RS : Full-year results (year ended 31 March 2022) (Statement)

24 May 2022, 7.00 am

RS GROUP PLC

RESULTS FOR YEAR ENDED 31 MARCH 2022

STRONG OUTPERFORMANCE DELIVERING REVENUE GROWTH, MARKET SHARE GAINS AND OPERATIONAL

EFFICIENCIES

LINDSLEY RUTH, CHIEF EXECUTIVE OFFICER, COMMENTED: "This has been an exciting and successful year as we have continued to grow market share, improved our operating performance across all three regions and started to unite our teams under the RS Group brand. This is due to the hard work of our skilled and talented people as they have overcome significant challenges; I thank them all. Uncertainties remain and we are mindful of the ongoing difficulties many are experiencing and external headwinds our Group could face. However, we have continued to invest in our operations and develop our proposition. We are well positioned on our Journey to Greatness to drive stronger revenue and high-quality profitable growth to deliver significant sustainable value for all our stakeholders in making amazing happen for a better world."

				Like-for-like1
Highlights	2021/22	2020/21	Change	change
Revenue	£2,553.7m	£2,002.7m	28%	26%
Adjusted2 operating profit	£320.4m	£188.3m	70%	78%
Adjusted2 operating profit margin	12.5%	9.4%	3.1 pts	3.7 pts
Adjusted2 profit before tax	£313.8m	£181.7m	73%	81%
Adjusted2 earnings per share	51.3p	31.3p	64%	72%
Operating profit	£308.8m	£167.2m	85%	97%
Profit before tax	£302.2m	£160.6m	88%	102%
Earnings per share	48.9p	27.7p	77%	90%
Full-year dividend	18.0p	15.9p	13%
Adjusted2 free cash flow	£162.9m	£145.4m	12%
Net debt	£42.1m	£122.0m
Net debt to adjusted2 EBITDA	0.1x	0.5x

Strong outperformance driven by our people and differentiated proposition

• Revenue growth of 28%, with like-for-like up 26%; revenue growth of 31% on a two-year basis
• Strong market share gains in all three regions reflects our purpose-led culture and focused strategic plan
• Outperformance underpinned by product availability, innovative solutions and responsive omni-channel service
• RS PRO like-for-like revenue growth of 19% due to limited electronics range and low Americas participation
• Web revenue grew 30% like-for-like with total digital revenue accounting for 62% of Group revenue
• Group Net Promoter Score3 was 50.6 due to external challenges but customer metrics suggest relative strength
• Good progress on our 2030 environmental, social and governance (ESG) action plan - For a Better World4

Adjusted operating profit growth of 70%; 45% on a two-year basis

• Gross margin grew 1.5 pts to 44.2%, with 1.1 pts reflecting more focused pricing and discount policies
• Cost inflationary pressures continuing but more than offset by gross margin gains and operational efficiencies
• RISE programme to simplify and streamline the Group delivered c. £15 million of cost benefits
• Adjusted operating profit conversion improved by 6.4 pts to 28.4% including ongoing operational investment
• Adjusted operating profit margin was 3.1 pts higher at 12.5%
• Return on capital employed (ROCE) grew by 9.3 pts to 28.7% reflecting improved profitability

Strong balance sheet and cash flow supports investment plans

• Strong adjusted free cash flow generation of £163 million despite c. £100 million of investment in inventory
• Balance sheet strength: net debt to adjusted EBITDA of 0.1x supports organic and inorganic strategic ambitions
• Growth in full-year dividend, in line with progressive dividend policy

Current trading illustrates our strength against external headwinds

Trading continues to be strong in the first seven weeks of 2022/23. Our inventory availability remains robust, our average order value has increased further and our industrial products growth is slightly better than that of our

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electronics product range. EMEA continues to benefit from an increasingly engaged customer base and Americas from deeper product availability and sales campaigns. Asia Pacific growth has slowed slightly as a result of the temporary lockdown in Shanghai; revenue from China accounted for less than 2% of our Group in 2021/22.

Well positioned for accelerating our growth strategy organically and inorganically

Over recent years we have demonstrated our resilience and the benefits of having a clear strategy and proposition with a high-performance,purpose-led culture. Our experience, expertise and talented people remain key as we navigate the current geopolitical and economic uncertainties. Despite the external challenges, we remain confident in driving further market share gains, improving operating efficiencies, delivering ongoing adjusted operating profit margin growth and generating long-term sustainable value.

We are well positioned to make good progress as we leverage our strengths and prioritise those initiatives which will continue to differentiate us - namely to become more solutions led, improve the user experience and develop our product offer further. We have a clear roadmap to delivering stronger revenue and high-quality profitable growth on our Journey to Greatness.

1. Like-for-likechange excludes the impact of acquisitions and the effects of changes in exchange rates on translation of overseas operating results, with 2020/21 converted at 2021/22 average exchange rates. Revenue is also adjusted to eliminate the impact of trading days year on year. Acquisitions are only included once they have been owned for a year, at which point they start to be included in both the current and comparative periods for the same number of months (see Note 10 for reconciliations).
2. Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, acquisition-related items, substantial reorganisation costs, substantial asset write-downs,one-off pension credits or costs, significant tax rate changes and associated income tax (see Note 10 for reconciliations).
3. Rolling 12-month NPS is a measure of customer satisfaction.
4. Main ESG ratings: MSCI ESG A rating 2021, CDP 2021 climate leadership score A-, Sustainalytics negligible risk (6) 18 / 14,661 companies, FTSE4Good Index score 3.2 / 5 score 2021, EcoVadis Gold medal rating 2021.

Enquiries:
David Egan, Chief Financial Officer	RS Group plc	020 7239 8400
Lucy Sharma, VP Investor Relations	RS Group plc	020 7239 8427
Martin Robinson / Olivia Peters	Tulchan Communications	020 7353 4200

There will be an analyst presentation today at 9.00am (BST) at UBS, 5 Broadgate, London EC2M 2QS. 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.

Participant dial-in numbers

United Kingdom (Local): 020 3936 2999

All other locations: [phone]

Participant access code: 241854

Webcast link:https://www.investis-live.com/rsgroup/6283979ca4707c1200b35bdd/rsfr

Notes to editors:

RS Group plc (formerly Electrocomponents plc) is a leading global omni-channel industrial product and service solutions provider to customers who are involved in designing, building and maintaining industrial equipment and operations, safely and sustainably. We stock more than 700,000 industrial and electronic products, sourced from over 2,500 leading suppliers, and provide a wide range of product and service solutions to over 1.2 million customers. With operations in 32 countries, we trade through multiple channels and ship over 60,000 parcels a day.

We support customers across the product lifecycle, whether via innovation and technical support at the design phase, improving time to market and productivity at the build phase, or reducing purchasing costs and optimising inventory in the maintenance phase. We offer our customers tailored product and service propositions that are essential for the successful operation of their businesses and help them save time and money.

RS Group plc is listed on the London Stock Exchange with stock ticker RS1 and in the year ended 31 March 2022 reported revenue of £2,554 million.

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CEO STRATEGIC REVIEW

Our year

We have had a very strong year, reflecting the work our people and teams have done in strengthening our position as a global omni-channel provider of industrial product and service solutions. We have delivered strong revenue and profit growth despite the challenges created by the pandemic, global supply chain disruptions and cost inflation.

Our performance is down to our talented people, and our number one priority remains their health, safety and wellbeing. The pandemic brought us closer together as colleagues and as a Group. Physically we have spent much of the year working apart, but our strong technology capability has allowed us to operate uninterrupted and connect better across teams and regions.

There has been a change in culture across the Group as we have invested in talent, empowered our leaders and incentivised our teams with targets they can identify with and influence. The culture change has been the main driver of our market outperformance in all three regions, with greater operational ownership underpinning stronger profitable growth. We thank all our 7,654 employees and feel honoured that 90% choose to remain with us.

This year has been one of external recognition too. Our strength has resulted in us re-joining the FTSE 100 Index, over 19 years after we left. We also won 'company of the year' at the plc awards 2021, were voted one of the Top 50 Inclusive UK Employers 2020/21 and are ranked by Sustainalytics as 18 out of 14,661 companies globally for our environmental, social and governance (ESG) commitment. Achieving these milestones reflects the hard work all our teams do to fulfil our purpose of making amazing happen for a better world.

Our transformation

We have come a long way since I joined the Company in 2015, transforming the performance and aspirations of our business. We have proven our ability to outperform consistently and deliver market share gains; improved the Group's profitability and shown we can operate more efficiently and more sustainably; demonstrated the strength of the business through the cycle and particularly in difficult macroeconomic conditions; and accelerated our growth opportunities with bolt-on acquisitions.

Our outperformance is underpinned by being resilient and adaptable. We have a long history of controlling our own future through anticipating and adapting to market changes, to delivering a first-class customer experience and evolving our proposition to become solutions led. This has been fundamental to our growth journey and sets us aside from our more transactional competitors.

We are a socially and environmentally responsible organisation with high ethical and governance standards which I lead and for which I am directly accountable. We want to be a leader in creating a more sustainable and responsible future and know that this can also be a key value driver and competitive differentiator.

In November 2021, we launched our 2030 ESG action plan, with four global goals and 15 supporting actions. It is integrated into our strategic plans, our 2022/23 management incentive targets and underpins our purpose. Importantly, we are supporting all our stakeholders as they become more sustainable: we sell products and service solutions that support our customers' and suppliers' sustainability ambitions; we are attracting and empowering a more diverse workforce; we are adding value to our communities through our educational resource; and we are improving returns for our shareholders. Our work is also recognised externally by strong ESG ratings which is already proving a differentiator in winning commercial tenders.

Reviewing 2021/22

We delivered very strong like-for-like revenue growth of 26% during the year, of which c. 19% was volume and mix driven. We have grown market share in all regions through providing an extensive product and service solutions offer and industry-leading product availability with a fast, responsive and omni-channel customer experience.

We have strengthened our customer relationships, delivered a more tailored user experience and offered services to solve our customers' procurement problems. This has resulted in a higher average order value for our non-integrated supply business, growth in our business-to-business (B2B) customer base and increased levels of customer engagement. We are increasingly becoming a one-stop shop for our customers.

Meanwhile, our procurement expertise and experience allowed us to identify supply issues in the market early and work closely with our suppliers to secure and invest appropriately in greater levels of inventory and ensure industry-leading availability.

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We have taken actions during the year to improve our gross margin through revising our pricing and discount policies, developing our own-brand range and negotiating buying terms better. This has been delivered despite some regional and product mix dilution and ongoing pressures from inbound freight inflation.

Cost pressures have worsened. Freight rates and delivery charges remain at elevated levels and show no signs of abating. We are managing the cost impact through storing our product closer to the customer and working with our suppliers to become more regionally sourced. This action is reducing our freight miles, and those of our suppliers, thereby decreasing carbon emissions too.

We have also seen greater labour and energy inflation, although the latter is not significant given our capital-light business model and move towards lower-carbon facilities and sustainable energy sources (88% of our electricity is from renewable sources). Given the importance of our people, we ensure we offer competitive pay and benefits, implementing a real pay rise and an additional 'thank you' bonus to all permanent employees during the year.

We continually invest in our operating model to strengthen our expertise, advance our technological and digital capabilities, grow our product and service solutions capacity and improve our operating basics. We have strengthened our experience in areas where we can widen our competitive differential further. We have developed internally and recruited externally excellent people who support our ambitions for stronger revenue and high-quality profitable growth.

Even after this targeted operational investment, our adjusted operating profit conversion improved by 6.4 percentage points to 28.4%.

Our operating profit grew by 85%, or 70% on an adjusted basis to deliver a 3.1 percentage point improvement in our adjusted operating profit margin to 12.5%. On a two-year basis, and so excluding the impact of the COVID-19 pandemic in 2020/21, revenue and adjusted operating profit grew by 31% and 45% respectively.

We completed the physical expansion of our German distribution centre (DC) in September 2021. This will, in time, double our capacity and improve our speed and service in Europe, mitigating some of the additional costs and processes arising from the UK's exit from the European Union.

We remain strongly cash generative, despite additional inventory investment as we deepened our product offer through our expanded DCs in the US and Germany and ensured strong product availability despite supply chain disruptions.

We are financially strong and remain extremely disciplined. Our return on capital employed improved nearly 10 percentage points to 28.7% and we increased our dividend by 13% to 18.0p.

We believe we can accelerate our growth ambitions through ongoing organic investment, with value-accretive acquisitions which will enhance our proposition strategically. Our priority is to pursue high-quality businesses that can expand the Group's product and service solutions offer, extend our product offering and / or strengthen our position geographically. With our strong balance sheet, we have significant firepower but we are maintaining our financial discipline with acquisitions assessed on delivering strategic and financial benefit, strong returns and the all-important cultural fit. We are in a number of active discussions that meet our strict criteria.

Becoming first choice

Our vision is to be first choice for all our stakeholders: our people, customers, suppliers, communities and shareholders. Delivery of this vision is planned and monitored according to three key themes and incorporates our stakeholder feedback and needs.

Cultural transformation: having a high-performance,purpose-led culture

Our people are our most important asset and differentiate us. We have a diverse and inclusive culture, not just in gender and ethnicity but also mindset, which is vital in creating engaged, adaptable and high-performing people.

Operational efficiency: delivering world-class capability and execution

We have invested in our DCs to expand inventory capacity, increase automation, develop technology and drive environmental efficiencies. This has allowed us to source and store more product locally, re-engineer supplier routes to reduce carbon emissions and develop a scalable global network to support our revenue growth ambitions.

Additionally, our regional centres of expertise leverage our wisdom, insight and data across our core commercial functions to drive scale and improve efficiency.

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Growth accelerators: driving a compelling value proposition and customer experience

We have three growth accelerators which underpin our vision of being first choice for all our stakeholders:

• We are easy to do business with: our fast and responsive omni-channel model delivers a seamless end-to-end customer experience through digital channels, human touch or a combination of both with specialist support and product knowledge.
• We offer a broad and deep product offer: strong and extensive supplier relationships ensure product choice, availability and substitute options.
• We provide product and service solutions: solving our customers' problems across the design, build and maintain lifecycle drives closer and stronger relationships and greater value.

Combined, these three key themes, driven by our people and aligned to our purpose, ensure we provide a compelling customer experience and value proposition.

Our Journey to Greatness

We see a huge growth opportunity for RS Group. We have less than a 1% market share of a very fragmented market and our proposition is resonating. We believe we can increase our ambitions, moving from the good business we are today to a truly great one.

We are calling this next phase our Journey to Greatness. We have a differentiated business model, but it can be better. To be great, we need to benchmark our business against the highest global standards and deliver best-in-class growth and returns within our core competitive strengths by:

Galvanising a high-performance,purpose-led culture Realising a world-class customer experience Extending our wisdom, insight and data Accelerating to a solutions-led innovative business Transforming our executional capabilities

To mark this change, on 3 May 2022, we became RS Group. RS is our primary customer brand, recognised by engineers around the world. It has its roots in the very beginnings of the Company, which began life as Radiospares in 1937, founded on the same principles that guide us today: ease of doing business and putting the customer first. As RS Group, we are bringing our business together under one strong, unified global brand, united behind our single purpose. We believe this will open many more opportunities for us, unlocking our global efficiency, enabling scalability and helping us deliver our Journey to Greatness.

There is no change to our strategy. Our strategic roadmap, Destination 2025, has evolved into The RS Way, reflecting greater ambitions to drive stronger revenue and high-quality profitable growth. We have a purpose-led culture and vision with ESG embedded in everything we do to advance sustainability, champion education and innovation, empower our people and be a responsible business.

In summary

As I write, there is a significant amount of uncertainty around the world including the invasion of Ukraine and geopolitical fallout; the lockdown of many cities in Asia owing to further outbreaks of COVID-19 and its variants; and the continued impact of inflationary pressures as well as a potential severe global economic slowdown. While we have no operations in Ukraine or Russia, our thoughts and support are with all those affected by the events. We are mindful of the challenges that all our stakeholders face and continue to provide assistance where we can.

However, despite these uncertainties we have established a track record of being resilient through the economic cycle and particularly during periods of macroeconomic uncertainty. This has been driven by our people, having a purpose- led culture and working as a team.

Having repositioned our Group, we can see the opportunity to unlock further growth through leveraging the Group's differentiated model, improving our operational execution and ensuring we contribute to making amazing happen for a better world.

Our strong market share growth and outperformance underpins our confidence in being able to deliver stronger revenue and high-quality profitable growth, enhanced by strategic acquisitions, with a mid-teen adjusted operating profit margin and underpinned by at least 20% return on capital employed.

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