REG - RS Group PLC - Half-year Report
07/11/2023 07:00
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RNS Number : 5588S RS Group PLC 07 November 2023
7 November 2023
RS GROUP PLC
RESULTS FOR THE HALF YEAR ENDED 30 SEPTEMBER 2023
Highlights H1 2023/24 H1 2022/23 Change Like-for-like(1) change
Revenue £1,447m £1,458m (1)% (8)%
Adjusted operating profit(1) £156m £196m (21)% (24)%
Adjusted operating profit margin(1) 10.8% 13.4% (2.6) pts (2.3) pts
Adjusted profit before tax(1) £143m £192m (25)% (29)%
Adjusted earnings per share(1) 22.3p 31.5p (29)% (32)%
Operating profit £139m £187m (26)% (26)%
Profit before tax £126m £183m (31)% (30)%
Earnings per share 19.5p 30.0p (35)% (34)%
Interim dividend 8.3p 7.2p 15%
Adjusted free cash flow(1) £26m £112m (77)%
Cash generated from operations £104m £182m (43)%
Net (debt) / cash £(502)m £3m
Net debt to adjusted EBITDA(1) 1.2x n/m
Resilient performance in challenging markets in first half
· Revenue down 1%, including 8% like-for-like decline and 10% benefit
from acquisitions
· Like-for-like revenue for digital declined 5%, service solutions grew
4% and our main own-brand, RS PRO, grew 5%
· Robust gross margin at 43.7%, down 0.4 pts like-for-like
· Adjusted operating profit margin of 10.8% due to lower volumes, lack of
2022/23 trading tailwind, short-term dilutive impact of acquisitions and input
cost inflation
· Adjusted free cash flow impacted by easing of supply chain constraints,
expected to normalise in second half
Positive strategic and operational momentum
· Operating cost actions identified that deliver annualised savings over
£30m
· Opportunity for further improvement through reducing complexity and
greater efficiency
· Continuing to invest in growth accelerators and to improve operational
leverage and operational effectiveness
· Integration of Distrelec progressing well
Exciting growth opportunity
· Strong position in fragmented markets with attractive through-cycle
growth characteristics
· Global presence, digitally led, product breadth and service focus
support potential for continued market outperformance
· Margin expansion opportunity through leveraging physical, process and
digital infrastructure and improved execution
· Attractive cash generation and returns profile and a robust balance
sheet
SIMON PRYCE, CHIEF EXECUTIVE OFFICER, COMMENTED:
"RS has delivered a resilient performance in difficult markets, which have
been more challenging than anticipated at the beginning of the year.
Industrial revenue has been robust despite the challenging macro and
geopolitical environment but cyclical weakness in electronics has been
exasperated by customer de-stocking. Our committed people are responding
effectively in this environment by reducing costs and driving improvement in
operational effectiveness, whilst continuing to invest to improve operational
leverage and in our growth accelerators.
Whilst markets remain difficult in the short term, the medium and longer-term
growth characteristics are attractive. We are managing our costs more
appropriately whilst continuing to invest in key strategic accelerators. We
are also already beginning to see the benefit of tighter focus, more
alignment, better prioritisation and improved execution across the Group. This
is positioning the Group very effectively to benefit when our markets return
to growth and gives us continued confidence in our ability to realise our
exciting growth strategy and deliver first choice outcomes for all our
stakeholders."
1. See Note 13 for definitions and reconciliations of all
alternative performance measures, including like-for-like change and adjusted
measures.
Enquiries:
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 Numis, 45
Gresham Street, London EC2V 7BF. 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:
https://www.investis-live.com/rsgroup/65201e2919d2ca0e00132399/qeqq
(https://www.investis-live.com/rsgroup/65201e2919d2ca0e00132399/qeqq)
It is advisable to pre-register early to avoid any delays in joining the
conference call. 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: 006872
Presentation timing
Date: Tuesday, 7 November 2023
Time: 9am UK time
Venue: Deutsche Numis, 45 Gresham Street, London EC2V 7BF
Notes to editors:
RS Group plc provides product and service solutions that help our customers
design, build, maintain, repair and operate industrial equipment and
operations, safely and sustainably. We stock more than 750,000 industrial and
electronic products, sourced from over 2,500 leading suppliers, and provide a
wide range of product and service solutions to customers.
We support customers across the product lifecycle, whether via innovation and
technical support at the design phase, improving time to market and
productivity at the build phase, or reducing purchasing costs and optimising
inventory in the maintenance, repair and operation phase. We offer our
customers tailored product and service propositions that are essential for the
successful operation of their businesses and help them save time and money.
RS Group plc is listed on the London Stock Exchange with stock ticker RS1 and
in the year ended 31 March 2023 reported revenue of £2,982 million.
BUSINESS REVIEW
In the half year ended 30 September 2023, we experienced continuing
geopolitical uncertainty, ongoing deterioration in manufacturing PMI(1) data
globally, industry destocking particularly in electronics, supply chain
normalisation, reducing price inflation and ongoing cost inflation. Last year
we also benefited from the tailwind of having inventory in a constrained
global supply environment experiencing material price inflation, which
delivered an estimated c. £35 million of adjusted operating profit of which
£26 million was realised in H1 2022/23 and a further £9 million in H2
2022/23.
Despite this more challenging than anticipated market backdrop, the lack of
trading tailwind and a cost structure that needs to be more closely aligned to
our market and strategic opportunity, we delivered a resilient performance.
In the first half, new leadership met with RS people across the globe and took
the opportunity to review strategy and evaluate markets, projects, progress
and barriers to execution. This work served to support and confirm the Group's
strategic ambitions and potential. However, following a sustained period of
strong trading post COVID-19 it also identified significant opportunities to
improve operating effectiveness and execution. We are therefore taking actions
to tighten our focus, create more alignment, prioritise better and improve
agility to accelerate the realisation of our exciting growth strategy.
Driving operational effectiveness
We have commenced a review of the way we operate and of our core processes to
reduce complexity and improve efficiency. Key actions that we are undertaking
include:
· Streamlining the Senior Management Team to an empowered Executive
Committee (ExCo) responsible for prioritisation and effective resource
allocation to drive greater focus, agility and improved operational and
financial performance.
· Creating a broader Advisory Group formed of senior leaders and
functional experts to align, shape, challenge, test and lead the delivery of
our strategic priorities and improvement actions.
· Simplifying and clarifying our operating model to reduce
complexity and improve operating effectiveness, agility and scalability.
· Commencing a bottom-up, action orientated and aligned planning
process within clearer Group-wide guiderails.
· Enhancing the Group's performance management metrics and
processes to ensure effective operational oversight, better information and
sharing of best practice and to improve alignment and collaboration across
functional, regional and country teams.
· Reducing duplication and creating clarity on accountability.
Improving operational leverage
We are pursuing clear opportunities to improve our operational leverage as we
continue to evolve from a transactional product supplier to a strategic
partner and product and service solutions provider for our customers and
suppliers. This is through increased prioritisation of higher lifetime value
customers, focusing on cost to serve, implementing and optimising global
processes, and increasing volumes through efficient physical, process and
digital infrastructure.
We are taking action to manage our operating costs more effectively. We
anticipate these actions will deliver over £30 million of annualised savings
of which £10 million will be realised this year and most of the remainder in
2024/25. The costs of delivering these savings are estimated to be c. £15
million of which £4 million has been incurred in the first half with the
remainder to be incurred in the second half.
Key actions that we have delivered include:
· Reorganised, aligned our divisional management structures and
reduced headcount in our Americas and Asia Pacific regions.
· Optimising our supply chain and distribution footprint with the
Distrelec acquisition providing a needed distribution centre (DC) in
Switzerland, improving the functionality of our DC in Germany and adding third
party customer fulfilment centres in Asia.
· Completing the migration of all our servers and over 100
back-office, middleware and frontend applications to become a cloud-based
business.
Ongoing growth accelerators
We continue to develop our growth accelerators; the products, services and
customer experience that drive stronger revenue and increase our share of
customer wallet. Over the last six months we have:
· Developed and introduced sophisticated search capabilities
powered by Google technology and AI into our UK and Irish websites which we
are rolling out across the globe in the second half.
· Developed and launched a common customer relationship management
process and tool, initially in Germany, but to be deployed globally over the
next 18 months.
· Expanded our own-brand range, RS PRO, to include more automation
and control (A&C) products, which are relevant for our customer base in
Americas.
· Better World sustainable product range now available in 15
countries across EMEA and Asia Pacific.
· Expanded our service solutions offer further in EMEA,
specifically our inventory management solutions.
Strategic acquisitions
On 30 June 2023 we acquired Distrelec, gaining critical mass in key markets,
widening our product and service solutions offer and creating the opportunity
to realise material operational efficiencies. Integration is proceeding well,
with more potential benefits than initially anticipated and lower costs of
delivery. With Distrelec experiencing similar market conditions to those of RS
Germany, Switzerland and Scandinavia we are taking the opportunity to
accelerate integration and remain confident that the acquisition of Distrelec
will generate exciting returns for all stakeholders over the medium and long
term.
Our integration of Risoul is progressing well. Trading is exceeding
expectations, helped by the buoyant Mexican market driven by the nearshoring
trend and benefit from strong product availability where supply remains
constrained. We are extending the product offer from RS into Risoul,
developing a transactional website and leveraging Risoul's technical service
knowledge into our business in Americas.
Driving sustainability for a better world
We continue to advance sustainability across our global operations through
energy saving initiatives and decarbonisation activities at our DCs, switching
to renewable energy tariffs and transitioning to a net zero fleet, resulting
in further reductions in our direct carbon emissions. Additionally, we are
reducing the cost, distance and emissions of our product transportation,
enabled by our regionalised supply chain, to help reduce our overall carbon
footprint.
Four of our science-based targets covering our direct operations, logistics,
suppliers and products have been validated by the Science Based Targets
initiative.
Exciting through-cycle opportunity
We are a strong global player operating in very fragmented markets. We are a
digitally-led, high-service, broad-based maintenance, repair and operation
(MRO) distributor with particular strengths in electrical (including
electronics), automation and control as well as complementary products such as
test and measurement, tools and consumables, safety and fluid power.
We provide these critical product and service solutions to help our industrial
customers maintain, repair and operate their facilities. We execute high
volumes of small batch orders through a well-established physical, process and
digital infrastructure, providing a fast and responsive customer service. The
breadth of our reach through multiple geographies, industries, product
categories, channels and our increasing product and service solutions focus
gives us the potential for continued and sustained market outperformance over
time.
We are already beginning to see the benefit of tighter focus, more alignment,
better prioritisation and much improved execution and this gives us continuing
confidence in our ability to accelerate realisation of our exciting
opportunity.
1. Purchasing Manager Index (PMI) is a survey-based economic
indicator designed to provide a timely insight into business conditions. The
PMI is widely used to anticipate changing economic trends in official data
such as GDP, or sometimes as an alternative gauge of economic performance and
business conditions to official data, as the latter sometimes suffer from
delays in publication, poor availability or data quality issues. (Source:
S&P Global).
OVERALL RESULTS
H1 2023/24 H1 2022/23 Change Like-for-like(1) change
Revenue £1,447m £1,458m (1)% (8)%
Gross margin 43.7% 45.5% (1.8) pts (0.4) pts
Operating profit £139m £187m (26)% (26)%
Adjusted operating profit(1) £156m £196m (21)% (24)%
Adjusted operating profit margin(1) 10.8% 13.4% (2.6) pts (2.3) pts
Adjusted operating profit conversion(1) 24.6% 29.6% (5.0) pts (4.6) pts
Digital revenue(2) £872m £916m (5)% (5)%
Service solutions revenue(2) £337m £320m 5% 4%
RS PRO revenue(2) £188m £182m 3% 5%
1. See Note 13 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 £1,447 million. Like-for-like revenue
declined 8% after adjusting for the £142 million gain from acquisitions,
£21 million from adverse exchange rate movements and a negative impact of
£13 million from fewer trading days. As anticipated, the transition of our
single-board computing range away from Raspberry Pi accounted for 1% of the
Group like-for-like revenue decline. Our strong product availability when
global supply chains were constrained provided a trading benefit in H1
2022/23. We estimate the reversal of this benefit contributed c. 5% of the
revenue decline in this half year, as the global supply chain issues eased and
our customers reduced their higher inventory levels.
Our industrial product and service solutions ranges, which account for 80% of
Group revenue, declined by 2%
like-for-like during the first half with growth across all ranges apart from
A&C (43% of Group revenue) where performance is most correlated towards
the electronics cycle. The macroeconomic environment remains challenging
illustrated by the PMI and industrial production figures which have
deteriorated across our main markets.
Our electronics product and service solutions range accounts for 19% of Group
revenue and is predominantly supplied to our industrial customers as they
become more digitalised and better connected. Supply constraints have
continued to ease and demand soften, especially for passives and semiconductor
components. As a result, our like-for-like electronics revenue declined by
24%.
RS PRO, which is our main own-brand product range and accounts for 13% of
Group revenue, grew by 5% on a
like-for-like basis, due to extending its product breadth and the end-to-end
sales and marketing focus in the regions. Our competitively priced offer
continues to gain traction as a quality but non-competing alternative to main
branded ranges as we demonstrate quality and value through our quality
assurance qualifications and design and test facilities.
Digital, accounting for 60% of Group revenue (65% of Group like-for-like
revenue but diluted by Risoul's current offline model), performed ahead of the
Group overall with a like-for-like revenue decline of 5%. Web revenue
decreased by 8% on a like-for-like basis, while eProcurement and other
digital, which are used predominantly by our larger customers, grew by 2% on a
like-for-like basis.
In the first half, service solutions revenue accounted for 23% of our Group
revenue and increased by 5% to £337 million, 4% like-for-like, with our
digital solutions offer being one of the strongest areas.
Gross margin
Group gross margin decreased 1.8 percentage points to 43.7%, of which 1.4
percentage points was a function of the dilutive impact from our recent
acquisitions due to their lower digital participation compared to the rest of
the Group. Last year's gross margin benefit from our cost of sales inflation
lagging price inflation, especially within electronics products, due to our
low inventory turn has begun to unwind. Like-for-like gross margin decreased
0.4 percentage points, better than anticipated, reflecting our focus on gross
margin optimisation through direct procurement initiatives, commercial
discipline, tighter discount policies and expanding our own-brand ranges. We
expect our gross margin dilution in the second half to be more than in the
first half due to lower price inflation and full dilutive effect of
acquisitions.
Operating costs
Operating costs, which include regional and central costs, increased by 4%
mainly due to the acquisitions made in the past 12 months. 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 4% like-for-like with lower variable costs more
than offsetting cost inflation specifically within labour and energy. We have
also taken action to manage our operating costs more effectively, part of
which is accelerating the integration of Distrelec. We estimate that these
actions will deliver over £30 million of annualised savings of which £10
million will be realised this year and most of the remainder in 2024/25. The
costs of delivering these savings are estimated to be some £15 million of
which £4 million has been incurred in the first half with the remainder in
the second half.
A large proportion of our operating costs relate to our people. We awarded a
mid-single digit pay increase across the Group which included a higher than
average increase for our non-management employees in most markets in
recognition of the greater impact of inflationary pressures. As sales volumes
have reduced, we have flexed our variable people costs and additional actions
in specific areas, with people costs slightly down excluding the impact of
acquisitions. Our employee voluntary annual turnover rate remains low at 8.2%.
We continue to invest to ensure we are developing our strategic growth
drivers, strengthening our digital and commercial capabilities, technology
platform, product and service solutions capacity and improving our operating
basics. This means we will be well-positioned to benefit when economic
conditions improve. We are monitoring our investment spend closely and
implementing greater oversight around execution, progress and delivery.
We are seeing a continued benefit from the expansion and ongoing optimisation
of our DC in Bad Hersfeld, Germany, which allows us to route more inventory
directly into Europe, and not through our UK DCs, so reducing the additional
border costs relating to Brexit and improves our environmental footprint.
Against this, lower volumes in our DCs overall have reduced our operational
efficiencies. We remain focused on optimising our network of DCs to minimise
freight costs and miles and are improving our operating structure to drive
greater operational focus and ownership so that we can simplify our cost base
further.
Central costs (Group strategic investment, Board, Group Finance and Group
Professional Services and People costs that cannot be attributed to
region-specific activity) decreased by £6 million to £31 million, largely
reflecting foreign exchange and lower share-based payments. We will focus on
tighter cost management going forward.
Adjusted operating costs as a percentage of revenue increased by 0.9
percentage points to 33.0%, while adjusted operating profit conversion is 5.0
percentage points lower at 24.6%.
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 13 for definitions and reconciliations of adjusted
measures).
Amortisation and impairment of acquired intangibles
Amortisation of acquired intangibles was £13 million (H1 2022/23 amortisation
and impairment of acquired intangibles: £9 million) and relates to the
intangible assets arising from acquisitions.
Acquisition-related items
Acquisition-related items of £4 million mainly relate to transaction costs
incurred in the first half which are directly attributable to the acquisition
of Distrelec.
Operating profit
Operating profit decreased by 26% to £139 million. Excluding the impact of
acquisitions and the adverse impact of currency movements, adjusted operating
profit saw a like-for-like decrease of 24%. We estimate the reversal of the
one-off trading benefit in H1 2022/23 contributed c. 13% of the decrease in
this half year. Adjusted operating profit margin declined by 2.6 percentage
points to 10.8%.
Non-financial key performance indicators (KPIs)
We have eight non-financial KPIs to help measure progress against our strategy
and 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) /esg.
H1 2023/24 H1 2022/23
Carbon intensity (1,2,3) 1.4 1.4
(tonnes of CO(2)e due to Scope 1 and 2 emissions / £m revenue)
Carbon emissions(1,2,3) 1,800 2,000
(tonnes of CO(2)e due to Scope 1 and 2 emissions)
Packaging intensity(1,2) (tonnes / £m revenue) 1.73 1.76
Waste(1) (% of waste recycled) 83% 76%
Group rolling 12-month Net Promoter Score (NPS) 50.4 48.5
Employee engagement(4) - 78
Percentage of management that are women 31% 32%
All accidents (per 200,000 hours) 0.34 0.35
1. Revenue and environmental-related performance of businesses
acquired in 2022/23 and 2023/24 are not included pending finalisation and
confirmation of their reports, which we are aiming to publish in our Annual
Report and Accounts for the year ending 31 March 2024 (Annual Report 2024).
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.
4. We are in the process of compiling the results from our
October 2023 engagement survey and the results will be published in our Annual
Report 2024.
REGIONAL PERFORMANCE
EMEA
H1 2023/24 H1 2022/23 Change Like-for-like(1) change
Revenue £861m £854m 1% (4)%
Operating profit(2) £132m £131m 1% (2)%
Operating profit margin 15.3% 15.4% (0.1) pts 0.4 pts
Digital revenue(3) £637m £624m 2% (1)%
Service solutions revenue(3) £252m £235m 7% 6%
RS PRO revenue(3) £168m £159m 5% 6%
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.
EMEA revenue increased 1% with like-for-like revenue declining 4% as some of
our product markets contracted and recession affected some countries. PMI data
in all countries has worsened during the period, with specific weakness in our
A&C industrial category where some parts of our range are closely aligned
to more cyclical electronics components. The electronics market has continued
to deteriorate and is affecting those countries with the most exposure. In the
comparative period we benefited from our strong inventory availability which
temporarily increased our volumes, particularly with one-off transactional
customers. We have maintained share with our target customers but have seen
some smaller, lower value and transitory customers revert to their usual
distribution channels.
UK and Ireland, which accounts for 40% of the region's revenue, delivered low
single-digit revenue growth resulting from a focus on higher-value corporate
customers and less exposure to electronics products. A more targeted customer
focus, coordinated marketing campaigns, effective pricing and understanding
our cost to serve has supported revenue and profit growth.
France grew in the first half as we continued to focus on our long-term
high-value customers. We are working in partnership with our strategic
suppliers to develop effective commercial and marketing activities, especially
in our core product categories, providing technical product support using both
our sales teams and digital channels.
Germany suffered due to the weakening economy and slowdown in production
output. Germany has the greatest exposure to electronics products in Europe,
leading to a material fall in demand for on-board products. We are continuing
to expand the product range stocked in the market at our enlarged DC, pivoting
our offer towards growth sectors to ensure preparedness to exploit our
position when the market recovers. Additionally, this is reducing fulfilment
costs and improving service to customers.
Digital, accounting for 74% of the region's revenue, was supported by growth
from our target customers using eProcurement and purchasing manager channels.
We continue to focus on generating recurring revenue and customer loyalty with
our target customers through providing digital procurement solutions. Web
revenue is most impacted by lower demand from transitory customers as the
supply chain constraints have eased.
Service solutions growth, which accounts for 29% of EMEA's revenue, benefited
from greater participation of our digital solutions offer of eProcurement and
purchasing manager as we migrate higher-value customers from the web. RS
Integrated Supply in EMEA continues to win new contracts, although the
operational investment of their rollout continues to impact financial
performance and depress profitability. We are improving our commercial model,
which, together with cross-selling opportunities, will enhance our financial
results going forward.
RS PRO, which accounts for 20% of the region's revenue, increased its share as
we continue to expand the range of products, using quarterly marketing
launches, to provide customers with a high quality and lower price point
alternative.
Distrelec contributed £45 million to revenue and £3 million to EMEA's
operating profit since its acquisition on 30 June 2023. Detailed plans have
been developed for accelerating the integration of key markets. In the first
three months of ownership trading has been below original expectations given
Distrelec's German and electronics exposure; albeit performance has been in
line with trading seen in our similar businesses. We remain confident in the
delivery of the anticipated cost savings and synergy benefits from cross
selling opportunities; Distrelec has already started to sell RS PRO products.
EMEA's operating profit margin was impacted by the effect of the acquisition
of Distrelec and integration costs. Excluding this, like-for-like operating
profit margin increased due to gross margin benefiting from the quick pass
through of product cost inflation against a lower average cost of inventory
and tight operating cost control.
EMEA's rolling 12-month NPS was 50.8, 6% above H1 2022/23. We have continued
to improve inventory availability as lead times reduce, while inventory
investments in our expanded DC in Germany and our new warehouse in Spain have
also improved service levels to customers.
Americas
H1 2023/24 H1 2022/23 Change Like-for-like(1) change
Revenue £476m £461m 3% (14)%
Operating profit(2) £52m £78m (33)% (41)%
Operating profit margin 11.0% 17.0% (6.0) pts (5.2) pts
Digital revenue(3) £172m £205m (16)% (13)%
Service solutions revenue(3) £63m £62m 3% 0%
RS PRO revenue(3) £3m £4m (8)% (4)%
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 by 3% due to the acquisition of Risoul in January 2023.
Excluding Risoul, exchange rate movements and the impact of trading days,
revenue declined 14% like-for-like against very strong comparatives in H1
2022/23 when we benefited from strong inventory availability when market
supply was constrained, delivering trading and pricing gains, especially
within electronics and associated product ranges.
Volumes during the period fell reflecting the declining market, especially in
A&C which trades more in line with the electronics cycle. This
particularly impacted Americas as A&C accounted for 70% of the region's
revenue versus 43% across the Group. Also, customers had less of a requirement
to hold inventory as supply chain constraints eased. Demand from more
transitory customers, who purchased from us when their typical channels did
not have supply, has reduced and we saw greater pricing competition within the
market particularly in the electronics product range.
We have made significant changes in our sales proposition as we develop more
strategic customer relationships. This has focused on targeting high-growth
vertical markets, generating more targeted product campaigns and improving our
digital proposition and service offer, all of which are resulting in greater
customer engagement and marketing returns.
Our digital like-for-like revenue decline slightly outperformed the region's
revenue decline as we moved some of our large customers onto our eProcurement
platforms.
While less mature than in EMEA, we have been developing our digitally led
service solutions offer in Americas. Growth has been driven by developing our
eProcurement offer and more customised order and project consultancy services.
RS Integrated Supply in Americas has seen several changes as we have focused
on profitable accounts 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.
RS PRO continues to account for under 1% of the region's revenue but we expect
to benefit from our rebranding to RS Americas and tailoring the product
offering to be more appropriate for the region's customers.
Risoul contributed £95 million to revenue and £8 million to Americas'
operating profit in the first half. Revenue performance is stronger than
anticipated helped by strong inventory availability despite ongoing supply
chain issues.
Operating profit and operating profit margin fell due to the volume decline
and as last year's gross margin gains from price inflation benefits unwound.
During the period we took action to adjust our cost base to the reduced
volumes, namely within our headcount, which led to short-term operating costs
with benefits second-half weighted. We have also invested in training, tools
and technology for our customer-facing teams and continue to adjust our
operating model to serve our customers better while lowering overall cost.
Additionally, we continued to invest in marketing and other strategic
initiatives focused on customer growth, digital and technology advances and
our service solutions offering.
Americas' rolling twelve-month NPS was 64.4, a 4% decline from 67.0 in H1
2022/23, reflecting some market pricing pressures and the twelve-month metric
includes the temporary effect of the brand change which took place in February
2023. Our focus remains on delivering a strong customer experience and
mitigating the external industry issues we are facing.
Asia Pacific
H1 2023/24 H1 2022/23 Change Like-for-like(1) change
Revenue £110m £143m (23)% (18)%
Operating profit(2) £2m £23m (91)% (90)%
Operating profit margin 1.9% 16.4% (14.5) pts (13.7) pts
Digital revenue(3) £64m £87m (26)% (21)%
Service solutions revenue(3) £21m £23m (10)% (5)%
RS PRO revenue(3) £17m £19m (13)% (6)%
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 decline was against a period of exceptionally strong
growth in H1 2022/23 with performance negatively impacted by a sharp slowdown
and then contraction in the electronics market and the unwinding of supply
constraints. The global economic slowdown was across the whole region,
although we have seen particularly difficult trading in China given less
external investment as industrial production has moved outside the country.
As with many distribution businesses, a certain level of revenue is required
to offset the underlying cost base making operating profit very sensitive to
changes in revenue. The rapid reduction in revenue at a time of growth
investment has had an impact on our operating profit margin.
Australia and New Zealand, accounting for 33% of the region's revenue,
maintained like-for-like revenue growth, benefiting from stronger performance
in large industrial customers and less exposure to the electronics sector. Our
success with large corporate customers has provided a blueprint to scale
across the rest of the region.
Greater China, which represents 24% of the region's revenue, was heavily
impacted by the ongoing geopolitical uncertainty and greater exposure to the
electronics sector. The economic recovery after the COVID-19 lockdowns has
been much slower than expected.
South East Asia revenue represents 31% of the region's revenue and saw
like-for-like revenue decline with softer demand for electronics products,
stagnant manufacturing segment growth and political instability specifically
in Thailand. We have invested in expanding our local inventory capacity
including upgrading our warehouse in Thailand and opening new local warehouses
in Malaysia and Philippines in the first half which will support revenue
growth and improve lead times once the market starts to recover.
Japan and Korea saw the steepest revenue decline due to its high exposure to
the electronics market and weaker industrial performance following strong
growth in H1 2022/23. We have seen customer destocking in Japan as inventory
held as a buffer when supply chains were constrained has unwound.
Digital like-for-like revenue decline was due to weaker market demand and
lower search engine optimisation performance with reduced traffic and
conversion rates; a function of supply chain normalisation within the market
and the more transitory customers reverting to previous suppliers.
Like-for-like revenue decline in RS PRO outperformed the region. This was
supported by an improved go-to-market strategy with specific product marketing
campaigns to targeted customers. We have launched RS PRO focused product
ranges to capture high value opportunities with target customers.
Operating profit margin was impacted by the reversal of the inventory benefits
in H1 2022/23, resulting in significant volume reduction, and a weaker gross
margin as supply chain constraints eased and competitive pressures increased.
The new warehouses opened in South East Asia are operated by third party
logistic providers, with the associated cost being an operating, rather than
capital, expenditure. We have made some adjustments to our cost base to
reflect lower volumes, including adapting our labour requirements, which will
start to deliver financial benefits by the end of the second half.
Asia Pacific's rolling twelve-month NPS was 20.2, versus 17.1 in H1 2022/23.
Our focus remains on delivering a strong customer experience and mitigating
the external industry issues we are facing.
FINANCIAL REVIEW
Net finance costs
Net finance costs were £13 million, up from £5 million mainly due to the
impact of increased net debt resulting from the acquisition of Distrelec and
Risoul and higher interest rates. At 30 September 2023, 20% of the Group's
gross borrowings excluding lease liabilities (H1 2022/23: 30%; 2022/23: 49%)
was at fixed rates, with surplus cash deposited at variable rates. Going
forward we expect the full year 2023/2024 net finance costs to be c. £30
million based on current interest rates.
Profit before tax
Profit before tax declined 31% to £126 million. Adjusted profit before tax
was down 25% to £143 million, 29% on a like-for-like basis.
Taxation
The Group's income tax charge was £34 million (H1 2022/23: £41 million). The
adjusted income tax charge, which excludes the impact of tax relief on items
excluded from adjusted profit before tax, was £38 million (H1 2022/23:
£43 million), resulting in an effective tax rate of 26.2% on adjusted profit
before tax (H1 2022/23: 22.5%).
The main driver for the increase in the rate was the change in the UK
corporate income tax rate from 19% to 25% effective from 1 April 2023. Going
forward we expect the full year 2023/2024 effective tax rate on adjusted
profit before tax to be c. 26%.
Earnings per share
Earnings per share declined by 35% to 19.5p. Adjusting for items excluded from
adjusted profit and associated income tax effects, adjusted earnings per share
of 22.3p declined 32% on a like-for-like basis.
Cash flow
£m H1 2023/24 H1 2022/23
Operating profit 139 187
Add back depreciation and amortisation 41 32
EBITDA(1) 179 219
Add back impairments and loss on disposal of non-current assets - 7
Movement in working capital (79) (45)
Defined benefit retirement contributions in excess of charge (5) (6)
Movement in provisions 1 (1)
Other 7 8
Cash generated from operations 104 182
Net capital expenditure (25) (22)
Operating cash flow 79 160
Add back cash effect of adjustments(1) 5 -
Adjusted operating cash flow(1) 85 160
Net interest paid (13) (4)
Income tax paid (46) (44)
Adjusted free cash flow(1) 26 112
1. See Note 13 for definitions and reconciliations of all
alternative performance measures.
Lower EBITDA (earnings before interest, tax, depreciation and amortisation)
was compounded by the receipt of inventory from suppliers that had either been
on order for a long time or was received quicker than expected due to the
easing of global supply chain issues. As a result, cash generated from
operations was £104 million (H1 2022/23: £182 million) causing adjusted
operating cash flow conversion to fall by 27.5 percentage points to 54.3%.
Net capital expenditure increased from £22 million to £25 million as we
continued to invest in optimising our DCs, implementing new product management
systems, augmenting digital commerce capabilities and strengthening our
technology platforms.
Capital expenditure was at 1.2 times depreciation (H1 2022/23: 1.0 times), in
line with our typical maintenance capital expenditure levels of 1.0 - 1.5
times depreciation. We anticipate capital expenditure in 2023/24 to be c.
£50 million including planned spend to deliver our 2030 ESG action plan such
as decarbonising our DC in Beauvais, France.
Net interest paid increased by £9 million to £13 million due to increased
net debt resulting from the acquisition of Distrelec and Risoul and higher
interest rates.
Income tax paid rose to £46 million reflecting additional payments made in
respect of the previous year and advance tax payments based on early estimates
of higher results.
Adjusted free cash flow fell to £26 million. We remain committed to
conserving cash while ensuring we continue to invest in our business to enable
a swift recovery when the economic conditions improve.
Working capital
Working capital as a percentage of revenue increased by 3.5 percentage points
year on year to 26.3%, with half of the increase due to the impact of the
acquisitions.
Trade and other receivables have decreased by £4 million since the year end
to £688 million, with the acquisition of Distrelec increasing receivables by
£27 million. The collection of receivables is our greatest short-term
liquidity sensitivity and we continue to limit our exposure through tight
credit policies, proactive monitoring and collections.
Gross inventories were £799 million, an increase of £139 million since the
year end with the acquisition of Distrelec accounting for £74 million. Our
inventory levels have increased 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 a
result, our inventory turn has decreased to 2.3 times from 2.6 times at March.
We expect to benefit during the second half from actions to reduce inventory
levels in response to declining volumes. Inventory provisions have increased
by £35 million to £79 million since the year end, £23 million due to the
acquisition of Distrelec as expected and the balance due to the continued
sales slowdown pushing inventory into excess, particularly of electronics
products where minimum order quantities are high.
Overall trade and other payables decreased to £625 million from £659 million
at March with the acquisition of Distrelec increasing payables by £35
million. The overall reduction reflects the slowdown in the business and the
timing of payments for inventories.
Looking forward we continue to manage our working capital position actively
and optimising cash conversion is a key area of focus. We remain focused on
receivables collection. We will continue to seek to manage our inventory
levels to take account of changing demand dynamics and supply chain behaviour,
while anticipating our customers' expectations. We will continue to invest in
the right inventory to ensure that we remain well positioned to maintain
service levels and deliver strong growth as the markets recover. We pay our
suppliers to terms and continue to work with some of our larger suppliers to
improve terms where possible.
Net debt
Our net debt has increased to £502 million from £113 million at March (see
Note 8) with the acquisition of Distrelec increasing net debt by £333
million.
The acquisition was 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 £691 million, of which £168 million was undrawn
at 30 September 2023. 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
remaining.
The Group's financial metrics remain strong, with net debt to adjusted EBITDA
of 1.2x and EBITA to interest of 18.8x, 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 30 September
2023 expressed as a percentage of the monthly average capital employed (net
assets excluding net debt and retirement benefit obligations). ROCE was 23.3%
compared to 31.4% at 30 September 2022, due to the impact of acquisitions in
the last twelve months (2.0 percentage points), the decline in adjusted
operating profit (3.8 percentage points) and the increase in monthly average
capital employed (2.3 percentage points).
Retirement benefit obligations
Overall, the retirement benefit net obligations of the Group's defined benefit
schemes at 30 September 2023 were £31 million compared to £36 million at 31
March 2023 and £41 million at 30 September 2022. The UK defined benefit
scheme (our largest scheme) had a net obligation of £21 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 while
remaining committed to a healthy dividend cover over time by driving improved
results and stronger cash flow.
In the normal course, the interim dividend is equivalent to approximately 40%
of the prior year full-year dividend. As such, the Board proposes an interim
dividend of 8.3p per share. This will be paid on 5 January 2024 to
shareholders on the register on 24 November 2023.
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 £2.1 million and a one cent movement in
the US dollar would impact annual adjusted profit before tax by £1.2 million.
The Group is also exposed to foreign currency transactional risk because most
operating companies have some level of payables in currencies other than their
functional currency. Some operating companies also have receivables in
currencies other than their functional currency. Group Treasury maintains
three to seven months hedging against freely tradable currencies to smooth the
impact of fluctuations in currency. The Group's largest exposures related to
euros and US dollars.
RISKS AND UNCERTAINTIES
The Board has overall accountability for the Group's risk management, which is
managed by the Executive Committee and co-ordinated by the Group's risk team.
The principal elements of the process are: the identifying of risks, their
assessment, their mitigation and then the ongoing monitoring of these risks.
The Group has a defined risk appetite, which has been adopted by the Board,
and is considered across three risk categories: strategic, operational and
regulatory / compliance. These three categories use both quantitative and
qualitative criteria.
Principal risks and uncertainties
The principal risks and mitigations disclosed in the 2023 Annual Report and
Accounts (pages 40 to 47) were:
1. Talent and people resources
2. Change in customer, supplier or competitor behaviours
3. Geopolitical environment
4. Delivery of strategy: The RS Way
5. M&A activity
6. Organisational resilience
7. Cyber security breach / information loss
8. Future global pandemics
9. Macroeconomic environment
10. Climate change
11. Legal and regulatory compliance
These risks have not changed since they were reported in the 2023 Annual
Report and Accounts.
GOING CONCERN
Overview
In adopting the going concern basis for preparing these condensed Group
accounts, the Board has considered the Group's future trading prospects; the
Group's available liquidity, the maturity of its debt facilities and
obligations under its debt covenants; and the Group's principal risks as
summarised above.
As described in more detail in the Viability Statement in the 2023 Annual
Report and Accounts, our business model is structured so that the Group has a
global network of DCs; a talented and customer-centric team; strong supplier
relationships; a broad and deep product offering and service solutions
capabilities; and a strong digital presence. We are not reliant on one
particular group of customers or suppliers and have a very broad spread of
customers both in terms of industry sector and geography.
Financial position, liquidity and debt covenants
Our capital position is supported by regular reviews of the Group's funding
facilities and debt covenants' headroom, through the Board's Treasury
Committee.
The Group's net debt at 30 September 2023 was £502 million (31 March 2023:
£113 million). Our committed debt facilities were £691 million, of which
£168 million were undrawn (see the net debt section in the Financial Review
for more details of our committed facilities). The earliest facility expiring
is our £130 million (€150 million) term loan in April 2026.
The Group's debt covenants are EBITA to interest to be greater than 3 times
and net debt to adjusted EBITDA to be less than 3.25 times, which are measured
on a rolling 12-month basis at half year and year end. At 30 September 2023
EBITA to interest was 18.8x (31 March 2023: 34.2x) and net debt to adjusted
EBITDA was 1.2x (31 March 2023: 0.2x) (see Note 13 for reconciliations).
Financial modelling
We frequently update our rolling 18-month forecast and this is reviewed
regularly, and the assumptions approved, by the Board.
We have undertaken reverse stress tests on the latest forecast to assess the
circumstances that would threaten the Group's current financing arrangements.
These included significant declines in like-for-like revenue, significant
declines in revenue and gross margin and a major deterioration in cash
collection and each would have to result in adjusted operating profit margin
falling to under 3% in at least one of the following five quarters. Also, a
reverse stress test of an acquisition of a significantly loss-making business
was undertaken and would have to cost over £250 million to use up our debt
facilities. All these reverse stress tests assumed no mitigations, capital
expenditure and dividends are unchanged from those forecast and there are no
changes in debt financing. The Board considers the risk of these circumstances
occurring to be remote.
Going concern basis
Based on the assessment outlined above, the Board has a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities
as they fall due over the going concern period of at least 12 months from
6 November 2023. Therefore, the Board believes that it is appropriate to
continue to adopt the going concern basis in preparing these condensed Group
accounts.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEAR
FINANCIAL REPORT
The Directors confirm that these condensed Group accounts have been prepared
in accordance with International Accounting Standard 34 'Interim Financial
Reporting' as contained in UK-adopted International Financial Reporting
Standards and that the interim management report includes a fair review of the
information required by Disclosure and Transparency Rules (DTR) 4.2.7 and DTR
4.2.8, namely:
· An indication of important events that have occurred during the
first six months and their impact on the condensed set of accounts, and a
description of the principal risks and uncertainties for the remaining six
months of the financial year; and
· Material related party transactions in the first six months and
any material changes in the related party transactions described in the last
annual report.
A list of current Directors of RS Group plc is maintained on the RS Group plc
website: www.rsgroup.com (http://www.rsgroup.com) .
Kate Ringrose, Chief Financial Officer
6 November 2023
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 six months ended 30 September 2023
Six months ended Year ended
30.9.2023 30.9.2022 31.3.2023
Notes £m £m £m
Revenue 2 1,446.7 1,458.0 2,982.3
Cost of sales (813.8) (794.5) (1,630.1)
Gross profit 632.9 663.5 1,352.2
Distribution and marketing expenses (446.9) (430.6) (899.5)
Administrative expenses (47.2) (45.9) (79.7)
Operating profit 2 138.8 187.0 383.0
Finance income 2.3 0.5 2.0
Finance costs (15.1) (5.4) (14.2)
Share of profit of joint venture 0.3 0.4 0.7
Profit before tax 2 126.3 182.5 371.5
Income tax expense (34.1) (41.1) (86.7)
Profit for the period attributable to owners of the Company 92.2 141.4 284.8
Earnings per share attributable to owners of the Company
Basic 3 19.5p 30.0p 60.4p
Diluted 3 19.5p 29.8p 60.2p
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 September 2023
Six months ended Year ended
30.9.2023 30.9.2022 31.3.2023
£m £m £m
Profit for the period 92.2 141.4 284.8
Other comprehensive income
Items that will not be reclassified subsequently to the income statement
Remeasurement of retirement benefit obligations 0.3 (33.4) (34.2)
Related income tax - 6.9 7.9
Items that may be reclassified subsequently to the income statement
Foreign exchange translation differences of joint venture - 0.3 (0.1)
Foreign exchange translation differences 19.0 106.6 43.1
Fair value (loss) / gain on net investment hedges (2.4) (0.5) 5.4
Movement in cash flow hedges (0.5) 9.3 3.9
Related income tax 0.1 (2.0) (0.7)
Other comprehensive income for the period 16.5 87.2 25.3
Total comprehensive income for the period attributable to owners of the 108.7 228.6 310.1
Company
GROUP BALANCE SHEET
As at 30 September 2023
30.9.2023 30.9.2022 31.3.2023
Notes £m £m £m
Non-current assets
Intangible assets 1,012.1 524.6 704.8
Property, plant and equipment 183.8 192.9 186.3
Right-of-use assets 75.6 41.9 46.9
Investment in joint venture 1.2 1.9 1.5
Other receivables 9.2 3.6 6.5
Retirement benefit net assets 5 0.8 1.1 0.8
Deferred tax assets 4.7 12.6 6.9
Total non-current assets 1,287.4 778.6 953.7
Current assets
Inventories 6 719.7 632.3 616.3
Trade and other receivables 7 687.7 636.1 692.0
Cash and cash equivalents - cash and short-term deposits 8 379.1 379.1 260.3
Other derivative assets 2.5 7.4 1.8
Current income tax receivables 30.2 15.7 19.9
Total current assets 1,819.2 1,670.6 1,590.3
Total assets 3,106.6 2,449.2 2,554.0
Current liabilities
Trade and other payables (624.8) (629.5) (658.9)
Cash and cash equivalents - bank overdrafts 8 (268.8) (154.9) (139.8)
Other borrowings 8 (12.6) - -
Lease liabilities 8 (15.7) (16.2) (14.6)
Interest rate swaps 8 - (0.7) -
Other derivative liabilities (2.8) (4.0) (1.7)
Provisions (4.5) (2.3) (1.8)
Current income tax liabilities (27.6) (23.6) (22.1)
Total current liabilities (956.8) (831.2) (838.9)
Non-current liabilities
Other payables (8.8) (11.0) (9.3)
Retirement benefit obligations 5 (31.9) (42.3) (37.2)
Borrowings 8 (523.1) (176.3) (184.6)
Lease liabilities 8 (60.6) (28.4) (34.3)
Provisions (16.0) (2.7) (4.7)
Deferred tax liabilities (113.6) (71.5) (90.1)
Total non-current liabilities (754.0) (332.2) (360.2)
Total liabilities (1,710.8) (1,163.4) (1,199.1)
Net assets 1,395.8 1,285.8 1,344.9
Equity
Share capital and share premium 283.7 279.0 283.3
Own shares held by Employee Benefit Trust (EBT) (0.4) (0.3) (2.2)
Other reserves 126.2 169.6 108.8
Retained earnings 985.6 836.8 954.3
Equity attributable to owners of the Company 1,395.1 1,285.1 1,344.2
Non-controlling interests 0.7 0.7 0.7
Total equity 1,395.8 1,285.8 1,344.9
GROUP CASH FLOW STATEMENT
For the six months ended 30 September 2023
Six months ended Year ended
30.9.2023 30.9.2022 31.3.2023
Notes £m £m £m
Cash flows from operating activities
Profit before tax 126.3 182.5 371.5
Depreciation and amortisation 40.6 32.1 64.6
Impairment of intangible assets - 6.6 7.1
Loss on disposal of non-current assets 0.1 0.1 4.4
Equity-settled share-based payments 6.6 8.2 14.2
Net finance costs 12.8 4.9 12.2
Share of profit of and dividends received from joint venture 0.3 (0.2) (0.1)
Increase in inventories (50.2) (62.4) (44.3)
Decrease / (increase) in trade and other receivables 29.7 2.0 (37.8)
(Decrease) / increase in trade and other payables (58.6) 15.2 33.2
Increase / (decrease) in provisions 1.2 (1.1) (1.4)
Defined benefit retirement contributions in excess of charge (5.0) (5.8) (10.6)
Cash generated from operations 103.8 182.1 413.0
Interest received 2.3 0.5 2.0
Interest paid (15.4) (4.6) (14.6)
Income tax paid (45.7) (44.4) (93.9)
Net cash from operating activities 45.0 133.6 306.5
Cash flows from investing activities
Acquisition of businesses 10 (313.1) (3.1) (237.2)
Cash and cash equivalents acquired with businesses 10 9.0 1.2 12.7
Total cash impact on acquisition of businesses (304.1) (1.9) (224.5)
Purchase of intangible assets (17.5) (12.1) (27.5)
Purchase of property, plant and equipment (7.0) (10.0) (18.6)
Proceeds on sale of property, plant and equipment - - 0.1
Net cash used in investing activities (328.6) (24.0) (270.5)
Cash flows from financing activities
Proceeds from the issue of share capital 0.4 0.5 4.8
Purchase of own shares by EBT (0.1) (0.1) (2.1)
Loans drawn down 402.3 - 83.2
Loans repaid 8 (53.2) - (58.1)
Payment of lease liabilities 8 (9.5) (8.9) (18.8)
Dividends paid 4 (64.8) (54.6) (88.6)
Net cash from / (used in) financing activities 275.1 (63.1) (79.6)
Net (decrease) / increase in cash and cash equivalents (8.5) 46.5 (43.6)
Cash and cash equivalents at the beginning of the period 120.5 158.4 158.4
Effects of exchange rate changes (1.7) 19.3 5.7
Cash and cash equivalents at the end of the period 8 110.3 224.2 120.5
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 September 2023
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 period - - - 141.4 141.4 - 141.4
Remeasurement of retirement benefit obligations - - - (33.4) (33.4) - (33.4)
Foreign exchange translation differences - - 106.4 - 106.4 - 106.4
Movement in cash flow hedges - - 9.3 - 9.3 - 9.3
Tax on other comprehensive income - - (2.0) 6.9 4.9 - 4.9
Total comprehensive income - - 113.7 114.9 228.6 - 228.6
Cash flow hedging gains transferred to inventories - - (5.3) - (5.3) - (5.3)
Tax on cash flow hedging transfers - - 1.0 - 1.0 - 1.0
Dividends (Note 4) - - - (54.6) (54.6) - (54.6)
Equity-settled share-based payments - - - 8.2 8.2 - 8.2
Settlement of share awards 0.5 2.8 - (2.7) 0.6 - 0.6
Purchase of own shares by EBT - (0.1) - - (0.1) - (0.1)
Tax on equity-settled share-based payments - - - (1.1) (1.1) - (1.1)
Sale of subsidiary's shares to - - - (0.7) (0.7) 0.7 -
non-controlling interests
At 30 September 2022 279.0 (0.3) 169.6 836.8 1,285.1 0.7 1,285.8
Profit for the period - - - 143.4 143.4 - 143.4
Remeasurement of retirement benefit obligations - - - (0.8) (0.8) - (0.8)
Foreign exchange translation differences - - (58.0) - (58.0) - (58.0)
Movement in cash flow hedges - - (5.4) - (5.4) - (5.4)
Tax on other comprehensive income - - 1.3 1.0 2.3 - 2.3
Total comprehensive income - - (62.1) 143.6 81.5 - 81.5
Cash flow hedging losses transferred to inventories - - 1.6 - 1.6 - 1.6
Tax on cash flow hedging transfers - - (0.3) - (0.3) - (0.3)
Dividends (Note 4) - - - (34.0) (34.0) - (34.0)
Equity-settled share-based payments - - - 6.0 6.0 - 6.0
Settlement of share awards 4.3 0.1 - (0.2) 4.2 - 4.2
Purchase of own shares by EBT - (2.0) - - (2.0) - (2.0)
Tax on equity-settled share-based payments - - - 2.1 2.1 - 2.1
At 31 March 2023 283.3 (2.2) 108.8 954.3 1,344.2 0.7 1,344.9
Profit for the period - - - 92.2 92.2 - 92.2
Remeasurement of retirement benefit obligations - - - 0.3 0.3 - 0.3
Foreign exchange translation differences - - 16.6 - 16.6 - 16.6
Movement in cash flow hedges - - (0.5) - (0.5) - (0.5)
Tax on other comprehensive income - - 0.1 - 0.1 - 0.1
Total comprehensive income - - 16.2 92.5 108.7 - 108.7
Cash flow hedging gains transferred to inventories - - (0.2) - (0.2) - (0.2)
Cash flow hedging losses transferred to acquisition purchase price - - 1.8 - 1.8 - 1.8
Tax on cash flow hedging transfers - - (0.4) - (0.4) - (0.4)
Dividends (Note 4) - - - (64.8) (64.8) - (64.8)
Equity-settled share-based payments - - - 6.6 6.6 - 6.6
Settlement of share awards 0.4 1.9 - (1.9) 0.4 - 0.4
Purchase of own shares by EBT - (0.1) - - (0.1) - (0.1)
Tax on equity-settled share-based payments - - - (1.1) (1.1) - (1.1)
At 30 September 2023 283.7 (0.4) 126.2 985.6 1,395.1 0.7 1,395.8
NOTES TO THE CONDENSED GROUP ACCOUNTS
1. Basis of preparation
These condensed Group accounts were approved by the Board of Directors on 6
November 2023 and are unaudited but have been reviewed by the auditors. They
do not constitute statutory accounts within the meaning of section 434 of the
Companies Act 2006, but have been prepared in accordance with the UK-adopted
International Accounting Standard (IAS) 34 'Interim Financial Reporting' and
the Disclosure and Transparency Rules of the UK's Financial Conduct Authority.
As outlined in the Going Concern statement, the Directors consider it
appropriate to continue to adopt the going concern basis in preparing these
condensed Group accounts. The Annual Report and Accounts for the year ended
31 March 2023 was prepared in accordance with UK-adopted international
accounting standards (UK IAS) and has been delivered to the Registrar of
Companies. The auditors' report on those accounts was unqualified, did not
include a reference to any matters to which the auditors drew attention by way
of emphasis without qualifying their report and did not contain any statement
under section 498(2) or 498(3) of the Companies Act 2006.
These condensed Group accounts have been prepared on the basis of the
accounting policies set out in the Annual Report and Accounts for the year
ended 31 March 2023 except for the estimation of income tax. Under IAS 34, the
tax charge for the period is calculated using the estimated weighted average
effective tax rate for the year ending 31 March 2024. Where tax balances are
revised due to changes in tax rates or estimates of tax liabilities for prior
periods, the full effect is included in the tax charge for the first half of
the year.
No accounting standards, amendments to existing standards or interpretations,
either adopted in the period or issued but not yet applicable, have or are
expected to have a material impact on the reported results or financial
position of the Group. Finance (No.2) Act 2023 was substantively enacted in
the UK on 20 June 2023 and the Group has applied the exception under
Amendments to IAS 12 'International Tax Reform - Pillar Two Model Rules' to
not recognise and disclose information about deferred tax assets and
liabilities related to any resulting top-up income taxes.
The significant judgements made by the Group in applying its accounting
policies and the key sources of estimation uncertainty were the same as those
applied to the Group accounts for the year ended 31 March 2023, although the
assumptions used in the judgements involved in estimations have been updated
to take account of the Group's latest expectations of the longer-term impacts
of climate change and environmental regulations and the current global
economic and geopolitical uncertainties.
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
Six months ended 30 September 2023
Revenue from external customers 860.9 475.6 110.2 1,446.7
Segmental operating profit 131.9 52.1 2.1 186.1
Central costs (30.5)
Adjusted operating profit 155.6
Amortisation of acquired intangibles (12.6)
Acquisition-related items (4.2)
Operating profit 138.8
Net finance costs (12.8)
Share of profit of joint venture 0.3
Profit before tax 126.3
Six months ended 30 September 2022
Revenue from external customers 854.3 461.0 142.7 1,458.0
Segmental operating profit 131.2 78.3 23.4 232.9
Central costs (36.8)
Adjusted operating profit 196.1
Amortisation and impairment of acquired intangibles (9.1)
Operating profit 187.0
Net finance costs (4.9)
Share of profit of joint venture 0.4
Profit before tax 182.5
2. Segmental reporting (continued)
EMEA Americas Asia Pacific Group
£m £m £m £m
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
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
and other. The Group's largest own-brand is RS PRO. £1,400.7 million of
revenue is recognised at a point in time (six months ended 30 September 2022:
£1,419.3 million; year ended 31 March 2023: £2,901.2 million) and
£46.0 million over time (six months ended 30 September 2022:
£38.7 million; year ended 31 March 2023: £81.1 million).
Sales channel
EMEA Americas Asia Pacific Group
£m £m £m £m
Six months ended 30 September 2023
Web 428.8 129.6 47.0 605.4
eProcurement and other digital 208.2 42.0 16.8 267.0
Digital 637.0 171.6 63.8 872.4
Offline 223.9 304.0 46.4 574.3
Group 860.9 475.6 110.2 1,446.7
Six months ended 30 September 2022
Web 431.4 154.9 66.2 652.5
eProcurement and other digital 192.6 50.1 20.3 263.0
Digital 624.0 205.0 86.5 915.5
Offline 230.3 256.0 56.2 542.5
Group 854.3 461.0 142.7 1,458.0
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
Group 1,768.5 945.5 268.3 2,982.3
2. Segmental reporting (continued)
Own-brand / other product and service solutions
EMEA Americas Asia Pacific Group
£m £m £m £m
Six months ended 30 September 2023
Own-brand product and service solutions 177.6 3.4 16.8 197.8
Other product and service solutions 683.3 472.2 93.4 1,248.9
Group 860.9 475.6 110.2 1,446.7
Six months ended 30 September 2022
Own-brand product and service solutions 170.6 3.7 19.2 193.5
Other product and service solutions 683.7 457.3 123.5 1,264.5
Group 854.3 461.0 142.7 1,458.0
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
Group 1,768.5 945.5 268.3 2,982.3
Service solutions / other
During the six months ended 30 September 2023 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
Six months ended 30 September 2023
Service solutions 252.3 63.4 21.0 336.7
Other 608.6 412.2 89.2 1,110.0
Group 860.9 475.6 110.2 1,446.7
Six months ended 30 September 2022
Service solutions 235.0 61.7 23.3 320.0
Other 619.3 399.3 119.4 1,138.0
Group 854.3 461.0 142.7 1,458.0
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
Group 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
Group 1,579.5 718.7 255.5 2,553.7
3. Earnings per share
Six months ended Year ended
30.9.2023 30.9.2022 31.3.2023
Number Number Number
Weighted average number of shares 472,921,885 471,098,269 471,717,928
Dilutive effect of share-based payments 419,848 2,655,779 1,194,205
Diluted weighted average number of shares 473,341,733 473,754,048 472,912,133
Basic earnings per share attributable to owners of the Company 19.5p 30.0p 60.4p
Diluted earnings per share attributable to owners of the Company 19.5p 29.8p 60.2p
4. Dividends
Six months ended Year ended
30.9.2023 30.9.2022 31.3.2023
£m £m £m
Final dividend for the year ended 31 March 2023 - 13.7p (2022: 11.6p) 64.8 54.6 54.6
Interim dividend for the year ended 31 March 2023 - 7.2p - - 34.0
64.8 54.6 88.6
An interim dividend of 8.3p will be paid on 5 January 2024 to shareholders on
the register on 24 November 2023 with an ex-dividend date of 23 November 2023
and the estimated amount to be paid of £39.3 million has not been included
as a liability in these accounts.
5. Retirement benefit obligations
The Group operates defined benefit schemes in the United Kingdom and Europe.
30.9.2023 30.9.2022 31.3.2023
£m £m £m
Fair value of scheme assets 397.4 421.4 432.0
Present value of defined benefit obligations (371.4) (403.9) (407.3)
Effect of asset ceiling / onerous liability (57.1) (58.7) (61.1)
Retirement benefit net obligations (31.1) (41.2) (36.4)
Amount recognised on the balance sheet - liability (31.9) (42.3) (37.2)
Amount recognised on the balance sheet - asset 0.8 1.1 0.8
A change in the key assumptions on the UK scheme would have the following
increase / (decrease) on the UK defined benefit obligations as at 30 September
2023:
Increase in assumption Decrease in assumption
£m £m
Effect on obligation of a 0.5 pts change to the assumed discount rate (21.8) 24.1
Effect on obligation of a 0.1 pts change in the assumed inflation rate 4.2 (4.2)
Effect on obligation of a change of one year in assumed life expectancy 9.2 (9.3)
6. Inventories
30.9.2023 30.9.2022 31.3.2023
£m £m £m
Gross inventories 798.5 663.6 660.0
Inventory provisions (78.8) (31.3) (43.7)
Net inventories 719.7 632.3 616.3
During the six months ended 30 September 2023 £19.3 million was recognised as
an expense relating to the
write-down of inventories to net realisable value (six months ended 30
September 2022: £13.4 million; year ended 31 March 2023: £33.0 million).
7. Trade and other receivables
30.9.2023 30.9.2022 31.3.2023
£m £m £m
Gross trade receivables 599.3 568.3 621.0
Impairment allowance (11.5) (11.4) (12.6)
Net trade receivables 587.8 556.9 608.4
Other receivables (including prepayments) 99.9 79.2 83.6
Trade and other receivables 687.7 636.1 692.0
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 by maintaining tight credit policies, including short
payment terms and low credit limits for new customers and seeking payment
commitments for overdue balances before releasing new orders to existing
customers. 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 the six months ended 30 September 2023.
However, with the continued global economic and geopolitical uncertainties,
the Group remains cautious about its exposure and so has carefully reviewed,
and maintained at a higher level, its expected loss rates for those markets
and industries that are most affected.
8. Net (debt) / cash
30.9.2023 30.9.2022 31.3.2023
£m £m £m
Cash and short-term deposits 379.1 379.1 260.3
Bank overdrafts (268.8) (154.9) (139.8)
Cash and cash equivalents 110.3 224.2 120.5
Non-current private placement loan notes (161.4) (176.3) (160.4)
Non-current sustainability-linked loan (232.0) - (24.2)
Non-current term loan (unsecured and repayable by 27 April 2026 bearing (129.7) - -
interest at EURIBOR plus 1.15%)
Current money market loans (10.0) - -
Current bank facilities (2.6) - -
Current interest rate swaps designated as fair value hedges - liabilities - (0.7) -
Current lease liabilities (15.7) (16.2) (14.6)
Non-current lease liabilities (60.6) (28.4) (34.3)
Net (debt) / cash (501.7) 2.6 (113.0)
Movements in net (debt) / cash were:
Borrowings Lease liabilities Total liabilities from financing activities Interest rate swaps Cash and cash equivalents Net (debt) / cash
£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 - 8.9 8.9 - 46.5 55.4
Acquired with businesses - (0.3) (0.3) - - (0.3)
Net lease additions - (2.9) (2.9) - - (2.9)
Gain / (loss) in fair value in period 0.6 - 0.6 (0.6) - -
Translation differences (25.2) (1.6) (26.8) - 19.3 (7.5)
Net cash at 30 September 2022 (176.3) (44.6) (220.9) (0.7) 224.2 2.6
Cash flows (25.1) 9.9 (15.2) - (90.1) (105.3)
Acquired with businesses - (9.5) (9.5) - - (9.5)
Net lease additions - (5.5) (5.5) - - (5.5)
(Loss) / gain in fair value in period (0.7) - (0.7) 0.7 - -
Translation differences 17.5 0.8 18.3 - (13.6) 4.7
Net debt at 31 March 2023 (184.6) (48.9) (233.5) - 120.5 (113.0)
Cash flows (349.1) 9.5 (339.6) - (8.5) (348.1)
Acquired with businesses - (28.5) (28.5) - - (28.5)
Net lease additions - (8.0) (8.0) - - (8.0)
Translation differences (2.0) (0.4) (2.4) - (1.7) (4.1)
Net debt at 30 September 2023 (535.7) (76.3) (612.0) - 110.3 (501.7)
9. Fair values of financial instruments
The other derivatives, interest rate swaps and the fair value of the private
placement loan notes they were hedging are measured at fair value using Level
2 inputs. These are estimated by discounting the future contractual cash flows
using appropriate market-sourced data at the balance sheet date.
For all financial assets and liabilities, fair value approximates the carrying
amounts shown in the balance sheet except for the following:
30.9.2023 30.9.2022 31.3.2023
Carrying amounts Fair Carrying amounts Fair Carrying amounts Fair
value
value
value
£m £m £m £m £m £m
Private placement loan notes (161.4) (143.0) (176.3) (170.1) (160.4) (147.7)
The fair values are calculated using Level 2 inputs by discounting future cash
flows to net present values using prevailing interest rate curves and the
Group's credit margin.
10. Acquisitions
On 30 June 2023 the Group acquired 100% of the issued share capital of the
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.
The fair value of the net assets acquired, consideration and goodwill arising
were:
£m
Intangible assets - customer relationships 73.5
Intangible assets - brands 22.1
Intangible assets - software 10.6
Property, plant and equipment 0.6
Right-of-use assets 29.8
Inventories (gross £74.1 million less provisions of £22.5 million) 51.6
Trade and other receivables 27.1
Cash and cash equivalents - cash and short-term deposits 9.0
Current trade and other payables (34.9)
Current lease liabilities (2.4)
Current provisions (1.9)
Non-current lease liabilities (26.1)
Non-current other payables (1.1)
Non-current other provisions (10.9)
Current income tax liabilities (5.4)
Deferred tax liabilities (23.3)
Net assets acquired 118.3
Indemnification assets (included in non-current other receivables) 2.8
Goodwill 192.0
Consideration paid - cash 313.1
The goodwill will not be deductible for tax purposes. The fair values of tax
balances and other assets and liabilities are provisional while the Group
continues to assess the assets and liabilities acquired. The gross contractual
amounts receivable for trade and other receivables was £27.9 million, of
which £0.8 million is not expected to be collected. £4.6 million of
acquisition-related costs for Distrelec were charged to administrative
expenses in the six months ended 30 September 2023 and £2.8 million in the
year ended 31 March 2023. Amortisation is calculated to write off the acquired
intangible assets on a straight-line basis over the following useful lives:
customer relationships 16 years; brands 5 - 10 years; and software 2 years.
10. Acquisitions (continued)
The indemnification assets relate to:
· £1.9 million for full indemnification from the sellers of costs
under the lease of the distribution centre in the Netherlands from 1 January
2027 to the end of the lease in November 2036, or when the lease is exited if
earlier, measured as the difference between the right-of-use asset and the
lease liability for that lease over that time frame, with a range of outcomes
from £nil to an amount equal to the aggregate of any such costs (capped at
the consideration for the acquisition); and
· £0.9 million for contractual indemnifications relating to
uncertain tax provisions measured on the same basis as the provisions, with a
range of outcomes from £nil to £0.9 million.
Distrelec contributed revenue of £45.4 million and profit after tax of £0.4
million to the Group's results since acquisition and is included in EMEA. If
the acquisition had occurred on 1 April 2023, the Group's revenue and profit
for the six months ended 30 September 2023 would have been £1,496.4 million
and £75.2 million respectively.
Movements in the Group's goodwill in the period were:
Cost and net book value £m
At 1 April 2023 463.3
Acquisition 192.0
Translation differences 9.7
At 30 September 2023 665.0
Included in acquisition-related items for the six months ended 30 September
2023 was the release of the £0.4 million contingent consideration payable on
acquisition of domnick hunter-RL (Thailand) Co., Ltd. given the conditions for
payment were not met.
11. Capital commitments
As at 30 September 2023, the Group is contractually committed to, but has not
provided for, future capital expenditure of £13.5 million (30 September 2022:
£0.7 million; 31 March 2023: £3.5 million) for property, plant and equipment
and £8.3 million (30 September 2022: £4.5 million; 31 March 2023: £2.1
million) for intangible assets.
12. Related party transactions
There has been no material change in related party relationships in the six
months ended 30 September 2023. There were no significant related party
transactions which have materially affected the financial position or
performance of the Group during that period.
13. 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 aid comparison of the underlying performance between
reporting periods and between businesses with similar assets that were
internally generated.
13. 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 tax effects. Adjusted profit before tax is a
performance measure for the annual bonus 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(2) Operating profit conversion(3) Profit before tax Profit for the period Basic earnings per share Diluted earnings per share
£m £m % % £m £m p p
Six months ended 30 September 2023
Reported (494.1) 138.8 9.6% 21.9% 126.3 92.2 19.5p 19.5p
Amortisation of acquired intangibles 12.6 12.6 12.6 9.1 1.9p 1.9p
Acquisition-related items 4.2 4.2 4.2 4.3 0.9p 0.9p
Adjusted (477.3) 155.6 10.8% 24.6% 143.1 105.6 22.3p 22.3p
Six months ended 30 September 2022
Reported (476.5) 187.0 12.8% 28.2% 182.5 141.4 30.0p 29.8p
Amortisation and impairment of acquired intangibles 9.1 9.1 9.1 7.1 1.5p 1.5p
Adjusted (467.4) 196.1 13.4% 29.6% 191.6 148.5 31.5p 31.3p
((1)) Operating costs are distribution and marketing expenses plus
administrative expenses.
((2)) Operating profit margin is operating profit expressed as a percentage of
revenue.
((3)) 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 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 periods until they have been owned for a year, at
which point they start to be included in both the current and comparative
periods for the same number of months. 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:
Average for six months ended Closing
30.9.2023 30.9.2022 30.9.2023 30.9.2022 31.3.23
US dollar 1.259 1.216 1.226 1.105 1.239
Euro 1.157 1.174 1.157 1.132 1.137
13. 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 period with the prior period converted at the
current period's average exchange rates and pro-rated for the same number of
trading days as the current period. It is a performance measure for the annual
bonus and a financial KPI.
£m
Revenue for six months ended 30 September 2022 (H1 2022/23) 1,458.0
Effect of exchange rates (21.2)
Effect of trading days (13.4)
Revenue for H1 2022/23 at H1 2023/24 rates and trading days 1,423.4
H1 2023/24 Less: acquisitions owned H1 2023/24 base business H1 2022/23 H1 2022/23 at H1 2023/24 rates and trading days Like-for-like change
Group
<1 year
£m £m £m £m £m %
EMEA 860.9 45.4 815.5 854.3 848.9 (4)%
Americas 475.6 94.9 380.7 461.0 441.7 (14)%
Asia Pacific 110.2 1.7 108.5 142.7 132.8 (18)%
Revenue 1,446.7 142.0 1,304.7 1,458.0 1,423.4 (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 period and gross margin for the prior period
with revenue and gross profit converted at the current period's average
exchange rates.
H1 2023/24 Less: acquisitions owned H1 2023/24 base business H1 2022/23 H1 2022/23 at H1 2023/24 rates Like-for-like change
Group
<1 year
£m £m £m £m £m pts
Revenue 1,446.7 142.0 1,304.7 1,458.0 1,436.8
Gross profit 632.9 44.5 588.4 663.5 654.1
Gross margin 43.7% 31.3% 45.1% 45.5% 45.5% (0.4) pts
Like-for-like profit change
Like-for-like change in profit is calculated by comparing the base business
for the current period with the prior period converted at the current period's
average exchange rates.
H1 2023/24 Less: acquisitions owned H1 2023/24 base business H1 2022/23 H1 2022/23 at H1 2023/24 rates Like-for-like change
Group
<1 year
£m £m £m £m £m %
Segmental operating profit
EMEA 131.9 2.8 129.1 131.2 132.3 (2)%
Americas 52.1 7.7 44.4 78.3 75.4 (41)%
Asia Pacific 2.1 - 2.1 23.4 20.8 (90)%
Segmental operating profit 186.1 10.5 175.6 232.9 228.5 (23)%
Central costs (30.5) - (30.5) (36.8) (36.6) (17)%
Adjusted operating profit 155.6 10.5 145.1 196.1 191.9 (24)%
Adjusted profit before tax 143.1 9.5 133.6 191.6 187.4 (29)%
Adjusted earnings per share 22.3p 1.3p 21.0p 31.5p 30.8p (32)%
Adjusted diluted earnings per share 22.3p 1.4p 20.9p 31.3p
13. Alternative Performance Measures (APMs) (continued)
Adjusted free cash flow and adjusted operating cash flow conversion
Adjusted free cash flow is the net cash from operating activities less
purchase of intangible assets, property, plant and equipment plus any proceeds
on sale of intangible assets, property, plant and equipment adjusted for the
impact of substantial reorganisation and acquisition-related items cash flows
and is a performance measure for the annual bonus.
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.
Six months ended Year ended
30.9.2023 30.9.2022 31.3.2023
£m £m £m
Net cash from operating activities 45.0 133.6 306.5
Purchase of intangible assets (17.5) (12.1) (27.5)
Purchase of property, plant and equipment (7.0) (10.0) (18.6)
Proceeds on sale of property, plant and equipment - - 0.1
Add back: impact of substantial reorganisation cash flows 0.6 0.4 0.5
Add back: impact of acquisition-related items cash flows 4.6 - 2.6
Adjusted free cash flow 25.7 111.9 263.6
Add back: income tax paid 45.7 44.4 93.9
Add back: net interest paid 13.1 4.1 12.6
Adjusted operating cash flow 84.5 160.4 370.1
Adjusted operating profit 155.6 196.1 402.2
Adjusted operating cash flow conversion 54.3% 81.8% 92.0%
Earnings before interest, tax, depreciation and amortisation (EBITDA) and net
debt to adjusted EBITDA
EBITDA is operating profit excluding depreciation and amortisation. 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 for the preceding twelve-month period.
30.9.2023 30.9.2022 31.3.2023
£m £m £m
Operating profit 138.8 187.0 383.0
Add back: depreciation and amortisation 40.6 32.1 64.6
EBITDA 179.4 219.1 447.6
Add back: impairment of acquired intangibles - 3.3 3.3
Add back: acquisition-related items 4.2 - 2.6
Adjusted EBITDA for this period 183.6 222.4 453.5
Adjusted EBITDA for prior year 453.5 372.5
Less: adjusted EBITDA for prior first half (222.4) (170.5)
Annualised adjusted EBITDA 414.7 424.4 453.5
Net (debt) / cash (Note 8) (501.7) 2.6 (113.0)
Net debt to adjusted EBITDA 1.2x n/m 0.2x
13. Alternative Performance Measures (APMs) (continued)
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 for the preceding twelve-month
period.
30.9.2023 30.9.2022 31.3.2023
£m £m £m
Adjusted EBITDA for this period 183.6 222.4 453.5
Less: depreciation (17.8) (17.9) (36.2)
EBITA for this period 165.8 204.5 417.3
EBITA for prior year 417.3 339.0
Less: EBITA for prior first half (204.5) (153.9)
Annualised adjusted EBITA 378.6 389.6 417.3
Finance costs 15.1 5.4 14.2
Less: finance income (2.3) (0.5) (2.0)
Interest (per debt covenants) for this period 12.8 4.9 12.2
Interest (per debt covenants) for prior year 12.2 7.6
Less: interest (per debt covenants) for prior first half (4.9) (3.7)
Annualised interest (per debt covenants) 20.1 8.8 12.2
EBITA to interest 18.8x 44.3x 34.2x
Return on capital employed (ROCE)
ROCE is annualised adjusted operating profit expressed as a percentage of
annualised monthly average net assets excluding net cash / debt and retirement
benefit obligations and is an underpin for the LTIP and J2G LTIP Award and a
financial KPI.
30.9.2023 30.9.2022 31.3.2023
£m £m £m
Annualised monthly average net assets 1,342.5 1,116.5 1258.0
Add back: annualised average net debt 174.6 36.4 25.6
Add back: annualised average retirement benefit net (assets) / obligations 36.1 31.5 24.1
Annualised average capital employed 1,553.2 1,184.4 1,307.7
Adjusted operating profit for this period 155.6 196.1 402.2
Adjusted operating profit for prior year 402.2 320.4
Less: adjusted operating profit for prior first half (196.1) (144.8)
Annualised adjusted operating profit 361.7 371.7 402.2
ROCE 23.3% 31.4% 30.8%
Working capital as a percentage of revenue
Working capital is inventories, current trade and other receivables and
current trade and other payables.
30.9.2023 30.9.2022 31.3.2023
£m £m £m
Inventories 719.7 632.3 616.3
Current trade and other receivables 687.7 636.1 692.0
Current trade and other payables (624.8) (629.5) (658.9)
Working capital 782.6 638.9 649.4
Revenue for this period 1,446.7 1,458.0 2,982.3
Revenue for prior year 2,982.3 2,553.7
Less: revenue for prior first half (1,458.0) (1,208.9)
Annualised revenue 2,971.0 2,802.8 2,982.3
Working capital as a percentage of revenue 26.3% 22.8% 21.8%
13. Alternative Performance Measures (APMs) (continued)
Inventory turn
Inventory turn is annualised cost of sales divided by inventories.
30.9.2023 30.9.2022 31.3.2023
£m £m £m
Cost of sales for this period 813.8 794.5 1,630.1
Cost of sales for prior year 1,630.1 1,425.8
Less: cost of sales for prior first half (794.5) (680.7)
Annualised cost of sales 1,649.4 1,539.6 1,630.1
Inventories 719.7 632.3 616.3
Inventory turn 2.3 2.4 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.
Six months ended Year ended
30.9.2023 30.9.2022 31.3.2023
£m £m £m
Depreciation and amortisation 40.6 32.1 64.6
Less: amortisation of acquired intangibles (12.6) (5.8) (13.3)
Less: depreciation of right-of-use assets (9.4) (8.9) (18.3)
Adjusted depreciation and amortisation 18.6 17.4 33.0
Capital expenditure 22.2 17.0 42.4
Ratio of capital expenditure to depreciation 1.2 times 1.0 times 1.3 times
INDEPENDENT REVIEW REPORT TO RS GROUP PLC
Report on the condensed Group accounts
Our conclusion
We have reviewed RS Group plc's condensed consolidated interim financial
statements (the interim financial statements) in the condensed Group accounts
of RS Group plc for the six month period ended 30 September 2023 (the
period).
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK-adopted International Accounting
Standard 34 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Group balance sheet as at 30 September 2023;
· the Group income statement and Group statement of comprehensive
income for the period then ended;
· the Group cash flow statement for the period then ended;
· the Group statement of changes in equity for the period then
ended; and
· the explanatory notes to the condensed Group accounts.
The interim financial statements included in the condensed Group accounts of
RS Group plc have been prepared in accordance with the UK-adopted
International Accounting Standard 34 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the condensed Group accounts
and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the Directors have
inappropriately adopted the going concern basis of accounting or that the
Directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the Group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the Directors
The condensed Group accounts, including the interim financial statements, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the condensed Group accounts in accordance with
the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority. In preparing the condensed Group
accounts, including the interim financial statements, the Directors are
responsible for assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the condensed Group accounts based on our review. Our
conclusion, including our Conclusions relating to going concern, is based on
procedures that are less extensive than audit procedures, as described in the
Basis for conclusion paragraph of this report. This report, including the
conclusion, has been prepared for and only for the Company for the purpose of
complying with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior consent in
writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
6 November 2023
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