GICS Sector : Industrials
RS Group plc, together with its subsidiaries, distributes various electronics and industrial products in the United Kingdom, the United States, France, Germany, Italy, and internationally.The company provides industrial interconnect and test, industrial automation and control, board-level electronics, and single-board computing products; and tools, consumables, and facilities maintenance products, such as personal protective equipment, site safety products, and 3D printing products.It operates DesignSpark, an online design community and resource center for makers, students, and design engineers.
RS Group delivered a stable revenue performance in the first half, with a marginal growth in Q2, despite challenging geopolitical environments and uncertain markets. Revenue decreased by 3% compared to last year on a reported basis and 1% on a like-for-like basis. The adjusted profit and earnings measures decreased due to lower revenue and increased investment, with a single-digit reduction despite a higher gross margin. EPS came in at 0.176, slightly below estimates of 0.18. Gross margin expanded, and the company reported a strong cash flow conversion of 107%.
Publication Date: Nov -13
The regional performance was mixed, with EMEA delivering a resilient revenue performance, Americas growing by 1% on a like-for-like basis, and Asia Pacific seeing positive momentum with revenue up 4% on a like-for-like basis. The company's growth accelerators, including digital revenue and e-procurement solutions, showed resilient performance, with RS PRO growing sales by 4%. As Simon Pryce noted, "Our data shows we're outperforming, delivering financial outcomes in line with expectations, and investing in strategic initiatives that are already beginning to deliver."
With a P/E Ratio of 17.62 and an EV/EBITDA of 10.14, the market appears to be pricing in a moderate growth outlook. The Dividend Yield of 3.9% and Free Cash Flow Yield of 9.03% suggest an attractive return profile. The company's guidance for the full year remains consistent with previous expectations, with a gross margin expected to be slightly above 43%. The outlook for revenue growth is stable, with analysts estimating a 0.4% growth next year.
The company has made significant progress in repositioning RS to drive better growth, improve efficiency, and deliver better operating leverage. The investment in digital experience has driven a 2% improvement in Add to Cart rate and a 5% improvement in basket to order conversion. The RS PRO brand has seen a good performance, although it still needs to build recognition in America. The company's focus on customer targeting and personalized experiences has led to higher win rates and bigger deal sizes.
The company has achieved sustainable restructuring and integration savings of over GBP 47 million over the last 2 years and is on track to deliver at least an additional 150 basis points of margin over the next few years. The delivery to promise investment is allowing the company to optimize product flows through its distribution network, reducing the number of times it handles a product by over 12% in the first half.
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RS Group plc's Motor Vehicles and Related Accessories segment growth of 2.5% is driven by increasing demand for electric vehicles, government incentives for eco-friendly transportation, and rising disposable income in emerging markets. Additionally, the segment benefits from the company's strategic partnerships with automotive manufacturers and its focus on innovative product development.
RS Group plc's Recycled Metals segment growth of 2.8% is driven by increasing demand for sustainable and environmentally-friendly products, government regulations promoting recycling, and rising scrap metal prices. Additionally, the company's strategic expansion into emerging markets and investments in recycling technologies have contributed to the growth.
RS Group plc's 4.2% growth in Property Investment is driven by increasing demand for industrial and logistics spaces, strategic acquisitions, and expansion into high-growth markets. Additionally, the company's focus on sustainable and energy-efficient properties, as well as its strong relationships with blue-chip tenants, contribute to its growth momentum.
RS Group plc's Hotel and Related Business segment growth of 3.5% is driven by increasing demand for travel and tourism, expansion into new markets, strategic partnerships, and investments in digital platforms to enhance customer experience. Additionally, the segment benefits from a strong brand reputation, efficient operations, and a focus on sustainability, contributing to its steady growth.
RS Group plc's 3.8% growth in Financial Services is driven by increasing demand for digital payment solutions, expansion into emerging markets, and strategic partnerships. Additionally, the company's focus on innovation, cost savings initiatives, and effective risk management have contributed to its growth momentum.
RS Group plc offers a wide range of electronic components, including semiconductors, passives, electromechanical, and interconnect products.
The company provides automation and control solutions, including industrial control systems, robotics, and machine vision products.
RS Group plc offers test and measurement equipment, including oscilloscopes, signal generators, and logic analyzers.
The company provides connectivity and networking solutions, including cables, connectors, and networking equipment.
RS Group plc offers power and thermal management solutions, including power supplies, batteries, and thermal management products.
The company provides mechanical and panel components, including switches, sensors, and enclosures.
RS Group plc offers tools and consumables, including hand tools, power tools, and consumable materials.
RS Group plc faces moderate threat from substitutes as customers have limited alternatives for its electronic components and services.
RS Group plc has a diverse customer base, which reduces the bargaining power of individual customers, and the company's products are often critical to customers' operations, making it difficult for them to negotiate prices.
RS Group plc has a moderate level of bargaining power over its suppliers, as it is a significant customer for many of them, but suppliers also have some bargaining power due to the specialized nature of some components.
The threat of new entrants is low for RS Group plc due to the high barriers to entry in the electronic components industry, including the need for significant capital investment and specialized expertise.
The electronic components industry is highly competitive, with many established players, and RS Group plc faces intense rivalry from companies such as Avnet, Arrow Electronics, and Premier Farnell.
| Value | |
|---|---|
| Debt Weight | 30.18% |
| Debt Cost | 6.47% |
| Equity Weight | 69.82% |
| Equity Cost | 8.35% |
| WACC | 7.78% |
| Leverage | 43.22% |
Value: 6.9
Growth: 4.1
Quality: 5.2
Yield: 6.9
Momentum: 3.0
Volatility: 7.7
1-Year Total Return ->
Value: 0.2
Growth: 7.8
Quality: 6.7
Yield: 2.5
Momentum: 8.0
Volatility: 6.0
1-Year Total Return ->
Value: 5.6
Growth: 5.1
Quality: 6.1
Yield: 5.6
Momentum: 1.0
Volatility: 6.7
1-Year Total Return ->
Value: 0.9
Growth: 8.2
Quality: 6.4
Yield: 1.2
Momentum: 5.0
Volatility: 5.7
1-Year Total Return ->
Value: 1.8
Growth: 7.4
Quality: 6.2
Yield: 1.2
Momentum: 1.5
Volatility: 6.0
1-Year Total Return ->
Value: 2.2
Growth: 3.1
Quality: 3.7
Yield: 3.1
Momentum: 3.0
Volatility: 4.0
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