Half-year Report

GROUP RESULTS

1.         See Note 15 for definitions and reconciliations of all alternative performance measures, including like-for-like change and adjusted measures.

2.         See Note 2 for disaggregation of revenue analysis and reconciliations.

3.         Digital revenue has been restated for H1 2023/24, see Note 2.

4.         Service solutions revenue has been restated for H1 2023/24, see Note 2.

Revenue

Group revenue was broadly flat compared to H1 2023/24 at £1,441 million. Like-for-like revenue declined 3% after adjusting for £45 million contribution from acquisitions, £25 million from adverse exchange rate movements and a positive benefit of £23 million from more trading days in H1 2024/25. Trading was broadly stable throughout the six-month period driven by lower volumes and mix effect and minimal price impact given the market backdrop.

Our product category performance demonstrates the difference between those categories that are more industrial and tend to be less volatile (Facilities & Maintenance, Mechanical & Fluid Power, PPE & Site Safety, Other) and those correlated to the electronics market (such as Automation & Control (A&C) and Electrification) and the more electronics-specific categories, Semi & Passives and Cables & Connectors.

Digital, accounting for 61% of Group revenue, declined 4% like-for-like. Digital solutions such as eProcurement, which are predominantly used by our larger customers, outperformed, declining by 1% on a like-for-like basis. Web revenue, which tends to reflect smaller, more transactional purchases, decreased by 5% on a like-for-like basis.

Revenue driven by service solutions accounted for 25% of Group revenue and increased by 4% like-for-like, with a strong performance in inventory solutions and design, technical and custom order services. RS Integrated Supply delivered positive like-for-like revenue growth reflecting new contract wins and customer retention rates continuing in both EMEA and Americas. We are strengthening our operating model at RS Integrated Supply through focusing on driving scalable and profitable revenue growth and optimising working capital.

RS PRO, which is our main own-brand product range and accounts for 13% of Group revenue, grew by 2% on a
like-for-like basis, due to extending its product breadth and end-to-end sales and marketing focus in the regions. Our competitively priced offer continues to gain traction as a quality but non-competing value alternative to third-party branded ranges as we demonstrate quality through our quality assurance qualifications and design and test facilities.

Gross margin

Group gross margin decreased 1.0 percentage points to 42.7%, or 1.1 percentage points on a like-for-like basis. This was broadly in line with our expectation for the full year due to the anticipated unwinding of post-pandemic inflation benefit that elevated the gross margin in the prior period. Cost of goods inflation is normalising and is largely being passed through although there has been some additional competitive activity within the Semis & Passives product category. We continue to focus on gross margin optimisation through direct procurement initiatives, commercial discipline and expanding our own-brand ranges.

Operating costs

Operating costs, which include regional and central costs, were flat. On a like-for-like basis, adjusted operating costs fell by 1%, which excludes the impact of acquisitions, currency movements, amortisation and impairment of acquired intangibles and acquisition-related items. Cost management actions more than offset cost inflation, specifically within labour, ongoing strategic investment and the charges relating to our cost savings programme.

We delivered £10 million of restructuring benefits that resulted from improving our productivity and removing labour and facility duplication within the Group. We also delivered £8 million of integration cost savings which included the early exit of a distribution centre lease in the Netherlands operated by Distrelec. We are on track to deliver c. £30 million of accumulated cost savings during 2024/25, after the £9 million generated in 2023/24, above our original expectations of over £30 million in total. There was a £9 million in-year charge relating to delivering both these restructuring and integration benefits, with a further c. £8 million charge expected in the second half of 2024/25.

A large proportion of our operating costs relate to our people. We awarded a low-single digit pay increase across the Group and part normalisation of employee incentive awards. As sales volumes have reduced, we have flexed our variable people costs and taken additional actions in specific areas, such as removing duplicate roles. Our employee voluntary annual turnover rate remains low at 8.3% (H1 2023/24: 8.2%).

We spent £14 million on organic investment in the first half (a £3 million increase year on year) as we implement our strategic action plan of strengthening our digital and commercial capabilities, technology platform, product and service solutions capacity and improving our operating basics. This will support ongoing market share growth and ensure we are well-positioned to benefit when economic conditions improve. We are monitoring our investment spend closely and implementing greater oversight around execution, progress and delivery and will flex our annual organic investment between c. £35 million to £45 million.

As previously indicated, we reallocated our central costs to limit them to costs solely related to support Group head office activities. Costs incurred to support directly the Group's operating segments have been allocated accordingly to the regions. The reallocation drives greater accountability and efficiency in the regions, with central costs now focused on the resources that are required to run a listed company, principally senior Group leadership, central finance, legal and company secretariat. Central costs, under the new definition, increased to £7 million, largely reflecting the normalisation of annual incentive and share-based payments. Details on the reallocation are set out in Note 2.

Operating costs as a percentage of revenue increased by 0.2 percentage points to 34.4% and on an adjusted basis increased by 0.5 percentage points to 33.5%. Operating profit conversion is 2.4 percentage points lower at 19.5% and on an adjusted basis is 2.9 percentage points lower at 21.7%.

Items excluded from adjusted profit

To improve the comparability of information between reporting periods and between businesses with similar assets that were internally generated, we exclude certain items from adjusted profit measures. The items excluded are described below (see Note 15 for definitions and reconciliations of adjusted measures).

Amortisation and impairment of acquired intangibles

Amortisation of acquired intangibles was £14 million (H1 2023/24 amortisation and impairment of acquired intangibles: £13 million) and relates to the intangible assets arising from acquisitions.

Acquisition-related items

Acquisition-related items were £nil in the first half (H1 2023/24: £4 million directly attributable to the acquisition of Distrelec).

Operating profit

Operating profit decreased by 13% to £120 million. Adjusted operating profit, which excludes the impact of acquisitions and adverse impact of currency movements, saw a like-for-like decrease of 13%. Operating profit margin declined by 1.3 percentage points to 8.3% and on an adjusted basis declined by 1.5 percentage points to 9.3%.

Non-financial key performance indicators (KPIs)

We have eight non-financial KPIs to help measure progress against our strategy and the commitments of our 2030 ESG action plan - For a Better World. To provide greater transparency on our performance in the period, a summary of our progress is included below with further details available in the ESG section on our website: www.rsgroup.com/esg.   

REGIONAL PERFORMANCE

EMEA

1.         Like-for-like adjusted for currency and to exclude the impact of acquisitions; revenue also adjusted for trading days.

2.         See Note 2 for reconciliation to Group operating profit.  Regional operating profit has been restated in the prior period as shown in Note 2.

3.         See Note 2 for disaggregation of revenue analysis and reconciliations to region's revenue.

4.         Digital revenue has been restated for H1 2023/24, see Note 2.

Revenue increased 2% including the acquisition of Distrelec. Like-for-like revenue declined 3% reflecting the ongoing economic weakness across the region and decrease in industrial production output. Across most of continental Europe PMI has been below 50 throughout the half, representing a contraction in business activity.

UK and Ireland, which accounts for 38% of the region's revenue, saw a small revenue decline. Production output has been low and we have experienced customers running down inventory levels and ordering only when needed as they manage their businesses more tightly to counteract inflationary pressures and rebuild their operating margins. The UK PMI has been above 50 since May 2024 which is encouraging, but we note that there tends to be a lag effect before improved confidence feeds through to increased output and subsequent maintenance, repair and operations (MRO) expenditure.

Germany, part of the Germany, Austria and Switzerland (DACH) market which together accounts for 15% of the region's revenue, continues to suffer from declining production volumes with the PMI being one of the weakest in Europe, hovering around 42 for most of the period but finishing weaker in September. In Germany, we have a higher exposure to the manufacturing sector and the automotive industry where production volumes were very weak with many businesses extending their summer shutdowns. Additionally, there is a higher participation from A&C and Electrification, and Semis & Passives product categories. Revenue in the DACH market declined by low teens percentage like-for-like. 

France, which contributes 18% of the region's revenue, continued to outperform the market with like-for-like revenue growing by low single digit percentage despite depressed PMIs. Our more focussed product and sales offer, aligned to specific industry verticals, was initiated in France resulting in stronger relationships with our suppliers, improved product range curation and a focus by our teams on the more resilient industry verticals.

Across the region, our more resilient product categories of Facilities & Maintenance, Mechanical & Fluid Power, and PPE & Site Safety performed well delivering small single digit percentage like-for-like growth. A&C and Electrification products, with demand correlated to the weak electronics market, declined by mid-single digit percentage, however indications are that we are still outperforming distribution peers in this area. Demand for Semis & Passives remains weak with high levels of stock in the distribution network keeping prices suppressed.

We are making good progress with our customer strategy focusing on high lifetime value customers and have seen revenue growth from our corporate customers and several account wins.

Digital delivered good growth in our eProcurement and purchasing manager solutions. These solutions are integrated within our customers' systems, pulling through product revenue and generating customer loyalty and recurring revenue. Web revenue has been impacted by reduced demand from small and medium-sized customers.

RS Integrated Supply in EMEA achieved new contract wins in the first half and delivered good underlying performance. We have been rigorously reviewing our customer contracts and exited those where terms have not been commercially viable and will continue to assess opportunities within a tightened commercial framework. The EMEA business operating model has been realigned to optimise customer engagement, leveraging best practice from RS Integrated Supply in Americas. We continue to invest in system automation and simplification to maximise efficiency and support our growth ambitions, while improving our working capital.

RS PRO continued to outperform despite some disruption from the conflict in the Red Sea increasing lead times. RS PRO revenue through the Distrelec ecommerce platforms has now reached £2 million.

Distrelec (acquired 30 June 2023) contributed £79 million to revenue and £7 million to EMEA's operating profit during the period. This included £7 million of integration costs. Trading in Distrelec has been similarly impacted by soft market conditions given its exposure to Germany and Eastern Europe and a higher proportion of A&C and Electrification and Semis & Passive products, very similar to our base business in Germany. Integration plans are continuing well.

EMEA's like-for-like gross margin declined 150bp due to the lag effect of cost inflation with minimal sales price inflation and some pricing activity across Semis & Passives.

Operating costs were marginally down on a like-for-like basis. Headcount reductions and cutbacks in discretionary spend have helped to offset labour cost inflation and ongoing investments in our strategic portfolio and the expenditure relating to our cost savings programme. Falling average order value has impacted variable costs and in particular freight costs relative to sales.

Operating profit margin fell by 2.0 percentage points like-for-like to 10.8%.

EMEA's rolling 12-month NPS was 49.9, down from 50.8 in H1 2023/24. The decline reflects the deliver-to-promise capability being implemented which impacted order fulfilment scheduling temporarily. We expect the monthly NPS score to increase as our customer delivery information accuracy improves, albeit depressing the rolling 12-month score until it annualises.

Americas

1.         Like-for-like adjusted for currency and to exclude the impact of acquisitions; revenue also adjusted for trading days.

2.         See Note 2 for reconciliation to Group operating profit. Regional operating profit has been restated in the prior period as shown in Note 2.

3.         See Note 2 for disaggregation of revenue analysis and reconciliations to region's revenue.

4.         Service solutions revenue has been restated for H1 2023/24, see Note 2.

Americas revenue declined 5% with like-for-like revenue down 3% excluding exchange rate movements and the impact of trading days. This performance reflects continuing economic weakness in the US and Canada markets as evident in the PMI which returned to below 50 in the second quarter. We saw ongoing contraction in industrial production against a backdrop of uncertainty, including the US Presidential election, with companies restraining spending and investment until the future business environment is clearer.

Our operations in Latin America (LATAM) have grown strongly helped by a robust market benefiting from increased capital investment in private and public sectors (mining, metals, food & beverage and energy) and steadily increasing MRO and service sales to serve the existing customer base.

Our business in Americas serves builders of industrial assets, including discrete manufacturers, who deliver highly specified products and systems. This results in being sensitive to capital investment expenditure and project-related sales and so affected by the reduction in manufacturing production and destocking by customers.

Additionally, our performance in Americas reflects a larger proportion of revenue from A&C and Electrification products (c. 70% of the region's revenue versus 42% across the Group) which is closely linked to the electronics market and experienced a small digit percentage like-for-like revenue decline. This was partially offset by like-for-like revenue growth within Test & Measurement, Mechanical & Fluid Power and PPE & Site Safety. Demand for
Semis & Passives remained weak with ongoing pricing activity within the market.  

Revenue from digital declined by 7% like-for-like, reflecting softer demand from some of our larger customers that use our eProcurement and web quotes technology. Against that, core web outperformed overall regional performance reflecting our investment in paid marketing to drive traffic and offset weaker Search Engine Optimisation (SEO) visibility, a lingering impact of our domain migration to RS Online. Our operations in LATAM, through our acquisition of Risoul in January 2023, are at the very early stages of rolling out a transactional website.

Revenue attributed to service solutions grew 2% driven by our investment and sales team focus in ramping up our design and technical services offer.  

RS PRO revenue increased, from a low base, as we increased management focus and concentrated our sales efforts on three product categories that drive the majority of revenue in Americas. In LATAM, we are beginning to introduce RS PRO to our customers with inventory in three Mexico locations.

Americas' gross margin was slightly lower (0.7 percentage points on a like-for-like basis) due to competitive pricing pressure, partially offset by favourable exchange rates in Risoul.

We reduced our operating costs by 4% like-for-like reflecting structural cost reductions and efficiencies actioned in 2023/24 to better align the region with current demand while we continue to invest in initiatives focused on customer experience, service-based solutions and product offer expansion. 

Americas' operating profit declined year-on-year mainly due to reduced revenue and pricing pressures partially offset by favourable operating cost reductions and discipline. Operating profit margin was 9.3%.

Americas' rolling twelve-month NPS was 65.9, an increase from 64.4 in H1 2023/24 reflecting steady increases to the monthly scores for the last six months due to an increased focus within our business. Our high NPS score reflects our strong customer experience with fast response, consistent service and building more efficient and scalable service processes.

Asia Pacific

1.         Like-for-like adjusted for currency and to exclude the impact of acquisitions; revenue also adjusted for trading days.

2.         See Note 2 for reconciliation to Group operating profit. Regional operating profit has been restated in the prior period as shown in Note 2.

3.         See Note 2 for disaggregation of revenue analysis and reconciliations to region's revenue.

Asia Pacific's revenue was flat year-on-year having benefited from favourable exchange rate movements. Like-for-like revenue decreased by 2% reflecting the slower than expected electronics market recovery and continued economic pressure across most of the region. Over half of the Asia Pacific markets observed PMIs below 50 during the first half.

Australia and New Zealand, which contribute 37% of the region's revenue, saw a slight like-for-like revenue decline reflecting the challenging economic environment with large corporate customers' performance most impacted. The acquisition of Trident in Perth, Australia in April 2024 expands our service capability, local fulfilment centre capacity and opens opportunities with customers in the resources sector.

Southeast Asia, which accounts for 31% of the region's revenue, maintained single digit like-for-like revenue growth in line with the second half of 2023/24. Our performance benefitted from focusing on larger corporate customers, marketing our main own-brand, RS PRO, and increasing investment in expanding our network of fulfilment centres and inventory capacity. This resulted in improving our customer experience through faster delivery times, expanding our product offer through enhanced vendor management capabilities and lowering our cost-to-serve through sourcing more products locally and reducing freight costs.

Greater China, representing 23% of the region's revenue, saw a recovery in H1 2024/25 despite a higher exposure to the electronics markets and intensified sanctions imposed by the US. Performance was supported by our continuous effort to serve the larger industrial segment and focusing on our high lifetime value customers.

Digital like-for-like revenue declined mainly impacted by web performance, particularly in Greater China, Japan and Korea due to local digital infrastructure challenges and weaker market demand. However, our eProcurement performance grew by high single-digit percentage.

RS PRO like-for-like revenue outperformed the region supported by an enhanced go-to-market strategy, including targeted product marketing campaigns and focused product range catalogues.

Our gross margin improved on a like-for-like basis by 1.2 percentage points contributed by favourable exchange rate in our pricing and reduced excess inventory provisions.

Regional operating costs decreased by 1% like-for-like reflecting the restructuring initiatives in adjusting our cost base in the prior year partially offset by the continued investment in growth initiatives focusing on customer experience, digital marketing campaigns and local fulfilment capacity. 

Our operating profit margin increased by 1.4 percentage points on a like-for-like basis, reflecting the favourable gross margin drop through and operational cost efficiencies we delivered to offset the slightly lower volumes impact.

Asia Pacific's rolling 12 months NPS score has improved by 1.9 pts to 22.1 compared with H1 2023/24. The improvement was mainly attributed to dedicated actions to improve customer experience.

FINANCIAL REVIEW

Net finance costs

Net finance costs were £15 million, up from £13 million mainly due to the full six-month impact of increased net debt resulting from the acquisition of Distrelec in June 2023. At 30 September 2024, 23% of the Group's gross borrowings excluding lease liabilities (H1 2023/24: 20%; FY 2023/24: 26%) was at fixed rates, with surplus cash deposited at variable rates. Going forward we expect the full year 2024/25 net finance costs to be c. £31 million based on current interest rates.

Profit before tax

Profit before tax declined 16% to £106 million.  Operating profit in the regions, explained above, reduced by £22m and other operating costs reduced by £3m, as the prior year had acquisition costs related to Distrelec that did not recur. Adjusted profit before tax was down 17% to £119 million, down 16% on a like-for-like basis.

Taxation

The Group's income tax charge was £28 million (H1 2023/24: £34 million). The adjusted income tax charge, which excludes the impact of tax relief on items excluded from adjusted profit before tax, was £31 million (H1 2023/24: £38 million), resulting in an effective tax rate of 26.0% on adjusted profit before tax (H1 2023/24: 26.2%).

Going forward we expect the full year 2024/25 effective tax rate on adjusted profit before tax to be c. 26.1%.

Earnings per share

Earnings per share declined by 15% to 16.6p. Adjusting for items excluded from adjusted profit and associated income tax effects, adjusted earnings per share of 18.7p declined 16% on a like-for-like basis.

Cash flow

1.         See Note 15 for definitions and reconciliations of all alternative performance measures.

Lower EBITDA (earnings before interest, tax, depreciation and amortisation) was partially mitigated by a slight improvement in working capital as we focus on improving debt collection. As a result, cash generated from operations was £163 million (H1 2023/24: £104 million) driving an improvement in adjusted free cash flow. Adjusted operating cash flow conversion increased by 48.8 percentage points to 103.1%.

Net capital expenditure remained steady at £25 million as we continued to invest in optimising our DCs, launching a new product management system, augmenting digital commerce capabilities and strengthening our technology platforms.

Capital expenditure was at 1.1 times depreciation (H1 2023/24: 1.2 times), in line with our typical maintenance capital expenditure levels of 1.0 - 1.5 times depreciation. We anticipate capital expenditure in 2024/25 to be c. £50 million including planned spend to deliver our 2030 ESG action plan such as decarbonising our DC in Beauvais, France.

Net interest paid increased by £2 million to £15 million due to increased net debt resulting from the acquisition of Distrelec.

Adjusted free cash flow increased to £89 million. We remain committed to conserving cash while ensuring we continue to invest in our business to enable a swift recovery when the economic conditions improve.

Intangible assets

Intangible assets have decreased from £983 million at March 2024 to £911 million (see Note 6), with translation differences driving £69 million of the decrease. Goodwill of £4 million was recognised on the acquisition of Trident, there were additions of £19 million and an amortisation charge and impairment cost for the period of £26 million.

Working capital

Working capital as a percentage of revenue decreased by 1.6 percentage points year on year to 24.7%.

Trade and other receivables have decreased by £73 million since the year end to £628 million, with the acquisition of Trident increasing receivables by £2 million. The collection of receivables is our greatest short-term liquidity sensitivity and we continue to limit our exposure through tight credit policies, proactive monitoring and collections.

Inventories were £644 million, in line with our year end position of £656m. Our inventory turn has remained stable at 2.6 times, unchanged from 2.6 times at March. Inventory provisions have increased by £4 million to £72 million since the year end, representing a slight increase in the overall provision rate from 9.5% to 10.1%.

Overall trade and other payables decreased to £547 million from £603 million at March. The overall reduction reflects the slowdown in the business and the timing of payments for inventories.

Looking forward we continue to manage our working capital position actively and optimising cash conversion is a key area of focus. We remain focused on receivables collection. We will continue to seek to manage our inventory levels to take account of changing demand dynamics and supply chain behaviour, while anticipating our customers' expectations. We will continue to invest in the right inventory to ensure that we remain well positioned to maintain service levels and deliver strong growth as the markets recover. We pay our suppliers to terms and continue to work with some of our larger suppliers to improve terms where possible.

Net debt

Our net debt has increased to £437 million from £418 million at March (see Note 9) due mainly to the purchase of our own shares by the Employee Benefit Trust.

The sustainability-linked loan (SLL), term loan and the private placement loan notes form our committed debt facilities of £674 million, down from £685 million at March due to the impact of exchange rates, of which £200 million was undrawn at 30 September 2024 (FY 2023/24: £245 million undrawn).  In October 2024, our request to take up a one-year term extension to the SLL was approved by the lenders and so this facility now matures in October 2029.

The Group's financial metrics, as set out in the Alternative Performance Measures in Note 15, remain strong, with net debt to adjusted EBITDA of 1.3x and EBITA to interest of 9.3x, leaving significant headroom for the Group's banking covenants of net debt to adjusted EBITDA less than 3.25 times and EBITA to interest greater than 3 times.

Return on Capital Employed (ROCE)

ROCE is the adjusted operating profit for the 12 months ended 30 September 2024 expressed as a percentage of the monthly average capital employed (net assets excluding net debt and retirement benefit obligations). ROCE was 15.6% compared to 23.3% at 30 September 2023, due to the impact of recent acquisitions (3.0 percentage points) and the decline in adjusted operating profit (4.7 percentage points).

Retirement benefit obligations

Overall, the retirement benefit net obligations of the Group's defined benefit schemes at 30 September 2024 were £20 million compared to £26 million at 31 March 2024 and £31 million at 30 September 2023. The UK defined benefit scheme (our largest scheme) had a net obligation of £11 million under International Accounting Standard 19 'Employee Benefits', being the present value of the agreed future deficit contributions agreed following the March 2022 triennial funding valuation and payable to September 2025.

Dividend

The Board intends to continue to pursue a progressive dividend policy while remaining committed to a healthy dividend cover over time by driving improved results and stronger cash flow.

In the normal course, the interim dividend is equivalent to 40% of the prior year full-year dividend. For the six months ended 30 September 2024 the Board proposes an interim dividend of 8.5p per share, in line with our progressive policy, but reflecting a move to return toward a normalised dividend cover post the unwind of the post pandemic inflation trading benefit. For this trading period, the interim dividend is equivalent to approximately 39% of 2023/24 full-year dividend. This will be paid on 3 January 2025 to shareholders on the register on 22 November 2024.

Foreign exchange risk

The Group does not hedge translation exposure on the income statements of overseas subsidiaries. Based on the mix of non-sterling denominated revenue and adjusted operating profit, a one cent movement in the euro would impact annual adjusted profit before tax by £2.0 million and a one cent movement in the US dollar would impact annual adjusted profit before tax by £0.7 million.

During the six months ended 30 September 2024, there were foreign exchange differences arising on translation of £103 million, recognised within Other Comprehensive Income, of which £69 million related to the translation of intangible assets as set out in Note 6.  These were partially offset by the gains on net investment hedges of
£11 million.

The Group is also exposed to foreign currency transactional risk because most operating companies have some level of payables in currencies other than their functional currency. Some operating companies also have receivables in currencies other than their functional currency. Group Treasury maintains three to seven months hedging against freely tradable currencies to smooth the impact of fluctuations in currency. The Group's largest exposures relate to euros and US dollars.

RISKS AND UNCERTAINTIES

The Board has overall accountability for the Group's risk management, which is delegated to the Executive Committee and supported by the Group's risk team. The Board is fully committed to setting and embedding a sound risk culture which is aligned with the principles and ethics of the organisation. The Group has a defined risk appetite, approved by the Board, which reflects the business' willingness and ability to absorb the impact of risk and the Board's appetite for such risks in six risk categories: strategy and change, operational, regulatory compliance, financial resilience, customer experience, and product risks. The business uses consistent impact and likelihood assessment criteria with behaviours that are mapped across the six categories of risk and are aligned to the strategy of the business and the activities RS provides.

Principal risks and uncertainties

The principal risks and mitigations disclosed in the 2024 Annual Report and Accounts (pages 32 to 37) were:

1.     Cyber security

2.     Change initiatives

3.     M&A activity

4.     Talent and capability

5.     Geopolitical environment

6.     Market disruption

7.     Business resilience

8.     Climate change

9.     Access to debt and capital markets

10.  Legal and regulatory compliance

These risks have not changed since they were reported in the 2024 Annual Report and Accounts.

GOING CONCERN

Overview

In adopting the going concern basis for preparing these condensed Group accounts, the Board has considered the Group's future trading prospects; the Group's available liquidity, the maturity of its debt facilities and obligations under its debt covenants; and the Group's principal risks as summarised above.

As described in more detail in the Viability Statement in the 2024 Annual Report and Accounts, our business model is structured so that the Group is a digitally-enabled global distributor of product and service solutions, providing small volumes of our suppliers' products to satisfy our industrial customers' MRO demands. 

We supply a very broad spread of customers both in terms of industry sector and geography.  The Group is not reliant on one particular group of customers or suppliers, with its largest customer accounting for under one percent of revenue and its largest supplier less than five percent of revenue.

Financial position, liquidity and debt covenants

Our capital position is supported by regular reviews of the Group's funding facilities and debt covenants' headroom, through the Board's Treasury Committee.

The Group's net debt at 30 September 2024 was £437 million (31 March 2024: £418 million). Our committed debt facilities were £674 million, of which £200 million was undrawn (see the net debt section in the Financial Review for more details of our committed facilities). The earliest facility expiring is our £125 million (€150 million) Caixa term loan in April 2026.

The Group's debt covenants are EBITA to interest to be greater than 3 times and net debt to adjusted EBITDA to be less than 3.25 times, which are measured on a rolling 12-month basis at half year and year end. At 30 September 2024 EBITA to interest was 9.3x (31 March 2024: 10.5x) and net debt to adjusted EBITDA was 1.3x (31 March 2024: 1.1x) (see Note 15 for reconciliations).

Financial modelling

We frequently update our forecast and this is regularly reviewed, and the assumptions approved, by the Board.

We have undertaken reverse stress tests on the latest forecast to assess the circumstances that would threaten the Group's current financing arrangements. These included significant declines in like-for-like revenue, significant declines in revenue and gross margin and a major deterioration in cash collection and each would have to result in adjusted operating profit margin falling to under 3% in at least one of the following five quarters. Also, a reverse stress test of an acquisition of a significantly loss-making business was undertaken and would have to cost over £270 million to use up our debt facilities. All these reverse stress tests assumed no mitigations, capital expenditure and dividends are unchanged from those forecast and there are no changes in debt financing. The Board considers the risk of these circumstances occurring to be remote.

Going concern basis

Based on the assessment outlined above, the Board has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the going concern period of at least 12 months from 6 November 2024. Therefore, the Board believes that it is appropriate to continue to adopt the going concern basis in preparing these condensed Group accounts.

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEAR FINANCIAL REPORT

The Directors confirm that these condensed Group accounts have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as contained in UK-adopted International Financial Reporting Standards and that the interim management report includes a fair review of the information required by Disclosure and Transparency Rules (DTR) 4.2.7 and DTR 4.2.8, namely:

·       An indication of important events that have occurred during the first six months and their impact on the condensed set of accounts, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·       Material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

A list of current Directors of RS Group plc is maintained on the RS Group plc website: www.rsgroup.com.

Kate Ringrose, Chief Financial Officer
6 November 2024

Forward-looking statements

This financial report contains certain statements, statistics and projections that are or may be forward-looking. The accuracy and completeness of all such statements, including, without limitation, statements regarding the future financial position, strategy, projected costs, plans and objectives for the management of future operations of RS Group plc and its subsidiaries is not warranted or guaranteed. These statements typically contain words such as "intends", "expects", "anticipates", "estimates" and words of similar import. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Although RS Group plc believes that the expectations reflected in such statements are reasonable, no assurance can be given that such expectations will prove to be correct. There are a number of factors, which may be beyond the control of RS Group plc, which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. Other than as required by applicable law or the applicable rules of any exchange on which our securities may be listed, RS Group plc has no intention or obligation to update forward-looking statements contained herein.