RS Group PLC

Well, good morning and welcome. Thank you all of you in this room for joining us this morning, and thank you for everybody else who's online. We are here, as you will know, to discuss the first half results for RS Group. But before we start the results presentation, I just wanted to take a moment to address the announcement that we made this morning about our CEO, Lindsley. Lindsley is not here today because the board has agreed for him to take a leave of absence from the business due to personal reasons. This is a personal situation and out of respect for that, I am not going to get into the details as those are personal matters for Lindsley. However, it is necessary that he takes a leave of absence from the business and he is being well supported during that time. And as you all know, under Lindsley's leadership, we have built a truly great business. You'll be hearing more about that today. And we are incredibly grateful to David Egan and our entire senior management team, many of whom are here today, for stepping up to make sure that we just keep that momentum going because the momentum we have is extraordinary. And of course, the Board and I stand fully ready to support them in any possible way we can. So on behalf of everyone at RS, we wish Lindsley well and we sent him our thoughts and best wishes. And now I will respectfully ask that we focus the rest of the discussion on the results. And in that regard, I am delighted that RS is in a really fantastic place. Our strategy is clear. It is really resonating with our customers and our suppliers. And it is delivering consistent share gains across every region. We have really a fantastic depth in people. We have a top class senior management team. And that goes all the way through the company, serious talent throughout the company. So under the leadership of David during this period and the executive team, the board is extremely confident that we just won't miss a beat. So I won't steal the team's thunder and we'll now hand over to David and to Jane Titchener to take you through our first half results. And I thank you for your understanding and your support.

Thank you, Rona. And good morning. I'm David Egan, the Acting CFO of RS Group. And I'm joined here today by Jane Tichner, a very senior member of the finance team within RS Group, the Vice President of Corporate Development and Strategy. This is Jane's first time, so please take it easy on her. So welcome, Jane. But may I start by saying something about Lindsley. Lindsley is both a boss, but he's also a very personal and close friend of mine. I wish him well through this leave of absence. And Lindsley, what I would say to you is that we will continue the momentum and we will be focusing on customers, our people, the culture and the purpose that you have established. And we have every intention of doing you proud upon your return and the team that you have assembled in the delivery of that. So now, let's shift gears and let's focus on our first half results. Presentation for the six months ended the 30th of September, 2022. We have delivered strong revenue and profit performance in the first half. Slide four shows our ongoing market share outperformance versus our peers as our differentiated proposition continues to resonate in the market and with our customers. And we continue to invest in our future. while delivering increased margins and, more importantly, or equal importance, returns. And this has been supported by a very strong balance sheet within our group. So moving on to slide five, as Lindsley has said many times, our people are the most powerful driver of our business. We've invested in and supported high-performance, purpose-led culture throughout the world. We never underestimate the value that our people bring to our stakeholders, our customers, our suppliers, our communities, and our shareholders. And so we've launched a share-based award under our Journey to Greatness plan for all employees to participate globally. We've recently conducted our employee engagement survey And our score improved three points to 78, which is, it places us very close to upper quartile of top performing companies throughout the world. And our US business ranked 33rd on the list of the top 50 inspiring workplaces in North America in 2022, with a special mention for our inclusivity. Turning to slide six, We've had an exciting six months rebranding our company to RS Group. AESA and Synovos has become RS Integrated Supply. Needlers and Liskim, the acquisitions that we did a little while ago, now operate under the brand of RS Safety Solutions. And in February 2023, we plan to rebrand Allied in the Americas to RS. Operating as RS brings recognition to our global proposition. It strengthens our product and solutions offer, and it delivers greater collaboration and efficiencies across the group. And it allows us to have one team, one purpose, one brand, and one culture. So now let me pass you over to Jane. And as I said, please be easy on her. This is her first time. And she's going to cover our first half results. And then I will come back and talk to you about the outlook and also some of the areas that we are focusing on to drive superior outperformance. Over to you, Jane.

Yeah, thank you, David. And good morning, everybody. So let's go through our results for the six months ended the 30th of September 2022. Slide eight summarises our strong profitability, returns, cash and shareholder value over the last three years. We have outperformed in the first half, leveraging our operating base to deliver an adjusted operating profit margin of 13.4%. nearly 30% adjusted operating profit conversion, over 31% return on capital employed, and we've generated over £110 million of adjusted free cash flow. We have eight non-financial KPIs and they're detailed in the appendix. On slide nine, we've highlighted three metrics which are linked to our sustainability-linked loan and our progress on delivering our 2030 ESG action plans. They're carbon emissions, packaging intensity, and the percentage of women leaders in our business. Onto our income statement on slide 10. which shows that our revenue increased by 21% to £1.5 billion, and our adjusted PBT grew by 35% to £192 million. If we look at revenue in a bit more detail, as shown on slide 11, we delivered 16% like-for-like growth, with 5 percentage points from volume and mix, and 11 percentage points from price inflation. And in the total revenue growth of 21%, there was five percentage point benefit from favourable foreign exchange. On slide 12, we detail the drivers of the 1.4 percentage point improvement in our adjusted operating profit margin, which has increased to 13.4%. Our revenue growth has provided strong operational leverage on our cost base. Our gross margin grew by 1.8 percentage points to 45.5%, and this is driven by margin optimization work, especially within our own brand, a tighter discounting policy, and more focused buying commitments. We had limited transaction currency impact. Total operating costs have grown by 22%. Approximately a third of that relates to inflation, mainly in labour. One third is volume driven. And the balance relates to strategic investments, which we're continuing to make. We continue to invest in digital, our journey to greatness, rebranding to RS, as David referred to earlier, and in our people, including paying a total of £5 million in additional one-off payments to all of our employees to help them through what's a very difficult economic time. Our group energy bill is around £5 million and is largely hedged for the next nine months. Slide 13 shows all three regions delivering material improvements in revenue and operating profit through a greater focus on higher value B2B customers, price optimization, improved digital capability, and strong operational leverage on our cost base. This was all achieved while managing constrained supply of single board computing, particularly Raspberry Pi, which is sold through our consumer brand, OKDo, and the cost pressures and investment identified earlier. Regionally, we've seen a mere drive profit improvement despite ongoing investment in our operating model. In the Americas, we've benefited from strong operational investment on the underlying cost base and from inventory investment into the expanded DC. And in Asia Pacific, we've delivered greater scale with tighter commercial focus. So if we move on to slide 14, which shows our cash performance. We remain very cash generative with an adjusted operating cash flow conversion of 82%. Our inventory investment, which has supported customer demand in the first half, led to a decline in inventory turns to 2.4 times. We expect our inventory turns to improve slightly in the second half, as we tighten inventory commitments, restricting our investments to the higher inventory turn products, which we know will sell through quickly, and the products which are searched most for online by our customers. If we move to slide 15, our balance sheet remains strong. We had a small net cash position at the half year, and this will move towards pro forma net debt to adjusted EBITDA of 0.6 times after the acquisition of Rizal. Last week, we completed the refinancing of a sustainability link loan, which increasing the value to 400 million pounds, extending the maturity to five years plus one, plus one extension option, and all at similar terms. This eliminates any financing risk over the medium term. Our fixed to floating interest rate swaps on our US private placement loans will all mature before the year end. There is no change to our capital allocation, as shown in slide 16. Our three focus areas for growth are unchanged. Our number one priority remains organic growth, and given our high ROKI of over 31%, we're able to profitably leverage our asset base. but our balance sheet is strong and that provides inorganic opportunities too. And there are some exciting opportunities in our M&A pipeline. We do continue to be super disciplined financially, strategically, and culturally. So onto slide 17, we're really proud to welcome two new businesses to RS Group. First is Dominic Hunter, a leading distributor and service provider of major air compression, purification, and filtration products based in Thailand. And second, Rizal, a major distributor of industrial and automation products and service solutions in Mexico. And this acquisition remains on track to complete by the end of this calendar year. Both businesses expand our products and service solutions offered geographically and are expected to exceed our group cost of capital by the third year. And we welcome everyone from Dominic Hunter and Rizal to the RS Group. So now I'll hand you back to David to update you on current trading.