OVERALL RESULTS

1.         See Note 13 for definitions and reconciliations of all alternative performance measures, including like-for-like change and adjusted measures.

2.         See Note 2 for disaggregation of revenue analysis and reconciliations.

Revenue

Group revenue decreased by 1% to £1,447 million. Like-for-like revenue declined 8% after adjusting for the £142 million gain from acquisitions, £21 million from adverse exchange rate movements and a negative impact of £13 million from fewer trading days. As anticipated, the transition of our single-board computing range away from Raspberry Pi accounted for 1% of the Group like-for-like revenue decline. Our strong product availability when global supply chains were constrained provided a trading benefit in H1 2022/23. We estimate the reversal of this benefit contributed c. 5% of the revenue decline in this half year, as the global supply chain issues eased and our customers reduced their higher inventory levels.

Our industrial product and service solutions ranges, which account for 80% of Group revenue, declined by 2%
like-for-like during the first half with growth across all ranges apart from A&C (43% of Group revenue) where performance is most correlated towards the electronics cycle. The macroeconomic environment remains challenging illustrated by the PMI and industrial production figures which have deteriorated across our main markets.

Our electronics product and service solutions range accounts for 19% of Group revenue and is predominantly supplied to our industrial customers as they become more digitalised and better connected. Supply constraints have continued to ease and demand soften, especially for passives and semiconductor components. As a result, our like-for-like electronics revenue declined by 24%.

RS PRO, which is our main own-brand product range and accounts for 13% of Group revenue, grew by 5% on a
like-for-like basis, due to extending its product breadth and the end-to-end sales and marketing focus in the regions. Our competitively priced offer continues to gain traction as a quality but non-competing alternative to main branded ranges as we demonstrate quality and value through our quality assurance qualifications and design and test facilities.

Digital, accounting for 60% of Group revenue (65% of Group like-for-like revenue but diluted by Risoul's current offline model), performed ahead of the Group overall with a like-for-like revenue decline of 5%. Web revenue decreased by 8% on a like-for-like basis, while eProcurement and other digital, which are used predominantly by our larger customers, grew by 2% on a like-for-like basis.

In the first half, service solutions revenue accounted for 23% of our Group revenue and increased by 5% to £337 million, 4% like-for-like, with our digital solutions offer being one of the strongest areas.

Gross margin

Group gross margin decreased 1.8 percentage points to 43.7%, of which 1.4 percentage points was a function of the dilutive impact from our recent acquisitions due to their lower digital participation compared to the rest of the Group. Last year's gross margin benefit from our cost of sales inflation lagging price inflation, especially within electronics products, due to our low inventory turn has begun to unwind. Like-for-like gross margin decreased 0.4 percentage points, better than anticipated, reflecting our focus on gross margin optimisation through direct procurement initiatives, commercial discipline, tighter discount policies and expanding our own-brand ranges. We expect our gross margin dilution in the second half to be more than in the first half due to lower price inflation and full dilutive effect of acquisitions.

Operating costs

Operating costs, which include regional and central costs, increased by 4% mainly due to the acquisitions made in the past 12 months. Excluding the impact of acquisitions, the benefit of currency movements, amortisation and impairment of acquired intangibles and acquisition-related items, adjusted operating costs reduced by 4% like-for-like with lower variable costs more than offsetting cost inflation specifically within labour and energy. We have also taken action to manage our operating costs more effectively, part of which is accelerating the integration of Distrelec. We estimate that these actions will deliver over £30 million of annualised savings of which £10 million will be realised this year and most of the remainder in 2024/25. The costs of delivering these savings are estimated to be some £15 million of which £4 million has been incurred in the first half with the remainder in the second half.  

A large proportion of our operating costs relate to our people. We awarded a mid-single digit pay increase across the Group which included a higher than average increase for our non-management employees in most markets in recognition of the greater impact of inflationary pressures. As sales volumes have reduced, we have flexed our variable people costs and additional actions in specific areas, with people costs slightly down excluding the impact of acquisitions. Our employee voluntary annual turnover rate remains low at 8.2%.

We continue to invest to ensure we are developing our strategic growth drivers, strengthening our digital and commercial capabilities, technology platform, product and service solutions capacity and improving our operating basics. This means we will be well-positioned to benefit when economic conditions improve. We are monitoring our investment spend closely and implementing greater oversight around execution, progress and delivery.

We are seeing a continued benefit from the expansion and ongoing optimisation of our DC in Bad Hersfeld, Germany, which allows us to route more inventory directly into Europe, and not through our UK DCs, so reducing the additional border costs relating to Brexit and improves our environmental footprint. Against this, lower volumes in our DCs overall have reduced our operational efficiencies. We remain focused on optimising our network of DCs to minimise freight costs and miles and are improving our operating structure to drive greater operational focus and ownership so that we can simplify our cost base further.

Central costs (Group strategic investment, Board, Group Finance and Group Professional Services and People costs that cannot be attributed to region-specific activity) decreased by £6 million to £31 million, largely reflecting foreign exchange and lower share-based payments. We will focus on tighter cost management going forward.

Adjusted operating costs as a percentage of revenue increased by 0.9 percentage points to 33.0%, while adjusted operating profit conversion is 5.0 percentage points lower at 24.6%.

Items excluded from adjusted profit

To improve the comparability of information between reporting periods and between businesses with similar assets that were internally generated, we exclude certain items from adjusted profit measures. The items excluded are described below (see Note 13 for definitions and reconciliations of adjusted measures).

Amortisation and impairment of acquired intangibles

Amortisation of acquired intangibles was £13 million (H1 2022/23 amortisation and impairment of acquired intangibles: £9 million) and relates to the intangible assets arising from acquisitions.

Acquisition-related items

Acquisition-related items of £4 million mainly relate to transaction costs incurred in the first half which are directly attributable to the acquisition of Distrelec.

Operating profit

Operating profit decreased by 26% to £139 million. Excluding the impact of acquisitions and the adverse impact of currency movements, adjusted operating profit saw a like-for-like decrease of 24%. We estimate the reversal of the one-off trading benefit in H1 2022/23 contributed c. 13% of the decrease in this half year. Adjusted operating profit margin declined by 2.6 percentage points to 10.8%.

Non-financial key performance indicators (KPIs)

We have eight non-financial KPIs to help measure progress against our strategy and the commitments of our 2030 ESG action plan - For a Better World. To provide greater transparency on our performance in the period, a summary of our progress is included below with further details available in the ESG section on our website: www.rsgroup.com/esg.   

1.         Revenue and environmental-related performance of businesses acquired in 2022/23 and 2023/24 are not included pending finalisation and confirmation of their reports, which we are aiming to publish in our Annual Report and Accounts for the year ending 31 March 2024 (Annual Report 2024).

2.         KPI is on a constant exchange rate basis and updated to reflect changes in reporting methodology and emissions factors.

3.         Scope 2 emissions calculated with electricity purchased from renewable sources at zero CO₂e per kWh and grid average CO₂e per kWh for all other sources.

4.         We are in the process of compiling the results from our October 2023 engagement survey and the results will be published in our Annual Report 2024.

REGIONAL PERFORMANCE

EMEA

1.         Like-for-like adjusted for currency and to exclude the impact of acquisitions; revenue also adjusted for trading days.

2.         See Note 2 for reconciliation to Group operating profit.

3.         See Note 2 for disaggregation of revenue analysis and reconciliations to region's revenue.

EMEA revenue increased 1% with like-for-like revenue declining 4% as some of our product markets contracted and recession affected some countries. PMI data in all countries has worsened during the period, with specific weakness in our A&C industrial category where some parts of our range are closely aligned to more cyclical electronics components. The electronics market has continued to deteriorate and is affecting those countries with the most exposure. In the comparative period we benefited from our strong inventory availability which temporarily increased our volumes, particularly with one-off transactional customers. We have maintained share with our target customers but have seen some smaller, lower value and transitory customers revert to their usual distribution channels.

UK and Ireland, which accounts for 40% of the region's revenue, delivered low single-digit revenue growth resulting from a focus on higher-value corporate customers and less exposure to electronics products. A more targeted customer focus, coordinated marketing campaigns, effective pricing and understanding our cost to serve has supported revenue and profit growth.

France grew in the first half as we continued to focus on our long-term high-value customers. We are working in partnership with our strategic suppliers to develop effective commercial and marketing activities, especially in our core product categories, providing technical product support using both our sales teams and digital channels.

Germany suffered due to the weakening economy and slowdown in production output. Germany has the greatest exposure to electronics products in Europe, leading to a material fall in demand for on-board products. We are continuing to expand the product range stocked in the market at our enlarged DC, pivoting our offer towards growth sectors to ensure preparedness to exploit our position when the market recovers. Additionally, this is reducing fulfilment costs and improving service to customers.

Digital, accounting for 74% of the region's revenue, was supported by growth from our target customers using eProcurement and purchasing manager channels. We continue to focus on generating recurring revenue and customer loyalty with our target customers through providing digital procurement solutions. Web revenue is most impacted by lower demand from transitory customers as the supply chain constraints have eased.

Service solutions growth, which accounts for 29% of EMEA's revenue, benefited from greater participation of our digital solutions offer of eProcurement and purchasing manager as we migrate higher-value customers from the web. RS Integrated Supply in EMEA continues to win new contracts, although the operational investment of their rollout continues to impact financial performance and depress profitability. We are improving our commercial model, which, together with cross-selling opportunities, will enhance our financial results going forward.

RS PRO, which accounts for 20% of the region's revenue, increased its share as we continue to expand the range of products, using quarterly marketing launches, to provide customers with a high quality and lower price point alternative.

Distrelec contributed £45 million to revenue and £3 million to EMEA's operating profit since its acquisition on 30 June 2023. Detailed plans have been developed for accelerating the integration of key markets. In the first three months of ownership trading has been below original expectations given Distrelec's German and electronics exposure; albeit performance has been in line with trading seen in our similar businesses. We remain confident in the delivery of the anticipated cost savings and synergy benefits from cross selling opportunities; Distrelec has already started to sell RS PRO products.

EMEA's operating profit margin was impacted by the effect of the acquisition of Distrelec and integration costs. Excluding this, like-for-like operating profit margin increased due to gross margin benefiting from the quick pass through of product cost inflation against a lower average cost of inventory and tight operating cost control.

EMEA's rolling 12-month NPS was 50.8, 6% above H1 2022/23. We have continued to improve inventory availability as lead times reduce, while inventory investments in our expanded DC in Germany and our new warehouse in Spain have also improved service levels to customers.

Americas

1.         Like-for-like adjusted for currency and to exclude the impact of acquisitions; revenue also adjusted for trading days.

2.         See Note 2 for reconciliation to Group operating profit.

3.         See Note 2 for disaggregation of revenue analysis and reconciliations to region's revenue.

Revenue increased by 3% due to the acquisition of Risoul in January 2023. Excluding Risoul, exchange rate movements and the impact of trading days, revenue declined 14% like-for-like against very strong comparatives in H1 2022/23 when we benefited from strong inventory availability when market supply was constrained, delivering trading and pricing gains, especially within electronics and associated product ranges.

Volumes during the period fell reflecting the declining market, especially in A&C which trades more in line with the electronics cycle. This particularly impacted Americas as A&C accounted for 70% of the region's revenue versus 43% across the Group. Also, customers had less of a requirement to hold inventory as supply chain constraints eased. Demand from more transitory customers, who purchased from us when their typical channels did not have supply, has reduced and we saw greater pricing competition within the market particularly in the electronics product range.

We have made significant changes in our sales proposition as we develop more strategic customer relationships. This has focused on targeting high-growth vertical markets, generating more targeted product campaigns and improving our digital proposition and service offer, all of which are resulting in greater customer engagement and marketing returns.

Our digital like-for-like revenue decline slightly outperformed the region's revenue decline as we moved some of our large customers onto our eProcurement platforms.

While less mature than in EMEA, we have been developing our digitally led service solutions offer in Americas. Growth has been driven by developing our eProcurement offer and more customised order and project consultancy services. RS Integrated Supply in Americas has seen several changes as we have focused on profitable accounts and put in place processes that will allow the business to scale more quickly and efficiently. We have signed several new contracts with multinational customers and are focusing on driving cross-selling opportunities with RS PRO.

RS PRO continues to account for under 1% of the region's revenue but we expect to benefit from our rebranding to RS Americas and tailoring the product offering to be more appropriate for the region's customers.

Risoul contributed £95 million to revenue and £8 million to Americas' operating profit in the first half. Revenue performance is stronger than anticipated helped by strong inventory availability despite ongoing supply chain issues. 

Operating profit and operating profit margin fell due to the volume decline and as last year's gross margin gains from price inflation benefits unwound. During the period we took action to adjust our cost base to the reduced volumes, namely within our headcount, which led to short-term operating costs with benefits second-half weighted. We have also invested in training, tools and technology for our customer-facing teams and continue to adjust our operating model to serve our customers better while lowering overall cost. Additionally, we continued to invest in marketing and other strategic initiatives focused on customer growth, digital and technology advances and our service solutions offering.

Americas' rolling twelve-month NPS was 64.4, a 4% decline from 67.0 in H1 2022/23, reflecting some market pricing pressures and the twelve-month metric includes the temporary effect of the brand change which took place in February 2023. Our focus remains on delivering a strong customer experience and mitigating the external industry issues we are facing.

Asia Pacific

1.         Like-for-like adjusted for currency and to exclude the impact of acquisitions; revenue also adjusted for trading days.

2.         See Note 2 for reconciliation to Group operating profit.

3.         See Note 2 for disaggregation of revenue analysis and reconciliations to region's revenue.

Asia Pacific's revenue decline was against a period of exceptionally strong growth in H1 2022/23 with performance negatively impacted by a sharp slowdown and then contraction in the electronics market and the unwinding of supply constraints. The global economic slowdown was across the whole region, although we have seen particularly difficult trading in China given less external investment as industrial production has moved outside the country.

As with many distribution businesses, a certain level of revenue is required to offset the underlying cost base making operating profit very sensitive to changes in revenue. The rapid reduction in revenue at a time of growth investment has had an impact on our operating profit margin.

Australia and New Zealand, accounting for 33% of the region's revenue, maintained like-for-like revenue growth, benefiting from stronger performance in large industrial customers and less exposure to the electronics sector. Our success with large corporate customers has provided a blueprint to scale across the rest of the region.

Greater China, which represents 24% of the region's revenue, was heavily impacted by the ongoing geopolitical uncertainty and greater exposure to the electronics sector. The economic recovery after the COVID-19 lockdowns has been much slower than expected.

South East Asia revenue represents 31% of the region's revenue and saw like-for-like revenue decline with softer demand for electronics products, stagnant manufacturing segment growth and political instability specifically in Thailand. We have invested in expanding our local inventory capacity including upgrading our warehouse in Thailand and opening new local warehouses in Malaysia and Philippines in the first half which will support revenue growth and improve lead times once the market starts to recover.

Japan and Korea saw the steepest revenue decline due to its high exposure to the electronics market and weaker industrial performance following strong growth in H1 2022/23. We have seen customer destocking in Japan as inventory held as a buffer when supply chains were constrained has unwound.

Digital like-for-like revenue decline was due to weaker market demand and lower search engine optimisation performance with reduced traffic and conversion rates; a function of supply chain normalisation within the market and the more transitory customers reverting to previous suppliers.

Like-for-like revenue decline in RS PRO outperformed the region. This was supported by an improved go-to-market strategy with specific product marketing campaigns to targeted customers. We have launched RS PRO focused product ranges to capture high value opportunities with target customers.

Operating profit margin was impacted by the reversal of the inventory benefits in H1 2022/23, resulting in significant volume reduction, and a weaker gross margin as supply chain constraints eased and competitive pressures increased. The new warehouses opened in South East Asia are operated by third party logistic providers, with the associated cost being an operating, rather than capital, expenditure. We have made some adjustments to our cost base to reflect lower volumes, including adapting our labour requirements, which will start to deliver financial benefits by the end of the second half.

Asia Pacific's rolling twelve-month NPS was 20.2, versus 17.1 in H1 2022/23. Our focus remains on delivering a strong customer experience and mitigating the external industry issues we are facing.

FINANCIAL REVIEW

Net finance costs

Net finance costs were £13 million, up from £5 million mainly due to the impact of increased net debt resulting from the acquisition of Distrelec and Risoul and higher interest rates. At 30 September 2023, 20% of the Group's gross borrowings excluding lease liabilities (H1 2022/23: 30%; 2022/23: 49%) was at fixed rates, with surplus cash deposited at variable rates. Going forward we expect the full year 2023/2024 net finance costs to be c. £30 million based on current interest rates.

Profit before tax

Profit before tax declined 31% to £126 million. Adjusted profit before tax was down 25% to £143 million, 29% on a like-for-like basis.

Taxation

The Group's income tax charge was £34 million (H1 2022/23: £41 million). The adjusted income tax charge, which excludes the impact of tax relief on items excluded from adjusted profit before tax, was £38 million (H1 2022/23: £43 million), resulting in an effective tax rate of 26.2% on adjusted profit before tax (H1 2022/23: 22.5%).

The main driver for the increase in the rate was the change in the UK corporate income tax rate from 19% to 25% effective from 1 April 2023. Going forward we expect the full year 2023/2024 effective tax rate on adjusted profit before tax to be c. 26%.

Earnings per share

Earnings per share declined by 35% to 19.5p. Adjusting for items excluded from adjusted profit and associated income tax effects, adjusted earnings per share of 22.3p declined 32% on a like-for-like basis.

Cash flow

1.         See Note 13 for definitions and reconciliations of all alternative performance measures.

Lower EBITDA (earnings before interest, tax, depreciation and amortisation) was compounded by the receipt of inventory from suppliers that had either been on order for a long time or was received quicker than expected due to the easing of global supply chain issues. As a result, cash generated from operations was £104 million (H1 2022/23: £182 million) causing adjusted operating cash flow conversion to fall by 27.5 percentage points to 54.3%.

Net capital expenditure increased from £22 million to £25 million as we continued to invest in optimising our DCs, implementing new product management systems, augmenting digital commerce capabilities and strengthening our technology platforms.

Capital expenditure was at 1.2 times depreciation (H1 2022/23: 1.0 times), in line with our typical maintenance capital expenditure levels of 1.0 - 1.5 times depreciation. We anticipate capital expenditure in 2023/24 to be c. £50 million including planned spend to deliver our 2030 ESG action plan such as decarbonising our DC in Beauvais, France.

Net interest paid increased by £9 million to £13 million due to increased net debt resulting from the acquisition of Distrelec and Risoul and higher interest rates.

Income tax paid rose to £46 million reflecting additional payments made in respect of the previous year and advance tax payments based on early estimates of higher results.

Adjusted free cash flow fell to £26 million. We remain committed to conserving cash while ensuring we continue to invest in our business to enable a swift recovery when the economic conditions improve.

Working capital

Working capital as a percentage of revenue increased by 3.5 percentage points year on year to 26.3%, with half of the increase due to the impact of the acquisitions.

Trade and other receivables have decreased by £4 million since the year end to £688 million, with the acquisition of Distrelec increasing receivables by £27 million. The collection of receivables is our greatest short-term liquidity sensitivity and we continue to limit our exposure through tight credit policies, proactive monitoring and collections.

Gross inventories were £799 million, an increase of £139 million since the year end with the acquisition of Distrelec accounting for £74 million. Our inventory levels have increased due to the easing of global supply chain issues resulting in the improvement in performance of suppliers fulfilling new orders and the receipt of inventory previously on long lead times. As a result, our inventory turn has decreased to 2.3 times from 2.6 times at March. We expect to benefit during the second half from actions to reduce inventory levels in response to declining volumes. Inventory provisions have increased by £35 million to £79 million since the year end, £23 million due to the acquisition of Distrelec as expected and the balance due to the continued sales slowdown pushing inventory into excess, particularly of electronics products where minimum order quantities are high.

Overall trade and other payables decreased to £625 million from £659 million at March with the acquisition of Distrelec increasing payables by £35 million. The overall reduction reflects the slowdown in the business and the timing of payments for inventories.

Looking forward we continue to manage our working capital position actively and optimising cash conversion is a key area of focus. We remain focused on receivables collection. We will continue to seek to manage our inventory levels to take account of changing demand dynamics and supply chain behaviour, while anticipating our customers' expectations. We will continue to invest in the right inventory to ensure that we remain well positioned to maintain service levels and deliver strong growth as the markets recover. We pay our suppliers to terms and continue to work with some of our larger suppliers to improve terms where possible.

Net debt

Our net debt has increased to £502 million from £113 million at March (see Note 8) with the acquisition of Distrelec increasing net debt by £333 million.

The acquisition was funded by a new three-year term loan of ?150 million and drawing down part of our £400 million sustainability-linked loan (SLL) facility. The SLL, term loan and the private placement loan notes form our committed debt facilities of £691 million, of which £168 million was undrawn at 30 September 2023. In October 2023, our request to take up one of the one-year term extensions to the SLL was approved by the lenders and so this facility now matures in October 2028, with a further one-year extension option remaining.

The Group's financial metrics remain strong, with net debt to adjusted EBITDA of 1.2x and EBITA to interest of 18.8x, leaving significant headroom for the Group's banking covenants of net debt to adjusted EBITDA less than 3.25 times and EBITA to interest greater than 3 times.

Return on Capital Employed (ROCE)

ROCE is the adjusted operating profit for the 12 months ended 30 September 2023 expressed as a percentage of the monthly average capital employed (net assets excluding net debt and retirement benefit obligations). ROCE was 23.3% compared to 31.4% at 30 September 2022, due to the impact of acquisitions in the last twelve months (2.0 percentage points), the decline in adjusted operating profit (3.8 percentage points) and the increase in monthly average capital employed (2.3 percentage points).

Retirement benefit obligations

Overall, the retirement benefit net obligations of the Group's defined benefit schemes at 30 September 2023 were £31 million compared to £36 million at 31 March 2023 and £41 million at 30 September 2022. The UK defined benefit scheme (our largest scheme) had a net obligation of £21 million under International Accounting Standard 19 'Employee Benefits', being the present value of the agreed future deficit contributions agreed following the March 2022 triennial funding valuation and payable to September 2025.

Dividend

The Board intends to continue to pursue a progressive dividend policy while remaining committed to a healthy dividend cover over time by driving improved results and stronger cash flow.

In the normal course, the interim dividend is equivalent to approximately 40% of the prior year full-year dividend. As such, the Board proposes an interim dividend of 8.3p per share. This will be paid on 5 January 2024 to shareholders on the register on 24 November 2023.

Foreign exchange risk

The Group does not hedge translation exposure on the income statements of overseas subsidiaries. Based on the mix of non-sterling denominated revenue and adjusted operating profit, a one cent movement in the euro would impact annual adjusted profit before tax by £2.1 million and a one cent movement in the US dollar would impact annual adjusted profit before tax by £1.2 million.

The Group is also exposed to foreign currency transactional risk because most operating companies have some level of payables in currencies other than their functional currency. Some operating companies also have receivables in currencies other than their functional currency. Group Treasury maintains three to seven months hedging against freely tradable currencies to smooth the impact of fluctuations in currency. The Group's largest exposures related to euros and US dollars.

RISKS AND UNCERTAINTIES

The Board has overall accountability for the Group's risk management, which is managed by the Executive Committee and co-ordinated by the Group's risk team. The principal elements of the process are: the identifying of risks, their assessment, their mitigation and then the ongoing monitoring of these risks.

The Group has a defined risk appetite, which has been adopted by the Board, and is considered across three risk categories: strategic, operational and regulatory / compliance. These three categories use both quantitative and qualitative criteria.

Principal risks and uncertainties

The principal risks and mitigations disclosed in the 2023 Annual Report and Accounts (pages 40 to 47) were:

1.     Talent and people resources

2.     Change in customer, supplier or competitor behaviours

3.     Geopolitical environment

4.     Delivery of strategy: The RS Way

5.     M&A activity

6.     Organisational resilience

7.     Cyber security breach / information loss

8.     Future global pandemics

9.     Macroeconomic environment

10.  Climate change

11.  Legal and regulatory compliance

These risks have not changed since they were reported in the 2023 Annual Report and Accounts.

GOING CONCERN

Overview

In adopting the going concern basis for preparing these condensed Group accounts, the Board has considered the Group's future trading prospects; the Group's available liquidity, the maturity of its debt facilities and obligations under its debt covenants; and the Group's principal risks as summarised above.

As described in more detail in the Viability Statement in the 2023 Annual Report and Accounts, our business model is structured so that the Group has a global network of DCs; a talented and customer-centric team; strong supplier relationships; a broad and deep product offering and service solutions capabilities; and a strong digital presence. We are not reliant on one particular group of customers or suppliers and have a very broad spread of customers both in terms of industry sector and geography.

Financial position, liquidity and debt covenants

Our capital position is supported by regular reviews of the Group's funding facilities and debt covenants' headroom, through the Board's Treasury Committee.

The Group's net debt at 30 September 2023 was £502 million (31 March 2023: £113 million). Our committed debt facilities were £691 million, of which £168 million were undrawn (see the net debt section in the Financial Review for more details of our committed facilities). The earliest facility expiring is our £130 million (?150 million) term loan in April 2026.

The Group's debt covenants are EBITA to interest to be greater than 3 times and net debt to adjusted EBITDA to be less than 3.25 times, which are measured on a rolling 12-month basis at half year and year end. At 30 September 2023 EBITA to interest was 18.8x (31 March 2023: 34.2x) and net debt to adjusted EBITDA was 1.2x (31 March 2023: 0.2x) (see Note 13 for reconciliations).

Financial modelling

We frequently update our rolling 18-month forecast and this is reviewed regularly, and the assumptions approved, by the Board.

We have undertaken reverse stress tests on the latest forecast to assess the circumstances that would threaten the Group's current financing arrangements. These included significant declines in like-for-like revenue, significant declines in revenue and gross margin and a major deterioration in cash collection and each would have to result in adjusted operating profit margin falling to under 3% in at least one of the following five quarters. Also, a reverse stress test of an acquisition of a significantly loss-making business was undertaken and would have to cost over £250 million to use up our debt facilities. All these reverse stress tests assumed no mitigations, capital expenditure and dividends are unchanged from those forecast and there are no changes in debt financing. The Board considers the risk of these circumstances occurring to be remote.

Going concern basis

Based on the assessment outlined above, the Board has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the going concern period of at least 12 months from 6 November 2023. Therefore, the Board believes that it is appropriate to continue to adopt the going concern basis in preparing these condensed Group accounts.

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEAR FINANCIAL REPORT

The Directors confirm that these condensed Group accounts have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as contained in UK-adopted International Financial Reporting Standards and that the interim management report includes a fair review of the information required by Disclosure and Transparency Rules (DTR) 4.2.7 and DTR 4.2.8, namely:

·       An indication of important events that have occurred during the first six months and their impact on the condensed set of accounts, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·       Material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

A list of current Directors of RS Group plc is maintained on the RS Group plc website: www.rsgroup.com.

Kate Ringrose, Chief Financial Officer
6 November 2023

Forward-looking statements

This financial report contains certain statements, statistics and projections that are or may be forward-looking. The accuracy and completeness of all such statements, including, without limitation, statements regarding the future financial position, strategy, projected costs, plans and objectives for the management of future operations of RS Group plc and its subsidiaries is not warranted or guaranteed. These statements typically contain words such as "intends", "expects", "anticipates", "estimates" and words of similar import. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Although RS Group plc believes that the expectations reflected in such statements are reasonable, no assurance can be given that such expectations will prove to be correct. There are a number of factors, which may be beyond the control of RS Group plc, which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. Other than as required by applicable law or the applicable rules of any exchange on which our securities may be listed, RS Group plc has no intention or obligation to update forward-looking statements contained herein.