RS Group PLC (EENEF) (H1 2025) Earnings Call Highlights: Navigating Market Challenges with Strategic Progress

• EMEA: Revenue increased by 2%; like-for-like revenue down 3%.
• Americas: Like-for-like revenue fell 3%; strong performance in Mexico.
• Asia Pacific: Like-for-like revenue fell 2%; gross margin improved by 1.2 percentage points.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• RS Group PLC (EENEF, Financial) has stabilized its sales per day despite tougher market conditions.
• The company is making strategic and operational progress, focusing on key areas such as customers, products, suppliers, solutions experience, and operational excellence.
• RS Group PLC (EENEF) continues to gain market share across most product categories.
• The company has delivered strong cash flow conversion with effective working capital management.
• Recent acquisitions, including Distrelec, are on track to cover their cost of capital within three years, demonstrating successful integration and synergy realization.

Negative Points

• Gross margin has declined due to the normalization of inflation benefits and reduced sales volumes.
• The industrial markets remain softer than anticipated, with ongoing geopolitical risks and economic uncertainties affecting customer demand.
• Average order value remains depressed, indicating customers are buying less in depth.
• Operating profit margin reduced by 150 basis points to 9.3%, impacted by reduced sales volumes and cost inflation.
• Short-term trading visibility remains limited, with no expected market growth for the remainder of the year.

Q & A Highlights

Q: Simon, you mentioned seeing more "green days" in your system. Can you elaborate on what this means and whether it's due to better sales intensity or market trends?
A: Simon Pryce, CEO: The "green days" refer to positive trading days, which we've seen more of recently. This isn't due to a fundamental market growth but rather stability in some areas, easier comparators, and our continued market share gains. Investments we've made are also starting to show benefits, although markets remain choppy, and we don't expect market growth for the rest of the year.

Q: Can you discuss the dynamics within gross margin and your expectations for the second half?
A: Kate Ringrose, CFO: The gross margin decline is largely due to the annualization of inflation tailwinds from last year. Changes in inflation rates affect our margins due to inventory turnover timing. We expect these dynamics to continue influencing our margins.

Q: Regarding your US business, how much is exposed to imports, and from where?
A: Simon Pryce, CEO: Most imports into Mexico come from the US, with procurement primarily in dollars. There's minimal impact from Mexico to the US. We are monitoring sanctions and geopolitical issues, but they are not expected to materially impact our US or Mexican operations.

Q: On organic investment, you mentioned being at the lower end of the 35 to 40 million range. What are the priorities for this investment?
A: Kate Ringrose, CFO: The investment focuses on strategic priorities like customer relationship management, digital enhancements, and process improvements across supply chain and back-office functions. We are on track with our planned investments.

Q: Can you provide an update on the progress with the Distri acquisition and its contribution to profits?
A: Kate Ringrose, CFO: Distri contributed 79 million in revenue and 7 million in profit, including integration costs. We are pleased with the integration progress and synergy delivery, which is ahead of plan.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.