Rs Group Plc · LSE:RS1
Rs — Q2 2024 Earnings Presentation
37 slides from Rs's earnings presentation, Nov 7, 2023
Slide 1: Half Year Results 2023/24
HALF YEAR RESULTS 2023/24 7 November 2023
Slide 2: Disclaimer
Disclaimer This presentation contains certain statements, There are a number of factors, which may be statistics and projections that are or may be beyond the control of RS Group plc, which could forward looking. The accuracy and completeness cause actual results and developments to differ of all su
Slide 3: Introduction
01. Find robot photo Introduction Simon Pryce Chief Executive Officer 2023/24 Half Year Results 3
Slide 4: Making progress… …despite short term challenges
Making progress… H1 2023/24 Highlights RESILIENT PERFORMANCE IN CHALLENGING MARKETS • Markets more challenging than anticipated (1)% • Strong comparatives Revenue £1,447m (8)% LFL • LFL revenue for digital -5%, service solutions +4% and RS PRO +5% • ROCE above 20% Adj. operating (2.6) pts • 15% incr
Slide 5: Kate Ringrose, Chief Financial Officer
Kate Ringrose Chief Financial Officer 5
Slide 6: Financial review
02. Financial review Jane Titchener 2023/24 Half Year Results 6
Slide 7: Performance reflects… challenging environment and strong comparatives
Performance reflects… Revenue Adjusted operating Adjusted operating Adjusted operating cash flow Return on capital (£m) profit (£m) profit margin (%) conversion (%) employed (%) (8)% LFL (21)% (2.6) pts (27.5) pts (8.1) pts 13.4 1,458 1,447 196 81.8 31.4 156 10.8 23.3 54.3 H1 22/23 H1 23/24 as H1 22
Slide 8: Revenue bridge (£m)
Revenue bridge (£m) 1,600 1,500 £1,458 m £1,447 m 1,400 1,300 1,200 1,100 1,000 H1 2022/23 Volume & mix Price Acquisitions FX Days H1 2023/24 inflation impact …affected by market decline 2023/24 Half Year Results 8 Prior year trading benefit estimated c. 5% of H1 2022/23 revenue.
Slide 9: Adjusted operating profit margin bridge (%)
Adjusted operating profit margin bridge (%) 14% 13.4% 12% 10.8% 10% 8% 6% H1 2022/23 Volume Gross FX Inflation Acquisitions Incentives Net operating Net overhead H1 2023/24 margin and people cost actions savings …supported by improving cost control 2023/24 Half Year Results 9 Prior year trading bene
Slide 10: EMEA …operationally strong
EMEA H1 PERFORMANCE Like-for-like revenue performance reflects: H1 23/24 H1 22/23 Change Like-for-like change • Resilient performance in deteriorating markets • Maintained share with target customers Revenue £861m £854m 1% (4)% • Increased digital, services, RS PRO participation Operating profit £13
Slide 11: Americas …remains challenging
Americas H1 PERFORMANCE Like-for-like revenue performance reflects: Like-for-like H1 23/24 H1 22/23 Change • Unwinding last year’s inventory benefit change • Americas A&C offer correlated to electronics Revenue £476m £461m 3% (14)% • Customer destocking depressed volumes Operating profit £52m £78m (
Slide 12: Asia Pacific …long-term opportunity
Asia Pacific H1 PERFORMANCE Like-for-like revenue performance reflects: Like-for-like H1 23/24 H1 22/23 Change • Large exposure to declining electronics market change • Markets worse than expected, especially China Revenue £110m £143m (23)% (18)% • Customers destocking affecting volumes Operating pr
Slide 13: Cash flow and balance sheet
Cash flow and balance sheet Adjusted free Working capital / Net debt / adjusted cash flow (£m) revenue (%) EBITDA (x) 112 26.3 1.2 22.8 • £26m adjusted free cash flow – Lower EBITDA contribution – Timing of inventory intake 26 • Balance sheet working capital increase due to: n/m – Distrelec acquisit
Slide 14: Second half considerations
Second half considerations… • Markets continue to be challenging • Gross margin full year assumptions unchanged – Dilution from acquisitions – Limited price inflation • Operating profit impacts – Operating cost actions benefit of c. £8m (remainder in 2024/25)* – Associated operating costs of c. £11m
Slide 15: Positive strategic and operational momentum
03. Positive strategic and operational momentum Simon Pryce Chief Executive Officer 2023/24 Half Year Results 15
Slide 16: Resilient performance… challenging markets
Resilient performance… RS Group trades in line with weighted PMI data EMEA 70 40% EMEA 65 30% • RS industrial revenue continues to • RS industrial revenue continues to outperform PMI data outperform PMI data 60 20% • RS electronics revenue unwinding • RS electronics revenue unwinding last year’s inv
Slide 17: We continue to make progress… on key priorities
We continue to make progress… Growth accelerators Growth accelerators Operating leverage Operating effectiveness Delivery through: Focus Alignment Prioritisation Execution …on key priorities 2023/24 Half Year Results 17
Slide 18: Driving operational effectiveness
Driving operational effectiveness… Operating effectiveness …to accelerate execution 2023/24 Half Year Results 18
Slide 19: Focus on operational effectiveness
Focus on operational effectiveness… LEADERSHIP OPERATING STRATEGY ALIGNMENT CULTURAL MODEL PROCESS FOCUS EVOLUTION • Senior leadership • Simplifying and • Action orientated • CPO priority H1 appointments clarifying operating strategic planning • Completed base culture model 2023/24 • Empowered ExCo
Slide 20: Improving operating leverage
Improving operating leverage… Operating leverage …to accelerate into recovery 2023/24 Half Year Results 20
Slide 21: Improving operating leverage
Improving operating leverage… OPTIMISING COST-TO-SERVE INCREASED RIGHT-SIZING COST SUPPLY CHAIN AGILITY AND SCALABLE SCALE BASE OPTIMISATION H1 • Acquisitions enhancing • Reorganised and • Improved German • Cloud-based business 2023/24 existing footprint reduced headcount in DC capacity and • Reduce
Slide 22: Growth accelerators
Growth accelerators… Growth accelerators …to accelerate customer capture and loyalty 2023/24 Half Year Results 22
Slide 23: Growth accelerators
Growth accelerators… DIGITAL AND CUSTOMER ENHANCED VALUE-ADD SERVICE EXPERIENCE PRODUCT OFFER SOLUTIONS H1 • Developed and introduced • Introduced an additional • Expanded service offer website search capabilities 5,800 RS PRO products throughout EMEA 2023/24 powered by Google with 4,000 relevant to
Slide 24: High quality acquisitions
High quality acquisitions... Product and Product Geographic Operational Product and Product Geographic Operational service extensions and opportunities efficiencies service extensions and opportunities efficiencies solutions adjacencies solutions adjacencies • Expands RS in Mexico and Latin America
Slide 25: Exciting growth opportunity
04. Exciting growth opportunity 2023/24 Half Year Results 25
Slide 26: RS is well positioned…
RS is well positioned… THE RS STRENGTHS RESILIENT PERFORMANCE IN CHALLENGING MARKETS • Good people • Global player • Strong market fundamentals POSITIVE STRATEGIC AND • Unique proposition OPERATIONAL MOMENTUM • Digitally enabled, data rich EXCITING GROWTH OPPORTUNITY Opportunity for sustained outper
Slide 27: Questions?
05. Questions? 2023/24 Half Year Results 27
Slide 28: Appendix
Appendix 2023/24 Half Year Results 28
Slide 29: Guidance points
Guidance points ⚫ Fewer trading days in 2023/24 are expected to reduce revenue Trading days by around £23 million ⚫ Net capital expenditure forecast to be c. £50 million in 2023/24 Other guidance points ⚫ We expect the effective tax rate to be c. 26% in 2023/24 due to UK corporate income tax rate in
Slide 30: Income statement
Income statement Like-for-like H1 2023/24 H1 2022/23 Change change Revenue £1,447m £1,458m (1)% (8)% Gross margin 43.7% 45.5% (1.8) pts (0.4) pts Operating profit £139m £187m (26)% (26)% Adjusted operating profit £156m £196m (21)% (24)% Adjusted operating profit margin 10.8% 13.4% (2.6) pts (2.3)pts
Slide 31: Region operating profit summary
Region operating profit summary £m H1 2023/24 H1 2022/23 EMEA 132 131 Americas 52 78 Asia Pacific 2 23 Segmental operating profit 186 233 Central costs (31) (37) Adjusted operating profit 156 196 Amortisation of acquired intangibles (13) (9) Acquisition-related items (4) 0 Operating profit 139 187 2
Slide 32: Cash flow
Cash flow £m H1 2023/24 H1 2022/23 Operating profit 139 187 Add back depreciation and amortisation 41 32 EBITDA 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) Movem
Slide 33: Net debt risen to £502m
Net debt risen to £502m • Net debt has increased due to acquisition Net debt of Distrelec £m H1 2023/24 H1 2022/23 Net debt at 1 April (113) (42) • Lease liabilities of £76 million Adjusted free cash flow 26 112 (H1 2022/23: £45 million) Acquisition of businesses (333) (2) • Net debt to adjusted EBI
Slide 34: Financial key performance indicators
Financial key performance indicators Like-for-like H1 2023/24 H1 2022/23 Change change Like-for-like revenue change (8)% 16% Adjusted operating profit conversion 24.6% 29.6% (5.0) pts (4.6) pts Adjusted operating profit margin 10.8% 13.4% (2.6) pts (2.3) pts Adjusted earnings per share 22.3p 31.5p (
Slide 35: Progress against our eight non-financial KPIs
Progress against our eight non-financial KPIs • Direct carbon emissions reduced by 10% to 1,800 tCO2e due to energy Environment 1.4 1,800 1.73 83% savings, switching to renewable electricity and a net zero fleet. Reduction from baseline year (b/y)* to 2022/23 was 58%. • Packaging intensity reduced b
Slide 36: ESG is core in how we operate…
ESG is core in how we operate… Our ESG approach recognised by leading ESG ratings • MSCI ESG rating: AA • Sustainalytics rating: Global top 50 ESG companies • CDP climate change leadership score 2022: A- • EcoVadis rating 2023: Platinum medal • FTSE4Good Index score: 3.8/5 • Member of: Dow Jones Sus
Slide 37: Basis of preparation
Basis of preparation Unless otherwise stated • Figures have been prepared using UK-adopted international accounting standards • Adjusted excludes amortisation and impairment of intangible assets arising on acquisition of businesses, acquisition-related items, substantial reorganisation costs, substa