REG - RS Group PLC - Half-year Report
07/11/2024 07:00
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RNS Number : 2712L RS Group PLC 07 November 2024
7 November 2024
RS GROUP PLC
RESULTS FOR THE HALF YEAR ENDED 30 SEPTEMBER 2024
SIMON PRYCE, CHIEF EXECUTIVE OFFICER, COMMENTED:
"RS executed well in the first half despite more challenging than anticipated
markets. Our strategic investments are on track and beginning to deliver, we
are continuing to gain share in most categories and strong operational control
is leading to efficiency and cost optimisation programmes running ahead of
plan.
As we enter H2, whilst markets remain challenging, our sales per day has
stabilised. Thanks to the great efforts of the RS team, we are delivering well
on the things we can control. We continue to invest in our differentiated
proposition in a focussed and prioritised way. We have made good progress on
programmes to drive efficiency, right-size our cost base and improve our
operating leverage and our acquisition pipeline is strong although we remain
very value disciplined. This gives us continued confidence that, as our
markets return to growth, we can deliver our financial targets, including a
mid-teens operating margin, in the medium term."
Highlights H1 2024/25 H1 2023/24 Change Like-for-like(1) change
Revenue £1,441m £1,447m (0)% (3)%
Adjusted operating profit(1) £134m £156m (14)% (13)%
Adjusted operating profit margin(1) 9.3% 10.8% (1.5) pts (1.3) pts
Adjusted profit before tax(1) £119m £143m (17)% (16)%
Adjusted earnings per share(1) 18.7p 22.3p (16)% (16)%
Operating profit £120m £139m (13)% (12)%
Operating profit margin 8.3% 9.6% (1.3) pts
Profit before tax £106m £126m (16)% (14)%
Earnings per share 16.6p 19.5p (15)% (13)%
Interim dividend 8.5p 8.3p 2%
Adjusted free cash flow(1) £89m £26m 246%
Cash generated from operations £163m £104m 57%
Net debt(1) £(437)m £(502)m
Net debt to adjusted EBITDA(1) 1.3x 1.2x
First half in line despite more difficult than anticipated markets
· Group revenue broadly unchanged, with a 3% benefit from acquisitions
offsetting a 3% like-for-like decline
· Like-for-like revenue attributed to service solutions grew 4%, RS PRO
(our main own-brand) +2% and digital -4%
· Strong cost control delivered structural savings of £13m, ahead of
plan
· Cash improvement due to tighter working capital discipline
Executing at pace
· Strategic investment programmes on track
· Material further cost saving and efficiency programmes underway
· Distrelec cost synergies ahead of plan; Risoul and Trident performing
well
Exciting growth opportunity
· Well positioned in fragmented growth markets
· Differentiated proposition driving market share gains
· Investing to improve efficiency and operating leverage
· Disciplined acquisitions accelerating growth
· Significant and sustainable value creation opportunity
Outlook for second half 2024/25
We are not anticipating any material market improvement for the remainder of
2024/25. We continue to focus our efforts on things we can control. We are
reacting effectively to market conditions, exercising strong operational
discipline, gaining share and bringing forward our cost efficiency and
integration plans. As a result, whilst short-term trading visibility remains
limited, we will continue to flex the cost base appropriately and expect the
outcome for the full year 2024/25 to be in line with current market
expectations.
1. See Note 15 for definitions and reconciliations of all
alternative performance measures, including like-for-like change and adjusted
measures.
2. Consensus for the year ending 31 March 2025 is revenue of
£2,961 million (range: £2,875m-£3,037m), adjusted operating profit of £299
million (range: £277m-£312m) and adjusted profit before tax of £266 million
(range: £247m-£280m).
Source: https://www.rsgroup.com/investors/analyst-consensus/
(https://www.rsgroup.com/investors/analyst-consensus/) .
Enquiries:
Kate Ringrose Chief Financial Officer 020 7239 8426
Lucy Sharma VP Investor Relations 020 7239 8427
Martin Robinson / Olivia Peters Teneo 020 7353 4200
There will be an audio presentation today at 9am (UK time) which can be
accessed live and later as a recording on the RS Group website at
www.rsgroup.com (http://www.rsgroup.com) . A short video of Simon Pryce
summarising the key messages of the first half is now available to watch on
the RS Group website.
Webcast link: www.investis-live.com/rsgroup/6718d19f4132f40015513223/grej
(http://www.investis-live.com/rsgroup/6718d19f4132f40015513223/grej)
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 3936 2999
All other locations: Global Dial-In Numbers
(https://url.uk.m.mimecastprotect.com/s/n0UQCkrM6sO3LKBLCVh9FG9Fr7?domain=netroadshow.com)
(https://url.uk.m.mimecastprotect.com/s/n0UQCkrM6sO3LKBLCVh9FG9Fr7?domain=netroadshow.com)
Participant access code: 770247
Presentation timing
Date: Thursday, 7 November 2024
Time: 9am UK time
Notes to editors:
RS Group plc is a global product and service solutions provider for industrial
customers, enabling them to operate efficiently and sustainably.
We operate in 36 markets, stock over 800,000 technical and specialist products
and list an additional five million relevant for our industrial customers,
sourced from over 2,500 suppliers. This extensive range supports our customers
across the industrial lifecycle of designing, building, and maintaining
equipment and operations. We enhance their experience through a tailored
service model, leveraging our efficient physical, digital and process
infrastructure sustainably. We combine a technically led and digitally enabled
approach with an exceptional team of experts; ultimately, it's our people that
make the difference.
Our purpose, making amazing happen for a better world, reflects our focus on
delivering results for people, planet and profit.
RS Group plc is listed on the London Stock Exchange with stock ticker RS1 and
in the year ended 31 March 2024 reported revenue of £2,942 million.
BUSINESS REVIEW
In the half year ended 30 September 2024, RS Group continued to execute well
on an underlying basis despite markets being tougher than anticipated. Soft
economic conditions have led to declining industrial production figures, with
ongoing weakness in global manufacturing PMI(1) data indicating low market
confidence. Despite this backdrop, our sales per day has stabilised, our
supplier data indicates we are outperforming the market, we have improved our
execution and cash conversion, and our cost savings are running ahead of plan.
We remain focused on improving our operational efficiency, unlocking our
customer data, enhancing our digital experience to increase market share and
leveraging our global infrastructure to generate accelerated sustainable value
creation. We are implementing a clear strategic action plan supported by an
enhanced Executive Committee and investing in our offer to drive stronger
market outperformance and improved marginal return. We are monitoring progress
through an enhanced performance management process with clear financial and
operational KPIs to increase agility to respond to changing market conditions
and drive improved strategic and operational execution.
Strategic delivery
Our detailed strategic action plan, aligned with our simplified operating
model, is focussed on accelerating our journey to be consistently first choice
for all our stakeholders and particularly our customers and suppliers. We have
already delivered, ahead of plan, over £22 million of structural cost savings
over the last 18 months with the more difficult market backdrop enabling
earlier implementation. We have identified further cost efficiency
opportunities through operating a more effective, flexible and scalable
physical, digital and process infrastructure. Combined these will potentially
deliver c. 250 percentage points of operating margin improvement over time.
We have increased organic investment to strengthen our differentiated
proposition and drive market share gains, operate more efficiently and deliver
productivity improvements. During the first half of the year, we prioritised
the following projects within each of our key strategic areas of focus:
1. Customers
We are investing in improving our engagement with all our customers, with our
focus being on acquiring, developing and retaining those with higher lifetime
value potential, growing our share of wallet with those customers and aligning
our cost to serve in the most efficient way. In the first half, revenue growth
in our corporate customer base was 5%.
We have rolled out a global customer relationship management tool in 20
countries, are harmonising our global customer data to build a single view of
customer and are aligning our market campaigns and sales teams according to
more granular customer segmentation.
2. Product and supply chain
We are broadening and curating our product range and building closer and
strategic relationships with our key suppliers to become a more valuable
go-to-market channel in distributing small volumes of low value products
across many product categories.
We realigned our product categories to reflect how our customers buy, what
satisfies their needs and how our suppliers bring product to the market. It is
important that we can constantly enhance and refresh our product offer and be
a technical partner for suppliers rolling out new product.
We upgraded our product management system which will triple the number of
products we can onboard and launch on our website per year and at a
significantly faster rate (onboarding in days rather than months). This has
strengthened our product offer and supplier engagement. Additionally, we
accelerated our sourcing evolution plans for RS PRO and expanded our Better
World product range including launching in the Americas.
3. Solutions and services
We are focussing and aligning those solutions and services that deliver value
to our customers, drive product pull-through, are scalable and support closer
and more loyal relationships with our customers.
We have reviewed our service solutions portfolio to improve scalability,
profitability and cross-Group synergies. This has included exiting or
right-sizing non-core solutions, re-focussing OKdo and DesignSpark to be a
value-added solution for B2B customers going forwards and we are improving
materially the efficiency and scalability of our end-to-end procurement and
inventory outsourcing service, RS Integrated Supply.
Our digital solutions, such as eProcurement, help customers manage their
inventory more quickly, cost efficiently and sustainably by aggregating their
purchases through our digital system. We have onboarded more high potential
customers to our procurement solutions and upgraded our systems to provide
greater order automation and reduced manual intervention, and in the first
half, revenue growth in our procurement solution was 1%.
4. Experience
We are enhancing our customer experience, moving towards a more consistent,
seamless, tailored and
best-in-class omnichannel experience across all channels. We focussed on two
major projects during the half year:
· AI powered search capabilities: This has been rolled out now across
27 websites in EMEA and Asia Pacific, with Americas due in the third quarter.
The new search capabilities have driven improved onsite conversion, removed
hundreds of manual rules and redeployed or reduced manual merchandise
headcount. The UK website has been utilising AI powered search for over a year
and in September delivered a 0.35 percentage points year-on-year increase in
search conversion rates.
· Real-time product tracking: We have developed improved
deliver-to-promise capability that will provide meaningful and accurate
delivery promise dates for our customers. This will decrease the level of
returned or cancelled orders we receive, reduce open orders and calls to
customer services through improving delivery consistency. The back-end
onboarding is complete with the front-end planned to go live with our
customers in the second half of the year.
Other projects during the period have included the continued migration of
Distrelec customers onto the RS digital commerce platform and enhancing its
design and specification in advance of a wider rollout in 2025/26.
5. Operational excellence
We are driving programmes to better leverage our physical, digital and process
infrastructure and deliver greater operating leverage and marginal returns as
volumes grow. In the first half, we made good progress in three key areas:
· Leveraging our physical infrastructure: Expanded capacity of
our distribution centres (DCs) in France and the US, and improved warehouse
operational flexibility in the UK.
· Optimising our technology estate: We have reorganised our
Information Services & Technology expertise globally to prioritise and
improve delivery efficiency and we have initiated simplifying and
rationalising our technology application estate.
· Harmonising and improving our processes: We continue to consolidate
our global shared business services (GSBS) locations, optimise costs and
leverage global scale.
During the first half, we delivered £10 million of restructuring cost savings
and an additional £8 million of integration benefits from our acquisition of
Distrelec.
Strategic acquisitions
We have the balance sheet strength to accelerate our growth through
disciplined value accretive acquisitions. We are on track to cover the cost of
capital for all three of the most recent acquisitions within three years, as
originally targeted, despite the difficult market environment.
Risoul has performed strongly since acquisition in January 2023. During the
first half, we successfully expanded the business into Trinidad and Tobago,
rolled out a transactional website, increased our in-stock offer of RS PRO
products and opened a new services business, RS Custom Order Solutions.
We are pleased with the progress we have made integrating Distrelec: bringing
forward our cost synergies including utilising RS distribution facilities
earlier than planned and exiting a DC early in the Netherlands.
We acquired Trident in April 2024 which is performing better than expected and
we have already completed the integration of key back-office functions and
invested in a calibration service lab to accelerate growth.
Driving sustainability for a better world
ESG is a key priority and strength for RS and is becoming a more integral part
of the sourcing criteria for customers and partnership selection for
suppliers. Our commitment to ESG aligns with two of our core company values of
'doing the right thing' and 'making every day better'.
Our Better World product range, underpinned by our claims-based framework,
provides confidence that our sustainable products are backed by verifiable
claims, helping attract high-value customers and generate new revenue
opportunities.
We continue to reduce the cost, distance travelled and emissions of our
product transportation, enabled by our regionalised supply chain and
distribution sites. As at 2023/24, 94% of our packaging is recyclable, 90% of
our electricity comes from renewable sources and 82% of our UK company car
fleet is electric or hybrid.
Exciting through-cycle opportunity
All these actions demonstrate the significant strategic and operational
progress we are now making with greater focus and discipline. We have a clear
strategy, we have implemented an operating model that clarifies accountability
and creates alignment across our regions and functions and we are more outward
looking for both customers and suppliers. We are removing waste, driving
efficiency and taking actions to improve our operating leverage and
prioritising operational discipline that is critical to effective delivery.
We believe RS is:
· Well positioned in fragmented markets with attractive
through-cycle growth characteristics
· Driving market share gains through a differentiated technical and
digital product and service solutions offer
· Investing to improve efficiency and operating leverage of our
global infrastructure to drive significant margin expansion
· Accelerating growth through disciplined acquisitions
· On track to generate significant and sustainable value creation
opportunity
We remain confident of delivering our targeted financial outcomes in the
medium term of revenue growth of twice our market, mid-teen adjusted operating
margin, cash conversion of 80% and a sustainable return on capital more than
20%.
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).
2. Including emissions from businesses acquired up to 2023/24 in the
2019/20 baseline year.
GROUP RESULTS
H1 2024/25 H1 2023/24 Change Like-for-like(1) change
Revenue £1,441m £1,447m 0% (3)%
Gross margin 42.7% 43.7% (1.0) pts (1.1) pts
Operating profit £120m £139m (13)% (12)%
Adjusted operating profit(1) £134m £156m (14)% (13)%
Adjusted operating profit margin(1) 9.3% 10.8% (1.5) pts (1.3) pts
Adjusted operating profit conversion(1) 21.7% 24.6% (2.9) pts (2.3) pts
Digital revenue(2,3) £874m £882m (1)% (4)%
Service solutions revenue(2,)(4) £358m £340m 5% 4%
RS PRO revenue(2) £193m £188m 3% 2%
1. See Note 15 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.
3. Digital revenue has been restated for H1 2023/24, see Note
2.
4. Service solutions revenue has been restated for H1 2023/24,
see Note 2.
Revenue
Group revenue was broadly flat compared to H1 2023/24 at £1,441 million.
Like-for-like revenue declined 3% after adjusting for £45 million
contribution from acquisitions, £25 million from adverse exchange rate
movements and a positive benefit of £23 million from more trading days in H1
2024/25. Trading was broadly stable throughout the six-month period driven by
lower volumes and mix effect and minimal price impact given the market
backdrop.
Our product category performance demonstrates the difference between those
categories that are more industrial and tend to be less volatile (Facilities
& Maintenance, Mechanical & Fluid Power, PPE & Site Safety, Other)
and those correlated to the electronics market (such as Automation &
Control (A&C) and Electrification) and the more electronics-specific
categories, Semi & Passives and Cables & Connectors.
Share of H1 LFL revenue growth
Group revenue
A&C and Electrification, Test & Measurement 48% (4.3)%
Facilities & Maintenance, Mechanical & Fluid Power, PPE & Site 34% 2.1%
Safety, Other
Semis & Passives (inc. Single Board Computing), Cables & Connectors 18% (9.9)%
Total 100% (3.4)%
Digital, accounting for 61% of Group revenue, declined 4% like-for-like.
Digital solutions such as eProcurement, which are predominantly used by our
larger customers, outperformed, declining by 1% on a like-for-like basis. Web
revenue, which tends to reflect smaller, more transactional purchases,
decreased by 5% on a like-for-like basis.
Revenue driven by service solutions accounted for 25% of Group revenue and
increased by 4% like-for-like, with a strong performance in inventory
solutions and design, technical and custom order services. RS Integrated
Supply delivered positive like-for-like revenue growth reflecting new contract
wins and customer retention rates continuing in both EMEA and Americas. We are
strengthening our operating model at RS Integrated Supply through focusing on
driving scalable and profitable revenue growth and optimising working capital.
RS PRO, which is our main own-brand product range and accounts for 13% of
Group revenue, grew by 2% on a
like-for-like basis, due to extending its product breadth and end-to-end sales
and marketing focus in the regions. Our competitively priced offer continues
to gain traction as a quality but non-competing value alternative to
third-party branded ranges as we demonstrate quality through our quality
assurance qualifications and design and test facilities.
Gross margin
Group gross margin decreased 1.0 percentage points to 42.7%, or 1.1 percentage
points on a like-for-like basis. This was broadly in line with our expectation
for the full year due to the anticipated unwinding of post-pandemic inflation
benefit that elevated the gross margin in the prior period. Cost of goods
inflation is normalising and is largely being passed through although there
has been some additional competitive activity within the Semis & Passives
product category. We continue to focus on gross margin optimisation through
direct procurement initiatives, commercial discipline and expanding our
own-brand ranges.
Operating costs
Operating costs, which include regional and central costs, were flat. On a
like-for-like basis, adjusted operating costs fell by 1%, which excludes the
impact of acquisitions, currency movements, amortisation and impairment of
acquired intangibles and acquisition-related items. Cost management actions
more than offset cost inflation, specifically within labour, ongoing strategic
investment and the charges relating to our cost savings programme.
We delivered £10 million of restructuring benefits that resulted from
improving our productivity and removing labour and facility duplication within
the Group. We also delivered £8 million of integration cost savings which
included the early exit of a distribution centre lease in the Netherlands
operated by Distrelec. We are on track to deliver c. £30 million of
accumulated cost savings during 2024/25, after the £9 million generated in
2023/24, above our original expectations of over £30 million in total. There
was a £9 million in-year charge relating to delivering both these
restructuring and integration benefits, with a further c. £8 million charge
expected in the second half of 2024/25.
A large proportion of our operating costs relate to our people. We awarded a
low-single digit pay increase across the Group and part normalisation of
employee incentive awards. As sales volumes have reduced, we have flexed our
variable people costs and taken additional actions in specific areas, such as
removing duplicate roles. Our employee voluntary annual turnover rate remains
low at 8.3% (H1 2023/24: 8.2%).
We spent £14 million on organic investment in the first half (a £3 million
increase year on year) as we implement our strategic action plan of
strengthening our digital and commercial capabilities, technology platform,
product and service solutions capacity and improving our operating basics.
This will support ongoing market share growth and ensure we are
well-positioned to benefit when economic conditions improve. We are monitoring
our investment spend closely and implementing greater oversight around
execution, progress and delivery and will flex our annual organic investment
between c. £35 million to £45 million.
As previously indicated, we reallocated our central costs to limit them to
costs solely related to support Group head office activities. Costs incurred
to support directly the Group's operating segments have been allocated
accordingly to the regions. The reallocation drives greater accountability and
efficiency in the regions, with central costs now focused on the resources
that are required to run a listed company, principally senior Group
leadership, central finance, legal and company secretariat. Central costs,
under the new definition, increased to £7 million, largely reflecting the
normalisation of annual incentive and share-based payments. Details on the
reallocation are set out in Note 2.
Operating costs as a percentage of revenue increased by 0.2 percentage points
to 34.4% and on an adjusted basis increased by 0.5 percentage points to 33.5%.
Operating profit conversion is 2.4 percentage points lower at 19.5% and on an
adjusted basis is 2.9 percentage points lower at 21.7%.
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 15 for definitions and reconciliations of adjusted
measures).
Amortisation and impairment of acquired intangibles
Amortisation of acquired intangibles was £14 million (H1 2023/24 amortisation
and impairment of acquired intangibles: £13 million) and relates to the
intangible assets arising from acquisitions.
Acquisition-related items
Acquisition-related items were £nil in the first half (H1 2023/24: £4
million directly attributable to the acquisition of Distrelec).
Operating profit
Operating profit decreased by 13% to £120 million. Adjusted operating profit,
which excludes the impact of acquisitions and adverse impact of currency
movements, saw a like-for-like decrease of 13%. Operating profit margin
declined by 1.3 percentage points to 8.3% and on an adjusted basis declined by
1.5 percentage points to 9.3%.
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/esg (http://www.rsgroup.com/esg)
.
H1 2024/25 H1 2023/24
Carbon intensity (1,2,3) 1.9 2.0
(tonnes of CO(2)e due to Scope 1 and 2 emissions / £m revenue)
Carbon emissions(1,2,3) 2,800 2,900
(tonnes of CO(2)e due to Scope 1 and 2 emissions)
Packaging intensity(1,2) (tonnes / £m revenue) 1.55 1.62
Waste(1) (% of waste recycled) 85% 81%
Group rolling 12-month Net Promoter Score (NPS) 49.9 50.4
Employee engagement(4) 72 75
Percentage of management that are women 36% 31%
All accidents (per 200,000 hours) 0.46 0.34
1. H1 2023/24 figures have been restated to include post-acquisition
data for businesses acquired by the Group in 2022/23 and 2023/24.
Revenue and environmental-related performance of businesses acquired in
2024/25 (Trident) are not included in the H1 2024/25 figures, as per our basis
of reporting for new acquisitions. We aim to include this data in our Annual
Report and Accounts for the year ending 31 March 2025.
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 CO2e per kWh and grid average CO2e per kWh for all
other sources.
4. H1 2023/24 employee engagement results updated with
subsequently available score for October 2023 survey.
REGIONAL PERFORMANCE
EMEA
H1 2024/25 H1 2023/24 Change Like-for-like(1) change
Revenue £879m £861m 2% (3)%
Operating profit(2) £95m £114m (16)% (17)%
Operating profit margin(2) 10.8% 13.2% (2.4) pts (2.0) pts
Digital revenue(3,4) £656m £647m 1% (3)%
Service solutions revenue(3) £267m £252m 6% 4%
RS PRO revenue(3) £172m £168m 3% 1%
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.
Regional operating profit has been restated in the prior period as shown in
Note 2.
3. See Note 2 for disaggregation of revenue analysis and
reconciliations to region's revenue.
4. Digital revenue has been restated for H1 2023/24, see Note
2.
Revenue increased 2% including the acquisition of Distrelec. Like-for-like
revenue declined 3% reflecting the ongoing economic weakness across the region
and decrease in industrial production output. Across most of continental
Europe PMI has been below 50 throughout the half, representing a contraction
in business activity.
UK and Ireland, which accounts for 38% of the region's revenue, saw a small
revenue decline. Production output has been low and we have experienced
customers running down inventory levels and ordering only when needed as they
manage their businesses more tightly to counteract inflationary pressures and
rebuild their operating margins. The UK PMI has been above 50 since May 2024
which is encouraging, but we note that there tends to be a lag effect before
improved confidence feeds through to increased output and subsequent
maintenance, repair and operations (MRO) expenditure.
Germany, part of the Germany, Austria and Switzerland (DACH) market which
together accounts for 15% of the region's revenue, continues to suffer from
declining production volumes with the PMI being one of the weakest in Europe,
hovering around 42 for most of the period but finishing weaker in September.
In Germany, we have a higher exposure to the manufacturing sector and the
automotive industry where production volumes were very weak with many
businesses extending their summer shutdowns. Additionally, there is a higher
participation from A&C and Electrification, and Semis & Passives
product categories. Revenue in the DACH market declined by low teens
percentage like-for-like.
France, which contributes 18% of the region's revenue, continued to outperform
the market with like-for-like revenue growing by low single digit percentage
despite depressed PMIs. Our more focussed product and sales offer, aligned to
specific industry verticals, was initiated in France resulting in stronger
relationships with our suppliers, improved product range curation and a focus
by our teams on the more resilient industry verticals.
Across the region, our more resilient product categories of Facilities &
Maintenance, Mechanical & Fluid Power, and PPE & Site Safety performed
well delivering small single digit percentage like-for-like growth. A&C
and Electrification products, with demand correlated to the weak electronics
market, declined by mid-single digit percentage, however indications are that
we are still outperforming distribution peers in this area. Demand for Semis
& Passives remains weak with high levels of stock in the distribution
network keeping prices suppressed.
We are making good progress with our customer strategy focusing on high
lifetime value customers and have seen revenue growth from our corporate
customers and several account wins.
Digital delivered good growth in our eProcurement and purchasing manager
solutions. These solutions are integrated within our customers' systems,
pulling through product revenue and generating customer loyalty and recurring
revenue. Web revenue has been impacted by reduced demand from small and
medium-sized customers.
RS Integrated Supply in EMEA achieved new contract wins in the first half and
delivered good underlying performance. We have been rigorously reviewing our
customer contracts and exited those where terms have not been commercially
viable and will continue to assess opportunities within a tightened commercial
framework. The EMEA business operating model has been realigned to optimise
customer engagement, leveraging best practice from RS Integrated Supply in
Americas. We continue to invest in system automation and simplification to
maximise efficiency and support our growth ambitions, while improving our
working capital.
RS PRO continued to outperform despite some disruption from the conflict in
the Red Sea increasing lead times. RS PRO revenue through the Distrelec
ecommerce platforms has now reached £2 million.
Distrelec (acquired 30 June 2023) contributed £79 million to revenue and £7
million to EMEA's operating profit during the period. This included £7
million of integration costs. Trading in Distrelec has been similarly impacted
by soft market conditions given its exposure to Germany and Eastern Europe and
a higher proportion of A&C and Electrification and Semis & Passive
products, very similar to our base business in Germany. Integration plans are
continuing well.
EMEA's like-for-like gross margin declined 150bp due to the lag effect of cost
inflation with minimal sales price inflation and some pricing activity across
Semis & Passives.
Operating costs were marginally down on a like-for-like basis. Headcount
reductions and cutbacks in discretionary spend have helped to offset labour
cost inflation and ongoing investments in our strategic portfolio and the
expenditure relating to our cost savings programme. Falling average order
value has impacted variable costs and in particular freight costs relative to
sales.
Operating profit margin fell by 2.0 percentage points like-for-like to 10.8%.
EMEA's rolling 12-month NPS was 49.9, down from 50.8 in H1 2023/24. The
decline reflects the deliver-to-promise capability being implemented which
impacted order fulfilment scheduling temporarily. We expect the monthly NPS
score to increase as our customer delivery information accuracy improves,
albeit depressing the rolling 12-month score until it annualises.
Americas
H1 2024/25 H1 2023/24 Change Like-for-like(1) change
Revenue £452m £476m (5)% (3)%
Operating profit(2) £42m £47m (9)% (7)%
Operating profit margin(2) 9.3% 9.8% (0.5) pts (0.5) pts
Digital revenue(3) £159m £172m (8)% (7)%
Service solutions revenue(3,4) £68m £67m 1% 2%
RS PRO revenue(3) £4m £3m 3% 5%
1. Like-for-like adjusted for currency and to exclude the
impact of acquisitions; revenue also adjusted for trading days.
2. See Note 2 for reconciliation to Group operating profit.
Regional operating profit has been restated in the prior period as shown in
Note 2.
3. See Note 2 for disaggregation of revenue analysis and
reconciliations to region's revenue.
4. Service solutions revenue has been restated for H1 2023/24,
see Note 2.
Americas revenue declined 5% with like-for-like revenue down 3% excluding
exchange rate movements and the impact of trading days. This performance
reflects continuing economic weakness in the US and Canada markets as evident
in the PMI which returned to below 50 in the second quarter. We saw ongoing
contraction in industrial production against a backdrop of uncertainty,
including the US Presidential election, with companies restraining spending
and investment until the future business environment is clearer.
Our operations in Latin America (LATAM) have grown strongly helped by a robust
market benefiting from increased capital investment in private and public
sectors (mining, metals, food & beverage and energy) and steadily
increasing MRO and service sales to serve the existing customer base.
Our business in Americas serves builders of industrial assets, including
discrete manufacturers, who deliver highly specified products and systems.
This results in being sensitive to capital investment expenditure and
project-related sales and so affected by the reduction in manufacturing
production and destocking by customers.
Additionally, our performance in Americas reflects a larger proportion of
revenue from A&C and Electrification products (c. 70% of the region's
revenue versus 42% across the Group) which is closely linked to the
electronics market and experienced a small digit percentage like-for-like
revenue decline. This was partially offset by like-for-like revenue growth
within Test & Measurement, Mechanical & Fluid Power and PPE & Site
Safety. Demand for
Semis & Passives remained weak with ongoing pricing activity within the
market.
Revenue from digital declined by 7% like-for-like, reflecting softer demand
from some of our larger customers that use our eProcurement and web quotes
technology. Against that, core web outperformed overall regional performance
reflecting our investment in paid marketing to drive traffic and offset weaker
Search Engine Optimisation (SEO) visibility, a lingering impact of our domain
migration to RS Online. Our operations in LATAM, through our acquisition of
Risoul in January 2023, are at the very early stages of rolling out a
transactional website.
Revenue attributed to service solutions grew 2% driven by our investment and
sales team focus in ramping up our design and technical services offer.
RS PRO revenue increased, from a low base, as we increased management focus
and concentrated our sales efforts on three product categories that drive the
majority of revenue in Americas. In LATAM, we are beginning to introduce RS
PRO to our customers with inventory in three Mexico locations.
Americas' gross margin was slightly lower (0.7 percentage points on a
like-for-like basis) due to competitive pricing pressure, partially offset by
favourable exchange rates in Risoul.
We reduced our operating costs by 4% like-for-like reflecting structural cost
reductions and efficiencies actioned in 2023/24 to better align the region
with current demand while we continue to invest in initiatives focused on
customer experience, service-based solutions and product offer expansion.
Americas' operating profit declined year-on-year mainly due to reduced revenue
and pricing pressures partially offset by favourable operating cost reductions
and discipline. Operating profit margin was 9.3%.
Americas' rolling twelve-month NPS was 65.9, an increase from 64.4 in H1
2023/24 reflecting steady increases to the monthly scores for the last six
months due to an increased focus within our business. Our high NPS score
reflects our strong customer experience with fast response, consistent service
and building more efficient and scalable service processes.
Asia Pacific
H1 2024/25 H1 2023/24 Change Like-for-like(1) change
Revenue £110m £110m 0% (2)%
Operating profit(2) £3m £2m 72% 100%
Operating profit margin(2) 2.8% 1.6% 1.2 pts 1.4 pts
Digital revenue(3) £60m £64m (7)% (5)%
Service solutions revenue(3) £23m £21m 8% 11%
RS PRO revenue(3) £17m £17m 2% 3%
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.
Regional operating profit has been restated in the prior period as shown in
Note 2.
3. See Note 2 for disaggregation of revenue analysis and
reconciliations to region's revenue.
Asia Pacific's revenue was flat year-on-year having benefited from favourable
exchange rate movements. Like-for-like revenue decreased by 2% reflecting the
slower than expected electronics market recovery and continued economic
pressure across most of the region. Over half of the Asia Pacific markets
observed PMIs below 50 during the first half.
Australia and New Zealand, which contribute 37% of the region's revenue, saw a
slight like-for-like revenue decline reflecting the challenging economic
environment with large corporate customers' performance most impacted. The
acquisition of Trident in Perth, Australia in April 2024 expands our service
capability, local fulfilment centre capacity and opens opportunities with
customers in the resources sector.
Southeast Asia, which accounts for 31% of the region's revenue, maintained
single digit like-for-like revenue growth in line with the second half of
2023/24. Our performance benefitted from focusing on larger corporate
customers, marketing our main own-brand, RS PRO, and increasing investment in
expanding our network of fulfilment centres and inventory capacity. This
resulted in improving our customer experience through faster delivery times,
expanding our product offer through enhanced vendor management capabilities
and lowering our cost-to-serve through sourcing more products locally and
reducing freight costs.
Greater China, representing 23% of the region's revenue, saw a recovery in H1
2024/25 despite a higher exposure to the electronics markets and intensified
sanctions imposed by the US. Performance was supported by our continuous
effort to serve the larger industrial segment and focusing on our high
lifetime value customers.
Digital like-for-like revenue declined mainly impacted by web performance,
particularly in Greater China, Japan and Korea due to local digital
infrastructure challenges and weaker market demand. However, our eProcurement
performance grew by high single-digit percentage.
RS PRO like-for-like revenue outperformed the region supported by an enhanced
go-to-market strategy, including targeted product marketing campaigns and
focused product range catalogues.
Our gross margin improved on a like-for-like basis by 1.2 percentage points
contributed by favourable exchange rate in our pricing and reduced excess
inventory provisions.
Regional operating costs decreased by 1% like-for-like reflecting the
restructuring initiatives in adjusting our cost base in the prior year
partially offset by the continued investment in growth initiatives focusing on
customer experience, digital marketing campaigns and local fulfilment
capacity.
Our operating profit margin increased by 1.4 percentage points on a
like-for-like basis, reflecting the favourable gross margin drop through and
operational cost efficiencies we delivered to offset the slightly lower
volumes impact.
Asia Pacific's rolling 12 months NPS score has improved by 1.9 pts to 22.1
compared with H1 2023/24. The improvement was mainly attributed to dedicated
actions to improve customer experience.
FINANCIAL REVIEW
Net finance costs
Net finance costs were £15 million, up from £13 million mainly due to the
full six-month impact of increased net debt resulting from the acquisition of
Distrelec in June 2023. At 30 September 2024, 23% of the Group's gross
borrowings excluding lease liabilities (H1 2023/24: 20%; FY 2023/24: 26%) was
at fixed rates, with surplus cash deposited at variable rates. Going forward
we expect the full year 2024/25 net finance costs to be c. £31 million based
on current interest rates.
Profit before tax
Profit before tax declined 16% to £106 million. Operating profit in the
regions, explained above, reduced by £22m and other operating costs reduced
by £3m, as the prior year had acquisition costs related to Distrelec that did
not recur. Adjusted profit before tax was down 17% to £119 million, down 16%
on a like-for-like basis.
Taxation
The Group's income tax charge was £28 million (H1 2023/24: £34 million). The
adjusted income tax charge, which excludes the impact of tax relief on items
excluded from adjusted profit before tax, was £31 million (H1 2023/24:
£38 million), resulting in an effective tax rate of 26.0% on adjusted profit
before tax (H1 2023/24: 26.2%).
Going forward we expect the full year 2024/25 effective tax rate on adjusted
profit before tax to be c. 26.1%.
Earnings per share
Earnings per share declined by 15% to 16.6p. Adjusting for items excluded from
adjusted profit and associated income tax effects, adjusted earnings per share
of 18.7p declined 16% on a like-for-like basis.
Cash flow
£m H1 2024/25 H1 2023/24
Operating profit 120 139
Add back depreciation and amortisation 42 41
EBITDA(1) 162 179
Add back impairments and loss on disposal of non-current assets 1 -
Movement in working capital 4 (79)
Defined benefit retirement contributions in excess of charge (6) (5)
Movement in provisions (2) 1
Equity-settled share-based payments and cash from joint venture 4 7
Cash generated from operations 163 104
Net capital expenditure (25) (25)
Operating cash flow 138 79
Cash effect of adjusting items(1) - 5
Adjusted operating cash flow(1) 138 85
Net interest paid (15) (13)
Income tax paid (34) (46)
Adjusted free cash flow(1) 89 26
1. See Note 15 for definitions and reconciliations of all
alternative performance measures.
Lower EBITDA (earnings before interest, tax, depreciation and amortisation)
was partially mitigated by a slight improvement in working capital as we focus
on improving debt collection. As a result, cash generated from operations was
£163 million (H1 2023/24: £104 million) driving an improvement in adjusted
free cash flow. Adjusted operating cash flow conversion increased by 48.8
percentage points to 103.1%.
Net capital expenditure remained steady at £25 million as we continued to
invest in optimising our DCs, launching a new product management system,
augmenting digital commerce capabilities and strengthening our technology
platforms.
Capital expenditure was at 1.1 times depreciation (H1 2023/24: 1.2 times), in
line with our typical maintenance capital expenditure levels of 1.0 - 1.5
times depreciation. We anticipate capital expenditure in 2024/25 to be c.
£50 million including planned spend to deliver our 2030 ESG action plan such
as decarbonising our DC in Beauvais, France.
Net interest paid increased by £2 million to £15 million due to increased
net debt resulting from the acquisition of Distrelec.
Adjusted free cash flow increased to £89 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.
Intangible assets
Intangible assets have decreased from £983 million at March 2024 to £911
million (see Note 6), with translation differences driving £69 million of the
decrease. Goodwill of £4 million was recognised on the acquisition of
Trident, there were additions of £19 million and an amortisation charge and
impairment cost for the period of £26 million.
Working capital
Working capital as a percentage of revenue decreased by 1.6 percentage points
year on year to 24.7%.
Trade and other receivables have decreased by £73 million since the year end
to £628 million, with the acquisition of Trident increasing receivables by
£2 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.
Inventories were £644 million, in line with our year end position of £656m.
Our inventory turn has remained stable at 2.6 times, unchanged from 2.6 times
at March. Inventory provisions have increased by £4 million to £72 million
since the year end, representing a slight increase in the overall provision
rate from 9.5% to 10.1%.
Overall trade and other payables decreased to £547 million from £603 million
at March. 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 £437 million from £418 million at March (see
Note 9) due mainly to the purchase of our own shares by the Employee Benefit
Trust.
The sustainability-linked loan (SLL), term loan and the private placement loan
notes form our committed debt facilities of £674 million, down from £685
million at March due to the impact of exchange rates, of which £200 million
was undrawn at 30 September 2024 (FY 2023/24: £245 million undrawn). In
October 2024, our request to take up a one-year term extension to the SLL was
approved by the lenders and so this facility now matures in October 2029.
The Group's financial metrics, as set out in the Alternative Performance
Measures in Note 15, remain strong, with net debt to adjusted EBITDA of 1.3x
and EBITA to interest of 9.3x, 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
2024 expressed as a percentage of the monthly average capital employed (net
assets excluding net debt and retirement benefit obligations). ROCE was 15.6%
compared to 23.3% at 30 September 2023, due to the impact of recent
acquisitions (3.0 percentage points) and the decline in adjusted operating
profit (4.7 percentage points).
Retirement benefit obligations
Overall, the retirement benefit net obligations of the Group's defined benefit
schemes at 30 September 2024 were £20 million compared to £26 million at 31
March 2024 and £31 million at 30 September 2023. The UK defined benefit
scheme (our largest scheme) had a net obligation of £11 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 40% of the prior
year full-year dividend. For the six months ended 30 September 2024 the Board
proposes an interim dividend of 8.5p per share, in line with our progressive
policy, but reflecting a move to return toward a normalised dividend cover
post the unwind of the post pandemic inflation trading benefit. For this
trading period, the interim dividend is equivalent to approximately 39% of
2023/24 full-year dividend. This will be paid on 3 January 2025 to
shareholders on the register on 22 November 2024.
Foreign exchange risk
The Group does not hedge translation exposure on the income statements of
overseas subsidiaries. Based on the mix of non-sterling denominated revenue
and adjusted operating profit, a one cent movement in the euro would impact
annual adjusted profit before tax by £2.0 million and a one cent movement in
the US dollar would impact annual adjusted profit before tax by £0.7 million.
During the six months ended 30 September 2024, there were foreign exchange
differences arising on translation of £103 million, recognised within Other
Comprehensive Income, of which £69 million related to the translation of
intangible assets as set out in Note 6. These were partially offset by the
gains on net investment hedges of
£11 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 relate to
euros and US dollars.
RISKS AND UNCERTAINTIES
The Board has overall accountability for the Group's risk management, which is
delegated to the Executive Committee and supported by the Group's risk team.
The Board is fully committed to setting and embedding a sound risk culture
which is aligned with the principles and ethics of the organisation. The Group
has a defined risk appetite, approved by the Board, which reflects the
business' willingness and ability to absorb the impact of risk and the Board's
appetite for such risks in six risk categories: strategy and change,
operational, regulatory compliance, financial resilience, customer experience,
and product risks. The business uses consistent impact and likelihood
assessment criteria with behaviours that are mapped across the six categories
of risk and are aligned to the strategy of the business and the activities RS
provides.
Principal risks and uncertainties
The principal risks and mitigations disclosed in the 2024 Annual Report and
Accounts (pages 32 to 37) were:
1. Cyber security
2. Change initiatives
3. M&A activity
4. Talent and capability
5. Geopolitical environment
6. Market disruption
7. Business resilience
8. Climate change
9. Access to debt and capital markets
10. Legal and regulatory compliance
These risks have not changed since they were reported in the 2024 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 2024 Annual
Report and Accounts, our business model is structured so that the Group is a
digitally-enabled global distributor of product and service solutions,
providing small volumes of our suppliers' products to satisfy our industrial
customers' MRO demands.
We supply a very broad spread of customers both in terms of industry sector
and geography. The Group is not reliant on one particular group of customers
or suppliers, with its largest customer accounting for under one percent of
revenue and its largest supplier less than five percent of revenue.
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 2024 was £437 million (31 March 2024:
£418 million). Our committed debt facilities were £674 million, of which
£200 million was undrawn (see the net debt section in the Financial Review
for more details of our committed facilities). The earliest facility expiring
is our £125 million (€150 million) Caixa 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 2024
EBITA to interest was 9.3x (31 March 2024: 10.5x) and net debt to adjusted
EBITDA was 1.3x (31 March 2024: 1.1x) (see Note 15 for reconciliations).
Financial modelling
We frequently update our forecast and this is regularly reviewed, 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 £270 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 2024. 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 2024
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 2024
Six months ended Year ended
30.9.2024 30.9.2023 31.3.2024
Notes £m £m £m
Revenue 2 1,441.2 1,446.7 2,942.4
Cost of sales (825.1) (813.8) (1,678.5)
Gross profit 616.1 632.9 1,263.9
Operating costs (496.0) (494.1) (983.8)
Operating profit 2 120.1 138.8 280.1
Finance income 3.1 2.3 4.8
Finance costs (17.6) (15.1) (36.7)
Share of profit of joint venture 0.2 0.3 0.6
Profit before tax 2 105.8 126.3 248.8
Income tax expense (27.6) (34.1) (65.1)
Profit for the period attributable to owners of the Company 78.2 92.2 183.7
Earnings per share attributable to owners of the Company
Basic 3 16.6p 19.5p 38.8p
Diluted 3 16.6p 19.5p 38.7p
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 September 2024
Six months ended Year ended
30.9.2024 30.9.2023 31.3.2024
£m £m £m
Profit for the period 78.2 92.2 183.7
Other comprehensive income
Items that will not be reclassified subsequently to the income statement
Remeasurement of retirement benefit obligations (0.6) 0.3 0.8
Related income tax 0.1 - (0.1)
Items that may be reclassified subsequently to the income statement
Foreign exchange translation differences of joint venture (0.2) - (0.2)
Foreign exchange translation differences (102.9) 19.0 (3.9)
Fair value gain / (loss) on net investment hedges 10.9 (2.4) 3.4
Movement in cash flow hedges 3.0 (0.5) (0.1)
Related income tax (0.8) 0.1 -
Other comprehensive (expense) / income for the period (90.5) 16.5 (0.1)
Total comprehensive (loss) / income for the period (12.3) 108.7 183.6
Total comprehensive (loss) / income is attributable to:
Owners of the Company (12.3) 108.7 183.7
Non-controlling interests - - (0.1)
Total comprehensive (loss) / income for the period (12.3) 108.7 183.6
GROUP BALANCE SHEET
As at 30 September 2024
30.9.2024 30.9.2023 31.3.2024
Notes £m £m £m
Non-current assets
Intangible assets 6 911.3 1,012.1 982.6
Property, plant and equipment 172.6 183.8 180.9
Right-of-use assets 54.3 75.6 72.8
Investment in joint venture 0.8 1.2 1.3
Other receivables 5.8 9.2 8.4
Retirement benefit net assets 5 1.6 0.8 1.5
Deferred tax assets 7.1 4.7 9.5
Total non-current assets 1,153.5 1,287.4 1,257.0
Current assets
Inventories 7 644.2 719.7 656.0
Trade and other receivables 8 628.2 687.7 701.4
Cash and cash equivalents - cash and short-term deposits 9 274.2 379.1 258.7
Derivative assets 4.0 2.5 2.6
Current income tax receivables 25.2 30.2 22.7
Total current assets 1,575.8 1,819.2 1,641.4
Total assets 2,729.3 3,106.6 2,898.4
Current liabilities
Trade and other payables (547.4) (624.8) (602.7)
Cash and cash equivalents - bank overdrafts 9 (160.1) (268.8) (162.7)
Other borrowings 9 (20.0) (12.6) -
Lease liabilities 9 (14.8) (15.7) (16.0)
Derivative liabilities (2.3) (2.8) (1.1)
Provisions (2.0) (4.5) (5.0)
Current income tax liabilities (24.6) (27.6) (27.8)
Total current liabilities (771.2) (956.8) (815.3)
Non-current liabilities
Other payables (11.3) (8.8) (17.3)
Retirement benefit obligations 5 (21.8) (31.9) (27.2)
Borrowings 9 (474.4) (523.1) (440.3)
Lease liabilities 9 (41.8) (60.6) (57.9)
Provisions (5.9) (16.0) (4.2)
Deferred tax liabilities (91.1) (113.6) (103.3)
Total non-current liabilities (646.3) (754.0) (650.2)
Total liabilities (1,417.5) (1,710.8) (1,465.5)
Net assets 1,311.8 1,395.8 1,432.9
Equity
Share capital and share premium 287.1 283.7 286.9
Own shares held by Employee Benefit Trust (EBT) (43.9) (0.4) (1.8)
Other reserves 17.0 126.2 108.3
Retained earnings 1,051.0 985.6 1,038.9
Equity attributable to owners of the Company 1,311.2 1,395.1 1,432.3
Non-controlling interests 0.6 0.7 0.6
Total equity 1,311.8 1,395.8 1,432.9
GROUP CASH FLOW STATEMENT
For the six months ended 30 September 2024
Six months ended Year ended
30.9.2024 30.9.2023 31.3.2024
Notes £m £m £m
Cash flows from operating activities
Profit before tax 105.8 126.3 248.8
Depreciation and amortisation 42.3 40.6 83.7
Impairment of intangible assets 0.5 - 4.6
Impairment of right-of-use assets - - 0.4
Loss on disposal of non-current assets 0.1 0.1 1.6
Equity-settled share-based payments 3.8 6.6 7.8
Net finance costs 14.5 12.8 31.9
Share of profit of and dividends received from joint venture 0.3 0.3 -
(Increase) / decrease in inventories (4.9) (50.2) 4.9
Decrease in trade and other receivables 52.6 29.7 8.1
Decrease in trade and other payables (45.0) (58.6) (82.2)
(Decrease) / increase in provisions (1.5) 1.2 1.1
Defined benefit retirement contributions in excess of charge (5.8) (5.0) (9.8)
Cash generated from operations 162.7 103.8 300.9
Interest received 3.1 2.3 4.8
Interest paid (18.0) (15.4) (35.8)
Income tax paid (33.8) (45.7) (73.3)
Net cash from operating activities 114.0 45.0 196.6
Cash flows from investing activities
Acquisition of businesses 11 (8.2) (313.1) (313.1)
Cash and cash equivalents acquired with businesses 11 - 9.0 9.0
Total cash impact on acquisition of businesses (8.2) (304.1) (304.1)
Purchase of intangible assets (20.5) (17.5) (35.7)
Purchase of property, plant and equipment (4.4) (7.0) (15.9)
Net cash used in investing activities (33.1) (328.6) (355.7)
Cash flows from financing activities
Proceeds from the issue of share capital 0.2 0.4 3.6
Purchase of own shares by EBT (46.5) (0.1) (1.5)
Loans drawn down 9 120.0 402.3 286.7
Loans repaid 9 (55.0) (53.2) (27.3)
Principal elements of lease payments 9 (7.2) (9.5) (18.5)
Dividends paid 4 (64.9) (64.8) (104.1)
Net cash (used in) / generated from financing activities (53.4) 275.1 138.9
Net increase / (decrease) in cash and cash equivalents 27.5 (8.5) (20.2)
Cash and cash equivalents at the beginning of the period 96.0 120.5 120.5
Effects of exchange rate changes (9.4) (1.7) (4.3)
Cash and cash equivalents at the end of the period 9 114.1 110.3 96.0
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 September 2024
Attributable to owners of the Company
Share capital and share premium Own shares held by EBT Other reserves(1) Retained earnings Total Non-controlling interests Total equity
£m £m £m £m £m £m £m
At 1 April 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
Other comprehensive income - - 16.2 0.3 16.5 - 16.5
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
Profit for the period - - - 91.5 91.5 - 91.5
Other comprehensive income - - (16.9) 0.4 (16.5) (0.1) (16.6)
Total comprehensive income - - (16.9) 91.9 75.0 (0.1) 74.9
Cash flow hedging losses transferred to inventories - - (1.4) - (1.4) - (1.4)
Tax on cash flow hedging transfers - - 0.4 - 0.4 - 0.4
Dividends (Note 4) - - - (39.3) (39.3) - (39.3)
Equity-settled share-based payments - - - 1.2 1.2 - 1.2
Settlement of share awards 3.2 - - - 3.2 - 3.2
Purchase of own shares by EBT - (1.4) - - (1.4) - (1.4)
Tax on equity-settled share-based payments - - - (0.5) (0.5) - (0.5)
At 31 March 2024 286.9 (1.8) 108.3 1,038.9 1,432.3 0.6 1,432.9
Profit for the period - - - 78.2 78.2 - 78.2
Other comprehensive income - - (90.0) (0.5) (90.5) - (90.5)
Total comprehensive income - - (90.0) 77.7 (12.3) - (12.3)
Cash flow hedging gains transferred to inventories - - (1.8) - (1.8) - (1.8)
Tax on cash flow hedging transfers - - 0.5 - 0.5 - 0.5
Dividends (Note 4) - - - (64.9) (64.9) - (64.9)
Equity-settled share-based payments - - - 4.0 4.0 - 4.0
Settlement of share awards 0.2 4.4 - (4.7) (0.1) - (0.1)
Purchase of own shares by EBT - (46.5) - - (46.5) - (46.5)
At 30 September 2024 287.1 (43.9) 17.0 1,051.0 1,311.2 0.6 1,311.8
(()(1)) Other reserves comprises the Hedging reserve of £0.5 million (30
September 2023: £0.3 million; 31 March 2024: £(0.4) million) and the
Cumulative translation reserve of £16.5 million (30 September 2023: £125.9
million; 31 March 2024: £108.7 million).
NOTES TO THE CONDENSED GROUP ACCOUNTS
1. Basis of preparation
These condensed Group accounts were approved by the Board of Directors on 6
November 2024 and are unaudited but have been reviewed by the auditor. 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.
The Annual Report and Accounts for the year ended 31 March 2024 was prepared
in accordance with UK-adopted international accounting standards (UK IAS) and
has been delivered to the Registrar of Companies. The previous auditor's
report on those accounts was unqualified, did not include a reference to any
matters to which the previous auditor 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 2024 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 2025. 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. The Group will provide the disclosures required by
Amendments to IAS 7 and IFRS 7 'Supplier Finance Arrangements' for the first
time in its accounts for the year ending 31 March 2025. Also, the Group has
applied the temporary 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 Pillar Two income taxes.
Pillar Two income tax legislation has been enacted in the UK and came into
effect on 1 January 2024. The Group is continuing to assess the full impact of
the Pillar Two rules, but it is not expected to have a material impact on the
reported results or financial position of the Group.
Except for judgements involved in estimations, there are no significant
judgements that have had a significant effect on the amounts recognised in the
accounts. The significant estimates made in preparing the accounts were in
relation to retirement benefit obligations, same as those applied to the Group
accounts for the year ended 31 March 2024. 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, and the impact was not material.
The Group have adopted various alternative performance measures (APMs) to
provide additional useful information on underlying trends and its performance
and position. The APMs are not defined by IFRS and therefore may not be
directly comparable with other companies' APMs and are defined in Note 15.
Going concern basis
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.
The Group's net debt at 30 September 2024 was £437 million (31 March 2024:
£418 million). Our committed debt facilities were £674 million, of which
£200 million was undrawn. The earliest facility expiring is our £125
million (€150 million) Caixa 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 2024
EBITA to interest was 9.3x (31 March 2024: 10.5x) and net debt to adjusted
EBITDA was 1.3x (31 March 2024: 1.1x) (see Note 15 for reconciliations).
1. Basis of preparation (continued)
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 £270 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.
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 2024. The Directors consider it appropriate to continue to adopt
the going concern basis in preparing these condensed Group accounts.
2. Segmental reporting
The Group's operating segments comprise three regions: EMEA, Americas and Asia
Pacific.
During the first half of the year the Group reviewed the methodology for the
allocation of central costs which has resulted in an increased level of costs
apportioned to the regions and a lower level of central costs, and the prior
periods' segmental operating profits and central costs have been restated
below. The level of costs reallocated from / (to) central costs to / (from)
the regions as a result of the change was £24.1 million (EMEA: £18.3
million; Americas: £5.5 million; Asia Pacific: £0.3 million) in the six
months to 30 September 2023 and £37.7 million (EMEA: £32.3 million;
Americas: £6.6 million; Asia Pacific: (£1.2 million)) in the year ended 31
March 2024.
EMEA Americas Asia Pacific Group
£m £m £m £m
Six months ended 30 September 2024
Revenue from external customers 878.8 452.2 110.2 1,441.2
Segmental operating profit 95.0 42.2 3.1 140.3
Central costs (6.7)
Adjusted operating profit(1) 133.6
Amortisation of acquired intangibles (13.5)
Acquisition-related items -
Operating profit 120.1
Net finance costs (14.5)
Share of profit of joint venture 0.2
Profit before tax 105.8
Six months ended 30 September 2023 (restated)
Revenue from external customers 860.9 475.6 110.2 1,446.7
Segmental operating profit 113.6 46.6 1.8 162.0
Central costs (6.4)
Adjusted operating profit(1) 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
( )
(1)) See Note 15 for definition and reconciliation of this APM.
2. Segmental reporting (continued)
EMEA Americas Asia Pacific Group
Year ended 31 March 2024 (restated)
Revenue from external customers 1,794.8 933.7 213.9 2,942.4
Segmental operating profit 223.4 94.8 5.0 323.2
Central costs (11.4)
Adjusted operating profit(1) 311.8
Amortisation and impairment of acquired intangibles (26.6)
Acquisition-related items (5.1)
Operating profit 280.1
Net finance costs (31.9)
Share of profit of joint venture 0.6
Profit before tax 248.8
((1)) See Note 15 for definition of this APM.
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. Service solutions includes procurement solutions, maintenance
solutions and other solutions. The Group's largest own-brand is RS PRO.
£1,394.8 million of revenue is recognised at a point in time (six months
ended 30 September 2023: £1,400.7 million; year ended 31 March 2024:
£2,850.7 million) and £46.4 million over time (six months ended 30
September 2023: £46.0 million; year ended 31 March 2024: £91.7 million).
Sales channels, brands and service solutions
During the six months ended 30 September 2024 the Group reviewed what it
classes as digital revenue which has resulted in certain revenue streams now
being included, resulting in an overall increase to digital revenue and
corresponding decrease to offline revenue, all in EMEA, for the year ended 31
March 2024 of £18.4 million and £9.5 million for the six months ended 30
September 2023. The prior periods' digital revenue disaggregation have been
restated below.
During the period, the Group identified that the reported figure for Americas'
Service Solution revenue for the six months to 30 September 2023 was
understated by £3.7 million with a corresponding overstatement in the "Other"
category. The Group totals were similarly affected. The restated figures are
presented below.
EMEA Americas Asia Pacific Group
£m £m £m £m
Six months ended 30 September 2024
Web 426.2 127.3 41.6 595.1
eProcurement and other digital 229.5 31.2 17.9 278.6
Digital 655.7 158.5 59.5 873.7
Offline 223.1 293.7 50.7 567.5
Group 878.8 452.2 110.2 1,441.2
Six months ended 30 September 2023 (restated)
Web 429.0 129.6 47.0 605.6
eProcurement and other digital 217.5 42.0 16.8 276.3
Digital 646.5 171.6 63.8 881.9
Offline 214.4 304.0 46.4 564.8
Group 860.9 475.6 110.2 1,446.7
Year ended 31 March 2024 (restated)
Web 881.1 258.9 88.5 1,228.5
eProcurement and other digital 459.6 77.3 34.6 571.5
Digital 1,340.7 336.2 123.1 1,800.0
Offline 454.1 597.5 90.8 1,142.4
Group 1,794.8 933.7 213.9 2,942.4
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 2024
Own-brand product and service solutions 177.1 3.5 17.1 197.7
Other product and service solutions 701.7 448.7 93.1 1,243.5
Group 878.8 452.2 110.2 1,441.2
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
Year ended 31 March 2024
Own-brand product and service solutions 364.9 6.7 33.2 404.8
Other product and service solutions 1,429.9 927.0 180.7 2,537.6
Group 1,794.8 933.7 213.9 2,942.4
Service solutions / other
EMEA Americas Asia Pacific Group
£m £m £m £m
Six months ended 30 September 2024
Service solutions 267.4 67.9 22.6 357.9
Other 611.4 384.3 87.6 1,083.3
Group 878.8 452.2 110.2 1,441.2
Six months ended 30 September 2023 (restated)
Service solutions 252.3 67.1 21.0 340.4
Other 608.6 408.5 89.2 1,106.3
Group 860.9 475.6 110.2 1,446.7
Year ended 31 March 2024
Service solutions 532.3 132.8 43.4 708.5
Other 1,262.5 800.9 170.5 2,233.9
Group 1,794.8 933.7 213.9 2,942.4
3. Earnings per share
Six months ended Year ended
30.9.2024 30.9.2023 31.3.2024
Number Number Number
Weighted average number of shares 471,596,673 472,921,885 473,300,106
Dilutive effect of share-based payments 360,171 419,848 781,177
Diluted weighted average number of shares 471,956,844 473,341,733 474,081,283
Basic earnings per share attributable to owners of the Company 16.6p 19.5p 38.8p
Diluted earnings per share attributable to owners of the Company 16.6p 19.5p 38.7p
4. Dividends
Six months ended Year ended
30.9.2024 30.9.2023 31.3.2024
£m £m £m
Final dividend for the year ended 31 March 2024 - 13.7p (2023: 13.7p) 64.9 64.8 64.8
Interim dividend for the year ended 31 March 2024 - 8.3p - - 39.3
64.9 64.8 104.1
An interim dividend of 8.5p will be paid on 3 January 2025 to shareholders on
the register on 22 November 2024 with an ex-dividend date of 21 November 2024
and the estimated amount to be paid of £39.8 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.
30.9.2024 30.9.2023 31.3.2024
Restated(1)
£m £m £m
Fair value of scheme assets 454.2 423.2 452.0
Present value of defined benefit obligations (412.6) (392.1) (421.8)
Effect of asset ceiling / minimum funding requirement (61.8) (62.2) (55.9)
Retirement benefit net obligations (20.2) (31.1) (25.7)
Amount recognised on the balance sheet - liability (21.8) (31.9) (27.2)
Amount recognised on the balance sheet - asset 1.6 0.8 1.5
((1)) Restated to include the 30 September 2023 balances of the pension scheme
in Switzerland which were £25.8 million in fair value of scheme assets,
£20.7 million in present value of defined benefit obligations and £5.1
million in effect of asset ceiling. There is no impact on retirement benefit
net obligations.
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
2024:
Increase in assumption Decrease in assumption
£m £m
Effect on obligation of a 0.5 pts change to the assumed discount rate (23.3) 25.8
Effect on obligation of a 0.25 pts change in the assumed inflation rate 11.2 (10.9)
Effect on obligation of a change of one year in assumed life expectancy 10.3 (10.4)
6. Intangible assets
Goodwill Other intangibles Total
£m £m £m
Cost 463.3 546.2 1,009.5
At 1 April 2023
Acquired with businesses 192.0 106.2 298.2
Additions - 16.1 16.1
Translation differences 9.7 6.6 16.3
At 30 September 2023 665.0 675.1 1,340.1
Measurement period adjustment (9.7) - (9.7)
Additions - 19.5 19.5
Disposals - (1.0) (1.0)
Translation differences (9.0) (1.6) (10.6)
At 31 March 2024 646.3 692.0 1,338.3
Acquired with businesses 4.4 0.5 4.9
Additions - 18.9 18.9
Disposals - (1.2) (1.2)
Translation differences (44.8) (31.0) (75.8)
At 30 September 2024 605.9 679.2 1,285.1
Amortisation - 304.7 304.7
At 1 April 2023
Charge for the period - 22.8 22.8
Translation differences - 0.5 0.5
At 30 September 2023 - 328.0 328.0
Charge for the period - 25.4 25.4
Impairment losses - 4.6 4.6
Disposals - (0.8) (0.8)
Translation differences - (1.5) (1.5)
At 31 March 2024 - 355.7 355.7
Charge for the period - 25.1 25.1
Impairment losses - 0.5 0.5
Disposals - (1.0) (1.0)
Translation differences - (6.5) (6.5)
At 30 September 2024 - 373.8 373.8
Net book value
At 30 September 2024 605.9 305.4 911.3
At 30 September 2023 665.0 347.1 1,012.1
At 31 March 2024 646.3 336.3 982.6
7. Inventories
30.9.2024 30.9.2023 31.3.2024
Restated(1)
£m £m £m
Gross inventories 716.6 778.0 724.6
Inventory provisions (72.4) (58.3) (68.6)
Net inventories 644.2 719.7 656.0
((1)) Gross inventories and Inventory provisions are restated to reflect the
30 September 2023 balance (£20.5 million) of the fair value adjustment on
acquisition of Distrelec. There is no impact on net inventories.
During the six months ended 30 September 2024 £11.6 million was recognised as
an expense relating to the
write-down of inventories to net realisable value (six months ended 30
September 2023: £19.3 million; year ended 31 March 2024: £35.1 million).
8. Trade and other receivables
30.9.2024 30.9.2023 31.3.2024
£m £m £m
Gross trade receivables 556.4 599.3 624.0
Impairment allowance (12.0) (11.5) (11.1)
Net trade receivables 544.4 587.8 612.9
Other receivables (including prepayments) 83.8 99.9 88.5
Trade and other receivables 628.2 687.7 701.4
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. During the six months
ended 30 September 2024 £3.1 million was recognised as a loss from the
impairment of trade receivables (six months ended 30 September 2023: £0.8
million; year ended 31 March 2024: £3.4 million).
9. Net debt
30.9.2024 30.9.2023 31.3.2024
£m £m £m
Cash and short-term deposits 274.2 379.1 258.7
Bank overdrafts (160.1) (268.8) (162.7)
Cash and cash equivalents 114.1 110.3 96.0
Non-current private placement loan notes (149.1) (161.4) (157.1)
Non-current sustainability-linked loan (200.0) (232.0) (155.0)
Non-current term loan (125.3) (129.7) (128.2)
Current money market loans (20.0) (10.0) -
Current bank facilities - (2.6) -
Current lease liabilities (14.8) (15.7) (16.0)
Non-current lease liabilities (41.8) (60.6) (57.9)
Net debt (436.9) (501.7) (418.2)
See Note 15 for definition of net debt which is an APM.
Movements in net debt were:
Borrowings Lease liabilities Total liabilities from financing activities Cash and cash equivalents Net debt
£m £m £m £m £m
Net debt at 1 April 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)
Cash flows 89.7 9.0 98.7 (11.7) 87.0
Net lease additions - (7.2) (7.2) - (7.2)
Translation differences 5.7 0.6 6.3 (2.6) 3.7
Net debt at 31 March 2024 (440.3) (73.9) (514.2) 96.0 (418.2)
Cash flows (65.0) 7.2 (57.8) 27.5 (30.3)
Acquired with businesses - (2.3) (2.3) - (2.3)
Net lease disposals - 10.1 10.1 - 10.1
Translation differences 10.9 2.3 13.2 (9.4) 3.8
Net debt at 30 September 2024 (494.4) (56.6) (551.0) 114.1 (436.9)
10. Fair values of financial instruments
The derivative assets and derivative liabilities are measured at fair value
using Level 2 inputs, 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:
30.9.2024 30.9.2023 31.3.2024
Carrying amounts Fair Carrying amounts Fair Carrying amounts Fair
value
value
value
£m £m £m £m £m £m
Private placement loan notes (149.1) (135.9) (161.4) (143.0) (157.1) (142.9)
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.
11. Acquisitions
On 2 April 2024 the Group acquired 100% of the issued share capital of Trident
Australia Pty Ltd, a specialist MRO distribution and rental, calibration and
mechanical services partner for the energy and natural resource industry in
Australia. Trident adds to the Group's Australian presence by increasing the
Group's access to the energy and natural resources sector with associated
customer and product synergies and provides distribution infrastructure and
service capacity in Western Australia. The goodwill is attributable to the
revenue synergies which are expected to arise from combining Trident's
established presence in Western Australia and its highly specialised services
for customers in the energy sector with the Group's global customer base and
range of complementary products.
The provisional fair value of the net assets acquired, consideration and
goodwill arising were:
£m
Intangible assets - customer relationships 0.5
Property, plant and equipment 1.8
Right-of-use assets 2.4
Inventories (gross £2.6 million less provisions of £1.1 million) 1.5
Trade and other receivables 1.8
Cash and cash equivalents - cash and short-term deposits -
Current trade and other payables (1.1)
Current lease liabilities (0.3)
Non-current lease liabilities (2.0)
Non-current other provisions (0.1)
Current income tax liabilities (0.1)
Deferred tax liabilities (0.1)
Net assets acquired 4.3
Goodwill (Note 6) 4.4
Consideration paid - cash 8.2
Contingent consideration payable - accrued 0.5
Total consideration 8.7
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 £1.8 million, of which
£1.8 million is expected to be collected. There were no acquisition-related
costs for Trident charged to administrative expenses in the six months ended
30 September 2024 and £0.2 million in the year ended 31 March 2024. The
contingent consideration payable is due 12 months after the completion date
and is based on revenue in the period January to December 2024 with a range of
£nil to £0.9 million. Amortisation is calculated to write off the acquired
customer relationships on a straight-line basis over five years.
11. Acquisitions (continued)
Trident contributed revenue of £4.1 million and profit after tax of £0.1
million to the Group's results since acquisition and is included in Asia
Pacific operating segment. If the acquisition had occurred on 1 April 2024,
the Group's revenue and profit for the six months ended 30 September 2024
would have been unchanged.
12. Capital commitments
As at 30 September 2024, the Group is contractually committed to, but has not
provided for, future capital expenditure of £3.5 million (30 September 2023:
£13.5 million; 31 March 2024: £8.0 million) for property, plant and
equipment and £3.3 million (30 September 2023: £8.3 million; 31 March 2024:
£4.6 million) for intangible assets.
13. Related party transactions
There has been no material change in related party relationships in the six
months ended 30 September 2024. There were no significant related party
transactions which have materially affected the financial position or
performance of the Group during that period.
14. Post balance sheet event
On 21 October 2024, the Group's request to take up a one-year term extension
to the sustainability-linked loan facility was approved by the lenders and so
this facility now matures in October 2029.
15. 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 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 when assessing performance. The
Directors also believe that excluding recent acquisitions, amortisation and
impairment of acquired intangibles and acquisition-related items aids
comparison of the performance between reporting periods and between businesses
with similar assets that were internally generated.
15. 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 incentive and the all employee Long Term
Incentive Plan (LTIP) called the RS YAY! Award. Adjusted earnings per share is
a performance measure for the LTIP and Journey to Greatness (J2G) LTIP award.
Adjusted operating profit conversion, adjusted operating profit margin and
adjusted earnings per share are financial key performance indicators (KPIs)
which are used to measure the Group's progress in delivering the successful
implementation of its strategy and monitor and drive its performance.
Operating costs(1) Operating profit Operating profit margin(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 2024
Reported (496.0) 120.1 8.3% 19.5% 105.8 78.2 16.6p 16.6p
Amortisation of acquired intangibles 13.5 13.5 13.5 10.1 2.1p 2.1p
Acquisition-related items - - - - - -
Adjusted (482.5) 133.6 9.3% 21.7% 119.3 88.3 18.7p 18.7p
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
((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 expensed as
remuneration, adjustments to acquisition-related indemnification assets and
the related liabilities that result from events after the acquisition date and
any remeasurements of contingent consideration payable on acquisition of
businesses that result from events after the acquisition date.
Like-for-like revenue and profit measures
Like-for-like revenue and profit measures are adjusted to exclude the effects
of changes in exchange rates on translation of overseas profits. They exclude
acquisitions in the relevant 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. The Group excluding these acquisitions
owned for less than a year is referred to as base business. These measures
enable management and investors to track more easily, and consistently, the
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
30.9.2024 30.9.2023 30.9.2024 30.9.2023 31.3.24
US dollar 1.281 1.259 1.339 1.226 1.264
Euro 1.178 1.157 1.197 1.157 1.170
15. 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 2023 (H1 2023/24) 1,446.7
Effect of exchange rates (24.7)
Effect of trading days 22.7
Revenue for H1 2023/24 at H1 2024/25 rates and trading days 1,444.7
H1 2024/25 Less: acquisitions owned H1 2024/25 base business H1 2023/24 H1 2023/24 at H1 2024/25 rates and trading days Like-for-like change
Group
<1 year
£m £m £m £m £m %
EMEA 878.8 41.1 837.7 860.9 867.9 (3)%
Americas 452.2 - 452.2 475.6 468.4 (3)%
Asia Pacific 110.2 4.1 106.1 110.2 108.4 (2)%
Revenue 1,441.2 45.2 1,396.0 1,446.7 1,444.7 (3)%
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 reported revenue and reported gross profit converted at the current
period's average exchange rates.
H1 2024/25 Less: acquisitions owned H1 2024/25 base business H1 2023/24 H1 2023/24 at H1 2024/25 rates Like-for-like change
Group
<1 year
£m £m £m £m £m pts
Revenue 1,441.2 45.2 1,396.0 1,446.7 1,422.0
Gross profit 616.1 20.0 596.1 632.9 623.3
Gross margin 42.7% 44.2% 42.7% 43.7% 43.8% (1.1) 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 2024/25 Less: acquisitions owned H1 2024/25 base business H1 2023/24 H1 2023/24 at H1 2024/25 rates Like-for-like change
Group
<1 year
Restated Restated
£m £m £m £m £m %
Segmental operating profit
EMEA 95.0 2.4 92.6 113.6 111.5 (17)%
Americas 42.2 - 42.2 46.6 45.3 (7)%
Asia Pacific 3.1 0.1 3.0 1.8 1.5 100%
Segmental operating profit 140.3 2.5 137.8 162.0 158.3 (13)%
Central costs (6.7) - (6.7) (6.4) (6.6) 1%
Adjusted operating profit 133.6 2.5 131.1 155.6 151.7 (13)%
Adjusted profit before tax 119.3 2.2 117.1 143.1 139.1 (16)%
Adjusted earnings per share 18.7p 0.4p 18.3p 22.3p 21.7p (16)%
Adjusted diluted earnings per share 18.7p 0.5p 18.3p 22.3p
15. 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
30.9.2024 30.9.2023 31.3.2024
£m £m £m
Net cash from operating activities 114.0 45.0 196.6
Purchase of intangible assets (20.5) (17.5) (35.7)
Purchase of property, plant and equipment (4.4) (7.0) (15.9)
Add back: impact of substantial reorganisation cash flows - 0.6 0.7
Add back: impact of acquisition-related items cash flows - 4.6 5.5
Adjusted free cash flow 89.1 25.7 151.2
Add back: income tax paid 33.8 45.7 73.3
Add back: net interest paid 14.9 13.1 31.0
Adjusted operating cash flow 137.8 84.5 255.5
Adjusted operating profit 133.6 155.6 311.8
Adjusted operating cash flow conversion 103.1% 54.3% 81.9%
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 on an annualised basis covering the preceding twelve-month
period. Net debt comprises cash and cash equivalents, borrowings and lease
liabilities.
30.9.2024 30.9.2023 31.3.2024
£m £m £m
Operating profit 120.1 138.8 280.1
Add back: depreciation and amortisation 42.3 40.6 83.7
EBITDA 162.4 179.4 363.8
Add back: acquisition-related items - 4.2 5.1
Adjusted EBITDA for this period 162.4 183.6 368.9
Adjusted EBITDA for prior year 368.9 453.5
Less: adjusted EBITDA for prior first half (183.6) (222.4)
Annualised adjusted EBITDA 347.7 414.7 368.9
Net debt (Note 9) (436.9) (501.7) (418.2)
Net debt to adjusted EBITDA 1.3x 1.2x 1.1x
15. 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 (interest per debt covenants) on an
annualised basis covering the preceding twelve-month period.
30.9.2024 30.9.2023 31.3.2024
£m £m £m
Adjusted EBITDA for this period 162.4 183.6 368.9
Less: depreciation (17.3) (17.8) (35.5)
EBITA for this period 145.1 165.8 333.4
EBITA for prior year 333.4 417.3
Less: EBITA for prior first half (165.8) (204.5)
Annualised adjusted EBITA 312.7 378.6 333.4
Finance costs 17.6 15.1 36.7
Less: finance income (3.1) (2.3) (4.8)
Interest per debt covenants for this period 14.5 12.8 31.9
Interest per debt covenants for prior year 31.9 12.2
Less: interest per debt covenants for prior first half (12.8) (4.9)
Annualised interest per debt covenants 33.6 20.1 31.9
EBITA to interest 9.3x 18.8x 10.5x
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. Annualised monthly average net assets, annualised average net
debt and annualised average retirement benefit net (assets) / obligations are
the average of those respective month-end balances of the preceding thirteen
months.
30.9.2024 30.9.2023 31.3.2024
£m £m £m
Annualised monthly average net assets 1,397.9 1,342.5 1,389.3
Add back: annualised average net debt 439.8 174.6 371.6
Add back: annualised average retirement benefit net (assets) / obligations 25.7 36.1 31.2
Annualised average capital employed 1,863.4 1,553.2 1,792.1
Adjusted operating profit for this period 133.6 155.6 311.8
Adjusted operating profit for prior year 311.8 402.2
Less: adjusted operating profit for prior first half (155.6) (196.1)
Annualised adjusted operating profit 289.8 361.7 311.8
ROCE 15.6% 23.3% 17.4%
Working capital as a percentage of revenue
Working capital is inventories, current trade and other receivables and
current trade and other payables.
30.9.2024 30.9.2023 31.3.2024
£m £m £m
Inventories 644.2 719.7 656.0
Current trade and other receivables 628.2 687.7 701.4
Current trade and other payables (547.4) (624.8) (602.7)
Working capital 725.0 782.6 754.7
Revenue for this period 1,441.2 1,446.7 2,942.4
Revenue for prior year 2,942.4 2,982.3
Less: revenue for prior first half (1,446.7) (1,458.0)
Annualised revenue 2,936.9 2,971.0 2,942.4
Working capital as a percentage of revenue 24.7% 26.3% 25.6%
15. Alternative Performance Measures (APMs) (continued)
Inventory turn
Inventory turn is annualised cost of sales divided by inventories.
30.9.2024 30.9.2023 31.3.2024
£m £m £m
Cost of sales for this period 825.1 813.8 1,678.5
Cost of sales for prior year 1,678.5 1,630.1
Less: cost of sales for prior first half (813.8) (794.5)
Annualised cost of sales 1,689.8 1,649.4 1,678.5
Inventories 644.2 719.7 656.0
Inventory turn 2.6 2.3 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
30.9.2024 30.9.2023 31.3.2024
£m £m £m
Depreciation and amortisation 42.3 40.6 83.7
Less: amortisation of acquired intangibles (13.5) (12.6) (26.6)
Less: depreciation of right-of-use assets (8.6) (9.4) (18.6)
Adjusted depreciation and amortisation 20.2 18.6 38.5
Capital expenditure 22.5 22.2 51.2
Ratio of capital expenditure to depreciation 1.1 times 1.2 times 1.3 times
INDEPENDENT REVIEW REPORT TO RS GROUP PLC (THE "GROUP")
Conclusion
We have been engaged by the Group to review the consolidated financial
statements in the half-yearly financial report for the six months ended 30
September 2024 which comprises the income statement, the statement of
comprehensive income, the balance sheet, the cash flow statement, the
statement of changes in equity and related notes 1 to 15.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2024 is not prepared,
in all material respects, in accordance with United Kingdom adopted
International Accounting Standard 34 and the Disclosure Guidance and
Transparency Rules 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 inquiries, 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.
As disclosed in Note 1, the annual financial statements of the Group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion 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 entity to
cease to continue as a going concern.
Responsibilities of the Directors
The Directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, 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.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the Group a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the Group in accordance with ISRE (UK) 2410. Our
work has been undertaken so that we might state to the Group those matters we
are required to state to it in an independent review report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Group, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
6 November 2024
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