2.9) 4.8 - 4.8
Purchase of own shares by EBT - (2.1) - - (2.1) - (2.1)
Tax on equity-settled share-based payments - - - 1.0 1.0 - 1.0
Sale of subsidiary's shares to - - - (0.7) (0.7) 0.7 -
non-controlling interests
At 31 March 2023 283.3 (2.2) 108.8 954.3 1,344.2 0.7 1,344.9
Profit for the year - - - 183.7 183.7 - 183.7
Other comprehensive income - - (0.7) 0.7 - (0.1) (0.1)
Total comprehensive income - - (0.7) 184.4 183.7 (0.1) 183.6
Cash flow hedging gains transferred to inventories - - (1.6) - (1.6) - (1.6)
Cash flow hedging losses transferred to acquisition purchase price - - 1.8 - 1.8 - 1.8
Dividends (Note 4) - - - (104.1) (104.1) - (104.1)
Equity-settled share-based payments - - - 7.8 7.8 - 7.8
Settlement of share awards 3.6 1.9 - (1.9) 3.6 - 3.6
Purchase of own shares by EBT - (1.5) - - (1.5) - (1.5)
Tax on equity-settled share-based payments - - - (1.6) (1.6) - (1.6)
At 31 March 2024 286.9 (1.8) 108.3 1,038.9 1,432.3 0.6 1,432.9
NOTES TO THE PRELIMINARY ACCOUNTS
1. Basis of preparation
The financial information contained in this release does not constitute the
Company's statutory accounts for the years ended 31 March 2024 or 31 March
2023 but is derived from those accounts. The accounts are prepared in
accordance with UK-adopted international accounting standards (UK IAS) and the
requirements of the Companies Act 2006. None of the new accounting standards,
amendments or revisions to existing standards or interpretations which have
become effective have had a material impact on the reported results or
financial position of the Group. Statutory accounts for the year ended 31
March 2023 have been delivered to the Registrar of Companies and those for the
year ended 31 March 2024 will be delivered following the Company's Annual
General Meeting. The auditors have reported on both of these sets of accounts.
Their reports were 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 sections 498(2) or 498(3) of
the Companies Act 2006. The accounts for the year ended 31 March 2024 were
approved by the Board of Directors on 22 May 2024.
2. Segmental reporting
The Group's operating segments comprise three regions: EMEA, Americas and Asia
Pacific.
EMEA Americas Asia Pacific Group
£m £m £m £m
Year ended 31 March 2024
Revenue from external customers 1,794.8 933.7 213.9 2,942.4
Segmental operating profit 255.7 101.4 3.8 360.9
Central costs (49.1)
Adjusted operating profit 311.8
Amortisation of acquired intangibles (26.6)
Acquisition-related items (5.1)
Operating profit 280.1
Net finance costs (31.9)
Share of profit of joint venture 0.6
Profit before tax 248.8
Year ended 31 March 2023
Revenue from external customers 1,768.5 945.5 268.3 2,982.3
Segmental operating profit 275.8 148.5 38.4 462.7
Central costs (60.5)
Adjusted operating profit 402.2
Amortisation and impairment of acquired intangibles (16.6)
Acquisition-related items (2.6)
Operating profit 383.0
Net finance costs (12.2)
Share of profit of joint venture 0.7
Profit before tax 371.5
2. Segmental reporting (continued)
In the table below, revenue is disaggregated by sales channels, by own-brand
products or other product and service solutions, and also by service solutions
or other. The Group's largest own-brand is RS PRO. £2,850.7 million of
revenue is recognised at a point in time (2022/23: £2,901.2 million) and
£91.7 million over time (2022/23: £81.1 million).
Sales channel
EMEA Americas Asia Pacific Group
£m £m £m £m
Year ended 31 March 2024
Web 880.8 258.9 88.5 1,228.2
eProcurement and other digital 441.5 77.3 34.6 553.4
Digital 1,322.3 336.2 123.1 1,781.6
Offline 472.5 597.5 90.8 1,160.8
Revenue 1,794.8 933.7 213.9 2,942.4
Year ended 31 March 2023
Web 893.8 304.3 121.2 1,319.3
eProcurement and other digital 417.3 100.5 39.6 557.4
Digital 1,311.1 404.8 160.8 1,876.7
Offline 457.4 540.7 107.5 1,105.6
Revenue 1,768.5 945.5 268.3 2,982.3
Own-brand / other products and service solutions
EMEA Americas Asia Pacific Group
£m £m £m £m
Year ended 31 March 2024
Own-brand product and service solutions 364.9 6.7 33.2 404.8
Other product and service solutions 1,429.9 927.0 180.7 2,537.6
Revenue 1,794.8 933.7 213.9 2,942.4
Year ended 31 March 2023
Own-brand product and service solutions 360.2 7.1 37.2 404.5
Other product and service solutions 1,408.3 938.4 231.1 2,577.8
Revenue 1,768.5 945.5 268.3 2,982.3
Service solutions / other
During the first half of the year the Group reviewed what it classes as
service solutions which has resulted in certain revenue streams now being
included and certain ones excluded, resulting in an overall decrease to the
service solutions revenue for the year ended 31 March 2023 of £48.6 million
and £29.9 million for the year ended 31 March 2022. The information below
reflects the new classification.
EMEA Americas Asia Pacific Group
£m £m £m £m
Year ended 31 March 2024
Service solutions 532.3 132.8 43.4 708.5
Other 1,262.5 800.9 170.5 2,233.9
Revenue 1,794.8 933.7 213.9 2,942.4
Year ended 31 March 2023 (restated)
Service solutions 506.1 132.9 46.4 685.4
Other 1,262.4 812.6 221.9 2,296.9
Revenue 1,768.5 945.5 268.3 2,982.3
Year ended 31 March 2022 (restated)
Service solutions 425.6 93.4 39.1 558.1
Other 1,153.9 625.3 216.4 1,995.6
Revenue 1,579.5 718.7 255.5 2,553.7
3. Earnings per share
2024 2023
Number Number
Weighted average number of shares 473,300,106 471,717,928
Dilutive effect of share-based payments 781,177 1,194,205
Diluted weighted average number of shares 474,081,283 472,912,133
Basic earnings per share 38.8p 60.4p
Diluted earnings per share 38.7p 60.2p
4. Dividends
2024 2023
£m £m
Final dividend for the year ended 31 March 2023 - 13.7p (2022: 11.6p) 64.8 54.6
Interim dividend for the year ended 31 March 2024 - 8.3p (2023: 7.2p) 39.3 34.0
104.1 88.6
A proposed final dividend for the year ended 31 March 2024 of 13.7p is subject
to approval by shareholders at the Annual General Meeting on 11 July 2024 and
the estimated amount to be paid of £64.9 million has not been included as a
liability in these accounts. This will be paid on 19 July 2024 to shareholders
on the register on 14 June 2024 with an ex-dividend date of 13 June 2024.
5. Retirement benefit obligations
The Group operates defined benefit schemes in the United Kingdom and Europe.
2024 2023
£m £m
Fair value of scheme assets 452.0 432.0
Present value of defined benefit obligations (421.8) (407.3)
Effect of asset ceiling / onerous liability (55.9) (61.1)
Retirement benefit net obligations (25.7) (36.4)
Amount recognised on the balance sheet - liability (27.2) (37.2)
Amount recognised on the balance sheet - asset 1.5 0.8
A change would have the following increase / (decrease) on the UK defined
benefit obligations as at 31 March 2024:
Increase in assumption Decrease in assumption
£m £m
Effect on obligation of a 0.5 pts change to the assumed discount rate (24.7) 27.3
Effect on obligation of a 0.25 pts change in the assumed inflation rate 11.7 (11.3)
Effect on obligation of a change of one year in assumed life expectancy 10.9 (10.9)
6. Inventories
2024 2023
£m £m
Gross inventories 724.6 660.0
Inventory provisions (68.6) (43.7)
Net inventories 656.0 616.3
£35.1 million was recognised as an expense relating to the write-down of
inventories to net realisable value (2022/23: £33.0 million).
Currently the Group does not expect any reasonably likely changes, including
regulatory changes and the current global economic and geopolitical
uncertainties, to have a material impact on the net realisable value of
inventories.
7. Trade and other receivables
2024 2023
£m £m
Gross trade receivables 624.0 621.0
Impairment allowance (11.1) (12.6)
Net trade receivables 612.9 608.4
Other receivables (including prepayments and accrued income) 88.5 83.6
Trade and other receivables 701.4 692.0
Trade receivables are written off when there is no reasonable expectation of
recovery, for example when a customer enters liquidation or the Group agrees
with the customer to write off an outstanding invoice. The Group continues to
limit its exposure through tight credit policies, proactive monitoring and
collections. Historically, the Group has generally experienced very low levels
of trade receivables not being recovered, including those significantly past
due, and this was also the case during 2023/24. However, with the continued
global economic and geopolitical uncertainties, the Group remains cautious
about its exposure and so has reviewed carefully, and maintained at a higher
level, its expected loss rates for those markets and industries that are most
affected.
8. Net debt
2024 2023
£m £m
Cash and short-term deposits 258.7 260.3
Bank overdrafts (162.7) (139.8)
Cash and cash equivalents 96.0 120.5
Non-current private placement loan notes (157.1) (160.4)
Non-current sustainability-linked loan (155.0) (24.2)
Non-current term loan (128.2) -
Current lease liabilities (16.0) (14.6)
Non-current lease liabilities (57.9) (34.3)
Net debt (418.2) (113.0)
The amount borrowed under the sustainability-linked loan facility matured in
April 2024 and was rolled for another month. The expectation is that the
amounts rolled will be gradually reduced until they will be fully repaid
during 2027/28.
Movements in net debt were:
Borrowings Lease liabilities Total liabilities from financing activities Interest rate swaps Cash and cash equivalents Net debt
£m £m £m £m £m £m
Net debt at 1 April 2022 (151.7) (48.7) (200.4) (0.1) 158.4 (42.1)
Cash flows (25.1) 18.8 (6.3) - (43.6) (49.9)
Acquired with businesses - (9.8) (9.8) - - (9.8)
Net lease additions - (8.4) (8.4) - - (8.4)
(Loss) / gain in fair value in period (0.1) - (0.1) 0.1 - -
Translation differences (7.7) (0.8) (8.5) - 5.7 (2.8)
Net debt at 31 March 2023 (184.6) (48.9) (233.5) - 120.5 (113.0)
Cash flows (259.4) 18.5 (240.9) - (20.3) (261.2)
Acquired with businesses - (28.5) (28.5) - - (28.5)
Net lease additions - (15.2) (15.2) - - (15.2)
Translation differences 3.7 0.2 3.9 - (4.2) (0.3)
At 31 March 2024 (440.3) (73.9) (514.2) - 96.0 (418.2)
9. Acquisitions
On 30 June 2023 the Group acquired 100% of the issued share capital of
Distrelec B.V. and its subsidiaries (Distrelec), a high-service, digital-led
distributor of industrial and maintenance, repair and operations (MRO)
products in Europe. Distrelec significantly expands the Group's presence in
continental Europe and will leverage the Group's existing operations to drive
value-accretive growth. The goodwill is attributable to cost synergies in
procurement, logistics and warehousing, and marketing and administration, in
addition to revenue synergies from cross-selling opportunities of RS's own
brand and solutions offer. Distrelec is included in EMEA.
The fair value of the net assets acquired, consideration paid and goodwill
arising, plus transaction costs and contribution to the Group's results since
acquisition were:
£m
Intangible assets 106.2
Property, plant and equipment 0.6
Right-of-use assets 29.8
Working capital 42.5
Cash and cash equivalents - cash and short-term deposits 9.0
Lease liabilities (28.5)
Non-current other payables (11.1)
Non-current other provisions (1.3)
Current income tax liabilities (4.9)
Current other provisions (0.2)
Deferred tax liabilities (14.1)
Net assets acquired 128.0
Indemnification assets (included in non-current other receivables) 2.8
Goodwill 182.3
Consideration paid - cash 313.1
On 2 April 2024 the Group acquired Trident Australia Pty Ltd (Trident), a
specialist MRO distribution and rental, calibration and mechanical services
partner for the energy and natural resource industry in Australia, for an
estimated £8.0 million on a debt-free, cash-free, tax-free basis. The
completion accounts are being prepared and once agreed the consideration will
be finalised and the fair value of the net assets acquired assessed.
10. Alternative Performance Measures (APMs)
The Group uses a number of APMs in addition to those measures reported in
accordance with UK IAS. Such APMs are not defined terms under UK IAS and are
not intended to be a substitute for any UK IAS 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 aids comparison of the underlying performance
between reporting periods and between businesses with similar assets that were
internally generated.
10. Alternative Performance Measures (APMs) (continued)
Adjusted profit measures
These are the equivalent UK IAS measures adjusted to exclude amortisation and
impairment of intangible assets arising on acquisition of businesses,
acquisition-related items, substantial reorganisation costs, substantial asset
write-downs, one-off pension credits or costs, significant tax rate changes
and, where relevant, associated income tax effects. Adjusted profit before tax
is a performance measure for the annual incentive and the all employee Long
Term Incentive Plan (LTIP) called the RS YAY! Award. Adjusted earnings per
share is a performance measure for the LTIP and Journey to Greatness (J2G)
LTIP award. Adjusted operating profit conversion, adjusted operating profit
margin and adjusted earnings per share are financial key performance
indicators (KPIs) which are used to measure the Group's progress in delivering
the successful implementation of its strategy and monitor and drive its
performance.
Operating costs(1) Operating profit Operating profit margin(1) Operating profit conversion(2) Profit before tax Profit for the year Basic earnings per share Diluted earnings per share
£m £m % % £m £m p p
Year ended 31 March 2024
Reported (983.8) 280.1 9.5% 22.2% 248.8 183.7 38.8p 38.7p
Amortisation of acquired intangibles 26.6 26.6 26.6 19.8 4.2p 4.2p
Acquisition-related items 5.1 5.1 5.1 3.8 0.8p 0.8p
Adjusted (952.1) 311.8 10.6% 24.7% 280.5 207.3 43.8p 43.7p
Year ended 31 March 2023
Reported (969.2) 383.0 12.8% 28.3% 371.5 284.8 60.4p 60.2p
Amortisation and impairment of acquired intangibles 16.6 16.6 16.6 13.3 2.8p 2.8p
Acquisition-related items 2.6 2.6 2.6 2.1 0.4p 0.4p
Adjusted (950.0) 402.2 13.5% 29.7% 390.7 300.2 63.6p 63.4p
((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.
Acquisition-related items comprise transaction costs directly attributable to
the acquisition of businesses, any deferred consideration payments relating to
the retention of former owners of acquired businesses expensed as
remuneration, adjustments to acquisition-related indemnification assets and
the related liabilities that result from events after the acquisition date and
any remeasurements of contingent consideration payable on acquisition of
businesses that result from events after the acquisition date.
Like-for-like revenue and profit measures
Like-for-like revenue and profit measures are adjusted to exclude the effects
of changes in exchange rates on translation of overseas profits. They exclude
acquisitions in the relevant years until they have been owned for a year, at
which point they start to be included in both the current and comparative
years for the same number of months. These measures enable management and
investors to track more easily, and consistently, the underlying performance
of the business.
The principal exchange rates applied in preparing the Group accounts and in
calculating the following like-for-like measures are:
2024 2024 2023 2023
Average Closing Average Closing
US dollar 1.257 1.264 1.206 1.239
Euro 1.159 1.170 1.158 1.137
10. Alternative Performance Measures (APMs) (continued)
Like-for-like revenue change
Like-for-like revenue change is also adjusted to eliminate the impact of
trading days year on year. It is calculated by comparing the revenue of the
base business for the current year with the prior year converted at the
current year's average exchange rates and pro-rated for the same number of
trading days as the current year. It is a performance measure for the annual
incentive and a financial KPI.
£m
Revenue for 2023 2,982.3
Effect of exchange rates (57.4)
Effect of trading days (24.1)
Revenue for 2023 at 2024 rates and trading days 2,900.8
2024 Less: acquisitions owned 2024 base business 2023 2023 at 2024 rates and trading days Like-for-like change
Group
<1 year
£m £m £m £m £m %
EMEA 1,794.8 134.6 1,660.2 1,768.5 1,743.1 (5)%
Americas 933.7 145.9 787.8 945.5 909.3 (13)%
Asia Pacific 213.9 1.8 212.1 268.3 248.4 (15)%
Revenue 2,942.4 282.3 2,660.1 2,982.3 2,900.8 (8)%
Gross margin and like-for-like gross margin change
Gross margin is gross profit divided by revenue. Like-for-like change in gross
margin is calculated by taking the difference between gross margin for the
base business for the current year and gross margin for the prior year with
revenue and gross profit converted at the current year's average exchange
rates.
2024 Less: acquisitions owned 2024 base business 2023 2023 at 2024 rates Like-for-like change
Group
<1 year
£m £m £m £m £m pts
Revenue 2,942.4 282.3 2,660.1 2,982.3 2,924.9
Gross profit 1,263.9 88.8 1,175.1 1,352.2 1,326.0
Gross margin 43.0% 31.5% 44.2% 45.3% 45.3% (1.1) pts
Like-for-like profit change
Like-for-like change in profit is calculated by comparing the base business
for the current year with the prior year converted at the current year's
average exchange rates.
2024 Less: acquisitions owned 2024 base business 2023 2023 at 2024 rates Like-for-like change
Group
<1 year
£m £m £m £m £m %
Segmental operating profit
EMEA 255.7 5.9 249.8 275.8 274.1 (9)%
Americas 101.4 11.7 89.7 148.5 142.3 (37)%
Asia Pacific 3.8 - 3.8 38.4 33.7 (89)%
Segmental operating profit 360.9 17.6 343.3 462.7 450.1 (24)%
Central costs (49.1) - (49.1) (60.5) (60.1) (18)%
Adjusted operating profit 311.8 17.6 294.2 402.2 390.0 (25)%
Adjusted profit before tax 280.5 15.4 265.1 390.7 378.5 (30)%
Adjusted earnings per share 43.8p 2.8p 41.0p 63.6p 61.7p (34)%
Adjusted diluted earnings per share 43.7p 2.8p 40.9p 63.4p
10. Alternative Performance Measures (APMs) (continued)
Adjusted free cash flow and adjusted operating cash flow conversion
Adjusted free cash flow is net cash from operating activities less purchases
of intangible assets, property, plant and equipment plus any proceeds on sale
of intangible assets, property, plant and equipment, adjusted for the cash
impact of substantial reorganisation and acquisition-related items and is a
performance measure for the annual incentive.
Adjusted operating cash flow is adjusted free cash flow before income tax and
net interest paid. Adjusted operating cash flow conversion is adjusted
operating cash flow expressed as a percentage of adjusted operating profit and
is a financial KPI.
2024 2023
£m £m
Net cash from operating activities 196.6 306.5
Purchase of intangible assets (35.7) (27.5)
Purchase of property, plant and equipment (15.9) (18.6)
Proceeds on sale of property, plant and equipment - 0.1
Add back: impact of substantial reorganisation cash flows 0.7 0.5
Add back: impact of acquisition-related items cash flows 5.5 2.6
Adjusted free cash flow 151.2 263.6
Add back: income tax paid 73.3 93.9
Add back: net interest paid 31.0 12.6
Adjusted operating cash flow 255.5 370.1
Adjusted operating profit 311.8 402.2
Adjusted operating cash flow conversion 81.9% 92.0%
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 (one of the
Group's debt covenants) is the ratio of net debt to EBITDA excluding
impairment of intangible assets arising on acquisition of businesses,
acquisition-related items, substantial reorganisation costs, substantial asset
write-downs and one-off pension credits or costs.
2024 2023
£m £m
Operating profit 280.1 383.0
Add back: depreciation and amortisation 83.7 64.6
EBITDA 363.8 447.6
Add back: impairment of acquired intangibles - 3.3
Add back: acquisition-related items 5.1 2.6
Adjusted EBITDA 368.9 453.5
Net debt 418.2 113.0
Net debt to adjusted EBITDA 1.1x 0.2x
Earnings before interest, tax and amortisation (EBITA) and EBITA to interest
EBITA is adjusted EBITDA after depreciation. EBITA to interest (one of the
Group's debt covenants) is the ratio of EBITA to finance costs including
capitalised interest less finance income.
2024 2023
£m £m
Adjusted EBITDA 368.9 453.5
Less: depreciation (35.5) (36.2)
EBITA 333.4 417.3
Finance costs 36.7 14.2
Less: finance income (4.8) (2.0)
Interest (per debt covenants) 31.9 12.2
EBITA to interest 10.5x 34.2x
10. Alternative Performance Measures (APMs) (continued)
Return on capital employed (ROCE)
ROCE is adjusted operating profit expressed as a percentage of monthly average
net assets excluding net debt and retirement benefit obligations and is an
underpin for the LTIP and J2G LTIP Award and a financial KPI.
2024 2023
£m £m
Average net assets 1,389.3 1,258.0
Add back: average net debt 371.6 25.6
Add back: average retirement benefit net obligations 31.2 24.1
Average capital employed 1,792.1 1,307.7
Adjusted operating profit 311.8 402.2
ROCE 17.4% 30.8%
Working capital as a percentage of revenue
Working capital is inventories, current trade and other receivables and
current trade and other payables.
2024 2023
£m £m
Inventories 656.0 616.3
Current trade and other receivables 701.4 692.0
Current trade and other payables (602.7) (658.9)
Working capital 754.7 649.4
Revenue 2,942.4 2,982.3
Working capital as a percentage of revenue 25.6% 21.8%
Inventory turn
Inventory turn is cost of sales divided by inventories.
2024 2023
£m £m
Cost of sales 1,678.5 1,630.1
Inventories 656.0 616.3
Inventory turn 2.6 2.6
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.
2024 2023
£m £m
Depreciation and amortisation 83.7 64.6
Less: amortisation of acquired intangibles (26.6) (13.3)
Less: depreciation of right-of-use assets (18.6) (18.3)
Adjusted depreciation and amortisation 38.5 33.0
Capital expenditure 51.2 42.4
Ratio of capital expenditure to depreciation 1.3 times 1.3 times
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 (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR BFLLLZELLBBZRecent news on RS
See all newsREG - RS Group PLC - Block listing Interim Review
AnnouncementREG - RS Group PLC - Director/PDMR Shareholding
AnnouncementREG - RS Group PLC - Result of AGM
AnnouncementREG - RS Group PLC - AGM Update
AnnouncementREG - RS Group PLC - Directorate Change - Chair of Audit Committee
Announcement