Rs Group Plc · LSE:RS1
Rs — H1 2022/23 Earnings Presentation
48 slides from Rs's earnings presentation, Nov 3, 2022
Slide 1: Half Year Results 2022/23
3 NOVEMBER 2022 HALF YEAR RESULTS 2022/23
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 forward-looking. The accuracy and could cause actual results and developments completeness of all such stateme
Slide 3: Introduction
01. INTRODUCTION David Egan Acting Chief Executive Officer
Slide 4: A strong first half performance
A strong first half Distribution sector revenue per day1 (growth indexed to September 2015) performance 200 189 RS Group 180 • Ongoing market outperformance 164 • Continued operational investment to 160 support growth • Increased margins and returns 140 136 129 • Strong balance sheet 130 118 120 103
Slide 5: The most powerful driver of our success is our people
The most powerful driver of our success is our people • We have invested in and supported a purpose-led culture, ensuring all understand our strategic vision • We never underestimate the value our people bring all our stakeholders • We have launched a share-based award under our Journey to Greatness
Slide 6: One Brand. One Team. One Culture.
One Brand. One Team. One Culture. • Our Group is more united under a global RS brand • RS Integrated Supply brings together IESA and Synovos • RS Safety Solutions combines Needlers and Liscombe • Allied Electronics & Automation in Americas is set to be rebranded as RS in early calendar 2023 • As RS
Slide 7: Financial Performance
02. FINANCIAL PERFORMANCE Jane Titchener VP Corporate Development and Strategy Presentation Confidential Title 7
Slide 8: Strong returns and cash generation
Strong returns and cash generation Profitability Returns and cash Shareholder value Adjusted operating profit margin (%) Return on capital employed (%) Adjusted earnings per share (p) 8.5 12.0 13.4 20.4 24.7 31.4 12.8 23.0 31.5 H1 2020/21 H1 2021/22 H1 2022/23 H1 2020/21 H1 2021/22 H1 2022/23 H1 202
Slide 9: Metrics linked to our sustainability-linked loan
Metrics linked to our sustainability-linked loan Carbon emissions Packaging intensity Gender diversity Tonnes of CO2e due to scope 1 and 2 Tonnes / £m revenue % of management that are women emissions 2,300 2,100 2.04 1.66 30 32 H1 2021/22 H1 2022/23 H1 2021/22 H1 2022/23 H1 2021/22 H1 2022/23 2022/2
Slide 10: Strong profit performance
Strong profit performance Income statement Like-for-like £m H1 2022/23 H1 2021/22 Change change Revenue 1,458 1,209 21% 16% Gross margin 45.5% 43.7% 1.8 pts 2.1 pts Operating profit 187 139 34% 29% Adjusted operating profit 196 145 35% 30% Adjusted operating profit margin 13.4% 12.0% 1.4 pts 1.5 pts
Slide 11: Revenue bridge
Revenue bridge 1,600 £1,458m 1,400 £1,209m 1,200 1,000 £909m 800 600 400 H1 2020/21 H1 2021/22 Volume & mix Price Acquisitions FX Days H1 2022/23 inflation impact 2022/23 Half Year Results 11
Slide 12: Adjusted operating profit margin bridge
Adjusted operating profit margin bridge 18% 16% 14% 13.4% 12.0% 12% 10% 8.5% 8% 6% 4% 2% 0% 2020/21 2021/22 Revenue Gross Acquisitions Inflation FX Supply Digital J2G People & Rebranding Energy Other 2022/23 H1 H1 growth margin constraints investment incentives H1 2022/23 Half Year Results 12 Note:
Slide 13: Regional performance
Regional performance Revenue split Profit split 10% 10% 32% 58% 34% 56% Performance driven by: • Higher value B2B customers • Price optimisation • Improved digital capabilities Revenue (£m) Operating profit (£m) and margin (%) • Strong operational leverage 15.4% EMEA 568 753 854 75 120 131 While man
Slide 14: Cash flow
Cash flow Adjusted free cash flow (£m) Working capital / revenue (%) • £112m adjusted free cash flow despite inventory investment • Adjusted operating cash flow conversion of 82% 85.0 84.8 111.9 23.0 21.2 22.8 • Capital expenditure increase due H1 2020/21 H1 2021/22 H1 2022/23 to resumption of inves
Slide 15: Balance sheet strength
Balance sheet strength Net (debt) / cash (£m) Net debt / adjusted EBITDA (x) 3 (115) (84) • Proforma net debt to adjusted EBITDA post Risoul acquisition of c. 0.6x 0.5 0.3 n/m • In October 2022, our sustainability- H1 2020/21 H1 2021/22 H1 2022/23 H1 2020/21 H1 2021/22 H1 2022/23 linked loan (SLL) i
Slide 16: Capital allocation prioritises investment
Capital allocation Capital allocation Return on capital employed (%) prioritises investment Investment for future Stable Shareholder balance • Growth opportunities are in three growth opportunities sheet returns focus areas 20.4 24.7 31.4 H1 2020/21 H1 2021/22 H1 2022/23 • Organic investment is numb
Slide 17: We are welcoming two businesses to RS Group
We are welcoming two businesses to RS Group Risoul 1 domnick hunter • A leading distributor and • Leading distributor of service provider of major industrial and air compression, automation product and purification and filtration service solutions in products in Thailand Mexico • Accretive to earnin
Slide 18: Current trading: first four weeks of second half
03. Current trading: first four weeks of second half David Egan Acting Chief Executive Officer
Slide 19: Current trading in line with our expectations
Current trading in line with our expectations Trading broadly in line with Q2 despite economic backdrop due to: • Strong industrial offer EMEA • Greater proportion of service solutions revenue • Improving service levels Delivering strong revenue against tough comparatives as we Americas invest in op
Slide 20: Focusing on profitable market share growth
04. FOCUSING ON PROFITABLE MARKET SHARE GROWTH David Egan Acting Chief Executive Officer
Slide 21: We are delivering real market outperformance
We are delivering real market outperformance Our performance versus global industrial production growth • Consistent outperformance of 30% underlying market 25% • Outperformance accelerated 20% throughout COVID-19 • Breadth of offer, availability and 15% ease of ordering has driven higher 10% averag
Slide 22: Our strategic scorecard is driving our outperformance
Our strategic scorecard is driving our outperformance H1 2022/23 Financial Cultural Operational Growth accelerators: performance: transformation: efficiency: Compelling value High-performance, World-class capability proposition and • 16% like-for-like revenue purpose-led culture and execution custom
Slide 23: Change in culture and mindset underpins our outperformance
Cultural transformation Change in culture and mindset underpins our outperformance Being more strategically focused • Strong balance sheet • More returns focused • Increased commerciality • Improving operating model • Prioritisation list for investment, incl. M&A Being more agile and dynamic • Regio
Slide 24: We can improve our operational efficiencies further
Operational efficiency We can improve our operational efficiencies further Dynamic pricing Cultural model transformation Operational Strong inventory Financial performance efficiency management Growth Increased accelerators commercial focus 2022/23 Half Year Results 24
Slide 25: Running a dynamic pricing model
Operational efficiency Running a dynamic1 pricing model Insight Pricing is not key determinant in our customers’ purchase decisions2: • Frequent unplanned purchases • Availability, speed and ease of service crucial • Low average order value • Long tail of low turning products • Purchases linked to p
Slide 26: Strong inventory management
Operational efficiency Strong inventory c.170 Inventory management management team members People Foresight Insight Our expertise is based on systems, data and insight Data Technology & • Leadership team are specialist inventory experts Insight • Use of global planning tools using RPA (robotics) • D
Slide 27: Increased commercial focus
Operational efficiency Increased commercial Targeting higher value customers focus £300 1,300 £250 1,000 Case study: focusing on our higher £200 700 value B2B customers £150 400 Insight £100 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 H1 100 • 150 data points per customer AOV Customer numbers (k
Slide 28: Driving operational efficiencies
Operational efficiency Driving operational Adjusted operating costs % of revenue efficiencies 35% 34% J2G, rebranding and 33% one-off employee payment 32% • Increased automation and data analytics 31% • Labour being redeployed into value-add areas 30% • Expansion of Group Shared Business Services 29
Slide 29: Our levers for accelerating growth
Growth accelerators Our levers for accelerating growth Product Product and Ease of choice service solutions doing business We have a unique range of We have a portfolio of We have a technology-enabled industrial and electronic products and services solving experience enhanced by products for our cus
Slide 30: Our ESG approach delivers value to all our stakeholders
Our ESG approach delivers value to all our FOR OUR stakeholders FOR OUR PEOPLE CUSTOMERS Driving a high Developing Our approach is aligned to leading performance, sustainable purpose-led product and service ESG ratings and external culture solutions standards • Sustainalytics rating: Global top 50 E
Slide 31: We have proven we are resilient and can outperform
We have proven we are resilient and can outperform 4.6% revenue CAGR 12.0% revenue CAGR Driving our (11.0% revenue CAGR excluding acquisitions) outperformance 62% digital Cultural 23% transformation services 32% Operational Adj. operating costs/revenue efficiency 29% 31% digital ROCE Growth <10% ser
Slide 32: Our Journey to Greatness will deliver our growth ambitions
Our Journey to Greatness will deliver our growth ambitions GG RR E E A A TT Galvanising a Realising a Extending our Accelerating to Transforming our high-performance, world-class wisdom, insight a solutions-led, executional purpose-led culture customer and data innovative business capabilities exper
Slide 33: Questions?
05. QUESTIONS?
Slide 34: Appendix
APPENDIX 34
Slide 35: We are well positioned to generate significant sustainable value
We are well positioned to generate significant sustainable value 1. 2. 3. 4. There is enormous Our differentiated We are making Acquisitions will growth opportunity business model amazing happen for a accelerate with <1% share will improve further on better world organic growth of a c. £400bn+ our J
Slide 36: Our organic growth drivers and targets are unchanged
Our organic growth drivers and targets are unchanged Cultural Operational Growth Financial transformation efficiency accelerators performance • High-performance teams • Scalable global network • Brand recognition • Stronger revenue growth • Purpose driven culture • Best in class purchasing & • Best
Slide 37: domnick hunter: overview
domnick hunter: overview Company overview In numbers • Founded in 1993, domnick hunter-RL (Thailand) Co., Ltd. is a leading distributor and service £9.8m1 23% c.110 revenue 2020/21 revenue 2020/21 employees provider of major air compression, purification attributed to and filtration products service
Slide 38: Risoul: overview
Risoul: overview Company overview Revenue by division Revenue by customer • Founded in 1973 and headquartered in Monterrey, Mexico with > 580 employees • Operates through two distribution centres (Monterrey & Mexico City), eight local warehouses and six offices Automation & control: 17% • Largest au
Slide 39: EMEA: driving profit improvement
EMEA: driving profit improvement Revenue (£m) Our performance in H1 2022/23: 568 753 854 • Revenue benefited from improved operating H1 2020/21 H1 2021/22 H1 2022/23 model and sales focus • Digital like-for-like revenue +19%, with web Operating profit (£m) growth +17%, benefiting from search engine
Slide 40: Americas: continued operational investment
Americas: continued operational investment Revenue (£m) Our performance in H1 2022/23: 243 333 461 • Revenue benefited from strong market and the continued investment made in our people, H1 2020/21 H1 2021/22 H1 2022/23 operating model and distribution centre Operating profit (£m) • Digital like-for
Slide 41: Asia Pacific: driving scale and commercial focus
Asia Pacific: driving scale and commercial focus Revenue (£m) Our performance in H1 2022/23: 98 123 143 • Revenue growth benefited from strong H1 2020/21 H1 2021/22 H1 2022/23 growth in industrial products in Japan and Korea, and developing operational capabilities Operating profit (£m) in South Eas
Slide 42: Cash generation strong despite additional inventory investment
Cash generation strong despite additional inventory investment Cash flow £m H1 2022/23 H1 2021/22 EBITDA 219.1 170.5 Add back impairments and loss on disposal of non-current assets 6.7 - Movement in working capital (51.0) (48.2) Movement in provisions (1.1) (1.8) Other (equity-settled share-based pa
Slide 43: Net cash / (debt) has risen to £2.6M
Net cash / (debt) has risen to £2.6M Net cash / (debt) • We have maintained a strong financial £m H1 2022/23 H1 2021/22 Net cash / (debt) at 1 April (42.1) (122.0) position Adjusted free cash flow 111.9 84.8 • Lease liabilities of £44.6 million Acquisition of businesses (2.2) 2.2 (H1 2021/22: £54.8m
Slide 44: Financial key performance indicators
Financial key performance indicators Like-for-like H1 2022/23 H1 2021/22 Change change Like-for-like revenue growth 16% 31% Adjusted operating profit conversion 29.6% 27.4% 2.2 pts 1.9 pts Adjusted operating profit margin 13.4% 12.0% 1.4 pts 1.5 pts Adjusted earnings per share 31.5p 23.0p 37% 32% Re
Slide 45: We have eight non-financial KPIs
We have eight non- financial KPIs Environment • Total Scope 1 and 2 CO2e emissions reduced by 9% in the period, compared to H1 2021/22. We continue to progress our decarbonisation plans through a shift to renewable electricity tariffs and energy 1.4 2,100 1.66 73% management across our sites. Reduct
Slide 46: Case study: RS Industria
Case study: RS Industria We’re developing sustainable product and service solutions that help customers to maximise operational and environmental benefits. Through our specialist service, RS Industria, we help customers to: • monitor their operations and environmental output • improve machine reliab
Slide 47: Guidance points
Guidance points ⚫ Fewer trading days in 2022/23 are expected to reduce revenue by around Trading days £10 million ⚫ Net capital expenditure forecast to be c. £50 million in 2022/23 Other guidance points ⚫ We expect the effective tax rate to rise due to UK corporate income tax rate increase, being c.
Slide 48: Basis of preparation
Basis of preparation Unless otherwise stated • Figures have been prepared using UK-adopted international accounting standards (IFRS) • Adjusted excludes amortisation and impairment of intangible assets arising on acquisition of businesses, acquisition-related items, substantial reorganisation costs,