RS : Trading Update (Online)

RS Group plc today issues a trading update for the first quarter ended 30 June 2022

CONTINUED STRONG PERFORMANCE, MARKET SHARE GAINS AND ACQUISITION

LINDSLEY RUTH, CHIEF EXECUTIVE OFFICER, COMMENTED: "Our revenue performance remains strong. The Group's differentiated proposition continues to resonate with customers due to our industry-leading product availability, ease of ordering and customer service. Our strategy is to accelerate our organic growth ambitions with high-quality acquisitions that have a compelling strategic, financial and cultural fit. We are delighted to welcome domnick hunter-RL (Thailand) into the RS Group which will enhance our product and service solutions offer in Asia Pacific and generate value through cross-selling synergies.

While we remain alert to a difficult macroeconomic environment and increasing inflationary pressures, we have an improved pricing model, strong cost controls, tight inventory commitments and profitable growth initiatives as detailed within our Journey to Greatness. We have transformed and strengthened our Group significantly over recent years and our performance has demonstrated our ability to adapt quickly to external pressures, turn challenges into opportunities and outperform. We are confident we are well positioned to deliver continued profitable market share gains and attractive returns. Given our strength in the first quarter, we now expect our full year revenue and profit to be slightly ahead of current consensus estimates¹."

Q1 revenue growth remains strong as we grow profitable market share

• Like-for-like revenue growth of 18%, despite significantly tougher comparatives.
• Total revenue growth was 20%, with foreign exchange a 3% tailwind.
• Our industrial product ranges, which are c. 73% of Group revenue, grew like-for-like revenue by 21%.
• EMEA's growth reflects growing average order value and frequency, indicating share of wallet increases, and a greater focus on more profitable customers. Germany was one of EMEA's strongest performing countries due to sales, product and digital changes made with minimal benefit from the distribution centre expansion to date.
• Americas' performance is benefiting from stronger demand, focused sales campaigns, enhanced digital capabilities, improved inventory availability and greater product depth.
• Asia Pacific revenue growth recovered quickly from the lockdown in Shanghai which came to an end in June.
• Our main own-brand, RS PRO, grew like-for-like revenue by 21%, benefiting from targeted product campaigns.
• Web like-for-like revenue increased by 20%, with digital participation of 63%.

Improved pricing and tight cost control are offsetting inflationary pressures and operational investment

• Gross margin improvements reflect an improved pricing and discount model and product management work.
• Our inventory remains tightly controlled, with investment weighted towards faster-turning product.
• Strong cost control and operating leverage is helping offset inflationary pressures.
• Ongoing investment in operational capabilities to support our growth opportunities.

Acquisition of domnick hunter-RL (Thailand) Co., Ltd. for c. £10 million on 30 June 2022 on a debt-free, cash-free basis

• A leading distributor and service provider of major air compression, purification and filtration products in Thailand.
• domnick hunter accelerates development of our service solutions offer in Asia Pacific.
• Strong synergy potential through cross-selling ranges.
• Accretive to adjusted EPS in first year and expected to exceed Group cost of capital within two years.

Notes:

1. Consensus for the year ending 31 March 2023 is revenue of £2,735 million within a range of £2,629 million and £2,819 million and adjusted profit before tax of £345.3 million within a range of £328.4 million to £359.4 million (source: Electrocomponents.com/investors/analyst-coverage).
2. Like-for-like revenue growth is growth in revenue adjusted to eliminate the impact of acquisitions and the effects of changes in exchange rates and 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. 2021/22 is converted at 2022/23 average exchange rates for the period.
3. Our profit remains sensitive to movements in exchange rates on translation of overseas profits. Average exchange rates for the year ended 31 March 2022 for euro and US dollar respectively were €1.176 and $1.366 respectively. Every 1 cent movement in the euro has a c. £1.8 million impact on annual adjusted profit before tax. Every 1 cent movement in the US dollar has a c. £0.7 million impact on annual adjusted profit before tax.
4. We expect to see a negative impact of around £7 million on revenue from fewer trading days in 2022/23 compared to 2021/22.

Video webcast details
There will be a video webcast for analysts and investors today at 8.00am UK time. A replay of the video webcast will be provided shortly after the event via the investor relations page of the RS Group website: www.rsgroup.com/investors

Please find the registration link for the video webcast below. It is advisable to pre-register early to avoid any delays in joining the video webcast. To ask a question, participants will need to be connected by phone.

Video webcast pre-registration link: https://webcast.openbriefing.com/rsgroup-jul22/