Rs Group Plc · LSE:RS1
Rs — FY2023/24 Earnings Presentation
43 slides from Rs's earnings presentation, May 22, 2024
Slide 1: Full Year Results 2023/24
FULL YEAR RESULTS 2023/24 22 May 2024 2023/24 Full Year Results 1
Slide 2: Disclaimer
Disclaimer This presentation contains certain statements, that such expectations will prove to be correct. statistics and projections that are or may be There are a number of factors, which may be forward looking. The accuracy and beyond the control of RS Group plc, which completeness of all such st
Slide 3: Introduction
01. Introduction Simon Pryce Chief Executive Officer 2023/24 Full Year Results 3
Slide 4: 2023/24 in line, significant underlying progress
2023/24 in line, significant underlying progress…. CHALLENGING MARKETS ‒ Weak industrial demand, electronics cycle, accelerators outperform ‒ Unwinding post-pandemic revenue benefits Revenue £2,942m (1)% (8)% LFL ‒ Financial performance in line with market expectations Adj. operating INCREASED FOCUS
Slide 5: Challenging markets
02. Challenging markets Kate Ringrose Chief Financial Officer 2023/24 Full Year Results 5
Slide 6: Weak industrial demand and exaggerated electronics cycle
Weak industrial demand and effect of exaggerated electronics cycle… EXTERNAL MARKETS REVENUE SPLIT LFL REVENUE GROWTH IN MAJOR CATEGORIES Softer industrial PMI Group revenue £2,942m (1)% 42% (8)% LFL Industrial from A&C2 2% excluding A&C industrial products 81% (9)% A&C Weak electronics market1 Indu
Slide 7: Unwinding post-pandemic trading benefit
Unwinding post-pandemic trading benefit… WHAT HAPPENED ‘Outlier’ product volumes (EMEA and APAC) Sales per day (Americas) – Significant demand for electronics – Increased capacity and strong availability – Additional demand from transitory customers – Price inflation benefit from low inventory turn
Slide 8: Financial review
03. Financial review Kate Ringrose Chief Financial Officer 2023/24 Full Year Results 8
Slide 9: 2023/24 performance reflects difficult markets
2023/24 performance reflects… Revenue Adj. operating Adj. operating profit Adj. operating cash flow Return on capital (£m) (8)% LFL profit (£m) (25)% LFL margin (%) (2.2) pts LFL conversion (%) (10.1) pts employed (%) (13.4) pts 2,982 2,942 13.5 92.0 30.8 402 81.9 10.6 312 17.4* 22/23 23/24 22/23 23
Slide 10: Revenue bridge (£m)
Revenue bridge (£m) Post-pandemic Days 3,500 trading reversal Price Acquisitions FX impact Volume & mix 2,982 (95) inflation 282 (57) (24) (215) 2,942 3,000 69 2,500 2,000 1,500 1,000 500 0 2022/23 2023/24 …affected by inventory benefit unwind and market decline 2023/24 Full Year Results 10
Slide 11: Adjusted operating cost bridge (£m)
Adjusted operating cost bridge (£m) Restructuring Restructuring (1,100) Acquisitions Volume Cost & integration & integration (72) 26 management cost * benefit * Incentives (1,050) 25 Inflation (13) 9 37 1 FX (1,000) (28) 14 (950) (952) (950) (900) (850) (800) (750) (700) 2022/23 2023/24 …supported b
Slide 12: Adjusted operating profit margin bridge (%)
Adjusted operating profit margin bridge (%) 16% Post-pandemic trading reversal 14% 13.5% (1.8%) Cost management Volume & incentives 1 Acquisitions Restructuring/ 12% GrossGross margin 1.0% 1.0% (1.4%) margin 1.2% (0.6%) integration FX Gross margin (0.2%) (0.2%) 10.6% (0.1%) 10% 8% 6% 2022/23 2023/24
Slide 13: EMEA: More evolved proposition
EMEA: More evolved proposition… EMEA HIGHLIGHTS Like-for-like 2023/24 2022/23* Revenue performance reflects: Change change – Weak PMI, electronics cycle Revenue £1,795m £1,769m 1% (5)% – Industrial ex. A&C robust; electronics, A&C weak Operating profit £256m £276m (7)% (9)% – Digital, RS PRO, servic
Slide 14: Americas: Greater exposure to electronics cycle and OEM
Americas: Greater exposure to electronics cycle and OEM1… AMERICAS HIGHLIGHTS Like-for-like 2023/24 2022/23* Revenue performance reflects: Change change – High A&C exposure (correlated to electronics) Revenue £934m £946m (1)% (13)% – Customer destocking (especially OEMs) Operating profit £101m £149m
Slide 15: Asia Pacific: Electronics unwind and high operational gearing
Asia Pacific: Electronics unwind resulted in… ASIA PACIFIC HIGHLIGHTS Like-for-like 2023/24 2022/23* Revenue performance reflects: Change change – Large exposure to declining electronics market Revenue £214m £268m (20)% (15)% – Difficult markets in China and Japan Operating profit £4m £38m (90)% (89
Slide 16: Cash flow improved in second half
Cash flow improved in second half… £151m adjusted free cash flow: Adjusted free Working capital / Net debt / adjusted cash flow (£m) revenue (%) EBITDA (x) – Lower EBITDA 25.6 1.1 – Payables - timing of inventory intake / accruals 264 21.8 Working capital increase due to: 151 – Distrelec acquisition
Slide 17: Clear capital allocation
Clear capital allocation… 1 ORGANIC INVESTMENT 2 INORGANIC INVESTMENT 3 RETURNS TO SHAREHOLDERS – Deploy detailed – Strong strategic – Progressive strategic action plan rationale dividend policy – CapEx and OpEx – Risk-adjusted cash – Return excess capital growth investment return analysis to shareh
Slide 18: Factors to consider for 2024/25
Factors to consider for 2024/25 MARKETS CONTINUE OPERATING COST MOVEMENTS1 TARGET HIGH TO BE CHALLENGING – Inflation c. 2% - 3% LEVELS OF CASH – Demand stabilising – Normalisation of employee incentives CONVERSION – Lead indicators – Increased organic investment of c. £15m suggesting any market – Ad
Slide 19: Increased focus
IMAGE TO BE UPDATED 04. Increased focus Simon Pryce Chief Executive Officer 2023/24 Full Year Results 19
Slide 20: Greater strategic clarity
Greater strategic clarity… First choice for First choice for SUPPLIERS CUSTOMERS The world’s leading Global multi-site providers of general, operators to small technical and specialist one-off industrial products for industrial customers purchasing MRO application small volumes of multi-category MRO
Slide 21: Driving operational effectiveness
Driving operational effectiveness… TARGETED ACTIONS, LEADERSHIP OPERATING MODEL CULTURAL EVOLUTION ALREADY New team Clarified and simplified operating Defined and driving cultural DELIVERED model evolution Empowered executive Strengthened functional Clear accountabilities New and common corporate va
Slide 22: Improving operating leverage
Improving operating leverage… OPERATING EFFICIENCY TARGETED ACTIONS, ADDRESSING THE COST BASE PROCESS HARMONISATION SUPPLY CHAIN OPTIMISATION TECHNOLOGY SIMPLIFICATION ALREADY Cost reduction across Identified processes Improved German SAP convergence and DELIVERED functions and regions benefiting fr
Slide 23: Growth accelerators investment continuing
Growth accelerators investment continuing… TARGETED DIGITAL AND CUSTOMER EXPERIENCE ENHANCED PRODUCT OFFER VALUE-ADD SERVICE SOLUTIONS INVESTMENT, Enhanced search, AI enabled Range optimisation and supplier Improved and tailored supplier CLOSELY partnering and digitally enabled procurement Upgrading
Slide 24: Recent acquisitions delivering
Recent acquisitions delivering… Product and Product Product and Product Product and Product Geographic Operating Geographic Operating Geographic Operating service extensions and service extensions and service extensions and opportunities leverage opportunities leverage opportunities leverage solutio
Slide 25: Well positioned
05. Well positioned 2023/24 Full Year Results 25
Slide 26: Good and differentiated business
Good and differentiated business… FOCUSING, ALIGNING, LEADING GLOBAL MRO1 LARGE FRAGMENTED CLEAR COMPETITIVE GROWTH PRIORITISING AND DISTRIBUTOR MARKETS ADVANTAGES ACCELERATORS EXECUTING EMEA AMERICAS ASIA PACIFIC Most developed More focused Multi-country region, proposition serving a A&C / electric
Slide 27: Aligned in their direction of travel
Aligned in their direction of travel… FOCUSING, ALIGNING, LEADING GLOBAL MRO LARGE FRAGMENTED CLEAR COMPETITIVE GROWTH PRIORITISING AND DISTRIBUTOR MARKETS ADVANTAGES ACCELERATORS EXECUTING EMEA AMERICAS ASIA PACIFIC Most developed More focused Multi-country region, proposition serving a A&C / elect
Slide 28: Operating in cyclical, growth markets
Operating in cyclical, growth markets… RS generated 6% CAGR1 over last 5 years Outperforming GDP and Industrial Production 2019 2020 2021 2022 2023 2024 RS LFL revenue change GDP growth Industrial Production …continuing to outperform 2023/24 Full Year Results 28 1. Compound annual growth rate (CAGR)
Slide 29: Improving the fundamentals
Improving the fundamentals... – Digital and customer experience GROWTH – Enhanced product offer Growth ACCELERATORS – Value add service solutions accelerators – Productivity and efficiency OPERATING – Process harmonisation LEVERAGE – Supply chain optimisation – Technology simplification – Strong and
Slide 30: Summary and Q&A
06. SUMMARY AND Q&A 2023/24 Full Year Results 30
Slide 31: Our opportunity is significant
SAVE THE DATE Investor Event 24 September Our opportunity is significant…. 2024 LEADING LARGE CLEAR FOCUSING, ALIGNING, GROWTH GLOBAL MRO FRAGMENTED COMPETITIVE PRIORITISING AND ACCELERATORS DISTRIBUTOR MARKETS ADVANTAGES EXECUTING REVENUE GROWTH TWICE MARKET MID-TEEN >70% >20% 30% ADJUSTED CASH RET
Slide 32: Appendix
APPENDIX 2023/24 Full Year Results 32
Slide 33: Guidance points
Guidance points – More trading days in 2024/25 are expected to increase revenue by Trading days around £29 million Other guidance – Net capital expenditure forecast to be c. £50 million in 2024/25 points – We expect the effective tax rate to be steady c. 26% in 2024/25 – Currency movements decreased
Slide 34: Income statement
Income statement Like-for-like 2024 2023 Change change Revenue £2,942m £2,982m (1)% (8)% Gross profit £1,264m £1,352m (7)% (11)% Gross margin 43.0% 45.3% (2.3) pts (1.1) pts Operating profit £280m £383m (27)% (25)% Adjusted operating profit £312m £402m (22)% (25)% Adjusted operating profit margin 10
Slide 35: Like-for-like revenue change
Like-for-like revenue change Like-for-like revenue change1 Q1 to Q2 to Q3 to Q4 to Region Jun 2023 Sep 2023 Dec 2023 Mar 2024 EMEA (3)% (5)% (5)% (6)% Americas (13)% (15)% (19)% (7)% Asia Pacific (19)% (18)% (13)% (8)% Group (7)% (9)% (10)% (6)% 2023/24 Full Year Results 35 1. Like-for-like revenue
Slide 36: Operating profit summary
Operating profit summary £m 2024 2023 EMEA 256 276 Americas 101 149 Asia Pacific 4 38 Region operating profit 361 463 Central costs (49) (61) Adjusted operating profit 312 402 Amortisation of acquired intangibles (27) (17) Acquisition-related items (5) (3) Operating profit 280 383 2023/24 Full Year
Slide 37: Cash flow
Cash flow £m 2023/24 2022/23 Operating profit 280 383 Add back depreciation and amortisation 84 65 EBITDA 364 448 Add back impairments and loss on disposal of non-current assets 7 12 Movement in working capital (69) (49) Defined benefit retirement contributions in excess of charge (10) (11) Movement
Slide 38: Net debt has risen to £418m
Net debt has risen to £418m – We have maintained a strong financial position Net debt – Acquisition of Distrelec increasing net debt £m 2023/24 2022/23 £333 million Net debt at 1 April (113) (42) – Lease liabilities of £74 million (2022/23: £49million) Adjusted free cash flow 151 264 – Net debt to a
Slide 39: Financial key performance indicators
Financial key performance indicators Like-for-like 2023/24 2022/23 Change change Like-for-like revenue change (8)% 10% Adjusted operating profit conversion 24.7% 29.7% (5.0) pts (4.4) pts Adjusted operating profit margin 10.6% 13.5% (2.9) pts (2.2) pts Adjusted earnings per share 43.8p 63.6p (31)% (
Slide 40: Non-financial key performance indicators
Non-financial key performance indicators Customer People Health and safety 50.6 75 34% 0.37 Net Promoter Score Employee engagement Percentage of All Accidents (Group, R12) management that (per 200,000 hours) are women Environment 2.3 6,800 1.57 82% Carbon intensity Carbon emissions Packaging intensi
Slide 41: ESG is core in how we operate
ESG is core in how we operate Our ESG approach recognised by leading ESG ratings • S&P: included in Sustainability Yearbook • EcoVadis: Platinum medal • CDP climate leadership score: A- • MSCI: AA rating • FTSE4Good index score: 3.6/5 2023/24 Full Year Results 41
Slide 42: Trident overview
Trident overview – Trident is a specialised provider of products, calibration and equipment rental services in REVENUE BY INDUSTRIES REVENUE BY CATEGORIES Australia – Founded in 1997 in Perth, Australia, Trident Energy (O&G) 71% Product and serves customers in the energy, mining, Resellers 8% System
Slide 43: 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