RS Group (RS1) is still feeling the effects of a weak industrial backdrop, especially in Europe. Like-for-like revenue fell 2 per cent to £2.9bn, dragged down by the EMEA region, with average order values slightly lower year on year. 

The group, which distributes maintenance, repair and operations products and services, saw an improvement in the second half, particularly in the Americas and Asia Pacific region, including a small increase in like-for-like sales during the fourth quarter. Monthly trends were mixed, however. 

Despite choppy end markets, the company has continued to gain share across most of its technical product categories. Sales from its ‘growth accelerators’, RS PRO and digital procurement tools, rose by 2 and 4 per cent respectively on a like-for-like basis. 

RS Group is highly operationally geared, so margins took a hit. Adjusted operating profit was down 10 per cent to £274mn, with margins slipping by 1 percentage point to 9.4 per cent. Gross margins, meanwhile, held steady at 42.8 per cent as cost inflation eased and pricing held up.

The group delivered £29mn in cost savings over the year, including through job cuts. Over the past two years, total savings have reached £38mn, ahead of plan. The balance sheet is still in good shape, with leverage at 1.1 times Ebitda and 111 per cent cash conversion, helped by tighter working capital controls. 

A recovery in industrial demand is still not in sight, but management said RS is on track to meet its medium-term targets, including revenue growth of twice the market rate and mid-teen adjusted operating margins. Yet at 14.8 times forward earnings, we’d argue the shares look fairly priced. Hold.

Last IC view: Hold, 724p, 07 Nov 2024

RS GROUP (RS1)       ORD PRICE: 580p MARKET VALUE: £ 2.7bn TOUCH: 578.5-580p 12-MONTH HIGH: 850p LOW: 477p DIVIDEND YIELD: 3.9% PE RATIO: 18 NET ASSET VALUE: 286p* NET DEBT: 27% Year to 31 March Turnover (£bn) Pre-tax profit (£mn) Earnings per share (p) Dividend per share (p) 2021 2.00 161 27.7 15.9 2022 2.55 302 48.9 18.0 2023 2.98 372 60.4 20.9 2024 (restated) 2.94 243 37.9 22.0 2025 2.90 206 32.5 22.4 % change -1 -15 -14 +2 Ex-div: 12 Jun Payment: 25 Jul

*Includes intangible assets of £899mn, or 190p a share