RS Group PLC

Good morning everybody and welcome to the RS full year results presentation for the 12 month period ended 31st of March 2025. Thank you for joining us here today. Thank you for joining us online and thank you all for your continuing interest in the RS group. I'm pleased to report that 12 months into our quite ambitious multi-year plan to enhance and improve RS, we're making really good underlying progress in all areas of our business. And we'll highlight that as we go through the course of the presentation today. Although the unwinding of post-pandemic trading benefits and the challenging macro environment continues to impact our financials and to slightly mask the sustainable and underlying improvements that are going on and are in train across the group. However, by focusing on the things that we can influence and executing well to our plan, we are now in much more control of our own destiny as we continue to position ourselves effectively for the acceleration as markets recover and we return to more sustained growth. And so on to the presentation itself. I'm going to share some detail on what we've done this year. Kate will then take us through how this has been reflected in our numbers and our regional performance. And then I'll wrap up by sharing what we're focusing on going into 2026. And our presentation should take around 35 minutes, but we'll leave plenty of time for questions at the end and we'll aim to get you all away by 10 o'clock. Now, as you know, at RS, we like to start all meetings with a health and safety and values moment. And so first, I'd like to point out the fire exits to those that are here in the room, back corner. There are no planned fire alarms. So please, if you hear one, leave in an orderly fashion and follow the instructions of the fire marshals who will be wearing high-vis vests. But at RS, safety isn't just about physical well-being, it's about mental well-being too. And that's why, to mark World Mental Health Awareness Month, nearly 200 of us at RS around the world joined our LifeWorks employee resource group initiative, Move for Mental Health. The object is simple but powerful. We're going to walk to raise awareness of mental health in the workplace. And, of course, moving also... is good for our own physical and mental wellbeing. We started with an ambition to walk collectively a kilometre in May for every colleague statistically likely to be impacted by mental health during their working lives. We passed that goal of 4,350 kilometres by week two, and so we've extended it. And I fully expect the 200 of us to walk over 10,000 kilometres this month each kilometre a message of awareness and support. And this is an example of what RS is all about. It's our values in action. It's one team doing the right thing by coming together to raise awareness and make every day better for ourselves and for each other. So into the presentation itself. Fiscal year 25 was a year of significant underlying progress at RRS, where, thanks to the continuing efforts of our great people, we delivered a pretty resilient and in-line performance. We are executing against our plan effectively, with clear prioritisation, improved accountability, enhanced agility and, as a result, much improved delivery. We're performing as we should, delivering more predictable outcomes, even in difficult markets and continuing to take market share. We're managing the things that we can control better, taking action early, delivering restructuring and integration benefits ahead of plan, improving efficiency and managing costs appropriately. And we are beginning to see the benefits in our underlying operating metrics of our continued strategic investments, and all of which gives us great confidence in our ability to drive stronger growth and operating leverage, which in turn will generate significant value for all of our stakeholders over time. And we've done all this and made all this progress despite the difficult market backdrop that we've operated in. Now, expanding on each of these themes in turn, as this slide suggests, we're executing more extensively because of the extensive changes that we've made here over the last two years. We've now got a strong, diverse and stable leadership team with enhanced capabilities and a breadth of experience and, most importantly, a common set of aligned objectives. The second block... As set out in our Capital Markets Day in September, we've got a clear and focused strategy and an integrated and multi-year action plan to deliver it with much more systematic and rigorous resource and people prioritisation. We've implemented changes to our operating model and the ways of working to create clearer accountability and to support better execution. And we're more process-focused, and that's highlighting opportunities to harmonise, automate and improve delivery through more rigorous programme and change management. And importantly, we're actively monitoring progress with much more effective management oversight, all of which is driving clear prioritisation, that enhanced accountability that I referred to, and much better visibility, agility and ultimately delivery. This year, we performed much more as we should. As the chart on the left-hand side here shows, it's one we've published before. It plots our like-for-like revenue growth, the red line, against the RS weighted market PMI, which are the grey bars. It shows that the post-pandemic, mainly electronics trading benefit, that we saw from the second half of our financial year in 2021 had broadly unwound by the first half of 2024. And it also shows that PMI data throughout this period has been below 50 and certainly has been in decline since Q2 2023. And despite this, our revenue performance this year returned to its more close correlation with PMI and has even started to outperform in the third and fourth quarter of this year, despite actually PMI softening a little. And this reflects some of our strategic initiatives beginning to deliver. And whilst it's difficult to measure market growth and share in the high-service distribution space, the proxies that we use, which tell us we're continuing to gain share, such as supplier-reported channel relative and absolute growth, and web inquiries all indicate that we are performing better than the market. And now, and most importantly, we are performing predictably. And part of this is because in 25, we were much more effective at managing the things that we control. As you'll hear from Kate shortly, our growth accelerators continue to outperform the broader group. we're managing our variable and fixed costs better, exceeding our expectations on restructuring benefits and taking additional in-year action to reflect a more difficult than anticipated trading environment and are actually our headcount reduced by over 4% during the year. And although we increased strategic investment to 31 million this year, we did actually defer and reprioritise nearly 9 million of strategic investment to later years. And Kate will expand on both these things in her section. We accelerated delivery of integration benefits, commencing the early exit of our distribution centre in the Netherlands, originally operated by Distrilec, and this will generate significant additional cost savings in future years. And we're driving greater efficiency through reducing complexity, removing duplication, and this will continue as we improve collaboration and begin to harmonise our processes. And finally, and importantly, much more focused balance sheet management has led to over £200 million of free cash flow this year, strong cash conversion, and as a result, leverage remains towards the bottom end of our target range. And all of this demonstrates that we are able to exercise greater agility in our execution, investment and cost management. And on this chart, we're just showing you where the focus of our £31 million of organic OPEX this year and our £35 million of related CAPEX has been spent. And the light red is the capital expenditure and the darker red is the OPEX. And in customers, we've got cleansed and much more granular data and have rolled out improved tools to enhance our customer understanding. In products and suppliers, we've launched major systems improvements to accelerate new product introduction. In solutions, we've replatformed and upgraded our principal digital procurement solution and we've enhanced our service offerings. In customer experience, we've developed an upgraded digital platform for rollout across the group and launched an extensive systems upgrade that will ultimately allow real-time delivery tracking. And in operational excellence, we continue to integrate Distrilec into RS at an accelerated pace, whilst better leveraging automation and our global shared business services capability to optimise our operating cost. And all of this highlights the significant strategic and operational progress that we've made this year. And with that, I'm going to hand over to Kate, who's going to share with you how this has all been reflected in our numbers.

Thank you, Simon. Good morning everyone. I've seen significant improvement in NRS in a greater understanding of our strategic direction, analyzing our commercial KPIs better, and what levers we need to pull to optimize our performance and how to respond to external factors. We've navigated the difficult market well, executing better, and staying focused on what we can control, building the foundations to take the opportunity to benefit from greater operating leverage as market conditions improve. So let's move on to what's behind the numbers. This slide summarizes the results for the 12 months to 31 March 25. Year-on-year revenue decreased by 1%, and that's 2% on a like-for-like basis, having adjusted for acquisitions, trading days, and FX. Trading was slightly stronger in the second half in Americas and Asia Pacific as PMIs improved and we traded against weaker comparators. Our adjusted profit before tax reflects the market backdrop and our actions taken on normalised costs, which have all set inflation, as well as the increase in organic investment. Adjusted operating cash flow conversion has been very strong at over 110% as we released working capital in the year through improved working capital management. Our rookie decline reflects an 80 basis point impact from last year's acquisitions, with the remainder due to lower profit, partially offset by reduced capital employment. And our full year dividend increases by 2% to 22.4 pence per share, consistent with the progressive dividend policy. Our digital like-for-like performance of negative 2% largely reflects the market decline. And as Simon mentioned, we can see material declines in online footfall for some of the key words we're bidding for, albeit our conversion rates are improving following our search tool investment. The majority of the digital revenue decline is in web sales, and that's to medium and smaller customers. Services solutions revenue grew by 6%, like for like, as we have had success in targeting high-value corporate customers who are increasingly using our digital procurement solutions, which grew by 4%. We have restructured our business model for RS integrated supply, improving the commercial offer, and we're pleased with the progress that the team is making with new profitable contract wins, improved contract management, and a doubling of the order book. I'm also pleased with the performance of our own brand, RS Pro, which grew 2% due to range development and end-to-end sales and marketing focus. RS Pro now accounts for 14% of group revenue. Before I leave this page, you will also have noticed our full year 23 and 24 inventory provisions have been restated for an adjustment in the U.S. to reflect the correct application of the group inventory provisioning policy. This is further detailed in Note 12 of the RNS, but there is no effect on our full year 25 numbers. All right, let's turn to revenue. Group revenue was broadly flat, with like-for-like revenue declined 2%, largely due to lower volumes with minimal price inflation. There was a full-year benefit from last year's acquisitions, Distrilect and Trident, and a Forex impact from a stronger dollar. Average order value declined slightly, whilst average order frequency increased marginally. And in our three product categories, facilities and maintenance and other industrial categories grew 3%. Automation, control, electrification and testing measurement fell 2%. And these two categories cover around 80% of our group revenue. Our weakest category is in semis and passes, cables and connectors, which declined 8%, reflecting weak end markets. We have been active in managing our cost base, and as you've heard from Simon earlier, we exceeded our expectations on restructuring and integration benefits, and this in part offset inflation and normalization of incentives. We took additional short-term cost action, recognizing a difficult trading environment. I've updated the cost bridge that I've shown you in previous sessions so that you can follow the change in OPEX over the year. So that we can all align on a good starting point, I've re-based 2324 OPEX to exclude the 13 million cost to achieve last year's benefits, which as a reminder, we show above the line. That gives us a baseline starting point of 939 million. As we step through the chart from left to right, We include the full-year impact of acquisitions, small single-digit increase in inflation, and normalization of employee incentives. We've increased our organic investment by $7 million to $31 million, which is $9 million below our original expectations. And that's because we optimized our pace and our sequencing of our investment spend appropriately. This leads to a cost base of $9.94 million before management cost savings. We executed the integration and restructuring plans to generate another 29 million of ongoing cost savings by removing labour and facility duplication. This costs 17 million, which is a payback well below 12 months. We've also delivered over $38 million of cost savings over, sorry, we have now delivered over $38 million of cost savings over two years, which is above our $30 million target. And this leaves us with an ongoing cost base before in-year one-offs of $965 million. During the year, we identified a further $13 million of one-off savings, including the early termination of a lease agreement in the first half, general bail tightening and spending, and delaying vacancies. The $17 million, which I referred to above, of restructuring and integration costs, which we incurred in-year, were again recorded above the line. So our operating costs, including one-off costs and benefits, finished the year at $969 million. Right, so let's bring this all together. Our adjusted operating profit margin reduced by 100 basis points to 9.4%. The most significant movement in that being inflation in the cost base, given there is little revenue and COGS inflation during the year in gross profit. Let's move on to our region, starting with EMEA. Total revenue declined by 1%, including an extra quarter contribution from Disrelec. Like-for-like revenue declined 3%, with weak industrial production output and ongoing economic weakness across the region. And within the region, we saw France outperform, helped by more resilient industry verticals. The UK suffered from weaker demand since November, and Germany be impacted by a higher exposure to manufacturing and automotive industries. In Americas, our total revenue fell 3%, which is largely a result of the weak dollar during the year with like-for-like revenue flat. Economic weakness in the US and Canada through most of the year impacted business confidence, as evidenced by the weaker PMI data, although this showed some signs of improvement in the fourth quarter. Our operations in Mexico performed well as we expanded our product and service offer against a strong economic backdrop. Like-for-like gross margin was down just 0.1 percentage point, and the 4% decline in like-for-like operating profit reflects the revenue decline in increased organic investment, including within Mexico, which was partially offset by operating cost discipline. Moving on to Asia Pacific, total revenue grew 2% with like-for-like flat. We saw improving momentum during the year with like-for-like growth in the second half, reflecting signs of market recovery, especially in Southeast Asia. We have been developing our industrial offer, focusing on high lifetime value customers and expanding our service solutions offer, helped by the acquisitions of Dominic Hunter and Trident, and we're pleased with the success that we're having with RS Pro in the region. Operating profit increased by 1 million, with evidence of improved operating leverage emerging. I am pleased to report strong free cash flow with an operating cash flow conversion of over 110%. The lower EBITDA was partly offset by an improvement in working capital with better working capital management, especially in receivables. Capital expenditure remains stable at 1.2 times depreciation and supports our organic investment and strategy, notably physical and system infrastructure. Net debt decreased to $364 million, resulting in a gearing ratio of 1.1 times, which gives us good headroom to consider inorganic opportunities. And our cash generation balance sheet and debt facility headroom provide plenty of capacity for continued strategic investment. And our clear capital allocation policy hasn't changed. First, we prioritise organic investment to support organic growth, especially in strengthening our physical, system and process infrastructure. And this will increase next year and continue at around about 35 to 45 million, as previously signalled. Second, acquisitions in this globally fragmented market can accelerate our strategy, especially small bolt-ons. We remain value and capacity disciplined in our approach, assessing and building a pipeline of acquisitions which have executed or targeted to cover a cost of capital within three years. And third, we believe in sharing cash generated with shareholders through a progressive dividend policy and where we don't have sufficient value creation opportunities in organic and inorganic investments, we will return excess capital to shareholders. Our full year dividend in 24-25 grew by 2%. We expect future increases to continue to be in the low single digits until dividend cover is rebuilt. We target return on capital employed of over 20% and leverage an efficient balance sheet within a range of one to two times net debt adjusted EBITDA, depending on prevailing market conditions and acquisition opportunities. Right, finally, to give you some help on factors to consider when you're thinking about full year 26. We believe that the work we're doing to improve the operating performance of RS puts us in a strong position to drive greater operating leverage when the markets return to growth. We are planning for gross margin to be broadly flat, with pricing discipline maintained, whilst recognising gross margin can be impacted short-term by a variety of factors, including forex and inflation. We plan to increase our spend on organic investment next year to within the lower end of the guided range of 35 to 45 million per annum. And we anticipate similar cost inflation to that seen in full year 25 of 3%, including higher labor costs and additional UK national insurance costs. We announced a further $13 million cost savings program, which is now complete, and a further 150 basis points of margin improvement through cost savings over the medium term. I approximate that to be around about $45 million of cost, and we're making inroads into that target and will continue to do so in full year 26. We expect during this coming year that further cost efficiencies combined with cost synergies delivered from integrating Distrilect will deliver at least a further 15 million of cost benefit. The associated cost to deliver these benefits will be in the region of 10 to 15 million pound. Higher depreciation from our capital investment spend and further normalization of our employee incentives will be about 5 to 10 million of increase. We are proactively managing costs and have demonstrated our ability to flex expenditure as required. Remember, as shown as our cost bridge slide on slide 11, that our underlying cost base for 24-25 was $965 million, stripping out one-off cost benefits and expenditure. We'll continue to target cash conversion to exceed 80%. There's no change to our capital expenditure guidance at around 50 million. And we continue to support the physical and system infrastructure investment with our CapEx, including progress on the 2030 ESG action plan. Guidance points, which include trading days and forex and change tax rate and a summary of the operating cost actions is included on slide 34 of your PAC. And with a final word on tariffs, we are not currently experiencing any visible direct impact from tariffs and we're closely monitoring this evolving situation. We're fully engaged with our suppliers on their response and to support our customers in meeting their needs. And we would expect to pass on any price increases as suppliers adjust and we have the system capability to manage those changes. Given our global reach, broad product offer, wider supplier base and supply chain management expertise, we have the opportunity to offer alternative products, manage supply disruption and minimize our direct and indirect exposure to tariffs where necessary. Whilst mindful of the impact of tariffs that it may have more broadly on PMIs and the macro environment. I'd like to now hand you back to Simon.

Thanks, Kate. And now in this last section, I'd just like to share with you a bit more detail on the significant progress that we're making against our strategic action plan, where we're focusing on going into 2026 and where we are in our broader strategic and operational improvement journeys. So this is a slide some of you will recognise from our Capital Markets Day in September, and it's our pictorial plan on a page. It's how we intend to become first choice for customers, first choice for suppliers, and how we will accelerate sustainable value for creation for all of our stakeholders. So what have we done and what are we planning to do? At the core of our wheel, core to everything we do, is people. And for people, for us, it's all about further aligning and developing our people and leadership capability and capacity. Our people actions in 2025 led to greater focus and empowerment, more accountability and responsibility. And we did see a small drop in our October engagement survey, although it's perhaps, it remains at high levels and it's perhaps not surprising given the difficult market environment in which we've been working and the level of change going on at RS. But pleasingly, our most recent survey, which is just coming to a close now, is showing significant improvement in engagement in all areas. So in 2026, we'll be focusing on equipping our leaders with greater agility and flexibility to better manage and lead continuous change and moving to a more skills-based organisation, particularly in key functional areas like finance, product and supply chain and people, as we continue to build a greater organisational agility, efficiency and competence to support our strategic opportunity. In customers, it's all about prioritising the most valuable ones whilst continuing to serve all who buy a broad mix of industrial MRO products in small volumes, but doing so in a more effective cost to serve. In 2025, we aggregated and cleansed our customer data and enhanced our data capture mechanisms and put in place the tools to enable us to develop much more targeted sales approaches and to clarify those costs to serve. We defined and put in place standardised and forward-looking operational metrics to monitor our progress. And as we move into 2026, we will start to use this data and advanced segmentation capability to provide much more tailored and effective sales service and marketing efforts to our customer base. We'll also be using our improved digital flexibility to optimize our digital front end in markets where there are significant cultural variations, such as China. And all of this allows us to better prioritise the right customers with the right products and the right services efficiently and at an effective cost to serve, all enabled through the use of proprietary data and enhanced data platforms. In products and supplies, it's about strengthening our technical product offer through value-sharing partnerships with strong suppliers and by developing more curation for our customers. In 2025, we made material changes to our systems to allow increased local sourcing and stocking and introduced a new product management capability to materially accelerate both our capacity for new product introduction and our speed of adoption, whilst migrating sourcing to improve sustainability and stability of our supply chain. And this is particularly true in RS Pro. Moving into 26, our focus is on optimising our product management systems to accelerate the availability of relevant technical data and improve our customer experience. Building out further our RS Pro range and upgrading our pricing capability and processes to make us more effective value-based prices. And all of this is creating greater flexibility and allow a better sharing of the value we create for both suppliers and customers. We're continuing to focus our solutions and service offer. During the year, we re-platformed our e-procurement offer in Americas and Asia Pacific, enhancing content and order processing with new software planning tools. As you heard from Katie earlier, under new management, we've also refocused the RS integrated supply business to drive standardization and automation, which will lead to greater cost efficiencies and better scalability. And as we enter 2026, we'll continue to develop our digital product solutions, our technical solutions, and to leverage closer relationships between our integrated supply business and the broader RS as we pursue greater scalability and enhanced value through our solutions and our services. And we continue to strengthen and tailor our customer journey for a seamless, omnichannel customer experience. In 25, as you heard from Kate, we introduced a major artificial intelligence-enabled enhanced search capability across the group and commenced the development of a major upgrade to our digital commerce platforms, with release one actually launched in Americas just after the year end. We've also launched an extensive systems upgrade in EMEA and APAC that will, whilst causing some initial disruption, ultimately allow us to deliver real-time delivery tracking to our customers. Going into 2026. We'll be further enhancing our digital commerce platform and begin rolling it out in Europe. And we'll also launch the real-time tracking functionality to customers that we've done all the base work to enable and start to better tailor our customer experience using, again, our extensive proprietary data that's all enhanced by artificial intelligence and machine learning-enabled platforms. And of course, we're improving our physical, digital and process infrastructure to make it more efficient, more agile and more scalable to better support our strategic direction of travel and ultimately to improve our operating leverage. In 2025, we made really good progress in a number of areas. In addition to commencing the closure of the DistriElect Central Distribution Centre, we've also expanded our capacity and capability in our DCs in both France and in the US. We've begun the simplification and upgrading of our technology stack, retiring over 40 applications during the year. And we've now commenced our middle and back office transformation planning. In 26, our focus will be on continuing the exit from Distrelect, CDC, and upgrading our warehouse management systems in the UK and continuing to selectively invest and automate our distribution infrastructure in Europe. We will also commence the final phase of the Distrelec integration and start decommissioning the Distrelec technology stack. And on the process side, global end-to-end process owners will be defining harmonised processes for application across the group and will begin driving standardisation where it makes sense. And we're well into the next phase of operational improvement work at RS, which will further increase efficiency, reduce cost and ultimately support accelerated growth and much improved operating leverage. So bringing this all back together. We're 12 months into our ambitious multi-year plan to enhance and improve this group, and we continue to invest despite the tough markets that we've seen this year. This chart reflects the progress we're making and the increased confidence we have in the plan as we execute it. The chart on the left-hand side of the page is a repeat of what you saw, which allocates the OPEX and the CAPEX that we'll be spending over the next four years to the areas in which we'll be driving improvement. And remember, Kate referred to that £35 million to £45 million of elevated OPEX or so that will incur. And this will drive at least a further £45 million of efficiencies and cost reductions. Then the chart on the right-hand side is a directionally correct representation of how these costs and these benefits are expected to come through over the next four years. And as you can see from the chart... we are beginning to build real momentum going into next year. We will, of course, continue to be agile in our cost management, as we've demonstrated this year, but with benefits already beginning to come through in our operational performance, we do have increased confidence that these investments will drive accelerated and long-term value creation. And as we enter 2026, markets remain challenging with Americas and Asia-Pacific probably more resilient than EMEA and particularly in the UK, as you will have noted from the PMIs. However, we may remain confident that once PMIs recover, structural industry trends will return our markets to growth. And therefore, whilst we'll flex effectively, as we've demonstrated this year, we will continue to execute our improvement plan to drive and improve the quality of RS and to position us best for accelerated growth, to realise the significant value opportunity that exists here, from being uniquely placed in fragmented markets and well positioned for when they return to growth, which they will, through driving market share gains through an increasingly differentiated technical and digital product and service solutions offer, through improving and continuing to improve the efficiency of our global infrastructure to enhance that operating leveraged, and enhancing it all with disciplined acquisitions that accelerate growth and value creation. And as we do that, we will increasingly become sustainably first choice and drive sustainable value creation for all of our stakeholders. And to conclude, I am extremely proud and hugely grateful of the efforts of our great people who continue to embrace the changes that we're making and are working extremely hard to deliver them. This stuff isn't easy, and it can be frustrating, particularly when difficult markets mean that you can't immediately see the benefits of all your hard work in the headline financials. But thanks to the efforts of the RS team, we are making real and significant underlying strategic and operational progress. And this is giving us increased confidence in our ability to deliver on those medium-term objectives that we've set out for you in the past. Growing at twice the market, with mid-teens adjusted operating margins, generating over 80% cash flow conversion and delivering returns on capital well in excess of 20%. That brings us to the end of the formal presentation. I'm going to open up the meeting to questions. We'll take questions in the room first, if that's OK. There are a couple of people with mics. If you can raise your hand, state your name and the institution that you represent. We'll take questions and we'll also then take any questions submitted online. So... giving me two seconds to go and sit down, then stick your hand up and...

Good morning. It's David Brockton from Deutsche Neumann. Can I ask two questions in relation to tariffs, please? Thanks for setting out the minimal direct imports that you think fill the business housing to the U.S. I guess that was somewhat contrary to my prior view. I thought it was minimal from China. I'm just wondering if you just give us a rough split of the proportion of products that that are sourced from Europe and the UK, as well as China, into the US if you're able to, or any sort of directional indication there. And then secondly, in relation to tariffs, it's very encouraging that the business has seen improved performance through Q3 and Q4. And I think you noted that it was ahead of PMIs due to the sort of strategic initiatives that are coming through. Have you ruled out any pull forward of orders ahead of tariffs in those numbers? I'm just wondering what you're seeing on a ground level there. Thanks.

Thanks, David. I'm going to give Kate a bit of time just to check the origin data for our America's business. But the reason that you see relatively little direct import into America is a lot of us, our suppliers will import from where it's manufactured into their own country. stock holding centre in America, and then we'll ship from that to us. So we're generally, all bar about 5% of our North American revenue is actually tariffed, but quite a lot of it comes from all sorts of different places. Have you managed to dig that number out yet?

Yeah, I mean, when we're looking at country of origin, bearing in mind that this is a country of origin into the US, not necessarily directly to us. if that makes sense. So in terms of China, it's about 34% is country of origin. Then we've got sort of Germany and Europe and the rest of Europe at about 40% combined. And then it's a range of other places after that.

So, do we see any evidence that tariffs are driving accelerated growth and portfolio? We don't see any of that directly, David, but perhaps that's in part because of the demand we're satisfying. Generally, it's high complexity, small growth. Small volume specialist manufacturing and mainly brake fix MRO. So people are tending not to try and project forward what machines might break. They're still buying that sort of as and when they need it. And I think maybe just standing back a little bit from tariffs, we don't see any short-term impact. There's lots of admin costs associated with it, but actually there's probably a bit of price inflation that gives you some gross margin opportunity as well. And our business model enables us to take advantage in a tariffed environment. One of the things you heard me refer to is we've done quite a lot of system change over the year that allows us to now adopt product at multi-locations across our global network and distribute out from them. So being a broad MRO-based distributor, global, with global operations involved, and an ability to operate, you know, we have 2,500 suppliers, an ability to switch product and provide alternatives across the globe, I think positions us quite well in a tariffed environment. Thanks very much. Hi, Karen.

Hi. Thank you for your presentation. Karen So from JP Morgan. I have two questions, please. One is around the delta of the 31 million organic investments versus the range you mentioned around defer. for the future years. Just curious around if you could elaborate around the thinking of that and how should we think about the lower end range of the 35 to 40 million for next year. And then my second question is around, probably also for Kate, of the free cash flow improvement with better working capital. Just trying to understand, should we interpret this as more of a one-off or is there kind of any structural changes you mentioned for the working capital management? Thank you.

So I think I'll start and then hand it over to Kate Caron. Just on the 31 million of strategic investments we've made, being at the lower end of the range we guided to, there are two things going on there that resulted in a deferral into later years of some of that investment. One is continuously analysing the scheduling and interdependencies of some of this investment work. and de-risking it by moving bits and pieces of it around. And a little bit is also the person on my left who's got an appropriate stick when we need it. It does show that we can be effective and agile and manage our investments to the trading environment that we need. that we find ourselves in without losing the significant opportunity that's out there and indeed we don't think we've pushed any of it to the right with this deferral in fact we think we'll be more efficient with that spend anything you want to say on this year's spend and then and then the free cash flow kate

Yeah, I mean, really what we're reflecting here, Karen, is having taken a really good look at what projects were live, what is the interdependencies that we have on the projects that are either starting or in train, and also what the right resourcing expertise that need to be applied. A lot of what we've done in terms of looking at what we wanted to spend this year and where we've landed is making sure that we're doing that efficiently and effectively. um and also clearly conscious of the border environment that we're in so pacing is important because otherwise there's a risk you don't spend the money well so that's why we're looking to an increase certainly into this year i'm guiding to kind of you know the lower half of the 35 to 45 so somewhere between 35 and 40 is probably where i'd expect you guys to to guess where we end up and we'll update along the way With regards to the free cash flow, fundamentally what we did this year is we took a really good look at what was going on on cash flow, our forecasts, our metrics, really a lot of measurement around DSO, DPO, the inventory terms and things you'd expect us to be looking at really closely. We have in the year achieved a bit of a working capital release by improving metrics. And one of it was putting in an additional system capability within receivables that just allowed us to do that better within a year. So what I'm expecting going forward is for us to at least maintain the quality of those metrics, but there is an in-year one-off release that results in improving, for example, DSOs by, I think it was around three days that we improved it by across the piece.

Hi, good morning. Annalise Vermeulen from Morgan Stanley. I have two questions as well, please. So firstly, on RS Pro, you talked about range development. I was wondering if you could expand on that in terms of what you've been adding on the RS Pro side. And the two percentage points increase is that you're actually seeing customers convert from branded to own brand, or is it just incremental sales of the newer own brand products that you've launched? And perhaps you could comment also, as you accelerate that, how you're managing your supplier relationships as to not upset them too much if you're switching to branded. Second question, a little bit shorter. Just on the headcount reductions, 4% this year, could you comment on how much of that was natural attrition versus active headcount management. And are you happy with where headcount is today? If, you know, you never know, volumes do come back and things start to pick up again. Do you feel you've got the right people count in place?

Thank you. Thanks, Alice. On RS Pro and range development, one of the things we now understand much better about RS Pro is that brand development is really important. And in the UK, the RS brand has got nearly 90 years of investment in it. In other parts of the world, the RS Pro brand is relatively new. And that it's important that we build brand strength and understanding before we launch a huge range of products into those markets. It's also a learning for us that we need to launch products that our customers want to buy and that don't compete with our suppliers. And that's always a constant balance that we're driving. But we have much more data and knowledge now that allows us to influence what products we do actually source online. with RS Pro. And of course, we're always monitoring that it is not getting in the way or cannibalising some of our supplier relationships. In fact, some of our suppliers actually supply us with those products for the RS Pro brand. So often it's done in conjunction with our suppliers, not isolated from them. But this will be a slow and continuous build of an important range of RS Pro products that over time, We would continue to expect to see RS Pro grow as a percentage of group revenue. And I think up to 20% over a number of years is the sorts of targets that we're looking for. On headcount and headcount reduction, some of it is hiring freeze, but quite a chunk of it is people actually leaving the organisation. Now, a chunk of that is to do with the combination of Distrelec and... And RS, we're taking the best of both, but we did identify some duplication. I think that headcount reduction is relatively permanent. We still have very significant capacity in the business, both from physical and people and process capability. The one area where you're likely to see headcount increase as volumes increase and as we go back to growth, is in the physical distribution centres themselves, but that's a relatively small proportion of our total labour base. So I don't envisage a huge labour influx as we move into growth.

Thank you. Good morning. Ryan Flight from Jefferies here. Free from me, if I may. So first one on a pretty high level, the competitive landscape, given the tough operating environment. I wondered if you could give us an update on whether you've seen some exits there. Number two, you're obviously seeing a little bit of a drag from the smaller customers in digital. I wonder if you can give us some more colour on the kind of dynamics behind that and what's required for that to turn. And then third, the bullet point on shareholder returns beyond the dividend. I wonder, again, if you could give us some extra colour on what would be required. Is there a flaw to leverage and your thinking behind that? Thank you.

Competitive land state, it feels to us like we're taking share from the smaller local non-digital distributors really across the globe. We have seen one or two get into financial challenges, but we haven't seen a material change in the competitive landscape anywhere we play. I mean, interestingly, we refer to our acquisition pipeline and our... rigor around value. We certainly feel that perhaps some of the sellers in today's world are not necessarily affecting the reality of the environment that we're trading in, and that value tension is keen at the moment. But we'll see how that plays out. On the sort of smaller customers in digital, Kate referred to the fact that we are seeing less of those smaller customers, and that is the area of our business that continues to decline a bit. A lot of those customers are buying one-off electronic components, but also those buyers are probably the most price sensitive in our industry. in our portfolio and of course we are there to satisfy immediacy of need and availability and that comes with a price so I think we continue to monitor that we're continuing to create a much more targeted approach to ensure that we can meet those customers needs but at the right cost to serve for ourselves but we don't regard it as a major issue Shell the returns

So, I mean, I think pretty much consistent with what I said, you know, we've got a clear order of capital allocation and we hold to that. With regards to leverage, you know, we give guidance around, you know, broadly one to two times leverage is where we are. And absolutely, we're on the lower end of that at the moment. And as we said, we're actively monitoring and looking at a pipeline of acquisitions. And those are the dynamics that we look at across the piece. Do we have good opportunities to deploy our capital? in organic and inorganic. And if we don't see those opportunities over a period of time, then we look at the right options to return capital and cash to shareholders. I don't think there's much more I can add to it other than what I've said.

I think we've got... We see plenty of opportunities for value-creative deployment of our capital today. We don't think we're sitting here with surplus capital. If it does get to that point at some stage in the future, we will, of course, look at how best to get it back to shareholders.

Hi, it's James Rose from Barclays here. I've got three, if I may. The first is, do you have a view on what organic revenue growth could be for this year, and can you grow it twice the market as per the medium-term plan? The second one is, you mentioned growth with smaller customers, but on the flip side, growth with larger customers seems to have gone a bit better in FY25. Is that something you can... It progressed further in FY26. I appreciate your thoughts there. And then lastly, can we have an update on the UK business? The last time we heard from you, that was a bit more challenging.

Thanks, James. If you'll forgive me, I won't ask the first bit of your first question, what do I think growth will be next year. I think what we've said relatively consistently here is a good indicator of the market environment that we're facing will be provided to you by PMIs and what they're doing. I think even in a relatively flat environment, industrial environment we can continue to grow and we're very comfortable with the work we're doing and we've even demonstrated to ourselves in the last couple of quarters that we can continue to grow even when markets are tough but giving you an absolute number on that I suspect is probably something I'll get into trouble for doing and if I knew I'd probably be sitting on a beach drinking pina coladas not sitting here because I would be able to predict the future so What I can tell you is that our business, as we've demonstrated this year, can operate in pretty much any sort of environment. And the most important thing is medium and long term. We absolutely see the structural drivers that return our markets to growth and our ability to grow twice those markets is probably underpinned by the work that we've done this year. You're right about large customers. We talked about focusing on high lifetime value customers and we did grow our large customers, what, 6%? Yeah, revenue in that group, yeah. Revenue 6% last year. We anticipate that continuing to grow. going forward but our our strategy is is about focus on those high lifetime customers but don't forget everybody else because there's still a big proportion of our business so ensuring that using the tools we've got we put in place today ensuring we have the data that allows us to offer those smaller customers the products and services they need at the right cost to serve is is also part of what we've been working on we'll continue to work on going forward Then the UK, the UK's tough. I'm just going to look at what the PMIs are doing. After actually quite a positive start to our fiscal 25 in terms of PMIs, they turned pretty rapidly, sort of in the last quarter of the calendar year, and they haven't really recovered. Now, we're actually doing relatively well in that environment, but the broader market in the UK remains challenging. Thank you.

Good morning, it's Rory McKenzie from UBS. Firstly, can you give us more detail on the error you found in the inventory measurement? And why was that reported as a restatement rather than a 19 million extra cost of provisions this year, if that makes sense? And then secondly, I think in the release you referenced average order value was down and frequency was up. Has that been a trend all year long? As you've dug into that, what does that represent? And I guess that brings in a way a form of margin pressure that makes changing. So has that changed how you think about either your pricing or how you build your model for cost to serve? Thank you.

Thanks, Rory. Do you want to take the accounting one?

So... The dynamic around the inventory measurement. So firstly, let's just answer the question as to why it's a prior year adjustment as opposed to an in-year. So a prior year adjustment is where you correct for the incorrect application of a group policy, which is what we are talking to here. We would do something in-year if we had a change of estimate. So this isn't a change of estimate. This is when we've really gone in and rigorously looked at how the group policy was applied across the group. There was an area where it hadn't been consistently and appropriately applied, and that's related primarily to prior years, and therefore we've adjusted accordingly. I think that's them.

Yeah. I think on the question, Rory, about average order value frequency, you're right. Average order value is down a bit. Frequency is up. A couple of things driving that, I think. Firstly, when times are tough, people tend to buy for what they need when they need it. They also tend to buy... They tend to run machines longer, do less planned maintenance and overhaul and therefore have more immediate need and therefore are ordering just that thing because that thing broke. So there's a bit of that going on. The other thing that's going on is we're coming off... three years or two and a half years of post-COVID trading, when a number of our product categories, supply chains, were very difficult and constrained. And we did see a big run-up in average order value over that period because people weren't just buying for immediate need, they were also buying for availability. That has unwound, and I think what you're seeing now is people back to buying break-fix MRO as break-fix MRO. Does it create additional margin pressure? It does a little bit because you're shipping more parcels for the same amount of revenue, but it's not a massive margin headwind. So it doesn't change our view of what those medium-term margin targets can be.

Morning. Tom Callum from Investec. Just picking up on comments around the closure of the district like DC in the Netherlands. Can you just remind us of where you are currently in terms of capacity levels across the various DCs that you have and your view on sort of headroom and what competitive advantage that might give you in this environment? Thanks.

Thanks, Tom. Yeah. So we accelerated the we negotiated an early exit out of the the district central distribution center in Holland. We are in the process now, actually, most of the way through moving that product from Holland mainly into our Bad Hersfeld distribution center area. Germany that's actually quite a is a surprisingly complex thing to do because not only do you have to put the stuff on a truck and ship it to Germany you have to rebuild all the routings and pricing manuals and the data content that allow people to find it on on your website and as they order and and we're pleased with the progress that we're making and that that will be closed by by the end of June But that is still leaving us with very significant capacity, both process and physical, across the network. We're continuing to invest on a three-cycle basis to build that capacity and also increasingly to automate it, which creates more capacity. investments in the US and in France, we would not need to add any additional physical distribution to get back to volumes that are well above where they were at the prior peak. It's difficult to estimate that specifically, but we've got 40% or 50% physical inventory capacity if we need it. It's slightly the opposite. We need to make sure we can continue to apply very effective inventory management and only build physical inventory into that capacity as and when we can sell it.

Hi, it's Sandra from Stiefel. Two questions from me, please. Firstly, on bolt-on M&A, is that something that's on the agenda in the upcoming 12 months? I think you said valuation is probably not reflecting where the market is and a lot going on internally. And then secondly, on the 150 basis points of cost savings, appreciate we're sort of eight months on from the CMD. Any change in thought on how that could be phased or any areas which are showing more promise than you would have thought eight months ago?

Thanks. I'll do bolt-ons and then I'll leave... Kate answer the question on the 150 basis points, which I might add my colour to at the end. On bolt-ons, yes, absolutely. They have and always have been on the agenda. We acquired Trident at the beginning of the year, very pleased with that, fitting well into the business and performing very well. I alluded to a good pipeline, but not necessarily an alignment of buyers and sellers' views. We'll continue to monitor those and to see what happens over the year. But the pipeline is pretty strong at the moment. I suggest. And then have our views on 45 million changed very much?

Well, let's just kind of repeat the orientation, because I recognize there's a lot of numbers that sort of fly around. So originally, we talked to a 13 million target. And then we updated that to an additional 150 basis points, which in this presentation today, I have for ease of reference converted to looks like around 45 million. So of the 13 million target, we've already delivered that. So from last year and this year, we delivered 38 million in total. We're looking at a further at least 15 million in full year 26. I would say with regards to what we've done, the easy stuff has been done, you know, where we've identified duplication, where we've got and identified the integration cost of savings and benefits. We've identified what they were well on the way and we've talked about district. And we're now moving on to things that I would say are a little bit more tricky. You know, they do require more in terms of process investments, system investments, removing duplications of applications and the like. But we're underway. It's a multi-year program, but we're underway. And we'll continue to review what savings we can make and update you accordingly.

And that's what I thought the finance director would say. And I'm far enough away to say I think a year in, we are more than comfortable with the sort of 150 basis points, 45 million. We think there's more to go for. As and when we can quantify it, we will. But it is as a result of the work that we're doing. I'm not sure that we'll need a huge amount of additional work. So I think you should assume... that that 45 million number is solid and probably a bit conservative until the FD kicks me. But we'll keep you informed as we see an opportunity to evolve that. Just conscious of it being 10.04... We've got some questions online, Lucy.

I think most of them have been covered, but one of them is just to clarify, Kate, on the £13 million of in-year cost savings. Obviously, they've identified the £5 million from the DC exit. Can you give more detail on the $8 million and is it repeatable, please?

Sure. So, I mean, you would always expect in a business like ours with the cost basis, there's a degree of choices that you make within years as to where and how you spend some of the more discretionary spend. You know, how you deal with vacancies, how you deal with travel. in how you make other in-year choices. And that's effectively what that 8 million is, is choices that we've made recognizing a more challenging market that we saved this year. In any year, we'd look to do that. In any year, we'd look around those different discretionary choices that we'd make in order to manage our cost base. So are those direct choices repeatable? No. Are other choices makeable? Yes. is how I would hold that number. There is flexibility in our cost base. We manage it very vigorously. You'd obviously expect us to be able to do that.

Conscious, it's 10.05. Thanks very much for your attention and your time and look forward to seeing you all over the course of the year.