RS Group PLC

Good morning, everyone, and welcome to the virtual 2021 preliminary results presentation for Electro Components for the year end of the 31st of March 2021. I'm Lucy Sharma, responsible for Investor Relations at Electro Components. If you are dialing in through the phone line, you can find our presentation slides on our website under the Investor Relations link. I'd like to introduce you to Lindsay Ruth, our CEO, and David Egan, our CFO. Over to you, Lindsay.

Thank you very much, Lucy. And after such an extraordinary year, I'd like to begin by talking about what underpins our success at Electro Components, and that is our people. Our amazing team has driven our strong performance this year, working tirelessly and collaboratively to support our customers, suppliers, communities, and each other. Special mention goes to the essential workers in our distribution centers, who came into work every day despite the lockdown to ensure ongoing service and continue to do so. We have been supporting our communities too. For example, setting up 3D printing farms for personal protective equipment, PPE, designing personal ventilators, and providing free educational tools for homeschooling. I'm incredibly proud of how strong our team is. I thank everyone for their hard work, positive attitude, and Humir, which continues to make electric components the amazing business I'm proud to lead. So turning to slide five, our Destination 2025 strategy outlined two years ago sets out our five strategic priorities to deliver value to all our stakeholders by becoming first choice, our vision. This strategic roadmap has been driving our market outperformance and is guiding our actions going forward. It is a plan based on five key principles. One, delivering the best customer and supplier experience. Two, investing in our talent to maintain a high-performance team. Three, continuously improving how we do things to build operational excellence. Four, driving innovation, be this within product and service solutions or harnessing our digital expertise. And five, reinvesting to accelerate growth, both organic and inorganic. There is no change to the overall plan, but we have refocused our efforts to deliver these ambitions faster. Destination 2025 is about driving profitable market share growth towards our goal of a mid-teen adjusted operating profit margin. I will now hand it over to David to take you through our financial performance.

Thank you, Lindsay. And good morning, everyone. And thank you for joining our preliminary results presentation. Let me start by giving you the key messages from the results on slide seven. We delivered a strong performance during FY21 with momentum building through the year after the onset of the global lockdowns from COVID-19 in March 2020. Key for me is how we have proven the strength and resilience of the business in extreme circumstances and had the ability to improve our competitive position. We believe these factors plus our differentiated offer and financial strength drove the significant market share gains that we have seen. During the year, we took a step forward in our inorganic strategy, making three high-quality strategic acquisitions that are all performing well. Acquisitions will help us to accelerate our strategy and we have an active pipeline of further targets, but we will remain disciplined and selective in our approach. And finally, we delivered strong free cash flow and with ongoing rigorous capital discipline generated strong investment returns. Slide 8 illustrates our financial highlights. Full year like-for-like revenue growth was up 1.4%. It fell 7.3% in the first half as COVID-19 hit, improving to a positive 10.2% in the second as lockdown restrictions eased and the strength of our model and our customer proposition shone through. Our main own brand, RS Pro, continues to outperform the group with like-for-like revenue growth of 9.7%. Digital like-for-like revenue growth of 0.9% was lower than the overall group due to less e-procurement revenue from some large customers. Pure web sales, which is a truer measure of our digital proposition and customer traffic, grew at 2.4%. Our adjusted operating profit margin fell by 1.9 percentage points predominantly due to inventory provisions and additional cost relating to COVID and Brexit. Despite this, our return on capital employed remains strong at over 19%. During the year, we focused on conserving cash, delivering adjusted free cash flow of 145 million, even after an additional 12.5 million payment into our UK pension scheme, and no real slowing of our capital investment program. Accordingly, We reinstated our progressive dividend policy and increased our full-year dividend by 3.2% to 15.9 pence. We have seven non-financial KPIs which relate to our ESG ambitions, which Lindsley will address later. So turning to slide nine, I will detail four of them. Our CO2 emission intensity improved by 36.5% to 3.3 tonnes per million pounds revenue. In fact, that is a 62% reduction in tons of CO2 since FY15. Customer experience remains a core focus for the business and a key performance metric for our teams. Our group rolling 12-month net promoter score was 54.4. Despite all of our team's hard work, we could not fully mitigate the impact of product shortages and longer lead times from COVID and Brexit. Improving NPS is a key focus for us all going forward. Our employee engagement score grew to 74 as our teams worked hard in keeping our people safe, connected and healthy. And our accident rate fell by 36%, resulting from safer working within our distribution centres. Slide 10 details the income statement. Like-to-like revenue growth was 1.4%. Total revenue grew by 2.5%, with acquisitions accounting for 1.5 percentage points of the overall growth. The gross margin decreased by 1 percentage point to 42.7%, which includes a 0.6 percentage point impact from inventory provisions on certain PPE products as prices fell. with the remainder being higher inbound freight costs and a geographic and product mix effect. Outside of gross margin, costs relating to COVID were circa $17 million, with Brexit another circa $2 million, reflecting increased freight costs, brokerage fees and a higher cost to serve. Many of these costs have continued into the current year, although we should see reduced brokerage fees when our distribution centre expansion in Germany comes on stream in early autumn. Our RISE initiative to streamline and simplify the group delivered 7 million of benefit and is on track to deliver the full 25 million of benefit over a two-year period. There was an 11 million substantial reorganisation cost, less than the charge booked in the first half As some plans were stopped due to Brexit, more people with less service years left, and we redeployed people from redundant roles into vacant positions. The three acquisitions contributed 29 million of revenue and 2 million of adjusted operating profit since joining the group. Our adjusted effective tax rate was 21.8% in line with last year, helped by circa one percentage point from one-off tax credits, which are unlikely to repeat. Looking forward, we expect the FY22 tax rate to rise to circa 24%, with further increases in the outer years as the effect of corporate income tax rate increases in both the UK and the US come into effect. On slide 11, we see that all regions had positive like-for-like revenue growth. Industrial production data shows our core markets gained share, as can be seen on a chart in the appendix. We provided revenue data at our trading update on the 13th of April, so I will concentrate on the profit metrics within this presentation. Starting first with EMEA, which accounts for circa 64% of group revenue. Like-for-like revenue was 1% up during the year, with nearly an 18 percentage point swing in performance between the two halves. The gross margin decline was largely due to the inventory provision on certain PPE products. Operating profit fell by circa 15%, a result of the lower gross margin and $13 million of extra costs associated with COVID and Brexit. the operating profit margin was 13.5%. Needless and Liscombe, our two PPE acquisitions in the UK, contributed $1.6 million to the profitability within the EMEA region. The Americas, which is circa 26% of group revenue, saw like-for-like revenue grow by 1.4%, with a circa 19% swing in performance between the two halves. There's been a lot of change within our America's business over the last two years. We've transformed our senior management and sales force teams. We've doubled the capacity of the distribution center, refocused our marketing initiatives, and acquired Synovos. We're starting to see the benefits coming through from this repositioning. The gross margin rose due to less discounting and better price optimization. offsetting the inbound freight inflation. Operating profit declined by 8%, with higher operating costs relating to supply chain, labor, and depreciation from the DC investment. The operating profit margin was 10%. Synovus contributed 0.5 million of operating profit since its acquisition in mid-January. And finally, Asia-Pacific, which accounts for circa 10% of group revenue, saw like-for-like revenue grow by 4.6%, with a 13% swing from the first half into the second. We have broadened our product offer, restructured our country operations, and refocused our sales force. The gross margin declined largely due to a mix effect from stronger revenue from lower gross margin product. The operating profit fell to $1.4 million, with a higher cost on a small profit base more than offsetting the revenue growth. On slide 12, we detail our adjusted free cash flow of $145 million, which benefits from tight working capital control. Our working capital to revenue ratio was 21.8% for the year, a great performance. Inventory turn was 2.7 times. with delays in receiving product due to Brexit and the Suez Canal blockage. Net capital expenditure was $55 million, as we focused investments on key value levers, such as our distribution center expansions and technology platforms. Our expanded DC and Fort Worth US was completed in the first half, and we continue to invest in expanding our distribution center in Bad Hersfeld, Germany. We anticipate capital expenditure in FY22 to be circa 65 million pounds. We delivered 100% adjusted operating cash flow conversion during the year, providing strong financial support for our investment program. During the year, we acquired three strategic businesses, detailed on slide 13. Synovos is a leading player in integrated supply solutions based in the US and very similar to our IESA business. We see significant cross-selling synergies between Synovos, IESA, Allied and RS Pro. Needless and Liskam expand our product and services solutions offer in safety, hygiene and PPE, allowing us to capture a greater share of spend with new and existing customers. All three acquisitions are performing in line with expectations with integration and cross-selling opportunities on track. Our pipeline of acquisition opportunities remains strong. On slide 14, we note how we are optimizing our capital allocation. During the year, we delivered strong cash generation, refinanced and increased our debt facilities, and raised equity to fund our acquisitions. Given our strong performance, the Board resumed our progressive dividend policy, paying a deferred final dividend from last year in December 2020. We returned to our normal dividend timetable this year, paying an interim dividend in January, and the Board proposes a 9.8 pence per share final dividend policy, giving a full-year dividend of 15.9 pence and dividend cover of two times. The group's financial metrics remain strong, with net debt to adjusted EBITDA of 0.5 times, providing us with the financial base to support both organic and inorganic growth investment. Moving to slide 15 and current trading. The first seven weeks of FY22 have seen very strong growth, but attempts on either a one- or two-year view provide good tailings. On a one-year basis, this is due to weaker comps from the first COVID-19 lockdown, and on a two-year view, we saw a very slow start to the year, particularly within the Americas. Looking at our current performance on a two-year view, revenue growth remains robust, at broadly low double-digit CAGR. Our performance in the Americas continues to benefit from a wider product range, improved digital performance, and much easier comps. We're particularly pleased with the robust performance in EMEA, given ongoing lockdowns and the logistical challenges presented by Brexit. And Asia-Pacific remains strong, helped somewhat by the buoyant electronics market. We're mindful of ongoing uncertainty regarding COVID-19 and its variants, continuing cost pressures relating to freight inflation and Brexit, currency headwinds, thus the potential for some supply chain constraints later in the year. However, we're well positioned to make good progress this year, and our expectations for strong growth in FY22 remain unchanged. With that, I'll hand you back to Lindsley to go through our strategic opportunities. Over to you, Lindsley.