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TOP NEWS: RS says demand remains subdued as annual profit slides

22nd May 2024 09:44

(Alliance News) - RS Group PLC on Wednesday flagged higher costs ahead, and a dilution to margins, as it said weakness in global industrial production had weighed on its performance in the last financial year.

Shares in RS fell 4.3% to 772.00 pence in London on Wednesday. The wider FTSE 100 was down 0.3%.

In the financial year ending March 31, RS said pretax profit fell 33% to GBP248.8 million from GBP371.5 million a year prior. Earnings per diluted share fell 36% to 38.7 pence from 60.2p.

The London-based distributor of industrial and electrical products said revenue fell to GBP2.94 billion from GBP2.98 billion.

Chief Executive Simon Pryce said: "Our financial performance in 2023/24 reflected weakness in global industrial production and the unwinding of unusual post-pandemic trading tailwinds."

RS said demand is "stabilising, but remains subdued, with limited short-term visibility."

The company said it was "focusing on improving our operating efficiency and leverage and investing where we can accelerate our growth."

But it warned during this period of investment, "we expect some

short-term dilution to our operating profit margin."

This reflected a partial resumption of its employee annual incentive, ongoing cost inflation, annualisation of Distrelec costs and an additional GBP15 million of organic investment also announced Wednesday.

In April 2023, RS acquired the Dutch industrial products distributor Distrelec BV for EUR365 million.

RS said it was accelerating its initial integration plans at Distrelec with expected cost savings already exceeding those anticipated when it made the initial acquisition.

In total, RS expects GBP22 million of cost savings across the business in the current financial year, after delivering GBP9 million in the year just ended.

Looking ahead to financial 2025 and 2026, RS anticipates organic investment to continue at elevated levels as it supports efficiency improvement initiatives.

RS increased the total dividend by 5.3% to 22.0p from 20.9p a year prior.

By Jeremy Cutler, Alliance News reporter

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