TIDMRS1
RNS Number : 1444F
RS Group PLC
03 November 2022
3 November 2022
RS GROUP PLC
RESULTS FOR THE HALF YEARED 30 SEPTEMBER 2022
A STRONG FIRST HALF PERFORMANCE WITH CONTINUED MARKET SHARE
GAINS
DAVID EGAN, ACTING CHIEF EXECUTIVE OFFICER, COMMENTED:
"We have delivered a strong revenue and profit performance in
the first half as our differentiated proposition continues to
resonate with all our stakeholders. Our performance has been driven
by our people who are aligned to our purpose-led culture and are
working hard to improve our customer experience and commercial
focus further. We continue to invest in our Group to become
stronger, more profitable and to take greater market share. While
mindful of a slowing economic backdrop, we remain optimistic that
we will continue to outperform the market."
Highlights H1 2022/23 H1 2021/22 Change Like-for-like(2) change
------------------------------------ ----------- ----------- ------- -----------------------
Revenue GBP1,458.0m GBP1,208.9m 21% 16%
------------------------------------ ----------- ----------- ------- -----------------------
Adjusted(3) operating profit GBP196.1m GBP144.8m 35% 30%
Adjusted(3) operating profit margin 13.4% 12.0% 1.4 pts 1.5 pts
Adjusted(3) profit before tax GBP191.6m GBP141.8m 35% 30%
Adjusted(3) earnings per share 31.5p 23.0p 37% 32%
------------------------------------ ----------- ----------- ------- -----------------------
Operating profit GBP187.0m GBP139.1m 34% 29%
Profit before tax GBP182.5m GBP136.1m 34% 29%
Earnings per share 30.0p 21.5p 40% 34%
Interim dividend 7.2p 6.4p 13%
Adjusted(3) free cash flow GBP111.9m GBP84.8m 32%
Net cash / (debt) GBP2.6m GBP(83.6)m
Net debt to adjusted(3) EBITDA n/m 0.3x
Outperformance reflects the strength of our people, purpose-led
culture and differentiated offer
-- Our people are the most powerful driver of our success,
delivering our strong revenue and profit performance
-- Employee engagement score of 78 (2021/22: 75), placing us
near the upper quartile of top performing companies
-- Ongoing increase in average order value as our proposition
gains traction with our core customers
-- Industrial products, 74% of Group revenue, grew volumes c. 8%
with total like-for-like growth of 21%
-- Net Promoter Score of 48.5 (rolling six month(4) ), with all
regions increasing slightly, remains a Group-wide focus
-- Awarded Platinum medal with EcoVadis: we are committed to
being net zero in our operations by 2030
-- All employees are empowered and aligned to our Journey to
Greatness through a share-based award(5)
Margin accretion driven by a tighter commercial focus and
operating leverage while investing strategically
-- Revenue growth of 21% includes a 16% like-for-like
contribution and a 5% currency benefit(2)
-- Gross margin of 45.5%, up 1.8 pts year on year, due to
improved pricing and tighter discount policy
-- One-off payment of c. GBP5 million to financially support our
employees during these more difficult economic times
-- Adjusted(3) operating profit margin of 13.4% benefits from
gross margin gains and strong operating cost leverage
o EMEA operating profit margin of 15.4% includes ongoing
targeted investment in our operating model
o Americas operating profit margin of 17.0% reflects strong
operational leverage on the underlying base
o Asia Pacific operating profit margin of 16.4% due to growing
scale and a tighter commercial focus
-- Adjusted operating profit conversion of 29.6%
Rigorous financial management and balance sheet strength
supports organic and inorganic growth opportunities
-- Adjusted free cash flow generation was strong at GBP111.9
million with inventory investment supporting growth
-- Modest net cash position, with proforma net debt to adjusted
EBITDA of c. 0.6x upon acquisition of Risoul(6)
-- Return on capital employed of 31.4%, a 6.7 percentage point
increase year on year due to strong profitability
-- Increased sustainability-linked loan to GBP400 million and
maturity extended to five years at similar terms
-- Acquisitions of domnick hunter, Thailand, and Risoul(6) ,
Mexico, enhance our product, service and market offer
-- Strong pipeline of acquisition opportunities and strict
financial, strategic and cultural discipline being maintained
Current trading and outlook
Overall, trading over the first four weeks of the second half
has been in line with our expectations.
Despite the more difficult economic backdrop, our performance in
EMEA remains broadly in line with the second quarter driven by our
strong industrial offer, greater proportion of service solutions
revenue and improving service levels. Americas continues to deliver
strong revenue, against toughening comparatives, as we maintain our
investment in our operational capabilities after a period of
exceptional growth. Trading in Asia Pacific continues to be
affected by the slower electronics market and reduced availability
of single-board computing product as well as a more challenging
geopolitical backdrop and lockdowns resuming in China.
Notwithstanding the tougher global economic environment, trading
remains in line with our and consensus expectations for the full
year.
1. Consensus for the year ending 31 March 2023 is revenue of
GBP2,919 million, adjusted operating profit of GBP372.4 million and
adjusted profit before tax of GBP364.9 million. Source:
rsgroup.com/investors/analyst-coverage.
2. Like-for-like change excludes the impact of acquisitions and
the effects of changes in exchange rates on translation of overseas
operating results, with 2021/22 converted at 2022/23 average
exchange rates for the period. Revenue is also adjusted to
eliminate the impact of trading days year on year. Acquisitions are
only included once 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. Currency movements increased
revenue by GBP48.7 million and fewer trading days decreased revenue
by GBP8.0 million during the period. Currency movements increased
adjusted profit before tax by GBP5.8 million.
3. Adjusted excludes 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 associated income tax. See Note 11 for definitions and
reconciliations of all alternative performance measures.
4. Our customer key performance indicator is Group rolling
12-month Net Promoter Score (NPS). We have updated the methodology
from 1 April 2022 to make it more representative of our customer
base. The changes made are to weight NPS by percentage of orders;
separate out business to business (B2B) from business to consumer
(B2C) customers, with B2B becoming our primary metric; and
customers that opted out of marketing can be included in the
survey. As a result, we currently do not have the data to calculate
a Group rolling 12-month NPS (see appendix in 2021/2022 full year
results presentation for full details).
5. Awarded to all permanent and fixed-term employees and
apprentices employed on 14 July 2022.
6. Acquisition of Risoul is subject to review by Mexican
competition authorities and we anticipate it will be completed by
the end of December 2022.
LEI: 549300KVXDURRKVWR37
Enquiries:
020 7239
David Egan Acting Chief Executive Officer 8400
020 7239
Lucy Sharma VP Investor Relations 8427
Martin Robinson / Olivia 020 7353
Peters Tulchan Communications 4200
There will be an analyst presentation today at 9am (UK time) at
Numis, 45 Gresham Street, London EC2V 7BF. We will also provide a
video webcast, which can be accessed live and later as a recording
on the RS Group website at www.rsgroup.com .
Webcast link:
https://www.investis-live.com/rsgroup/634585495cf89d1500069ce5/qbke
It is advisable to pre-register early to avoid any delays in
joining the conference call.
Participant dial-in numbers
United Kingdom (Local): 020 3936 2999
All other locations: +44 20 3936 2999
Participant access code: 362958
Presentation timing
Date: Thursday, 3 November 2022
Time: 9am UK time
Venue: Numis, 45 Gresham Street, London EC2V 7BF
Notes to editors:
RS Group plc is a leading global omni-channel industrial product
and service solutions provider to customers who are involved in
designing, building and maintaining industrial equipment and
operations, safely and sustainably. We stock more than 700,000
industrial and electronic products, sourced from over 2,500 leading
suppliers, and provide a wide range of product and service
solutions to over 1.2 million customers. With operations in 32
countries, we trade through multiple channels and ship over 60,000
parcels a day.
We support customers across the product lifecycle, whether via
innovation and technical support at the design phase, improving
time to market and productivity at the build phase, or reducing
purchasing costs and optimising inventory in the maintenance phase.
We offer our customers tailored product and service propositions
that are essential for the successful operation of their businesses
and help them save time and money.
RS Group plc is listed on the London Stock Exchange with stock
ticker RS1 and in the year ended 31 March 2022 reported revenue of
GBP2,554 million.
BUSINESS REVIEW
Our first half performance has been strong: we have delivered
excellent revenue and profit growth while continuing to invest in
our proposition and support our strategic aspirations. Our people
are driving this outperformance and the investment we have made in
them is supporting a high-performance, purpose-led culture.
This investment has been the most powerful component of our
success and we never underestimate the value our people bring to
all our stakeholders. We thank them all, demonstrating our
appreciation and ensuring all employees can share in our success
through a share-based award based on our Journey to Greatness plan.
We have also invested in more inclusive and relevant employee
benefit programmes and are providing ad-hoc financial support to
all employees during these more difficult economic times.
This has been an exciting six months for our Group. We have
rebranded our corporate name from Electrocomponents plc to RS Group
plc and our businesses are gradually transitioning to the RS brand.
Operating as RS brings recognition to our global reach, strengthens
our product and service solutions offer and unites our Group. We
see significant opportunity from leveraging the RS proposition
globally.
Our work in making amazing happen for a better world, our
purpose, continues to be recognised externally. EcoVadis, the
independent provider of global sustainability ratings, has awarded
RS Group a Platinum medal, its highest ranking, for notable
leadership in the fields of environment and sustainable
procurement. This is another step forward on our Journey to
Greatness.
We are a global business with one vision that is delivered
regionally. Our strategy, The RS Way, remains unchanged but we are
increasing accountability and responsibility by empowering our
regional teams. This allows each country manager to operate their
business according to their local markets and customer needs, which
in turn provides a more relevant, competitive and agile offer.
We continue to grow market share. We have invested to ensure
strong inventory availability at a time when industry supply chain
constraints persist. We have focused on widening our proposition,
solving our customers' problems through providing more product and
service solutions and improving our customer service so our
customers can operate more efficiently.
We are delivering operational efficiencies as we benefit from
the investment we have made in people, processes and tools that
have improved our inventory management, pricing, customer analysis,
marketing and sales effectiveness. This has resulted in greater
agility and a more proactive offer as we utilise the skills and
expertise we have across the Group. Additionally, we are benefiting
from greater automation within our distribution centres (DCs),
allowing us to redeploy our people into more productive and
value-adding operations. We are running a more commercial operating
model, using our extensive data and insight, which is generating
better returns.
At the same time, we are excited about the opportunities we see
for our Group and so continue to invest in our operating model in
areas such as innovation, branding, marketing, systems, technology
and people. We believe that ongoing investment will ensure we are
fit for the future and are strong enough to withstand external
challenges as they occur. Fundamentally, ensuring we remain
relevant and agile, do not become complacent and can adapt to our
environment will underpin our success.
We are committed to acting as a responsible and sustainable
business for all our stakeholders to ensure we are fulfilling our
purpose of making amazing happen for a better world. We continue to
make progress on our 2030 ESG action plan - For a Better World and
are now reporting on our key eight metrics every six months.
Our number one priority remains to ensure that we create a safe,
inclusive and dynamic culture in which our people can thrive and
grow. In our most recent employee engagement survey, our engagement
score improved three points to 78, placing us near the upper
quartile of high-performing organisations . Our commitment has been
recognised externally with our US business ranking 33rd on the list
of Top 50 Inspiring Workplaces in North America in 2022, receiving
special recognition for its inclusive practices.
Given our technical expertise, supplier relationships and
product breadth we are well placed to help our customers on their
sustainability journey. Working closely with our suppliers, we are
developing a range of sustainable product and service solutions
that help our customers maximise operational and environmental
benefits such as reducing energy use, reducing water waste and
cutting CO(2) emissions.
Our organic growth remains a priority. However, with less than a
one percent share of our total addressable market, we want to
accelerate our growth with high-quality acquisitions that have a
compelling strategic, financial and cultural fit.
We are delighted to welcome both domnick hunter in Thailand and
Risoul, subject to Mexican anti-trust clearance expected by the end
of the calendar year. Both these acquisitions expand our
capabilities into new product and service solutions categories and
strengthen our geographic coverage. These are strong specialist
businesses with exceptional teams, which we are very pleased to
retain, who will drive cross-selling synergies in line with our
strategic growth ambitions.
We have transformed and strengthened our Group materially over
recent years, embracing the trends within a rapidly changing market
with significantly greater revenue from service solutions and
digital channels, utilising our extensive data and insight and
driving greater responsibility. We have invested in our model, both
our assets and operations, and have a strong business which
supports our outperformance.
Most importantly we have a different mindset and culture within
our Group; we are more proactive, agile and commercial, operating a
dynamic pricing model, a strong inventory management system and
having a greater understanding of our customers. We have proven we
operate well during more difficult times and have emerged stronger
over recent years despite the COVID-19 pandemic and supply
constraints.
We outlined at the start of our financial year our plans and
vision, within our Journey to Greatness plan, to drive stronger
revenue and high-quality profitable growth. We believe that the
fundamentals of our plan are in place, our proposition is
resonating with all our stakeholders and our future aspirations are
underpinned by providing a
best-in-class service and experience in everything we do.
While we are mindful of a more difficult economic backdrop and
inflationary pressures, we are concentrating our efforts on
improving what we can control and seeing challenges as potential
opportunities. We are confident in the strength of our people and
proposition and believe we are well positioned to deliver continued
market share gains and attractive returns.
OVERALL RESULTS
H1 2022/23 H1 2021/22 Change Like-for-like(1) change
---------------------------------------- ----------- ----------- ------- -----------------------
Revenue GBP1,458.0m GBP1,208.9m 21% 16%
Gross margin 45.5% 43.7% 1.8 pts 2.1 pts
Operating profit GBP187.0m GBP139.1m 34% 29%
Adjusted(2) EBITDA GBP222.4m GBP170.5m 30% 25%
Adjusted(2) operating profit GBP196.1m GBP144.8m 35% 30%
Adjusted(2) operating profit margin 13.4% 12.0% 1.4 pts 1.5 pts
Adjusted(2) operating profit conversion 29.6% 27.4% 2.2 pts 1.9 pts
1. Like-for-like change excludes the impact of acquisitions and
the effects of changes in exchange rates on translation of overseas
operating results, with 2021/22 converted at 2022/23 average
exchange rates for the period. Revenue is also adjusted to
eliminate the impact of trading days year on year. Acquisitions are
only included once 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. See Note 11 for definitions
and reconciliations.
2. Adjusted excludes amortisation and 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. See Note 11 for
definitions and reconciliations.
Revenue
Group revenue in H1 2022/23 was GBP1,458.0 million (H1 2021/22:
GBP1,208.9 million). This included a benefit of GBP48.7 million
from favourable exchange rate movements and GBP2.3 million from
acquisitions offset by GBP8.0 million negative impact from reduced
trading days. Like-for-like revenue growth was 16%, of which
volumes and mix accounted for c. 5 percentage points.
Industrial production figures, supplier indications and results
reported by peers indicate that we are outperforming the industrial
market and gaining share as our customers benefited from our strong
product availability, breadth of product range and service
delivered by our experienced teams. We have focused on our core
customers and away from low-value, transactional customers
resulting in a 5% decrease in our total customer numbers year on
year, with our average order value growing by 23% (excluding RS
Integrated Supply's pass-through sales orders).
Our industrial products ranges, which account for 74% of Group
revenue, grew by 21% like-for-like including a c. 8% contribution
from volume growth. Towards the end of the first half, growth in
our electronic product range and our single-board computing (SBC)
product range slowed partly due to tougher comparatives but also
owing to the ongoing supply constraints, particularly in relation
to the SBC product, Raspberry Pi. Electronics grew by 12% on a
like-for-like basis with demand lower for passives and
semiconductors. OKdo (our technology solutions business focused on
SBC, Internet of Things and education) declined by 39% on a
like-for-like basis and now accounts for 2% of revenue.
RS PRO, which is our main own-brand product range and accounts
for 12% of Group revenue, grew by 21% on a
like-for-like basis. Our offer continues to gain traction driven
by strong availability, new product launches and greater online
personalisation. We have a good product pipeline with a focus on
sustainability and are excited about the opportunities to drive
stronger revenue across the Group.
Digital, accounting for 63% of Group revenue, performed slightly
ahead of the Group overall, growing by 20%
like-for-like. Web revenue, which is a truer representation of
our digital proposition and demand as it excludes eProcurement,
increased by 18% on a like-for-like basis. eProcurement and other
digital, which are used predominantly by our larger customers, grew
25% on a like-for-like basis.
We are delivering improvements to our return on marketing spend.
We have focused on driving customer lifetime value based on
marginal return on investment post customer acquisition costs. We
continue to benefit from promoting a 'test and learn' environment,
resulting in quicker, more iterative development improvements.
Gross margin
Group gross margin increased 1.8 percentage points to 45.5%, (H1
2021/22: 43.7%). Excluding the small dilutive impact from exchange
rates and acquisitions, like-for-like growth was 2.1 percentage
points.
We have taken actions to improve our gross margin through our
margin optimisation tool, revising our discount policy, improving
our own-brand ranges and buying better. Additionally, we have
benefited from price inflation and our low inventory turn which we
expect to unwind going forward. Our gross margin gains are despite
regional and product mix dilution and ongoing pressures from
inbound freight inflation. We have had limited transactional
currency effects with most of our products for EMEA and Asia
Pacific bought in sterling and euros. Our Americas business is
sourced locally in US dollars.
Operating costs
Total operating costs, which include regional and central costs,
increased by 22%. Excluding amortisation and impairment of acquired
intangibles, total adjusted operating costs also increased by 22%,
18% on a like-for-like basis, to GBP467.4 million (H1 2021/22:
GBP383.4 million). A third of this increase relates to foreign
exchange rates and inflation, a third is volume driven and the
balance relates to strategic investment, rebranding and c. GBP5
million one-off payment to all our employees during these more
difficult economic times. Excluding the latter, adjusted operating
costs as a percentage of revenue were flat year on year.
A large proportion of our operating costs relates to our people.
We awarded a pay rise across the Group early in the year but are
continuing to see inflationary pressures within the labour market
given general employment shortages across many specialist areas,
including technology, and greater labour demand within DCs
generally. We are mindful of the competitive pressures for new
talent so have updated many of our employee benefits programmes to
be more inclusive and increased the level of benefits relating to
health and wellbeing. Our employee turnover rate is 12.1% on a
rolling 12-month basis, higher than the first half of last year of
10.2% as the labour market has become more competitive
generally.
Benefits from our RISE programme to simplify the Group have been
realised now. We have a more agile business with leaders that have
greater operational focus and ownership. This simpler operating
model has allowed us to adapt to change faster, improve margins and
operate more efficiently.
We have increased operational investment as we develop our
expertise, technological capabilities and product and service
solutions capacity further. This is to support the significant
growth opportunities that we see, both organically and
inorganically as part of our Journey to Greatness.
Higher energy and fuel costs are a feature of all three regions,
albeit more prevalent within EMEA and less so within Asia Pacific.
Air freight rates are currently stable and are expected to remain
so during the remainder of the calendar year. There has been some
decrease in sea freight rates, but this has been largely offset by
premium fees to secure and expedite shipments given ongoing supply
issues. Our parcel delivery charges have increased in the UK. We
are managing our overall freight cost by sourcing and storing
product closer to the customer. We expect our expanded DC in Bad
Hersfeld, Germany will reduce some of these costs further over time
as we route fewer products through our DCs in the UK.
Adjusted operating costs as a percentage of revenue increased by
0.4 percentage points to 32.1% (H1 2021/22: 31.7%). Our improved
trading momentum and simplified operating model have driven higher
conversion of gross profit into operating profit, with adjusted
operating profit conversion 2.2 percentage points higher at 29.6%
(H1 2021/22: 27.4%). We remain committed to our strategic target of
a 30% adjusted operating profit conversion and high-quality
profitable growth.
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 11 for
definitions and reconciliations of adjusted measures.
Amortisation and impairment of acquired intangibles
Amortisation and impairment of acquired intangibles was GBP9.1
million (H1 2021/22: GBP5.7 million) and relates to the intangible
assets arising from acquisitions. As a result of the rebranding of
Needlers to RS Safety Solutions effective from 1 November 2022,
this includes an impairment of GBP3.3 million for the net book
value of the Needlers brand acquired in December 2020.
Operating profit
Operating profit increased by 34% to GBP187.0 million (H1
2021/22: GBP139.1 million). Excluding the impact of acquisitions
and the GBP6.1 million benefit from currency movements, adjusted
operating profit saw a like-for-like increase of 30% helped by
strong operating leverage. Adjusted operating profit margin
improved 1.4 percentage points to 13.4%.
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 .
H1 2022/23(1) H1 2021/22
------------------------------------------------------------------- ------------- ----------
Carbon intensity (2,3,4)
(tonnes of CO(2) e due to Scope 1 and 2 emissions / GBPm revenue) 1.4 1.8
Carbon emissions(2,3,4)
(tonnes of CO(2) e due to Scope 1 and 2 emissions) 2,100 2,300
Packaging intensity(2) (tonnes / GBPm revenue) 1.66 2.04
Waste (% of waste recycled) 73% 77%
Group Net Promoter Score (see below) 48.5
Employee engagement 78 74(5)
Percentage of management that are women 32% 30%
All Accidents (per 200,000 hours) 0.35 0.41
1. Acquisitions in 2022/23 are not included
2. KPIs are on a constant exchange rate basis and are updated to
reflect changes in reporting methodology and emissions factors.
3. As a result of recent conditions in the energy markets, or
for other reasons, some reports include estimated data where
suppliers have been unable to provide their usual reports.
4. Market based Scope 2 emissions due to electricity use.
5. Comparative employee engagement score is from January 2021 MyVoice survey.
Net Promoter Score
We changed the methodology of calculating our Group rolling
12-month Net Promoter Score (NPS) on 1 April 2022 to better reflect
our customer base. Our new NPS methodology is weighted by
percentage of orders (rather than unweighted) and uses business to
business (B2B) customers as our primary metric, thus excluding our
business to consumer customers. We now also include customers that
have opted out of marketing campaigns, but still provide service
feedback. As a result, we currently do not have the data to
calculate a Group rolling 12-month NPS.
Our rolling six-month NPS was 48.5, with all regions increasing
slightly compared with the shadow survey using the new metrics in
the prior six-month period ended 31 March 2022. Improving NPS is an
area of significant Group-wide focus and we expect to drive
significant improvements through the Journey to Greatness
initiatives, consistent with our objective to provide a
best-in-class customer experience.
Regional performance
EMEA
EMEA accounts for 58% of Group revenue and is managed across the
key markets of: UK and Ireland; France; Italy; Iberia; Germany,
Austria and Switzerland; and rest of EMEA which includes Benelux,
Eastern Europe, Scandinavia, South Africa and our export business
(covering 32 international distribution partners servicing 82
countries). During the first half, we traded under our brand names
of RS, RS PRO, OKdo, RS Integrated Supply (formerly IESA in EMEA),
Needlers and Liscombe. From 1 November 2022 Needlers and Liscombe
were rebranded to RS Safety Solutions. A broad range of products,
high inventory availability and specialist expertise are key
priorities for our customers. We differentiate our offering by
providing an online experience supported by a knowledgeable sales
force, technical expertise, 24/7 customer support and a range of
product and service solutions. Delivering on these differentiators
drives stronger customer relationships, higher average order values
and operational efficiencies.
H1 2022/23 H1 2021/22 Change Like-for-like(1) change
------------------------ ---------- ---------- --------- -----------------------
Revenue GBP854.3m GBP753.2m 13% 15%
Operating profit(2) GBP131.2m GBP119.8m 10% 10%
Operating profit margin 15.4% 15.9% (0.5) pts (0.5) pts
1. Like-for-like adjusted for currency; revenue also adjusted for trading days.
2. See Note 2 for reconciliation to Group operating profit.
-- Overall, EMEA revenue grew 13%, 15% on a like-for-like basis,
to GBP854.3 million (H1 2021/22: GBP753.2 million), benefiting from
an improved operating model and sales focus. We continued to gain
share during the period as the security of our offer, in terms of
product availability and financial strength, resonated with
customers with average order value continuing to improve.
-- UK and Ireland, which accounts for c. 40% of the region's
revenue, delivered solid volume growth resulting from a greater
focus on higher value B2B customers and digital revenue growth.
Price optimisation activity has further supported revenue growth
and gross margin gains.
-- Germany remains strong, marginally above EMEA's growth,
driven by our ongoing investment in and improvement to the
commercial and operating model which is focusing on people
development, improved digital capabilities and product range
expansion.
-- France has focused on improving the customer experience
through targeted sales campaigns to drive increased digital and
own-brand participation.
-- RS Integrated Supply in EMEA continues to win new contracts
across a wide range of industries, with the pipeline remaining very
strong especially within Europe where we have invested in
developing our coverage and reach. However, the operational
investment from expanding into new territories and delay in some
new contracts launching, largely from the customer side, has had an
impact on the financial performance. As part of the rebrand to RS
Integrated Supply (which combines IESA with Synovos in Americas) we
have adapted to the best combined commercial model. We have won new
contracts based on having a global offer with improved procurement
strength. We see more opportunities for cross-Group benefits
including expanding our RS PRO reach.
-- Digital, accounting for 73% of the region's revenue,
outperformed with 19% like-for-like revenue growth as greater focus
continued to be placed on driving organic growth through search
engine optimisation marketing, improving content and greater focus
on delivering greater lifetime customer value. Our mobile
responsive website has delivered a significant improvement in
enabling our customers to use us in real time during their
production process. Web revenue grew 17% on a like-for-like basis.
We continue to see increased activity from our larger customers,
benefiting our eProcurement business.
-- RS PRO, which accounts for 19% of the region's revenue,
performed well with 21% like-for-like revenue growth.
-- OKdo, which accounts for 2% of revenue in the region,
declined 34% on a like-for-like basis with growth impacted by lack
of SBC product.
-- Gross margin has benefited from a cross functional focus to
optimise our pricing proposition, reduce the level of discounting
and implement more agile processes enabling faster pass through of
product cost inflation.
-- Operating profit improved 10%, also up 10% like-for-like, to
GBP131.2 million (H1 2021/22: GBP119.8 million).
-- Operating profit margin declined 0.5 percentage points to
15.4% (H1 2021/22: 15.9%) due to operational investment including
expanding further into Europe within RS Integrated Supply,
improving our customer experience and reducing the cost to
serve.
-- EMEA's rolling six-month NPS was 48.0, a 0.3 point
improvement from the 47.7 score of the shadow survey conducted in
the six months ended 31 March 2022. We maintained relatively stable
levels of availability during the period due to forward planning,
our strong relationships with suppliers and investment in our
inventory position, with some improvement as we exited the first
half. Our teams have continued to work hard to mitigate the impact
of industry-wide supply challenges, improving our service
proposition and making it easier for customers to complete their
journey online.
Americas
Americas accounts for 32% of Group revenue, with Allied
Electronics & Automation (Allied), RS Integrated Supply
(formerly Synovos in Americas), RS PRO and OKdo being our trading
brands during the first half. We are expecting to change our
trading name from Allied to RS in early calendar 2023. We have
operations in the US, together with smaller operations in Canada,
Mexico and Chile. We are driving ongoing gains from the changes we
have made in recent years to focus our sales teams on identifying
new revenue generating opportunities, utilising our shared
expertise across the Group and continuing improvements to our
digital proposition. This is resulting in greater customer
engagement and marketing returns.
An agreement to acquire Risoul, a distributor of industrial and
automation product and service solutions in Mexico, for US$275
million was announced in August 2022 with completion expected,
subject to review by Mexican competition authorities, by the end of
December 2022.
H1 2022/23 H1 2021/22 Change Like-for-like(1) change
------------------------ ---------- ---------- ------- -----------------------
Revenue GBP461.0m GBP333.2m 38% 21%
Operating profit(2) GBP78.3m GBP42.5m 84% 61%
Operating profit margin 17.0% 12.8% 4.2 pts 4.2 pts
1. Like-for-like adjusted for currency; revenue also adjusted for trading days.
2. See Note 2 for reconciliation to Group operating profit.
-- Like-for-like revenue grew 21%, underpinned by a strong
market and the investment we have made over the last few years in
our people, operating model and DC. We are seeing strong growth in
the automation and control product range and we continue to extend
our proposition into the maintenance, repair and operations (MRO)
market. Our customer base has an industrial bias with our strong
growth being across most industry verticals and locations.
-- The investment we have made, in our people and culture,
digital and marketing proposition, distribution centre and product
and service solutions offer, is driving our outperformance. We
significantly expanded our DC in summer 2020 and are seeing the
benefits of having a more automated, efficient and larger operation
and expanded product offer. We have a much more focused field sales
team who are incentivised on customer acquisition and retention,
and a central customer service team that provides specialist
support and help with administrative functions. Our incentive
scheme is aligned to the scorecard we use across the Group to
deliver our strategy, The RS Way. This includes profit as well as
revenue growth.
-- Digital accounted for 45% of the region's revenue, with 25%
like-for-like growth. Like-for-like growth in web revenue was
22%.
-- RS PRO accounts for under 1% of the region's revenue and grew
like-for-like revenue by 46%. The RS PRO brand is less known to our
Americas customers and has an MRO focused range, rather than
automation and control. We expect to benefit from the Group
rebranding as we move towards becoming RS Americas, while the
movement into more MRO focused products and customers to continue
widening our offer will also help drive RS PRO's participation in
the region.
-- RS Integrated Supply in Americas has seen several changes as
we have focused on profitable accounts and put in place processes
that will allow the business to scale more quickly and efficiently.
Following the rebrand from Synovos (and IESA in EMEA) we now offer
customers a best-in-class commercial model, improved procurement
strength and global coverage. We have signed several new contracts
with multinational customers and see more opportunities for
cross-business benefits including expanding our RS PRO reach.
-- Gross margin grew due to a strong product margin focus to
reduce the level of discounting and improve price optimisation
across our products.
-- Operating profit improved 84%, 61% on a like-for-like basis,
to GBP78.3 million (H1 2021/22: GBP42.5 million).
-- Operating profit margin improved 4.2 percentage points, to
17.0% (H1 2021/22: 12.8%) which is a function of larger volumes,
gross margin gains and operational leverage due to the strong
revenue growth on our cost base. We plan to invest further in our
operating model to ensure we can continue to service our customers
well and thus expect there to be some dilution to this margin in
the second half.
-- Americas' rolling six-month NPS was 67.5, a 1.3 point
improvement from the 66.2 score of the shadow survey conducted in
the six months ended 31 March 2022. Our focus remains on delivering
a strong offline and online customer experience and mitigating the
external industry issues we are facing.
Asia Pacific
Asia Pacific accounts for 10% of Group revenue and consists of
Australia and New Zealand (ANZ), Greater China, Japan and Korea,
and South East Asia. RS, RS PRO, OKdo and domnick hunter are our
main trading brands in Asia Pacific. Our broadening product offer,
strong technical expertise, omni-channel service and a growing
range of product and service solutions underpin our market share
growth. This allows us increasingly to become a one-stop-shop
partner of choice for our customers.
H1 2022/23 H1 2021/22 Change Like-for-like(1) change
------------------------ ---------- ---------- ------- -----------------------
Revenue GBP142.7m GBP122.5m 16% 10%
Operating profit(2) GBP23.4m GBP11.9m 97% 80%
Operating profit margin 16.4% 9.7% 6.7 pts 6.6 pts
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.
-- Asia Pacific revenue increased 16%, 10% on a like-for-like
basis, to GBP142.7 million (H1 2021/22: GBP122.5 million).
-- Average order value has continued to improve across the
region as the sales teams focused on the industrial components
market, where we are increasing share, and our higher value
corporate customers.
-- Japan and Korea have benefited from strong growth in
industrial products. Greater China has seen several changes as we
became more commercially focused and concentrated on our
proposition within industrial products. Operational capabilities
continue to be developed in South East Asia which saw strong growth
in the first half, with the acquisition of domnick hunter
accelerating the development of our service offer in the region.
ANZ's performance continues to benefit from high margin RS PRO
growth.
-- OKdo, which accounts for 4% of the region's revenue (H1
2021/22: 9%), declined 51% on a like-for-like basis having been
impacted by the constrained supply of SBC product.
-- Digital, which accounts for 61% of the region's revenue,
increased 13% on a like-for-like basis driven by
like-for-like digital share gains in Japan, Korea and South East
Asia, which saw a strong recovery in eProcurement. Web
like-for-like revenue grew by 10%.
-- RS PRO, which accounts for 14% of the region's revenue, saw
strong like-for-like growth of 17%, with growth spread across all
markets.
-- Gross margin improvement was driven by greater focus on
higher revenue opportunities, the implementation of a small order
handling charge in the second half of 2021/22 and price
increases.
-- Operating profit was GBP23.4 million, nearly double that of
H1 2021/22 which delivered GBP11.9 million.
-- The operating profit margin of 16.4% (H1 2021/22: 9.7%) was a
6.7 percentage points improvement, benefiting from strong revenue
growth, gross margin gains, continued cost discipline and our
scalable operating model. The region remains focused on improving
cost to serve, reducing freight costs by shifting shipments from
air to sea and sourcing products locally.
-- Asia Pacific's rolling six-month NPS was 22.0, a 0.8 point
improvement from the 21.2 score of the shadow survey conducted in
the six months ended 31 March 2022. We remain committed to
improving the customer experience and actions we have implemented,
including a more focused sales force and proactive engagement to
mitigate issues in relation to supply shortages, have been well
received by customers.
Central costs
Central costs are Group head office costs and other one-off
strategic investments and include Board, Group Finance, Group
Professional Services and People costs that cannot be attributed to
region-specific activity.
H1 2022/23 H1 2021/22 Change Like-for-like(1) change
-------------- ----------- ----------- ------ -----------------------
Central costs GBP(36.8)m GBP(29.4)m 25% 25%
1. Like-for-like adjusted for currency.
-- Central costs increased by GBP7.4 million to GBP36.8 million
(H1 2021/22: GBP29.4 million) due to costs related to strategic
investment to support future growth opportunities. This included
investments in global rebranding, innovation and Group technology
infrastructure.
FINANCIAL REVIEW
Net finance costs
Net finance costs were GBP4.9 million (H1 2021/22: GBP3.2
million) with no interest capitalised (H1 2021/22: GBP0.5 million)
as our DC expansions were completed last year. Our fixed to
floating rate interest rate swaps increased net finance costs by
GBP0.4 million; these swap US$85 million of our private placement
loan notes to floating rates and mature before the end of the year
and we have no plans to replace them. At 30 September 2022, 30% (H1
2021/22: 37%; 2021/22: 35%) of the Group's gross borrowings
excluding lease liabilities was at fixed rates, with surplus cash
deposited at variable rates and with low floating interest rates on
deposits there has been little benefit seen from our lower net debt
position.
Profit before tax
Profit before tax was up 34% to GBP182.5 million (H1 2021/22:
GBP136.1 million). Adjusted profit before tax was up 35% to
GBP191.6 million (H1 2021/22: GBP141.8 million), up 30% on a
like-for-like basis.
Taxation
The Group's income tax charge was GBP41.1 million (H1 2021/22:
GBP34.9 million). The adjusted income tax charge, which excludes
the impact of tax on items excluded from adjusted profit before
tax, was GBP43.1 million (H1 2021/22: GBP33.8 million). The
effective tax rate on adjusted profit before tax was 22.5% (H1
2021/22: 23.8%) with the decrease predominantly due to the impact
in H1 2021/22 of recalculating deferred tax balances, as a result
of the UK corporate income tax rate change from 19% to 25%
effective from 1 April 2023 and enacted in May 2021.
Going forward we expect the full year 2022/2023 effective tax
rate on adjusted profit before tax to be c. 23%, increasing to c.
26% in 2023/2024 reflecting the increase in the UK corporate income
tax rate.
Earnings per share
Earnings per share increased 40% to 30.0p (H1 2021/22: 21.5p).
Adjusting for items excluded from adjusted profit and associated
income tax effects, adjusted earnings per share of 31.5p (H1
2021/22: 23.0p) grew 32% like-for-like.
Cash flow
GBPm H1 2022/23 H1 2021/22
----------------------------------------------- ---------- ----------
Operating profit 187.0 139.1
Add back depreciation and amortisation 32.1 31.4
----------------------------------------------- ---------- ----------
EBITDA 219.1 170.5
Add back impairments and loss on disposal of
non-current assets 6.7 -
Movement in working capital (51.0) (48.2)
Movement in provisions (1.1) (1.8)
Other (equity-settled share-based payments and
dividends from joint venture) 8.4 4.3
----------------------------------------------- ---------- ----------
Cash generated from operations 182.1 124.8
Net interest paid (4.1) (3.0)
Income tax paid (44.4) (22.5)
----------------------------------------------- ---------- ----------
Net cash from operating activities 133.6 99.3
Net capital expenditure (22.1) (16.0)
----------------------------------------------- ---------- ----------
Free cash flow 111.5 83.3
Add back cash effect of adjustments(1) 0.4 1.5
----------------------------------------------- ---------- ----------
Adjusted(1) free cash flow 111.9 84.8
----------------------------------------------- ---------- ----------
1. Adjusted excludes the impact of substantial reorganisation cash flows.
Cash generated from operations increased to GBP182.1 million (H1
2021/22: GBP124.8 million) as we continue to be focused on our cash
conversion. Higher EBITDA more than offset continued inventory
investment to support revenue growth. As a result, adjusted
operating cash flow conversion was 81.8%, an increase of 5.6
percentage points.
Net interest paid increased by GBP1.1 million to GBP4.1 million
(H1 2021/22: GBP3.0 million) due to our higher net finance
costs.
Income tax paid increased to GBP44.4 million (H1 2021/22:
GBP22.5 million) due to taxable profit being higher than in H1
2021/22.
Net capital expenditure increased to GBP22.1 million (H1
2021/22: GBP16.0 million) due to the resumption of our ongoing
investment schedule, although this is weighted towards the second
half. Capital expenditure was 1.0 times depreciation (H1 2021/22:
1.0 times), which is in line with our typical maintenance capital
expenditure levels of 1.0 - 1.5 times depreciation. We anticipate
capital expenditure in 2022/23 will be c. GBP50 million.
Free cash flow increased to GBP111.5 million (H1 2021/22:
GBP83.3 million). Excluding cash outflows of GBP0.4 million (H1
2021/22: GBP1.5 million) related to substantial reorganisation
costs provided for in 2020/21, adjusted free cash flow was GBP111.9
million (H1 2021/22: GBP84.8 million).
Working capital
Working capital as a percentage of revenue increased by 1.6
percentage points to 22.8% (H1 2021/22: 21.2%). We continue to
monitor receivables collection closely, which remains our greatest
short-term liquidity sensitivity. Our continued effort to limit our
exposure by tightening credit policies, including short payment
terms and low credit limits for new customers and seeking payment
commitments for overdue balances before releasing new orders to
existing customers, have led to higher cash generation. Trade and
other receivables at GBP636.1 million (H1 2021/22: GBP536.1
million; 2021/22: GBP594.3 million) are higher due to the GBP41.8
million impact of the weaker sterling exchange rate and the balance
due to our increased revenue.
Gross inventories increased to GBP663.6 million (H1 2021/22:
GBP505.7 million; 2021/22: GBP559.2 million). We have extended our
product offering in Americas and invested in inventory across the
Group to ensure continuous availability, supporting strong customer
demand. GBP36.4 million of the increase was due to the weaker
sterling exchange rate. This has led to a decline in our inventory
turn to 2.4 times (H1 2021/22: 2.8 times; 2021/22: 2.7 times). We
expect our inventory turn to improve from this level over the next
six months as we tighten our inventory commitments given the more
uncertain economic backdrop we face. We are restricting our
investment to higher inventory turn products, which we know will
sell through quickly, and utilising information from our customers'
digital searches. Inventory provisions have increased by GBP1.6
million to GBP31.3 million since the year end mainly due to the
slowdown in sales of electronics products.
Overall trade and other payables increased to GBP629.5 million
(H1 2021/22: GBP517.9 million; 2021/22: GBP 584.1 million)
reflecting the growth in inventory and GBP31.8 million impact of
the weaker sterling exchange rate. We pay our suppliers to terms
and have continued to work with some of our larger suppliers to
improve terms where possible. Looking forward we continue to manage
actively our working capital position.
Net debt
Our cash generation has been strong, leading to a net cash
position of GBP2.6 million, compared to GBP42.1 million of net debt
at 31 March 2022 and GBP83.6 million of net debt at 30 September
2021, despite foreign exchange translation impacts of GBP7.5
million. Net cash / debt comprised gross borrowings of GBP376.5
million (H1 2021/22: 285.9 million; 2021/22: GBP300.1 million),
including lease liabilities of GBP44.6 million (H1 2021/22: GBP54.8
million; 2021/22: GBP48.7 million), and interest rate swaps with a
fair value of GBP0.7 million liability (H1 2021/22: GBP0.9 million
asset; 2021/22: GBP0.1 million liability), offset by cash and
short-term deposits of GBP379.1 million (H1 2021/22: GBP201.4
million; 2021/22: GBP257.9 million).
On 24 October 2022 we refinanced our GBP300 million
sustainability-linked loan (SLL) which had a maturity of November
2024. The new SLL is for GBP400 million with a five-year term on
broadly unchanged rates and we increased our lender base by three
to a total of 11 banks. The SLL has a lender option accordion of up
to a further GBP100 million and an option for the Group to extend
for up to two further one-year terms subject to individual lender
approval. The SLL was undrawn at 30 September 2022 and, together
with GBP176.3 million of private placement loan notes, form our
committed debt facilities of GBP476.3 million.
The Group's financial metrics remain strong, with EBITA to
interest of 44.3x and net debt to adjusted EBITDA not being
meaningful due to the Group's net cash position. On a proforma
basis, adjusted for the pending completion of the Risoul
acquisition, net debt to adjusted EBITDA would be 0.6x. These leave
significant headroom for the Group's banking covenants of EBITA to
interest greater than 3 times and net debt to adjusted EBITDA less
than 3.25 times.
Return on Capital Employed (ROCE)
ROCE is the adjusted operating profit for the 12 months ended 30
September 2022 expressed as a percentage of the monthly average
capital employed (net assets excluding net cash / debt and
retirement benefit obligations). ROCE remained strong at 31.4%, up
6.7 percentage points year on year (H1 2021/22: 24.7%) mainly as a
result of higher adjusted operating profit.
Retirement benefit obligations
The Group has defined benefit pension schemes in the UK and
Europe, with the UK scheme being by far the largest. All these
schemes are closed to new entrants and in Germany and Ireland the
pension schemes are closed to accrual for future service.
Overall, the accounting deficit of the Group's defined benefit
schemes at 30 September 2022 was GBP41.2 million compared to
GBP12.4 million at 31 March 2022 and GBP57.4 million at 30
September 2021.
At 30 September 2022, the UK defined benefit scheme had an
accounting surplus of GBP27.7 million (H1 2021/22: an accounting
deficit of GBP42.9 million; 2021/22: accounting surplus of GBP24.9
million). Under the scheme's matching asset portfolio, the decrease
in liabilities mainly caused by a 2.5 percentage points increase in
the discount rate (which increased from 2.8% to 5.3%) was
significantly offset by the decrease in the value of the assets,
leading to the increase in the accounting surplus. Under the
scheme's rules the Group does not have an unconditional right to
any surplus that may arise on the scheme and so the accounting
surplus has been restricted to GBPnil. An additional liability of
GBP31.0 million was recognised which is equal to the present value
of the agreed future deficit contributions under the revised
recovery plan.
The triennial funding valuation of the UK scheme at 31 March
2022 showed a deficit of GBP36.4 million on a statutory technical
provisions basis. A new recovery plan, which replaces the previous
recovery plan, has been agreed with the trustee of the UK scheme
and deficit contributions of GBP11.1 million per annum will be paid
with the aim that the scheme is fully funded on a technical
provisions basis by 30 September 2025.
Due to the high degree of liability hedging in the scheme's
investment strategy, its statutory technical provisions basis has
remained relatively stable since March 2022 despite the current
volatility in the UK markets. In line with the recommendation of
the scheme's liability-driven investments (LDI) manager, the scheme
had sufficient liquidity in its portfolio to more than double its
cash collateral since the end of September 2022.
Dividend
The Board intends to continue to pursue a progressive dividend
policy while remaining committed to a healthy dividend cover over
time by driving improved results and stronger cash flow.
In the normal course, the interim dividend is equivalent to
approximately 40% of the prior year full-year dividend. As such,
the Board proposes an interim dividend of 7.2p per share. This will
be paid on 6 January 2023 to shareholders on the register on 25
November 2022.
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 GBP1.8 million and a one cent movement in the US
dollar would impact annual adjusted profit before tax by GBP0.7
million.
The Group is also exposed to foreign currency transactional risk
because most operating companies have some level of payables in
currencies other than their functional currency. Some operating
companies also have receivables in currencies other than their
functional currency. Group Treasury maintains three to seven months
hedging against freely tradable currencies to smooth the impact of
fluctuations in currency. The Group's largest exposures related to
euros and US dollars.
The Group is exposed to translational exposure on the net assets
of overseas subsidiaries, although local currency debt is used
where economically and fiscally efficient in the financing of
subsidiaries and this provides a degree of natural hedging. The
Group's largest exposures related to US dollars and euros. The
Group's private placement loan notes are also denominated in US
dollars and euros, with a small proportion designated as hedges of
net investments in its US subsidiaries. Overall, the weaker
sterling exchange rate at 30 September 2022 resulted in an increase
of GBP106.4 million to net assets in the first half.
RISKS AND UNCERTAINTIES
The Board has overall accountability for the Group's risk
management, which is managed by the Senior Management Team (SMT)
and co-ordinated by the Group's risk team.
The Group's risk management process identifies, evaluates and
manages the Group's principal risks and uncertainties. These risks
are identified through a variety of sources, both external, to
ensure that developing risk themes (emerging risks) are considered,
and internal, including the Board, senior, regional and country
management teams. These risks are reviewed by both the Group's SMT
Risk Committee, comprising the Group's senior managers, and the
Board.
The Group has a defined risk appetite, which has been adopted by
the Board, and is considered across three risk categories:
strategic, operational and regulatory / compliance. These three
categories use both quantitative and qualitative criteria.
Principal risks and uncertainties
The principal risks and mitigations disclosed in the 2022 Annual
Report and Accounts (pages 50 to 55) were:
Strategic risk category
1. Prolonged effects of the ongoing COVID-19 pandemic across
different geographies (now amended, see below)
2. Fail to respond to strategic market shifts, for example,
changes in customer demands / competitor activity and related
stakeholder requirements
3. The Group's revenue and profit growth activities are not successfully implemented
4. Effects on the business due to geopolitical developments
Operational risk category
5. Failure in the business's critical infrastructure
6. Cyber security breach / information loss
7. UK defined benefit pension scheme cash requirements are more
than the cash available (now removed, see below)
8. People resources unable to support the existing and future growth of the business
9. Impact on the business if the macroeconomic environment deteriorates
10. Potential impact on the business due to climate change
effects
Regulatory / compliance risk category
11. Fail to comply with international and local legal /
regulatory requirements
Two changes have been made to the Group's principal risks from
those disclosed in the 2022 Annual Report and Accounts. These
are:
-- amending wording for risk 1: prolonged effects of the ongoing
COVID-19 pandemic across different geographies.
This risk has been revised to reflect the wider pandemic risk
rather than a focus on the current COVID-19. Although COVID-19
continues as a global pandemic, the success of the global
vaccination programme and subsequent reductions in hospitalisations
and deaths and the lessening severity of new strains has led to
many countries either significantly reducing or removing
restrictions. While further increased infection rates are likely
the Group is better placed to manage these challenges.
-- removing risk 7: UK defined benefit pension scheme cash
requirements are more than the cash available.
Owing to the pension scheme's improved position on a long-term
funding basis and its de-risked investment strategy which reduces
volatility in the funding position, the likelihood of the risk
crystallising has reduced sufficiently to be no longer reported as
a principal risk for the Group.
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
2022 Annual Report and Accounts, our business model is structured
so that the Group has a global network of 14 DCs; a talented and
customer-centric team; strong supplier relationships; a strong
digital presence; a very broad spread of customers both in terms of
industry sector and geography and is not reliant on one particular
group of customers or suppliers; and a broad range of products and
service solutions.
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 cash at 30 September 2022 was GBP2.6 million (31
March 2022: net debt GBP42.1 million). Our committed debt
facilities and loans were GBP476.3 million, of which GBP300.0
million were undrawn (see the net debt section in the Financial
Review for more details of our committed facilities). The earliest
facility expiring was the Group's GBP300 million SLL with a
maturity of November 2024 and an option for the Group to extend for
a further one-year term subject to individual lender approval.
Since 30 September 2022, this SLL has been refinanced to a
five-year GBP400 million SLL with a lender option accordion of up
to a further GBP100 million and an option for the Group to extend
for up to two further one-year terms subject to individual lender
approval.
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 2022 EBITA to interest was 44.3x (31
March 2022: 44.6x) and net debt to adjusted EBITDA was not
meaningful due to the Group's net cash position (31 March 2022:
0.1x) (see Note 11 for reconciliations).
Financial modelling
We frequently update our rolling 18-month 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 gross margin and a
major deterioration in cash collection and would have resulted in
adjusted operating profit margin falling to under 2% in at least
one of the following five quarters. These reverse stress tests
assumed no mitigations and that capital expenditure and dividends
are unchanged from those forecast. 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 3 November 2022.
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.
The Directors of RS Group plc are listed in the RS Group Annual
Report and Accounts for the year ended 31 March 2022. A list of
current Directors is maintained on the RS Group plc website:
www.rsgroup.com .
David Egan, Acting Chief Executive Officer
2 November 2022
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 2022
Six months ended Year ended
30.9.2022 30.9.2021 31.3.2022
Notes GBPm GBPm GBPm
------------------------------------------ ----- --------- --------- ----------
Revenue 2 1,458.0 1,208.9 2,553.7
Cost of sales (794.5) (680.7) (1,425.8)
------------------------------------------ ----- --------- --------- ----------
Gross profit 663.5 528.2 1,127.9
Distribution and marketing expenses (430.6) (354.0) (755.6)
Administrative expenses (45.9) (35.1) (63.5)
Operating profit 2 187.0 139.1 308.8
Finance income 0.5 0.5 1.0
Finance costs (5.4) (3.7) (8.1)
Share of profit of joint venture 0.4 0.2 0.5
Profit before tax 2 182.5 136.1 302.2
Income tax expense (41.1) (34.9) (72.2)
------------------------------------------ ----- --------- --------- ----------
Profit for the period attributable to
owners of the Company 141.4 101.2 230.0
========================================== ===== ========= ========= ==========
Earnings per share attributable to owners
of the Company - Basic 3 30.0p 21.5p 48.9p
Earnings per share attributable to owners
of the Company - Diluted 3 29.8p 21.4p 48.6p
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 September 2022
Six months ended Year ended
30.9.2022 30.9.2021 31.3.2022
GBPm GBPm GBPm
------------------------------------------------ --------- --------- ----------
Profit for the period 141.4 101.2 230.0
------------------------------------------------- --------- --------- ----------
Other comprehensive income
Items that will not be reclassified
subsequently to the income statement
Remeasurement of retirement benefit obligations (33.4) (6.2) 21.8
Income tax on items that will not be
reclassified to the income statement 6.9 5.6 (0.9)
Items that may be reclassified subsequently
to the income statement
Foreign exchange translation differences
of joint venture 0.3 - 0.1
Foreign exchange translation differences 106.1 10.9 21.8
Movement in cash flow hedges 9.3 4.5 1.4
Income tax on items that may be reclassified
to the income statement (2.0) (1.0) (0.3)
------------------------------------------------- --------- --------- ----------
Other comprehensive income for the period 87.2 13.8 43.9
------------------------------------------------- --------- --------- ----------
Total comprehensive income for the period
attributable to owners of the Company 228.6 115.0 273.9
================================================= ========= ========= ==========
GROUP BALANCE SHEET
As at 30 September 2022
30.9.2022 30.9.2021 31.3.2022
Notes GBPm GBPm GBPm
-------------------------------------------- ----- --------- --------- ---------
Non-current assets
Intangible assets 524.6 468.5 473.3
Property, plant and equipment 192.9 171.4 177.3
Right-of-use assets 41.9 51.9 45.8
Investment in joint venture 1.9 1.2 1.5
Other receivables 3.6 2.7 3.0
Interest rate swaps 8 - 0.9 -
Retirement benefit net assets 5 1.1 0.8 0.3
Deferred tax assets 12.6 12.7 4.9
-------------------------------------------- ----- --------- --------- ---------
Total non-current assets 778.6 710.1 706.1
-------------------------------------------- ----- --------- --------- ---------
Current assets
Inventories 6 632.3 469.8 529.5
Trade and other receivables 7 636.1 536.1 594.3
Cash and cash equivalents - cash and
short-term deposits 8 379.1 201.4 257.9
Interest rate swaps - - 0.1
Other derivative assets 7.4 1.4 1.4
Current income tax receivables 15.7 16.2 11.9
-------------------------------------------- ----- --------- --------- ---------
Total current assets 1,670.6 1,224.9 1,395.1
-------------------------------------------- ----- --------- --------- ---------
Total assets 2,449.2 1,935.0 2,101.2
-------------------------------------------- ----- --------- --------- ---------
Current liabilities
Trade and other payables (629.5) (517.9) (584.1)
Cash and cash equivalents - bank overdrafts 8 (154.9) (81.2) (99.5)
Lease liabilities 8 (16.2) (17.0) (16.7)
Interest rate swaps 8 (0.7) - (0.2)
Other derivative liabilities (4.0) (1.1) (3.2)
Provisions (2.3) (2.5) (2.6)
Current income tax liabilities (23.6) (22.8) (19.9)
-------------------------------------------- ----- --------- --------- ---------
Total current liabilities (831.2) (642.5) (726.2)
-------------------------------------------- ----- --------- --------- ---------
Non-current liabilities
Other payables (11.0) (7.7) (6.9)
Retirement benefit obligations 5 (42.3) (58.2) (12.7)
Borrowings 8 (176.3) (149.9) (151.7)
Lease liabilities 8 (28.4) (37.8) (32.0)
Provisions (2.7) (2.8) (2.8)
Deferred tax liabilities (71.5) (61.6) (60.4)
-------------------------------------------- ----- --------- --------- ---------
Total non-current liabilities (332.2) (318.0) (266.5)
-------------------------------------------- ----- --------- --------- ---------
Total liabilities (1,163.4) (960.5) (992.7)
-------------------------------------------- ----- --------- --------- ---------
Net assets 1,285.8 974.5 1,108.5
============================================ ===== ========= ========= =========
Equity
Share capital and share premium 279.0 277.8 278.5
Own shares held by Employee Benefit Trust
(EBT) (0.3) (0.1) (3.0)
Other reserves 169.6 51.5 60.2
Retained earnings 836.8 645.3 772.8
-------------------------------------------- ----- --------- --------- ---------
Equity attributable to owners of the
Company 1,285.1 974.5 1,108.5
Non-controlling interests 0.7 - -
-------------------------------------------- ----- --------- --------- ---------
Total equity 1,285.8 974.5 1,108.5
============================================ ===== ========= ========= =========
GROUP CASH FLOW STATEMENT
For the six months ended 30 September 2022
Six months ended Year ended
30.9.2022 30.9.2021 31.3.2022
Notes GBPm GBPm GBPm
------------------------------------------- ----- --------- --------- ----------
Cash flows from operating activities
Profit before tax 182.5 136.1 302.2
Depreciation and amortisation 32.1 31.4 63.7
Impairment of intangible assets 6.6 - -
Loss on disposal of non-current assets 0.1 - 2.4
Equity-settled share-based payments 8.2 4.2 9.9
Net finance costs 4.9 3.2 7.1
Share of profit of and dividends received
from joint venture (0.2) (0.1) (0.3)
Increase in inventories (62.4) (46.2) (102.1)
Decrease / (increase) in trade and other
receivables 2.0 (40.0) (96.5)
Increase in trade and other payables
and retirement benefit obligations 9.4 38.0 82.4
Decrease in provisions (1.1) (1.8) (1.7)
------------------------------------------- ----- --------- --------- ----------
Cash generated from operations 182.1 124.8 267.1
Interest received 0.5 0.5 1.0
Interest paid (4.6) (3.5) (8.0)
Income tax paid (44.4) (22.5) (57.1)
------------------------------------------- ----- --------- --------- ----------
Net cash from operating activities 133.6 99.3 203.0
------------------------------------------- ----- --------- --------- ----------
Cash flows from investing activities
Acquisition of businesses 10 (3.1) 2.2 2.2
Cash and cash equivalents acquired with
businesses 1.2 - -
------------------------------------------- ----- --------- --------- ----------
Aggregate of cash paid to acquire and
cash and cash equivalents acquired with
businesses (1.9) 2.2 2.2
Purchase of intangible assets, property,
plant and equipment (22.1) (16.0) (42.5)
Net cash used in investing activities (24.0) (13.8) (40.3)
Cash flows from financing activities
Proceeds from the issue of share capital 0.5 2.3 3.0
Purchase of own shares by EBT (0.1) - (2.9)
Loans repaid 8 - (0.7) (0.7)
Payment of lease liabilities 8 (8.9) (9.1) (17.8)
Dividends paid 4 (54.6) (46.1) (76.2)
Net cash used in financing activities (63.1) (53.6) (94.6)
------------------------------------------- ----- --------- --------- ----------
Net increase in cash and cash equivalents 46.5 31.9 68.1
Cash and cash equivalents at the beginning
of the period 158.4 86.4 86.4
Effects of exchange rate changes 19.3 1.9 3.9
------------------------------------------- ----- --------- --------- ----------
Cash and cash equivalents at the end
of the period 8 224.2 120.2 158.4
=========================================== ===== ========= ========= ==========
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 September 2022
Attributable to owners of the Company
Share
capital Own shares
and share held by Other Retained Non-controlling Total
premium EBT reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ---------- ---------- --------- --------- ------- --------------- -------
At 1 April 2021 275.5 (1.5) 37.6 587.8 899.4 - 899.4
-------------------------------- ---------- ---------- --------- --------- ------- --------------- -------
Profit for the period - - - 101.2 101.2 - 101.2
Remeasurement of retirement
benefit obligations - - - (6.2) (6.2) - (6.2)
Foreign exchange translation
differences - - 10.9 - 10.9 - 10.9
Net gain on cash flow
hedges - - 4.5 - 4.5 - 4.5
Taxation on other comprehensive
income - - (1.0) 5.6 4.6 - 4.6
-------------------------------- ---------- ---------- --------- --------- ------- --------------- -------
Total comprehensive
income - - 14.4 100.6 115.0 - 115.0
Cash flow hedging gains
transferred to inventories - - (0.6) - (0.6) - (0.6)
Tax on cash flow hedging
gains transferred to
inventories - - 0.1 - 0.1 - 0.1
Dividends (Note 4) - - - (46.1) (46.1) - (46.1)
Equity-settled share-based
payments - - - 4.2 4.2 - 4.2
Settlement of share
awards 2.3 1.4 - (1.4) 2.3 - 2.3
Tax on equity-settled
share-based payments - - - 0.2 0.2 - 0.2
-------------------------------- ---------- ---------- --------- --------- ------- --------------- -------
At 30 September 2021 277.8 (0.1) 51.5 645.3 974.5 - 974.5
Profit for the period - - - 128.8 128.8 - 128.8
Remeasurement of retirement
benefit obligations - - - 28.0 28.0 - 28.0
Foreign exchange translation
differences - - 11.0 - 11.0 - 11.0
Net loss on cash flow
hedges - - (3.1) - (3.1) - (3.1)
Taxation on other comprehensive
income - - 0.7 (6.5) (5.8) - (5.8)
-------------------------------- ---------- ---------- --------- --------- ------- --------------- -------
Total comprehensive
income - - 8.6 150.3 158.9 - 158.9
Cash flow hedging losses
transferred to inventories - - 0.1 - 0.1 - 0.1
Dividends (Note 4) - - - (30.1) (30.1) - (30.1)
Equity-settled share-based
payments - - - 5.7 5.7 - 5.7
Settlement of share
awards 0.7 - - - 0.7 - 0.7
Purchase of own shares
by EBT - (2.9) - - (2.9) - (2.9)
Tax on equity-settled
share-based payments - - - 1.6 1.6 - 1.6
-------------------------------- ---------- ---------- --------- --------- ------- --------------- -------
At 31 March 2022 278.5 (3.0) 60.2 772.8 1,108.5 - 1,108.5
-------------------------------- ---------- ---------- --------- --------- ------- --------------- -------
Profit for the period - - - 141.4 141.4 - 141.4
Remeasurement of retirement
benefit obligations - - - (33.4) (33.4) - (33.4)
Foreign exchange translation
differences - - 106.4 - 106.4 - 106.4
Net gain on cash flow
hedges - - 9.3 - 9.3 - 9.3
Taxation on other comprehensive
income - - (2.0) 6.9 4.9 - 4.9
-------------------------------- ---------- ---------- --------- --------- ------- --------------- -------
Total comprehensive
income - - 113.7 114.9 228.6 - 228.6
Cash flow hedging gains
transferred to inventories - - (5.3) - (5.3) - (5.3)
Tax on cash flow hedging
gains transferred to
inventories - - 1.0 - 1.0 - 1.0
Dividends (Note 4) - - - (54.6) (54.6) - (54.6)
Equity-settled share-based
payments - - - 8.2 8.2 - 8.2
Settlement of share
awards 0.5 2.8 - (2.7) 0.6 - 0.6
Purchase of own shares
by EBT - (0.1) - - (0.1) - (0.1)
Tax on equity-settled
share-based payments - - - (1.1) (1.1) - (1.1)
Sale of subsidiary's
shares to
n on-controlling interests - - - (0.7) (0.7) 0.7 -
-------------------------------- ---------- ---------- --------- --------- ------- --------------- -------
At 30 September 2022 279.0 (0.3) 169.6 836.8 1,285.1 0.7 1,285.8
================================ ========== ========== ========= ========= ======= =============== =======
NOTES TO THE CONDENSED GROUP ACCOUNTS
1. Basis of preparation
These condensed Group accounts were approved by the Board of
Directors on 2 November 2022 and are unaudited but have been
reviewed by the auditors. They do not constitute statutory accounts
within the meaning of section 434 of the Companies Act 2006, but
have been prepared in accordance with the UK-adopted International
Accounting Standard (IAS) 34 'Interim Financial Reporting' and the
Disclosure and Transparency Rules of the UK's Financial Conduct
Authority. As outlined in the Going Concern statement, the
Directors consider it appropriate to continue to adopt the going
concern basis in preparing these condensed Group accounts. The
Annual Report and Accounts for the year ended 31 March 2022 was
prepared in accordance with UK-adopted international accounting
standards (UK IAS) and has been delivered to the Registrar of
Companies. The auditors' report on those accounts was unqualified,
did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying their report
and did not contain any statement under section 498(2) or 498(3) of
the Companies Act 2006.
These condensed Group accounts have been prepared on the basis
of the accounting policies set out in the Annual Report and
Accounts for the year ended 31 March 2022 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 2023. 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.
The significant judgements made by the Group in applying its
accounting policies and the key sources of estimation uncertainty
were the same as those applied to the Group accounts for the year
ended 31 March 2022, although the assumptions used in the
judgements involved in estimations have been updated to take
account of the Group's latest expectations of the likely impact of
climate change, economic and geopolitical uncertainties and the
COVID-19 pandemic and its variants.
2. Segmental reporting
The Group's operating segments comprise three regions: EMEA,
Americas and Asia Pacific.
EMEA Americas Asia Pacific Group
GBPm GBPm GBPm GBPm
---------------------------------------- ----- -------- ------------ ---------
Six months ended 30 September 2022
Revenue from external customers 854.3 461.0 142.7 1,458.0
---------------------------------------- ----- -------- ------------ -------
Segmental operating profit 131.2 78.3 23.4 232.9
Central costs (36.8)
---------------------------------------- ----- -------- ------------ -------
Adjusted operating profit 196.1
Amortisation and impairment of acquired
intangibles (Note 11) (9.1)
Operating profit 187.0
Net finance costs (4.9)
Share of profit of joint venture 0.4
---------------------------------------- ----- -------- ------------ -------
Profit before tax 182.5
======================================== ===== ======== ============ =======
Six months ended 30 September 2021
Revenue from external customers 753.2 333.2 122.5 1,208.9
---------------------------------------- ----- -------- ------------ -------
Segmental operating profit 119.8 42.5 11.9 174.2
Central costs (29.4)
---------------------------------------- ----- -------- ------------ -------
Adjusted operating profit 144.8
Amortisation of acquired intangibles (5.7)
Operating profit 139.1
Net finance costs (3.2)
Share of profit of joint venture 0.2
---------------------------------------- ----- -------- ------------ -------
Profit before tax 136.1
======================================== ===== ======== ============ =======
2. Segmental reporting (continued)
EMEA Americas Asia Pacific Group
GBPm GBPm GBPm GBPm
------------------------------------- ------- -------- ------------ -------
Year ended 31 March 2022
Revenue from external customers 1,579.5 718.7 255.5 2,553.7
------------------------------------- ------- -------- ------------ -------
Segmental operating profit 243.7 99.3 29.3 372.3
Central costs (51.9)
------------------------------------- ------- -------- ------------ -------
Adjusted operating profit 320.4
Amortisation of acquired intangibles (11.6)
Operating profit 308.8
Net finance costs (7.1)
Share of profit of joint venture 0.5
------------------------------------- ------- -------- ------------ -------
Profit before tax 302.2
===================================== ======= ======== ============ =======
In the table below, revenue is disaggregated by own-brand
products or other products and service solutions, and also by sales
channels. The Group's largest own-brand is RS PRO. GBP1,419.3
million of revenue is recognised at a point in time (six months
ended 30 September 2021: GBP1,203.5 million; year ended 31 March
2022: GBP2,483.9 million) and GBP38.7 million over time (six months
ended 30 September 2021: GBP5.4 million; year ended 31 March 2022:
GBP69.8 million).
EMEA Americas Asia Pacific Group
GBPm GBPm GBPm GBPm
---------------------------------------- ------- -------- ------------ ---------
Six months ended 30 September 2022
Own-brand / ot her products and service
solutions
Own-brand products 170.6 3.7 19.2 193.5
Other product and service solutions 683.7 457.3 123.5 1,264.5
Group 854.3 461.0 142.7 1,458.0
---------------------------------------- ------- -------- ------------ -------
Sales channel
Web 431.4 154.9 66.2 652.5
eProcurement and other digital 192.6 50.1 20.3 263.0
---------------------------------------- ------- -------- ------------ -------
Digital 624.0 205.0 86.5 915.5
Offline 230.3 256.0 56.2 542.5
---------------------------------------- ------- -------- ------------ -------
Group 854.3 461.0 142.7 1,458.0
======================================== ======= ======== ============ =======
Six months ended 30 September 2021
Own-brand / ot her products and service
solutions
Own-brand products 145.3 2.2 15.7 163.2
Other product and service solutions 607.9 331.0 106.8 1,045.7
Group 753.2 333.2 122.5 1,208.9
---------------------------------------- ------- -------- ------------ -------
Sales channel
Web 372.8 111.3 58.1 542.2
eProcurement and other digital 159.6 32.6 16.0 208.2
---------------------------------------- ------- -------- ------------ -------
Digital 532.4 143.9 74.1 750.4
Offline 220.8 189.3 48.4 458.5
---------------------------------------- ------- -------- ------------ -------
Group 753.2 333.2 122.5 1,208.9
======================================== ======= ======== ============ =======
Year ended 31 March 2022
Own-brand / ot her products and service
solutions
Own-brand products 300.2 4.8 34.0 339.0
Other product and service solutions 1,279.3 713.9 221.5 2,214.7
Group 1,579.5 718.7 255.5 2,553.7
---------------------------------------- ------- -------- ------------ ---------
Sales channel
Web 781.7 241.8 121.8 1,145.3
eProcurement and other digital 344.6 69.8 33.9 448.3
---------------------------------------- ------- -------- ------------ ---------
Digital 1,126.3 311.6 155.7 1,593.6
Offline 453.2 407.1 99.8 960.1
---------------------------------------- ------- -------- ------------ ---------
Group 1,579.5 718.7 255.5 2,553.7
======================================== ======= ======== ============ =========
3. Earnings per share
Six months ended Year ended
30.9.2022 30.9.2021 31.3.2022
Number Number Number
------------------------------------------- ----------- ----------- -----------
Weighted average number of shares 471,098,269 470,194,538 470,552,792
Dilutive effect of share-based payments 2,655,779 2,767,829 2,669,271
------------------------------------------- ----------- ----------- -----------
Diluted weighted average number of shares 473,754,048 472,962,367 473,222,063
=========================================== =========== =========== ===========
Basic earnings per share attributable to
owners of the Company 30.0p 21.5p 48.9p
Diluted earnings per share attributable to
owners of the Company 29.8p 21.4p 48.6p
=========================================== =========== =========== ===========
4. Dividends
Six months ended Year ended
30.9.2022 30.9.2021 31.3.2022
GBPm GBPm GBPm
--------------------------------------------- --------- --------- ----------
Final dividend for the year ended 31 March
2022 - 11.6p (2021: 9.8p) 54.6 46.1 46.1
Interim dividend for the year ended 31 March
2022 - 6.4p - - 30.1
54.6 46.1 76.2
============================================= ========= ========= ==========
An interim dividend of 7.2p will be paid on 6 January 2023 to
shareholders on the register on 25 November 2022 with an
ex-dividend date of 24 November 2022 and the estimated amount to be
paid of GBP34.0 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.
30.9.2022 30.9.2021 31.3.2022
GBPm GBPm GBPm
Fair value of scheme assets 421.4 605.6 593.3
Present value of defined benefit obligations (403.9) (663.0) (580.8)
Effect of asset ceiling / onerous liability (58.7) - (24.9)
Retirement benefit net obligations (41.2) (57.4) (12.4)
--------------------------------------------- --------- --------- ---------
Amount recognised on the balance sheet -
liability (42.3) (58.2) (12.7)
Amount recognised on the balance sheet -
asset 1.1 0.8 0.3
============================================= ========= ========= =========
The volatility at the end of September 2022 in the UK markets
caused the discount rate assumption to move from 2.8% at 31 March
2022 to 5.3% at 30 September 2022. This decreased the UK defined
benefit scheme's present value of defined benefit obligations by
GBP179.3 million. This was offset by the decrease in the UK
scheme's fair value of scheme assets as a result of the scheme's
liability hedging strategy.
As a result, the sensitivity of the calculation of the defined
benefit obligations to the assumptions used has decreased. The
sensitivity analysis below is based on a change in the assumption
on the UK scheme while holding all other assumptions constant; in
practice changes in some of the assumptions may be correlated.
A change would have the following increase / (decrease) on the
UK defined benefit obligations as at 30 September 2022:
Increase Decrease
in assumption in assumption
GBPm GBPm
--------------------------------------------- -------------- --------------
Effect on obligation of a 0.1% change to
the assumed discount rate (5.3) 5.4
Effect on obligation of a 0.1% change in
the assumed inflation rate 5.0 (5.0)
Effect on obligation of a change of one year
in assumed life expectancy 11.0 (10.1)
============================================== ============== ==============
6. Inventories
30.9.2022 30.9.2021 31.3.2022
GBPm GBPm GBPm
--------------------- --------- --------- ---------
Gross inventories 663.6 505.7 559.2
Inventory provisions (31.3) (35.9) (29.7)
--------------------- --------- --------- ---------
Net inventories 632.3 469.8 529.5
===================== ========= ========= =========
During the six months ended 30 September 2022 GBP13.4 million
was recognised as an expense relating to the
write-down of inventories to net realisable value (six months
ended 30 September 2021: GBP1.7 million; year ended 31 March 2022:
GBP7.7 million).
Currently the Group does not expect any reasonable likely
changes, including regulatory changes, impacts of the economic and
geopolitical uncertainty and any further impacts of the COVID-19
pandemic and any future variants, to have a material impact on the
net realisable value of inventories.
7. Trade and other receivables
30.9.2022 30.9.2021 31.3.2022
GBPm GBPm GBPm
------------------------------------------ --------- --------- ---------
Gross trade receivables 568.3 461.4 535.8
Impairment allowance (11.4) (8.4) (9.1)
------------------------------------------ --------- --------- ---------
Net trade receivables 556.9 453.0 526.7
Other receivables (including prepayments) 79.2 83.1 67.6
------------------------------------------ --------- --------- ---------
Trade and other receivables 636.1 536.1 594.3
========================================== ========= ========= =========
Trade receivables are written off when there is no reasonable
expectation of recovery, for example when a customer enters
liquidation or the Group agrees with the customer to write off an
outstanding invoice. The Group continues to limit its exposure by
maintaining tight credit policies, including short payment terms
and low credit limits for new customers and seeking payment
commitments for overdue balances before releasing new orders to
existing customers. Historically, the Group has generally
experienced very low levels of trade receivables not being
recovered, including those significantly past due, and this was
also the case during the six months ended 30 September 2022 .
However, with the continued uncertainty about the global economy,
the Group remains cautious about its exposure and so has carefully
reviewed, and maintained at a higher level, its expected loss rates
for those markets and industries that are most affected.
8. Net cash / (debt)
30.9.2022 30.9.2021 31.3.2022
GBPm GBPm GBPm
------------------------------------------- --------- --------- ---------
Cash and short-term deposits 379.1 201.4 257.9
Bank overdrafts (154.9) (81.2) (99.5)
------------------------------------------- --------- --------- ---------
Cash and cash equivalents 224.2 120.2 158.4
Non-current private placement loan notes (176.3) (149.9) (151.7)
Non-current interest rate swaps designated
as fair value hedges - assets - 0.9 -
Current interest rate swaps designated as
fair value hedges - assets - - 0.1
Current interest rate swaps designated as
fair value hedges - liabilities (0.7) - (0.2)
Current lease liabilities (16.2) (17.0) (16.7)
Non-current lease liabilities (28.4) (37.8) (32.0)
Net cash / (debt) 2.6 (83.6) (42.1)
=========================================== ========= ========= =========
Movements in net cash / (debt) were:
Total liabilities
from financing Interest Cash and Net cash
Borrowings Lease liabilities activities rate swaps cash equivalents / (debt)
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ---------- ----------------- ----------------- ----------- ----------------- ---------
Net debt at 1 April 2021 (148.0) (61.5) (209.5) 1.1 86.4 (122.0)
Cash flows 0.7 9.1 9.8 - 31.9 41.7
Net lease additions - (2.1) (2.1) - - (2.1)
Gain / (loss) in fair
value in period 0.2 - 0.2 (0.2) - -
Translation differences (2.8) (0.3) (3.1) - 1.9 (1.2)
-------------------------
Net debt at 30 September
2021 (149.9) (54.8) (204.7) 0.9 120.2 (83.6)
Cash flows - 8.7 8.7 - 36.2 44.9
Net lease additions - (2.6) (2.6) - - (2.6)
Gain / (loss) in fair
value in period 1.0 - 1.0 (1.0) - -
Translation differences (2.8) - (2.8) - 2.0 (0.8)
Net debt at 31 March
2022 (151.7) (48.7) (200.4) (0.1) 158.4 (42.1)
Cash flows - 8.9 8.9 - 46.5 55.4
Acquired with businesses - (0.3) (0.3) - - (0.3)
Net lease additions - (2.9) (2.9) - - (2.9)
Gain / (loss) in fair
value in period 0.6 - 0.6 (0.6) - -
Translation differences (25.2) (1.6) (26.8) - 19.3 (7.5)
Net cash / (debt) at
30 September 2022 (176.3) (44.6) (220.9) (0.7) 224.2 2.6
========================= ========== ================= ================= =========== ================= =========
On 24 October 2022 we refinanced our GBP300 million SLL to a
five-year GBP400 million SLL, on broadly unchanged rates, with a
lender option accordion of up to a further GBP100 million and an
option for the Group to extend for up to two further one-year terms
subject to individual lender approval. The SLL was undrawn at 30
September 2022.
9. Fair values of financial instruments
The other derivatives, interest rate swaps and the fair value of
the private placement loan notes they are hedging are measured at
fair value using Level 2 inputs. These are estimated by discounting
the future contractual cash flows using appropriate market-sourced
data at the balance sheet date.
For all financial assets and liabilities, fair value
approximates the carrying amounts shown in the balance sheet except
for the following:
30.9.2022 30.9.2021 31.3.2022
Carrying Fair Carrying Fair Carrying Fair
amounts value amounts value amounts value
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- ------- -------- ------- -------- -------
Private placement
loan notes (176.3) (170.1) (149.9) (147.5) (151.7) (144.8)
================== ======== ======= ======== ======= ======== =======
The fair values are calculated using Level 2 inputs by
discounting future cash flows to net present values using
prevailing interest rate curves and the Group's credit margin.
10. Acquisitions
On 30 June 2022 the Group acquired 100% of the issued share
capital of domnick hunter-RL (Thailand) Co., Ltd. (DH), a leading
distributor and service provider of major air compression,
purification and filtration products in Thailand. DH accelerates
development of the Group's service solutions offer in Asia Pacific.
The goodwill is attributable to the synergies which are expected to
arise from opportunities to cross-sell product and service solution
ranges. As part of the transaction, immediately following the
acquisition, the Group sold 51% of its shares in Electrocomponents
Holdings (Thailand) Limited, an intermediate holding company of DH,
for GBPnil (THB 1.5 million). This resulted in a 13.26%
non-controlling interest in DH as the Group still controls
Electrocomponents Holdings (Thailand) Limited and DH.
The fair value of the net assets acquired, consideration paid
and payable and goodwill arising were:
GBPm
---------------------------------------------------------------- -----
Intangible assets - customer contracts, relationships and
distribution agreements 1.9
Property, plant and equipment 1.1
Right-of-use assets 0.6
Non-current other receivables 0.7
Inventories 2.6
Current trade and other receivables 3.3
Cash and cash equivalents - cash and short-term deposits 1.2
Current trade and other payables (8.3)
Current lease liabilities (0.1)
Non-current lease liabilities (0.3)
Non-current other payables (0.8)
Non-current other provisions (0.4)
Current income tax liabilities (0.5)
Deferred tax liabilities (0.4)
---------------------------------------------------------------- -----
Net assets acquired 0.6
Goodwill 3.4
Consideration paid - cash 3.1
Consideration payable - accrued, due on agreement of completion
accounts 0.4
Contingent consideration payable - accrued 0.5
================================================================ =====
The goodwill will not be deductible for tax purposes. The fair
values are provisional as the completion accounts are yet to be
approved. The gross contractual amounts receivable for trade and
other receivables was GBP3.8 million, of which GBP0.5 million is
not expected to be collected. No acquisition-related costs for DH
were incurred in the six months ended 30 September 2022. The
contingent consideration payable is due 12 months after the
completion date and is based on revenue growth with a range of
GBPnil to GBP0.5 million. Amortisation is calculated on a
straight-line basis to write off customer contracts, relationships
and distribution agreements at annual rates of 20% - 25%.
DH contributed revenue of GBP2.3 million and profit after tax of
GBP0.2 million to the Group's results since acquisition and is
included in Asia Pacific. If the acquisition had occurred on 1
April 2022, the Group's revenue and profit for the six months ended
30 September 2022 would have been GBP1,460.8 million and GBP140.3
million respectively.
On 10 August 2022 we announced we had agreed to acquire Risoul y
Cia, S.A. de C.V., a leading distributor of industrial and
automation product and service solutions in Mexico, for a cash
consideration of US$275 million on a cash-free and debt-free basis.
The acquisition is expected to be completed by the end of December
2022 as it is subject to review by Mexican competition
authorities.
Movements in the Group's goodwill in the period were:
Cost and net book value GBPm
------------------------ -----
At 1 April 2022 330.5
Acquisition 3.4
Translation differences 53.0
At 30 September 2022 386.9
======================== =====
11. Alternative Performance Measures (APMs)
The Group uses a number of APMs in addition to those measures
reported in accordance with UK IAS. Such APMs are not defined terms
under UK IAS and are not intended to be a substitute for any UK IAS
measure. The Directors believe that the APMs are important when
assessing the underlying financial and operating performance of the
Group. The APMs are used internally for performance analysis and in
employee incentive arrangements, as well as in discussions with the
investment analyst community.
The APMs improve the comparability of information between
reporting periods by adjusting for factors such as fluctuations in
foreign exchange rates, number of trading days and items, such as
reorganisation costs, that are substantial in scope and impact and
do not form part of operational or management activities that the
Directors would consider part of underlying performance. The
Directors also believe that excluding recent acquisitions and
acquisition-related items aid comparison of the underlying
performance between reporting periods and between businesses with
similar assets that were internally generated.
Adjusted profit measures
These are the equivalent UK IAS measures adjusted to exclude
amortisation and impairment of intangible assets arising on
acquisition of businesses, acquisition-related items, substantial
reorganisation costs, substantial asset
write-downs, one-off pension credits or costs, significant tax
rate changes and, where relevant, associated tax effects. Adjusted
profit before tax is a performance measure for the annual bonus and
adjusted earnings per share is a performance measure for the Long
Term Incentive Plan (LTIP). 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 Operating Profit Profit Basic Diluted
Operating Operating profit profit before for the earnings earnings
costs(1) profit margin(2) conversion(3) tax period per share per share
GBPm GBPm % % GBPm GBPm p p
------------------------- --------- --------- ---------- -------------- ------- -------- ---------- ----------
Six months ended 30
September 2022
Reported (476.5) 187.0 12.8% 28.2% 182.5 141.4 30.0p 29.8p
Amortisation and
impairment
of acquired intangibles 9.1 9.1 9.1 7.1 1.5p 1.5p
Adjusted (467.4) 196.1 13.4% 29.6% 191.6 148.5 31.5p 31.3p
------------------------- --------- --------- ---------- -------------- ------- -------- ---------- ----------
Six months ended 30
September 2021
Reported (389.1) 139.1 11.5% 26.3% 136.1 101.2 21.5p 21.4p
Amortisation of acquired
intangibles 5.7 5.7 5.7 6.8 1.5p 1.4p
Adjusted (383.4) 144.8 12.0% 27.4% 141.8 108.0 23.0p 22.8p
========================= ========= ========= ========== ============== ======= ======== ========== ==========
(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.
As a result of the rebranding of Needlers to RS Safety Solutions
effective from 1 November 2022, the net book value of the Needlers
brand acquired in December 2020 has been impaired by GBP3.3
million.
Like-for-like revenue and profit measures
Like-for-like revenue and profit measures are adjusted to
exclude the effects of changes in exchange rates on translation of
overseas profits. They exclude acquisitions in the relevant periods
until they have been owned for a year, at which point they start to
be included in both the current and comparative periods for the
same number of months. These measures enable management and
investors to track more easily, and consistently, the underlying
performance of the business.
The principal exchange rates applied in preparing the Group
accounts and in calculating the following like-for-like measures
are:
Average for six
months ended Closing
30.9.2022 30.9.2021 30.9.2022 30.9.2021 31.3.22
US dollar 1.216 1.388 1.105 1.347 1.313
Euro 1.174 1.165 1.132 1.163 1.183
========== ========= ========= ========= ========= =======
11. 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.
GBPm
--------------------------------------- -------
Revenue for six months ended 30.9.2021
(H1 2021/22) 1,208.9
Effect of exchange rates 48.7
Effect of trading days (8.0)
-------
Revenue for H1 2021/22 at H1 2022/23
rates and trading days 1,249.6
========================================== =======
Less: H1 2021/22
acquisitions at H1 2022/23
owned rates and
H1 2022/23 <1 year H1 2022/23 trading Like-for-like
Group base business H1 2021/22 days change
GBPm GBPm GBPm GBPm GBPm %
------------- ---------- ------------- -------------- ---------- -------------- -------------
EMEA 854.3 - 854.3 753.2 742.0 15%
Americas 461.0 - 461.0 333.2 379.6 21%
Asia Pacific 142.7 2.3 140.4 122.5 128.0 10%
-------------- -------------
Revenue 1,458.0 2.3 1,455.7 1,208.9 1,249.6 16%
============= ========== ============= ============== ========== ============== =============
Gross margin and like-for-like gross margin change
G ross margin is gross profit divided by revenue. Like-for-like
change in gross margin is calculated by taking the difference
between gross margin for the base business for the current period
and gross margin for the prior period with revenue and gross profit
converted at the current period's average exchange rates.
Less:
acquisitions H1 2021/22
H1 2022/23 owned H1 2022/23 at H1 2022/23 Like-for-like
Group <1 year base business H1 2021/22 rates change
GBPm GBPm GBPm GBPm GBPm pts
------------- ---------- ------------- -------------- ---------- -------------- -------------
Revenue 1,458.0 2.3 1,455.7 1,208.9 1,257.6
Gross profit 663.5 1.0 662.5 528.2 545.7
Gross margin 45.5% 43.5% 45.5% 43.7% 43.4% 2.1 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.
Less:
acquisitions H1 2021/22
H1 2022/23 owned H1 2022/23 at H1 2022/23 Like-for-like
Group <1 year base business H1 2021/22 rates change
GBPm GBPm GBPm GBPm GBPm %
--------------------------- ---------- ------------- -------------- ---------- -------------- -------------
Segmental operating
profit
EMEA 131.2 - 131.2 119.8 118.9 10%
Americas 78.3 - 78.3 42.5 48.6 61%
Asia Pacific 23.4 0.3 23.1 11.9 12.8 80%
Segmental operating
profit 232.9 0.3 232.6 174.2 180.3 29%
Central costs (36.8) - (36.8) (29.4) (29.4) 25%
--------------------------- ---------- ------------- -------------- ---------- --------------
Adjusted operating
profit 196.1 0.3 195.8 144.8 150.9 30%
--------------------------- ---------- ------------- -------------- ---------- --------------
Adjusted profit before
tax 191.6 0.3 191.3 141.8 147.6 30%
Adjusted earnings
per share 31.5p - 31.5p 23.0p 23.9p 32%
Adjusted diluted earnings
per share 31.3p - 31.3p 22.8p
=========================== ========== ============= ============== ========== ============== =============
11. Alternative Performance Measures (APMs) (continued)
Free cash flow, adjusted free cash flow and adjusted operating
cash flow conversion
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 free cash flow is free cash flow 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 conversion is adjusted free cash flow
before income tax and net interest paid, expressed as a percentage
of adjusted operating profit and is a financial KPI.
Six months ended Year ended
30.9.2022 30.9.2021 31.3.2022
GBPm GBPm GBPm
----------------------------------------------- --------- --------- ----------
Net cash from operating activities 133.6 99.3 203.0
Purchase of intangible assets, property,
plant and equipment (22.1) (16.0) (42.5)
Free cash flow 111.5 83.3 160.5
Add back: impact of substantial reorganisation
cash flows 0.4 1.5 2.4
Adjusted free cash flow 111.9 84.8 162.9
Add back: income tax paid 44.4 22.5 57.1
Add back: net interest paid 4.1 3.0 7.0
----------------------------------------------- --------- --------- ----------
Adjusted free cash flow before income tax
and net interest paid 160.4 110.3 227.0
Adjusted operating profit 196.1 144.8 320.4
Adjusted operating cash flow conversion 81.8% 76.2% 70.8%
=============================================== ========= ========= ==========
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
acquisition-related items, substantial reorganisation costs,
substantial asset write-downs and one-off pension credits or costs
for the preceding twelve-month period.
30.9.2022 30.9.2021 31.3.2022
GBPm GBPm GBPm
--------------------------------------------- --------- --------- ---------
Operating profit 187.0 139.1 308.8
Add back: depreciation and amortisation 32.1 31.4 63.7
--------------------------------------------- --------- --------- ---------
EBITDA 219.1 170.5 372.5
Add back: impairment of acquired intangibles 3.3 - -
Adjusted EBITDA for this period 222.4 170.5 372.5
Adjusted EBITDA for prior year 372.5 237.8
Less: adjusted EBITDA for prior first half (170.5) (102.0)
--------------------------------------------- --------- --------- ---------
Annualised adjusted EBITDA 424.4 306.3 372.5
Net cash / (debt) (Note 8) 2.6 (83.6) (42.1)
Net debt to adjusted EBITDA n/m 0.3x 0.1x
============================================= ========= ========= =========
Earnings before interest, tax and amortisation (EBITA) and EBITA
to interest
EBITA is adjusted EBITDA after depreciation. EBITA to interest
(one of the Group's debt covenants) is the ratio of EBITA to
finance costs including capitalised interest less finance income
for the preceding twelve-month period.
30.9.2022 30.9.2021 31.3.2022
GBPm GBPm GBPm
---------------------------------------------- --------- --------- ---------
Adjusted EBITDA for this period 222.4 170.5 372.5
Less: depreciation (17.9) (16.6) (33.5)
---------------------------------------------- --------- --------- ---------
EBITA for this period 204.5 153.9 339.0
EBITA for prior year 339.0 205.3
Less: EBITA for prior first half (153.9) (86.1)
---------------------------------------------- --------- --------- ---------
Annualised adjusted EBITA 389.6 273.1 339.0
---------------------------------------------- --------- --------- ---------
Finance costs 5.4 3.7 8.1
Less: finance income (0.5) (0.5) (1.0)
Add back: capitalised interest - 0.5 0.5
---------------------------------------------- --------- --------- ---------
Interest (per debt covenants) for this period 4.9 3.7 7.6
Interest (per debt covenants) for prior year 7.6 7.7
Less: interest (per debt covenants) for prior
first half (3.7) (3.9)
---------------------------------------------- --------- --------- ---------
Annualised interest (per debt covenants) 8.8 7.5 7.6
---------------------------------------------- --------- --------- ---------
EBITA to interest 44.3x 36.4x 44.6x
============================================== ========= ========= =========
11. Alternative Performance Measures (APMs) (continued)
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 a financial KPI.
30.9.2022 30.9.2021 31.3.2022
GBPm GBPm GBPm
------------------------------------------------ --------- --------- ---------
Annualised monthly average net assets 1,116.5 885.4 982.8
Add back: annualised average net debt 36.4 96.4 82.7
Add back: annualised average retirement benefit
net (assets) / obligations 31.5 54.2 49.3
------------------------------------------------ --------- --------- ---------
Annualised average capital employed 1,184.4 1,036.0 1,114.8
Adjusted operating profit for this period 196.1 144.8 320.4
Adjusted operating profit for prior year 320.4 188.3
Less: adjusted operating profit for prior
first half (144.8) (77.6)
------------------------------------------------ --------- --------- ---------
Annualised adjusted operating profit 371.7 255.5 320.4
------------------------------------------------ --------- --------- ---------
ROCE 31.4% 24.7% 28.7%
================================================ ========= ========= =========
Working capital as a percentage of revenue
Working capital is inventories, current trade and other
receivables and current trade and other payables. Working capital
as a percentage of revenue is working capital expressed as a
percentage of annualised revenue.
30.9.2022 30.9.2021 31.3.2022
GBPm GBPm GBPm
------------------------------------------- --------- --------- ---------
Inventories 632.3 469.8 529.5
Current trade and other receivables 636.1 536.1 594.3
Current trade and other payables (629.5) (517.9) (584.1)
------------------------------------------- --------- --------- ---------
Working capital 638.9 488.0 539.7
------------------------------------------- --------- --------- ---------
Revenue for this period 1,458.0 1,208.9 2,553.7
Revenue for prior year 2,553.7 2,002.7
Less: revenue for prior first half (1,208.9) (908.9)
------------------------------------------- --------- --------- ---------
Annualised revenue 2,802.8 2,302.7 2,553.7
------------------------------------------- --------- --------- ---------
Working capital as a percentage of revenue 22.8% 21.2% 21.1%
=========================================== ========= ========= =========
I nventory turn
Inventory turn is annualised cost of sales divided by
inventories.
30.9.2022 30.9.2021 31.3.2022
GBPm GBPm GBPm
----------------------------------------- --------- --------- ---------
Cost of sales for this period 794.5 680.7 1,425.8
Cost of sales for prior year 1,425.8 1,146.7
Less: cost of sales for prior first half (680.7) (516.6)
----------------------------------------- --------- --------- ---------
Annualised cost of sales 1,539.6 1,310.8 1,425.8
----------------------------------------- --------- --------- ---------
Inventories 632.3 469.8 529.5
Inventory turn 2.4 2.8 2.7
========================================= ========= ========= =========
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
30.9.2022 30.9.2021 31.3.2022
GBPm GBPm GBPm
--------------------------------------------- --------- --------- ----------
Depreciation and amortisation 32.1 31.4 63.7
Less: amortisation of acquired intangibles (5.8) (5.7) (11.6)
Less: depreciation of right-of-use assets (8.9) (9.0) (17.7)
--------------------------------------------- --------- --------- ----------
Adjusted depreciation and amortisation 17.4 16.7 34.4
Capital expenditure 17.0 17.4 45.5
Ratio of capital expenditure to depreciation 1.0 times 1.0 times 1.3 times
============================================= ========= ========= ==========
12. Capital commitments
As at 30 September 2022, the Group is contractually committed
to, but has not provided for, future capital expenditure of GBP0.7
million (30 September 2021: GBP2.9 million; 31 March 2022: GBP1.1
million) for property, plant and equipment and GBP4.5 million for
intangible assets (30 September 2021: GBP2.9 million; 31 March
2022: GBP5.5 million).
13. Related party transactions
There has been no material change in related party relationships
in the six months ended 30 September 2022. There were no
significant related party transactions which have materially
affected the financial position or performance of the Group during
that period.
INDEPENT REVIEW REPORT TO RS GROUP PLC
Report on the condensed Group accounts
Our conclusion
We have reviewed RS Group plc's condensed consolidated interim
financial statements (the interim financial statements) in the
condensed Group accounts of RS Group plc for the six month period
ended 30 September 2022 (the period).
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK-adopted
International Accounting Standard 34 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
-- the Group balance sheet as at 30 September 2022;
-- the Group income statement and Group statement of
comprehensive income for the period then ended;
-- the Group cash flow statement for the period then ended;
-- the Group statement of changes in equity for the period then ended; and
-- the explanatory notes to the condensed Group accounts.
The interim financial statements included in the condensed Group
accounts of RS Group plc have been prepared in accordance with the
UK-adopted International Accounting Standard 34 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (ISRE) (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. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the condensed
Group accounts and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the Directors have inappropriately
adopted the going concern basis of accounting or that the Directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with this ISRE.
However, future events or conditions may cause the Group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the Directors
The condensed Group accounts, including the interim financial
statements, is the responsibility of, and has been approved by, the
Directors. The Directors are responsible for preparing the
condensed Group accounts in accordance with the Disclosure Guidance
and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the condensed Group accounts,
including the interim financial statements, the Directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the condensed Group accounts based on our
review. Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. This report, including the conclusion, has been
prepared for and only for the Company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
2 November 2022
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