TIDMRS1
RNS Number : 5588S
RS Group PLC
07 November 2023
7 November 2023
RS GROUP PLC
RESULTS FOR THE HALF YEARED 30 SEPTEMBER 2023
Highlights H1 2023/24 H1 2022/23 Change Like-for-like(1) change
------------------------------------ ---------- ---------- --------- -----------------------
Revenue GBP1,447m GBP1,458m (1)% (8)%
------------------------------------ ---------- ---------- --------- -----------------------
Adjusted operating profit(1) GBP156m GBP196m (21)% (24)%
Adjusted operating profit margin(1) 10.8% 13.4% (2.6) pts (2.3) pts
Adjusted profit before tax(1) GBP143m GBP192m (25)% (29)%
Adjusted earnings per share(1) 22.3p 31.5p (29)% (32)%
------------------------------------ ---------- ---------- --------- -----------------------
Operating profit GBP139m GBP187m (26)% (26)%
Profit before tax GBP126m GBP183m (31)% (30)%
Earnings per share 19.5p 30.0p (35)% (34)%
Interim dividend 8.3p 7.2p 15%
Adjusted free cash flow(1) GBP26m GBP112m (77)%
Cash generated from operations GBP104m GBP182m (43)%
Net (debt) / cash GBP(502)m GBP3m
Net debt to adjusted EBITDA(1) 1.2x n/m
Resilient performance in challenging markets in first half
-- Revenue down 1%, including 8% like-for-like decline and 10% benefit from acquisitions
-- Like-for-like revenue for digital declined 5%, service
solutions grew 4% and our main own-brand, RS PRO, grew 5%
-- Robust gross margin at 43.7%, down 0.4 pts like-for-like
-- Adjusted operating profit margin of 10.8% due to lower
volumes, lack of 2022/23 trading tailwind, short-term dilutive
impact of acquisitions and input cost inflation
-- Adjusted free cash flow impacted by easing of supply chain
constraints, expected to normalise in second half
Positive strategic and operational momentum
-- Operating cost actions identified that deliver annualised savings over GBP30m
-- Opportunity for further improvement through reducing complexity and greater efficiency
-- Continuing to invest in growth accelerators and to improve
operational leverage and operational effectiveness
-- Integration of Distrelec progressing well
Exciting growth opportunity
-- Strong position in fragmented markets with attractive through-cycle growth characteristics
-- Global presence, digitally led, product breadth and service
focus support potential for continued market outperformance
-- Margin expansion opportunity through leveraging physical,
process and digital infrastructure and improved execution
-- Attractive cash generation and returns profile and a robust balance sheet
SIMON PRYCE, CHIEF EXECUTIVE OFFICER, COMMENTED:
"RS has delivered a resilient performance in difficult markets,
which have been more challenging than anticipated at the beginning
of the year. Industrial revenue has been robust despite the
challenging macro and geopolitical environment but cyclical
weakness in electronics has been exasperated by customer
de-stocking. Our committed people are responding effectively in
this environment by reducing costs and driving improvement in
operational effectiveness, whilst continuing to invest to improve
operational leverage and in our growth accelerators.
Whilst markets remain difficult in the short term, the medium
and longer-term growth characteristics are attractive. We are
managing our costs more appropriately whilst continuing to invest
in key strategic accelerators. We are also already beginning to see
the benefit of tighter focus, more alignment, better prioritisation
and improved execution across the Group. This is positioning the
Group very effectively to benefit when our markets return to growth
and gives us continued confidence in our ability to realise our
exciting growth strategy and deliver first choice outcomes for all
our stakeholders."
1. See Note 13 for definitions and reconciliations of all
alternative performance measures, including like-for-like change
and adjusted measures.
Enquiries:
020 7239
Lucy Sharma VP Investor Relations 8427
Martin Robinson / Olivia 020 7353
Peters Teneo 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/65201e2919d2ca0e00132399/qeqq
It is advisable to pre-register early to avoid any delays in
joining the conference call. To ask a question, participants will
need to be connected by phone.
Participant dial-in numbers
United Kingdom (Local): +44 20 4587 0498
All other locations: Global Dial-In Numbers
Participant access code: 006872
Presentation timing
Date: Tuesday, 7 November 2023
Time: 9am UK time
Venue: Deutsche Numis, 45 Gresham Street, London EC2V 7BF
Notes to editors:
RS Group plc provides product and service solutions that help
our customers design, build, maintain, repair and operate
industrial equipment and operations, safely and sustainably. We
stock more than 750,000 industrial and electronic products, sourced
from over 2,500 leading suppliers, and provide a wide range of
product and service solutions to customers.
We support customers across the product lifecycle, whether via
innovation and technical support at the design phase, improving
time to market and productivity at the build phase, or reducing
purchasing costs and optimising inventory in the maintenance,
repair and operation phase. We offer our customers tailored product
and service propositions that are essential for the successful
operation of their businesses and help them save time and
money.
RS Group plc is listed on the London Stock Exchange with stock
ticker RS1 and in the year ended 31 March 2023 reported revenue of
GBP2,982 million.
BUSINESS REVIEW
In the half year ended 30 September 2023, we experienced
continuing geopolitical uncertainty, ongoing deterioration in
manufacturing PMI(1) data globally, industry destocking
particularly in electronics, supply chain normalisation, reducing
price inflation and ongoing cost inflation. Last year we also
benefited from the tailwind of having inventory in a constrained
global supply environment experiencing material price inflation,
which delivered an estimated c. GBP35 million of adjusted operating
profit of which GBP26 million was realised in H1 2022/23 and a
further GBP9 million in H2 2022/23.
Despite this more challenging than anticipated market backdrop,
the lack of trading tailwind and a cost structure that needs to be
more closely aligned to our market and strategic opportunity, we
delivered a resilient performance.
In the first half, new leadership met with RS people across the
globe and took the opportunity to review strategy and evaluate
markets, projects, progress and barriers to execution. This work
served to support and confirm the Group's strategic ambitions and
potential. However, following a sustained period of strong trading
post COVID-19 it also identified significant opportunities to
improve operating effectiveness and execution. We are therefore
taking actions to tighten our focus, create more alignment,
prioritise better and improve agility to accelerate the realisation
of our exciting growth strategy.
Driving operational effectiveness
We have commenced a review of the way we operate and of our core
processes to reduce complexity and improve efficiency. Key actions
that we are undertaking include:
-- Streamlining the Senior Management Team to an empowered
Executive Committee (ExCo) responsible for prioritisation and
effective resource allocation to drive greater focus, agility and
improved operational and financial performance.
-- Creating a broader Advisory Group formed of senior leaders
and functional experts to align, shape, challenge, test and lead
the delivery of our strategic priorities and improvement
actions.
-- Simplifying and clarifying our operating model to reduce
complexity and improve operating effectiveness, agility and
scalability.
-- Commencing a bottom-up, action orientated and aligned
planning process within clearer Group-wide guiderails.
-- Enhancing the Group's performance management metrics and
processes to ensure effective operational oversight, better
information and sharing of best practice and to improve alignment
and collaboration across functional, regional and country
teams.
-- Reducing duplication and creating clarity on accountability.
Improving operational leverage
We are pursuing clear opportunities to improve our operational
leverage as we continue to evolve from a transactional product
supplier to a strategic partner and product and service solutions
provider for our customers and suppliers. This is through increased
prioritisation of higher lifetime value customers, focusing on cost
to serve, implementing and optimising global processes, and
increasing volumes through efficient physical, process and digital
infrastructure.
We are taking action to manage our operating costs more
effectively. We anticipate these actions will deliver over GBP30
million of annualised savings of which GBP10 million will be
realised this year and most of the remainder in 2024/25. The costs
of delivering these savings are estimated to be c. GBP15 million of
which GBP4 million has been incurred in the first half with the
remainder to be incurred in the second half.
Key actions that we have delivered include:
-- Reorganised, aligned our divisional management structures and
reduced headcount in our Americas and Asia Pacific regions.
-- Optimising our supply chain and distribution footprint with
the Distrelec acquisition providing a needed distribution centre
(DC) in Switzerland, improving the functionality of our DC in
Germany and adding third party customer fulfilment centres in
Asia.
-- Completing the migration of all our servers and over 100
back-office, middleware and frontend applications to become a
cloud-based business.
Ongoing growth accelerators
We continue to develop our growth accelerators; the products,
services and customer experience that drive stronger revenue and
increase our share of customer wallet. Over the last six months we
have:
-- Developed and introduced sophisticated search capabilities
powered by Google technology and AI into our UK and Irish websites
which we are rolling out across the globe in the second half.
-- Developed and launched a common customer relationship
management process and tool, initially in Germany, but to be
deployed globally over the next 18 months.
-- Expanded our own-brand range, RS PRO, to include more
automation and control (A&C) products, which are relevant for
our customer base in Americas.
-- Better World sustainable product range now available in 15
countries across EMEA and Asia Pacific.
-- Expanded our service solutions offer further in EMEA,
specifically our inventory management solutions.
Strategic acquisitions
On 30 June 2023 we acquired Distrelec, gaining critical mass in
key markets, widening our product and service solutions offer and
creating the opportunity to realise material operational
efficiencies. Integration is proceeding well, with more potential
benefits than initially anticipated and lower costs of delivery.
With Distrelec experiencing similar market conditions to those of
RS Germany, Switzerland and Scandinavia we are taking the
opportunity to accelerate integration and remain confident that the
acquisition of Distrelec will generate exciting returns for all
stakeholders over the medium and long term.
Our integration of Risoul is progressing well. Trading is
exceeding expectations, helped by the buoyant Mexican market driven
by the nearshoring trend and benefit from strong product
availability where supply remains constrained. We are extending the
product offer from RS into Risoul, developing a transactional
website and leveraging Risoul's technical service knowledge into
our business in Americas.
Driving sustainability for a better world
We continue to advance sustainability across our global
operations through energy saving initiatives and decarbonisation
activities at our DCs, switching to renewable energy tariffs and
transitioning to a net zero fleet, resulting in further reductions
in our direct carbon emissions. Additionally, we are reducing the
cost, distance and emissions of our product transportation, enabled
by our regionalised supply chain, to help reduce our overall carbon
footprint.
Four of our science-based targets covering our direct
operations, logistics, suppliers and products have been validated
by the Science Based Targets initiative.
Exciting through-cycle opportunity
We are a strong global player operating in very fragmented
markets. We are a digitally-led, high-service, broad-based
maintenance, repair and operation (MRO) distributor with particular
strengths in electrical (including electronics), automation and
control as well as complementary products such as test and
measurement, tools and consumables, safety and fluid power.
We provide these critical product and service solutions to help
our industrial customers maintain, repair and operate their
facilities. We execute high volumes of small batch orders through a
well-established physical, process and digital infrastructure,
providing a fast and responsive customer service. The breadth of
our reach through multiple geographies, industries, product
categories, channels and our increasing product and service
solutions focus gives us the potential for continued and sustained
market outperformance over time.
We are already beginning to see the benefit of tighter focus,
more alignment, better prioritisation and much improved execution
and this gives us continuing confidence in our ability to
accelerate realisation of our exciting opportunity.
1. Purchasing Manager Index (PMI) is a survey-based economic
indicator designed to provide a timely insight into business
conditions. The PMI is widely used to anticipate changing economic
trends in official data such as GDP, or sometimes as an alternative
gauge of economic performance and business conditions to official
data, as the latter sometimes suffer from delays in publication,
poor availability or data quality issues. (Source: S&P
Global).
OVERALL RESULTS
H1 2023/24 H1 2022/23 Change Like-for-like(1) change
---------------------------------------- ---------- ---------- --------- -----------------------
Revenue GBP1,447m GBP1,458m (1)% (8)%
Gross margin 43.7% 45.5% (1.8) pts (0.4) pts
Operating profit GBP139m GBP187m (26)% (26)%
Adjusted operating profit(1) GBP156m GBP196m (21)% (24)%
Adjusted operating profit margin(1) 10.8% 13.4% (2.6) pts (2.3) pts
Adjusted operating profit conversion(1) 24.6% 29.6% (5.0) pts (4.6) pts
---------------------------------------- ---------- ---------- --------- -----------------------
Digital revenue(2) GBP872m GBP916m (5)% (5)%
Service solutions revenue(2) GBP337m GBP320m 5% 4%
RS PRO revenue(2) GBP188m GBP182m 3% 5%
1. See Note 13 for definitions and reconciliations of all
alternative performance measures, including like-for-like change
and adjusted measures .
2. See Note 2 for disaggregation of revenue analysis and reconciliations.
Revenue
Group revenue decreased by 1% to GBP1,447 million. Like-for-like
revenue declined 8% after adjusting for the GBP142 million gain
from acquisitions, GBP21 million from adverse exchange rate
movements and a negative impact of GBP13 million from fewer trading
days. As anticipated, the transition of our single-board computing
range away from Raspberry Pi accounted for 1% of the Group
like-for-like revenue decline. Our strong product availability when
global supply chains were constrained provided a trading benefit in
H1 2022/23. We estimate the reversal of this benefit contributed c.
5% of the revenue decline in this half year, as the global supply
chain issues eased and our customers reduced their higher inventory
levels.
Our industrial product and service solutions ranges, which
account for 80% of Group revenue, declined by 2%
like-for-like during the first half with growth across all
ranges apart from A&C (43% of Group revenue) where performance
is most correlated towards the electronics cycle. The macroeconomic
environment remains challenging illustrated by the PMI and
industrial production figures which have deteriorated across our
main markets.
Our electronics product and service solutions range accounts for
19% of Group revenue and is predominantly supplied to our
industrial customers as they become more digitalised and better
connected. Supply constraints have continued to ease and demand
soften, especially for passives and semiconductor components. As a
result, our like-for-like electronics revenue declined by 24%.
RS PRO, which is our main own-brand product range and accounts
for 13% of Group revenue, grew by 5% on a
like-for-like basis, due to extending its product breadth and
the end-to-end sales and marketing focus in the regions. Our
competitively priced offer continues to gain traction as a quality
but non-competing alternative to main branded ranges as we
demonstrate quality and value through our quality assurance
qualifications and design and test facilities.
Digital, accounting for 60% of Group revenue (65% of Group
like-for-like revenue but diluted by Risoul's current offline
model), performed ahead of the Group overall with a like-for-like
revenue decline of 5%. Web revenue decreased by 8% on a
like-for-like basis, while eProcurement and other digital, which
are used predominantly by our larger customers, grew by 2% on a
like-for-like basis.
In the first half, service solutions revenue accounted for 23%
of our Group revenue and increased by 5% to GBP337 million, 4%
like-for-like, with our digital solutions offer being one of the
strongest areas.
Gross margin
Group gross margin decreased 1.8 percentage points to 43.7%, of
which 1.4 percentage points was a function of the dilutive impact
from our recent acquisitions due to their lower digital
participation compared to the rest of the Group. Last year's gross
margin benefit from our cost of sales inflation lagging price
inflation, especially within electronics products, due to our low
inventory turn has begun to unwind. Like-for-like gross margin
decreased 0.4 percentage points, better than anticipated,
reflecting our focus on gross margin optimisation through direct
procurement initiatives, commercial discipline, tighter discount
policies and expanding our own-brand ranges. We expect our gross
margin dilution in the second half to be more than in the first
half due to lower price inflation and full dilutive effect of
acquisitions.
Operating costs
Operating costs, which include regional and central costs,
increased by 4% mainly due to the acquisitions made in the past 12
months. Excluding the impact of acquisitions, the benefit of
currency movements, amortisation and impairment of acquired
intangibles and acquisition-related items, adjusted operating costs
reduced by 4% like-for-like with lower variable costs more than
offsetting cost inflation specifically within labour and energy. We
have also taken action to manage our operating costs more
effectively, part of which is accelerating the integration of
Distrelec. We estimate that these actions will deliver over GBP30
million of annualised savings of which GBP10 million will be
realised this year and most of the remainder in 2024/25. The costs
of delivering these savings are estimated to be some GBP15 million
of which GBP4 million has been incurred in the first half with the
remainder in the second half.
A large proportion of our operating costs relate to our people.
We awarded a mid-single digit pay increase across the Group which
included a higher than average increase for our non-management
employees in most markets in recognition of the greater impact of
inflationary pressures. As sales volumes have reduced, we have
flexed our variable people costs and additional actions in specific
areas, with people costs slightly down excluding the impact of
acquisitions. Our employee voluntary annual turnover rate remains
low at 8.2%.
We continue to invest to ensure we are developing our strategic
growth drivers, strengthening our digital and commercial
capabilities, technology platform, product and service solutions
capacity and improving our operating basics. This means we will be
well-positioned to benefit when economic conditions improve. We are
monitoring our investment spend closely and implementing greater
oversight around execution, progress and delivery.
We are seeing a continued benefit from the expansion and ongoing
optimisation of our DC in Bad Hersfeld, Germany, which allows us to
route more inventory directly into Europe, and not through our UK
DCs, so reducing the additional border costs relating to Brexit and
improves our environmental footprint. Against this, lower volumes
in our DCs overall have reduced our operational efficiencies. We
remain focused on optimising our network of DCs to minimise freight
costs and miles and are improving our operating structure to drive
greater operational focus and ownership so that we can simplify our
cost base further.
Central costs (Group strategic investment, Board, Group Finance
and Group Professional Services and People costs that cannot be
attributed to region-specific activity) decreased by GBP6 million
to GBP31 million, largely reflecting foreign exchange and lower
share-based payments. We will focus on tighter cost management
going forward.
Adjusted operating costs as a percentage of revenue increased by
0.9 percentage points to 33.0%, while adjusted operating profit
conversion is 5.0 percentage points lower at 24.6%.
Items excluded from adjusted profit
To improve the comparability of information between reporting
periods and between businesses with similar assets that were
internally generated, we exclude certain items from adjusted profit
measures. The items excluded are described below (see Note 13 for
definitions and reconciliations of adjusted measures).
Amortisation and impairment of acquired intangibles
Amortisation of acquired intangibles was GBP13 million (H1
2022/23 amortisation and impairment of acquired intangibles: GBP9
million) and relates to the intangible assets arising from
acquisitions.
Acquisition-related items
Acquisition-related items of GBP4 million mainly relate to
transaction costs incurred in the first half which are directly
attributable to the acquisition of Distrelec.
Operating profit
Operating profit decreased by 26% to GBP139 million. Excluding
the impact of acquisitions and the adverse impact of currency
movements, adjusted operating profit saw a like-for-like decrease
of 24%. We estimate the reversal of the one-off trading benefit in
H1 2022/23 contributed c. 13% of the decrease in this half year.
Adjusted operating profit margin declined by 2.6 percentage points
to 10.8%.
Non-financial key performance indicators (KPIs)
We have eight non-financial KPIs to help measure progress
against our strategy and the commitments of our 2030 ESG action
plan - For a Better World. To provide greater transparency on our
performance in the period, a summary of our progress is included
below with further details available in the ESG section on our
website: www.rsgroup.com /esg .
H1 2023/24 H1 2022/23
------------------------------------------------------------------- ---------- ----------
Carbon intensity (1,2,3)
(tonnes of CO(2) e due to Scope 1 and 2 emissions / GBPm revenue) 1.4 1.4
Carbon emissions(1,2,3)
(tonnes of CO(2) e due to Scope 1 and 2 emissions) 1,800 2,000
Packaging intensity(1,2) (tonnes / GBPm revenue) 1.73 1.76
Waste(1) (% of waste recycled) 83% 76%
Group rolling 12-month Net Promoter Score (NPS) 50.4 48.5
Employee engagement(4) - 78
Percentage of management that are women 31% 32%
All accidents (per 200,000 hours) 0.34 0.35
1. Revenue and environmental-related performance of businesses
acquired in 2022/23 and 2023/24 are not included pending
finalisation and confirmation of their reports, which we are aiming
to publish in our Annual Report and Accounts for the year ending 31
March 2024 (Annual Report 2024).
2. KPI is on a constant exchange rate basis and updated to
reflect changes in reporting methodology and emissions factors.
3. Scope 2 emissions calculated with electricity purchased from
renewable sources at zero CO(2) e per kWh and grid average CO(2) e
per kWh for all other sources.
4. We are in the process of compiling the results from our
October 2023 engagement survey and the results will be published in
our Annual Report 2024.
REGIONAL PERFORMANCE
EMEA
Like-for-like
H1 2023/24 H1 2022/23 Change (1) change
----------------------------- ---------- ---------- --------- -------------
Revenue GBP861m GBP854m 1% (4)%
Operating profit(2) GBP132m GBP131m 1% (2)%
Operating profit margin 15.3% 15.4% (0.1) pts 0.4 pts
----------------------------- ---------- ---------- --------- -------------
Digital revenue(3) GBP637m GBP624m 2% (1)%
Service solutions revenue(3) GBP252m GBP235m 7% 6%
RS PRO revenue(3) GBP168m GBP159m 5% 6%
1. Like-for-like adjusted for currency and to exclude the impact
of acquisitions; revenue also adjusted for trading days.
2. See Note 2 for reconciliation to Group operating profit.
3. See Note 2 for disaggregation of revenue analysis and
reconciliations to region's revenue.
EMEA revenue increased 1% with like-for-like revenue declining
4% as some of our product markets contracted and recession affected
some countries. PMI data in all countries has worsened during the
period, with specific weakness in our A&C industrial category
where some parts of our range are closely aligned to more cyclical
electronics components. The electronics market has continued to
deteriorate and is affecting those countries with the most
exposure. In the comparative period we benefited from our strong
inventory availability which temporarily increased our volumes,
particularly with one-off transactional customers. We have
maintained share with our target customers but have seen some
smaller, lower value and transitory customers revert to their usual
distribution channels.
UK and Ireland, which accounts for 40% of the region's revenue,
delivered low single-digit revenue growth resulting from a focus on
higher-value corporate customers and less exposure to electronics
products. A more targeted customer focus, coordinated marketing
campaigns, effective pricing and understanding our cost to serve
has supported revenue and profit growth.
France grew in the first half as we continued to focus on our
long-term high-value customers. We are working in partnership with
our strategic suppliers to develop effective commercial and
marketing activities, especially in our core product categories,
providing technical product support using both our sales teams and
digital channels.
Germany suffered due to the weakening economy and slowdown in
production output. Germany has the greatest exposure to electronics
products in Europe, leading to a material fall in demand for
on-board products. We are continuing to expand the product range
stocked in the market at our enlarged DC, pivoting our offer
towards growth sectors to ensure preparedness to exploit our
position when the market recovers. Additionally, this is reducing
fulfilment costs and improving service to customers.
Digital, accounting for 74% of the region's revenue, was
supported by growth from our target customers using eProcurement
and purchasing manager channels. We continue to focus on generating
recurring revenue and customer loyalty with our target customers
through providing digital procurement solutions. Web revenue is
most impacted by lower demand from transitory customers as the
supply chain constraints have eased.
Service solutions growth, which accounts for 29% of EMEA's
revenue, benefited from greater participation of our digital
solutions offer of eProcurement and purchasing manager as we
migrate higher-value customers from the web. RS Integrated Supply
in EMEA continues to win new contracts, although the operational
investment of their rollout continues to impact financial
performance and depress profitability. We are improving our
commercial model, which, together with cross-selling opportunities,
will enhance our financial results going forward.
RS PRO, which accounts for 20% of the region's revenue,
increased its share as we continue to expand the range of products,
using quarterly marketing launches, to provide customers with a
high quality and lower price point alternative.
Distrelec contributed GBP45 million to revenue and GBP3 million
to EMEA's operating profit since its acquisition on 30 June 2023.
Detailed plans have been developed for accelerating the integration
of key markets. In the first three months of ownership trading has
been below original expectations given Distrelec's German and
electronics exposure; albeit performance has been in line with
trading seen in our similar businesses. We remain confident in the
delivery of the anticipated cost savings and synergy benefits from
cross selling opportunities; Distrelec has already started to sell
RS PRO products.
EMEA's operating profit margin was impacted by the effect of the
acquisition of Distrelec and integration costs. Excluding this,
like-for-like operating profit margin increased due to gross margin
benefiting from the quick pass through of product cost inflation
against a lower average cost of inventory and tight operating cost
control.
EMEA's rolling 12-month NPS was 50.8, 6% above H1 2022/23. We
have continued to improve inventory availability as lead times
reduce, while inventory investments in our expanded DC in Germany
and our new warehouse in Spain have also improved service levels to
customers.
Americas
Like-for-like
H1 2023/24 H1 2022/23 Change (1) change
----------------------------- ---------- ---------- --------- -------------
Revenue GBP476m GBP461m 3% (14)%
Operating profit(2) GBP52m GBP78m (33)% (41)%
Operating profit margin 11.0% 17.0% (6.0) pts (5.2) pts
----------------------------- ---------- ---------- --------- -------------
Digital revenue(3) GBP172m GBP205m (16)% (13)%
Service solutions revenue(3) GBP63m GBP62m 3% 0%
RS PRO revenue(3) GBP3m GBP4m (8)% (4)%
1. Like-for-like adjusted for currency and to exclude the impact
of acquisitions; revenue also adjusted for trading days.
2. See Note 2 for reconciliation to Group operating profit.
3. See Note 2 for disaggregation of revenue analysis and
reconciliations to region's revenue.
Revenue increased by 3% due to the acquisition of Risoul in
January 2023. Excluding Risoul, exchange rate movements and the
impact of trading days, revenue declined 14% like-for-like against
very strong comparatives in H1 2022/23 when we benefited from
strong inventory availability when market supply was constrained,
delivering trading and pricing gains, especially within electronics
and associated product ranges.
Volumes during the period fell reflecting the declining market,
especially in A&C which trades more in line with the
electronics cycle. This particularly impacted Americas as A&C
accounted for 70% of the region's revenue versus 43% across the
Group. Also, customers had less of a requirement to hold inventory
as supply chain constraints eased. Demand from more transitory
customers, who purchased from us when their typical channels did
not have supply, has reduced and we saw greater pricing competition
within the market particularly in the electronics product
range.
We have made significant changes in our sales proposition as we
develop more strategic customer relationships. This has focused on
targeting high-growth vertical markets, generating more targeted
product campaigns and improving our digital proposition and service
offer, all of which are resulting in greater customer engagement
and marketing returns.
Our digital like-for-like revenue decline slightly outperformed
the region's revenue decline as we moved some of our large
customers onto our eProcurement platforms.
While less mature than in EMEA, we have been developing our
digitally led service solutions offer in Americas. Growth has been
driven by developing our eProcurement offer and more customised
order and project consultancy services. RS Integrated Supply in
Americas has seen several changes as we have focused on profitable
accounts and put in place processes that will allow the business to
scale more quickly and efficiently. We have signed several new
contracts with multinational customers and are focusing on driving
cross-selling opportunities with RS PRO.
RS PRO continues to account for under 1% of the region's revenue
but we expect to benefit from our rebranding to RS Americas and
tailoring the product offering to be more appropriate for the
region's customers.
Risoul contributed GBP95 million to revenue and GBP8 million to
Americas' operating profit in the first half. Revenue performance
is stronger than anticipated helped by strong inventory
availability despite ongoing supply chain issues.
Operating profit and operating profit margin fell due to the
volume decline and as last year's gross margin gains from price
inflation benefits unwound. During the period we took action to
adjust our cost base to the reduced volumes, namely within our
headcount, which led to short-term operating costs with benefits
second-half weighted. We have also invested in training, tools and
technology for our customer-facing teams and continue to adjust our
operating model to serve our customers better while lowering
overall cost. Additionally, we continued to invest in marketing and
other strategic initiatives focused on customer growth, digital and
technology advances and our service solutions offering.
Americas' rolling twelve-month NPS was 64.4, a 4% decline from
67.0 in H1 2022/23, reflecting some market pricing pressures and
the twelve-month metric includes the temporary effect of the brand
change which took place in February 2023. Our focus remains on
delivering a strong customer experience and mitigating the external
industry issues we are facing.
Asia Pacific
Like-for-like
H1 2023/24 H1 2022/23 Change (1) change
----------------------------- ---------- ---------- ---------- -------------
Revenue GBP110m GBP143m (23)% (18)%
Operating profit(2) GBP2m GBP23m (91)% (90)%
Operating profit margin 1.9% 16.4% (14.5) pts (13.7) pts
----------------------------- ---------- ---------- ---------- -------------
Digital revenue(3) GBP64m GBP87m (26)% (21)%
Service solutions revenue(3) GBP21m GBP23m (10)% (5)%
RS PRO revenue(3) GBP17m GBP19m (13)% (6)%
1. Like-for-like adjusted for currency and to exclude the impact
of acquisitions; revenue also adjusted for trading days.
2. See Note 2 for reconciliation to Group operating profit.
3. See Note 2 for disaggregation of revenue analysis and
reconciliations to region's revenue.
Asia Pacific's revenue decline was against a period of
exceptionally strong growth in H1 2022/23 with performance
negatively impacted by a sharp slowdown and then contraction in the
electronics market and the unwinding of supply constraints. The
global economic slowdown was across the whole region, although we
have seen particularly difficult trading in China given less
external investment as industrial production has moved outside the
country.
As with many distribution businesses, a certain level of revenue
is required to offset the underlying cost base making operating
profit very sensitive to changes in revenue. The rapid reduction in
revenue at a time of growth investment has had an impact on our
operating profit margin.
Australia and New Zealand, accounting for 33% of the region's
revenue, maintained like-for-like revenue growth, benefiting from
stronger performance in large industrial customers and less
exposure to the electronics sector. Our success with large
corporate customers has provided a blueprint to scale across the
rest of the region.
Greater China, which represents 24% of the region's revenue, was
heavily impacted by the ongoing geopolitical uncertainty and
greater exposure to the electronics sector. The economic recovery
after the COVID-19 lockdowns has been much slower than
expected.
South East Asia revenue represents 31% of the region's revenue
and saw like-for-like revenue decline with softer demand for
electronics products, stagnant manufacturing segment growth and
political instability specifically in Thailand. We have invested in
expanding our local inventory capacity including upgrading our
warehouse in Thailand and opening new local warehouses in Malaysia
and Philippines in the first half which will support revenue growth
and improve lead times once the market starts to recover.
Japan and Korea saw the steepest revenue decline due to its high
exposure to the electronics market and weaker industrial
performance following strong growth in H1 2022/23. We have seen
customer destocking in Japan as inventory held as a buffer when
supply chains were constrained has unwound.
Digital like-for-like revenue decline was due to weaker market
demand and lower search engine optimisation performance with
reduced traffic and conversion rates; a function of supply chain
normalisation within the market and the more transitory customers
reverting to previous suppliers.
Like-for-like revenue decline in RS PRO outperformed the region.
This was supported by an improved go-to-market strategy with
specific product marketing campaigns to targeted customers. We have
launched RS PRO focused product ranges to capture high value
opportunities with target customers.
Operating profit margin was impacted by the reversal of the
inventory benefits in H1 2022/23, resulting in significant volume
reduction, and a weaker gross margin as supply chain constraints
eased and competitive pressures increased. The new warehouses
opened in South East Asia are operated by third party logistic
providers, with the associated cost being an operating, rather than
capital, expenditure. We have made some adjustments to our cost
base to reflect lower volumes, including adapting our labour
requirements, which will start to deliver financial benefits by the
end of the second half.
Asia Pacific's rolling twelve-month NPS was 20.2, versus 17.1 in
H1 2022/23. Our focus remains on delivering a strong customer
experience and mitigating the external industry issues we are
facing.
FINANCIAL REVIEW
Net finance costs
Net finance costs were GBP13 million, up from GBP5 million
mainly due to the impact of increased net debt resulting from the
acquisition of Distrelec and Risoul and higher interest rates. At
30 September 2023, 20% of the Group's gross borrowings excluding
lease liabilities (H1 2022/23: 30%; 2022/23: 49%) was at fixed
rates, with surplus cash deposited at variable rates. Going forward
we expect the full year 2023/2024 net finance costs to be c. GBP30
million based on current interest rates.
Profit before tax
Profit before tax declined 31% to GBP126 million. Adjusted
profit before tax was down 25% to GBP143 million, 29% on a
like-for-like basis.
Taxation
The Group's income tax charge was GBP34 million (H1 2022/23:
GBP41 million). The adjusted income tax charge, which excludes the
impact of tax relief on items excluded from adjusted profit before
tax, was GBP38 million (H1 2022/23: GBP43 million), resulting in an
effective tax rate of 26.2% on adjusted profit before tax (H1
2022/23: 22.5%).
The main driver for the increase in the rate was the change in
the UK corporate income tax rate from 19% to 25% effective from 1
April 2023. Going forward we expect the full year 2023/2024
effective tax rate on adjusted profit before tax to be c. 26%.
Earnings per share
Earnings per share declined by 35% to 19.5p. Adjusting for items
excluded from adjusted profit and associated income tax effects,
adjusted earnings per share of 22.3p declined 32% on a
like-for-like basis.
Cash flow
GBPm H1 2023/24 H1 2022/23
--------------------------------------------- ---------- ----------
Operating profit 139 187
Add back depreciation and amortisation 41 32
--------------------------------------------- ---------- ----------
EBITDA(1) 179 219
Add back impairments and loss on disposal of
non-current assets - 7
Movement in working capital (79) (45)
Defined benefit retirement contributions in
excess of charge (5) (6)
Movement in provisions 1 (1)
Other 7 8
--------------------------------------------- ---------- ----------
Cash generated from operations 104 182
Net capital expenditure (25) (22)
--------------------------------------------- ---------- ----------
Operating cash flow 79 160
Add back cash effect of adjustments(1) 5 -
--------------------------------------------- ---------- ----------
Adjusted operating cash flow(1) 85 160
Net interest paid (13) (4)
Income tax paid (46) (44)
--------------------------------------------- ---------- ----------
Adjusted free cash flow(1) 26 112
--------------------------------------------- ---------- ----------
1. See Note 13 for definitions and reconciliations of all
alternative performance measures .
Lower EBITDA (earnings before interest, tax, depreciation and
amortisation) was compounded by the receipt of inventory from
suppliers that had either been on order for a long time or was
received quicker than expected due to the easing of global supply
chain issues. As a result, cash generated from operations was
GBP104 million (H1 2022/23: GBP182 million) causing adjusted
operating cash flow conversion to fall by 27.5 percentage points to
54.3%.
Net capital expenditure increased from GBP22 million to GBP25
million as we continued to invest in optimising our DCs,
implementing new product management systems, augmenting digital
commerce capabilities and strengthening our technology
platforms.
Capital expenditure was at 1.2 times depreciation (H1 2022/23:
1.0 times), in line with our typical maintenance capital
expenditure levels of 1.0 - 1.5 times depreciation. We anticipate
capital expenditure in 2023/24 to be c. GBP50 million including
planned spend to deliver our 2030 ESG action plan such as
decarbonising our DC in Beauvais, France.
Net interest paid increased by GBP9 million to GBP13 million due
to increased net debt resulting from the acquisition of Distrelec
and Risoul and higher interest rates.
Income tax paid rose to GBP46 million reflecting additional
payments made in respect of the previous year and advance tax
payments based on early estimates of higher results.
Adjusted free cash flow fell to GBP26 million. We remain
committed to conserving cash while ensuring we continue to invest
in our business to enable a swift recovery when the economic
conditions improve.
Working capital
Working capital as a percentage of revenue increased by 3.5
percentage points year on year to 26.3%, with half of the increase
due to the impact of the acquisitions.
Trade and other receivables have decreased by GBP4 million since
the year end to GBP688 million, with the acquisition of Distrelec
increasing receivables by GBP27 million. The collection of
receivables is our greatest short-term liquidity sensitivity and we
continue to limit our exposure through tight credit policies,
proactive monitoring and collections.
Gross inventories were GBP799 million, an increase of GBP139
million since the year end with the acquisition of Distrelec
accounting for GBP74 million. Our inventory levels have increased
due to the easing of global supply chain issues resulting in the
improvement in performance of suppliers fulfilling new orders and
the receipt of inventory previously on long lead times. As a
result, our inventory turn has decreased to 2.3 times from 2.6
times at March. We expect to benefit during the second half from
actions to reduce inventory levels in response to declining
volumes. Inventory provisions have increased by GBP35 million to
GBP79 million since the year end, GBP23 million due to the
acquisition of Distrelec as expected and the balance due to the
continued sales slowdown pushing inventory into excess,
particularly of electronics products where minimum order quantities
are high.
Overall trade and other payables decreased to GBP625 million
from GBP659 million at March with the acquisition of Distrelec
increasing payables by GBP35 million. The overall reduction
reflects the slowdown in the business and the timing of payments
for inventories.
Looking forward we continue to manage our working capital
position actively and optimising cash conversion is a key area of
focus. We remain focused on receivables collection. We will
continue to seek to manage our inventory levels to take account of
changing demand dynamics and supply chain behaviour, while
anticipating our customers' expectations. We will continue to
invest in the right inventory to ensure that we remain well
positioned to maintain service levels and deliver strong growth as
the markets recover. We pay our suppliers to terms and continue to
work with some of our larger suppliers to improve terms where
possible.
Net debt
Our net debt has increased to GBP502 million from GBP113 million
at March (see Note 8) with the acquisition of Distrelec increasing
net debt by GBP333 million.
The acquisition was funded by a new three-year term loan of
EUR150 million and drawing down part of our GBP400 million
sustainability-linked loan (SLL) facility. The SLL, term loan and
the private placement loan notes form our committed debt facilities
of GBP691 million, of which GBP168 million was undrawn at 30
September 2023. In October 2023, our request to take up one of the
one-year term extensions to the SLL was approved by the lenders and
so this facility now matures in October 2028, with a further
one-year extension option remaining.
The Group's financial metrics remain strong, with net debt to
adjusted EBITDA of 1.2x and EBITA to interest of 18.8x, leaving
significant headroom for the Group's banking covenants of net debt
to adjusted EBITDA less than 3.25 times and EBITA to interest
greater than 3 times.
Return on Capital Employed (ROCE)
ROCE is the adjusted operating profit for the 12 months ended 30
September 2023 expressed as a percentage of the monthly average
capital employed (net assets excluding net debt and retirement
benefit obligations). ROCE was 23.3% compared to 31.4% at 30
September 2022, due to the impact of acquisitions in the last
twelve months (2.0 percentage points), the decline in adjusted
operating profit (3.8 percentage points) and the increase in
monthly average capital employed (2.3 percentage points).
Retirement benefit obligations
Overall, the retirement benefit net obligations of the Group's
defined benefit schemes at 30 September 2023 were GBP31 million
compared to GBP36 million at 31 March 2023 and GBP41 million at 30
September 2022. The UK defined benefit scheme (our largest scheme)
had a net obligation of GBP21 million under International
Accounting Standard 19 'Employee Benefits', being the present value
of the agreed future deficit contributions agreed following the
March 2022 triennial funding valuation and payable to September
2025.
Dividend
The Board intends to continue to pursue a progressive dividend
policy while remaining committed to a healthy dividend cover over
time by driving improved results and stronger cash flow.
In the normal course, the interim dividend is equivalent to
approximately 40% of the prior year full-year dividend. As such,
the Board proposes an interim dividend of 8.3p per share. This will
be paid on 5 January 2024 to shareholders on the register on 24
November 2023.
Foreign exchange risk
The Group does not hedge translation exposure on the income
statements of overseas subsidiaries. Based on the mix of
non-sterling denominated revenue and adjusted operating profit, a
one cent movement in the euro would impact annual adjusted profit
before tax by GBP2.1 million and a one cent movement in the US
dollar would impact annual adjusted profit before tax by GBP1.2
million.
The Group is also exposed to foreign currency transactional risk
because most operating companies have some level of payables in
currencies other than their functional currency. Some operating
companies also have receivables in currencies other than their
functional currency. Group Treasury maintains three to seven months
hedging against freely tradable currencies to smooth the impact of
fluctuations in currency. The Group's largest exposures related to
euros and US dollars.
RISKS AND UNCERTAINTIES
The Board has overall accountability for the Group's risk
management, which is managed by the Executive Committee and
co-ordinated by the Group's risk team. The principal elements of
the process are: the identifying of risks, their assessment, their
mitigation and then the ongoing monitoring of these risks.
The Group has a defined risk appetite, which has been adopted by
the Board, and is considered across three risk categories:
strategic, operational and regulatory / compliance. These three
categories use both quantitative and qualitative criteria.
Principal risks and uncertainties
The principal risks and mitigations disclosed in the 2023 Annual
Report and Accounts (pages 40 to 47) were:
1. Talent and people resources
2. Change in customer, supplier or competitor behaviours
3. Geopolitical environment
4. Delivery of strategy: The RS Way
5. M&A activity
6. Organisational resilience
7. Cyber security breach / information loss
8. Future global pandemics
9. Macroeconomic environment
10. Climate change
11. Legal and regulatory compliance
These risks have not changed since they were reported in the
2023 Annual Report and Accounts.
GOING CONCERN
Overview
In adopting the going concern basis for preparing these
condensed Group accounts, the Board has considered the Group's
future trading prospects; the Group's available liquidity, the
maturity of its debt facilities and obligations under its debt
covenants; and the Group's principal risks as summarised above.
As described in more detail in the Viability Statement in the
2023 Annual Report and Accounts, our business model is structured
so that the Group has a global network of DCs; a talented and
customer-centric team; strong supplier relationships; a broad and
deep product offering and service solutions capabilities; and a
strong digital presence. We are not reliant on one particular group
of customers or suppliers and have a very broad spread of customers
both in terms of industry sector and geography.
Financial position, liquidity and debt covenants
Our capital position is supported by regular reviews of the
Group's funding facilities and debt covenants' headroom, through
the Board's Treasury Committee.
The Group's net debt at 30 September 2023 was GBP502 million (31
March 2023: GBP113 million). Our committed debt facilities were
GBP691 million, of which GBP168 million were undrawn (see the net
debt section in the Financial Review for more details of our
committed facilities). The earliest facility expiring is our GBP130
million (EUR150 million) term loan in April 2026.
The Group's debt covenants are EBITA to interest to be greater
than 3 times and net debt to adjusted EBITDA to be less than 3.25
times, which are measured on a rolling 12-month basis at half year
and year end. At 30 September 2023 EBITA to interest was 18.8x (31
March 2023: 34.2x) and net debt to adjusted EBITDA was 1.2x (31
March 2023: 0.2x) (see Note 13 for reconciliations).
Financial modelling
We frequently update our rolling 18-month forecast and this is
reviewed regularly, and the assumptions approved, by the Board.
We have undertaken reverse stress tests on the latest forecast
to assess the circumstances that would threaten the Group's current
financing arrangements. These included significant declines in
like-for-like revenue, significant declines in revenue and gross
margin and a major deterioration in cash collection and each would
have to result in adjusted operating profit margin falling to under
3% in at least one of the following five quarters. Also, a reverse
stress test of an acquisition of a significantly loss-making
business was undertaken and would have to cost over GBP250 million
to use up our debt facilities. All these reverse stress tests
assumed no mitigations, capital expenditure and dividends are
unchanged from those forecast and there are no changes in debt
financing. The Board considers the risk of these circumstances
occurring to be remote.
Going concern basis
Based on the assessment outlined above, the Board has a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the going
concern period of at least 12 months from 6 November 2023.
Therefore, the Board believes that it is appropriate to continue to
adopt the going concern basis in preparing these condensed Group
accounts.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE
HALF-YEAR FINANCIAL REPORT
The Directors confirm that these condensed Group accounts have
been prepared in accordance with International Accounting Standard
34 'Interim Financial Reporting' as contained in UK-adopted
International Financial Reporting Standards and that the interim
management report includes a fair review of the information
required by Disclosure and Transparency Rules (DTR) 4.2.7 and DTR
4.2.8, namely:
-- An indication of important events that have occurred during
the first six months and their impact on the condensed set of
accounts, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- Material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
A list of current Directors of RS Group plc is maintained on the
RS Group plc website: www.rsgroup.com .
Kate Ringrose, Chief Financial Officer
6 November 2023
Forward-looking statements
This financial report contains certain statements, statistics
and projections that are or may be forward-looking. The accuracy
and completeness of all such statements, including, without
limitation, statements regarding the future financial position,
strategy, projected costs, plans and objectives for the management
of future operations of RS Group plc and its subsidiaries is not
warranted or guaranteed. These statements typically contain words
such as "intends", "expects", "anticipates", "estimates" and words
of similar import. By their nature, forward-looking statements
involve risk and uncertainty because they relate to events and
depend on circumstances that will occur in the future. Although RS
Group plc believes that the expectations reflected in such
statements are reasonable, no assurance can be given that such
expectations will prove to be correct. There are a number of
factors, which may be beyond the control of RS Group plc, which
could cause actual results and developments to differ materially
from those expressed or implied by such forward-looking statements.
Other than as required by applicable law or the applicable rules of
any exchange on which our securities may be listed, RS Group plc
has no intention or obligation to update forward-looking statements
contained herein.
GROUP INCOME STATEMENT
For the six months ended 30 September 2023
Six months ended Year ended
30.9.2023 30.9.2022 31.3.2023
Notes GBPm GBPm GBPm
------------------------------------------ ----- --------- --------- ----------
Revenue 2 1,446.7 1,458.0 2,982.3
Cost of sales (813.8) (794.5) (1,630.1)
------------------------------------------ ----- --------- --------- ----------
Gross profit 632.9 663.5 1,352.2
Distribution and marketing expenses (446.9) (430.6) (899.5)
Administrative expenses (47.2) (45.9) (79.7)
Operating profit 2 138.8 187.0 383.0
Finance income 2.3 0.5 2.0
Finance costs (15.1) (5.4) (14.2)
Share of profit of joint venture 0.3 0.4 0.7
Profit before tax 2 126.3 182.5 371.5
Income tax expense (34.1) (41.1) (86.7)
------------------------------------------ ----- --------- --------- ----------
Profit for the period attributable to
owners of the Company 92.2 141.4 284.8
========================================== ===== ========= ========= ==========
Earnings per share attributable to owners
of the Company
Basic 3 19.5p 30.0p 60.4p
Diluted 3 19.5p 29.8p 60.2p
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 September 2023
Six months ended Year ended
30.9.2023 30.9.2022 31.3.2023
GBPm GBPm GBPm
------------------------------------------------ --------- --------- ----------
Profit for the period 92.2 141.4 284.8
------------------------------------------------- --------- --------- ----------
Other comprehensive income
Items that will not be reclassified
subsequently to the income statement
Remeasurement of retirement benefit obligations 0.3 (33.4) (34.2)
Related income tax - 6.9 7.9
Items that may be reclassified subsequently
to the income statement
Foreign exchange translation differences
of joint venture - 0.3 (0.1)
Foreign exchange translation differences 19.0 106.6 43.1
Fair value (loss) / gain on net investment
hedges (2.4) (0.5) 5.4
Movement in cash flow hedges (0.5) 9.3 3.9
Related income tax 0.1 (2.0) (0.7)
------------------------------------------------- --------- --------- ----------
Other comprehensive income for the period 16.5 87.2 25.3
------------------------------------------------- --------- --------- ----------
Total comprehensive income for the period
attributable to owners of the Company 108.7 228.6 310.1
================================================= ========= ========= ==========
GROUP BALANCE SHEET
As at 30 September 2023
30.9.2023 30.9.2022 31.3.2023
Notes GBPm GBPm GBPm
-------------------------------------------- ----- --------- --------- ---------
Non-current assets
Intangible assets 1,012.1 524.6 704.8
Property, plant and equipment 183.8 192.9 186.3
Right-of-use assets 75.6 41.9 46.9
Investment in joint venture 1.2 1.9 1.5
Other receivables 9.2 3.6 6.5
Retirement benefit net assets 5 0.8 1.1 0.8
Deferred tax assets 4.7 12.6 6.9
-------------------------------------------- ----- --------- --------- ---------
Total non-current assets 1,287.4 778.6 953.7
-------------------------------------------- ----- --------- --------- ---------
Current assets
Inventories 6 719.7 632.3 616.3
Trade and other receivables 7 687.7 636.1 692.0
Cash and cash equivalents - cash and
short-term deposits 8 379.1 379.1 260.3
Other derivative assets 2.5 7.4 1.8
Current income tax receivables 30.2 15.7 19.9
-------------------------------------------- ----- --------- --------- ---------
Total current assets 1,819.2 1,670.6 1,590.3
-------------------------------------------- ----- --------- --------- ---------
Total assets 3,106.6 2,449.2 2,554.0
-------------------------------------------- ----- --------- --------- ---------
Current liabilities
Trade and other payables (624.8) (629.5) (658.9)
Cash and cash equivalents - bank overdrafts 8 (268.8) (154.9) (139.8)
Other borrowings 8 (12.6) - -
Lease liabilities 8 (15.7) (16.2) (14.6)
Interest rate swaps 8 - (0.7) -
Other derivative liabilities (2.8) (4.0) (1.7)
Provisions (4.5) (2.3) (1.8)
Current income tax liabilities (27.6) (23.6) (22.1)
-------------------------------------------- ----- --------- --------- ---------
Total current liabilities (956.8) (831.2) (838.9)
-------------------------------------------- ----- --------- --------- ---------
Non-current liabilities
Other payables (8.8) (11.0) (9.3)
Retirement benefit obligations 5 (31.9) (42.3) (37.2)
Borrowings 8 (523.1) (176.3) (184.6)
Lease liabilities 8 (60.6) (28.4) (34.3)
Provisions (16.0) (2.7) (4.7)
Deferred tax liabilities (113.6) (71.5) (90.1)
-------------------------------------------- ----- --------- --------- ---------
Total non-current liabilities (754.0) (332.2) (360.2)
-------------------------------------------- ----- --------- --------- ---------
Total liabilities (1,710.8) (1,163.4) (1,199.1)
-------------------------------------------- ----- --------- --------- ---------
Net assets 1,395.8 1,285.8 1,344.9
============================================ ===== ========= ========= =========
Equity
Share capital and share premium 283.7 279.0 283.3
Own shares held by Employee Benefit Trust
(EBT) (0.4) (0.3) (2.2)
Other reserves 126.2 169.6 108.8
Retained earnings 985.6 836.8 954.3
-------------------------------------------- ----- --------- --------- ---------
Equity attributable to owners of the
Company 1,395.1 1,285.1 1,344.2
Non-controlling interests 0.7 0.7 0.7
-------------------------------------------- ----- --------- --------- ---------
Total equity 1,395.8 1,285.8 1,344.9
============================================ ===== ========= ========= =========
GROUP CASH FLOW STATEMENT
For the six months ended 30 September 2023
Six months ended Year ended
30.9.2023 30.9.2022 31.3.2023
Notes GBPm GBPm GBPm
----------------------------------------------- ----- --------- --------- ----------
Cash flows from operating activities
Profit before tax 126.3 182.5 371.5
Depreciation and amortisation 40.6 32.1 64.6
Impairment of intangible assets - 6.6 7.1
Loss on disposal of non-current assets 0.1 0.1 4.4
Equity-settled share-based payments 6.6 8.2 14.2
Net finance costs 12.8 4.9 12.2
Share of profit of and dividends received
from joint venture 0.3 (0.2) (0.1)
Increase in inventories (50.2) (62.4) (44.3)
Decrease / (increase) in trade and other
receivables 29.7 2.0 (37.8)
(Decrease) / increase in trade and other
payables (58.6) 15.2 33.2
Increase / (decrease) in provisions 1.2 (1.1) (1.4)
Defined benefit retirement contributions
in excess of charge (5.0) (5.8) (10.6)
----------------------------------------------- ----- --------- --------- ----------
Cash generated from operations 103.8 182.1 413.0
Interest received 2.3 0.5 2.0
Interest paid (15.4) (4.6) (14.6)
Income tax paid (45.7) (44.4) (93.9)
----------------------------------------------- ----- --------- --------- ----------
Net cash from operating activities 45.0 133.6 306.5
----------------------------------------------- ----- --------- --------- ----------
Cash flows from investing activities
Acquisition of businesses 10 (313.1) (3.1) (237.2)
Cash and cash equivalents acquired with
businesses 10 9.0 1.2 12.7
----------------------------------------------- ----- --------- --------- ----------
Total cash impact on acquisition of businesses (304.1) (1.9) (224.5)
Purchase of intangible assets (17.5) (12.1) (27.5)
Purchase of property, plant and equipment (7.0) (10.0) (18.6)
Proceeds on sale of property, plant and
equipment - - 0.1
Net cash used in investing activities (328.6) (24.0) (270.5)
Cash flows from financing activities
Proceeds from the issue of share capital 0.4 0.5 4.8
Purchase of own shares by EBT (0.1) (0.1) (2.1)
Loans drawn down 402.3 - 83.2
Loans repaid 8 (53.2) - (58.1)
Payment of lease liabilities 8 (9.5) (8.9) (18.8)
Dividends paid 4 (64.8) (54.6) (88.6)
Net cash from / (used in) financing
activities 275.1 (63.1) (79.6)
----------------------------------------------- ----- --------- --------- ----------
Net (decrease) / increase in cash and
cash equivalents (8.5) 46.5 (43.6)
Cash and cash equivalents at the beginning
of the period 120.5 158.4 158.4
Effects of exchange rate changes (1.7) 19.3 5.7
----------------------------------------------- ----- --------- --------- ----------
Cash and cash equivalents at the end
of the period 8 110.3 224.2 120.5
=============================================== ===== ========= ========= ==========
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 September 2023
Attributable to owners of the Company
Share
capital 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 2022 278.5 (3.0) 60.2 772.8 1,108.5 - 1,108.5
----------------------------- ---------- ---------- --------- --------- ------- --------------- -------
Profit for the period - - - 141.4 141.4 - 141.4
Remeasurement of retirement
benefit obligations - - - (33.4) (33.4) - (33.4)
Foreign exchange translation
differences - - 106.4 - 106.4 - 106.4
Movement in cash flow
hedges - - 9.3 - 9.3 - 9.3
Tax on other comprehensive
income - - (2.0) 6.9 4.9 - 4.9
----------------------------- ---------- ---------- --------- --------- ------- --------------- -------
Total comprehensive
income - - 113.7 114.9 228.6 - 228.6
Cash flow hedging gains
transferred to inventories - - (5.3) - (5.3) - (5.3)
Tax on cash flow hedging
transfers - - 1.0 - 1.0 - 1.0
Dividends (Note 4) - - - (54.6) (54.6) - (54.6)
Equity-settled share-based
payments - - - 8.2 8.2 - 8.2
Settlement of share
awards 0.5 2.8 - (2.7) 0.6 - 0.6
Purchase of own shares
by EBT - (0.1) - - (0.1) - (0.1)
Tax on equity-settled
share-based payments - - - (1.1) (1.1) - (1.1)
Sale of subsidiary's
shares to
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
Profit for the period - - - 143.4 143.4 - 143.4
Remeasurement of retirement
benefit obligations - - - (0.8) (0.8) - (0.8)
Foreign exchange translation
differences - - (58.0) - (58.0) - (58.0)
Movement in cash flow
hedges - - (5.4) - (5.4) - (5.4)
Tax on other comprehensive
income - - 1.3 1.0 2.3 - 2.3
----------------------------- ---------- ---------- --------- --------- ------- --------------- -------
Total comprehensive
income - - (62.1) 143.6 81.5 - 81.5
Cash flow hedging losses
transferred to inventories - - 1.6 - 1.6 - 1.6
Tax on cash flow hedging
transfers - - (0.3) - (0.3) - (0.3)
Dividends (Note 4) - - - (34.0) (34.0) - (34.0)
Equity-settled share-based
payments - - - 6.0 6.0 - 6.0
Settlement of share
awards 4.3 0.1 - (0.2) 4.2 - 4.2
Purchase of own shares
by EBT - (2.0) - - (2.0) - (2.0)
Tax on equity-settled
share-based payments - - - 2.1 2.1 - 2.1
At 31 March 2023 283.3 (2.2) 108.8 954.3 1,344.2 0.7 1,344.9
----------------------------- ---------- ---------- --------- --------- ------- --------------- -------
Profit for the period - - - 92.2 92.2 - 92.2
Remeasurement of retirement
benefit obligations - - - 0.3 0.3 - 0.3
Foreign exchange translation
differences - - 16.6 - 16.6 - 16.6
Movement in cash flow
hedges - - (0.5) - (0.5) - (0.5)
Tax on other comprehensive
income - - 0.1 - 0.1 - 0.1
----------------------------- ---------- ---------- --------- --------- ------- --------------- -------
Total comprehensive
income - - 16.2 92.5 108.7 - 108.7
Cash flow hedging gains
transferred to inventories - - (0.2) - (0.2) - (0.2)
Cash flow hedging losses
transferred to acquisition
purchase price - - 1.8 - 1.8 - 1.8
Tax on cash flow hedging
transfers - - (0.4) - (0.4) - (0.4)
Dividends (Note 4) - - - (64.8) (64.8) - (64.8)
Equity-settled share-based
payments - - - 6.6 6.6 - 6.6
Settlement of share
awards 0.4 1.9 - (1.9) 0.4 - 0.4
Purchase of own shares
by EBT - (0.1) - - (0.1) - (0.1)
Tax on equity-settled
share-based payments - - - (1.1) (1.1) - (1.1)
At 30 September 2023 283.7 (0.4) 126.2 985.6 1,395.1 0.7 1,395.8
============================= ========== ========== ========= ========= ======= =============== =======
NOTES TO THE CONDENSED GROUP ACCOUNTS
1. Basis of preparation
These condensed Group accounts were approved by the Board of
Directors on 6 November 2023 and are unaudited but have been
reviewed by the auditors. They do not constitute statutory accounts
within the meaning of section 434 of the Companies Act 2006, but
have been prepared in accordance with the UK-adopted International
Accounting Standard (IAS) 34 'Interim Financial Reporting' and the
Disclosure and Transparency Rules of the UK's Financial Conduct
Authority. As outlined in the Going Concern statement, the
Directors consider it appropriate to continue to adopt the going
concern basis in preparing these condensed Group accounts. The
Annual Report and Accounts for the year ended 31 March 2023 was
prepared in accordance with UK-adopted international accounting
standards (UK IAS) and has been delivered to the Registrar of
Companies. The auditors' report on those accounts was unqualified,
did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying their report
and did not contain any statement under section 498(2) or 498(3) of
the Companies Act 2006.
These condensed Group accounts have been prepared on the basis
of the accounting policies set out in the Annual Report and
Accounts for the year ended 31 March 2023 except for the estimation
of income tax. Under IAS 34, the tax charge for the period is
calculated using the estimated weighted average effective tax rate
for the year ending 31 March 2024. Where tax balances are revised
due to changes in tax rates or estimates of tax liabilities for
prior periods, the full effect is included in the tax charge for
the first half of the year.
No accounting standards, amendments to existing standards or
interpretations, either adopted in the period or issued but not yet
applicable, have or are expected to have a material impact on the
reported results or financial position of the Group. Finance (No.2)
Act 2023 was substantively enacted in the UK on 20 June 2023 and
the Group has applied the exception under Amendments to IAS 12
'International Tax Reform - Pillar Two Model Rules' to not
recognise and disclose information about deferred tax assets and
liabilities related to any resulting top-up income taxes.
The significant judgements made by the Group in applying its
accounting policies and the key sources of estimation uncertainty
were the same as those applied to the Group accounts for the year
ended 31 March 2023, although the assumptions used in the
judgements involved in estimations have been updated to take
account of the Group's latest expectations of the longer-term
impacts of climate change and environmental regulations and the
current global economic and geopolitical uncertainties.
2. Segmental reporting
The Group's operating segments comprise three regions: EMEA,
Americas and Asia Pacific.
EMEA Americas Asia Pacific Group
GBPm GBPm GBPm GBPm
---------------------------------------- ----- -------- ------------ ---------
Six months ended 30 September 2023
Revenue from external customers 860.9 475.6 110.2 1,446.7
---------------------------------------- ----- -------- ------------ -------
Segmental operating profit 131.9 52.1 2.1 186.1
Central costs (30.5)
---------------------------------------- ----- -------- ------------ -------
Adjusted operating profit 155.6
Amortisation of acquired intangibles (12.6)
Acquisition-related items (4.2)
Operating profit 138.8
Net finance costs (12.8)
Share of profit of joint venture 0.3
---------------------------------------- ----- -------- ------------ -------
Profit before tax 126.3
======================================== ===== ======== ============ =======
Six months ended 30 September 2022
Revenue from external customers 854.3 461.0 142.7 1,458.0
---------------------------------------- ----- -------- ------------ -------
Segmental operating profit 131.2 78.3 23.4 232.9
Central costs (36.8)
---------------------------------------- ----- -------- ------------ -------
Adjusted operating profit 196.1
Amortisation and impairment of acquired
intangibles (9.1)
Operating profit 187.0
Net finance costs (4.9)
Share of profit of joint venture 0.4
---------------------------------------- ----- -------- ------------ -------
Profit before tax 182.5
======================================== ===== ======== ============ =======
2. Segmental reporting (continued)
EMEA Americas Asia Pacific Group
GBPm GBPm GBPm GBPm
---------------------------------------- ------- -------- ------------ -------
Year ended 31 March 2023
Revenue from external customers 1,768.5 945.5 268.3 2,982.3
---------------------------------------- ------- -------- ------------ -------
Segmental operating profit 275.8 148.5 38.4 462.7
Central costs (60.5)
---------------------------------------- ------- -------- ------------ -------
Adjusted operating profit 402.2
Amortisation and impairment of acquired
intangibles (16.6)
Acquisition-related items (2.6)
Operating profit 383.0
Net finance costs (12.2)
Share of profit of joint venture 0.7
---------------------------------------- ------- -------- ------------ -------
Profit before tax 371.5
======================================== ======= ======== ============ =======
In the table below, revenue is disaggregated by sales channels,
by own-brand products or other product and service solutions, and
also by service solutions and other. The Group's largest own-brand
is RS PRO. GBP1,400.7 million of revenue is recognised at a point
in time (six months ended 30 September 2022: GBP1,419.3 million;
year ended 31 March 2023: GBP2,901.2 million) and GBP46.0 million
over time (six months ended 30 September 2022: GBP38.7 million;
year ended 31 March 2023: GBP81.1 million).
Sales channel
EMEA Americas Asia Pacific Group
GBPm GBPm GBPm GBPm
----------------------------------- ------- -------- ------------ ---------
Six months ended 30 September 2023
Web 428.8 129.6 47.0 605.4
eProcurement and other digital 208.2 42.0 16.8 267.0
----------------------------------- ------- -------- ------------ ---------
Digital 637.0 171.6 63.8 872.4
Offline 223.9 304.0 46.4 574.3
----------------------------------- ------- -------- ------------ ---------
Group 860.9 475.6 110.2 1,446.7
----------------------------------- ------- -------- ------------ ---------
Six months ended 30 September 2022
Web 431.4 154.9 66.2 652.5
eProcurement and other digital 192.6 50.1 20.3 263.0
----------------------------------- ------- -------- ------------ -------
Digital 624.0 205.0 86.5 915.5
Offline 230.3 256.0 56.2 542.5
----------------------------------- ------- -------- ------------ -------
Group 854.3 461.0 142.7 1,458.0
----------------------------------- ------- -------- ------------ -------
Year ended 31 March 2023
Web 893.8 304.3 121.2 1,319.3
eProcurement and other digital 417.3 100.5 39.6 557.4
----------------------------------- ------- -------- ------------ -------
Digital 1,311.1 404.8 160.8 1,876.7
Offline 457.4 540.7 107.5 1,105.6
----------------------------------- ------- -------- ------------ -------
Group 1,768.5 945.5 268.3 2,982.3
=================================== ======= ======== ============ =======
2. Segmental reporting (continued)
Own-brand / ot her product and service
solutions
EMEA Americas Asia Pacific Group
GBPm GBPm GBPm GBPm
---------------------------------------- ------- -------- ------------ ---------
Six months ended 30 September 2023
Own-brand product and service solutions 177.6 3.4 16.8 197.8
Other product and service solutions 683.3 472.2 93.4 1,248.9
Group 860.9 475.6 110.2 1,446.7
---------------------------------------- ------- -------- ------------ -------
Six months ended 30 September 2022
Own-brand product and service solutions 170.6 3.7 19.2 193.5
Other product and service solutions 683.7 457.3 123.5 1,264.5
Group 854.3 461.0 142.7 1,458.0
---------------------------------------- ------- -------- ------------ -------
Year ended 31 March 2023
Own-brand product and service solutions 360.2 7.1 37.2 404.5
Other product and service solutions 1,408.3 938.4 231.1 2,577.8
---------------------------------------- ------- -------- ------------ ---------
Group 1,768.5 945.5 268.3 2,982.3
======================================== ======= ======== ============ =========
Service solutions / ot her
During the six months ended 30 September 2023 the Group reviewed
what it classes as service solutions which has resulted in certain
revenue streams now being included and certain ones excluded,
resulting in an overall decrease to the service solutions revenue
for the year ended 31 March 2023 of GBP48.6 million and GBP29.9
million for the year ended 31 March 2022. The information below
reflects the new classification.
EMEA Americas Asia Pacific Group
GBPm GBPm GBPm GBPm
------------------------------------ ------- -------- ------------ ---------
Six months ended 30 September 2023
Service solutions 252.3 63.4 21.0 336.7
Other 608.6 412.2 89.2 1,110.0
------------------------------------ ------- -------- ------------ ---------
Group 860.9 475.6 110.2 1,446.7
------------------------------------ ------- -------- ------------ ---------
Six months ended 30 September 2022
Service solutions 235.0 61.7 23.3 320.0
Other 619.3 399.3 119.4 1,138.0
------------------------------------ ------- -------- ------------ ---------
Group 854.3 461.0 142.7 1,458.0
------------------------------------ ------- -------- ------------ -------
Year ended 31 March 2023 (restated)
Service solutions 506.1 132.9 46.4 685.4
Other 1,262.4 812.6 221.9 2,296.9
------------------------------------ ------- -------- ------------ ---------
Group 1,768.5 945.5 268.3 2,982.3
------------------------------------ ------- -------- ------------ ---------
Year ended 31 March 2022 (restated)
Service solutions 425.6 93.4 39.1 558.1
Other 1,153.9 625.3 216.4 1,995.6
------------------------------------ ------- -------- ------------ ---------
Group 1,579.5 718.7 255.5 2,553.7
==================================== ======= ======== ============ =========
3. Earnings per share
Six months ended Year ended
30.9.2023 30.9.2022 31.3.2023
Number Number Number
------------------------------------------- ----------- ----------- -----------
Weighted average number of shares 472,921,885 471,098,269 471,717,928
Dilutive effect of share-based payments 419,848 2,655,779 1,194,205
------------------------------------------- ----------- ----------- -----------
Diluted weighted average number of shares 473,341,733 473,754,048 472,912,133
=========================================== =========== =========== ===========
Basic earnings per share attributable to
owners of the Company 19.5p 30.0p 60.4p
Diluted earnings per share attributable to
owners of the Company 19.5p 29.8p 60.2p
=========================================== =========== =========== ===========
4. Dividends
Six months ended Year ended
30.9.2023 30.9.2022 31.3.2023
GBPm GBPm GBPm
--------------------------------------------- --------- --------- ----------
Final dividend for the year ended 31 March
2023 - 13.7p (2022: 11.6p) 64.8 54.6 54.6
Interim dividend for the year ended 31 March
2023 - 7.2p - - 34.0
64.8 54.6 88.6
============================================= ========= ========= ==========
An interim dividend of 8.3p will be paid on 5 January 2024 to
shareholders on the register on 24 November 2023 with an
ex-dividend date of 23 November 2023 and the estimated amount to be
paid of GBP39.3 million has not been included as a liability in
these accounts.
5. Retirement benefit obligations
The Group operates defined benefit schemes in the United Kingdom
and Europe.
30.9.2023 30.9.2022 31.3.2023
GBPm GBPm GBPm
Fair value of scheme assets 397.4 421.4 432.0
Present value of defined benefit obligations (371.4) (403.9) (407.3)
Effect of asset ceiling / onerous liability (57.1) (58.7) (61.1)
Retirement benefit net obligations (31.1) (41.2) (36.4)
--------------------------------------------- --------- --------- ---------
Amount recognised on the balance sheet -
liability (31.9) (42.3) (37.2)
Amount recognised on the balance sheet -
asset 0.8 1.1 0.8
============================================= ========= ========= =========
A change in the key assumptions on the UK scheme would have the
following increase / (decrease) on the UK defined benefit
obligations as at 30 September 2023:
Increase Decrease
in assumption in assumption
GBPm GBPm
--------------------------------------------- -------------- --------------
Effect on obligation of a 0.5 pts change
to the assumed discount rate (21.8) 24.1
Effect on obligation of a 0.1 pts change
in the assumed inflation rate 4.2 (4.2)
Effect on obligation of a change of one year
in assumed life expectancy 9.2 (9.3)
============================================== ============== ==============
6. Inventories
30.9.2023 30.9.2022 31.3.2023
GBPm GBPm GBPm
--------------------- --------- --------- ---------
Gross inventories 798.5 663.6 660.0
Inventory provisions (78.8) (31.3) (43.7)
--------------------- --------- --------- ---------
Net inventories 719.7 632.3 616.3
===================== ========= ========= =========
During the six months ended 30 September 2023 GBP19.3 million
was recognised as an expense relating to the
write-down of inventories to net realisable value (six months
ended 30 September 2022: GBP13.4 million; year ended 31 March 2023:
GBP33.0 million).
7. Trade and other receivables
30.9.2023 30.9.2022 31.3.2023
GBPm GBPm GBPm
------------------------------------------ --------- --------- ---------
Gross trade receivables 599.3 568.3 621.0
Impairment allowance (11.5) (11.4) (12.6)
------------------------------------------ --------- --------- ---------
Net trade receivables 587.8 556.9 608.4
Other receivables (including prepayments) 99.9 79.2 83.6
------------------------------------------ --------- --------- ---------
Trade and other receivables 687.7 636.1 692.0
========================================== ========= ========= =========
Trade receivables are written off when there is no reasonable
expectation of recovery, for example when a customer enters
liquidation or the Group agrees with the customer to write off an
outstanding invoice. The Group continues to limit its exposure by
maintaining tight credit policies, including short payment terms
and low credit limits for new customers and seeking payment
commitments for overdue balances before releasing new orders to
existing customers. Historically, the Group has generally
experienced very low levels of trade receivables not being
recovered, including those significantly past due, and this was
also the case during the six months ended 30 September 2023 .
However, with the continued global economic and geopolitical
uncertainties, the Group remains cautious about its exposure and so
has carefully reviewed, and maintained at a higher level, its
expected loss rates for those markets and industries that are most
affected.
8. Net (debt) / cash
30.9.2023 30.9.2022 31.3.2023
GBPm GBPm GBPm
----------------------------------------------- --------- --------- ---------
Cash and short-term deposits 379.1 379.1 260.3
Bank overdrafts (268.8) (154.9) (139.8)
----------------------------------------------- --------- --------- ---------
Cash and cash equivalents 110.3 224.2 120.5
Non-current private placement loan notes (161.4) (176.3) (160.4)
Non-current sustainability-linked loan (232.0) - (24.2)
Non-current term loan (unsecured and repayable
by 27 April 2026 bearing interest at EURIBOR
plus 1.15%) (129.7) - -
Current money market loans (10.0) - -
Current bank facilities (2.6) - -
Current interest rate swaps designated as
fair value hedges - liabilities - (0.7) -
Current lease liabilities (15.7) (16.2) (14.6)
Non-current lease liabilities (60.6) (28.4) (34.3)
Net (debt) / cash (501.7) 2.6 (113.0)
=============================================== ========= ========= =========
Movements in net (debt) / cash were:
Total liabilities
from financing Interest Cash and Net (debt)
Borrowings Lease liabilities activities rate swaps cash equivalents / cash
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ ---------- ----------------- ----------------- ----------- ----------------- ----------
Net debt at 1 April 2022 (151.7) (48.7) (200.4) (0.1) 158.4 (42.1)
Cash flows - 8.9 8.9 - 46.5 55.4
Acquired with businesses - (0.3) (0.3) - - (0.3)
Net lease additions - (2.9) (2.9) - - (2.9)
Gain / (loss) in fair
value in period 0.6 - 0.6 (0.6) - -
Translation differences (25.2) (1.6) (26.8) - 19.3 (7.5)
Net cash at 30 September
2022 (176.3) (44.6) (220.9) (0.7) 224.2 2.6
Cash flows (25.1) 9.9 (15.2) - (90.1) (105.3)
Acquired with businesses - (9.5) (9.5) - - (9.5)
Net lease additions - (5.5) (5.5) - - (5.5)
(Loss) / gain in fair
value in period (0.7) - (0.7) 0.7 - -
Translation differences 17.5 0.8 18.3 - (13.6) 4.7
Net debt at 31 March
2023 (184.6) (48.9) (233.5) - 120.5 (113.0)
Cash flows (349.1) 9.5 (339.6) - (8.5) (348.1)
Acquired with businesses - (28.5) (28.5) - - (28.5)
Net lease additions - (8.0) (8.0) - - (8.0)
Translation differences (2.0) (0.4) (2.4) - (1.7) (4.1)
Net debt at 30 September
2023 (535.7) (76.3) (612.0) - 110.3 (501.7)
======================== ========== ================= ================= =========== ================= ==========
9. Fair values of financial instruments
The other derivatives, interest rate swaps and the fair value of
the private placement loan notes they were hedging are measured at
fair value using Level 2 inputs. These are estimated by discounting
the future contractual cash flows using appropriate market-sourced
data at the balance sheet date.
For all financial assets and liabilities, fair value
approximates the carrying amounts shown in the balance sheet except
for the following:
30.9.2023 30.9.2022 31.3.2023
Carrying Fair Carrying Fair Carrying Fair
amounts value amounts value amounts value
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- -------- ------- -------- ------- -------- -------
Private placement loan
notes (161.4) (143.0) (176.3) (170.1) (160.4) (147.7)
======================= ======== ======= ======== ======= ======== =======
The fair values are calculated using Level 2 inputs by
discounting future cash flows to net present values using
prevailing interest rate curves and the Group's credit margin.
10. Acquisitions
On 30 June 2023 the Group acquired 100% of the issued share
capital of the Distrelec B.V. and its subsidiaries (Distrelec), a
high-service, digital-led distributor of industrial and
maintenance, repair and operations (MRO) products in Europe.
Distrelec significantly expands the Group's presence in continental
Europe and will leverage the Group's existing operations to drive
value-accretive growth. The goodwill is attributable to cost
synergies in procurement, logistics and warehousing, and marketing
and administration, in addition to revenue synergies from
cross-selling opportunities of RS's own brand and solutions
offer.
The fair value of the net assets acquired, consideration and
goodwill arising were:
GBPm
----------------------------------------------------------------------- ------
Intangible assets - customer relationships 73.5
Intangible assets - brands 22.1
Intangible assets - software 10.6
Property, plant and equipment 0.6
Right-of-use assets 29.8
Inventories (gross GBP74.1 million less provisions of GBP22.5 million) 51.6
Trade and other receivables 27.1
Cash and cash equivalents - cash and short-term deposits 9.0
Current trade and other payables (34.9)
Current lease liabilities (2.4)
Current provisions (1.9)
Non-current lease liabilities (26.1)
Non-current other payables (1.1)
Non-current other provisions (10.9)
Current income tax liabilities (5.4)
Deferred tax liabilities (23.3)
----------------------------------------------------------------------- ------
Net assets acquired 118.3
Indemnification assets (included in non-current other receivables) 2.8
Goodwill 192.0
----------------------------------------------------------------------- ------
Consideration paid - cash 313.1
======================================================================= ======
The goodwill will not be deductible for tax purposes. The fair
values of tax balances and other assets and liabilities are
provisional while the Group continues to assess the assets and
liabilities acquired. The gross contractual amounts receivable for
trade and other receivables was GBP27.9 million, of which GBP0.8
million is not expected to be collected. GBP4.6 million of
acquisition-related costs for Distrelec were charged to
administrative expenses in the six months ended 30 September 2023
and GBP2.8 million in the year ended 31 March 2023. Amortisation is
calculated to write off the acquired intangible assets on a
straight-line basis over the following useful lives: customer
relationships 16 years; brands 5 - 10 years; and software 2
years.
10. Acquisitions (continued)
The indemnification assets relate to:
-- GBP1.9 million for full indemnification from the sellers of
costs under the lease of the distribution centre in the Netherlands
from 1 January 2027 to the end of the lease in November 2036, or
when the lease is exited if earlier, measured as the difference
between the right-of-use asset and the lease liability for that
lease over that time frame, with a range of outcomes from GBPnil to
an amount equal to the aggregate of any such costs (capped at the
consideration for the acquisition); and
-- GBP0.9 million for contractual indemnifications relating to
uncertain tax provisions measured on the same basis as the
provisions, with a range of outcomes from GBPnil to GBP0.9
million.
Distrelec contributed revenue of GBP45.4 million and profit
after tax of GBP0.4 million to the Group's results since
acquisition and is included in EMEA. If the acquisition had
occurred on 1 April 2023, the Group's revenue and profit for the
six months ended 30 September 2023 would have been GBP1,496.4
million and GBP75.2 million respectively.
Movements in the Group's goodwill in the period were:
Cost and net book value GBPm
------------------------ -----
At 1 April 2023 463.3
Acquisition 192.0
Translation differences 9.7
At 30 September 2023 665.0
======================== =====
Included in acquisition-related items for the six months ended
30 September 2023 was the release of the GBP0.4 million contingent
consideration payable on acquisition of domnick hunter-RL
(Thailand) Co., Ltd. given the conditions for payment were not
met.
11. Capital commitments
As at 30 September 2023, the Group is contractually committed
to, but has not provided for, future capital expenditure of GBP13.5
million (30 September 2022: GBP0.7 million; 31 March 2023: GBP3.5
million) for property, plant and equipment and GBP8.3 million (30
September 2022: GBP4.5 million; 31 March 2023: GBP2.1 million) for
intangible assets.
12. Related party transactions
There has been no material change in related party relationships
in the six months ended 30 September 2023. There were no
significant related party transactions which have materially
affected the financial position or performance of the Group during
that period.
13. Alternative Performance Measures (APMs)
The Group uses a number of APMs in addition to those measures
reported in accordance with UK IAS. Such APMs are not defined terms
under UK IAS and are not intended to be a substitute for any UK IAS
measure. The Directors believe that the APMs are important when
assessing the underlying financial and operating performance of the
Group. The APMs are used internally for performance analysis and in
employee incentive arrangements, as well as in discussions with the
investment analyst community.
The APMs improve the comparability of information between
reporting periods by adjusting for factors such as fluctuations in
foreign exchange rates, number of trading days and items, such as
reorganisation costs, that are substantial in scope and impact and
do not form part of operational or management activities that the
Directors would consider part of underlying performance. The
Directors also believe that excluding recent acquisitions and
acquisition-related items aid comparison of the underlying
performance between reporting periods and between businesses with
similar assets that were internally generated.
13. Alternative Performance Measures (APMs) (continued)
Adjusted profit measures
These are the equivalent UK IAS measures adjusted to exclude
amortisation and impairment of intangible assets arising on
acquisition of businesses, acquisition-related items, substantial
reorganisation costs, substantial asset
write-downs, one-off pension credits or costs, significant tax
rate changes and, where relevant, associated tax effects. Adjusted
profit before tax is a performance measure for the annual bonus and
the all employee Long Term Incentive Plan (LTIP) called the RS YAY!
Award. Adjusted earnings per share is a performance measure for the
LTIP and Journey to Greatness (J2G) LTIP award . Adjusted operating
profit conversion, adjusted operating profit margin and adjusted
earnings per share are financial key performance indicators (KPIs)
which are used to measure the Group's progress in delivering the
successful implementation of its strategy and monitor and drive its
performance.
Operating 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 2023
Reported (494.1) 138.8 9.6% 21.9% 126.3 92.2 19.5p 19.5p
Amortisation of acquired
intangibles 12.6 12.6 12.6 9.1 1.9p 1.9p
Acquisition-related items 4.2 4.2 4.2 4.3 0.9p 0.9p
Adjusted (477.3) 155.6 10.8% 24.6% 143.1 105.6 22.3p 22.3p
------------------------- --------- --------- ---------- -------------- ------- -------- ---------- ----------
Six months ended 30
September 2022
Reported (476.5) 187.0 12.8% 28.2% 182.5 141.4 30.0p 29.8p
Amortisation and
impairment
of acquired intangibles 9.1 9.1 9.1 7.1 1.5p 1.5p
------------------------- --------- --------- ---------- -------------- ------- -------- ---------- ----------
Adjusted (467.4) 196.1 13.4% 29.6% 191.6 148.5 31.5p 31.3p
========================= ========= ========= ========== ============== ======= ======== ========== ==========
(1) Operating costs are distribution and marketing expenses plus
administrative expenses.
(2) Operating profit margin is operating profit expressed as a
percentage of revenue.
(3) Operating profit conversion is operating profit expressed as
a percentage of gross profit.
Acquisition-related items comprise transaction costs directly
attributable to the acquisition of businesses, any deferred
consideration payments relating to the retention of former owners
of acquired businesses and any remeasurements of contingent
consideration payable on acquisition of businesses that result from
events after the acquisition date.
Like-for-like revenue and profit measures
Like-for-like revenue and profit measures are adjusted to
exclude the effects of changes in exchange rates on translation of
overseas profits. They exclude acquisitions in the relevant periods
until they have been owned for a year, at which point they start to
be included in both the current and comparative periods for the
same number of months. These measures enable management and
investors to track more easily, and consistently, the underlying
performance of the business.
The principal exchange rates applied in preparing the Group
accounts and in calculating the following like-for-like measures
are:
Average for six
months ended Closing
30.9.2023 30.9.2022 30.9.2023 30.9.2022 31.3.23
US dollar 1.259 1.216 1.226 1.105 1.239
Euro 1.157 1.174 1.157 1.132 1.137
========== ========= ========= ========= ========= =======
13. Alternative Performance Measures (APMs) (continued)
Like-for-like revenue change
Like-for-like revenue change is also adjusted to eliminate the
impact of trading days year on year. It is calculated by comparing
the revenue of the base business for the current period with the
prior period converted at the current period's average exchange
rates and pro-rated for the same number of trading days as the
current period. It is a performance measure for the annual bonus
and a financial KPI.
GBPm
------------------------------------------ -------
Revenue for six months ended 30 September
2022 (H1 2022/23) 1,458.0
Effect of exchange rates (21.2)
Effect of trading days (13.4)
-------
Revenue for H1 2022/23 at H1 2023/24
rates and trading days 1,423.4
============================================= =======
Less: H1 2022/23
acquisitions at H1 2023/24
owned rates and
H1 2023/24 <1 year H1 2023/24 trading Like-for-like
Group base business H1 2022/23 days change
GBPm GBPm GBPm GBPm GBPm %
------------- ---------- ------------- -------------- ---------- -------------- -------------
EMEA 860.9 45.4 815.5 854.3 848.9 (4)%
Americas 475.6 94.9 380.7 461.0 441.7 (14)%
Asia Pacific 110.2 1.7 108.5 142.7 132.8 (18)%
-------------- -------------
Revenue 1,446.7 142.0 1,304.7 1,458.0 1,423.4 (8)%
============= ========== ============= ============== ========== ============== =============
Gross margin and like-for-like gross margin change
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 2022/23
H1 2023/24 owned H1 2023/24 at H1 2023/24 Like-for-like
Group <1 year base business H1 2022/23 rates change
GBPm GBPm GBPm GBPm GBPm pts
------------- ---------- ------------- -------------- ---------- -------------- -------------
Revenue 1,446.7 142.0 1,304.7 1,458.0 1,436.8
Gross profit 632.9 44.5 588.4 663.5 654.1
Gross margin 43.7% 31.3% 45.1% 45.5% 45.5% (0.4) pts
============= ========== ============= ============== ========== ============== =============
Like-for-like profit change
Like-for-like change in profit is calculated by comparing the
base business for the current period with the prior period
converted at the current period's average exchange rates.
Less: acquisitions H1 2022/23
H1 2023/24 owned H1 2023/24 at H1 2023/24 Like-for-like
Group <1 year base business H1 2022/23 rates change
GBPm GBPm GBPm GBPm GBPm %
------------------------- ---------- ------------------ -------------- ---------- -------------- -------------
Segmental operating
profit
EMEA 131.9 2.8 129.1 131.2 132.3 (2)%
Americas 52.1 7.7 44.4 78.3 75.4 (41)%
Asia Pacific 2.1 - 2.1 23.4 20.8 (90)%
Segmental operating
profit 186.1 10.5 175.6 232.9 228.5 (23)%
Central costs (30.5) - (30.5) (36.8) (36.6) (17)%
------------------------- ---------- ------------------ -------------- ---------- --------------
Adjusted operating
profit 155.6 10.5 145.1 196.1 191.9 (24)%
------------------------- ---------- ------------------ -------------- ---------- --------------
Adjusted profit before
tax 143.1 9.5 133.6 191.6 187.4 (29)%
Adjusted earnings
per share 22.3p 1.3p 21.0p 31.5p 30.8p (32)%
Adjusted diluted earnings
per share 22.3p 1.4p 20.9p 31.3p
========================= ========== ================== ============== ========== ============== =============
13. Alternative Performance Measures (APMs) (continued)
Adjusted free cash flow and adjusted operating cash flow
conversion
Adjusted free cash flow is the net cash from operating
activities less purchase of intangible assets, property, plant and
equipment plus any proceeds on sale of intangible assets, property,
plant and equipment adjusted for the impact of substantial
reorganisation and acquisition-related items cash flows and is a
performance measure for the annual bonus.
Adjusted operating cash flow is adjusted free cash flow before
income tax and net interest paid. Adjusted operating cash flow
conversion is adjusted operating cash flow expressed as a
percentage of adjusted operating profit and is a financial KPI.
Six months ended Year ended
30.9.2023 30.9.2022 31.3.2023
GBPm GBPm GBPm
-------------------------------------------------- --------- --------- ----------
Net cash from operating activities 45.0 133.6 306.5
Purchase of intangible assets (17.5) (12.1) (27.5)
Purchase of property, plant and equipment (7.0) (10.0) (18.6)
Proceeds on sale of property, plant and equipment - - 0.1
Add back: impact of substantial reorganisation
cash flows 0.6 0.4 0.5
Add back: impact of acquisition-related items
cash flows 4.6 - 2.6
Adjusted free cash flow 25.7 111.9 263.6
Add back: income tax paid 45.7 44.4 93.9
Add back: net interest paid 13.1 4.1 12.6
-------------------------------------------------- --------- --------- ----------
Adjusted operating cash flow 84.5 160.4 370.1
Adjusted operating profit 155.6 196.1 402.2
Adjusted operating cash flow conversion 54.3% 81.8% 92.0%
================================================== ========= ========= ==========
Earnings before interest, tax, depreciation and amortisation
(EBITDA) and net debt to adjusted EBITDA
EBITDA is operating profit excluding depreciation and
amortisation. Net debt to adjusted EBITDA (one of the Group's debt
covenants) is the ratio of net debt to EBITDA excluding impairment
of intangible assets arising on acquisition of businesses,
acquisition-related items, substantial reorganisation costs,
substantial asset write-downs and one-off pension credits or costs
for the preceding twelve-month period.
30.9.2023 30.9.2022 31.3.2023
GBPm GBPm GBPm
--------------------------------------------- --------- --------- ---------
Operating profit 138.8 187.0 383.0
Add back: depreciation and amortisation 40.6 32.1 64.6
--------------------------------------------- --------- --------- ---------
EBITDA 179.4 219.1 447.6
Add back: impairment of acquired intangibles - 3.3 3.3
Add back: acquisition-related items 4.2 - 2.6
Adjusted EBITDA for this period 183.6 222.4 453.5
Adjusted EBITDA for prior year 453.5 372.5
Less: adjusted EBITDA for prior first half (222.4) (170.5)
--------------------------------------------- --------- --------- ---------
Annualised adjusted EBITDA 414.7 424.4 453.5
Net (debt) / cash (Note 8) (501.7) 2.6 (113.0)
Net debt to adjusted EBITDA 1.2x n/m 0.2x
============================================= ========= ========= =========
13. Alternative Performance Measures (APMs) (continued)
Earnings before interest, tax and amortisation (EBITA) and EBITA
to interest
EBITA is adjusted EBITDA after depreciation. EBITA to interest
(one of the Group's debt covenants) is the ratio of EBITA to
finance costs including capitalised interest less finance income
for the preceding twelve-month period.
30.9.2023 30.9.2022 31.3.2023
GBPm GBPm GBPm
---------------------------------------------- --------- --------- ---------
Adjusted EBITDA for this period 183.6 222.4 453.5
Less: depreciation (17.8) (17.9) (36.2)
---------------------------------------------- --------- --------- ---------
EBITA for this period 165.8 204.5 417.3
EBITA for prior year 417.3 339.0
Less: EBITA for prior first half (204.5) (153.9)
---------------------------------------------- --------- --------- ---------
Annualised adjusted EBITA 378.6 389.6 417.3
---------------------------------------------- --------- --------- ---------
Finance costs 15.1 5.4 14.2
Less: finance income (2.3) (0.5) (2.0)
Interest (per debt covenants) for this period 12.8 4.9 12.2
Interest (per debt covenants) for prior year 12.2 7.6
Less: interest (per debt covenants) for prior
first half (4.9) (3.7)
---------------------------------------------- --------- --------- ---------
Annualised interest (per debt covenants) 20.1 8.8 12.2
---------------------------------------------- --------- --------- ---------
EBITA to interest 18.8x 44.3x 34.2x
============================================== ========= ========= =========
Return on capital employed (ROCE)
ROCE is annualised adjusted operating profit expressed as a
percentage of annualised monthly average net assets excluding net
cash / debt and retirement benefit obligations and is an underpin
for the LTIP and J2G LTIP Award and a financial KPI.
30.9.2023 30.9.2022 31.3.2023
GBPm GBPm GBPm
------------------------------------------------ --------- --------- ---------
Annualised monthly average net assets 1,342.5 1,116.5 1258.0
Add back: annualised average net debt 174.6 36.4 25.6
Add back: annualised average retirement benefit
net (assets) / obligations 36.1 31.5 24.1
------------------------------------------------ --------- --------- ---------
Annualised average capital employed 1,553.2 1,184.4 1,307.7
Adjusted operating profit for this period 155.6 196.1 402.2
Adjusted operating profit for prior year 402.2 320.4
Less: adjusted operating profit for prior
first half (196.1) (144.8)
------------------------------------------------ --------- --------- ---------
Annualised adjusted operating profit 361.7 371.7 402.2
------------------------------------------------ --------- --------- ---------
ROCE 23.3% 31.4% 30.8%
================================================ ========= ========= =========
Working capital as a percentage of revenue
Working capital is inventories, current trade and other
receivables and current trade and other payables.
30.9.2023 30.9.2022 31.3.2023
GBPm GBPm GBPm
------------------------------------------- --------- --------- ---------
Inventories 719.7 632.3 616.3
Current trade and other receivables 687.7 636.1 692.0
Current trade and other payables (624.8) (629.5) (658.9)
------------------------------------------- --------- --------- ---------
Working capital 782.6 638.9 649.4
------------------------------------------- --------- --------- ---------
Revenue for this period 1,446.7 1,458.0 2,982.3
Revenue for prior year 2,982.3 2,553.7
Less: revenue for prior first half (1,458.0) (1,208.9)
------------------------------------------- --------- --------- ---------
Annualised revenue 2,971.0 2,802.8 2,982.3
------------------------------------------- --------- --------- ---------
Working capital as a percentage of revenue 26.3% 22.8% 21.8%
=========================================== ========= ========= =========
13. Alternative Performance Measures (APMs) (continued)
I nventory turn
Inventory turn is annualised cost of sales divided by
inventories.
30.9.2023 30.9.2022 31.3.2023
GBPm GBPm GBPm
----------------------------------------- --------- --------- ---------
Cost of sales for this period 813.8 794.5 1,630.1
Cost of sales for prior year 1,630.1 1,425.8
Less: cost of sales for prior first half (794.5) (680.7)
----------------------------------------- --------- --------- ---------
Annualised cost of sales 1,649.4 1,539.6 1,630.1
----------------------------------------- --------- --------- ---------
Inventories 719.7 632.3 616.3
Inventory turn 2.3 2.4 2.6
========================================= ========= ========= =========
Ratio of capital expenditure to depreciation
Ratio of capital expenditure to depreciation is capital
expenditure divided by depreciation and amortisation excluding
amortisation of acquired intangibles and depreciation of
right-of-use assets.
Six months ended Year ended
30.9.2023 30.9.2022 31.3.2023
GBPm GBPm GBPm
--------------------------------------------- --------- --------- ----------
Depreciation and amortisation 40.6 32.1 64.6
Less: amortisation of acquired intangibles (12.6) (5.8) (13.3)
Less: depreciation of right-of-use assets (9.4) (8.9) (18.3)
--------------------------------------------- --------- --------- ----------
Adjusted depreciation and amortisation 18.6 17.4 33.0
Capital expenditure 22.2 17.0 42.4
Ratio of capital expenditure to depreciation 1.2 times 1.0 times 1.3 times
============================================= ========= ========= ==========
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 2023 (the period).
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK-adopted
International Accounting Standard 34 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
-- the Group balance sheet as at 30 September 2023;
-- the Group income statement and Group statement of
comprehensive income for the period then ended;
-- the Group cash flow statement for the period then ended;
-- the Group statement of changes in equity for the period then ended; and
-- the explanatory notes to the condensed Group accounts.
The interim financial statements included in the condensed Group
accounts of RS Group plc have been prepared in accordance with the
UK-adopted International Accounting Standard 34 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the condensed
Group accounts and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the Directors have inappropriately
adopted the going concern basis of accounting or that the Directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with ISRE (UK) 2410.
However, future events or conditions may cause the Group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the Directors
The condensed Group accounts, including the interim financial
statements, is the responsibility of, and has been approved by, the
Directors. The Directors are responsible for preparing the
condensed Group accounts in accordance with the Disclosure Guidance
and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the condensed Group accounts,
including the interim financial statements, the Directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the condensed Group accounts based on our
review. Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. This report, including the conclusion, has been
prepared for and only for the Company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
6 November 2023
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