RS Group outperform with revenue growth of 28%


RS Group plc (LON:RS1) has announced its results for year ended 31 March 2022.

Highlights2021/222020/21ChangeLike-for-like1 change
Adjusted2 operating profit£320.4m£188.3m70%78%
Adjusted2 operating profit margin12.5%9.4%3.1 pts3.7 pts
Adjusted2 profit before tax£313.8m£181.7m73%81%
Adjusted2 earnings per share51.3p31.3p64%72%
Operating profit£308.8m£167.2m85%97%
Profit before tax£302.2m£160.6m88%102%
Earnings per share48.9p27.7p77%90%
Full-year dividend18.0p15.9p13%
Adjusted2 free cash flow£162.9m£145.4m12%
Net debt£42.1m£122.0m
Net debt to adjusted2 EBITDA0.1x0.5x

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 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-like change 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.

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.”

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