Final Results

RNS Number : 5228M
RS Group PLC
24 May 2022
 

24 May 2022, 7.00 am

 

RS GROUP PLC

RESULTS FOR YEAR ENDED 31 MARCH 2022

 

STRONG OUTPERFORMANCE DELIVERING REVENUE GROWTH, MARKET SHARE GAINS AND OPERATIONAL EFFICIENCIES

 

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."

Highlights

2021/22

2020/21

Change

Like-for-like1 change

Revenue

£2,553.7m

£2,002.7m

28%

26%

Adjusted2 operating profit

£320.4m

£188.3m

70%

78%

Adjusted2 operating profit margin

12.5%

9.4%

3.1 pts

3.7 pts

Adjusted2 profit before tax

£313.8m

£181.7m

73%

81%

Adjusted2 earnings per share

51.3p

31.3p

64%

72%

Operating profit

£308.8m

£167.2m

85%

97%

Profit before tax

£302.2m

£160.6m

88%

102%

Earnings per share

48.9p

27.7p

77%

90%

Full-year dividend

18.0p

15.9p

13%


Adjusted2 free cash flow

£162.9m

£145.4m

12%


Net debt

£42.1m

£122.0m



Net debt to adjusted2 EBITDA

0.1x

0.5x



· 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

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.

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.

 

 

Enquiries:

David Egan, Chief Financial Officer

RS Group plc

020 7239 8400

Lucy Sharma, VP Investor Relations

RS Group plc

020 7239 8427

Martin Robinson / Olivia Peters

Tulchan Communications

020 7353 4200

There will be an analyst presentation today at 9.00am (BST) at UBS, 5 Broadgate, London EC2M 2QS. We will also provide a video webcast, which can be accessed live and later as a recording on the RS Group website at www.rsgroup.com .

 

Participant dial-in numbers

United Kingdom (Local):  020 3936 2999

All other locations:  +44 20 3936 2999

Participant access code:  241854

Webcast link: https://www.investis-live.com/rsgroup/6283979ca4707c1200b35bdd/rsfr  

CEO STRATEGIC REVIEW

Our year

Cultural transformation: having a high-performance, purpose-led culture

Operational efficiency: delivering world-class capability and execution

Growth accelerators: driving a compelling value proposition and customer experience

We have three growth accelerators which underpin our vision of being first choice for all our stakeholders:

· We are easy to do business with: our fast and responsive omni-channel model delivers a seamless end-to-end customer experience through digital channels, human touch or a combination of both with specialist support and product knowledge.

· We offer a broad and deep product offer: strong and extensive supplier relationships ensure product choice, availability and substitute options.

· We provide product and service solutions: solving our customers' problems across the design, build and maintain lifecycle drives closer and stronger relationships and greater value.

We are calling this next phase our Journey to Greatness. We have a differentiated business model, but it can be better. To be great, we need to benchmark our business against the highest global standards and deliver best-in-class growth and returns within our core competitive strengths by:

T

To mark this change, on 3 May 2022, we became RS Group. RS is our primary customer brand, recognised by engineers around the world. It has its roots in the very beginnings of the Company, which began life as Radiospares in 1937, founded on the same principles that guide us today: ease of doing business and putting the customer first. As RS Group, we are bringing our business together under one strong, unified global brand, united behind our single purpose. We believe this will open many more opportunities for us, unlocking our global efficiency, enabling scalability and helping us deliver our Journey to Greatness. 

 

There is no change to our strategy. Our strategic roadmap, Destination 2025, has evolved into The RS Way, reflecting greater ambitions to drive stronger revenue and high-quality profitable growth. We have a purpose-led culture and vision with ESG embedded in everything we do to advance sustainability, champion education and innovation, empower our people and be a responsible business. 

 

In summary

As I write, there is a significant amount of uncertainty around the world including the invasion of Ukraine and geopolitical fallout; the lockdown of many cities in Asia owing to further outbreaks of COVID-19 and its variants; and the continued impact of inflationary pressures as well as a potential severe global economic slowdown. While we have no operations in Ukraine or Russia, our thoughts and support are with all those affected by the events. We are mindful of the challenges that all our stakeholders face and continue to provide assistance where we can. 

 

However, despite these uncertainties we have established a track record of being resilient through the economic cycle and particularly during periods of macroeconomic uncertainty. This has been driven by our people, having a purpose-led culture and working as a team. 

 

Having repositioned our Group, we can see the opportunity to unlock further growth through leveraging the Group’s differentiated model, improving our operational execution and ensuring we contribute to making amazing happen for a better world. 

 

Our strong market share growth and outperformance underpins our confidence in being able to deliver stronger revenue and high-quality profitable growth, enhanced by strategic acquisitions, with a mid-teen adjusted operating profit margin and underpinned by at least 20% return on capital employed. 

 

RESULTS

 

2021/22

2020/21

Change

Like-for-like1 change

Revenue

£2,553.7m

£2,002.7m

28%

26%

Gross margin

44.2%

42.7%

1.5 pts

1.7 pts

Operating profit

£308.8m

£167.2m

85%

97%

Adjusted2 operating profit

£320.4m

£188.3m

70%

78%

Adjusted2 operating profit margin

12.5%

9.4%

3.1 pts

3.7 pts

Adjusted2 operating profit conversion

28.4%

22.0%

6.4 pts

7.5 pts

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).

Revenue

Group revenue increased by 28% to £2,553.7 million (2020/21: £2,002.7 million). Adjusting for the year-on-year impact of acquisitions of £94.8 million, £10.5 million from additional trading days and a negative impact of £62.7 million from exchange rate movements, like-for-like revenue growth was 26% of which volumes and mix accounted for c. 19%. Revenue momentum was strong across the year, with second half like-for-like growth of 22% despite tougher comparatives as the economy recovered from the initial COVID-19 pandemic impact.

Industrial production figures, supplier indications and results reported by peers show that we are outperforming the industrial market and gaining share as our customers have relied on our product availability, the breadth of our range and our experienced team to deliver products and services in time to ensure their trading continuity. We have seen a 1% increase in our total customer numbers. Our average order value grew by 10% (excluding our integrated supply business's pass-through sales orders) with the majority of the growth driven by an increasing number of products within our customers' baskets.

Our industrial products ranges, which account for c. 75% of Group revenue, grew by 24% like-for-like during the year with strong growth across all our industrial product ranges. Our electronic products range, predominantly supplied to our industrial customers as they become more digitalised and connected, grew by 43% on a like-for-like basis benefiting from strong market conditions, our product availability and new customers. OKdo, the Group's single-board computing (SBC) and Internet of Things (IoT) business, which accounts for c. 3% of revenue, declined by 3% on a like-for-like basis as supply tightened from the second quarter.

RS PRO, which is our main own-brand product range and accounts for 12% of Group revenue, grew by 19% on a like-for-like basis, despite having a limited electronics offer, fewer automation and control products and a very small participation within Americas. Our offer continues to gain traction with our performance aided by targeted product marketing and new product development. We have a strong product line-up and are excited about the opportunities to drive stronger revenue across the Group.

Digital, accounting for 62% of Group revenue, performed slightly ahead of the Group overall, delivering 27% like-for-like growth. Web revenue, which is a truer representation of our digital proposition and demand as it excludes eProcurement, grew by 30% on a like-for-like basis. eProcurement and other digital, which are used predominantly by our larger customers who suffered heavily during lockdowns, have recovered strongly with 21% growth on a like-for-like basis.

We continue to redirect our digital marketing spend away from paid advertising towards organic marketing which is driving a better return on our investment. We have seen efficiency improvements in our key marketing channels as we have focused more on marginal return on investment rather than purely on revenue, a result of the investment we have made in increasing the digital expertise within our teams. We have also benefited from promoting a 'test and learn' environment, resulting in quicker, less risky development changes.

Gross margin

Group gross margin increased 1.5 percentage points to 44.2%, (2020/21: 42.7%). Excluding the dilutive impact from our recent acquisitions and the small benefit from exchange rates, the like-for-like growth was 1.7 percentage points which includes a 0.6 percentage points benefit from last year's one-off inventory provision relating to the decline in price of certain personal protective equipment (PPE) products bought at the start of the pandemic.

We have taken actions to improve our gross margin through revising our discount policy, ensuring pricing options reflect demand elasticity, improving our own-brand ranges and negotiating buying terms better. We are delivering gross margin benefits although this is being partly offset by regional and product mix dilution and ongoing pressures from inbound freight inflation.

The dilutive impact from acquisitions reflects the lower digital participation within the acquired businesses compared to our Group model. We expect this dilutive impact to reduce over time as integration continues.

Operating costs

Total operating costs, which include regional and central costs, increased by 19%. Excluding amortisation of acquired intangibles and the substantial reorganisation costs and acquisition-related items incurred in 2020/21, total adjusted operating costs increased by 21%, 19% on a like-for-like basis, to £807.5 million (2020/21: £667.7 million). Two thirds of this increase is volume driven or relates to the annualisation of the operating costs of last year's acquisitions.

At the moment, we see no indications that the elevated costs we have experienced since the start of the COVID-19 pandemic will unwind. The UK leaving the EU (Brexit) has led to additional brokerage and air freight costs to ensure timely delivery and greater administrative expenses relating to border and custom checks. Higher energy and fuel costs are affecting all three regions. Freight rates have, in some instances, been impacted by premium fees to expedite shipments given the shortage of containers and we are also seeing fuel surcharges. Our parcel delivery charges have increased in the UK.

We are managing what we can control, which includes working partly to mitigate this by storing our product closer to the customer, but this is taking time to achieve. It is anticipated that our newly commissioned Bad Hersfeld DC in Germany will reduce some of these costs over time.

A large proportion of our operating costs relates to our people. We awarded a pay rise across the Group early in the year but are seeing inflationary pressures build given general employment shortages across all specialist areas, including technology, and within our US and UK DCs. Our employee retention rate is 90%, and we are mindful of the competitive pressures for new talent.

Operating costs increased to strengthen our expertise, technological capabilities and product and services capacity, and improve our operating basics. We want to be the best in class in each of our disciplines and will invest in our business to ensure it can support the strong organic growth we are delivering and the inorganic opportunities we see on our Journey to Greatness.

Our RISE programme to simplify the Group remains on track. We are excited by the benefits we see from having a more agile business and leaders with greater operational focus and ownership. We have delivered c. £15 million of benefits in 2021/22 due to the flatter regional management structure and sharing our business functions across the Group including marketing, digital, innovation and product and supplier management. This simpler operating model has allowed us to adapt to change faster, improve margins and operate more efficiently. We can see from the work to date that there are more opportunities to improve our differentiated business model further and be better at the basics to increase our operational leverage.

Adjusted operating costs as a percentage of revenue decreased by 1.7 percentage points to 31.6% (2020/21: 33.3%). Our improved trading momentum and steps taken to simplify our operating model to drive efficiencies have driven higher conversion of gross profit into operating profit, with adjusted operating profit conversion 6.4 percentage points higher at 28.4% (2020/21: 22.0%). We remain committed to The RS Way target of a 30% adjusted operating profit conversion and focused on achieving our aspiration of a mid-teen adjusted operating profit margin.

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 from 2021/22 are described below. In 2020/21 we also excluded substantial reorganisation costs of £11.2 million, primarily labour-related restructuring costs to implement RISE, and £2.9 million of acquisition-related items. See Note 10 for definitions and reconciliations of adjusted measures.

Amortisation of acquired intangibles

Amortisation of acquired intangibles was £11.6 million (2020/21: £7.0 million) and relates to the intangible assets arising from acquisitions.

Operating profit

Operating profit increased by 85% to £308.8 million (2020/21: £167.2 million). Excluding the year-on-year impact of acquisitions and the negative impact of currency movements, adjusted operating profit saw a like-for-like increase of 78%. Adjusted operating profit margin improved 3.1 percentage points to 12.5%.

Regional performance

Our strong revenue performance across all three regions is due to the hard work of our teams and the strength of our differentiated offer. We are gaining share in all major markets as we focus on the core basics: who are our customers, what do they need and how can we solve their procurement problems. During a time of extreme uncertainty, being able to deliver on those fundamentals has been key in developing closer relationships with our customers and increasingly becoming a one-stop shop.

Our investment into areas such as product and service solutions, digital, inventory and our DC infrastructure has meant that we have been able to navigate successfully not only COVID-19 and its variants but also Brexit, external industry supply challenges and inflationary pressures. Our industrial experience and strong relationships allowed us to identify the supply issues in the market early and partner closely with our suppliers to secure and invest appropriately in greater levels of inventory. This ensured we maintained good product availability despite global supply constraints.

All regions have seen operating profit margin improvement, most notably in Asia Pacific. This was achieved by revising our discount policy, ensuring pricing options reflect demand elasticity, improving our own-brand ranges and negotiating better buying terms to drive gross margin benefits. We have also delivered operational improvements as we focused on becoming more agile and streamlined, albeit these were partly offset by freight, energy and labour inflation and ongoing investment in our people, digital capabilities, technology and customer experience.

We have seen increased collaboration across the business as regional heads adapt global expertise and best practice to suit local needs. Regions are empowered to react quickly to support changing customer needs and priorities, deepening our relationship as a trusted partner to both our customers and our suppliers. Our customer base continues to increase and the breadth of our product offer and strong availability has meant that we are also seeing an increase in average order values across all regions. The more difficult supply environment has meant that online journeys have been supported more often by sales teams as customers seek reassurance about availability and lead times. We have seen a significant increase in supplier lead times but only a slight worsening in our order availability to customers. Our on time to promise metric was 86% for the three months ended 31 March 2022.

Customer experience remains a core focus for the business as we improve ease of use, personalisation, sales and technical expertise and maintain relatively high inventory availability. Our Group rolling 12-month Net Promoter Score (NPS), a measure of customer satisfaction, fell to 50.6 (2020/21: 54.4). This was due to the external pressures our business faced including the COVID-19 pandemic, Brexit fallout and industry supply shortages, with our revenue and order metrics suggesting relative market outperformance. We are working hard on improving this score, which is part of our employee incentive plans and core to our customer-centric strategy. We have developed our digital capabilities further to provide our customers with more information on availability and lead times and seen greater interaction with our sales teams; a benefit of our omni-channel model. However, we note that the supply chain issues and geopolitical uncertainties continue to worsen.

EMEA

EMEA

2021/22

2020/21

Change

Like-for-like 1 change

Revenue

£1,579.5m

£1,277.4m

24%

22%

Operating profit2

£243.7m

£172.6m

41%

46%

Operating profit margin

15.4%

13.5%

1.9 pts

2.5 pts

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.

· Overall, EMEA revenue grew 24%, 22% on a like-for-like basis, to £1,579.5 million (2020/21: £1,277.4 million), benefiting from an improved market backdrop, operational model and sales focus. Industrial production data shows that we continued to gain share during the year as the security of our offer, in terms of product availability and financial strength, resonated with customers with both average order value and average order frequency improving.

· UK and Ireland, which accounts for c. 40% of the region's revenue, performed well but slightly below the region's overall performance due to lower industrial production growth. The summer months were impacted by labour shortages relating to COVID-19 restrictions with supply constraints impacting some industry verticals, especially those in heavy industry. Our peer analysis suggests we increased market share significantly.

· Germany saw good momentum and market share gains. We have a new German management team which has driven new sales strategies and focus. Performance during the period was helped by a slightly larger electronics product bias. Our enlarged DC opened for first stage commissioning at the end of September and is being slowly brought up to full stage working. The facility is highly automated which allows us to improve our sustainability performance, reduce our environmental impact and increase efficiency. We will also be able to broaden our product range and offer service solutions to European customers.

· Our business in France benefited, as a result of flattening the reporting structure in EMEA, from greater end-to-end ownership by the team and some additional inventory within the French DC.

· IESA continues to win new contracts and the pipeline is very strong especially within Europe where we have invested in developing our coverage and reach over the last two years. In some instances, particularly in the first half, new business rollout was delayed due to lockdowns restricting our teams moving onto our customers' sites. We have seen reduced trading activity from some of our major customers within the heavy industry sector and thus disproportionately hit by COVID-19. Our new customer wins are across a wider industry range. We are excited about being able to provide our integrated supply offer across Europe and now globally as we work closely with our integrated supply business in Americas, Synovos, on joint tenders.

· Digital, accounting for 71% of the region's revenue, outperformed with 23% like-for-like revenue growth as greater focus was placed on driving organic growth through search engine optimisation marketing, improving content and greater focus on delivering greater lifetime customer value. Our mobile responsive website has delivered a significant improvement in how easily our customers can search, find and order with us in real time during their production process. Web revenue grew 25% on a like-for-like basis. We also saw a recovery in our eProcurement business due to increased activity from our larger customers.

· RS PRO, which accounts for 18% of the region's revenue, performed well with 17% like-for-like revenue growth, against a strong comparative period last year, less exposure to the fastest growing industrial component product ranges and a lower electronics weighting.

· OKdo, which accounts for 4% of revenue in the region was flat on a like-for-like basis with growth impacted by extreme supply constraints since the second quarter.

· Supply shortages were a significant challenge across the region as demand recovered before manufacturing capacity resumed fully. However, we maintained relatively stable levels of availability due to forward planning, our close relationships with suppliers and investment in our inventory position. We were able to limit as much of the supply disruption as possible through utilising our experience that we gained during Brexit, rerouting transport, advancing orders, increasing local sourcing and holding greater inventory as a buffer. Although our teams worked hard to mitigate industry-wide supply challenges and the effect of Brexit, there continued to be unavoidable impacts on delivery lead times especially across the UK border and inventory availability. EMEA's rolling 12-month NPS was 48.6 (2020/21: 55.5).

· Gross margin has benefited from product management work to reduce the level of discounting, set appropriate prices given inventory turn and pass-through cost of goods inflation. There is a small dilutive impact from our acquisitions of Needlers Holdings Limited and John Liscombe Limited which operate at a lower gross margin given their personal protective equipment exposure.

· Operating profit improved 41%, up 46% on a like-for-like basis, to £243.7 million (2020/21: £172.6 million).

· Operating profit margin improved 1.9 percentage points to 15.4% (2020/21: 13.5%), despite extra costs relating to Brexit from higher outbound freight costs, cost inflationary pressures and continual investment in our operating model. We are driving a lower cost to serve and generating operating profit conversion improvements.

Americas

Americas accounts for 28% of Group revenue, with Allied Electronics & Automation (Allied), Synovos, RS PRO and OKdo being our trading brands during the year. We have operations in the US, together with smaller operations in Canada, Mexico and Chile. Our DC expansion completed in 2020/21 enables us to continue to widen our product offering further into the maintenance, repair and operations (MRO) market. We are driving ongoing gains from the changes we have made in recent years to focus our sales teams on identifying new revenue generating opportunities, utilising our shared expertise across the Group and continuing improvements to our digital proposition. This is resulting in greater customer engagement and marketing returns. Synovos, Inc. the integrated supply business we acquired in January 2021, is driving cross-business benefits as the Group becomes a supplier to its customers, RS PRO products provide a competitive alternative to the branded ranges and we offer transatlantic integrated supply solutions with IESA.

Americas

2021/22

2020/21

Change

Like-for-like 1 change

Revenue

£718.7m

£517.0m

39%

36%

Operating profit2

£99.3m

£51.9m

91%

98%

Operating profit margin

13.8%

10.0%

3.8 pts

4.5 pts

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.

· Like-for-like revenue grew 36%, underpinned by a strong market and the investment we have made over the last few years in our people, operating model and DC. We are seeing strong growth in the automation and control product range and are extending our proposition into the MRO market. Our growth has been similar across industrial and electronic products, with demand for the latter being driven by our industrial customers as we provide product experience and expertise to customers where we understand their business requirements and needs.

· We have significantly invested in our people and culture, digital and marketing proposition, and product and service offer. Our sales force, management and teams are better aligned to revenue and margin growth which form part of their incentive plans. Field sales teams are now focused on customer acquisition and retention, as well as expanding our product proposition and RS PRO participation, supported by a central customer service team providing specialist support and dealing with administrative tasks.

· Digital accounted for 43% of the region's revenue, with 37% like-for-like growth. Like-for-like growth in web revenue was 45% illustrating the strength of our offer and the investment we have made in our digital platform to improve site speed and search engine optimisation.

· RS PRO accounts for under 1% of the region's revenue and grew like-for-like revenue by 37%. The performance has been held back by the facts that the RS PRO brand is less well known to our Americas customers and has an MRO focused range, rather than automation and control. We expect to benefit from the Group rebranding as we move towards becoming RS Americas, while the movement into more MRO products will also help.

· We are very excited about the opportunities the acquisition of Synovos brings. Together with IESA, we are able to offer a global integrated supply solution; one of the first operators able to do this. During the year, Synovos experienced delays in implementing new contracts due to COVID-19 lockdowns restricting access to customers' sites. We have seen lower revenue from existing customers during the pandemic and a smaller margin contribution due to some fixed price contracts. Additionally, we have incurred costs relating to personnel changes and improving the commercial operating model to become more aligned with IESA. This will provide the opportunity to scale more quickly and efficiently to take advantage of the growth we see. We have already signed a number of new contracts with global companies in the technology and pharmaceutical verticals and we are pleased with Synovos's integration into the Group. We see more opportunities for cross-business benefits including expanding our RS PRO reach.

· Americas' rolling 12-month NPS declined 8% to 66.0 (2020/21: 71.9), largely due to external pressures including the pandemic and supply chain disruption plus the significant increase in volume throughput. Our focus remains on delivering a strong offline and online customer experience and mitigating the industry issues we are facing.

· Gross margin grew due to a strong product margin focus to reduce the level of discounting and improve price optimisation across our products.

· Operating profit improved 91%, 98% on a like-for-like basis, to £99.3 million (2020/21: £51.9 million).

· Operating profit margin improved 3.8 percentage points, 4.5 percentage points on a like-for-like basis, to 13.8% (2020/21: 10.0%), a function of larger volumes, gross margin gains and operational leverage due to the strong revenue growth.

Asia Pacific

Asia Pacific accounts for 10% of Group revenue and consists of Australia and New Zealand (ANZ), Greater China, Japan and Korea, and South East Asia. RS, RS PRO and OKdo are our main trading brands in Asia Pacific. Our broadening product offer, strong technical expertise, omni-channel service and a growing range of product and service solutions underpin our market share growth. This allows us increasingly to become a one-stop-shop partner of choice for our customers.

Asia Pacific

2021/22

2020/21

Change

Like-for-like 1 change

Revenue

£255.5m

£208.3m

23%

27%

Operating profit2

£29.3m

£1.4m

>200%

>200%

Operating profit margin

11.5%

0.7%

10.8 pts

11.4 pts

1.  Like-for-like adjusted for currency; revenue also adjusted for trading days.

2.  See Note 2 for reconciliation to Group operating profit.

· Asia Pacific revenue increased 23%, 27% on a like-for-like basis, to £255.5 million (2020/21: £208.3 million).

· A change in management culture has led to more focused and productive sales processes as we have increased attention on more profitable opportunities to drive a significant improvement in average order value. This has delivered an improved revenue performance, helped by a stronger participation of our electronics product range, and margin gains. Our industrial product performance has also remained strong and we have continued to take market share.

· Japan and Korea has benefited from a new president, greater understanding of the local customer needs and improved customer service. Greater China has enhanced business opportunities, with the sales team focused on increasing the average order value and higher margin revenue opportunities, although the recent lockdowns have impacted delivery. South East Asia's performance improved in the second half as local COVID-19 lockdowns eased and we continued to gain share. ANZ's performance in recent months has benefited from new contracts and high margin RS PRO growth.

· OKdo, which accounts for 8% of the region's revenue, declined 10% on a like-for-like basis having been impacted by shortages in the second half of the year.

· Digital, which accounts for 61% of the region's revenue, increased 37% on a like-for-like basis driven by digital share gains in Japan and Korea, Greater China and South East Asia, which all saw a strong recovery in eProcurement. Web like-for-like revenue also grew by 37%.

· RS PRO, which accounts for 13% of the region's revenue, saw strong like-for-like growth of 26%, with growth strong across all markets.

· Asia Pacific's rolling 12-month NPS of 36.7 (2020/21: 37.4) has been impacted by longer supply lead times and our decision to implement delivery charges for some small value orders which have low levels of profitability. We remain committed to improving the customer experience and actions we have implemented, including a more focused sales force, have supported a recent improvement in the monthly NPS trend.

· Gross margin growth was driven by greater focus on higher revenue opportunities, implementation of the small order handling charge and price increases.

· Operating profit was £29.3 million, a significant improvement on the prior year which delivered £1.4 million.

· The operating profit margin of 11.5% was a 10.8 percentage points improvement (2020/21: 0.7%), benefiting from strong revenue growth, gross margin gains, continued cost discipline and our scalable operating model. The region remains focused on improving our cost to serve, reducing freight costs by shifting shipments from air to sea and leveraging our operational assets.

Central costs

Central costs are Group head office costs and include Board, Group Finance and Group Professional Services and People costs that cannot be attributed to region-specific activity.

 

2021/22

2020/21

Change

Like-for-like 1 change

Central costs

£(51.9)m

£(37.6)m

38%

38%

1.  Like-for-like adjusted for currency.

Central costs increased by £14.3 million to £51.9 million (2020/21: £37.6 million) due to higher costs related to prospective acquisitions, investment in future growth opportunities and higher performance-related incentives and share-based payments.

 

FINANCIAL REVIEW

Net finance costs

Net finance costs were £7.1 million (2020/21: £6.8 million) with less interest capitalised as our DC expansions were completed. A high proportion of our debt is at fixed interest rates and with low floating deposit interest rates there has been little benefit seen from our lower net debt.

Profit before tax

Profit before tax was up 88% to £302.2 million (2020/21: £160.6 million). Adjusted profit before tax was up 73% to £313.8 million (2020/21: £181.7 million), up 81% on a like-for-like basis.

Taxation

The Group's income tax charge was £72.2 million (2020/21: £35.1 million). The adjusted income tax charge, which excludes the impact of tax relief on items excluded from adjusted profit before tax, was £72.3 million (2020/21: £39.6 million), resulting in an effective tax rate of 23.0% on adjusted profit before tax (2020/21: 21.8%). The increase is predominantly due to a recalculation of deferred tax balances as a result of the UK corporate income tax change from 19% to 25% effective from 1 April 2023 but enacted earlier this year.

Earnings per share

Earnings per share was up 77% to 48.9p (2020/21: 27.7p). Adjusting for items excluded from adjusted profit and associated income tax effects, adjusted earnings per share of 51.3p (2020/21: 31.3p) grew 72% on a like-for-like basis.

Cash flow

£m

2021/22

2020/21

Operating profit

308.8

167.2

Add back depreciation and amortisation

63.7

56.5

EBITDA

372.5

223.7

Add back loss on disposal of non-current assets

2.4

0.3

Movement in working capital

(116.2)

(1.5)

Movement in provisions

(1.7)

1.6

Other

10.1

7.0

Cash generated from operations

267.1

231.1

Net interest paid

(7.0)

(8.3)

Income tax paid

(57.1)

(35.2)

Net cash from operating activities

203.0

187.6

Net capital expenditure

(42.5)

(54.7)

Free cash flow

160.5

132.9

Add back cash effect of adjustments1

2.4

12.5

Adjusted1 free cash flow

162.9

145.4

1.  Adjusted excludes the impact of substantial reorganisation and acquisition-related items cash flows.

We remain a robust cash generative business, benefiting from actions we took to increase our focus on cash at the start of COVID-19. Cash generated from operations was £267.1 million (2020/21: £231.1 million) with higher EBITDA mainly offset by movements in working capital as we increased our inventory levels. As a result, adjusted operating cash flow conversion was 70.8%, a decline of 29.5 percentage points year on year.

Net interest paid decreased by £1.3 million to £7.0 million (2020/21: £8.3 million) as 2020/21 included the payment of the fees for refinancing our revolving credit facility.

Income tax paid increased to £57.1 million (2020/21: £35.2 million) due to taxable profit being higher than 2020/21. Also 2020/21 benefited from the utilisation of some prior year overpayments.

Net capital expenditure decreased to £42.5 million (2020/21: £54.7 million) due to Americas DC expansion completing in 2020/21 and Germany DC expansion moving to early-stage commissioning during the third quarter. Additionally, some capital expenditure was held back as we prioritised our Journey to Greatness plans. Capital expenditure was 1.3 times depreciation (2020/21: 1.7 times) moving more in line with our typical maintenance capital expenditure levels of closer to 1.0 - 1.5 times depreciation. We anticipate capital expenditure in 2022/23 to be £50 - 60 million as we resume our ongoing investment schedule.

Free cash flow increased to £160.5 million (2020/21: £132.9 million). Excluding cash outflows of £2.4 million (2020/21: £12.5 million) related to substantial reorganisation costs and acquisition-related items in 2020/21, adjusted free cash flow was £162.9 million (2020/21: £145.4 million).

Working capital

We have actively managed our working capital and, as a result, working capital as a percentage of revenue decreased by 0.8 percentage points to 21.1% (2020/21 restated - see Note 9: 21.9%).

We continue to monitor receivables collection closely, which remains our greatest short-term liquidity sensitivity. We have maintained the actions we took at the end of 2019/20 to limit our exposure by tightening credit policies, including short payment terms and low credit limits for new customers and seeking payment commitments for overdue balances before releasing new orders to existing customers. Trade and other receivables at £594.3 million (2020/21 restated - see Note 9: £493.6 million) are higher due to our increased revenue.

Gross inventories increased to £559.2 million (2020/21: £460.4 million). We have added more inventory into our expanded DC in Fort Worth, US, and have worked hard to add to our inventory levels across the Group to protect supply given external supply challenges, especially since they were lower than we would have liked at 31 March 2021 due to delays caused by Brexit and the Suez Canal blockage. Strong experience and foresight by our procurement teams meant that we were able to take steps to secure our inventory position as signs of industry supply shortages began to develop. Our inventory turn was unchanged at 2.7 times as our business grew in line with our increase in inventory. Inventory provisions have decreased by £10.9 million to £29.7 million mainly as a result of selling some heavily provisioned electronics products.

Overall trade and other payables increased to £584.1 million (2020/21: £475.3 million) mainly due to the increase in purchases of products.

Looking forward we continue to manage actively our working capital position and remain focused on receivables collection. We continue to invest in our inventory position to ensure that we remain well positioned to maintain service levels and deliver strong growth within this supply constrained market. However, we understand that demand and supply dynamics can change quickly and that our systems and orders need to remain flexible to be able to adapt according to market forces. We continue to pay our suppliers to terms and have worked with some of our larger suppliers to improve terms where possible.

Net debt

Our net debt is £42.1 million, £79.9 million lower than at 31 March 2021 when it was £122.0 million. Net debt comprised gross borrowings of £300.1 million (2020/21: £321.0 million), including lease liabilities of £48.7 million (2020/21: £61.5 million), offset by cash and short-term deposits of £257.9 million (2020/21: £197.9 million) and interest rate swap assets with a fair value of £0.1 million (2020/21: £1.1 million).

On 29 October 2021 we moved our £300 million three-year revolving credit facility to a sustainability-linked loan (SLL). We will be measured against annual ESG actions relating to Scope 1 and 2 CO2e emissions, packaging intensity and percentage of management that are women. Meeting these annual ESG actions will mean a margin benefit of up to 2.5 basis points, while missing these ESG actions would mean we pay a margin premium of up to 2.5 basis points, and if all three ESG actions were missed the loan would be declassified as an SLL but this would not be an event of default. This new agreement also replaced LIBOR with risk free rates and our request to take up the option to extend the maturity for a year was later accepted.

Our SLL of £300 million has a lender option accordion of up to a further £100 million and a maturity of November 2024 which may be extended at the option of the Group for a further one-year term subject to individual lender approval. This SLL was undrawn at 31 March 2022 and, together with £151.7 million of private placement loan notes, form our committed debt facilities of £451.7 million.

The Group's financial metrics remain strong, with net debt to adjusted EBITDA of 0.1x and EBITA to interest of 44.6x, 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 31 March 2022 expressed as a percentage of the monthly average capital employed (net assets excluding net debt and retirement benefit obligations). ROCE remained strong at 28.7%, up 9.3 percentage points year on year (2020/21: 19.4%).

Retirement benefit obligations

The Group has defined benefit pension schemes in the UK and Europe, with the UK scheme being by far the largest. All these schemes are closed to new entrants and in Germany and Ireland the pension schemes are closed to accrual for future service.

Overall, the accounting deficit of the Group's defined benefit schemes at 31 March 2022 was £12.4 million compared to £57.4 million at 30 September 2021 and £55.7 million at 31 March 2021.

At 31 March 2022, the UK defined benefit scheme had an accounting surplus of £24.9 million (2020/21: an accounting deficit of £41.2 million). Under the scheme's rules the Group does not have an unconditional right to any surplus that may arise on the scheme and so the accounting surplus has been restricted to £nil. The movement from a deficit to a surplus was principally due to a decrease in liabilities caused by a 0.7 percentage points increase in the discount rate (from 2.1% to 2.8%) partially offset by an increase of 0.5 percentage points in inflation-linked assumptions, as well as an increase in the value of the assets.

The triennial funding valuation of the UK scheme at 31 March 2019 showed a deficit of £44.7 million on a statutory technical provisions basis. A recovery plan was agreed with the trustee of the UK scheme with deficit contributions paid with the aim that the scheme was fully funded on a technical provisions basis by March 2022. These deficit contributions started in 2019/20 and consisted of an annual contribution of at least £10 million, increased each 1 April by the increase in the Retail Prices Index (RPI) for the year to the preceding December, plus an additional contribution of £25 million. This additional contribution could be paid in instalments and paid as and when we deemed appropriate, provided the total additional contribution had been paid no later than 31 March 2022. Given our financial strength, we paid £12.5 million in 2020/21 and the remaining £12.5 million in 2021/22.

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.

The Board proposes to increase the final dividend to 11.6p per share. This will be paid on 22 July 2022 to shareholders on the register on 17 June 2022. As a result, the total proposed dividend for 2021/22 will be 18.0p per share, representing an increase of 13% over the 2020/21 full-year dividend. Adjusted earnings dividend cover for 2021/22 was 2.9 times.

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 £1.8 million and a one cent movement in the US dollar would impact annual adjusted profit before tax by £0.7 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 related to euros and US dollars.

RISKS AND UNCERTAINTIES

The Board has overall accountability for the Group's risk management, which is managed by the Senior Management Team (SMT) and co-ordinated by the Group's risk team. The Group's risk management process identifies, evaluates and manages the Group's principal risks and uncertainties. These are reviewed by both the SMT Risk Committee, comprising the Group's senior managers, and the Board, which regularly discusses the principal risks and receives risk reports covering risk mitigations and controls.

The Group has a defined risk appetite, which has been adopted by the Board, and is considered across three risk categories: strategic, operational and regulatory / compliance. These three categories use both quantitative and qualitative criteria.

Principal risks and uncertainties

· The removal of the risk associated with the UK's exit from the EU with some of the specific effects now considered within the more detailed risks such as the impact of possible future diverging legislation between the UK and the EU.

· A new risk reflecting the increasing geopolitical uncertainties and how they may affect the business model and the Group's profitability.

· Including the climate change related risk as a principal risk (previously listed as an emerging risk), recognising our improving understanding of this area and its possible impact on the business.

1.  Prolonged effects of the ongoing COVID-19 pandemic across different geographies

2.  Fail to respond to strategic market shifts, for example, changes in customer demands / competitor activity and related stakeholder requirements

3.  The Group's revenue and profit growth activities are not successfully implemented

4.  Effects on the business due to geopolitical developments

5.  Failure in the business's critical infrastructure

6.  Cyber security breach / information loss

7.  UK defined benefit pension scheme cash requirements are more than the cash available

8.  People resources unable to support the existing and future growth of the business

9.  Impact on the business if the macroeconomic environment deteriorates

10.  Potential impact on the business due to climate change effects

11.  Fail to comply with international and local legal / regulatory requirements

 

GROUP INCOME STATEMENT

For the year ended 31 March 2022

 



2022

2021


Notes

£m

£m

Revenue

2

2,553.7

2,002.7

Cost of sales


(1,425.8)

(1,146.7)

Gross profit


1,127.9

856.0

Distribution and marketing expenses


(755.6)

(630.1)

Administrative expenses


(63.5)

(58.7)

Operating profit

2

308.8

167.2

Finance income


1.0

1.8

Finance costs


(8.1)

(8.6)

Share of profit of joint venture


0.5

0.2

Profit before tax

2

302.2

160.6

Income tax expense


(72.2)

(35.1)

Profit for the year attributable to owners of the Company


230.0

125.5

 


 


Earnings per share - Basic

3

48.9p

27.7p

Earnings per share - Diluted

3

48.6p

27.5p

 

 

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2022

 



2022

2021



£m

£m

Profit for the period


230.0

125.5

 

 

 


Other comprehensive income

 

 


Items that will not be reclassified subsequently to the income statement

 

 


Remeasurement of retirement benefit obligations


21.8

(22.5)

Income tax on items that will not be reclassified to the income statement


(0.9)

4.3

 


 


Items that may be reclassified subsequently to the income statement


 


Foreign exchange translation differences of joint venture


0.1

(0.1)

Foreign exchange translation differences


21.8

(42.4)

Movement in cash flow hedges


1.4

(4.5)

Income tax on items that may be reclassified to the income statement


(0.3)

1.0

Other comprehensive income / (expense) for the period

 

43.9

(64.2)

Total comprehensive income for the year attributable to owners of the Company

273.9

61.3

 

GROUP BALANCE SHEET

As at 31 March 2022

 



2022

2021



 

restated1


Notes

£m

£m

Non-current assets


 


Intangible assets


473.3

466.4

Property, plant and equipment


177.3

170.2

Right-of-use assets


45.8

58.6

Investment in joint venture


1.5

1.1

Other receivables


3.0

2.9

Interest rate swaps

8

-

1.1

Retirement benefit net assets

5

0.3

0.8

Deferred tax assets


4.9

9.9

Total non-current assets


706.1

711.0

Current assets


 


Inventories

6

529.5

419.8

Trade and other receivables

7

594.3

493.6

Cash and cash equivalents - cash and short-term deposits

8

257.9

197.9

Interest rate swaps

8

0.1

-

Other derivative assets


1.4

2.2

Current income tax receivables


11.9

21.3

Total current assets


1,395.1

1,134.8

Total assets


2,101.2

1,845.8

Current liabilities


 


Trade and other payables


(584.1)

(475.3)

Cash and cash equivalents - bank overdrafts

8

(99.5)

(111.5)

Other borrowings

8

-

(0.7)

Lease liabilities

8

(16.7)

(17.4)

Interest rate swaps

8

(0.2)

-

Other derivative liabilities


(3.2)

(2.0)

Provisions


(2.6)

(4.9)

Current income tax liabilities


(19.9)

(20.0)

Total current liabilities


(726.2)

(631.8)

Non-current liabilities


 


Other payables


(6.9)

(6.8)

Retirement benefit obligations

5

(12.7)

(56.5)

Borrowings

8

(151.7)

(147.3)

Lease liabilities

8

(32.0)

(44.1)

Provisions


(2.8)

(2.0)

Deferred tax liabilities


(60.4)

(57.9)

Total non-current liabilities


(266.5)

(314.6)

Total liabilities


(992.7)

(946.4)

Net assets


1,108.5

899.4

Equity


 


Share capital


47.1

47.0

Share premium account


231.4

228.5

Hedging reserve


(0.7)

(1.4)

Own shares held by Employee Benefit Trust (EBT)


(3.0)

(1.5)

Cumulative translation reserve


60.9

39.0

Retained earnings


772.8

587.8

Equity attributable to owners of the Company


1,108.5

899.4

1.  Restated for measurement period adjustments for prior year acquisitions (Note 9).

 

GROUP CASH FLOW STATEMENT

For the year ended 31 March 2022

 



2022

2021


Notes

£m

£m

Cash flows from operating activities


 


Profit before tax


302.2

160.6

Depreciation and amortisation


63.7

56.5

Loss on disposal of non-current assets


2.4

0.3

Equity-settled share-based payments


9.9

7.0

Net finance costs


7.1

6.8

Share of profit of and dividends received from joint venture


(0.3)

(0.2)

Increase in inventories


(102.1)

(4.4)

Increase in trade and other receivables


(96.5)

(32.6)

Increase in trade and other payables


82.4

35.5

(Decrease) / increase in provisions


(1.7)

1.6

Cash generated from operations


267.1

231.1

Interest received


1.0

1.8

Interest paid


(8.0)

(10.1)

Income tax paid


(57.1)

(35.2)

Net cash from operating activities


203.0

187.6

 


 


Cash flows from investing activities


 


Acquisition of businesses

9

2.2

(157.5)

Cash and cash equivalents acquired with businesses


-

22.0

Aggregate of cash paid to acquire and cash and cash equivalents acquired with businesses


2.2

(135.5)

Purchase of intangible assets, property, plant and equipment


(42.5)

(54.7)

Net cash used in investing activities


(40.3)

(190.2)



 


Cash flows from financing activities


 


Proceeds from the issue of share capital


3.0

179.5

Purchase of own shares by EBT


(2.9)

(1.6)

Loans repaid

8

(0.7)

(24.3)

Payment of lease liabilities

8

(17.8)

(16.4)

Dividends paid

4

(76.2)

(71.2)

Net cash (used in) / generated from financing activities


(94.6)

66.0



 


Net increase in cash and cash equivalents


68.1

63.4

Cash and cash equivalents at the beginning of the year


86.4

34.8

Effects of exchange rate changes


3.9

(11.8)

Cash and cash equivalents at the end of the year

8

158.4

86.4

 

 

GROUP STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2022

 


Share capital

Share premium account

Hedging reserve

Own shares held by EBT

Cumulative translation reserve

Retained earnings

Total

 

£m

£m

£m

£m

£m

£m

£m

At 1 April 2020

44.6

51.4

-

(0.7)

81.5

543.1

719.9

Profit for the year

-

-

-

-

-

125.5

125.5

Remeasurement of retirement benefit obligations

-

-

-

-

-

(22.5)

(22.5)

Foreign exchange translation differences

-

-

-

-

(44.7)

-

(44.7)

Fair value gain on net investment hedges 

-

-

-

-

2.2

-

2.2

Net loss on cash flow hedges

-

-

(4.5)

-

-

-

(4.5)

Tax on other comprehensive income

-

-

1.0

-

-

4.3

5.3

Total comprehensive (expense) / income

-

-

(3.5)

-

(42.5)

107.3

61.3

Cash flow hedging losses transferred to inventories

-

-

2.7

-

-

-

2.7

Tax on cash flow hedging losses transferred to inventories

-

-

(0.6)

-

-

-

(0.6)

Dividends (Note 4)

-

-

-

-

-

(71.2)

(71.2)

Equity-settled share-based payments

-

-

-

-

-

7.0

7.0

Share placing, net of transaction costs

2.2

173.9

-

-

-

-

176.1

Settlement of share awards

0.2

3.2

-

0.8

-

(0.8)

3.4

Purchase of own shares by EBT

-

-

-

(1.6)

-

-

(1.6)

Tax on equity-settled share-based payments

-

-

-

-

-

2.4

2.4

At 31 March 2021

47.0

228.5

(1.4)

(1.5)

39.0

587.8

899.4

Profit for the year

-

-

-

-

-

230.0

230.0

Remeasurement of retirement benefit obligations

-

-

-

-

-

21.8

21.8

Foreign exchange translation differences

-

-

-

-

22.0

-

22.0

Fair value loss on net investment hedges

-

-

-

-

(0.1)

-

(0.1)

Net gain on cash flow hedges

-

-

1.4

-

-

-

1.4

Tax on other comprehensive income

-

-

(0.3)

-

-

(0.9)

(1.2)

Total comprehensive income

-

-

1.1

-

21.9

250.9

273.9

Cash flow hedging gains transferred to inventories

-

-

(0.5)

-

-

-

(0.5)

Tax on cash flow hedging gains transferred to inventories

-

-

0.1

-

-

-

0.1

Dividends (Note 4)

-

-

-

-

-

(76.2)

(76.2)

Equity-settled share-based payments

-

-

-

-

-

9.9

9.9

Settlement of share awards

0.1

2.9

-

1.4

-

(1.4)

3.0

Purchase of own shares by EBT

-

-

-

(2.9)

-

-

(2.9)

Tax on equity-settled share-based payments

-

-

-

-

-

1.8

1.8

At 31 March 2022

47.1

231.4

(0.7)

(3.0)

60.9

772.8

1,108.5

 

NOTES TO THE PRELIMINARY ACCOUNTS

1.  Basis of preparation

 

2.  Segmental reporting

The Group's operating segments comprise three regions: EMEA, Americas and Asia Pacific.

 

EMEA

Americas

Asia Pacific

Group

 

£m

£m

£m

£m

Year ended 31 March 2022





 

Revenue from external customers

1,579.5

718.7

255.5

2,553.7

 

Segmental operating profit

243.7

99.3

29.3

372.3

 

Central costs

 

 

 

(51.9)

 

Adjusted operating profit

 

 

 

320.4

 

Amortisation of acquired intangibles

 

 

 

(11.6)

 

Operating profit

 

 

 

308.8

 

Net finance costs

 

 

 

(7.1)

 

Share of profit of joint venture

 

 

 

0.5

 

Profit before tax

 

 

 

302.2

 

 

 

 

 

 

 

Year ended 31 March 2021

 

 

 

 

 

Revenue from external customers

1,277.4

517.0

208.3

2,002.7

 

Segmental operating profit

172.6

51.9

1.4

225.9

 

Central costs

 

 

 

(37.6)

 

Adjusted operating profit

 

 

 

188.3

 

Amortisation of acquired intangibles

 

 

 

(7.0)

 

Acquisition-related items

 

 

 

(2.9)

 

Substantial reorganisation costs

 

 

 

(11.2)

 

Operating profit

 

 

 

167.2

 

Net finance costs

 

 

 

(6.8)

 

Share of profit of joint venture

 

 

 

0.2

 

Profit before tax

 

 

 

160.6

 

 

 

2.  Segmental reporting (continued)


EMEA

Americas

Asia Pacific

Group


£m

£m

£m

£m

Year ended 31 March 2022

 

 

 

 

 

Own-brand / other products and service solutions

 

 

 

 

 

Own-brand products

300.2

4.8

34.0

339.0

 

Other product and service solutions

1,279.3

713.9

221.5

2,214.7

 

Group

1,579.5

718.7

255.5

2,553.7

 


 

 

 

 

 

Sales channel

 

 

 

 

 

Web

781.7

241.8

121.8

1,145.3

 

eProcurement and other digital

344.6

69.8

33.9

448.3

 

Digital

1,126.3

311.6

155.7

1,593.6

 

Offline

453.2

407.1

99.8

960.1

 

Group

1,579.5

718.7

255.5

2,553.7

 






 

Year ended 31 March 2021





Own-brand / other products and service solutions





Own-brand products

248.5

3.6

27.7

279.8

Other product and service solutions

1,028.9

513.4

180.6

1,722.9

Group

1,277.4

517.0

208.3

2,002.7






Sales channel





Web

636.6

142.8

92.5

871.9

 

eProcurement and other digital

295.7

60.4

26.1

382.2

 

Digital

932.3

203.2

118.6

1,254.1

 

Offline

345.1

313.8

89.7

748.6

Group

1,277.4

517.0

208.3

2,002.7

 

3.  Earnings per share


2022

2021


Number

Number

Weighted average number of shares

470,552,792

453,851,022

Dilutive effect of share-based payments

2,669,271

2,069,427

Diluted weighted average number of shares

473,222,063

455,920,449


 


Basic earnings per share

48.9p

27.7p

Diluted earnings per share

48.6p

27.5p

 

4.  Dividends


2022

2021


£m

£m

Final dividend for the year ended 31 March 2021 - 9.8p (2020: nil p)

46.1

-

Additional interim dividend for the year ended 31 March 2020 to replace deferred final
dividend - 9.5p

-

42.6

Interim dividend for the year ended 31 March 2022 - 6.4p (2021: 6.1p)

30.1

28.6


76.2

71.2

A proposed final dividend for the year ended 31 March 2022 of 11.6p is subject to approval by shareholders at the Annual General Meeting on 14 July 2022 and the estimated amount to be paid of £54.6 million has not been included as a liability in these accounts. This will be paid on 22 July 2022 to shareholders on the register on 17 June 2022 with an ex-dividend date of 16 June 2022.

 

5.  Retirement benefit obligations


2022

2021


£m

£m

Fair value of scheme assets

593.3

580.9

Present value of defined benefit obligations

(580.8)

(636.6)

Effect of asset ceiling / onerous liability

(24.9)

-

Retirement benefit net obligations

(12.4)

(55.7)

Amount recognised on the balance sheet - liability

(12.7)

(56.5)

Amount recognised on the balance sheet - asset

0.3

0.8

 

6.  Inventories


2022

2021


£m

£m

Gross inventories

559.2

460.4

Inventory provisions

(29.7)

(40.6)

Net inventories

529.5

419.8

£7.7 million was recognised as an expense relating to the write-down of inventories to net realisable value (2020/21: £21.1 million including £12.7 million related to personal protective equipment (PPE) products bought at the start of the COVID-19 pandemic as a result of their significant decline in selling price).

 

7.  Trade and other receivables


2022

2021


 

restated1


£m

£m

Gross trade receivables

535.8

435.2

Impairment allowance

(9.1)

(7.4)

Net trade receivables

526.7

427.8

Other receivables (including prepayments and accrued income)

67.6

65.8

Trade and other receivables

594.3

493.6

1.  Restated for measurement period adjustments for prior year acquisitions (Note 9).

 

8.  Net debt


2022

2021

 

£m

£m

Cash and short-term deposits

257.9

197.9

Bank overdrafts

(99.5)

(111.5)

Cash and cash equivalents

158.4

86.4

 

 


Non-current private placement loan notes

(151.7)

(147.3)

Non-current interest rate swaps designated as fair value hedges

-

1.1

Current secured bank loans

-

(0.7)

Current interest rate swaps designated as fair value hedges - assets

0.1

-

Current interest rate swaps designated as fair value hedges - liabilities

(0.2)

-

Current lease liabilities

(16.7)

(17.4)

Non-current lease liabilities

(32.0)

(44.1)

Net debt

(42.1)

(122.0)


Borrowings

Lease liabilities

Total liabilities from financing activities

Interest rate swaps

Cash and cash equivalents

Net debt

 

£m

£m

£m

£m

£m

£m

Net debt at 1 April 2020

(169.3)

(56.3)

(225.6)

1.0

34.8

(189.8)

Cash flows

24.3

16.4

40.7

-

63.4

104.1

Acquired with businesses

(16.9)

(6.9)

(23.8)

-

-

(23.8)

Net lease additions

-

(15.2)

(15.2)

-

-

(15.2)

(Loss) / gain in fair value in period

(0.1)

-

(0.1)

0.1

-

-

Translation differences

14.0

0.5

14.5

-

(11.8)

2.7

Net debt at 31 March 2021

(148.0)

(61.5)

(209.5)

1.1

86.4

(122.0)

Cash flows

0.7

17.8

18.5

-

68.1

86.6

Net lease additions

-

(4.7)

(4.7)

-

-

(4.7)

Gain / (loss) in fair value in period

1.2

-

1.2

(1.2)

-

-

Translation differences

(5.6)

(0.3)

(5.9)

-

3.9

(2.0)

Net debt at 31 March 2022

(151.7)

(48.7)

(200.4)

(0.1)

158.4

(42.1)

 

9.  Prior year acquisitions

 

10.  Alternative Performance Measures (APMs)

Adjusted profit measures


Operating costs1

Operating profit

Operating profit margin2

Operating profit conversion3

Profit before tax

Profit for the period

Basic earnings per share

Diluted earnings per share


£m

£m

%

%

£m

£m

p

p

Year ended 31 March 2022

Reported

(819.1)

308.8

12.1%

27.4%

302.2

230.0

48.9p

48.6p

Amortisation of acquired intangibles

11.6

11.6

 

 

11.6

11.5

2.4p

2.4p

Adjusted

(807.5)

320.4

12.5%

28.4%

313.8

241.5

51.3p

51.0p


Year ended 31 March 2021









Reported

(688.8)

167.2

8.3%

19.5%

160.6

125.5

27.7p

27.5p

Amortisation of acquired intangibles

7.0

7.0



7.0

5.6

1.2p

1.2p

Acquisition-related items

2.9

2.9



2.9

2.5

0.5p

0.5p

Substantial reorganisation costs

11.2

11.2



11.2

8.5

1.9p

1.9p

Adjusted

(667.7)

188.3

9.4%

22.0%

181.7

142.1

31.3p

31.1p

(1) Operating costs are distribution and marketing expenses plus administrative expenses.

(2) Operating profit margin is operating profit expressed as a percentage of revenue.

(3) Operating profit conversion is operating profit expressed as a percentage of gross profit.

Acquisition-related items comprise transaction costs directly attributable to the acquisition of businesses and deferred consideration payments relating to the retention of former owners of businesses acquired.

Like-for-like revenue and profit measures

The principal exchange rates applied in preparing the Group accounts and in calculating the following like-for-like measures are:


2022

2022

2021

2021


Average

Closing

Average

Closing

US dollar

1.366

1.313

1.308

1.377

Euro

1.176

1.183

1.121

1.174

 

10.  Alternative Performance Measures (APMs) (continued)

Like-for-like revenue change

 

 



£m

Revenue for 2021

 



2,002.7

Effect of exchange rates

 



(62.7)

Effect of trading days

 



10.5

Revenue for 2021 at 2022 rates and trading days

 



1,950.5

 

 

2022
Group

Less: acquisitions owned
<1 year

2022 base business

2021

2021 at 2022 rates and trading days

Like-for-like change

 

£m

£m

£m

£m

£m

%

EMEA

1,579.5

52.3

1,527.2

1,277.4

1,250.7

22%

Americas

718.7

42.5

676.2

517.0

499.0

36%

Asia Pacific

255.5

-

255.5

208.3

200.8

27%

Revenue

2,553.7

94.8

2,458.9

2,002.7

1,950.5

26%

Gross margin and like-for-like gross margin change

G ross margin is gross profit divided by revenue. Like-for-like change in gross margin is calculated by taking the difference between gross margin for the base business for the current year and gross margin for the prior year with revenue and gross profit converted at the current year's average exchange rates.


2022
Group

Less: acquisitions owned
<1 year

2022 base
business

2021

2021 at 2022 rates

Like-for-like change

 

£m

£m

£m

£m

£m

pts

Revenue

2,553.7

94.8

2,458.9

2,002.7

1,940.0


Gross profit

1,127.9

33.1

1,094.8

856.0

829.6


Gross margin

44.2%

34.9%

44.5%

42.7%

42.8%

1.7 pts

Like-for-like profit change

Like-for-like change in profit is calculated by comparing the base business for the current year with the prior year converted at the current year's average exchange rates.

 

2022 Group

Less: acquisitions owned
<1 year

2022 base business

2021

2021 at 2022 rates

Like-for-like change

 

£m

£m

£m

£m

£m

%

Segmental operating profit

 







EMEA

243.7

4.2

239.5

172.6

164.4

46%


Americas

99.3

1.1

98.2

51.9

49.7

98%


Asia Pacific

29.3

-

29.3

1.4

0.3

>200%

Segmental operating profit

372.3

5.3

367.0

225.9

214.4

71%

Central costs

(51.9)

-

(51.9)

(37.6)

(37.6)

38%

Adjusted operating profit

320.4

5.3

315.1

188.3

176.8

78%

Adjusted profit before tax

313.8

5.1

308.7

181.7

170.3

81%

Adjusted earnings per share

51.3p

0.8p

50.5p

31.3p

29.3p

72%

Adjusted diluted earnings per share

51.0p

0.8p

50.2p

31.1p



 

 

10.  Alternative Performance Measures (APMs) (continued)

Free cash flow, adjusted free cash flow and adjusted operating cash flow conversion


2022

2021

 

£m

£m

Net cash from operating activities

203.0

187.6

Purchase of intangible assets, property, plant and equipment

(42.5)

(54.7)

Free cash flow

160.5

132.9

Add back: impact of substantial reorganisation cash flows

2.4

9.6

Add back: impact of acquisition-related items cash flows

-

2.9

Adjusted free cash flow

162.9

145.4

Add back: income tax paid

57.1

35.2

Add back: net interest paid

7.0

8.3

Adjusted free cash flow before income tax and net interest paid

227.0

188.9

Adjusted operating profit

320.4

188.3

Adjusted operating cash flow conversion

70.8%

100.3%

 

Earnings before interest, tax, depreciation and amortisation (EBITDA) and net debt to adjusted EBITDA


2022

2021

 

£m

£m

Operating profit

308.8

167.2

Add back: depreciation and amortisation

63.7

56.5

EBITDA

372.5

223.7

Add back: acquisition-related items

-

2.9

Add back: substantial reorganisation costs

-

11.2

Adjusted EBITDA

372.5

237.8

Net debt (Note 8)

42.1

122.0

Net debt to adjusted EBITDA

0.1x

0.5x

 

Earnings before interest, tax and amortisation (EBITA) and EBITA to interest


2022

2021

 

£m

£m

Adjusted EBITDA

372.5

237.8

Less: depreciation

(33.5)

(32.5)

EBITA

339.0

205.3

Finance costs

8.1

8.6

Less: finance income

(1.0)

(1.8)

Add back: capitalised interest

0.5

0.9

Interest (per debt covenants)

7.6

7.7

EBITA to interest

44.6x

26.7x

 

10.  Alternative Performance Measures (APMs) (continued)

Return on capital employed (ROCE)


2022

2021

 

£m

£m

Average net assets

982.8

791.0

Add back: average net debt

82.7

127.2

Add back: average retirement benefit net (assets) / obligations

49.3

53.8

Average capital employed

1,114.8

972.0

Adjusted operating profit

320.4

188.3

ROCE

28.7%

19.4%

 

Working capital as a percentage of revenue


2022

2021


 

restated

 

£m

£m

Inventories

529.5

419.8

Current trade and other receivables

594.3

493.6

Current trade and other payables

(584.1)

(475.3)

Working capital

539.7

438.1

Revenue

2,553.7

2,002.7

Working capital as a percentage of revenue

21.1%

21.9%

 

Inventory turn

Inventory turn is cost of sales divided by inventories.


2022

2021

 

£m

£m

Cost of sales

1,425.8

1,146.7

Inventories

529.5

419.8

Inventory turn

2.7

2.7

 

Ratio of capital expenditure to depreciation


2022

2021

 

£m

£m

Depreciation and amortisation

63.7

56.5

Less: amortisation of acquired intangibles

(11.6)

(7.0)

Less: depreciation of right-of-use assets

(17.7)

(17.1)

Adjusted depreciation and amortisation

34.4

32.4

Capital expenditure

45.5

56.2

Ratio of capital expenditure to depreciation

1.3 times

1.7 times

 

 

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