RS Group revenue, profits fall amid ongoing industrial weakness

(Sharecast News) - RS Group reported a 10% drop in adjusted profit before tax to £248m for the year ended 31 March on Wednesday, as revenue declined 1% to £2.9bn amid continued weakness in industrial demand. Adjusted operating profit fell 10% to £274m, with margins slipping one percentage point to 9.4%, reflecting cost inflation and organic investment partly offset by efficiency savings.

Statutory profit before tax declined 15% to £206m, while earnings per share fell 14% to 32.5p.

Nevertheless, the company raised its full-year dividend by 2% to 22.4p, underpinned by a 42% increase in adjusted free cash flow to £214m and a stronger balance sheet, with net debt reduced to £364m.

Despite subdued trading, RS highlighted significant strategic progress, including £31m to improve execution and efficiency, £29m in cost savings, and better-than-expected integration benefits from Distrelec and Risoul.

RS PRO and the services and solutions arm posted like-for-like growth of 2% and 6% respectively, although digital revenues slipped 2%.

The company said it remained focused on cost discipline and selective investment as global industrial conditions remain mixed.

It reiterated confidence in achieving medium-term goals, including growing revenue at twice the market rate and lifting operating margins to the mid-teens once purchasing manager indices recover.

"I am extremely grateful for the continuing efforts of our great people - this enabled us to deliver a resilient performance this year, particularly given the challenging macroeconomic backdrop," said chief executive officer Simon Pryce.

"RS is now executing more effectively, performing as it should and taking market share.

"We are delivering restructuring and integration benefits, improving efficiency and managing costs appropriately whilst continuing to invest in our people, customers, product, experience, infrastructure and technology."

Pryce said that was strengthening the value proposition for all stakeholders.

"We are focusing on what we can control in markets that remain challenging, and we will continue to be agile in our execution and cost management whilst investing selectively for the future.

"We have a solid pipeline of acquisition opportunities to accelerate our strategy, supported by our strong balance sheet, and will remain value disciplined."

RS was making "significant" underlying progress, Simon Pryce added.

"This gives us increased confidence in our ability to deliver our medium-term financial targets through accelerated growth and much improved operating leverage once markets recover."

At 0916 BST, shares in RS Group were up 0.25% at 603.5p.

Reporting by Josh White for Sharecast.com.